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HomeMy WebLinkAboutRevenue Bonds-Civic Improvement Corporation $16,000,000 COP 3 D r I z ' i2•Gri . REQUEST FOR CITY COUNCIL ACTION December 21 , 1992 Date Submitted to: Honorable Mayor and City Council Submitted by: Michael T. Uberuaga, City Administrator Prepared by: Robert J. Franz, Deputy Ci_ty_Admi-ni-str-a Appi OVLD BY Subject: REFINANCING OF CITY DEBT ! x-/ 19 'CITY CLLRK Consistent with Council Policy? [ ] Yes [)0 ew-Policy-or-E a io n Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions, Attachments: STATEMENT OF ISSUE: In 1986 the City issued $20 million of long term debt in the form of Certificates of Participation (COP's) at an interest rate of 7.9% and in 1989 an additional $15 million was issued at an interest rate of 7%. Due to current lower interest rates, the City can realize significant annual debt service savings by refinancing these prior debt issues resulting in an estimated 6.2% interest rate. RECOMMENDED ACTION: 1 . For the City Council : Approve Resolution approving the proceeding to refinance of 1986 and 1989 Certificates of Participation. 2. For the Civic Improvement Corporation: Approve Resolution approving the proceedings to refinance the 1986 and 1989 Certificates of Participation. 3. Place the estimated $4 million of unused COP's from the 1986 and 1989 issues in a Capital Projects Reserve. BACKGROUND ANALYSIS: Long term debt was issued by the City in 1986 ($20 million) and 1989 ($15 million) to generate proceeds for the payoff of prior debt, and provide funding for land acquisition/construction of parking facilities in the downtown area. Land has been acquired in the second and third block for parking, and the Main Promenade Commercial/Parking Structure has been completed. Approximately $10 million of the proceeds were to be utilized for the now cancelled parking structure north of the pier. Use of $6 million of the $10 million unused proceeds were approved for the Library Expansion Project ($5 million) and for the construction of Pier concession buildings ($1 million) . Approximately $4 million of proceeds remain unused. � t V rG m prDve—k" e- � 1 PIO 5/85 REQUEST FOR COUNCIL ACTION Refinancing of City Debt RECOMMENDED REFINANCING The 1986 and 1989 COP issues are recommended to be refinanced at today' s lower interest rates at an estimated annual savings of $120,000. The total savings from a refinancing is estimated to be $1 .6 million in today' s dollars (net present value) . Attached is a report from our independent financial advisor describing the market conditions that are expected to be favorable in early January 1993 for this refinancing. Since this type of debt issue can only be refinanced once during the life of the issue, it is important to select the correct timing for a refinancing. Therefore, the financial advisor has outlined criteria that should be utilized prior to approving a refinancing. Most of the savings from this refinancing would be generated from the 1986 COP proceeds because of the higher interest rate (7.9%) compared to the 1989 debt issue (7.0%) . The financial advisor has outlined the typical criteria for proceeding with a refinancing which is that the refinancing should generate a minimum of 3% net present value savings in order to proceed with the refinancing. Current rates would result in a 4.9% savings. This criteria has been written into the authorizing resolutions which are proposed for adoption. If either the 1986 or 1989 refinancing does not attain the 3% net present value savings criteria, then the refinancing of that portion of the refinancing would not go forward. It is anticipated that the 1986 issue will easily meet the 3% criteria, while the 1989 issue will meet the criteria if a slight improvement in market conditions occurs (See Attachments 2 & 3). RESERVING UNUSED COP'S Regarding the approximate $4 million of unused proceeds from the 1986 and 1989 issues, staff is recommending that these proceeds be placed in a capital reserve account for the City Council to determine at a later date whether to allocate to capital projects. This decision should be delayed until recovery from the economic recession is a certainty. While these unused proceeds could be utilized to further reduce debt service by $315,OOO per year as a part of this refinancing, such action is not recommended for the following reasons: 1 . The .unused proceeds are currently generating revenue (interest earnings) which equals $280,000 - $320,000 per year (90 to 100% of the estimated debt service savings) . 2. The City Council will be considering a number of proposed revenue producing capital projects in the next 2 years which are unfunded and would be logical candidates for use of debt proceeds since new revenue would be available to pay the debt service. 3. If none of the revenue producing projects are approved, the $4 million of unused proceeds could be placed in a "defeasance fund" to pay debt service, thereby generating a debt service reduction of $315,OOO per year or more. 4. The City' s independent Financial Advisor has recommended reserving the $4 million of unused proceeds, (Attachment 3) Attachment 4 is an analysis of the alternative uses of the unused proceeds that has been prepared by staff. -2- WPADSERT:1199 REQUEST FOR COUNCIL ACTION Refinancing of City Debt FUNDING SOURCE: General Fund - proposed action would reduce General Fund annual cost by an estimated $120,000. ALTERNATIVES: 1 . Do not refinance the 1986 or 1989 debt. 2. Include the unused COP' s in the refinancing. ATTACHMENTS: 1 . COP Debt Summary 2. Investment Banker' s Report On Estimated Savings 3. Financial Advisor' s Report 4. Staff Analysis of Alternatives - Unused Proceeds 5. City Council Resolution 6. Civic Improvement Corporation Resolution l -3- WPADSERT:1199 RESOLUTION NO. 6456 . A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING PROCEEDINGS TO REFINANCE 1986 AND 1989 CERTIFICATES OF PARTICIPATION, AUTHORIZING EXECUTION OF RELATED FIRST AMENDED AND RESTATED LEASE AGREEMENT AND TRUST AGREEMENT, APPROVING DELIVERY AND SALE OF NOT TO EXCEED $40,000, 000 PRINCIPAL AMOUNT OF REFUNDING CERTIFICATES OF PARTICIPATION AND APPROVING RELATED AGREEMENTS AND MATTERS WHEREAS, the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City of Huntington Beach (the "City") have previously entered into that certain Lease Agreement dated as of July 15, 1986, by and between the Corporation as lessor and the City as lessee (the "1986 Lease" ) and the Corporation and the City have previously entered into that certain Lease Agreement dated as of July 15, 1989, by and between the Corporation as lessor and the City as lessee (the "1989 Lease" ) , for the purpose of leasing certain land and improvements constituting a portion of the Huntington Beach "Civic Center (the "Project") ; and The Corporation and the City have determined at this time that as a result of favorable financial market conditions it is in the best interests of the Corporation and the City to refinance the 1986 Lease and the 1989 Lease (collectively, the "Prior Leases" ) , and thereby refinance the $20, 000, 000 aggregate principal- amount of Certificates of Participation (Civic Center Refinancing Project) dated as of July 15 , 1986 relating to the 1986 Lease (the "1986 Certificates" ) , and the $15, 025, 000 aggregate principal amount of Certificates of - 1 - Participation (1989 Public Parking Project Financing) dated as of July 15 , 1989 relating to the 1989 Lease (the " 1989 Certificates" ) , and to that end the Corporation and the City wish to amend and restate the Prior Leases in full pursuant to the First Amended and Restated Lease Agreement dated as of January 1, 1993 , by and between the Corporation as lessor and the City as lessee (the "Lease Agreement" ) ; and In order to provide funds sufficient to enable the Corporation to perform its obligations under the Lease Agreement, the Corporation proposes to assign and transfer to Bank of America National Trust and Savings Association as trustee (the "Trustee") , certain of its rights under the Lease Agreement pursuant to the Assignment Agreement dated as of January 1, 1993 , and in consideration of such assignment and the execution of the Trust Agreement dated as of January 1, 1993 , by and among the City, the Corporation and the Trustee, the Trustee has agreed to execute and deliver 1993 Refunding Certificates of Participation (Civic Center Refinancing Project) in the maximum principal amount of $40, 000, 000, each evidencing a direct, undivided fractional interest in the Lease Payments to be paid by the City under the Lease Agreement (the "Ce_rtificates") ; and The firm of Stone & Youngberg (the "Underwriter" ) has assisted the City and the Corporation in structuring the proposed financing as herein described and has informed the City and the Corporation that it intends to submit an offer to purchase the Certificates, and the Underwriter has presented to 2 - the City a form of agreement for the purchase of the Certificates (the "Purchase Agreement") ; and The City Council wishes at this time to authorize all proceedings relating to the refinancing of the Project and the execution and delivery of all agreements and documents relating thereto; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City ,of Huntington Beach as follows : Section 1. ' Approval of Lease Agreement. The City Council hereby approves the amendment and restatement of the Prior Leases in full pursuant to the Lease Agreement in substantially the form on file with the City Clerk together with any immaterial changes therein or additions thereto deemed advisable by the City Administrator and approved by the City Attorney. The City Council hereby authorizes and directs the Mayor and the City Administrator to execute, and the .City Clerk to attest and affix the seal of the City to, said form of the Lease Agreement for and in the name of the City. The lease of the Project shall be upon the terms and conditions set forth in the Lease Agreement . Section 2. Approval of Trust Agreement . The City Council hereby approves the Trust Agreement in substantially the form on file with the City Clerk together with any immaterial changes therein or additions thereto deemed advisable by the City Administrator and approved by the City Attorney. The City Council hereby authorizes and directs the Mayor and the City Administrator to execute, and the City Clerk - 3 - to attest and affix the seal of the City to, said form of the Trust Agreement for and in the name of the City. Section 3 . Sale of Certificates. The City Council hereby approves the sale of the Certificates by negotiation with the Underwriter, pursuant to the Purchase Agreement by and between the City and the Underwriter in substantially the form on file with the City Clerk together with any immaterial changes therein or additions thereto approved by the Deputy City Administrator/Chief of Administrative Services and approved by the City Attorney. The Purchase Agreement shall be executed in the name and on behalf of the City by the Deputy City Administrator/Chief of Administrative Services, who is hereby authorized and directed to execute and deliver said form of Purchase Agreement on behalf of the City upon submission of a proposal by the Underwriter to acquire the Certificates; provided, however, that such proposal is acceptable to the Deputy City Administrator/Chief of Administrative Services and is consistent with the requirements of this Resolution, including the requirements of Section 5 hereof . The amount of Underwriter ' s discount shall be not more than one and one-half percent (1-1/2%) of the par amount thereof and the weighted average rate of interest to be represented by the Certificates (taking into account any original issue discount on the sale thereof) shall not exceed seven percent (7%) per annum. In the event that the Certificates shall not have been sold to the Underwriter within sixty (60) days following the date of 4 - adoption of this . Resolution, the approvals and authorizations given pursuant hereto shall terminate and be of no further force and effect . Section 4 . Official Statement. The City Council hereby approves the preparation of, and hereby authorizes the Mayor to deem final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 except for permitted omissions, a preliminary form of Official Statement describing the Certificates . Distribution of such preliminary Official Statement by the Underwriter is hereby approved. The City Administrator is hereby authorized and directed to approve any immaterial changes therein or additions thereto deemed advisable by the City Administrator and approved by the City Attorney and to execute the final form of the Official Statement in the name and on behalf of the City. The City Council hereby authorizes the distribution of the final Official Statement by the Underwriter. Section 5. Minimum Required Level of Savings. The City Council hereby determines that the minimum level of net present value savings for each of the 1986 Certificates and the 1989 Certificates shall be three percent (3%) of the aggregate outstanding principal amount of the 1986 Certificates or the 1989 Certificates, as the case may be; and the Certificates shall not be sold to the Underwriter unless such minimum level of net present value savings can be achieved for each of the particular issue or issues to be refunded. In the event that such minimum level of net present value savings is 5 - realized with respect to the 1986 Certificates but not the 1989 Certificates, the Lease Agreement and the Trust Agreement which are described in Sections 1 and 2 shall be the respective forms of such agreements on file with the City Clerk and identified as "Financing Alternative No. 2" . Section 6. Engagement of Special Counsel. In connection with the delivery of the Certificates and the documents relating thereto, the City Council hereby authorizes the engagement of Jones Hall Hill & White, A Professional Law Corporation, to act as special legal counsel to the City upon the terms and conditions set forth in the proposed form of agreement between the City and such firm in the form on file with the City Clerk. The City Administrator is hereby authorized and directed to execute said agreement on behalf of the City so long as approved by the City Attorney. Section 7. Official Actions. 'The Mayor, the 'City Administrator, the Deputy City Administrator/Chief of Administrative Services, the City Clerk 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, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, including but not limited to an escrow deposit and trust agreement relating to the refunding of the City' s obligations under the Prior Leases and the corresponding 6 - refinancing of the 1986 Certificates and the 1989 Certificates, which they, or any of them, may deem necessary or advisable in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution so long as the same are approved as to form by the City Attorney. Section 8. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 21st day of December, 1992 . Mayor ATTEST: APPROVED AS TO FORM: City Clerk ;ter City Attorney REVIEWED AND APPROVED: INI�TI D' i ED: City Administrator L-H-epu y Citi Administrat / Chief of Aaministrativ Services 7 - Res No. 6456 STATE OF CALIFORNIA COUNTY OF ORANGE 3 ss: CITY OF HUNTINGTON BEACH ) I , CONNIE BROCKWAY, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative. .vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 21st day Of December 19 92 by the following vote: AYES: Councilmembers: Robitaille, Moulton-Patterson, WInchell, Silva, Sullivan, Leipzig NOES: Councilmembers: None ABSENT: Councilmembers: (seat vacant) 6'e- 'f i City Uter an -ex-of-tic er of the City Council of the City of Huntington Beach, California } RESOLUTION NO. 92-1 RESOLUTION OF THE BOARD OF DIRECTORS OF THE CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION APPROVING PROCEEDINGS TO REFINANCE 1986 AND 1989 CERTIFICATES OF PARTICIPATION, AUTHORIZING EXECUTION OF RELATED FIRST AMENDED AND RESTATED LEASE AGREEMENT ASSIGNMENT AGREEMENT AND TRUST AGREEMENT, APPROVING DELIVERY AND SALE OF NOT TO EXCEED $40,000, 000 PRINCIPAL AMOUNT OF REFUNDING CERTIFICATES OF PARTICIPATION AND APPROVING RELATED AGREEMENTS AND MATTERS WHEREAS, the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City of Huntington Beach (the "City") have previously entered into that certain Lease Agreement dated as of July 15, 1986, by and between the Corporation as lessor and the City as lessee (the "1986 Lease" ) and the Corporation and the City have previously entered into that ,certain Lease Agreement dated as of July 15, 1989 , by and between the Corporation as lessor and the City as lessee (the "1989 Lease") , for the purpose of leasing certain land and improvements constituting the Huntington Beach Civic Center (the "Project") ; and The Corporation and the City have determined at this time that as a result of favorable financial market conditions it is in the best interests of the Corporation and the City to refinance the 1986 Lease and the 1989 Lease (collectively, the "Prior Leases") , and thereby refinance the $20, 000, 000 aggregate principal amount of Certificates of Participation (Civic Center Refinancing Project) dated as of July 15, 1986 relating to the 1986 Lease (the "1986 Certificates") , and the $15, 025, 000 aggregate principal amount of Certificates of - 1 - Participation (1989 Public Parking Project Financing) dated as of July 15, 1989 relating to the 1989 Lease (the "1989 Certificates" ) , and to that end the Corporation and the City wish to amend and restate the Prior Leases in full pursuant to the First Amended and Restated Lease Agreement dated as of January 1, 1993 , by and between the Corporation as lessor and the City as lessee (the "Lease Agreement" ) ; and In order to provide funds sufficient to enable the Corporation to perform its obligations under the Lease Agreement, the Corporation proposes to assign and transfer to Bank of America National Trust and Savings Association as trustee (the "Trustee" ) , certain of its rights under the Lease Agreement pursuant to the Assignment Agreement dated as of January 1, 1993 (the "Assignment Agreement" ) , and in consideration of such assignment and the execution of the Trust Agreement dated as of January 1, 1993 , by and among the City, the Corporation and the Trustee, the Trustee has agreed to execute and deliver 1993 Refunding Certificates of Participation (Civic Center Refinancing Project) in the maximum principal amount of $40, 000, 000, each evidencing a direct, undivided fractional interest in the Lease Payments to be paid by the City under the Lease Agreement (the "Certificates") ; and The firm of Stone & Youngberg (the "Underwriter") has assisted the City and the Corporation in structuring the proposed financing as herein described and has informed the City and the Corporation that it intends to submit an offer to purchase the Certificates, and the Underwriter has presented to 2 the Corporation a form of agreement for the purchase of the Certificates (the "Purchase Agreement") ; and The Board of Directors (the "Board" ) of the Corporation wishes at this time to authorize all proceedings relating to the refinancing of the Project and the execution and delivery of all agreements and documents relating thereto; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the City of Huntington Beach Civic Improvement Corporation as follows : Section 1. Approval of Lease Agreement. The Board hereby approves the amendment and restatement of the Prior Leases in full pursuant to the Lease Agreement in substantially the form on file with the Secretary of the Corporation together with any immaterial changes therein or additions thereto deemed advisable by the Executive Director and approved by the Corporation Attorney. The Board hereby authorizes and directs the President and the Executive Director to execute, and the Secretary of the Corporation to attest and affix the seal of the Corporation to, said form of the Lease Agreement for and in the name of the Corporation. The lease of the Project shall be upon the terms and conditions set forth in the Lease Agreement . Section 2. Approval of Other Financing Agreements. The Board hereby approves the Trust Agreement and the Assignment Agreement in substantially the respective forms on file with the Secretary of the Corporation together with any immaterial changes therein or additions thereto deemed - 3 - advisable by the Executive Director and approved by the Corporation Attorney. The Board hereby authorizes and directs the President and the Executive Director to execute, and the Secretary of the Corporation to attest and affix the seal of the Corporation to, said forms of the Trust Agreement and Assignment Agreement for and in the name of the Corporation. Section 3 . Sale of Certificates. The Board hereby approves the sale of the Certificates by negotiation with the Underwriter, pursuant to the Purchase Agreement by and between the City and the Underwriter . The amount of Underwriter ' s discount shall be not more than one and one-half percent (1-1/2%) of the par amount thereof and the weighted average rate of interest to be represented by the Certificates (taking into account any original issue discount on the sale thereof) shall not exceed seven percent (7%) per annum. In the event that the Certificates shall not have been sold to the Underwriter within sixty (60) days following the date of adoption of this Resolution, the approvals and authorizations given pursuant hereto shall terminate and be of no further force and effect . Section 4 . Official Statement. The Board hereby approves the preparation of, and hereby authorizes the President to deem final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 except for permitted omissions, a preliminary form of Official Statement describing the Certificates . Distribution of such preliminary Official Statement by the Underwriter is hereby approved. 4 - The Board hereby authorizes the distribution of the final Official Statement by the Underwriter . Section 5 . Minimum Required Level of Savings . The Board hereby determines that the minimum level of net present value savings for each of the 1986 Certificates and the 1989 Certificates shall be three percent (3%) of the aggregate principal amount of the 1986 Certificates or the 1989 Certificates, as the. case may be; and the Certificates shall not be sold to the Underwriter unless such minimum level of net present value savings can be achieved for each of the particular issue or issues to be refunded. In the event that such minimum level of net present value savings is realized with respect to the 1986 Certificates but not the 1989 Certificates, the Lease Agreement and the Trust Agreement which are described in Sections 1 and 2 shall be the respective forms of such agreements on file with the Secretary and identified as "Financing Alternative No. 2" . Section 6. Official Actions. The President, the Executive Director, the Secretary, the Treasurer and any and all other officers of the Corporation are hereby authorized and directed, for and in the name and on behalf of the -Corporation, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates , requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate any of the transactions 5 - contemplated by the documents approved pursuant to this Resolution so long as the same are approved as to form by the Corporation Attorney. .Section 7. Effective Date. 'This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED by the Board of Directors of the City of Huntington Beach Civic Improvement Corporation at a special meeting thereof held on the 21st day of December, 1992 . President ATTEST: APPROVED AS TO FORM: Secretary of the Co oration Corporation Attorney'. 7 z REVIEWED AND APPROVED: I ED /ND P VED: Executive Director LD uty ExectitiVe Dire or/ Chief of Administrat ' ve Services 6 - Res . No. 92-1 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH) I , CONNIE BROCKWAY, Secretary of the Huntington Beach Civic Improvement Corporation of the City of . Huntington Beach, California DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Huntington Beach Civic Improvement Corporation of the City of Huntington Beach at a meeting of said Huntington Beach Civic Improvement Corporation held on the 21st day of December , 19 92 , and that it was so. adopted by the following vote . AYES : Directors : Robitaille, Moulton-Patterson,Winchell, Silva, Sullivan, Leipzig NOES : Directors : None ABSENT: Directors : (seat vacant) G Secretary ot the Hun ngton Beach Civic Improvement Corporation of the City of Huntington Beach, Ca . COP.XLS ATTACHEMENT I XXXXXX CERTIFICATE OF PARTICIPATION DEBT SUlYIMARY _ ........ __ _ AMOUNT INTEREST....:: GENERAL FUND I, DEBT ISSUE OF DEBT RATE COST:PER YEAR 1986 COP Issue $20,000,000 7.9% $1,700,000 1989 COP Issue 15,025,000 7.0% 1,200,000 TOTAL $35,025,000 $2,900,000 Less Interest Income On Reserve Fund (215,000) Net Annual Cost $2,685,000 :ALLOCATION OF II, USE OF PROCEEDS AMOUNT ANNUAL DEBT SVC': FUNDING SOURCE ...... _ _ _ _ _ _....... Reserve fund $2,013,000 N.A. N.A. Costs of Issuance 1,014,000 N.A. N.A. Payoff Old Debt (Civic Center) 6,941,000 $854,000 General Fund Land Acquisition&Main 17,400,000 1,076,000 General Fund& Promenade.Structure Parking Fees Library Expansion 5,000,000 350,000 Library Fund Pier Buildings 1,000,000 90,000 Lease Revenue Annual Debt Svc.Payments 1,800,000 N.A. Prior Interest Earnings Unused Proceeds 4,000,000 315,000 Future Interest Earnings SUBTOTAL $39,168,000 LESS NET INTEREST EARNINGS ON PROCEEDS (4,143'000) TOTALS $35,025,000 $2,685,000 III. PROPOSED 1993 NET ANNUAL INTEREST REFINANCING;AMOUNT DEBT SERVICE RATE COMMENT $37,260,000 $2,565,000 6.4% $120,000 Net Savings Page 1 STONE & YOUNGBERG MEMBERS: PACIFIC STOCK EXCHANGE December 7, 1992 TO: Bob Franz, Deputy City Administrator City of Huntington Beach FROM: Ed Schilling John Murray RE Updated Analysis of Refunding Savings on the 1986 and 1989 Civic Center COPS The purpose of this memo is to provide current savings levels available from a refunding of the 1986 and 1989 certificates of participation. We prepared three refunding scenarios: 1) Refunding of 1986 Certificates alone, 2) Refunding of 1989 Bonds alone, and 3) Refunding of 1989 and 1986 Certificates combined The results are as follows: PV Savings Par Amount as % of Gross Annual Bond Issue New Bonds (1) Refunded PV Savings Savings (2) Savings 86 Certificates $21.275 6.64% $1,215,829 $2,271,644 $95,000 89 Certificates $16.545 2.77% $402,657 $578,622 $25,000 Combined (2) $37.610 4.93% $1,618,492 $3,202,982 $120,000 (1) Amount in millions. (2) Gross savings do not total because dollar amounts are allocated over a slightly longer period in the combined structure. The savings on the 1989 Certificates described in the table above can only be achieved if the 1989 Certificates are refunded in conjunction with the 1986 Certificates. Should you have any questions regarding this result do not hesitate to give either of us a call. ATTACHE]' 2 (WPP/146M) ONE CALIFORNIA STREET•SAN FRANCISCO,CALIFORNIA 94111 •(415)981-1314 STONE & YOUNGBERG MEMBERS: PACIFIC STOCK EXCHANGE CITY OF HUNUNGTON BEACH 1992 Refunding Certificates of Participation (1986 and 1989 COPs) Tentative Schedule of Events (as of December 8, 1992) NOVEMBER DECEMBER JANUARY it S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 5 1 2 8 9 10 11 12 13 14 6 7 8 9 10 it 12 3 4 5 6 7 8 9 15 16 17 18 19 20 21 13 14 15 16 17 18 19 10 11 12 13 14 15 16 22 23 24 25 26 27 28 20 21 22 23 24 25 26 17 18 19 20 21 22 23 29 30 27 28 29 30 31 24 25 26 27 28 29 30 31 November 20 First draft Amended Lease Agreement, Trust Indenture, distributed and Resolution authorizing sale of certificates. November 25 Revised Preliminary Official Statement (POS) and Purchase Contract distributed December 2 Conference call to review draft legal documents, Resolution and Preliminary Official Statement December 7 Second draft legal documents and POS distributed to City, rating agency and. insurance company; second draft Purchase Contract distributed to City December 16 2 p.m. (Ron Junker) Meeting/presentation to Moody's in San Francisco December 21 Council approval of legal documents, Preliminary Official Statement, form of Purchase Contract and Resolution authorizing sale of Certificates December 29 Rating, insurance commitment received December 30 Preliminary Official Statement to printer January 4 Preliminary Official Statement delivered January 11 Pre-pricing discussion January 12 Pricing January 26 Pre-close January 27 Close EGS:crq (WPP/418S) ONE CALIFORNIA STREET•SAN FRANCISCO,CALIFORNIA 94111 •(415)981-1314 n a,5 7- T r 1 7 1 7 KEELING, NORTHCROSS & NOBRIGA. INC. 130nJ-Mana9cment Services for Pabigc AgencLs *11`i ti!!irkcl 5-reLr ,%mrc 1,35 ,(_A 94105 4 3024110 F rAX 415-457-261C MEMORANDUM TO: Robert J.Franz.Deputy City Administrator.City of Pfuntington Beach FROM: Mark Northcross, KNN DATE: December 9, 1992 SC MECT: Refunding the 1986 and 1989 COP's Introduction. We are acting as the City's independent financial advisor with respect to a potential refunding of the 1986 and 1989 COP issues by the City. As an independent financial advisor we derive no compensation from the sale or trading of municipal &ecurities. Our role is to structure and manage such financings, or in this case, to provide competent and impartial advice to the City regarding the refunding being managed by a bond underwriter. The purpose of this letter is to evaluate the pro's and eon's of these two potential refundings. Potential savings. The most common method of measuring the savings from a refunding is by calculating the present value of the cash flow savings in debt service over time. Since this figure is driven by actual cash flow savings it is net of all costs of doing the refunding. It is a fair way of measuring the benefit of the refunding to the City. Under present market conditions, the present value savings from refunding the 1986 COP's equals about $1.2 million. Cash flow savings are about $95,000 per year. This amount equals 6.6% of the outstanding principal of the refunded COP's. Normally, savings equal to 3% of the refunded principal is considered adequate for a refunding. This figure reflects what typically can be achieved through a refunding given typical market fluctuations. The general idea is that if savings are less than 3% the issuer should wait for better market conditions to refund the issue. With this in mind, 6.6% savings are excellent and exceed conventional expectations. Present value savings from refunding the 1989 issue are about $200,0U0. This is equivalent to about a 1.4% savings as a per cent of the refunded principal. This is below normal expectations. However, if this issue is combined with the 1996 refunding issme., the savings are doubled. This is a result of extra benefits under Federal tax law on the refunding escrow. (The proceeds of a refunding issue must be escrowed until the first date ou which the refunded bonds Tuay bo called. Federal tax law restricts the investments of the ATrACHMENT 3 'I fihiatic.' AJ,r,No,, )AM 1)__1 �Ai� N'G��lf k.1ipT_rp T� �r71 �1 71 1 F 1 Robert J, Franz City of Huntington Beach December 9, 1992 Page 2 escrows.) Even with this doubling of savings, the net present value savings are still less than 3% of the amount of the refunded pair. Future market conditions. Preparing to do a refunding is like shooting at a moving target. Since it can take several weeks to get a refunding issue to market, the issuer and the financing team must anticipate market conditions. Since this issue, if approved by the City Council, will not be sold until January, it is important to gauge what market conditions may he like then. The financial press has reported that over $9 billion in previously refunded bonds issued during a period of high interest rates in the early 1980's will be redeemed on January 1, 1993. This will increase demand for municipal securities greatly during the month of January. As a result, we anticipate that current market conditions favorable to refunding; the 1986 COP's will be maintained or even improve through January. Unspent proceeds from the 1986 issue, The City has $4 million in COP proceeds that have not yet be spent from the 1986 issue. The City needs to decide whether to apply this money to the refunding escrow, or to retain it to spend on future capital improvements, Allocating it to the refunding escrow will increase cash flow savings from $95,000 per year to $430,000 per year. On the other hand, if the City plans to spend the money for capital improvements, it would be more expensive to issue new debt in the near future to replace the $4 million allocated to the refunding escrow. The front-end costs of borrowing $4 million would easily exceed $100,000. It should also be noted that if this money is allocated to the escrow, it will be invested at a yield estimated now to be 5.5%, which is lower than what the City is presently receiving on its invested funds. Recommendations. It is our recommendation that the City refund the 1986 COP's, and make preparations to refund the 1989 COP's. However, the 1989 COP's should not be refunded unless present value savings increase to approximately 311/0, It is also our recommendation that the $4 million in unspent proceeds not be allocated to the refunding escrow unless the City is confident that it has no pressing capital improvement needs in the near future, [3 MN\hj C-\L`S2Scl09.me.ml ATTACHMENT 4 ALTERNATIVE USES UNUSED CERTIFICATES OF PARTICIPATION (COP'S) INTRODUCTION: - In January of 1992, the City Council approved a loan of up to $5 million of the City' s unused COP' s to finance the Library Expansion Project. In July of this year, $1 million of the unused C.O.P. ' s was approved to construct the concession buildings on the Pier. After making these allocations, and utilizing $900,000 of the unused COP' s to pay the General Fund Debt Service on the unused COP' s in 1991/92 and 1992/93, an estimated $4,000,000 of COP's are unallocated and could be used in one of the following alternative ways: ALTERNATIVE 1 - Refund/Defease - The $4 million of unused proceeds could be used as a part of a planned January 1993 refinancing of the 1986 and 1989 COP debt, resulting in a reduced debt service. The amount of the debt service reduction related to the use of $4 million of unused COP' s is $315,000 per year. This would be a permanent debt service reduction in the General Fund. ALTERNATIVE 2 - Use for Revenue Producing Capital Projects - Under this alternative, the $4 million of unused COP' s would be allocated or revenue producing projects that result in new general fund revenue equal to at least the $315,000 per year needed for debt service. If the $4 million is approved for projects to increase beach related parking, new General Fund parking revenue in the amount of $600,000 per year, (estimated) would be available to pay the debt service on the COP' s (debt service is $315,000) . ALTERNATIVE 3 - Use for Non-Revenue Producing Capital Projects - The City has over $100 million of unfunded capital improvement projects. The unused COP' s in the amount of $4 million could be allocated to any of these unfunded projects. Under this alternative, the City would have to pay the estimated $315,000 per year debt service on the COP' s from General Fund revenues. ALTERNATIVE 4 - Place the Unused COP's in a Capital Reserve - Under this alternative, no additional approvals of the $4,000,000 of unused COP's would be made until the City has clearly recovered from the current economic recession. The interest earnings on the unused COP' s (estimated to total $280,000 - $320,000 per year) would be utilized to pay the debt service on the $4,000,000. STAFF RECOMMENDS ALTERNATIVE #4: SEE EXPLANATION IN RCA. WPADSERT:976 Attachment 4 - ALTERNATIVE USES: UNUSED COP's (page 2) ALTERNATIVE 1 - Refund/Defease UNUSED C.O.P. 'S 12/8/92 Projected Cash Balance 1992/93 through 2015/16 Annual starting surplus/ ending FY balance REVENUE EXPENSES shortfall* balance ------ ---------- --------- ---------- --------- ------------ 92/93 $10, 500, 000 $635, 687 $8, 936, 000 $2, 199, 687 93/94 2, 199, 687 414, 646 2,405, 000 209, 333 94/95 209, 333 472, 600 585, 000 -112,400 96, 933 95/96 96, 933 471, 670 585, 000 -113, 330 -16, 397 96/97 -16, 397 472,275 585, 000 -112,725 -129, 122 97/98 -129, 122 480,544 585, 000 -104,456 -233 ,578 98/99 -233 , 578 489,226 585, 000 -95,774 -329, 352 99/00 -329, 352 498, 342 585, 000 -86, 658 -416, 010 00/01 -416, 010 508, 117 585, 000 -76,883 -492,893 01/02 -492 , 893 520, 178 585, 000 -64, 822 -557,715 02/03 -557, 715 532,842 585, 000 -52, 158 -609,873 03 04 -609,873 546, 139 585, 000 -38,861 -648,734 04/05 -648,734 560, 101 585, 000 -24, 899 -673 , 633 05 06 -673, 633 574,761 585, 000 -10,239 -683,872 06/07 -683, 872 590, 154 585, 000 5, 154 -678,718 07/08 -678,718 606, 317 585, 000 21, 317 -657,401 08 09 -657,401 623 , 288 585, 000 38,288 -619, 113 09/10 -619, 113 641, 107 585, 000 56, 107 -563 , 006 10/11 -563, 006 659, 817 585, 000 74,817 -488, 189 11/12 -488, 189 679, 463 585, 000 94, 463 -393 , 726 12/13 -393 ,726 700, 091 585, 000 115, 091 -278, 635 13/14 -278, 635 721, 751 585, 000 136, 751 -141,884 14/15 -141, 884 744, 494 585, 000 159, 494 17, 610 15/16 17, 610 769, 694 585, 000 184, 694 202 , 304 * Surplus/shortfall after completion of projects. Shortfall is legal obligation of General Fund. Attachment 4 - ALTERNATIVE USES: UNUSED COP's (page 3) ALTERNATIVE 2 - Use for Revenue Producing Projects UNUSED C.O.P. 'S 12/8/92 Projected Cash Balance 1992/93 through 2015/16 Annual starting surplus/ ending FY balance REVENUE EXPENSES shortfall* balance ------ ---------- --------- ---------- --------- ------------ 92/93 $10, 500, 000 $773 ,421 $4,950, 000 $6, 323 ,421 93/94 6, 323,421 736, 325 5,720, 000 1, 339,747 94/95 1, 339,747 1, 075, 881 1, 900, 000 515, 628 95/96 515, 628 1, 121, 572 900, 000 221, 572 737,200 96/97 737, 200 1, 146, 065 900, 000 246, 065 983 , 265 97/98 983, 265 1, 172 ,789 900, 000 272 ,789 1, 256, 053 98/99 1,256, 053 1,201, 930 900, 000 301, 930 1, 557,983 99/00 1,557, 983 1,233, 691 900, 000 333, 691 1, 891, 674 00/01 1,891, 674 1, 268,493 900, 000 368, 493 2, 260, 167 O1/02 2 ,260, 167 1, 308, 191 900, 000 408, 191 2, 668, 358 02/03 2, 668, 358 1, 351,469 900, 000 451, 469 3, 119,826 03 04 3 , 119,826 1, 398, 626 900, 000 498, 626 3, 618, 452 04/05 3, 618,452 1, 449, 985 900, 000 549, 985 4, 168,437 05 06 4, 168,437 1, 505,894 900, 000 605,894 40,774, 331 06/07 4,774, 331 1, 566,729 900, 000 666,729 5,441, 060 07/08 5,441, 060 1, 632,896 900, 000 732,896 6, 173, 957 08 09 6, 173 ,957 1,704,834 900, 000 804,834 6, 978, 791 09/10 6, 978,791 1,783 , 016 900, 000 883 , 016 7,861, 807 10/11 7, 861, 807 1,867, 953 900, 000 967,953 8, 829,760 11/12 8, 829, 760 1,960, 195 900, 000 1, 060, 195 9,889, 956 12/13 9,889, 956 2, 060, 338 900, 000 1, 160, 338 11, 050, 294 13/14 11, 050, 294 2 , 169, 023 900, 000 1,269, 023 12, 319, 317 14/15 12, 319, 317 2 , 286, 942 900, 000 1, 386, 942 13, 706,259 15/16 13 , 706, 259 2 , 414,843 900, 000 1, 514, 843 15,221, 102 * Surplus/shortfall after completion of projects. Surplus can be used for any governmental purpose. Attachment 4 - ALTERNATIVE USES: UNUSED COP's (page 4) ALTERNATIVE 3 - Use for Non Revenue Producing Projects UNUSED C.O.P. 'S 12/8/92 Projected Cash Balance 1992/93 through 2015/16 Annual starting surplus/ ending FY balance REVENUE EXPENSES shortfall* balance ------ ---------- --------- ---------- ---------- ------------ 92/93 $10,500, 000 $773,421 $4, 950, 000 -4, 176, 579 $6, 323 , 421 93/94 6, 323,421 592,240 6, 720, 000 -6, 127, 760 195, 661 94/95 195, 661 471,575 900, 000 -428,425 -232 , 764 95/96 0 464,400 900, 000 -435, 600 0 96/97 0 472 ,275 900, 000 -427, 725 0 97/98 0 480,544 900, 000 -419, 456 0 98/99 0 489,226 900, 000 -410,774 0 99/00 0 498, 342 900, 000 -401, 658 0 00/01 0 508, 117 900, 000 -391,883 0 O1/02 0 520, 178 900, 000 -379,822 0 02/03 0 532, 842 900, 000 -367, 158 0 03 04 0 546, 139 900, 000 -353,861 0 04/05 0 560, 101 900, 000 -339,899 0 05 06 0 574, 761 900, 000 -325,239 0 06/07 0 590, 154 900, 000 -309,846 0 07/08 0 606, 317 900, 000 -293 , 683 0 08 09 0 623, 288 900, 000 -276, 712 0 09/10 0 641, 107 900, 000 -258, 893 0 10/11 0 659, 817 900, 000 -240, 183 0 11/12 0 679,463 900, 000 -220, 537 0 12/13 0 700, 091 900, 000 -199, 909 0 13/14 0 721, 751 900, 000 -178, 249 0 14/15 0 744, 494 900, 000 -155,506 0 15/16 0 768, 373 900, 000 -131, 627 0 * Surplus/shortfall after completion of projects. Shortfall is legal obligation of General Fund. 1 Attachment 4 - ALTERNATIVE USES: UNUSED COP's (page 5) ALTERNATIVE 4 - Reserve for future Capital Projects UNUSED C.O.P. 'S 12/8/92 Projected Cash Balance 1992/93 through 2015/16 Annual starting surplus/ ending FY balance REVENUE EXPENSES shortfall* balance ------ ---------- --------- ---------- --------- ------------ 92/93 $10, 500, 000 $773,421 $4,950, 000 $6, 323 , 421 93/94 6, 323, 421 732 , 645 2,720, 000 4, 336, 067 94/95 4, 336, 067 782 , 105 900, 000 -117,895 4, 218, 172 95/96 4, 218, 172 780, 763 900, 000 -119,237 4, 098, 934 96/97 4, 098, 934 779, 695 900, 000 -120, 305 3 , 978, 629 97/98 3 , 978, 629 778, 941 900, 000 -121, 059 3,857, 570 98/99 3, 857, 570 778,544 900, 000 -121, 456 3,736, 114 99/00 3 ,736, 114 778, 551 900, 000 -121,449 3, 614, 665 00/01 3 , 614, 665 779,217 900, 000 -120, 783 3 ,493 , 882 O1/02 3,493, 882 782, 219 900, 000 -117, 781 3 , 376, 101 02/03 3, 376, 101 786, 050 900, 000 -113 , 950 3,262, 151 03 04 3,262, 151 790,800 900, 000 -109, 200 3 , 152, 951 04/05 3, 152, 951 796, 572 900, 000 -103 , 428 3 , 049,524 05 06 3, 049, 524 803,475 900, 000 -96, 525 2 , 952, 999 06/07 2,952,999 811, 629 900, 000 -88, 371 2 , 864, 628 07/08 2 , 864, 628 821, 164 900, 000 -78, 836 2 ,785,792 08 09 2 , 785,792 832, 222 900, 000 -67,778 2 , 718, 014 09/10 2, 718, 014 844, 958 900, 000 -55, 042 21662 , 972 10/11 2 , 662 ,972 859, 540 900, 000 -40,460 2, 622 , 512 11/12 2 , 622 , 512 876, 152 900, 000 -23 ,848 2, 598, 664 12/13 2 , 598, 664 894, 991 900, 000 -5, 009 2, 593, 655 13/14 2, 593, 655 916,275 900, 000 16, 275 2, 609, 931 14/15 2, 609, 931 940,238 900, 000 40, 238 2 , 650, 169 15/16 2 , 650, 169 967, 136 900, 000 67, 136 2 , 717, 305 REQUEST FOR CITY COUNCIL ACTION Date October 7, 1991 Submitted to: Honorable Mayor and City Council Submitted by: Michael T. Uberuaga, City Administrator Prepared by: Robert J. Franz, Deputy City Administra Subject: Allocation of Certificates of Participation Funds APP- OVED BY ITY CO CT; 19V- Consistent with Council Policy? [x] Yes [ ] New Policy or Excepti n 9 Statement of Issue, Recommendation,Analysis, Funding Source,Alternative A ons, ttachments: Statement of Issue: $10.2 million of Certificates of Participation (COP) proceeds are unused and available due to the cancellation of the North of the Pier Parking Structure. The City needs to decide how to use the unused proceeds. Recommendation: 1 . Utilize up to $5 million of the unused COP proceeds as temporaryy financing for the Library Expansion Project. 2. Defer the consideration of the permanent allocation of the $10.2 million of unused COP proceeds until determinations are made �;WT.cc1 regarding phasing, "Measure C" election requirements, and priority of other projects. I �---" 3. Utilize non—COP funding sources to finance the estimated $1 millions' Main Street Improvement Project and instruct staff to return to the City Council within 30 days with a recommended phasing of the = project and a specific funding recommendation. Analysis: This issue was on the City Council Agenda for Study Session of September 30, 1991 . Attached is a copy of the staff report prepared for that Study Session. As a result of the preparation of the attached staff report, meetings have been held with Redevelopment staff, Public Works staff, Chamber of Commerce representatives, Downtown Merchants and City Council members. It is clear as a result of these various discussions and meetings that there are numerous questions still to be answered regarding the unfunded capital projects listed on the attached staff report. It is, therefore, premature to make final decisions on allocation of funding. For instance, there are questions regarding the phasing of the various projects such as the South Beach Improvements, Pier Plaza, Pier Buildings and North of the Pier Parking Improvements. There are also potential other funding sources such as State Bond proceeds, Coastal Conservancy grants, Emerald Cove reserve funds, and additional park acquisition and development funding sources. PIO 5/85 REQUEST FOR COUNCIL ACTION Allocation of Certifiates of Participation Funds Questions remain regarding the need for a voter approval under Measure C to proceed with some of the following projects: South Beach Improvement Project, North of the Pier Parking Improvements, Bluff Bottom Parking Lot, and Pier Plaza. There is no urgency related to deciding the method of funding of any of the projects listed in the staff report except for the Main Street Improvement Project and the need to proceed with final design of the Library Expansion Project. Rather than attempt to make decisions now on the allocation of funds for all of these projects, staff is recommending the deferral of the decision on allocating unused COP funds. Once the election requirements and proposed phasing of the improvements are clarified, then a recommendation can be made on the allocation of the unused proceeds to these projects. An alternative is to refund the $10.2 million, thereby reducing debt service requirements by $900,000 per year. In regards to the Library Expansion Project, the current year budget proposed the temporary use of a portion of the unused $10.2 million COP proceeds. The plan is to replace the temporary financing with permanent financing using new revenue generated as result of the Library Expansion Project for debt service payments. This new revenue includes parking meter revenue, community enrichment fee revenue, room rentals, theatre rentals, bookstore sales, etc. This plan, as outlined in the budget, can still be followed as the expansion project design is finalized and construction bids are solicited. Staff would recommend that at the time of construction bid award (anticipated in January 1992) a determination be made on whether to issue permanent financing COP' s. There is no need to make a decision prior to the time of construction bid award as to the permanent financing method for the Library Expansion. The recommended approach, therefore, is to continue the plan to use the unused COP proceeds as the temporary financing for the Library Expansion Project. Alternatives: 1 . Allocate the $10.2 million in unused proceeds to projects. 2. Utilize the $10.2 million to refund bonds and eliminate debt service obligations. Funding Source: As indicated. Attachments: September 30, 1991 Study Session Staff Report -2- WPADSERT:584 ti r CA 91-32 CITY OF HUNTINGTON BEACH COUNCIL - ADMINISTRATOR COMMUNICATION HUNTINGTON BEACH To HONORABLE MAYOR AND From MICHAEL T. UBERUAGAbADN,'"O�� CITY COUNCIL MEMBERS City Administrator Subject ALLOCATION OF CERTIFICATES Date SEPTEMBER 30, 1991 Of PARTICIPATION FUNDS The City issued a total of $35,300,000 of Certificates of Participation debt in July of 1986 ($20,000,000) and August of 1989 ($15,300,000) . These Certificates were approved to; 1) pay off old debt ($7,700,000) , 2) build the Main Promenade Parking Structure ($17,400,000) and 3) build a parking structure north of the Pier ($10,200,000). Annual debt service to support the $35,300,000 is $2,600,000 for 30 years. Given that the plans for the intensity of development in the downtown have been reduced and that a Bluff Bottom Parking Lot is now proposed, it .has been determined that the proposed parking structure north of the pier is not needed. Therefore, the City Council should decide to either defease the $10,200,000 of certificates or reallocate to other projects. Annual debt service required to support the $35,300,000 of certificates is $2,600,000 and the portion of the annual payments for the originally proposed parking structure north of the pier is $900,000. This debt service is currently paid by the City's General Fund. However, the interest earned on the $10,200,000 equals the debt service payments. Staff recommends that the City Council reallocate the $10,200,000 to priority capital projects that generate revenue to support the debt service required and, therefore, the projects will not place a direct burden on the City's General Fund. The priority projects listed on the next page of this report incorporate staff' s recommendation for the use of the $10,200,000 and funding for some other priority capital projects. Also attached is a list of unfunded capital projects. CA 91-32 , ALLOCATION OF CERTIFICATES OF PARTICIPATION FUNDS PRIORITY UNFUNDED CAPITAL PROJECTS Estimated Estimated Recommended Start of Unfunded New Annual Funding Proiect Construction Amount Revenue Source South Beach Improvements 192/93 $ 3,000,000 $ 246,000 Unused C.O.P. 's North of Pier Parking 192/93 1 ,000,000 97,000 Unused C.O.P. 's Improvements Bluff Bottom Parking Lot 191/92 1 ,000,000 116,000 Unused C:O.P. 's , Library Expansion 191/92 5,000,000 450,000 Unused C.O.P.'s Pier Plaza 192/93 1 ,500,000 Unknown Grants, PA & D Fund (excludes cost of to as funding is secured relocating Maxwell 's) 2,300,000 or available Pier Buildings 191/92 800,000 100,000 Loan from _Water to Fund to be repaid 1 ,500,000 from private fund raising. Main Street '91/92 1 ,000,000 Unknown Reserve Funds Resultin/ Improvements from Land Sales and , Refinancing of Emerald Cove $ 12,300,000 to' $ 13:8� $ 1 .009.000 t �'✓ WPADSERT:513 33 c)--5 .� REQUEST FOR CITY COUNCIL ACTION T ,�/v P an January 21, ' 1992 Date ,submitted to: Honorable Mayor and City Council Submitted by: Michael T. Uberuaga, City Administr to Prepare&by: Ron Hayden, Director, Library Se Subject: CENTRAL LIBRARY EXPANSION Consistent with Council Policy? ( l Yes ( ] New Policy or Exception Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions,Attachments: STATEMENT OF ISSUE: To begin construction of the Central Library Expansion Project, the City Council must award the construction contract and approve the financing. RECOMMENDATION 1. Utilize up to $5, 000, 000 of the 1986/89 unused COP proceeds as temporary financing for the Library Expansion Project. 2 . Accept the lowest qualified bid and award the contract to Gentosi Brothers Contractors. 3 . Authorize the Director of Public Works to expend $6, 136,500 to cover contract costs of $5, 830, 000, estimated construction change orders of $291,500, and anticipated incidental expenditures of $15, 000. ANALYSIS: Pursuant to the. 1987 HBW Associates, Inc. "Needs and Assessment . Study," „of the Huntington Beach Library System, Council directed staff to proceed with the expansion of the' Central Library. On July 5, 198.8, Council approved the selection of Anthony & Langford to prepare plans, specifications, and a probable cost estimate for the expansion of the Central Library. Subsequent to this action, Council approved expanding the scope of the project to include the design of additional improvements and the development of a master parking plan. On October 21, 1991, City Council authorized a call for bids for the Central Library Expansion Project. The following lists the contractors and bids for the building only and limited site work received and opened on Tuesday, December 17 , 1991 . 'MISC.04.1 PIO 5/85 Contractor Bid Amount A.R. Willinger Company $5, 560, 000* Gentosi Bros Contractors 5',830, 000 Nationwide Construction Co. Inc. 5,889, 000 C.W. Driver & Associates 5,983,, 000 Lewis Jorge 6, 000, 000 Sumitomo Construction American, Inc. 6,825, 000 John R. Hundley, Inc. 6, 143 ,826 PW Construction, Inc. 6, 298, 000 Swinerton & Walberg Co. 6, 300, 000 Shirley Bros. , Inc. 6, 319, 000 J Ray Construction 6, 357, 000 Cal-Pac Construction, Inc. 6,383 ,000 Millie and Severson, Inc. 6, 390, 000 Macco Constructors, Inc. 6, 5,43 , 000 Berry Construction, Inc. 6, 572 , 588 Culp Construction Company 6,825, 000 *A.R. Willinger Company made a $1, 000, 000 clerical error, the correct bid should have been $6, 560, 000. Based on a legal opinion received from the. City Attorney (see attached) , A.R. Willinger was permitted to withdraw their bid without penalty. Therefore, the lowest bid was submitted by Gentosi Bros-. Contractors. A committee comprised of the Director of Library Services, the Public Contract Administrator, the Chief Structural Building Inspector, the Chief Plumbing & Mechanical Inspector, and the Chief Electrical Inspector reviewed the qualifications of Gentosi Bros Contractors. Based on the extremely positive outcome of this review process, it is recommended that a contract be awarded to Gentosi Bros Contractors for' the construction of Library Building only. Contract for the Parking Master Plan construction will be returned to the City Council June, 1992 . The estimated total costs of the Library Expansion and parking is $8, 500, 000. The unfunded portion is estimated to be $5, 000, 000. To finance the library during construction, the current budget proposes and staff recommend temporary use of $5, 000, 000 of the City's unused $10, 200, 000 COP proceeds. According to Stone & Youngberg, the underwriting firm used by the City for prior COP issue, using the existing COP' s are more economical than issuing new debt. The following are four funding alternatives by Bob Franz, Deputy City Administrator (see Attachment #1: Funding Alternatives Library Expansion Project) . An important point to understand is that the existing General Fund payment of $399 , 000 per year is for debt service on the 1972 Library bonds.- In the summaries and analysis of new library costs resulting from the expansion project, the continuation of the General Fund annual payment of $399, 000 is assumed. J �� MISC.04.1 M1 , Alternative l: (STAFF RECOMMENDATION) Loan $5 million from . 1986/89 COP proceeds, as interim/temporary Library Expansion Project funding, then repay the $5 million with a new 1994 COP issue which would include defeasance of 1972 library bonds. Alternative 2 : Defease 1972 library bonds, and issue $5 million of new COP' s (no use of 1986/89 COP's) . Alternative 3 : Use $5 million of 1986/89 COP proceeds as permanent financing (do not defease 1972 library bonds) . Alternative 4 : (Not included in attached analysis) : Utilize General Fund reserves to finance . all or a portion of the $5 million needed for the Library Expansion Project. Mr. Franz concludes that Alternative l provides the City with a sound interim financing approach while still keeping many options open as to the permanent financing of the Library Project. Therefore, it is recommended as the best financing option . available for the funding of the $5 million needed for the Library Expansion Project. The construction is expected to take 18 months. Upon completion of the construction, staff will return to Council to recommend the permanent financing. However, based on economic conditions or necessity of ' funding other capital projects, the $5, 000, 000 . loan of COP proceeds could be repaid by issuing new debt at any time during or post construction. To finance the project, Council approved the establishment of a special enterprise fund titled Library Service Fund. This fund will be used to finance the expansion costs including interest payments on the loan of COP proceeds, plus all increased personnel and operating costs. New revenues for the fund include 'the Community Enrichment Library Fee, room rentals, theater rentals, parking meter revenue, interest earnings, and media revenues. Because of this Library Service Fund, the General Fund would not be impacted during or post construction (see Attachment #2) During construction: During construction, the Library Service Fund will pay interest to the General Fund primarily from the interest earned on the existing Library Service Fund balance, revenue from the Community Enrichment- Library Fee, and the existing parking meter revenue (see Attachment #3 : Construction Financing During Construction) . The existing Library Service Fund has approximately $2, 122 , 000 in addition to approximately $700, 000 donated funds for a total fund balance of $2 , 822, 000. During construction, it is anticipated to use the Library Service Fund and donations prior to using the COP funds. This approach will allow the COP's to continue to generate interest earnings revenue to offset the General Fund costs. When the library begins using the $5, 000, 000, (estimated to be January, 1993) , the Library Service Fund will pay to the General MISC.04.1 1 /1 Fund the interest on the loan. Total interest payments during construction are estimated to be $327, 000. The revenue from the Library Service Fund during the construction period is estimated to be $506,748 . When interest payments on the COP loan of $327 , 000 are subtracted, the cumulative balance would be $178 , 917 . (See attachment #4 : Library Service Fund Revenues and Expenses During Construction. ) This reserve will carry over for post construction expenses. Post construction: The post construction expenses related to the Library Expansion Project will continue to be paid by the Library Service Fund. However, revenue from programs generated as a result of the expansion including the theater, room rental, media, and additional parking meters will be included in the Library Service Fund (please see Attachment #5) . Beginning in. FY 94/95, when the expanded library is in operation, the annual revenue related to the Library Expansion is estimated to be $575, 625. The annual estimated expenses are $450, 000, resulting in an annul surplus of $121,000 . When this surplus is added to the cumulative balance of $178,917, acquired during construction, the Library Service Fund reserve at the end of 94/95 should be approximately $300, 000. It is important to note that this does not include additional potential revenue of the Friends Book & Gift Store, and fund-raising and donations of $120, 000 total. For more detailed information on post , construction revenue, please see Attachment #6: Detailed Information on Post' Construction Revenue) . In summary, during construction, the Library Service Fund consisting of existing funds, interest earned, and limited parking meter revenue will pay to the General Fund the interest on the $5, 000, 000 loan. In post construction, the Library Service Fund package will expand to include room rental, theater rental, expanded parking meters and cumulative balance. These funds are sufficient to pay not only the debt service but also personnel and operating costs. Upon completion of the project, staff will return to Council to determine the most economical means for permanent financing. Again, if -economic conditions warrant, these funds can be returned and new debt issued at any time during the construction. MISC.64.1 FUNDING SOURCE: ARCHITECT'S ESTIMATE Based upon a detailed cost estimate proposed by Construction Analysts, Inc. of Carlsbad, CA. , the cost of constructing the building improvements alone, we projected at $5,403 ,598 prior to the bidding project. On December 16, 1991, Construction Analysts prepared a revised cost estimate to $5, 912,999 based on numerous plan changes and clarifications in the specifications which occurred during the project bidding process. The $5, 912 , 999 does not include a budget for anticipated change orders or incidental expenditures. When these items are included the final estimate is $6, 223 , 648 as summarized below: Contract Costs: $5,912,999 Anticipated Change Orders 295,649* Incidentals 15,000** $6,223,648 GENTOSI'S BID Contract Amount $5,830,000 Anticipated Change Orders 291,000* Incidental Expenses 15,000** $6,136,500 *Resolution 4896 authorizes the Director of Public Works to spend up to 10% of the contract amount, not to exceed $50, 000 for Change Orders. Staff recommends a budget equal to 5% of the contract amount. Examples of possible Change Orders include such things as change in field conditions, unavailable materials, weather delays, errors in the plans and changed city requirements. **Miscellaneous soils testing, Edison electrical hookup, water serve, etc. SOURCE OF FUNDING Funds for this- project will be obtained as directed in the analysis section of this RCA. ALTERNATIVE ACTION: 1. Select a different funding alternative as described in Attachment 1. 2 . Reject low bid or all bids and do not proceed with construction. ATTACHMENTS: 1. ' Funding Alternatives - Library Expansion Project 2 . Projected Annualized Increased Costs/Revenues 3 . Construction Financing During Construction 4. Library Service Fund Revenues and Expenses During Construction 5. Estimated Library Service Fund Revenues and Expenditures Post Construction 6. Detailed Information On Post Construction Revenue MTU:RH:gc a� ATTACHMENT 1 n H ! CITY OF HUNTING BEACH INTER-DEPARTMENT COMMUNICATION HUNTINGTON BEACH TO: RON HAYDEN, Library Director FROM: ROBERT J. FRANZ, Deputy City Administrator SUBJECT: FUNDING ALTERNATIVES — LIBRARY EXPANSION PROJECT DATE: January 9, 1992 Attached is a copy of my October 14, 1991 report recommeiding a financing program for the Library Expansion Project. For the reasons indicated in that report, it is recommended that $5,000,000 of the City` s unused C.O.P. proceeds be used as interim/temporary financing for the project. Permanent financing, under the recommended approach, would be determined upon project completion in 1994 when all construction costs are known. Permanent funding alternatives would be. more fully analyzed in 1994. Also attached is a financial analysis of alternatives to the above recommended funding approach. Following is a description of four funding alternatives. An important point in this analysis and the attached detail is to understand the existing General Fund payment of $399,000 per year for debt service on the .1972 Library bonds. In your summaries and analysis of new Library costs resulting from the expansion( ; project, the continuation of the General Fund annual payment of $399,000 is ` assumed. The attached analysis, therefore, needs to be reviewed in comparison to the current annual cost of $399,000 being paid by the General Fund. ALTERNATIVE 1 — (STAFF RECOMMENDATION) : Loan $5 million from 1986/89 C.O.P. proceeds, as interim/temporary Library Expansion Project funding, then repay the $5 million with a new 1994 C.O.P. issue which would include defeasance of 1972 Library Bonds This recommended alternative would allow a delay in the issuance of permanent C.O.P. ' s and defeasance of the 1972 bonds. This has the benefit of delaying the increase in annual debt service payments. You have shown that the Library Service Fund can pay interest to the City on the temporary loan of $5 million during the construction of the Library Expansion. Upon completion of the project, the City can then approve permanent financing as outlined under Alternative 2, 3 or 4 below, can consider the issue of whether to issue new C.O.P. debt. ALTERNATIVE 2: Defease 1972 Library Bonds, and issue $5 million of new C.O.P. ' s (no use of 1986/89 C.O.P. ' s) . This alternative represents the basic permanent financing approach for the Library Expansion _ Project. As indicated in the attached October 15th memorandum, this financing approach was approved by the City Council in , March of 1991 and could be implemented now. A delay in the implementation of this permanent financing approach (Alternative 1 ) has been recommended for the / following reasons: e� BUDGET STUDY SESSION Policy Guidelines for ' 92/93 Budget Preparation 1 . from a cash management point of view, it is not recommended that new C.O.P. debt be issued when proceeds of the prior C.O.P. issue have not yet been utilized or allocated. To do so would increase- annual debt service costs unnecessarily. 2. . Any new C.O.P. issue requires a pledge of General Fund resources as security for the annual debt service payments even if the Library Service Fund revenues are "earmarked" for debt service payments. Due to the current General Fund shortfall , rating agencies could lower the City' s bond rating upon issuance of a new C.O.P. debt. This, would result in higher annual debt service payments compared to issuance at current City bond ratings. 3. Total costs for the Library Expansion Project are unknown until the construction. contract is completed, parking, Talbert Avenue, and methane mitigation issues are resolved. ALTERNATIVE 3: Use $5 million of 1986/89 C.O.P. proceeds as permanent financing. (do not defease 1972 Library Bonds) . While this alternative has the advantage of being the least cost over the long term, it has the disadvantage of being the highest cost for the four fiscal years beginning in 1994/95. This is due to the need, through 1997/98 to pay both the debt service on the 1972 bonds ($399,000 per year) plus the debt service on the 1986/89 C.O.P. ' s (roughly $425,OOO per year) for a total annual average debt service for the four years of $815,000. Following those four years, the annual debt service would drop to an average of $423,000 compared to alternatives 1 and 2 where total average annual debt service would be an estimated $550,000 or $573,000 respectively. Please note that the City will retain the option of implementing this alternative in 1994 if Alternative #1 is approved as recommended. That _ is, in 1994; prior to the issuance of permanent financing for the. Library Project (including.. defeasance of the 1972 bonds) this Alternative #3 can be analyzed again in comparison to a 1994 C.O.P. issue to defease the 1972. bonds and raise $5 million in new proceeds. ALTERNATIVE 4 — (Not included in attached analysis) : Utilize General Fund reserves to finance all or a portion of the $5 million needed for the Library Expansion Project. Instead of loaning any of 1986/89 unused C.O.P. proceeds or issuing. any new debt to defease the 1972 bonds, General Fund reserves could be allocated to fund all or a portion of the $5 million needed for the Library Expansion Project. Obviously this would reduce the fund balance (reserve) of the General Fund by whatever amount is allocated to the Library Expansion Project. This alternative is not recommended at the current time due to the uncertainty about the 1992/93 General Fund budget shortfall (and the litigation of the additional PERS refund of $6.5 million) . Upon completion of the construction of the Library Project, the General Fund reserve may be large enough to fund all or a portion of the $5 million currently estimated to be needed for the Library Expansion Project. If this occurs, then the City could consider using General Fund reserves instead issuing new C.O.P. debt in 1994. —2— BUDGET STUDY SESSION Policy Guidelines for '92/93 Budget. Preparation SUMMARY As indicated in the above analysis, Alternative 1 provides the City with a sound interim financing approach while still keeping many options open as to the permanent financing of the Library Project. Therefore it is recommended as the best financing option available for the funding of th $5 million needed for the .Library Expansion Project. RT J. FRANZ Deputy City Administrator RJF:skd WPADSERT:738 ti-I MAO CITY OF HUNTING TON BEACH INTER-DEPARTMENT COMMUNICATION HUNTINGTON BEACH To MICHAEL T. UBERUAGA From ROBE RT J. FRANZ City Administrator Deputy City Administrator Subject. FINANCING — LIBRARY Date OCTOBER 14, 1991 EXPANSION PROJECT This memorandum will outline the reasons for the proposal to utilize up to $5,000,000 of unused Certificates of Participation (COP) proceeds as temporary financing for the Library Expansion Project. These COP proceeds (total = $10.2 million) are available due to the cancellation of the North of the Pier Parking Project. The unused COP proceeds will ultimately be used for City capital improvement projects or will be refunded. -- PERMANENT FINANCING — LIBRARY EXPANSION PROJECT The permanent financing for the Library Expansion Project is a refinancing of the 1972 Public Facilities Corporation (PFC) debt on the Library. The estimated new annual debt service for this approach is $589,780 compared to current debt ,service of $399,000. The $190,780 increase in annual debt service cost would be paid from the new Library Service Fund revenues. This financing approach was approved by the City Council in March of 1991 and could be implemented now. A delay in implementation of this permanent financing approach has been recommended for the following reasons: 1 . From a cash management point of view, it is not recommended that new COP debt be issued when proceeds of a prior COP issue have not yet been utilized or allocated. To do so would increase annual debt service unnecessarily. 2. Any new COP issue requires a pledge of General Fund resources as security for the annual debt service payments even if other revenues are "earmarked" for debt service payments. Due to the current General Fund shortfall, rating agencies could lower the City's bond rating upon issuance of a new debt issue. This would result in higher annual debt service payments compared to issuance at current City bond ratings. 3. Total costs for the Library Expansion Project are unknown until a construction contract is awarded, parking, Talbert Avenue, and methane mitigation issues are resolved. PROPOSED TEMPORARY FINANCING — LIBRARY EXPANSION PROJECT It is proposed to use up to $5,000,000 of the unused COP proceeds as temporary financing. This would allow a delay in the issue' of permanent COP' s and would delay the increase in annual debt service payments. The temporary financing can,/ be viewed as a construction loan or "line of credit" upon which interes't,rwould 'f be paid as funds are used. The interest rate on the funds used can be setrby-' the City Council at the same rate. as the City's investment portfolio earnings, thereby assuring that there is no loss in interest earning revenue to the unused COP fund. , FINANCING - LIBRARY EXPANSION PROJECT Conclusion: The permanent financing approach can be implemented at any time. Staff recommendation is: 1) .Use up to $5,000,000 of unused COP' s for temporary financing of the Library Service Project and, 2) Delay the implementation of permanent financing until the completion of the Library Expansion Project or at such earlier time that the $10.2 million of unused COP proceeds are needed for either refunding or use for City projects. ROB RT J. FRA De y ministrator RJF:skd �O -2- WPADSERT:605 STONE & YOUNGBERG MEMBERS: PACIFIC STOCK EXCHANGE January 10, 1992. Mr. Robert Franz Deputy City Administrator P.' O. Box 190 2000 Main Street Huntington Beach, California 92648 Dear Bob: Enclosed is our analysis of the City of Huntington Beach's alternatives regarding the funding of the $5 million Library Improvement Project. Each of the analyses assumes that project funding in some form begins on March 1, 1993, so the first expenses are reflected in the FY 1994 budgets. Interest rates for the analyses are based on tax- exempt and U S. Treasury rates on December 16, 1991. Please let me know if you have any additional questions on this matter. Sincerely, Stone & Youngberg Edward G. Schilling Enclosures , ONE CALIFORNIA STREET SAN FRANCISCO,CALIFORNIA 94111 (415)981-1314 CITY OF HUNTINGTON BEACH ANALYSIS OF LIBRARY FUNDING ALTERNATIVES December 17, 1991 Alternative #1 LEND PROCEEDS FROM 86189 COPS TO LIBRARY, CONTINUE TO PAY 72 BONDS, RESTORE 86189 PROCEEDS WITH 1994 COP SALE Par Amount of Bonds (1994 COP ) $7,025,000 Annual Debt Service FY 1994 (includes 72 Library Bonds & 86 COPS) $781;328 Average from 1995 through 2024 (72 Bonds defeased) (1) $548,568 Interim Debt Service for 86/89.COPS and 72 Library Bonds $781,328 Debt Service on 1994 COPS $16,457,043 Total Library Debt Service to maturity $17,238,371 Present Value of Debt Service @ 7% • $7,073,381 Alternative #2 DEFEASE 72 BONDS, $5 MILLION NEW MONEY CLOSING MARCH 1, 1993 Par Amount of Bonds $7,325,000 Average Annual Debt Service $573,346 Total Debt Service to maturity (2) $17,200,373 Present Value of Debt Service @ 7% $7,1 15,172 Alternative #3 REASSIGN PROCEEDS FROM 86189 COPS TO LIBRARY, CONTINUE TO PAY 72 BONDS (3) Amount of 86/89 COP Proceeds Required (4) $4,855,000 Average Annual Debt Service FY 1994 through 1998 (includes 1972 Library Bonds) $789,188 From 1998 through 2020 $423,794 Debt Service for new Library Project $1 1,414,344 Remaining 1972 Library Debt Service $1,944,869 Total Library Debt Service to maturity (5) $13,359,213 Present Value of Debt Service @ 7% $6,648,978 NOTES: I. Reinvestment yields to defease 1972 Library bonds taken from Wall Street Journal dated 12/16/91. 2. Alternatives #I and #2 assume 29 year amortization of debt at current A I interest levels. 3. Alternative #3 is assumed to be a permanent financing option for the purpose of this analysis; i.e. the 86/89 COP Fund would not be reimbursed by a future COP sale. 4. All three alternatives assume net funding of the Library project with 15 month construction period and 5% investment earnings. 5. Alternative #3 uses the 1986 interest rates through final maturity in 2016 and then the 1989 interest rates for the 2019 Term Bond (26 year'amortization), and continues scheduled debt service to maturity on 1972 Library Bonds CITY OF 1-I1-TINGTON BEACH ANALYSIS OF LIBRU ;UNDING ALTERNATIVES COMPARISON OF DEBT SERVICE PAYMENTS Fiscal Alternative#I ? Alternative#2 Alternative#3 Year Lend 86/89 Proceeds for Library 1993 Library Reassign 86/89 COP Proceeds for Library Ending Restore 86/89 COP Fund w/ 94 COP Sale COP/Defease Continue to Pay 72 Bonds " Jun-30. 86/89 COPS 72 Bonds 94 COP Total 72 Bonds 86/89 COPs 72 Bonds Total Debt Svc 1994 392,3S9 388,969 0 781,328' >:>< S73,406 ' ' 392,3S9 388,969 781,328 199S S09,318 S09,318 ::: 574,138 `< 424,240 386,000 810,240 1996 549,495 549,495 >'. S74,394> 424,800 387,025 811,825 1997 5S0,008 5S0,008' '" S74,I S0 <> 424,90S 388,250 813,155 1998 S50,033 SS0,033 ': 573,408± 424,575 394,625 819,200 1999 549,570 549,570 :s 572,170 <> ' 423,800 423,800 2000 S48,623 548,623 ;_''` 57S,325 422,S70 422,570 2001 S52,075 SS2,07S< :" S72,913 >' ::: 425,683 425,683 2002 549,96S S49,965 '' S74,915 < 423,075 423,075 2003 SS2,27S SS2,275 571,320€:"' 424,780 424,780 2004 548,993 548,993 <<`` 572,110 425,695 425,69S 2005 SS0,100 550,100 < 572,I I0 >'' 42S,820 42S,820 2006 550,423 550,423>' '. S71,300< _' 42S,I SS 425,I SS 2007 S49,940 549,940 :> ': 574,493 :` ': 423,700 423,700 2008 548,633 S48,633 <>"" 571,568> `» 426,258 426,258 2009 551,21 S SS 1,215: : ' S72,S95 ``> 422,828 422,828 2010 552,588 572,588 `:'>'': 423,410 423,410 - 2011 S48,098 S48,098 S71,545 : l : 422,808 422,808 2012 552,573 552,573' '"' 574,295>< 42S,823 42S,823 2013 550,840 550,840:: is 575,665 ; <':i 422,45S 422,45S 2014 548,073 548,073 ::'' 57S,6SS ' : 422,705 422,70S 2015 549,098 549,098 >:' : S74,26S"`%:<`` 421,375 421,37S 2016 S48,743 548,743 : S71,495<' `:'': 423,268 423,268 2017 551,83S S51,835€€ :' S72,173 ' ' ; 423,18S 423,18S 2018 S48,37S S48,37S: : S7S,953 : 422,72S 422,725 2019 548,363 548,363 >' 572,835 >">> 422,000 422,000 2020 551,4S3 SSIAS3 ` S72,820 ': 424,350 424,3S0 2021 S47,645 547,645 57S,S63 2022 S51,768 SS1,768€€ '' S71,063 2023 548,648 548,648":` : 2024 S48,285 548,285 :`:` : Total Debt Service 392,359 388,969 16,457,043 17,238,371 <" `': 17,200,373 11,414,344 1,944,869 13,359,213 Present Value of Payments @ 7% 7,073,381 6,648,978 ,,01 ATTACHMENT #2 Huntington. Beach Library Projected Increased Costs Expansion Project (Certificates of expansion - COPs) (Annualized) $4541405 CAP Annual Increase 42% $190,780 Building uildin Costs 8 500 000 Operating Costs 35% $167,956 Personnel 23% $105,669 Funded : $3,500,000 Unfunded : $5,000,000 Cost vs. Revenues Projected Increased Revenues (Annualized) Costs $457,500 $464,406 Theater 7% Medla Services 9% I $33,220 $43,000 Parking Meters 11% Room Rentals 10% '� $52.500 $46,680 Revenues Interest 7% $32,000 $467.500 0 100000 200000 300000 400000 500000 600000 Com. Enrich Lib. Fee 55% $260.000 Library Services Fund a CONSTRUCTION FINANCING DURING CONSTRUCTION ATTACHMENT #3; LIBRARY EXPANSION PROJECT Expenses During Construction (6 month increments) 12/91 2 12/92 6/93 12 93 6/94 Total 1. Construction Payments 0 $449,267 . 1,958,984 2,733,725 2,6451181 34,843 $7,822,OOC 2. Expenditures to Date $678,000 678,000 Total Project Cost , 3. Interest on COP Loan 0 0 0 0 104,399 223,432 327,831 Total $618,000 $449,267 1,958,984 2,733,725 2,749,580 258,275 $8,827,831 Construction Funding 12/91 6/92 12/92 6/93 12/93 6/94 Total 1. Capital Funds: Expenditures to Date $678,000 $ 678,000 Existing Fund Balance 0 $449,267 1,958,984 413,749 0 0 2,822,000 (Library Service Fund) Loan From Unused COP Funds 0 0 0 2,3190976 2,6:45,181 34,843 5,000,000 2. Use of Library Svcs.Fund Revenue 0 0 0 0 104,399 223,432 327,831 Total ` $678,000 $449,267 1,958,984 2,733,725 2,749,580 258,275 $8,827,831 ® ExpansionFinancing Pg.1 ATTACHMENT #4 LIBRARY SERVICE FUND REVENi1ES AND EXPENSES DURING CONSTRUCTION 6 MONTH INCREMENTS LIBRARY EXPANSION PROJECT 12/91 92 12 92- 6/93 12 93 / Total Revenues: Community Enrichment Library Fee $ 30,000 30,000 30,000 30,000 52,000 52,000 $224,00( Interest Earnings 111,275 95,490 24,994 12,480 15,834 15,475 275,541� Parking 1,200 1,200 1,200 1,200 1,200 1,200 7,20( Total Revenue $142,475 126,690 56,194 43,680 69,034 68,675 $506,70 Expenses: Interest Expense on COP Loan $ 0 0 0 0 104,399 223,432 $327,831 (See Page 1) Cumulative Balance: $142,475 269,165 325,359 369,039 333,674 178,917 178,91 ExpansionFiina cing Pg.2 y ;- a ESTIMATED LIBRARY SERVICE FUND REVENUE AND EXPENDITURES POST CONSTRUCTION LIBRARY EXPANSION PROJECT ATTACHMENT #5 (Annualized) Beginning FY 94/95 I. *Revenues Related to Library Expansion 1. Com. Enrichment Lib. Fee $360,000 2. Interest Earnings(7.58) 40,125 3. Media 43,000 4. Theater 33,000 5. Room Rental 47,000 6. Parking Meter Revenue 52,500 Total Estimated Revenue $575,625 Additional Annual Potential Revenue 7. Book/Gift Store 40,000 8. Fund-raising/Donations 80,000 Total Additional Revenue $120,000 II. Expenses Related to Library Expansion Personnel & Operating $263,625 Increased Debt Service 190,780 Total $454,405 III. Library Service Fund Reserve Total Estimated Revenue $575,625 Total Expenses $454,405 Surplus $121,220 Cumulative Balance $178,917 Library Service Fund Reserve $300,137 *See Detailed Information On Post Construction Revenue Expansion Financing Pg.3 1 DETAILED INFORMATION ON POST CONSTRUCTION REVENUE 1. Community Enrichment Library Fee (CELF) ATTACHMENT #6 This fee was approved to assist the library in meeting the growing demands of libran services as a result of development. It is placed into the Library Service Fund and assessed per square foot during building permit application. From 1982 through 1990, the fee ranged from 5C to lOC per square foot and annual revenue fluctuated from $30,000 to over $450,000. Since then, the City Council increased the fee to 151C per square foot. The actual average of these years is $216,378. However, if these amounts were adjusted to the current 15C per square foot, the average is $436,585 per year (see Chart A) . The projected average fees from 1992-2003 is estimated to be $273,000 (see Chart B) . The historical/projected revenues from 1982-2003 reflect an actual average of $247,000 and projected average of $347 ,000 (see Chart Q . Although there is a current building slowdown, major developments listed below have been projected by the Planning Division to result in approximately 33,500,000 square feet, .providing over $5,000,000 in CELF fees over the next 15 years. Although Planning originally projected over 30 'million square feet of development, to be conservative, these projections were reduced by 33 percent (see Charts D and E) . These charts reflect Planning Divisions original, prior projections compared to the revised, reduced projections. It is important to note, these estimates do not include other developments such as McDonnell Douglas or the routine, normal building, additions, etc. The information below includes Planning's projections with the reduced projections of specific development projects only. COMMUNITY ENRICHMENT LIBRARY FEE (CELF) Increases from Major Development Projects Community Enrichment Commercial/ Library Fee Development Residential Industrial SF Total SF .15 Units Avg.SF Total SF 2,650 2,438 6,460,700 7,320,700 $1,098,105 Holly Seacliff 4,400 2,509 11,000,000 860,000 11,868;008 $1,779,000 2,442 5,372,400 5,397,400 809,610 Bolsa Chica 4 ,894 2,200 !Q,7114,900 25,000 10,769,900 1,615,470 Meadowlark 600 2,000 1,200,000 122,000 1,322,000 198,300 Ascon 600 2,100 1,260,000 0 1,260,000 189,000 Waterfront 639 2,000 1,278,000 1,255,600 2,533,600 380,040 Downtown Core 800 1,800 1,440,000 250,000 1,690,000 253,500 Miscellaneous 1,200 1,800 2,160,000 152,000 2,,312,000 346,800 Redevelopment 8,931 2,203 19171,100 21,835,700 $3,275,355 ( Total 13,123 2,215 29: QUO 2,664,600 31,747,400 \� Expansion Financing Pg.4 Community ,_ En r Library Fee Annual Revenue: Historical and Adjusted . Thousands $ 1200 $ 1000 _ _. ... . ...... . :..... .... $800 - _-_—.----.------_.___._...__...._......._.___......__----:.._......._._ $6 0 0 ----__ ............... ............................. . .. .. _ $400 $2 0 0 -- _, -_-____-..--___-___ __-._-...- _-._-_-..__. ,�— .- __-_-__-_ _ -_ _ $0 82 83 84 85 86 87 88 89 90 91 92 —e— Actual Revenue Adjusted Revenue - Real Average Adjusted Average ($216,378) ($4367585) Community. Enrichmen t . Library Fee Projected 1992-2003 Thousands $600 $5 0 0 ---___ __ ____ _. _ .._ _. ..._ . ... ...... $4 0 0 _ —_- ...__ ___ _ _ _ _ ... _ .._..:... .__._...:. ............._......___..__..........._.........................._. --.._._...-... -------...................._............_................_._.-- ._...................- $3 0 0 ._.__._ _.___..___.___.---_.._...____-----__............_........_........_......................_...._..._-...._.._..___.........__..._._-..._......_._......_._.._..__._ -------------------- ------ ---------------------- $2 0 0 --__..__.___.._.____.._..____.___._.............. ._.__.._....................__..........._........._............................_._-...__.........................._............._.... _._ _ __.__....._.....___-__-..___.....-- $ 10 0 — - -- _..._._._...._.._..........._...._....._.................._....._....._............_..........................._...__..--................................_.---___..__.__...... - ..._..__...__... - ._..__...__..__._..........-- $0 92 93 94 95 96 97 98 99 00 01 02 03 Projected Revenues _------ Average ($272,916) Total for 1992-2003: $3,275,000 Community ' Enrichment. Library Fee Annual Revenue: Historical. and Projected Thousands $ 1200 $ 1000 __----_ _ _ __ ...... - _ --..:_.......-.........................._..._....... $8 0 0 ._...................._.,- $600 ________.____..._._._..___.........................._ -____-- $400 Ile, - - - --- - ------ ---- ----------------------- -------------------------------- - ------ $2 0 0 __________--_ ._.___......-._-__.......:...---_ -- ___._._.__._..__.._._._.._....._................._..___.._. -_ $0 '82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 Actual Rev. Projected Rev. Adjusted Rev. Act.-Prof. Avg. Adj.-Proj. Avg. ($247,217) ($347,311) OD Major and CommunityEnrichment LibraryFee (Revised) Holly Seacliff 1`1:&6 7.32 Bolsa Chica - T2-5Z i 5.40 Meadowlark - 1 .32 Ascon 1 .26 j I Waterfront 2.53 j 1 .69 Downtown Core - ! Misc. Redevelopment - 2.31 To t a l 339" 21 .81 0 10 20 30 40 50 Square Feet (In Millions) ® Revised Residential ® Revised Com./Indust. Prior Planning. Division Projections CELF 0$.15 $—�,0-1,3_` $3,275,000 Communit Enric'hment Library Fee (.Revised) by Fiscal Year Thousands $600 om om o 00 o m o 00 N O h d' un d' O w t/) c(} t/} O to Ch M O r m O O O $4 0 0 - --- Om .� O m Cr) O r v} r o d to N O CO O CD O CDv} Ln $2 0 0 --o---...-----o-�-- -- -- — -- --- - - ... ....... O O un � m O ur,H. $ 10 0 _---------- $0 92 - 93 94 95 96 97 98 99 00 01 02 03 ® Revised CELF Prior Projections Total. for 1991-2003: $3,2.75,000 1: Q 2. Interest Earnings All revenues indicated for items 1 - 6 will be placed into the Library Service Fund. Interest earnings on the cumulative fund balance has been estimated using an assumed interest rate of 7.0% for 1992/93, 7.5% thereafter. 3. Media Revenue Current Projected Increase Videos $21,500 $26,875 $ 5,375 Compact Discs 21,000 26,875 5,875 Computer Stations 6,600 35,750 29,150 Fines . 9,000 11,500 2,500 Equipment 1,900 2,000 100 TOTAL $60,000 $103,000 $43,000 The increased circulation and revenue for videos and compact discs is a result of the expanded space for growth of the collection, improved visibility of the Media Department due to relocation to the main entrance and the increase in operation hours per week from 48 to 60 hours (25% increase) . Ten additional computer stations will be added to the current three to meet patron demand for personal computers. The computer stations currently net $2,200 each. We anticipate a 25% increase in usage due to the increased visibility and the expanded hours of service. Therefore, it is anticipated that each of the 13 stations will generate $.2,750 per unit. One 20 hr. temporary clerk will be added to staff expanded hours and has been included in the personnel cost. Computer stations will cost $2,81 each to purchase and have been capitalized over a three year period. 4. Theater The theater will be primarily used for revenue generating performances and nonprofit meetings. The Huntington Beach Playhouse will occupy the theater one third of the time for 60 performances and the remaining two thirds will be rented out to other performing arts programs, business meetings, seminars, etc. Huntington Beach. Playhouse Rent: The Huntington Beach Playhouse is currently paying approximately $8,000 at its present location, Gisler School. The playhouse would agree to an additional $2,000 "rent" to be relocated to the library due to the upgraded facility, parking and the prime location. Ticket Sales: In addition, a city fee of $1.10 (or more) could be charged per ticket. 60 performances x 150 tickets per performance (average) . 60 Performances x 150. . Tickets per performance (average) 9,000 Tickets x 1.10 City Fee $ 9,900 Ticket Sales Revenue Expansion Financing PgS Other Uses: Twelve similar theaters were surveyed. Based on that information, we have conservatively projected the theater would generate $20,000 per year. Again, the Playhouse will 'use the theater one third of the time. The other two thirds .would be used by other organizations. We projected the revenue to be 2/3 of $20,000 for a total of $13,320. Total Playhouse $19,900 Rent $10,000 Tickets $9,900 Other Uses 13,320 $33,220 5.. Room Rental Current Projected Increase Talbert Room $13,320 $13,320 $ -0- Balboa Room 6,680 6,680 70- New Meeting Rooms A -0- 6,680 6,680 B -0- 6,680 6,680 C -0- 13,320 13,320 D -0- 13,320 13,320 E -0- 6,680 6 ,680 TOTAL $20;,000 $66,680 $46,680 Currently the library has two meeting rooms generating $20,000. The expansion rooms are various sizes and revenue is projected based on the uses of the current rooms. Due to lack of convenient parking, and booking availability, clients have been turned away. The expansion includes five additional rooms with catering facilities and convenient parking. City sponsored organizations are not charged. Twenty hours a week for a temporary clerk have been included under personnel costs for room reservations. Parking Meter Revenue The expansion parking plan allows for 705 parking spaces by eliminating a section of Talbert Avenue between Golden West and Gothard Streets. Additionally, the plan provides for more access to Central Park and outdoor cultural activities. Of the 705 spaces, 100 will be metered at .$25 per hour. The current six library meters net $525 per meter per year. The Parking Meter revenue projected for the post construction period is $52,500 per year. ($525 per meter x 100 meters. ) 7. Book and Gift Store The existing Gift and Book Shop is remotely located in the Central Library. It generates approximately $50,000 gross, . $25,000 net annually with a square footage of 700 square feet. In the new location it is prominently located near the exit with over 1,250 square feet. With this new location and increased marketing capability, it is expected that the gross would be $75,.000 or a net of $40,000. Expansion Financing Pg.6 8. Donations* The library has three support groups, in addition to other organizations which raise revenue for the library. Based on the last five years of fund-raising, the following is an annual average of these fund-raising activities: A. Friends of the Library $40,000 Book Sales - $30,000 Programs - $10,000 B. Library Patrons Foundation - $30,000 Concours d'Elegance - $10,000 Valentine "A Taste of Huntington Beach" - $10,000 Donations - $10,000 C. Friends of the Children's Library - $5,000 D. Miscellaneous donations $5,000 Total Estimated Annual Donations: $80,000 *Excludes special bequests, trusts designated for Expansion Project Building Fund. f Expansion Financing Pg.7 t APPROVED B S , FOR CITY COUNCIL- ACTION COUNCIL 19r,�j Date July 17, 1989 u v CLERKor and City Council Mem ers -� Submitted by: Paul E. Cook, i y Administrator Prepared by: Robert J. Franz, Deputy City Administrat Subject: 1989 Public Parking Project Financing- Certificates o P ticipation /R.. G o G Consistent with Council Policy? [A Yes [ ] New Policy or Exception &tJ S q — J1. Statement of Issue, Recommendation, Analysis, Funding Source, Alternative Actions, Attachments: Statement of Issue: In 1986 the Council issued debt for the land acquisition and construction of parking facilities in downtown Huntington Beach. It is now necessary to issue additional debt to finance the shortfall in funding for the Main Street Parking Project and new funding for the parking facility north of the Pier. Recommended Action: For the City Council - Approve Resolution 0' 6 removing property from the 1986 Iease agreement, approving the lease of such property back from the Civic Improvement Corporation and approving related agreements, official statement and sale of not to exceed$16,000,000 Certificates of Participation. For the Civic Improvement Co oration - Approve Resolution 8�J-a approving removal of property from the 1936 lease agreement and lease of such property back to the City and approval of related agreements and official statement and sale of not to exceed $16,000,000 Certificates of Participation. Analysis: In 1986 the City issued debt (Certifcates of Participation - COP's) to provide funds to acquire land and build parking improvements_ in the second and third block of Main Street in downtown Huntington Beach. Land acquisition is essentially complete in these two blocks as it relates to parking purposes. The award of a contract for the construction of the parking facility in the second block is scheduled as separate agenda item, as is the award of a- design contract for a parking structure north of th r. The COP's of 1986 generated proceeds of $11.7 million for t e par ing projects. n crest earnings on the proceeds of roughly $2,6a0,000 plus a developer commitment of $1,235,000 has resulted in a net amount available of approximately $15,500,000 for the land acquisition and construction. Total estimated .cost is detailed in the attached analysis leaving a shortfall that is proposed to be financed by this new COP debt issue. In addition to the shortfall on the Main Street Project, the City will be constructing a parking facility north of the Pier at an estimated cost of $11.75 million. This COP debt issue will provide the funding for this facility north of the Pier. As indicated in the attachments, parking revenues over the life of the debt issue will more than cover the cost of these facilities. There will be.a subsidy in the early years of the operation of these structures which in later years will be more than offset by anticipated surpluses. This is similar to the City's experience in the past where debt was issued to construct parking facilities on the beach at a time when revenues initially did not equal debt service but in later years has turned into a major revenue source for the General Fund. FIO 5/85 ' 1989 Public Pa �19 Project Financing - CertificateF participation The current year budget anticipates this debt issue with funds appropriated for the initial debt service payment. This financing approach is very efficient in terms of the size of the debt issue compared to a more traditional construction financing program. This is because by utilizing an existing asset, (Civic Center Facilities), the requirement to issue debt to fund interest during a construction period is avoided. Instead, by utilizing an existing asset there is no period of construction, and lease payments can begin immediately. Therefore the debt issue is approximately $1.4 million less in total size than a traditional construction financing debt issue, and annual debt service an estimated $140,000 less than traditional financing. Alternatives: 1. Issue debt under a different financing structure. 2. Do not issue debt and secure funding internally by reducing appropriations by $15 million. Funding Source: First year's debt service will be paid from 189/90 budgeted appropriations in the General Fund. Attachments: . Resolution of the City Council 2. Resolution of the Huntington Beach Civic Improvement Corporation 3. Construction Funding Analysis 4. Cash Flow Projections 5. Preliminary Sizing and Estimated Debt Service Schedule 6. Preliminary Official Statement (On File in the City Clerk's Office) 7. Purchase Agreement (On File in the City Clerk's Office)' S. Agreement Regarding Removal of Property from the 1986 Lease (On File in the City Clerk's Office) 9. Lease Agreement Dated as-of August 1, 1989 (On File in the City Clerk's Office) 10. Trust Agreement Dated- as of August 1, 1989(On File in the City Clerk's Office) 11. Assignment Agreement Dated as of August 1, 1989-(On File in the City Clerk's Office) 12. Agreement Between the City of Huntington Beach and Jones Ball Hill and White for Bond Counsel Services (On File in the City Clerk's Office) 4636j DOWNTOWN PARKING STRUCTURES CONSTRUCTION FUNDING ANALYSIS ESTIMATED COSTS: A. Main Street Parking Structure: Land Acquisition: 2nd Block $ 4,000,000 Relocation 2nd do 3rd Block 800,000 Construction (Estimated - 1989/90) 11,500,000 2nd be 3rd Block Excavation, Demolition, etc. 450,000 Sub-Total $ 16,750,000 B. Land Acquisition: 3rd Block of Main St. (Actual) 1,718,000 C. Estimate: Cost of Parking Structure North of Pier 11,750,000 Total Costs $ 301218,000 LESS AVAILABLE FUNDING: 1986 Certificates of Participation Proceeds $ 11,683,000 Interest Income on Proceeds 2,600,000 Sale of Commercial Shell: 2nd Block 1,235,000 Total Available $ 15,518,000 EQUALS ESTIMATED A.DMTIONAL FUNDING NEEDED $!14,700..000_ 989 CERTIFICATES OF PARTICIPATION: Net Proceeds $ 13,265,000 Interest on Proceeds(During Construct1W 1,500,000 $ 14*765,_000 4655j DOWNTOWN PARKING STRUCTURES CASH FLOW PROJECTIONS (Assumes 1650 parking spaces) CUMULATIVE FISCAL REVENUE ANNUAL DEBT TOTAL SURPLUS TOTAL YEAR (PARKING) MA1NT. SERVICE COSTS /DEFICIT 1986/87 0 325 '000 325 , 000 -325 , 000 - 325,000 1987/88 0 650 .000 650 , 000 -650,000 - 975,000 1988/89 0 650, 000 650, 000 -650., 000 - 1,625,000 1989/90 0 0 112151000 11215 , 000 -112151000 - 2,840,000 1990/91 635 , 250 118 ,580 1 , 780, 000 1 ,898 , 580 -1 , 263 ,330 - 4,103,330 1991/92 1 , 237, 500 231 , 000 1 . 780, 000 21011 , 000 773 , 500 - 4,876,830 1992/93 1 ,485 , 000 240, 240 1 ,780 ,000 2 ,020,240 -535, 240 - 5,412,070 1993/94 1 . 485 , 000 249 , 850 1 . 780,000 21029, 850 -544 ,850 - 5,956,920 1994/9S 1 , 732, 500 259 , 844 1 , 780, 000 2 , 039, 844 -307, 344 - 6,264,264 1995/96 1 , 732 . 500 270, 237 1 , 780,000 2 , 050,237 -317, 737 - 6,582,001 1996/97 1 , 732,500 281 , 047 1 , 780,000 2 ,061 , 047 -328 , 547 - 6,910,548 1997/98 1 ,980,000 292 .289 1 ,780.000 2 , 072 , 289 -92 , 289 - 7,002,837 1998/99 1 . 980, 000 303, 980 1 , 780, 000 2, 083, 980 -103, 980 - 7,106,817 1999/00 1 '980,000 316 . 139 1 ,780 .000 2,096 , 139 -116, 139 - 7,2221956 2000/01 2 ,475 ,000 328 ,785 1 ,780, 000 2 , 108,785 366 ,215 - 6,856,741 2001 /02 2, 475 , 000 341 , S36 1, 780,000 2 , 121 , 936 353, 064 - 6,503,677 2002/03 2 ,475 .000 355. 614 1 .780, 000 2, 135,614 339 ,386 - 6,164,291 2003/04. 2,970, 000 369, 838 1 , 780, 000 2 . 149,838 820, 162 -5,344,129 2004/05 2, 970,000 384, 632 1 , 780MO 2, 164 , 632 805-, 3368 - 4,538,761 2005106 3, 465,000 400. 017 1 . 780,000 2 , 180, 017 1 , 284 ,983 - 3,253,778 2006/07 3,46S .000 416 ,018 1 ,780, 000 2 , 196 , 018 1 , 268 , 982 - 1,984,796 2007/08 3, 465, 000 432, 659 1 , 780, 000 2 , 212 , 659 1 , 252 ,341 - 732,455 2008/09 3 . 960, 000 _449, 965 1 , 780, 000 2 , 229 , 965 1 , 730. 035 9971580 20.09/10 3,960,000 467. 964 1 , 780,000 2 ,247 ,964 1 , 712.036 2,709,616 2010/11 4 . 950 , 000 486, 682 1 .780, 000 21266 ,682 2 , 683,318 5,392,9134 2011/12 4. 950, 000 506, 149 1 , 780, 000 2, 286, 149 2 . 663, 851 8,056,785 2012/13 4 .950 ,000 526 , 395 1 , 780,000 21306 / 395 2 , 643, 605 10,700,390 2013/14 5.940 . 000 547 ,451 1 ,780,000 9,327.451 3 , 612 ,549 14,312,939 2014/15 5, 940, 000 569, 349 I , 780,000 Z. 349, 349 3, 590, 651 17,903,590 2015/ 16 6 ,930 ,000 592 , J23 1 .780,000 21372 , 123 4 , 557,877 22,461,467 2016/17 6 ,930 ,000 615,808 1 . 455 , 000 2 ,070,808 4 , 859 , 192 27,320,.659 2017/1 6430, 000 640,441 1 , 130, 000 1 , 770, 441 51159, 559 32,480,218 2018/1 f,,q20,000 666,058 565 , 000 1 ' 231 '058 6 , 688,942 39,169,160 2019/29 7s*2o ,000 692, 700 0 692 ,700 7 , 227 ,300 46,396,460 Cb r = �wo� a W W t a2 V r= U c G yrh n 0 02 +n Q l-t- Co#e f• PRELIMINARY SIZING CITY OF HUNTINGTON BEACH UNINSURED CERTIFICATES OF PARTICIPATION (CIVIC CENTER PROJECT) (6/6/89) SOURCES OF FUNDS Principal Amount (1 ) $14,865,000. 00 USES OF FUNDS Reserve Fund (MADS) $1 ,223, 912.00 Underwriter 's Discount (1.75%) $260, 137.50 Estimated Costs of Issuance (2) $116,050. 50 Construction Fund $13,265,000.00 Total 414,865,000. 00 ---------------------------------------------------------------------- ( 1 ) Principal Amount subject to change at time of actual pricing due to changes in Underwriter 's Discount and Costs of Issuance. (2) Bond Counsel $70,000.00 Rating Fee $10,000. 00 Trustee Fees $12,000. 00 O/S Printing $10,000. 00 Bond . Printing $5,000. 00 Miscellaneous $9,050.50 Total $116,050. 50 HUNTINGTON BEACH C'?IC CENTER COPs COST COyPARISON INSURED v. UNINSURED STRUCTURES 1616/39) INSURED STRUCTURE UNINSURED STRUCTURE ----------------------------------------------------------------------- - ----------------------------------------------------------------- ------------ I0erest Total D/S Reserve Total - -- Interest Total Reserve Fund Total Annual Savin DATE Principal (1) Debt Service ./C Fee(2) Cost Principal (3) Debt Service Ewings(4) Cost Insured ------ --------- -------- ------------- ----------- ---------- -------- _ ---------- ---------- ---------- ---------- -------- 8/1/90 $150,000 $967,620 $1,I17,620 $2,809 $1,120,429 $'160,000 $1,063,799 $1,223,798 ($88,323) $1,135,475 Sf5,046 8/1/91 $!60,000 S958,020 51,118,020 $2,809 $!,120,829 #170,000 #!,053,328 $1,223,398 ($88,323) $1,135,075 $14,246 B/1/92 $1701000 $147,700 $1,117,700 $2,809 $1,120,509 S!80,000 $1,042,178 $1,222,178 (S98,323) $1,133,855 t13,346 8/1/93 S185,000 $?36,735 41,121,735 $2,809 $1,124,544 $190,000 $1,030,206 $1,220,208 ($88,323! $1,131,865, 17,341 8/l/94 #195,000 $?24,710 $1,119,710 $2,809 $1,122,519 $205,000 $1,017,478 $1,222,478 398,323) $1,134,155 $11,636 8/1/95 $2!0,000 $?12,035 $1,122,035 $2,809 $1,124,644 $220,000 $1,003,640 $1,223,640 ($88,323) $1,135,317 $10,473 8/1/96 $220,000 S698,280 $1,118,290 $2,909 $1,121,099 $2.35,030 $988,680 #1,223,6aO (588,323) #1,135,357 514,268 8/1/97 $235,000 #883,76+0 31,118,76o $2,809 $1,121,569 $250,000 $972,583 $1,222,583 ($88,323) $1,134,260 S12,6?1 8/1/96 $250,000 $869,133 $1,1189133 $2,809 $1,120,942 $265, 70 $?55,458 $1,220,452 ($88,323) $1,132,135 8/1/99 $270,000 SB51,383 $1,121,383 $2,809 $1,124,192 $28 00 $937,173 $1,222,173 (588,323) 31,133,850 S9,658 8/1/2000 $285,000 $8339158 S1,118,158 #2,80? $1,120,767 #305,000 s917,508 SI,?22,50, (588,323) #1,134,!85 #13,218 8/l/01 €305,000 U13,779 $1,118,778 #2,809 S1,121,5 7 3325,0 40 5896,310 $1,221,310 (#88,323) $. !3" n.!, _, f11,H7 401 9/1/02 #330,000 S792,?35 $1,!22,885 $21 SC-3 $1,125,6i4 $3501040 ;873,540 S!,223,564 ($38,323) $I,i351237 Yi,543 3/1/03 $350000 S770,115 $1,120,115 #2,Bog $1,122,924 #3751CJ0 S848,m $1,223,885 (S83,323) S!,133,562 €12,638 8/1/04 $375'Goo $i45,73-0 $1,120,790 $2,809 51,123,599 3400,0-)0 #822,260, #1,222,26r (583,323) #1,133,937 $10,338 8/1/05 $400"u Si19,540 $1,119,540 $2,809 #11122,34? 5430,000 i7"r3,660 $1,223,660 ($88,323) 11,135,337 S12,90 8/1/06 5430,000 $691,540 11,121,540 " ' " i !'2 00 $1 222 7' - iu) 1 lm pi 11 02S S"t,BO': S!,!'[t,349 5460,':0) #.ec,7 ,.t-,.')tit 1583,.,_.. #.,.�,,.,rr 1'),V-. 8/!/07 $460,000 $661,010 $1,121,010 $2,803 31,12. ,819 S4?0,-wo $729,no 51,219,350 (588,m #',!31,027 5"na $490,000 $628,350 S!,1181350 #2,809 #1,121,15? $525,000 #6?3 M5 SS M0 8_5 (MI 32D SqOIS2 #9 343 8/!/0? #525,00t) S 93,560 $1,118,560 $2,804 $!,121,36? $5651040 $655,763 $1,220,761 ($8213 a) $1,132,440 #l!,O7! B/Ie10 $565,000 $556,285 S1,12!,285 $2,809 $1,124,094 $6051000 $614,800 $1,21?,800 (#88,323) $1,131,477 $7,383 4 8/1/11 $605,000 5516,170 $1,!21,170 $2,909 $1,123,979 5650,000 $570,938 $1,220,936 (#82,323) S1,132,615 S8,636 8/11/12 $645,000 $473,215 $1,118,215 $29909 $1,121,024 $700,000 $523,913 $1,223,813 ($88,323) ;1,135,49(1 $14,466 8/!/13 5695,000 $427,420 $1,122,420 #2,809 $1,125,229 $750""10 $473,063 $1,223,063 ($881323) $!,:14,740 st o 8/1/14 $745,000 $378,075 $1,123,075 $21809 $1,125,894 $3001000 $418,686 $1,218,6 8 (#88,323) S!,130,365 $4,461 8/I/15) #795,000 1325,180 $1,120,180 $2,809 $11122,989 3860,000 $360,696 $1,220,698 (299,523) $1,132,365 $9,376 8/1/16 $850,000 $268,735 $1,118,735 $2,809 S1,121,544 $925,000 #299,336 $1,223,338 (5881323) $1,135.015 $13,471 8/1/17 $910,000 $206,385 f1,!18,38 #2,809 $1,!21,194 $9901000 $231,275 $1,221,275 (#88,323) $1,1321952 111,758 811/18 $990,000 $143,775 $1,123,775 $2,809 $1,126,584 $!,060,000 #159,500 11,21150 (588,n n i1,131,177 $4,593 8/1/19 $1,045,000 i741195 $1,119,195 $2,009 $1,122,004 $1,140,+000 $82,650 $1,222,650 ($1,222165 ) #0 (€1,122,004) ------------------------------------------------------------------------ --------------------------------------------------------------------------- --------------- " aM +1f i1 #l? Mg535 03 5 9 M #84 � ? ' �i r! 0 � ? S 0 f it' Totai #t�r,,. .,,. , -, 9 , ,28' #3• ,b8..�,,, s 4,$6�,,.�10 S_1,79.,.6.' #36,651,16� i-.,7;4,+.,;. '_?,873,17 (SB10,661) Net Present value Savings d 7.'117. ($11098) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (/) Averag= coupon 7.06.3X. (2) 0.25X of ma.ieut annual debt service. (3), Average coupon 7.2171. (4) Reserve Fund Earnings S 7.211 . Reserve Fund used to "make last D/S Payment. AGREEMENT BY ANI) AMONG THE CITY OF HUNTINGTON BEACH AND JONES HALL ffiLL &WRITE,A PROFESSIONAL LAW CORPORATION, FOR BOND COUNSEL SERVICES IN CONNECTION WITH CERTIFICATES OF PARTICIPATION PROCEEDINGS (1989 Public Parking Project Financing) THIS AGREEMENT is entered into as of this 17th day of July, 1989, by and between the CITY OF HUNTD\TGTON BEACH (the "City") and JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION, San Francisco, California ("Attorneys"). WITNESSETH. - WHEREAS, the City intends to enter into a lease purchase financing of various existing public safety facilities and related land (the "Project") and cause Certificates of Participation (the "Certificates") to be issued to finance various municipal improvements of the City; and WHEREAS, in connection with such financing proceedings, the City requires the advice and assistance of bond counsel, and Attorneys are willing to provide such services; NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set fortis, the parties hereto do hereby agree as follows: Section 1. Duties of Attorneys. Attorneys shall do, carry out and perform all of the following services as are necessary for the financing to be accomplished through the issuance of the Certificates: (a) Consultation and cooperation with the City Attorney, City Administrator, Chief of Administrative Services, City Treasurer and all other officers and employees of the City, with the financial consultant or underwriter and other professional firms engaged by the City with respect to the financing to be accomplished through the issuance of the Certificates. (b) Preparation of all legal proceedings deemed necessary or advisable by Attorneys for the authorization, issuance and delivery of the Lease Agreement and the Certificates; including preparation of W any documentation required for the issuance of the Lease Agreement and the Certificates by the City, including the Lease Agreement and a Trust Agreement authorizing the execution and delivery-of the Certificates, resolution authorizing and directing the sale of the Certificates, resolution awarding the sale of the Certificates to the purchaser thereof, a1 documentation required to be executed by the City in connection with the delivery of the Certificates to zhe underwriter, (ii) all necessary California Debt Advisory Commission fiiings and other reports and documents required to be filed by the City in connection with the execution and delivery of the Certificates, (iii) all certificates, requisitions, receipts and other documents required in connection with the delivery of the Certificates to the original purchase: thereof, and (iv) all other proceedings of the City incidental to or in connection with the issuance, sale and delivery of the Lease Agreement and the Certificates. (c) Application for any Internal Revenue Service or other rulings deemed necessary by Attorneys (but only following consultation with and approval by the City) to ensure the exemption of interest payable with respect to the Certificates from federal or, if applicable, State of California personal income taxation. (d) Advising the City as to the need to register the Certificates under applicable federal securities laws or to obtain a permit to issue the Certificates under applicable State of California securities laws, or to obtain no-action letters or similar determinations from the Securities Exchange Commission or California Corporations Commission. (e) Subject to the completion of proceedings to the satisfaction of Attorneys, providing a legal opinion (i) unqualifiedly approving in all respects the legality of all proceedings of the City for the authorization, issuance and delivery of the Lease Agreement and the Certificates, and any related agreements to which the City is a party, and (ii) stating that interest payable with respect to the Certificates is exempt from federal and State of California personal income taxation. Such opinion shall be addressed to the City; provided, however, that such opinion shall inure to the benefit of the owners of the Certificates and Attorneys shall be entitled to execute letters to other interested parties entitling such parties to rely upon such opinion. In addition, subject to the completion of proceedings to the satisfaction of Attorneys, Attorneys shall provide such additional legal opinions to the City, the original purchaser of the Certificates and other interested parties as shall be requested of and deemed appropriate by Attorneys. (f) Any and all legal consultation requested by the City concerning the Certificates and any resolutions, certificates, agreements and other documents relating to the authorization, issuance and delivery of the Lease Agreement and Certificates at any time following issuance of the Lease Agreement and Certificates. (g) Attorneys shall not be responsible for the preparation or content of any official statement or other offering document prepared by or on behalf of an underwiiter or financial consultant other than to examine any such official statement or other offering document as to the description of the Lease Agreement, Certificates and related financial agreements and as to matters within Attorneys' knowledge (x-ithout undertaking any independent investigation thereof). (h) Attorneys shall not be responsible for compliance by the City with arbitrage rebate requirements under federal tax law, other than to render advice as to the legal interpretation of such requirements as set forth in the documents relating to the Certificates. Without limiting the generality of the foregoing, Attorneys shall not be responsible for preparing any calculations or documentation to establish compliance with such rebate requirements or otherwise for computing the amounts required to be rebated, without a separate agreement between the City and Attorneys. (i) Such other and further services as are customarily performed by bond counsel on similar tax-exempt financings. Section 2. Compensation. For the services listed in Section 1, Attorneys shall be paid the following compensation: (a) one percent of the principal amount of Certificates up to $1 million plus (b) one-half of one percent (1/2 of 1%) of the principal amount of Certificates in excess of $1 million but less than or equal to $5 million plus (c) one-quarter of one percent (1/4 of 1%) of said principal amount in excess of $5 million but less than or equal to $10 million, plus (d) one-eighth of one percent (1/8 of 1%) of said principal amount in excess of $10 million. In addition, the City shall reimburse Attorneys for all out-of-pocket costs and expenses incurred by Attorneys in connection with their services hereunder for out-of-state travel, messenger and delivery services, -2- photocopying, telecommunications, and the cost of preparing transcripts of the proceedings for closing purposes. Payment of said compensation shall be entirely contingent, and shall be due and payable, upon the execution and delivery of the Certificates; and shall be payable solely from the proceeds of the Certificates, and from no other funds of the City. Section 3. Responsibilities of City. The City shall cooperate with Attorneys and shall furnish Attorneys with certified copies of all proceedings taken by the City and deemed necessary by Attorneys to render an opinion on the validity of the Lease Agreement and Certificates. All costs and expenses incurred incidental to the actual issuance and delivery of the Certificates, including the cost and expense of preparing certified copies of proceedings required by Attorneys in connection with the execution and delivery of the Certificates, the cost of rating agencies, all printing and publication costs, fees and expenses of parties other than Attorneys, costs and expenses of legal advertising and all other expenses incurred in connection with the execution and delivery of the Certificates, shall be paid by the City from the proceeds of the Certificates and shall not be the responsibility of Attorneys. Section 4. Termination of Agreement. This Agreement may be terminated at any time by the City with or without cause upon written notice to Attorneys. In the event of such termination, all finished and unfinished documents shall, at the option of the City, become its property and shall be delivered to the City by Attorneys. Section 5. Direction of City Attorney. In performing legal services under this Agreement, Attorneys shall work under the direction and control of the City Attorney, and shall not render additional legal services other than those specified in this Agreement without the advance concurrence of the City Attorney. Section 6. Nondiscrimination. Attorneys agree that in the performance of the terms of this Agreement, they will not engage in, nor permit their agents to engage in, discrimination in employment of persons because of race, religious creed, color, national origin, ancestry, physical handicap, medical condition, marital status, or sex of such persons, except as provided in Labor Code Section 1420. Violation of this provision may result in the imposition of penalties referred to in Division 2, Part 7, Chapter 1 of the California Labor Code. Section 7. Compliance With Professional Insurance Requirements. Attorneys shall comply with the existing policy of the City with respect to errors and omissions insurance with respect to the services of Attorneys rendered hereunder. Section 8. Workers' Compensation. Attorneys shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California, the applicable provisions of Divisions 4 and 5 of the California Labor Code and all amendments thereto; and all similar state or federal acts or laws applicable; and shall indemnify, defend and hold harmless the City from and against all claims, demands, payments, suits, actions, proceedings and judgments of every nature and description, including attorneys' fees and costs, presented, brought or recovered against the City, for or on account of any liability under any of said acts which may be incurred by reason of any work to be performed by Attorneys under this Agreement. Section 9. Independent Contractor. It is further understood and agreed that Attorneys are, and shall be, acting at all times as independent contractors herein and not as employees of the City. Attorneys shall secure at their expense, and be responsible for any and all payment of income tax, social security, state disability insurance compensation, unemployment compensation and payroll deductions for Attorneys and their officers, agents and employees and all business licenses, if any, in connection with the services to be performed hereunder. —3— IN WITNESS WHEREOF, the City and Attorneys have executed this Agreement as of the date first above written. CITY OF TINGTON BEACH By Mayor Attest.. By City Clerk Approved as to legal form. C By ? 7.,��ity Attorney -7-z o- Y i JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION By Am If '5 'Charles F. ams Executive Vice President —4— 18019-26 JHHW:CFA:KML 08/24/89 KML4516 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION SCHEDULE OF TRANSCRIPT DOCUMENTS A. BASE LEGAL DOCUMENTS 1. Distribution List of Financing Participants. 2. City of Huntington Beach (the "City") Resolution No. 6046, entitled "A Resolution of the City Council of the City of Huntington Beach Approving (1) Removal of Public Safety Property from 1986 Lease Agreement, (2) Approving Lease of Such Property Back from City of Huntington Beach Civic Improvement Corporation (3) Approving Related Agreements, Official Statement and Sale of Not to Exceed $16,000,000 Certificates of Participation", adopted July 17, 1989. 3. City of Huntington Beach Civic Improvement Corporation (the "Corporation") Resolution No. 89-2, entitled "A Resolution of the Board of Directors of the Huntington Beach Civic Improvement Corp. Approving (1) Removal of Public Safety Property from 1986 Lease Agreement, (2) Lease of Such Property Back to City of Huntington Beach, (3) Related Agreements, & Official Statement and (4) Sale of Not to Exceed $16,000,000 Certificates of Participation", adopted July 17, 1989. 4. Acknowledgment of Receipt of Report of Proposed Debt Issuance from the California Debt Advisory Commission ("CDAC"), together with Report and Certificate of Mailing Report of Final Sale to CDAC, together with Report. 5. Preliminary Official Statement. 6. Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City. 7. Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City. (recorded in Orange County) 8. First Amendment to Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and Security Pacific National Bank, as trustee. (recorded in Orange County) 9. Certificate Purchase Agreement, dated July 27, 1989 (the "Purchase Agreement"), by and among Stone & Youngberg (the "Underwriter"), the City and the Corporation, as acknowledged by State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"). 10. Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City, together with Certificate of Acceptance by the City, as acknowledged by the Corporation. (recorded in Orange County) 11. Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement"), by and between the Corporation and the City. 12. Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and the Trustee. (recorded in Orange County) 13. Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among the Trustee, the Corporation and the City. 14. Final Official Statement, executed by the City, pursuant to Section 6(d)(7) of the Purchase Agreement. B. CITY CLOSING DOCUMENTS 1. Incumbency and Signature Certificate. 2. Certificate as to Arbitrage. 3. Officer's Certificate of City pertaining to (a) effectiveness of resolution and documents, (b) representation and warranties and (c) related matters pursuant to Section 6(d)(4) of the Purchase Agreement. 4. Certificate Regarding Use of Proceeds. 5. Written Request of the City to Trustee Regarding Investments, pertaining to the investment of the Lease Payment Fund, Reserve Fund and Program Fund, pursuant to Section 7.02 of the Trust Agreement, as acknowledged by the Trustee. 6. Evidence of, or commitment to provide, insurance pursuant to Sections 5.3, 5.4 and 5.5 of the Lease Agreement and in the form required pursuant to Section 5.7 of the Lease Agreement, together with letter of insurance representative stating that such requirements have been met. 7. CLTA title insurance policy issued by First American Title Insurance Company, pursuant to Section 5.6 of the Lease Agreement. 8. Certificate of Mailing Information Return for Tax-Exempt Governmental Bond •Issues, Form 8038-G, to the Internal Revenue Service, together with Form 8038- G. -2- 9. Opinion of Gail Hutton, Esq., City Attorney, pursuant to Section 6(d)(2) of the Purchase Agreement. 10. Appraisal Letter of Mark W. Linnes, M.A.I., dated March 17, 1989. C. CORPORATION CLOSING DOCUMENTS 1. Certificate of Status - Domestic Corporation, as certified by the California Secretary of State. 2. Certificate Regarding Effectiveness of Articles of Incorporation and Bylaws, together with Articles of Incorporation as certified by the California Secretary of State and Bylaws, and any and all amendments thereto, pursuant to Section 6(d)(10) of the Purchase Agreement. 3. Incumbency and Signature Certificate of Corporation. 4. Officer's Certificate of Corporation pertaining to (a) effectiveness of resolution and documents, (b) representation and warranties and (c) related matter pursuant to Section 6(d)(5) of the Purchase Agreement. 5. Written Request to Trustee, pursuant to Section 2.01 of the Trust Agreement. 6. Requisition for Disbursement from Program Fund, pursuant to Section 4.02 of the Trust Agreement. 7. Opinion of Gail Hutton, Esq., City Attorney, Counsel to the Corporation, pursuant to Section 6(d)(11) of the Purchase Agreement. D. TRUSTEE CLOSING DOCUMENTS 1. Authentication and Incumbency Certificate, together with certified general signing/authorizing resolution, pursuant to Section 6(d)(8) of the Purchase Agreement. 2. Certificate of Trustee, pursuant to Section 6(d)(3) of the Purchase Agreement. 3. Trustee's Receipt of Proceeds. 4. Opinion of Morrison & Foerster, Trustee's Counsel, pursuant to Section 6(d)(13) of the Purchase Agreement. E. UNDERWRITER CLOSING DOCUMENTS 1. Rating Letter of Moody's Investors Service, pursuant to Section 6(d)(12) of the Purchase Agreement. -3- 2. Underwriter's Representation Letter pertaining to (a) reoffering price of the Certificates and (b) criteria for establishing reserve fund. 3. Receipt for Certificates of Participation. 4. Specimen Certificate of Participation. F. SPECIAL COUNSEL CLOSING DOCUMENTS 1. Final Approving Legal Opinion of Jones Hall Hill & White, A Professional Law Corporation, pursuant to Section 6(d)(1) of the Purchase Agreement. 2. Supplemental Opinion of Jones Hall Hill & White, A Professional Law Corporation, pursuant to Section 6(d)(1) of the Purchase Agreement. 3. Reliance Letter to Underwriter regarding Final Approving Legal Opinion of Jones Hall Hill & White, A Professional Law Corporation, pursuant to Section 6(d)(1) of the Purchase Agreement. 4. Reliance Letter to Trustee regarding Final Approving Legal Opinion of Jones Hall Hill & White, A Professional Law Corporation. 5. Recording instructions to First American Title Insurance Company. -4- A 18019-26 JHHW:CFA:KML 08/12/89 KML4498 $15,025,000 CITY OF HUNTINGTON BEACH CERTIFICATES OF PARTICIPATION (1989 PUBLIC PARKING PROJECT FINANCING) DISTRIBUTION LIST OF FINANCING PARTICIPANTS CITY TRUSTEE'S COUNSEL —Mr. Robert J. Franz (0,t) —Sydney B. Bennion, Esq. (t) Deputy City Administrator MORRISON & FOERSTER —Mr. Donald Watson (0) 333 South Grand Avenue Treasurer Los Angeles, CA 90071 —Ms. Gail Hutton (t) (213) 621-9497 City Attorney (213) 621-9401 (FAX) —Mr. Art De La Loza Deputy City Attorney —Ms. Connie Brockway TITLE COMPANY City Clerk —Mr. Randy Owens CITY OF HUNTINGTON BEACH FIRST AMERICAN TITLE 2000 Main Street INSURANCE COMPANY Huntington Beach, CA 92648 114 East Fifth Street (714) 536-5236 (Franz) Santa Ana, CA 92702 (714) 536-5555 (Hutton and De La Loza) (714) 558-3211 (714) 536-4693 (FAX) (Order No. 1528307) UNDERWRITER RATING AGENCY —Mr. Scott Sollers —Ms. Connie O'Dea —Mr. Hunter Holding (0) MOODY'S INVESTORS SERVICE —Mr. Lloyd Thomas 99 Church Street STONE & YOUNGBERG New York, NY 10007 One California Street, Suite 2800 (212) 553-7121 San Francisco, CA 94111 (212) 267-1410 (FAX) (415) 981-1314 (415) 397-9592 (FAX) BOND COUNSEL —Charles F. Adams, Esq. (6,t) TRUSTEE —Ms. Katherine M. Lee —Mr. Steve Rivero (0) JONES HALL HILL & WHITE STATE STREET BANK AND TRUST Four Embarcadero Center, Suite 1950 COMPANY OF CALIFORNIA, N.A. San Francisco, CA 94111 725 South Figueroa St., Suite 975 (415) 391-5780 Los Angeles, CA 90017 (415) 391-5784, 956-6308 (FAX) (213) 688-7484 (213) 688-7592 (FAX) • Original Transcript Recipient t Copied Transcript Recipient z _-� RESOLUTION NO. 6046 r A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING ( 1) REMOVAL OF PUBLIC SAFETY PROPERTY FROM 1986 LEASE AGREEMENT, (2) APPROVING LEASE OF SUCH PROPERTY BACK FROM CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION (3) APPROVING RELATED AGREEMENTS, OFFICIAL STATEMENT AND SALE OF NOT TO EXCEED $16, 000 , 000 CERTIFICATES OF PARTICIPATION wHEREAS, the City of Huntington Beach Civic Improvement Corporation (the "Corporation" ) has been formed for the purpose of assisting the City of Huntington Beach (the "City") in financing the acquisition and construction of property which is of benefit to the City; and The Corporation has previously financed the acquisition of band and certain civic center and public safety improvements from the proceeds of the $20 , 000, 000 aggregate principal amount of Certificates of Participation (Civic Center Project) dated as of July .15 , 1986 , and has leased such land and improvements to the City pursuant to the Lease Agreement dated as of July 15 , 1986 (the " 1986 L(,ase" ) and Pursuant to Section 5 . 11 of the 1986 Lease, the City wishes to remove certain land and improvements used for police and public safety purposes (the "Project" ) from the 1986 Lease pursuant to the Agreement Regarding Removal of Property from 1986 Lease by and between the Corporation and theCity (the "Removal Agreement" ) , and in consideration of the retention by the Corporation of title to the Project, the Corporation proposes to pay to the City the amount of $13 , 365, 000 which the City intends to apply to pay the costs of various municipal improvements within the City; and -1- In order to provide funds sufficient to enable the Corporation to make such payment to the Ci.ty, . the Corporation has proposed to lease the Project back to the, City under the Lease Agreement dated as of August 1,, 1969, by and between the Corporation as lessor and the City as lessee (the "Lease Agreement" ) and to assign and transfer to a trustee bank .(`the "Trustee" ) certain of its rights under the Lease Agreement to the Trustee pursuant to the Lease Agreement dated as. of August 1 , 1989 , by and between the Corporation as assignor and the Trustee as assignee, and in consideration of such assignment and the execution of the Trust Agreement dated as of- August 1, 1989, by and among the City, the Corporation and the Trustee, the Trustee has agreed to execute and deliver Certificates of Participation (1989 Public Parking Project Financing) in the aggregate principal amount of not to exceed $16 , 000 , 000 (the "Certificates") , each evidencing a direct , undivided fractional interest in the Lease Payments to be paid t. the . City under the Lease Agreement; and The firm of Stone & Youngberg (the "Underwriter" ) has informed the City that it intends to ,present an offer to the City and the Corporation to purchase the Certificates pursuant to a form of Certificate Purchase Agreement to be entered into among the City, the Corporation and the Underwriter (the "Purchase Agreement" ) , and the Underwriter has prepared and presented to the City a form of Official Statement describing the Certificates ; and WHEREAS, the City Council wishet at this time to authorize all proceedings relating to such financing of the Project, the sale of the Certificates to the Underwriter and the execution and delivery of all ,agreements and documents relating thereto -2' 6046 NOW, THEREFORE, BE IT RESOLVED by the 'City Council of the City of Huntington Beach as follows : Section 1 . Removal of Project from 1986 Lease; Approval of Removal Agreement . The City Council hereby approves the removal of the Project from the 1986 Lease pursuant to and in accordance with the Removal Agreement in substantially the form on file with the City Clerk together, with any immaterial changes therein or additioris thereto deemed advisable by the City Administrator and approved by the City Attorney. The City Council hereby authorizes a-nd directs the City Administrator to execute, and the City Clerk to attest and affix the seal of the City to, said form of the Removal Agreement for and in the' name of the City. Section 2. Lease of Project From _Corporation; Approval of Lease Agreement. The City Council hereby approves the lease purchase of the Project by the City from the Corporation pursuant to and in accordance with the terms and provisions of the Lease. Agreement in substantially the form on file with the City Clerk together with any immaterial changes therein or additions thereto deemed advisable by the City Administrator and approved by the City Attorney. The City Council hereby authorizes and directs the City Administrator to execute, and the City Clerk to attest and affix the seal of the City to , said form of the Lease Agreement for and in the name of the City. The schedule of Lease Payments set forth in Exhibit B to the Lease Agreement shall conform to the schedule of principal and interest payments represented' by the Certificates, determined pursuant to Section 9 hereof. -3- 6046 Section 3 . Trust Agreement. The City Council hereby approves the Trust Agreement in substantially the form on file with the City Clerk together with any ir-..:T:ater al changes therein or additions thereto deemed advisable by ti:e City Adindnistrator and approved by the City Attorney. The City Council hereby authorizes and directs the City Administrator to execute, and the City Clerk to attest and affix the seal of the City to , said form of the Trust Agreement for and in the name of the City . Section 4 . Sale of Certificates. The City Council hereby approves the sale of the Certificates' to the Underwriter pursuant to the Purchase Agreement in substantially the form on file with the City Clerk, together with any immaterial changes therein or additions thereto deemed advisable by the City Administrator and approved by the_City Attorney, whose execution of said agreement shall be conclusive evidence of his approval of any such changes or additions . The Certificates shall' be substantially as described in the form of Official Statement on file with the City Clerk and hereinafter approved. The City ; Administrator is hereby delegated the authority to execute said Purchase Agreement for and in the name of the City and thereby .accept an offer from the Underwriter to purchase the Certificates , which offer is acceptable to the City Administrator; provided, however, that the Certificates shall be sold for not less than ninety-eight percent (98%) of the par value thereof and provided further that the rate of interest represented by the Certificates shall not exceed eight percent (8$) per annum: The City Administrator is hereby delegated to accept the offer of the Underwriter to purchase the Certificates, provided that such offer `4_ b446 is in form and substance acceptable to the City Administrator as approved by. the City Attorney and is within the limitations set forth in this Resolution. Section 5. Official Statement. The City Council hereby approves the preliminary Official Statement describing the Certificates , in substantially the form submitted by the Underwriter and on file with the City Clerk, together with any immaterial changes therein or additions thereto deemed advisableby the City Administrator ancd ' approved by the City 'Attorney. The City Council approves and authorizes the distribution by the Underwriter of said Preliminary Official Statement to prospective purchasers of the Certificates . Section 6. Enga+q`ement of Special Counsel.. In connection with the delivery of the Certificates and the documents relating thereto, the City Council hereby authorizes the engagement of Jones Hall Hill & white, 'A Professional Law Corporation, to act as special legal counsel: to -the City upon the terms and conditions set forth in. the proposed form of agreement between the City and such firm in the form on file with the City Clerk The City Administrator is hereby authorized and directed to execute said agreement on behalf of the City after approval by the City Attorney. Section 7. official "`Actions The Mayor, the City Administrator, the Chief of Administrative Services, the City Clerk and all other officers of the City are each authorized and directed in the name' and on behalf of the City to make any and all assignments, certificates, requisitions, agreements, notices, consents , instruments of -5"- 6046 conveyance, warrants and-other documents, which they or any of them might deem necessary or appropriate in order to consummate any, of the transactions contemplated by the document approved pursuant to this Resolution. Whenever in this resolution any officer of the City is authorized to execute or attest any document or take any action such execution, attestation or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable andso long as approved- by the. City Attorney. Section 8. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption; PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof, held on the 17th day of 4 July, 1989 . Mayor ATTEST: APPROVED AS TO FORM': City Clerk Cit,� �ttorney REVIEWS© AND. APPROVED: INITIATED AND APPROVED: City Administrator Chief of Administrative Services -6- Res. No. ;6046 STATE 4F, CAt ,FORMA COUNTY OF ORANGE ss: CITY OF HUNTI:NGTON BEACH ) I, CONNIE BROCKWAY. the duly elected, qualified Ci,ty, Clerk of the City of Huntington Beach, and ex.-officip Clerk of 'the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held, on the 17th day of July 19 89 by the following vote: AYES: Councilmembers MacAllister,, Green, Bannister, Mays, Silva NOES: Councilmembers Wi nchel l ABSENT: Councilmembers`: Erskine y . er and ex-o -is o Wrk of the City Council of the City of Huntington Beach, California TMe foregwna Instrument Is a cornet try of ttte original fik in this officee. Attest ... 2 ._.:t ►ity Cterk and Ex°officio Clerk of the 'City Council of the;City of l♦unthWon Beach. California. Y "Y . tY t l RESOLUTION NO. 89-2 l A RESOLUTION OF THE BOARD OF DIRECTORS OF THE HUNTINGTON BEACH CIVIC IMPROVEMENT CORP. APPROVING (1) REMOVAL OF PUBLIC SAFETY PROPERTY FROM 1986 LEASE AGREEMENT, (2) LEASE OF SUCH PROPERTY BACK TO CITY OF HUNTINGTON BEACH, (3) RELATED AGREEMENTS, & OFFICIAL STATEMENT AND (4) SALE OF NOT TO EXCEED $16, 000, 000 CERTIFICATES OF PARTICIPATION WHEREAS, - the City of Huntington Beach Civic Improvement Corporation (the "Corporation" ) has been formed for the purpose of assisting the City of Huntington Beach (the "City" ) in financing the acquisition and construction of property which is of benefit to the City; and The Corporation has previously financed the acquisition of land and certain civic center and public safety improvements from the proceeds of the $20, 000, 000 aggregate principal amount of Certificates of Participation (Civic Center Project) dated as of July 15, 1986, and has leased such land and improvements to the City pursuant to the Lease Agreement dated as of July 15, 1986 (the " 1986 Lease" ) ; and Pursuant to Section 5 . 11 of the 1986 Lease, the City wishes to remove certain land and improvements used for police and public safety purposes (the "Project") from the 1986 Lease pursuant to the Agreement Regarding Removal of Property from 1986 Lease by and between the Corporation and the City (the "Removal Agreement" ) , and in consideration of the retention by the Corporation of title to the Project , the Corporation purposes to pay to the City the amount of $13 , 365, 000 which the City intends to apply to pay the cost of ~' various municipal improvements within the City; and P P -1- In order to provide funds sufficient to enable the Corporation to make such payment to the City, the Corporation has proposed to lease the Project back to the City under the Lease Agreement dated as of August 1, 1989 , by and between the Corporation as lessor and the City as lessee (the "Lease Agreement" ) and to assign and transfer to a trustee bank (the "Trustee" ) certain of its rights under the Lease Agreement to the Trustee pursuant to the lease Agreement dated as of August 1, 1989 , by and between the Corporation as assignor and the Trustee as assignee, and in consideration of such assignment and the execution of the Trust Agreement dated as of August 1, 1989 , by and among the City, the Corporation and the Trustee, the Trustee has agreed to execute and deliver Certificates of Participation (1989 Public Parking Project Financing) in the aggregate principal amount of not to exceed $16 , 000 , 000 (the "Certificates" ) , each evidencing a direct , undivided fractional interest in the Lease Payments to be paid by the City under the Lease Agreement; and The firm of Stone & Youngberg (the "Underwriter" ) has informed the Corporation that it intends to present an offer to the City and the Corporation to purchase the Certificates pursuant a form of Certificate Purchase Agreement to be entered into among the City, the Corporation and the Underwriter (the "Purchase Agreement" ) , and the Underwriter has prepared and presented to the Corporation a form of Official Statement describing the Certificates; and i The Board of Directors wishes at this time to authorize all proceedings relating to such financing of the Project , the sale of -2- 89-2 the Certificates to the Underwriter and the execution and delivery of all agreements and documents relating thereto; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the City of Huntington Beach Civic Improvement Corporation as follows : Section 1 . Removal of Project from 1986 Lease; Approval of Removal Agreement . The Board of Directors hereby approves the removal of the Project from the 1986 Lease pursuant to and in accordance with the Removal Agreement in substantially the form on file with the Secretary together with any immaterial changes therein or additions thereto deemed advisable by the Executive Director and approved by the City Attorney. The Board of Directors hereby authorizes and directs the Executive Director to execute, and the Secretary to attest and affix the seal of the Corporation to, said form of the Removal Agreement for and in the name of the Corporation. Section 2 . Lease of Project From Corporation; Approval of Lease Agreement. The Board of Directors hereby approves the lease of the Project by the Corporation the City pursuant to and in accordance with the terms and provisions of the Lease Agreement in substantially the form on file with the Secretary together with any immaterial changes therein or additions thereto deemed advisable by the Executive Director and approved by the City Attorney. The Board of Directors hereby authorizes and directs the Executive Director to execute, and the Secretary to attest and affix the seal for the Corporation to, said form of the Lease Agreement for and in the name -3- 89-2 of the Corporation. The schedule of Lease Payments set forth in Exhibit B to the Lease Agreement shall conform to the schedule of principal and interest payments represented by the Certificates , determined pursuant to Section 5 hereof . Section 4 . Trust Agreement. The Board of Directors hereby approves the Trust Agreement in substantially the form on file with the Secretary together with any immaterial changes therein or additions thereto deemed advisable by • the Executive Director and approved by the City Attorney. The Board of Directors hereby authorizes and directs the Executive Director to execute, and the Secretary to attest and affix the seal of the Corporation to, said form of the Trust Agreement for and in the name of the Corporation. (� Section 5 . Sale of Certificates . The Board of Directors hereby approves the sale of the Certificates to the Underwriter pursuant to the Purchase Agreement in substantially the form on file with the Secretary, together with any immaterial changes therein or additions thereto deemed advisable by the Executive Director and approved by the City Attorney, whose execution of said agreement shall be conclusive evidence of his approval of any such changes or additions . Th Certificates shall be substantially as described in the form of Official Statement on file with the Secretary and hereinafter approved. The Executive Director is hereby delegated the authority to execute said Purchase Agreement for and in the name of the Corporation and thereby accept an offer from the Underwriter to purchase the Certificates, which offer is acceptable to the { Executive Director; provided, however, that the Certificates shall -4- 89-2 be sold for not less than ninety-eight percent (98%) of the par I value thereof and provided further that the rate of interest represented by the Certificates shall not exceed eight percent (8%) per annum. The Executive Director is hereby delegated the authority to accept the offer of the Underwriter to purchase the Certificates , provided that such offer is in form and substance acceptable to the Executive Director as approved by the City Attorney and is within the limitations set forth in this Resolution. Section 6 . Official Statement. The Board of Directors hereby approves the preliminary Official Statement- describing the Certificates , in substantially the form submitted by the Underwriter and on file with the Secretary, - together with any immaterial changes therein or additions thereto deemed advisable by the Executive Director and approved by the City Attorney. The Board of Directors approves and authorizes the distribution by the Underwriter of said Preliminary Official Statement to prospective purchasers of the Certificates . Section 7. Official Actions. The President, the Executive Director, the Treasurer, the Secretary and all other offices of the Corporation are each authorized and directed in the name and on behalf of the Corporation to make any and all assignments, certificates, requisitions , agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the document approved pursuant to this Resolution. Whenever in this resolution any officer of the Corporation is -5- 89-2 authorized to execute or attest any document or take any action, such execution, attestation or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable and so long as all documents have been approved by the City Attorney. Section 8 . Effective Date. This Resolution shall take effect from and after the date of its passage, and adoption. PASSED AND ADOPTED by the Board of Directors of th City of Huntington Beach Civic Improvement Corporation at a special meeting thereof held on the 17th day of July, 1989 . President ATTEST: APPROVED AS TO FORM: &""� q��— te�- 44Z'� Secretary " C Z-- _Attu;ney -Zl— rl REVIEWED AND APPROVED: INI END ND A ROVED: / Executive Director Chief o Ad itit nstra iv Services _6_ 89-2 Res . No. 89-2 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH) I . CONNIE BROCKWAY, Secretary of the Huntington Beach Civic Improvement Corporation of the City of Huntington Beach, California DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Huntington Beach Civic Improvement Corporation of the City of Huntington Beach at an adjourned regular meeting of said Huntington Beach Civic Improvement Corporation held on the _17th day of July , 19 89 , and that it was so adopted by the following vote. AYES : Directors : MacAllister, Green, Bannister, Mays, Silva NOES : Directors : Winchell ABSENT: Directors : Erskine The foregoing instrumerif is 8 Ld IL' copy of the original on file in this office. Attest Secretary o the Huntinlfton Beach Civic Improvement City Clerk and Ex•vfficio Clerk of the City Corporation of the City of Council of the City of Huntington Beach, Huntington Beach, Ca. California. PV_ eputy 4 --� .J1JN 2 2 AeZZ STATE OF UUFORNU CAUFORNIA DEBT ADVISORY COMMISSION ,ImUts 915 CAPfTOL MALL ROOM 400 P.O.BOX 942SOS Tlaa 1W.Kara SACRAMENTO.CAUFORNIA 94209-0001 s`""rm=m- TELEPHONE (916)324-2585 G....a.,.•.,;a, rod � On►D.•r sow C-..U_ June 21, 1989 yM40ft ►'► Me-"a t R.a.0 &"so"w TO: Charles F. Adams rubCaa Jones Hall Bill & White L"" """a'►"- Four Embarcadero Center Ste. 1950 wvicai wua San Francisco, CA 94111 Thar C.Re"n Tiwa...Cup./ro...a.. ChWf Ad.ftn..a.o.r... FROM: CALIFORNIA DEBT ADVISORY COMMISSION G.a,./1�,.o.aw SUBJECT: Acknowledgment of Report of Proposed Debt Issuance Section 8855(g) of the California Government Code requires written notice to be given to the California Debt Advisory Commission not later than 30 days prior to the proposed sale of any public agency debt issue. The California Debt Advisory Commission (CDAC) acknowledges your written notice of the following proposed debt issuance: CDAC Number: 89-0578 Issuer: HUNTINGTON BEACH Project: Parking Proposed Amount: $15,000,000 Proposed Sale Date: July 15, 1989 Date Notice Received: June 21, 1989 Please submit the "Report of Final Sale" and the Official Statement (or offering circular) on this issue after the sale is completed. Any questions regarding reporting requirements may be directed to the CDAC staff at (916) 324-2585. cc: Robert J. Franz, Deputy City Administrator REPORT OF PROPOSED DEBT ISSUANCE California Debt Advisory Commission 915 Capitol Mall,Room 400, Sacramento,CA 95814 P.O. Box 942809, Sacramento,CA 94209-0001 (916) 324-2585 Completion and timely submittal of this form to the California Debt Advisory Commission (CDAC) at the above address will assure your compliance with existing California State law and will assist In the maintenance of a complete data base. Thank you for your cooperation.1 NAME OF ISSUER: CITY OF HUNTINGTON BEACH ADDRESS OF ISSUER: 2000 Main Street, Huntington Beach CA 92648 COUNTY: Orange PROPOSED SALE DATE: July 15, 1989 TYPE OF SALE: — Competitive XX Negotiated PROPOSED PRINCIPAL TO BE SOLD: $15 000 000 DOES THE ISSUER INTEND TO SELL THE DEBT ISSUE IN A FOREIGN CURRENCY?2 XX No Yes IS THE INTEREST ON THE DEBT EXEMPT FROM TAXATION? Under State law: NO (taxable) XX YES(tax—exempt) Under Federal law: _NO (taxable) Y) YES (tax—exempt) If the issue is Federally tax—exempt, is interest a specific preference item for the purpose of alternative minimum tax? _Yes,preference item XX No, not a preference item IS ANY PORTION OF THE DEBT FOR REFUNDING?3 XX No Yes,proposed amount for refunding $ -*fPE OF DEBT INSTRUMENT NOTE BOND _Tax anticipation(T101) _General obligation (T201) _Tax and revenue anticipation (T102) _Limited tax obligation (T202) _Revenue anticipation (T103) _Revenue (Public enterprise) (T203) _Bond anticipation (T104) Conduit revenue (Private obligor) (T204) _Grant anticipation (T105) _Special assessment (T205) Tax allocation (T106) _Tax allocation (T206) _Other note (Please specify below.) (T107) Public lease revenue (T207) _Other bond (Please specify below.) (T208) FINANCING LEASE (T301) COMMERCIAL PAPER(T401) XX CERTIFICATES OF PARTICIPATION(T501) _OTHER (Please specify below.) (T601) Please specify if"Other note/Other bond/OTHEW was checked: SOURCE(S) OF REPAYMENT _Public enterprise revenues (8101) Tax—increment (S106) _Private obligor payments (S102) _Special assessments(S107) _Bond proceeds (S103) _Special tax revenues (S108) Grants(S104) Property tax revenues (S109) Intergovernmental transfers other than grant (S105) XX General fund of issuing jurisdiction (S110) Other(Please specify.) (S111): l Section 8855(g) of the California Government Code requires the issuer of any proposed new public debt issue to give written notice of the proposed sale to the CDAC no later than 30 days prior to the sale. 9 Section 5922(b)of the California Government Code requires the issuer to report 30 days prior to sale if the issuer intends to issue bonds payable in a currency other than lawful money of the United States of America. 3 Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis shall send a written statement, within two weeks after the bonds are sold, to the CDAC explaining the reasons why the local agency determined to sell the bonds at private sale or on a negotiated basis instead of at public sale. 5188 CDAC: Report of Proposed Debt Issuance Page 2 PURPOSE(S) OF FINANCING Cash-flow,interim financing(P101) _Airport(P401) _Ports and marinas(P402) _Single-family housing(P201)4 _Recreation and sports facilities(P403) _Multifamily housing(P203)4 _Parks/open space(P419) _College/university housing(P204) Power generation/transmission(P404) XX Parking(P405) _Hospital(P301) Convention center(P406) _Health care facilities(P302) _Solid waste recovery facilities(P407) _Other/multiple health care purposes(equipment,etc.)(P303)_Equipment(P408) _Flood control/storm drainage(P409) _K-12 school facility(P501) _Water supply/storage/distribution(P410) _College/university facility(P502) _Wastewater collection and treatment(P411) _Student loans(P504) _Public transit(P412) _Other/multiple educational uses(equipment,etc.)(P503) _Bridges and highways(P413) _Public building(P414) _Redevelopment,multiple uses(P601) _Street construction and improvements(P415) _Prisons/jail/correctional facilities(P418) _Pollution control(P701) _Multiple capital improvements and public works(P416) _Commercial development(P703) _Other capital improvements and public works(P417) _Industrial development(P704) Other than listed above(P901) Please specify type/name of project: BOND COUNSEL: Jones Hall Hill & White, A Professional Law Corporation FINANCIAL ADVISOR: None LEAD UNDERWRITER: Stone &Youngberg (or PURCHASER: PLACEMENT AGENT: ) Name of individual (representing XX Bond Counsel,_Issuer, Financial Advisor, or_Lead Underwriter) who has completed this form and may be contacted for further information: Name: Charles F. Adams, Esq. Firm/Agency: Jones Hall Hill &White, A Professional Law Corporation Address: Four Embarcadero Center Suite 1950 San Francisco CA 94111 Phone: (415) 391-5780 Date of Completion: June 19, 1989 Contact person at issuing jurisdiction,if different from above: Name: Robert J. Franz Title: Deputy City Administrator/Administrative Services Address: 2000 Main Street, Huntington Beach CA 92648 Phone: (805) 925-0951 4 Certain local government issuers of housing bonds are required to obtain a certification from the State Treasurer attesting to their compliance with the S' housing reporting requirements prior to issuance of the bonds to finance single—or multifamily housing. 5188—LGFA.CDA 18019-26 JHHW:CFA:KML 08/09/89 KML4515 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE OF MAILING I, Diana F. Speckels, certify as follows: That for and on behalf of the City of Huntington Beach, on the date hereof, I caused to be mailed a Report of Final Sale relating to the captioned financing, postage prepaid, to the California Debt Advisory Commission, Post Office Box 942809, Sacramento, California 94209-0001, a true copy of which Report is hereto attached. Dated: August 15, 1989 By Diana F. S els, for Jones Hall H I & White, A Professional Law Corporation CDAC#: 89-0578 REPORT OF FINAL SALE California Debt Advisory Corporation 915 Capitol Mall, Room 400, Sacramento, CA 95814 P.O. Box 942809, Sacramento, CA 94209-0001 (916) 324-2585 Completion of this form is requested to provide information which was not available when the "Report of Proposed Debt Issuance"was filed with the CDAC or to verify information which was reported as"proposed." Additionally,please send a copy of the official statement(or offering circular)with this form to the CDAC. NAME OF ISSUER: CITY OF HUNTINGTON ISSUE NAME: See Exhibit A OFFICIAL STATEMENT: X Enclosed To be sent None available SALE DATE: July 27, 1989 PRINCIPAL AMOUNT SOLD: $ 15,025,000 IS THE DEBT ISSUE DENOMINATED IN A FOREIGN CURRENCY? X No _Yes,type of foreign currency IS THE INTEREST ON THE DEBT EXEMPT FROM TAXATION? Under State law: NO (taxable) X YES (tax—exempt) Under Federal law: _NO (taxable) 7 YES (tax—exempt) If the issue is Federally tax—exempt, is interest a specific preference item for the purpose of alternative minimum tax? _Yes,preference item X No,not a preference item IS ANY PORTION OF THE DEBT FOR REFUNDINGV X No Yes,amount of this issue(including costs)which is for refunding of existing debt $ 'DERWRITER OR PURCHASER: Stone&Youngberg FINANCIAL ADVISOR: N/A INDICATE CREDIT RATING: (For example,"AAA"or"Aaa") X RATED Standard&Poor's: Fitch: Moody's: Al Other: NOT RATED WAS THE ISSUE INSURED OR GUARANTEED? X No Bond Insurance Letter(s) of credit Other GUARANTOR'S NAME: INTEREST COST: 7.035638 % (_) TIC (X) NIC (_) Variable (Please specify.) IF NEGOTIATED SALE,INDICATE GROSS SPREAD: $217,862.50 FINANCIAL ADVISOR FEE: N/A BOND COUNSEL FEE: $48,781.25 OTHER COSTS OF ISSUANCE PAID BY THE ISSUER: (For example, advertising, printing, bond registration, bond rating,etc. Please specify amount and purpose.) Special Counsel's Reimbursable Expenses-$1,618.45 1 section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis shall send vritten statement, within two weeks after the bonds are sold, to the CDAC explaining the reasons why the local agency determined to sell the bonds at private sale on a negotiated basis instead of at public sale. 5188 CDAC: Report of Final Sale Page 2 MATURITY SCHEDULE: (Please complete if an official statement is not submitted with this form.) Maturity Date Amount Interest Rate . 1 2. 3. 4. 5. 6. 7. 8. 9. 10. Name of individual (representing X Bond Counsel, Issuer, _Financial Advisor, or_ Lead Underwriter) who completed this form and may be contacted for information: Name: Charles F. Adams, Esq. Firm/Agency: Jones Hall Hill &White, A Professional Law Corporation Address: Four Embarcadero Center Suite 1950 San Francisco, CA 94111 Phone: (415) 391-5780 Date of Completion: August 15, 1989 Contact person at issuing jurisdiction, if different from above: Name: Mr. Robert Franz Title: Deputy City Administrator/Administrative Services Address: 2000 Main Street, Huntington Beach, CA 92648 Phone: (714) 536-5236 Name of individual to whom an invoice for the CDAC notification fee should be sent 2 Name: Mr. Hunter Holding Firm: Stone&Youngberg Address: One California Street Suite 2800 Los Angeles, CA 90071-3396 Phone: (415) 981-1314 2 Thi3 fee is authorized by Section 8856 of the California Government Code. 5/88—K,WL4523 EXHIBIT A $15,025,000 CERTIFICATES OF PARTICIPATION (1989 PUBLIC PARKING PROJECT FINANCING) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION 5 € PRELIMINARY OFFICIAL STATEMENT DATED JULY 20, 1989 t NEW ISSUE Moody's: A i .. W In the opinion of Jones Hall Hill&White, A Professional Law Corporation, San Francisco, California, Special o 1! Counsel, subject, however to certain qualification$ described herein, under existing law, the portion of the lease pay- ments paid by the City and designated as and comprising interest and received by the owners of the Certificates is $ a excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the 1 a t federal individual and corporate alternative minimum taxes,although it is included in certain income and earnings in a g computing the alternative minimum tax imposed on certain corporations. In the further opinion of Special Counsel, such interest is exempt from California personal income taxes. See "TAX EXEMPTION"herein. �a u a o r $1499609000* o Certificates of Participation (1989 Public Parking Project Financing) E c—° Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the 0 ' City of Huntington Beach Civic Improvement Corporation mma Dated: July 15, 1989 Due: August 1, as shown below The Certificates of Participation (1989 Public Parking Project Financing) (the "Certificates") are being sold, exe- $3 Q cuted, and delivered to provide for the acquisition of certain land,police and jail facilities(the"Project")by the City of o Huntington Beach Civic Improvement Corporation(the"Corporation")from he City. The Project will be leased to the M `o City of Hungtington Beach(the "City") by the Corporation. `m a The Certificates are deliverable in fully registered form in the denomination of$5,000 or any integral multiple m thereof. Principal and premium, if any, represented by the Certificates will be payable at the principal corporate trust office of State Street Bank and Trust Company of California, N.A., the Trustee and registrar of the Certificates (the 4 0 "Trustee"), in Los Angeles, California. Interest represented by the Certificates is payable semiannually on February 1 and August 1 of each year, commencing February 1, 1990. Payment of interest represented by the Certificates shall be c a made by check or draft mailed to the registered owners at their addresses appearing on the Certificate registration books as of the 15th day of the month preceding each Interest Payment Date, or upon the request of a registered owner of at E c m least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an E ; account in the continental United States designated by such owner. The Certificates are subject to redemption prior to S maturity, as described herein. The City has entered into a Lease Agreement(the"Lease Agreement")with the Corporation under which the City 5 2 30 has covenanted that as long as the Project is available for the City's use,it will take such action as may be necessary to E m include and maintain all payments under the Lease(the"Lease Payments")for the Project in its annual budgets, and to o E make the necessary appropriations therefore. The obligation of the City to make Lease Payments under the Lease m do Agreement does not constitute an obligation of he City for which the City is obligated to levy or pledge any form of s W c taxation. Neither the Certificates nor the obligation of the City to make Lease Payments constitute an indebtedness of 2-4 the State of E the meaning of he Constit Constitution of h of te State of Californiarotherwise.n Beach or any other tical subdivision of the State or the City, within iou0 c MATURITY SCHEDULE* C Maturity Principal Interest Yield/ Maturity Principal Interest Yield/ a 0 August 1 Amount Rate Price August 1 Amount Rate Price cm 1990............... r 1991............... 1998............... = Eu E w r 1992............... 1999............... R ; 1993............... 2000............... w—= 1994............... 2001 =m = 0 1995............... u d E_ 1996............... 2003............... day $ .00%Term Certificates Due August 1, 2019 y� � °J io The Certificates are offered when,as and if sold, executed and delivered, subject to the approval as to their legality m 5 by Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, Special Counsel. It is m m anticipated that the Certificates will be available in definitive form for delivery in San Francisco,California,on or about August 15, 1989. cy E STONE &YOUNGBERG U y t Dated: , 1989 m� 4 5 6 *Preliminary, subject to change. CITY OF HUNTINGTON BEACH CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION City Council and Corporation Board Members Wes Bannister, Chairman of the Corporation and Mayor of the City Tom Mays, Vice Chairman of the Corporation and Mayor Pro Tem of the City Jim Silva Peter Green Don MacAllister Grace Winchell John Erskine City and Corporation Staff Paul E. Cook, City Administrator Robert Franz, Deputy City Administrator Douglas LaBelle, Deputy City Administrator Gail Hutton, City Attorney Arthur DeLaLoza, Deputy City Attorney Don Watson, Treasurer Connie Brockway, City Clerk Trustee State Street Bank and Trust Company of California, N.A. Los Angeles Bond Counsel Jones Hall Hill & White, A Professional Law Corporation San Francisco, California - i - TABLE OF CONTENTS P aqe Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 TheProject . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Estimated Sources and Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Security for the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Certificate Owners' Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B City Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g Property Removal Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . is Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Assignment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 TaxExemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Approval of Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 General Information on the City Its Economy . . . . . . . . . . . . . . . . . . . . . Appendix A Audited General Fund Financial Statements of the City . . . . . . . . . . . Appendix B Form of Bond Counsel Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix C 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, the Corporation or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Certificates . Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall , under any circumstances , create any implication that there has been no change in the affairs of the Corporation or the City since the date hereof. All summaries of the Lease Agreement, 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. - ii - SUMMARY STATEMENT THIS SUMMARY IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND THE OFFERING OF THE CERTIFICATES TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. Purpose: The Certificates are being sold to provide for the acquisition by the Corporation of certain land, police and jail facilities from the City of Huntington Beach. The Project will be leased by the Corporation to the City. The proceeds received by the City from the sale of the Project will be used by the City to finance the acquisition of land and construction of certain parking facilities within the City. Security for the Certificates : Each Certificate represents a direct, undivided fractional interest of the owner thereof in Lease Payments to be paid by the City as the rental for the Project pursuant to a Lease Agreement with the Corporation. The City is legally required under the Lease to make Lease Payments from any source of available funds in each year, subject to abatement in the event of damage or eminent domain. The annual Lease Payments are equal to the annual principal and interest due with respect to the Certificates. The City has covenanted in the Lease Agreement to take such action each year as may be necessary to include all Lease Payments in its annual budgets and to make annual appropriations for all Lease Payments. Under California law, the obligation of the City to make Lease Payments (other than to the extent that funds are available for such purpose in accounts established from proceeds of the. Certificates or to the extent that the City receives moneys from •the proceeds of insurance or condemnation awards) may be abated in whole or in part if the Project is damaged or destroyed or taken in eminent domain proceedings. A reserve fund (the "Reserve Fund") has been established from Certificate proceeds for the benefit of the Certificate owners in an amount equal to the maximum Lease Payments due under the Lease Agreement in the current or any future fiscal year. Pursuant to an assignment agreement entered into between the Corporation and the Trustee (the "Assignment Agreement") , the Corporation has assigned to the Trustee for the benefit of the Certificate owners its 'right to receive Lease Payments and its rights to enforce payment of Lease Payments upon default. Form of Certificates: The Certificates will be delivered in fully registered form without coupons in the denomination of $5,000 each or any integral multiple thereof. Prepayment: The Certificates are subject to optional prepayment, as a result of the prepayment of Lease Payments , as a whole or in part, on any date on or after August 1 , 1999 at the prepayment prices set forth herein. The Certificates are subject to mandatory prepayment as a whole or in part, on any date, at par plus accrued interest without premium, in the event of damage to the Project or a taking by eminent domain if the proceeds of insurance or condemnation are not used to rebuild or restore the Project. (See "THE CERTIFICATES" herein. ) The Certificates maturing on August 1 , 2019 (the "Term Certificates") are also subject to mandatory sinking fund redemption on August 1 in each year on or after August 1 , 2004, by lot, from the principal components of the Lease Payments required to be paid by the City at redemption prices equal to the principal amounts provided on the cover hereof plus accrued interest. - iii - City of Huntington Beach: The City of Huntington Beach is coastal community of 27.7 square miles located approximately 35 miles south of Los Angeles in Orange County. The City is a Charter City with a Council-Administrator form of government and a current population of approximately 187,000. THE OBLIGATION OF THE CITY TO MAKE PAYMENTS UNDER THE LEASE AGREEMENT IS PAYABLE AS SET FORTH ABOVE. NEITHER THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS NOR THE CERTIFICATES WILL CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF. THE LEASE AGREEMENT DOES NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS PLEDGED TO THE PAYMENT OF LEASE PAYMENTS OR TO THE PRINCIPAL AND INTEREST WITH RESPECT TO THE CERTIFICATES. NEITHER THE OFFICERS OR DIRECTORS OF THE LESSOR, CITY OFFICERS NOR ANY PERSONS EXECUTING THE CERTIFICATES OR THE LEASE AGREEMENT SHALL BE LIABLE PERSONALLY ON THE CERTIFICATES OR SUBJECT TO ANY PERSONAL LIABILITY BY REASON OF THE EXECUTION THEREOF. iv - (THIS PAGE INTENTIONALLY LEFT BLANK) 101 \ / V9fl13RA VENTURA �\ KERN COUNTY " COUNTY I � Lsosr► �\ Pont Wool Ps ThumpedSo! 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M"ah / sm bloom w • Tijwnt \ ' IMPERIAL GREATER �.� ,/ COUNTY SOUTHERN CAUFORNIA AREA � cxleo `•� is f 1 is !allows .s 0 aaM&W-w TMW•raise r or.o.ssa Ou«ummm.a r,„ \ $14,960,000* CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation INTRODUCTION The purpose of this Official Statement is to provide certain information concerning the sale and delivery of Certificates of Participation (1989 Public Parking Project Financing) (the "Certificates") , in the aggregate principal amount of $14,960,000* . The Certificates represent direct, undivided fractional interests of the owners thereof in certain Lease Payments to be made by the City of Huntington Beach, California (the "City") for the use and occupancy of certain land, police and jail facilities (the "Project") pursuant to a Lease Agreement, dated as of August 1 , 1989 (the "Lease Agreement" or "Lease") , between the City and the City of Huntington Beach Civic Improvement Corporation, (the "Corporation") . The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of August 1 , 1989 (the "Trust Agreement") by and among the City, the Corporation and State Street Bank and Trust Company of California, N.A. , as trustee (the "Trustee") . The Certificates evidence the direct, undivided fractional interest of the owners thereof in Lease Payments payable by the City, as lessee, to the Trustee as assignee of the Corporation, for the use and occupancy of the Project. Pursuant to an Assignment Agreement, dated as of August 1 , 1989 (the "Assignment Agreement") the Corporation has assigned to the Trustee for the benefit of the owners of the Certificates all its rights to receive amounts payable by the City under the Lease ("Lease Payments") and its rights to enforce payment of all amounts due in the event of a default by the City. The Project consists of an existing police/public safety building and related facilities and land. Net proceeds of the Certificates in the amount of $13,365,000 will be used by the Corporation to acquire the City' s interest in the Project. Net proceeds , representing total proceeds from the sale of the Certificates less accrued interest, a deposit into the Reserve Fund and certain costs of issuance, will be held in the Program Fund by the Trustee on behalf of the City. The City will use these net proceeds for the acquisition of land and construction of certain parking facilities within the City. See "THE PROJECT" herein. *Preliminary, subject to change. -1- The City is required under the Lease to make Lease Payments from any source of legally available funds in each year, subject to' abatement under certain circumstances. The Lease Payments are designed to be sufficient in both time and amount to pay, when due, the principal and interest represented by the Certificates . The City has covenanted in the Lease to take such action as may be necessary to include the Lease Payments in its annual budgets and has further covenanted to make the necessary annual appropriations for all such Lease Payments . The amount of Lease Payments which the City is obligated to pay under the Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction or eminent domain proceedings , there is interference with the City' s use and possession of the Project. Lease Payments will not be abated to the extent moneys sufficient to pay Lease Payments are received from the Reserve Fund, any other account established from the proceeds of the Certificates or from the proceeds of rental interruption insurance or condemnation awards . Such adjustment or abatement will end with the substantial completion of repair, replacement or reconstruction of the Project. THE PROJECT The Project consists of a two-story police/public safety building and the underlying land. The Project is part of a complex which includes a separate five-level administrative structure which is connected to a single-level wing containing departments related to municipal development, Council Chambers and meeting rooms. The elements in the complex which are outside of the building and land which constitute the Project are not subject to the Lease and do not in any way secure the Certificates . See "PROPERTY REMOVAL AGREEMENT" herein . Net proceeds from the Certificates deposited into the Program Fund in the amount of $13,365,000 will be used by the Corporation to pay the costs of acquiring the Project and costs of issuance relating to Certificates . Amounts paid to the City by the Corporation from the Program Fund will be applied by the City to finance the acquisition of land for three parking structures and construction of two of the parking structures. One of the parking structures to be constructed is located north of the Huntington Beach Pier and the other is located downtown (Main Street) . The land to be acquired for the third structure is also located downtown (Fifth Street) . Although the two parking structures are expected to generate significant revenues for the City' s General Fund, such revenues are not directly pledged to the Certificates . Furthermore, neither the land purchased nor the facilities constructed with Certificate proceeds are pledged as security for the Certificates under the Lease or otherwise. ESTIMATED SOURCES AND USES OF FUNDS Net proceeds of the Certificates in the amount of $13,365,000 will be used by the Corporation to acquire the Project from the City. This amount represents moneys remaining in the Program Fund after costs of issuance have been paid, the Reserve Fund has been funded, the Underwriter' s Discount has been deducted and accrued interest has been deposited into the Lease Payment Fund. These net proceeds will be used by the City for the acquisition of land and construction of certain parking facilities as described under "THE PROJECT" . -2- SOURCES OF FUNDS Principal Amount of Certificates $14,960,000* Accrued Interest TOTAL SOURCES $ USES OF FUNDS Lease Payment Fund $ Reserve Fund Underwriter' s Discount Costs of Issuance (1 ) Net Proceeds (1 ) 13,365,000 TOTAL USES $ (1 ) Costs of Issuance plus Net Proceeds equal the total deposit of Certificate proceeds into the Program Fund. THE CERTIFICATES The Certificates shall be sold, executed and delivered in the aggregate principal amount of $14,960,000*. Each Certificate shall be dated as of the date of its execution and interest represented thereby shall be payable at the rates set forth on the cover page hereof from the Interest Payment Date (defined below) next preceding the date of execution thereof, unless: ( i ) it is executed on or before January 15, 1990, in which event interest represented thereby shall be payable from July 15, 1989; or (ii ) it is executed after .a Record Date and on or before the following Interest Payment Date , in which event interest represented thereby shall be payable from such Interest Payment j Date. The Interest Payment Dates are February 1 , 1990 and the first day of each February and August thereafter as long as any Certificates are outstanding. The Record Date is the 15th day of the month preceding each Interest Payment Date. The Certificates will mature on August 1 in each year of the designated years and in the principal amounts shown below: MATURITY SCHEDULE Certificates Principal Certificates Principal Maturing August 1 Amount Maturing August 1 Amount 1990 1997 1991 1998 1992 1999 1993 2000 1994 2001 1995 2002 1996 2003 $ Term Certificates due August 1 , 2019 —3— r R The Certificates will be executed and delivered in fully registered form without coupons, in the denomination of $5,000 or any integral multiple thereof. Principal and premium, if any, payable with respect to the Certificates will be payable at the corporate trust office of the Trustee in Los Angeles , California. Payment of interest represented by the Certificates shall be made by check or draft mailed to the registered owner as of the Record Date, or upon the request of a registered owner of at least $1 ,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the continental United States designated by such owner. Optional Prepayment The Certificates maturing on or before August 1 , 1999, are not subject to optional prepayment prior to maturity. The Certificates maturing on or after August 1 , 2000 are subject to optional prepayment prior to maturity on any date on or after August 1 , 1999, at the option of the City, as a whole or in part on any date from amounts deposited by the City in accordance with its option to prepay from any available source of funds therefor. In the event that less than all of the Certificates outstanding are called for prepayment, the principal components of the remaining Certificates outstanding shall be reduced on a pro-rata basis among maturities and by lot within a maturity, and the interest component of each remaining Certificate shall be reduced by the amount that would otherwise be payable on the Certificates that are prepaid. Certificates shall be called at the following prices expressed as percentages of the principal amount to be prepaid plus accrued interest to the prepayment date: Prepayment Period (Dates Inclusive) Prepayment Price August 1 , 1999 through February 1 , 2000 102% August 1 , 2000 through February 1 , 2001 101 1 /2 August 1 , 2001 through February 1 , 2002 101 August 1 , 2002 through February 1 , 2003 100 1 /2 August 1 , 2003 and thereafter 100. Additionally, the City may buy Certificates on the open market at a price not greater than par plus applicable premium and brokerage fees . Mandatory Prepayment The Certificates are subject to mandatory prepayment in whole or in part on any date, at a price equal to par plus accrued interest, without premium, upon a mandatory prepayment of Lease Payments made by the City under the following conditions : (i ) if the Project is damaged or destroyed, from insurance proceeds in excess of the amount (if any) which the City elects to use to repair the Project, or from all net insurance proceeds if the City elects not to repair the Project; or (ii ) from proceeds of title insurance or condemnation awards with respect to the Project. -4- Mandatory Sinking Fund Prepayment The Certificates maturing on August 1 , 2019 (the "Term Certificates") are subject to mandatory sinking fund prepayment on August 1 in each year on or after August 1 , 2004, by lot, from the principal components of the Lease Payments required to be paid by the City pursuant to the Lease with respect to each such prepayment date, at a prepayment price equal to the principal amount thereof to be prepaid, together with accrued interest thereon to the date fixed for prepayment, without premium, as follows : Prepayment Prepayment Date Amount Date Amount 2064 $ 2012 $ 2005 2013 2006 2014 2007 2015 2008 2016 2009 2017 2010 2018 2011 2019 Selection of Certificates for Prepayment Whenever provision is made for the prepayment of Certificates and less than all outstanding certificates of any maturity are called for prepayment, the Trustee shall select Certificates of such maturity for prepayment by lot provided, however, that if less than all the outstanding Term Certificates are called for prepayment at any one time (other than by mandatory sinking fund prepayment) , the Trustee shall specify a reduction in any sinking account payments required to be made with respect to such Term Certificates ( in an amount equal to the amount of outstanding Term Certificates to be prepaid) which, to the extent practicable, results in approximately equal annual debt service on the Certificates outstanding following such prepayment. Notice of Prepayment When prepayment is authorized or required, the Trustee shall give to the owners of the Certificates notice, at the expense of the City, of the prepayment of the Certificates. Such notice shall specify: (a) that the whole or a designated portion thereof (in the case of prepayment of a Certificate in part but not in whole) are to be prepaid, (b) the date of prepayment, (c) the place or places where the prepayment will be made and (d) the prepayment price. Such notice shall further state that on the specified prepayment date there shall become due and payable with respect to each Certificate to be prepaid, the principal thereof and premium, if any, together with interest accrued to said prepayment date, and that from and after such prepayment date interest thereon shall cease to accrue and be payable. Notice of prepayment shall be mailed to the respective owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books , at least thirty (30) days but not more than sixty (60) days prior to the prepayment date; provided that neither the failure to mail such notice nor any defect in any notice so mailed shall -5- affect the sufficiency of the proceedings for the prepayment of Certificates or the cessation of interest on the prepayment date. Lease Payments The Lease requires the City to make Lease Payments to the Corporation to be paid on each January 25 and July 25, commencing on January 25, 1990 ("Lease Payment Dates") , which Lease Payments have been assigned to the Trustee. Each semiannual Lease Payment is for the period commencing on the day following each Interest Payment Date and terminating on the following Interest Payment Date and is payable such that the payment made on or before January 25 of each year represents the interest payable with respect to the Certificates on the succeeding February 1 , and the payment made on or before each July 25 represents the interest and the principal payable with respect to the Certificates on the succeeding August 1 . The City shall receive a credit against Lease Payments in an amount equal to the amount on deposit in the Lease Payment Fund on each Lease Payment Date. The Lease provides that Lease Payments shall be abated for any period during which the Project is unusable by the City due to damage, destruction or eminent domain. During such a period, however, the Trustee may pay amounts relating to principal and interest represented by the Certificates from other sources , such as the Reserve Fund or Insurance and Condemnation Fund. Lease Payments with respect to the portions of the Project not damaged or condemned shall continue unabated. The City will obtain rental interruption insurance in an amount equal to not less than the maximum Lease Payment coming due and payable during the current or any future Fiscal Year (as defined in the Indenture) to insure against an interruption in Lease Payments because of damage to the Projects . See "LEASE AGREEMENT" herein. The Lease requires that Lease Payments be deposited in the Lease Payment Fund maintained by the Trustee. On each Interest Payment Date, the Trustee shall withdraw from the Lease Payment Fund the aggregate amount of such Lease Payments and shall apply such amounts to make principal and interest payments with respect to the Certificates. Table 1 below represents annual Lease Payments. -6- TABLE 1 Lease Payments on the Certificates For the Portion of Lease Payment Representing Year Ending Total Lease August 1 Principal Interest Payments 1990 $ $ $ 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sources of Lease Payments 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. It is the intent of the City that the City' s primary source of funds for Lease Payments will be its General Fund. However, the City is obligated to make Lease Payments from any lawfully available funds . SECURITY FOR THE CERTIFICATES Each Certificate represents a direct, undivided fractional interest in Lease Payments made by the City under the Lease. The Corporation, pursuant to the Assignment Agreement, will assign all its right, title and interest in the Lease to the Trustee for the benefit of the owners of the Certificates , including its right to receive Lease Payments and insurance and condemnation -7- gg, 6 proceeds thereunder and its rights to exercise all the rights and remedies conferred on the Corporation under the Lease. The City is obligated to make Lease Payments from annual appropriations of all funds lawfully available therefor. Neither the full faith and credit nor the taxing power of the City, the State of California or any of their political subdivisions is pledged to make Lease Payments under the Lease. The Lease Payments are calculated to be sufficient to pay, when due, the principal and interest represented by the Certificates. The Lease provides that the City shall take action each fiscal year as may be necessary to include all Lease Payments in its annual budgets and to make annual appropriations therefor. Under California law, even though the Lease becomes effective as of the date of the Certificates, the obligation of the City to make Lease Payments with regard to a particular building or portion of the Project (other than to the extent that funds to make Lease Payments are available in the Lease Payment Fund or the Reserve Fund) may be abated in whole or in part if the City does not have full use and occupancy of the Project due to damage, destruction or eminent domain. The City shall not be obligated to make Lease Payments on the portion of the Project which it does not occupy. However, the City' s obligation to make Lease Payments for other portions of the Project which it does occupy shall continue unabated. As provided in the Lease, the covenants of the City thereunder shall be deemed by the City to be and shall be ministerial duties imposed by law. It shall be the duty of each and every public official of the City to take such action and to 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. A reserve fund (the "Reserve Fund") has been established by the Trust Agreement in an amount equal to the maximum Lease Payment coming due and payable during the current or any future Fiscal Year (the "Reserve Requirement") . Except to the extent amounts in the Reserve Fund exceed the Reserve Requirement, such funds are to be used only for the payment of Lease Payments to the extent amounts in the Lease Payment Fund are insufficient therefor. CERTIFICATE OWNERS' RISKS City Lease Payments The City' s Lease Payments are not secured by any pledge of taxes or other revenues of the City, but are payable from all funds lawfully available to the City. In the event the City' s revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments. The same result could occur if, because of state constitutional limits on expenditures , the City is not permitted to appropriate and spend all of its available revenues . See "CITY FINANCIAL INFORMATION - Constitutional Limitations on Taxes" . However, the City has covenanted in the Lease to budget for, appropriate and make the Lease Payments, subject to abatement under certain circumstances, for the Project, which provides essential public services to the City. -8- i.. 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 obligation 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 has the capacity to enter into other obligations which may constitute additional charges against its revenues . To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. Limited Recourse on Default If the City defaults on its obligations to make Lease Payments , the Trustee may 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 the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease. The City shall only.be liable for Lease Payments on an annual basis , and the Trustee would be required to seek a separate judgment each year for that year' s defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Due to the governmental nature of the Project, it is unlikely that a court would permit the remedy of repossession of the Project for re-letting as provided in the Lease. Interruption of Use and Occupancy for Extended Period If because of damage to all or a portion of the Project, the City is unable to use and occupy the Project, the City' s Lease Payments shall be abated such that the resulting Lease Payments represent fair consideration for the remaining portions of the Project. If the Project cannot. be repaired during the period of time for which Lease Payments can be made with the proceeds of rental interruption insurance and Reserve Fund moneys , there may be no source for the payments due on the Certificates . CITY FINANCIAL INFORMATION Each Certificate represents an undivided fractional interest in Lease Payments to be made by the City under the Lease Agreement with the Corporation. The obligation of the City to make such Lease Payments is payable by the City from annual appropriations of the City from all funds lawfully available therefor. Organization The City has a seven-member city council elected at large, and the current members are: Wes Bannister, Mayor and Chairman of the Corporation; Tom Mays , Mayor Pro Tem and Vice Chairman of the Corporation ; Jim Silva, Peter Green , Don MacAllister, Grace Winchell and John Erskine. The City Council appoints -9- r the City Administrator, who acts in the capacity of chief executive officer of the Corporation. This post is held by Paul E. Cook. Assessed Valuation and Property Taxes Table 2 sets forth an eight-year history of Huntington Beach' s Assessed Valuation. Over the eight years shown, the City' s Assessed Valuation has increased at an average annual rate of approximately 7.76 percent. The 1988-89 Assessed Valuation is 4.8 percent higher than that of 1987-88 even though the State Assessed Valuation used in 1988-89 was substantially less than that used in 1987-88 due to a change in State law (See footnote 2) . Secured Assessed Valuation increased 11 percent in 1988-89 over the previous fiscal year. Table 3 sets forth the City' s secured tax levy for each of the six years ended June 30, 1988. The table also includes the dollar amount and percentage of delinquencies as of June 30 of each year. TABLE 2 CITY OF HUNTINGTON BEACH Assessed Valuation History 1981-82 -- 1988-890) Fiscal State Percent Year Secured Assessed Unsecured Total Increase 1981-82 $4,608,702,866 $322,527,240 $288,452,654 $5,219,682,760 -- 1982-83 5,179, 181 ,975 330,030, 190 374,691 ,841 5,883,904,006 12. 7% 1983-84 5,559,791 ,250 362,185,700 370,949,364 6,292,926,314 7 .0 1984-85 5,940,642,022 426,592,970 466,570,592 6,833,805,584 8.6 1985-86 6,519,922,590 450,742,080 441 ,125,438 7,411 ,790,108 8.5 1986-87 7,019,854,076 475,467,220 504,939,681 8,000,260,977 7.9 1987-88 7,457,614,000 487,793,000 436,502,000 8,381 ,909,000 4.8 1988-89(2) 8,288,586,074 3,062,550 490, 187,309 8,781 ,835,933 4.8 (1 ) Includes homeowners ' exemptions and state supplemental subventions. (2) State Assessed valuation in 1988-89 excludes all utilities except railroads. State law was changed to provide that tax revenues derived from all utility property assessed by the State except railroad property shall not be based on the valuation of these properties, but instead on revenue in the previous year. Assessed valuations are therefore not determined for such properties . Tax revenues derived from railroad property are based on the assessed valuation of such property, and this valuation is included. Source: California Municipal Statistics , Inc. -10- 1 TABLE 3 CITY OF HUNTINGTON BEACH Tax Levies and Delinquencies, 1982-83 -- 1987-88 Property Tax Levies and Collections Fiscal Secured Total - Delinquency - Unsecured Total -Delinquencies- Year Total Levy Collection] Amount Percent Total Levy Collections Amount Percent 1982-83 $11,405.210 $11,116.699 $288,511 2.53 $ 960.008 $ 908,66.6 $51.342 5.35 1983-84 11,402,791 11.664,690 430,471 3.78 982,118 942.305 25,543 2.60 1984-85 12.418.398 11.633.797 424,700 3.42 1,032,103 955,100 33,094 3.21 1985-86 13,607.853 12.780.632 452,047 3.32 1,130.254 1.059,541 39,631 3.51 N 1 1986-87 15,088,967 14,447,882 572,469 3.79 1.186.696 1,100,619 44,496 3.75 1987-88 16,055,000 15,419,000 580,000 3.61 1,250.000 1.180,000 46.000 3.68 Source: County of Orange Note: Delinquency does not necessarily equal the levy amounts minus the collections since there are always collections of amounts levied in prior years. 1987-88 rounded to nearest thousand. Bonded Indebtedness Table 4 sets forth the City' s direct and overlapping bonded indebtedness as of June 1 , 1989. TABLE 4 CITY OF HUNTINGTON BEACH Bonded Indebtedness 1988-89 Assessed Valuation: $8,580,201 ,414 (after deducting $201 ,634,519 redevelopment tax allocation increment) DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1 ) Debt 6/l /89 Orange County 7 .611% $ 133,954 Orange County Building Authorities 7.611 14,918,797 Orange County Flood Control District 7.613 583,537 Metropolitan Water District 1 .480 7,605,572 Municipal Water Dist. of Orange Co. Water Facilities Corp. 11 .411 7,628,254 Orange County Sanitation Districts #1 , 2 & 3 Certificates of Participation 5.110 5,907, 160 Orange County Sanitation District # 3 10.864 7 ,496 Orange County Sanitation District #11 98.494 160,545 Coast Community College District Authority 29.701 6, 127,316 Los Alamitos Unified School District 1 .745 12,390 Huntington Beach Union High School District 70.721 1 ,244,690 Fountain Valley School District 29.585 1 ,347 ,597 Huntington Beach School District 97.486 1 ,023,603 Ocean View School District 98. 123 1 ,226,538 City of Huntington Beach 100. 2,305,000 City of Huntington Beach Building Authorities 100. 33,640,000 City of Huntington Beach 1915 Act Bonds 100. 1 ,653,905 TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT $85,526, 354 ( 1 ) Less: MWDOC Water Facilities Corp. (100% self-supporting) 7 ,628,254 Orange County Sanitation District #3 (100% self-supporting) 7,496 TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT $77,890,604 (1 ) Excludes tax and revenue anticipation notes , revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations . Ratios to 1988-89 Assessed Valuation: Direct Debt ($35,945,000) 0.42% Total Gross Debt 1 .00% Total Net Debt 0.91% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District. . . . . . . . . . . . . . . .$3,922,000 Ocean View School District. . . . . . . . . . . . . . . . .$1 ,825,088 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/88: $29, 130,826 -12- Constitutional Limitations on Taxes On June 6, 1978, California voters approved Proposition 13, the Jarvis-Gann initiative, which added Article XIIIA to the California Constitution. The principal thrust of Article XIIIA is to limit the amount of ad valorem tax on real property to 1% of "full cash value" as determined by the County Assessor. Article XIIIA defines "full cash value" to mean "the County Assessor' s valuation of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment period." Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, and to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster. Additionally, Article XIIIA has been amended to provide that there would be no increase in the full cash value base in the event that property title is transferred from one member of the same immediate family to another member. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1 , 1978, and 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. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax laws resulting in increased tax revenues . In September 1978, the California Supreme Court upheld the general validity of Article XIIIA against a series of challenges which attacked the Jarvis-Gann initiative 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. On November 6, 1979, the California voters approved Proposition 4, the Gann initiative, which added Article XIIIB to the California Constitution . The principal effect of Article XIIIB is to limit the annual appropriations of the State and 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. The "base year" for establishing such appropriation limit is the 1978-79 fiscal year and the limit is to be adjusted annually to reflect change in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes , and 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 (1 ) regulatory licenses , user charges and user -13- fees (but only to the extent such proceeds exceed the cost of providing the service or regulation) and (2) the investment of tax revenues . It is the apparent intent of the law to insulate the other taxing entities and redevelopment agencies from the affects of such reductions on their property tax revenues. Article XIIIB 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. While the tax rate is assumed to decline to one percent of taxable value and remain constant in subsequent years, current law permits taxing entities deriving revenues from the one percent rate to reduce their levies under certain circumstances . The City' s adopted 1989/90 budget calls for appropriations which are 93.4% of the 1989/90 appropriations limit computed by the City. On November 4, 1987, an initiative statute (known as Proposition 62) was approved by the voters of the State which (i ) requires that any tax for general government purposes imposed on local governmental entities such as the City be approved by resolution or ordinance adopted by a two-thirds vote of th-e government entity' s legislative body and by a majority vote of the electorate of the governmental entity, ( ii ) requires that any special tax (defined as taxes levied for other than general government purpose) imposed by a local government entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii ) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by local government entities except as permitted by Article XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (vi ) requires that any tax imposed by a local governmental entity on or after August 1 , 1985, be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988. A recent decision of a State Court of Appeal (City of Westminster v. County of Orange) has declared that the provisions of Proposition 62 requiring majority vote approval of the electorate for general fund taxes are unconstitutional . X petition for review of the decision was filed with the State Supreme Court on October 21 , 1988. The petition was denied by the Court on December 15, 1988, making the Court of Appeal decision final . Financial Statements The City of Huntington Beach Comprehensive Annual Financial Reports for the fiscal years ending June 30, 1985, 1986, 1987 and 1988 are available upon request from the City Finance Director, 2000 Main Street, Huntington Beach, California. The City is audited annually by an independent auditor. Set forth in Appendix B are the General Fund Balance Sheets dated June 30, 1985, 1986, 1987 and 1988 and the General Fund Statements of Revenues , Expenditures and Changes in Fund Balances for the fiscal years ending June 30, 1985, 1986, 1987 and 1988. The City' s financial statements for the General Fund are prepared on the modified accrual basis of accounting. -14- PROPERTY REMOVAL AGREEMENT On July 15, 1986 the City and the Corporation entered into a certain lease agreement (the "1986 Lease") under which the City leased from the Corporation the Project and the other parts of the complex of which the Project is a part (as described under "THE PROJECT") . The City has the right under the 1986 Lease to remove property from the 1986 Lease if the City provides an appraisal stating that the value of the property remaining subject to the 1986 Lease is at least equal to $20,000,000. The City has provided an appraisal which demonstrates that the Project may be removed from the 1986 Lease such that the appraised value of the remaining land and improvements exceeds $20,000,000. The City has also amended the 1986 Lease so that the Project is no longer subject to the 1986 Lease by entering into a certain Agreement Regarding Removal of Property from 1986 Lease Agreement (the "Property Removal Agreement") with the Corporation. Under the 1986 Lease , title to property removed from the 1986 Lease is to be vested with the City. Under the Property Removal Agreement, the City and Corporation have agreed that title to the Project after its removal from the 1986 Lease shall remain with the Corporation, and that the Corporation is obligated to pay the City $13,365,000 as compensation. The Property Removal Agreement states that this compensation, which constitutes the value of the Project as shown in the aforementioned appraisal , shall be paid to the City from the proceeds of certificates of participation issued by the Corporation. Net proceeds of the Certificates shall be used to make that payment. LEASE AGREEMENT Lease of Proiect The Corporation agrees to lease the Project to the City pursuant to the Lease Agreement. The term of the Lease Agreement begins on the date of recordation thereof and ends only after all of the Lease Payments have been made. Lease Payments ; Abatement The City has agreed to pay the Lease Payments , as rental for the use and occupancy of the Project. Commencing January 25, 1990 and continuing each January 25 and July 25 thereafter until the Certificates have been redeemed in full , the City shall make the Lease Payments . The City has agreed to take such actions as may be necessary to include Lease Payments in its annual budgets and to appropriate the Lease Payments in each year during the term of the Lease Agreement, and to provide the Trustee with certifications that the Lease Payments have been included in the City' s budget. In addition, the City has agreed to pay compensation due .to the Trustee , and all costs and expenses of auditors , engineers and accountants , but excluding costs of issuance paid out of Certificate proceeds . The Lease Payments shall be abated during any period in which, due to damage or destruction, there is substantial interference with the City' s use and occupancy of the Project. The amount of such abatement shall be agreed upon by the City and the Corporation such that the resulting Lease Payments -15- allocable to the damaged or destroyed Project represent fair consideration for the use and occupancy of the portions of such Project not damaged or destroyed. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease shall continue in full force and effect and the City waives any right to terminate the Lease by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments to the extent that the proceeds of hazard insurance, rental interruption insurance or amounts in the Reserve Fund are available to pay Lease Payments which would otherwise be abated. Substitution of Project The City shall have the option at any time during the term of the Lease, to substitute other land, facilities, improvements or other property (the "Substitute Project") for the Project or portion thereof (the "Former Project") , provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution: (a) The City shall file with the Corporation and the Trustee an amended Exhibit A to the Lease which adds thereto a description of the substitute project and deletes therefrom the description of the former project; (b) the City shall certify in. writing to the Corporation and the Trustee that the estimated fair market value and the estimated fair rental value of the substitute project are at least equal to the estimated fair market value and the estimated fair rental value, respectively, of the former project, all as shown in the report or opinion of an M.A.I . appraiser selected by the City; (c) the City shall certify in writing to the Corporation and the Trustee that the substitute project serves the public purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California; and (d) the City shall certify in writing to the Corporation and the Trustee that the estimated useful life of the substitute project at least extends to the date on which the final Lease Payment becomes due and payable. Title Throughout the term of the Lease, title to the Project, and to each and every portion thereof, shall remain vested in the Corporation , subject to Permitted Encumbrances . Permitted Encumbrances are defined to include (i ) ad valorem taxes and assessments not then due and payable, or which the City may allow to remain unpaid pursuant to Article V of the Lease Agreement; ( ii ) the Lease Agreement and the Assignment Agreement; (iii ) any right or claim of any mechanic, laborer, materialman, supplier, vendor not filed or perfected in the manner prescribed by law, and ( iv) easements, rights of way, mineral rights , drilling rights and other rights, reservations, covenants, conditions or -16- restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Project for the purposes intended by the City. Maintenance, Utilities , Taxes and Modifications The City, at its own expense, has agreed to maintain or cause to be maintained the Project and the Project land in good repair; the Corporation has no responsibility for such repair. The City has the power to make additions, modifications and improvements to the Project which do not damage or reduce its value to a value substantially less than that which existed prior to such modification or improvement. Any such additions, modifications or improvements that constitute fixtures will automatically become subject to the Lease Agreement. The City must pay or cause to be paid all utility charges with respect to the Project, as well as any taxes and assessments , if any, which it is legally obligated to pay. Insurance The Lease Agreement requires the City to maintain or cause to be maintained the following insurance against risk of physical damage to the Project and other risks for the protection of the Certificate Owners, the Corporation and the Trustee: (i ) Public Liability and Property Damage Insurance. Throughout the term of the Lease, but only if and to the extent- available at reasonable cost from reputable insurers , a standard comprehensive general liability insurance policy or policies in protection of the City, the Corporation and their respective members , officers , agents and employees , and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by the operation or ownership of the Project. Said policy or policies shall provide coverage in the liability limits and shall be subject to such deductibles as shall be sufficient in the reasonable judgment of the City taking into account the nature and scope of the operations and affairs of the City. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in the form of self-insurance by the City subject to the provisions of Section 5.7 of the Lease, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The net proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the net proceeds of such insurance shall have been paid. (ii ) Fire and Extended Coverage Insurance. Throughout the term of the Lease, insurance against loss or damage to the Project by fire or lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance shall , as nearly as practicable, also cover loss or damage by explosion , windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount at least equal to one hundred percent (100%) of the replacement cost of the -17- i property insured thereunder, but in any event the aggregate coverage of all such policies shall not be required to exceed the aggregate principal component of the Lease Payments then remaining unpaid. Such insurance may be subject to deductible clauses of not to exceed $100,000 or ten percent (10%) of said replacement cost for any one loss. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in the form of self-insurance by the City subject to the provisions of Section 5.7 of the Lease, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The net proceeds of such insurance shall be applied as provided in Section 5.7 of the Lease Agreement. (iii ) Rental Interruption or Use and Occupancy Insurance. Throughout the term of the Lease, rental interruption or use and occupancy insurance to insure against abatement of Lease Payments as a result of any hazards covered in Section (ii ) above, in an amount sufficient to pay the maximum Lease Payments of the City payable during the current or any future Fiscal Year. Such insurance may be maintained in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. Such insurance may be maintained as part of or in conjunction with any other insurance carried by the City. The proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund, and shall be applied to the payment of Lease Payments in the order in which such Lease Payments become due and payable. Option to Prepay The City may exercise its option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, on any date on or after August 1 , 1999, by paying a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with the interest component of the Lease Payment required to be paid on such date and together with a prepayment premium equal to the aggregate premium required to be paid upon the corresponding prepayment of the Certificates pursuant to Section 3.01 (a) of the Trust Agreement. Such prepayment price shall be deposited by the Trustee in the Lease Payment Fund to be applied to the prepayment of Certificates pursuant to Section 3.01 (a) of the Trust Agreement. The City shall give the Trustee written notice of its intention to exercise its option not less than forty-five (45) days in advance of the prepayment date. Assignment; Subleases The Corporation has assigned certain of its rights under the Lease Agreement to the Trustee pursuant to the Assignment Agreement. The City may not assign any of its rights in the Lease Agreement, and may sublease all or a portion of the Project and the Project land only under the conditions contained in the Lease Agreement, including the condition that such sublease not cause the interest component of the Lease Payments to become subject to federal or State of California personal income taxes . -18- r Events of Default Each of the following constitutes an "event of default" under the Lease Agreement: (i ) Failure by the City to pay any Lease Payment or other payment required under the Lease Agreement when due and continuation of such failure for three (3) days. (ii ) Failure by the City to observe and perform any covenant, condition or agreement in the Lease Agreement, other than a default described in (i ) above, and the continuance of such failure or default for a period of 60 days after written notice thereof has been given to the City by the Trustee or the Corporation, provided that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 60 day period, the Trustee and the Corporation shall not unreasonably withhold their consent to an extension of such time and such failure shall not constitute an event of default if corrective action is instituted by the City within such 60 day period and diligently pursued until the default is corrected; or (iii ) Certain events relating to bankruptcy of the City or the inability of the City to pay its debts. Upon the occurrence of an Event of Default, the Corporation may exercise any and, all remedies available or granted to it pursuant to law under the Lease, 'including the right to exercise any and all rights of entry upon or repossession of the Project, and also, at its option , with or without such entry, to terminate this Lease; provided, however, that no termination shall be effected either by operation of law or acts of the parties hereto except upon express written notice from the Corporation to the City terminating the Lease, as provided below. Upon the occurrence of an Event of Default and notwithstanding any entry by the Corporation, the Corporation may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Corporation may have) : (a) Maintain the Lease in full force and effect and recover rent and other monetary charges as they become due without terminating the City' s right to possession of the Project, regardless of whether or not the City has abandoned the Project. In the event the Corporation elects not to terminate the Lease, it shall have the right and the City irrevocably appoints the Corporation as its agent and attorney-in-fact for such purpose to attempt to relet the Project at such rent, upon such conditions and for such term, so long as the tax-exempt status of the interest components of Lease Payments is preserved, and to do all other acts to maintain or preserve the Project, including the removal of persons or property therefrom or taking possession thereof, as the Corporation deems desirable or necessary, and the City waives any and all claims for any damages that may result to the Project thereby; provided, however, that no such actions shall be deemed to terminate the Lease and the City shall continue to remain liable for any deficiency that may arise out of such reletting, payable at the same time and manner as provided for Lease Payments . -19- (b) Terminate the City' s right to possession of the Project by giving a written notice of termination to the City. On the date specified in such notice (which shall not be less than three (3) days after the giving of such notice) the City' s right to possession under the Lease shall terminate and the City shall surrender possession of the Project to the Corporation, unless on or before such date all arrears of rental and all other sums payable by the City under the Lease, and all costs and expenses incurred by or on behalf of the Corporation under the Lease, including attorneys' fees incurred in connection with such defaults, shall have been paid by the City and all other defaults or breaches under the Lease by the City at the time existing shall have been fully remedied to the satisfaction of the Corporation. Upon such termination, the Corporation may recover, in addition to all other damages available by contract or at law, from the City all unpaid rental in accordance with Section 9.2 of the Lease. The Trustee has no right to accelerate Lease Payments and, due to the essential nature of the Project to the City' s governmental functions , it is uncertain whether a court would permit the exercise of the remedies of re-entry, repossession or re-letting. TRUST AGREEMENT Trustee The Trustee is appointed pursuant to the Trust Agreement and is authorized to prepare, execute and deliver the Certificates and to act as a depository of amounts held thereunder. The Trustee is required to make deposits into and withdrawals from funds, and invest amounts held under the Trust Agreement in accordance with the City' s instructions . Funds The Trust Agreement creates the Program Fund, the Lease Payment Fund, the Reserve Fund and the Insurance and Condemnation Fund to be held in trust by the Trustee. Acquisition Fund. The balance of the proceeds of the sale of the Certificates after certain deposits are made to the Reserve Fund and after setting aside accrued interest, will be deposited in the Program Fund and disbursed by the Trustee, upon the written order of the Corporation, to pay (i ) costs relating to the execution, sale and delivery of the Certificates and (ii ) the amounts due and payable to the City pursuant to the Property Removal Agreement. At such time as the City determines that the purposes for which the proceeds of the Certificates were to be used have been completed, the Trustee shall transfer to the Lease Payment Fund the balance of moneys remaining in the Program Fund, to be credited to the payment of the Lease Payments next coming due and payable. Lease Payment Fund. There shall be deposited in the Lease Payment Fund, when received by the Trustee, all Lease Payments and prepayments (except reimbursement for funds drawn from the Reserve Fund, as described below) . Moneys on deposit in the Lease Payment Fund will be used to pay principal of, -20- redemption premiums, if any, and interest represented by the Certificates . Any earnings on investment of moneys in the Lease Payment Fund will remain in such Fund and will constitute a credit on the City' s next Lease Payments . Any surplus remaining in the Lease Payment Fund after the payment of all Certificates , including premiums and accrued interest, and payment of any applicable fees and expenses to the Trustee, or provision for their payment has been made, shall be repaid to the City. Reserve Fund. The Reserve Fund will be funded out of proceeds of the sale of the Certificates in an amount equal to maximum annual principal and interest represented by the Certificates (the "Reserve Requirement") . If on any interest payment date, there are insufficient moneys in the Lease Payment Fund to pay principal and interest then due, the Trustee shall transfer so much of the Reserve Fund as shall be necessary to make such payment. The Trustee, at least annually, shall value the investments in the Reserve Fund at cost. Any moneys on deposit in the Reserve Fund at any time in excess of the Reserve Requirement shall be transferred to the Lease Payment Fund. Any deficiency in Lease Payments which are paid from the Reserve Fund and thereafter reimbursed by the City shall be deposited in the Reserve Fund. Any amounts remaining in the Reserve Fund after the payment of all Certificates , or provision for their payment has been made, shall be paid to the City. Insurance and Condemnation Fund. Any net proceeds of insurance against accident to or destruction of the Project collected by the City in the event of any such accident or destruction shall be paid to the Trustee pursuant to Section 6. 1 of the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in a special fund designated as the "Insurance and Condemnation Fund" which the Trustee shall thereupon establish. If the City determines and notifies the Trustee in writing of its determination, within ninety (90) days following the date of such deposit, that the replacement, repair, restoration, modification or improvement of the Project is not economically feasible or in the best interests of the City, then such net proceeds shall be promptly transferred by the Trustee to the Lease Payment Fund and applied to the prepayment of Lease Payments pursuant to Section 10.3 of the Lease Agreement and the corresponding prepayment of Certificates pursuant to Section 3.01 (b) of the Trust Agreement. In the event of damage or destruction of the Project in full , such net proceeds may be transferred to the Lease Payment Fund to be used to redeem outstanding certificates only if such net proceeds, together with other available moneys , are sufficient to cause the prepayment of outstanding certificates in an aggregate principal amount equal to the aggregate unpaid principal components of the unpaid Lease Payments allocable to the Project. All net proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Lease Payment Fund shall be applied to the prompt replacement, repair, restoration , modification of improvement of the damaged or destroyed portions of the Project by the City, upon receipt of written requisitions of the City stating with respect to each payment to be made (a) the name and address of the person, firm or corporation. to whom payment is due, (b) the amount to be paid and (c) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal , and specifying in reasonable detail the nature of the obligation , accompanied by a bill or a statement of account for such obligation. Any balance of the net proceeds remaining after the City shall file a written certificate with the Trustee stating that such work has been completed shall be paid to the City. -21- r If all or any part of the Project shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the net proceeds therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund, pursuant to Section 6. 1 of the Lease Agreement, and shall be applied and disbursed by the Trustee as follows: (a) If the City has given written notice to the Trustee of its determination that (i ) such eminent domain proceedings have not materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, and (ii ) that such proceeds are not needed for repair, replacement or rehabilitation of the Project, and the City has given written notice to the Trustee of such determination, the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited towards the payment of the Lease Payments as the same become due and payable. (b) If the City has given written notice to the Trustee of its determination that (i ) such eminent domain proceedings have not materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, and (ii ) such proceeds are needed for repair, replacement or rehabilitation of the Project, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing of requisitions of a city representative meeting the requirements of Section 6.01 of the Trust Agreement. (c) If (i ) less than all of the Project shall have been taken in such eminent domain proceedings or sold to a government threatening the use of eminent domain powers, and if the City has given written notice to the Trustee of its determination that such eminent domain proceedings have materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, or (ii ) all of the Project shall have been taken in such eminent domain proceedings , then the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited toward the prepayment of the Lease Payments allocable to the Project pursuant to Section 10.3 of the Lease Agreement and applied to the corresponding prepayment of Certificates in the manner provided in Section 3.01 (b) of the Trust Agreement. Investment of Funds The Trustee is required to invest and reinvest all moneys held under the Trust Agreement in Permitted Investments as defined therein, consisting of: (a) direct general 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 of the United States of America) ; and obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. -22- (b) any of the following obligations or indebtedness issued or guaranteed by any of the following federal agencies and entities : (i ) senior debt obligations of the Federal Home Loan Bank System; (ii ) participation certificates of the Federal Home Loan Mortgage Corporation; (iii ) mortgage-backed securities or senior debt obligations of the Federal National Mortgage Association; or (iv) senior debt obligations of the Student Loan Marketing Association. (c) interest-bearing demand or time deposits (including certificates of deposit) in federal or state chartered savings and loan associations or in national or State banks (including the Trustee) provided that either: (i ) the obligations of such association or bank or the obligations of the holding company of such association or bank have a rating of A or better by Moody' s; or (ii ) such deposits are fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation; (d) obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations have a rating of A or better by Moody' s ; (e) commercial paper which has a rating of P-1 or better by Moody' s or which is backed by a letter of credit which has a rating of A or better by Moody' s; (f) money market funds the policy of which is to invest in Federal Securities; (g) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System and the obligations of which commercial bank or the obligations of the holding company of which have a rating of A or better by Moody' s ; i (h) obligations the interest on which is excludable from gross income for federal income taxation purposes under Section 103 of the Federal Income Tax Code, and which have a rating of A or better by Moody' s; and (i ) investment agreements which are the obligation of, or which are secured or guaranteed by the obligations of, a financial institution whose long term unsecured obligations have a rating of A or better by Moody' s . Events of Default. Upon the occurrence of an event of default by the City under the Lease Agreement, the Trustee may, and upon request of the Owners of a majority of the outstanding principal amount of the Certificates, will exercise any and all remedies available at law or pursuant to the Lease Agreement. The Owner of' any Certificate then outstanding may institute any suit, action, or other proceeding in equity or at law for the protection or enforcement of any right under the Lease Agreement or Trust Agreement if and only if (a) such Owner has previously given the Trustee written notice of such event of default, (b) the owners of at least 25% in aggregate principal amount of the outstanding Certificates have made written request of the Trustee to exercise such powers , (c) said owners shall have tendered to the Trustee -23- i reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Trustee shall not have complied with such request for 60 days following receipt of such written request and such tender of indemnity. Amendment. The Trust Agreement or the Lease Agreement may be amended only by agreement among the parties thereto without the consent of the Owners of the Certificates but only (i ) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power reserved in the Trust Agreement to the Corporation or the City, (ii ) to cure, correct or supplement any ambiguous or defective provision, (iii ) in regard to questions arising thereunder, which shall not in the opinion of Bond Counsel adversely affect the interest of the Trustee or such Owners, (iv) to correct any incorrect property description and (v) to the extent permitted in an opinion of Bond Counsel , to delete or modify any of the provisions of the Trust Agreement relating to the exemption from federal income taxation of interest on the Certificates. Any other amendment shall require the approval of the Owners of at least 50% in aggregate principal amount of the Certificates then outstanding, provided that no such amendment shall (a) extend the maturity or time of interest payment, or reduce the interest rate , amount of principal or premium payable on, any Certificate without such Owner' s consent; (b) reduce the percentage of Owners of Certificates required to consent to any amendment or modification; or (c) modify any of the Trustee' s rights or obligations without its consent. Defeasance. Upon payment of all outstanding Certificates, either at or . before maturity, or upon the deposit of money or Federal Securities (as defined in the Trust Agreement) with the Trustee sufficient with other available funds to retire the Certificates at or before maturity, the Trust Agreement will be terminated, except for the obligation of the Trustee to make payments on the Certificates . ASSIGNMENT AGREEMENT Pursuant to the Assignment Agreement, the Corporation transfers , assigns and sets over to the Trustee, for the benefit of the Owners of the Certificates, all of the Corporation' s rights under the Lease Agreement (subject to certain exceptions) , including the right of the Corporation to receive and collect amounts payable under the Lease Agreement, its right to receive and collect proceeds of condemnation and insurance awards and the right to exercise rights and remedies of the Corporation in the Lease Agreement to enforce payments of amounts thereunder. The Trustee accepts such assignment for the purpose of securing such payments due to and rights of the Owners of the Certificates , subject to the provisions of the Trust Agreement. TAX EXEMPTION In the opinion of.Jones Hall Hill & White, A Professional - Law Corporation, San Francisco, California, Special Counsel , subject, however, to the qualifications set forth below, under existing law, the interest payable with respect to the Certificates is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the -24- alternative minimum tax imposed on such corporations (as defined for federal income tax purposes) , such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the issuance of the Certificates in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Certificates. Special Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Certificates . Prospective purchasers of the Certificates should be aware that, under existing law, for the purpose of computing the 20 percent federal alternative minimum tax imposed on corporations for a taxable year beginning in 1989, an amount equal to 50 percent of the amount by which adjusted net book income exceeds alternative minimum taxable income is added to alternative minimum taxable income, and for taxable years beginning after 1989, an amount equal to 75 percent of the amount (referenced below as "Adjusted Current Earnings Preference") by which adjusted current earnings exceed alternative minimum taxable income is added to alternative minimum taxable income. Interest otherwise excluded from gross income, such as interest represented by the Certificates, is included in adjusted net book income and in adjusted current earnings. On April 11 , 1989, Congressman Rostenkowski , Chairman of the Ways and Means Committee of the United States House of Representatives , introduced legislation under which, for the purpose of computing the 20 percent federal alternative minimum tax imposed on corporations for taxable years beginning after 1989, the Adjusted Current Earnings Preference would be eliminated and, in lieu thereof, for the purpose of computing the 20 percent alternative minimum tax imposed on corporations for taxable years beginning 1989, alternative minimum taxable income would include interest, such as interest represented by the Certificates , which is otherwise excluded from gross income. No prediction can be made whether such legislation will be enacted in its present form. Prospective purchasers of the Certificates should also be aware that ( i ) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certificates or, in the case of a financial institution, that portion of the Certificate*'owner' s interest expense allocated to interest payable with respect to the Certificates , ( ii ) with respect to insurance companies subject to the tax imposed by section 831 of the Code, for taxable years beginning after December 31 , 1986, section 832(b)(5)(6)(i ) reduces the deduction for loss reserves by 15 percent of the sum of certain items , including interest on the Certificates , ( iii ) for taxable years beginning after December 31 , 1986 and before January 1 , 1992, interest on the Certificates earned by some corporations could be subject to the environmental tax imposed by section 59A of the Code, ( iv) for taxable years beginning after December 31 , 1986, interest on the Certificates earned by certain foreign corporations doing business in the United States could be -25- subject to a branch profits tax imposed by section 884 of the Code, (v) passive investment income, including interest on the Certificates, may be subject to federal income taxation under section 1375 of the Code for subchapter S corporations that have subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such subchapter S corporation is passive investment income and (vi ) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest payable with respect to the Certificates . In the further opinion of Special Counsel , such interest is exempt from California personal income taxes . APPROVAL OF LEGAL PROCEEDINGS The legality of the sale, execution and delivery of the Certificates is subject to the approval of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, acting as Special Counsel . A copy of such legal opinion will be printed on each Certificate. ABSENCE OF LITIGATION At the time of delivery of and payment for the Certificates , the Corporation and the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, against the Corporation or the City affecting their existence or the titles of their respective offices or seeking to restrain or to enjoin the sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Lease, the Assignment Agreement, the Property Removal Agreement or any action of the Corporation or City contemplated by any of said documents , or in any way contesting the completeness or accuracy of this. Official Statement or any amendment or supplement thereto, or contesting the powers of the Corporation or City or their authority with respect to the Certificates or any action of the Corporation or City contemplated by any of said documents , nor, to the knowledge of the Corporation or City, is there any basis therefor. RATING Moody' s Investors Service ("Moody' s") has given the Certificates the rating of "Al ". The rating reflects only the view of such organization and an explanation of the significance of such rating may be obtained from it at the following address: 99 Church Street, New York, New York 10007. There is no assurance that the rating will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agency that issued it if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates . -26- UNDERWRITING The Certificates will be purchased from the Trustee by Stone & Youngberg as underwriter (the "Underwriter") , under a Purchase Contract dated , 1989 (the "Purchase Contract") , pursuant to which the Underwriter agrees to purchase all of the Certificates for an aggregate purchase price of $ plus accrued interest from August 1 , 1989 to the delivery date thereof. The initial public offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers ( including dealers depositing Certificates into investment trusts) , dealer banks , banks acting as agents and others at prices lower than said public offering prices . MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor, any statement which may have been made verbally or in writing is to be construed as a contract with the owners of the Certificates . The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF HUNTINGTON BEACH By /s/ Paul E. Cook Executive Director of the Corporation and City Administrator -27- .......... ...... . a (THIS PAGE INTENTIONALLY LEFT BLANK) z 4 €f 6 APPENDIX A GENERAL INFORMATION ON THE CITY AND ITS ECONOMY The following information is presented as general background data. The Certificates are payable solely from Lease Payments made by the City of Huntington Beach and other sources as described herein. The taxing power of the City of Huntington Beach, the State of California or any political subdivision thereof is not pledged to the payment of the Certificates . See Section "The Certificates" . Introduction The City of Huntington Beach is a coastal community of 27.7 square miles located approximately 35 miles south of Los Angeles in Orange County. Lying equidistant between Ventura and San Diego, the City has direct access to a market area of almost 12 million people. The City was incorporated on February 17, 1909. Huntington Beach is a charter city. Its first charter was adopted in May, 1937, and revised in November, 1982. The City is primarily a residential community with a balance of commercial and industrial activities . Some of the City' s diverse land uses include oil production, the Huntington Center Mall , a Southern California Edison electrical power plant, and a municipalpier. Huntington Beach has an extensive transportation network, excellent education and health services , and abundant recreation facilities -- notably, its public beaches. Huntington Beach enjoys a mild Mediterranean-like climate. Prevailing ocean breezes provide clean, clear air, warm sunny days and cool , crisp nights. Summer temperatures range from 75 to 80 degrees, while winter days are 60 to 70 degrees. Yearly rainfall is approximately 12 inches and humidity averages 65%. The City' s nine miles of public beaches attract many visitors throughout the year. Population For several years during the 1970' s , Huntington Beach was the fastest growing city in the United States . Results of the 1980 census indicated Huntington Beach' s population was 170,486, an increase of approximately 47 percent from the 1970 results. The City is currently the third largest in the County with a population of approximately 187,740. A-1 TABLE A-1 CITY OF HUNTINGTON BEACH AND ORANGE COUNTY Population Orange City Population Percent Square County as a Percent of Year Population Increase Miles Population County Population 1910 815 3.57 34,436 2.3% 1920 1 ,687 107.0% 3.57 61 ,375 2.7% 1930 3,690 118.0% 3.57 118,647 3. 1% 1940 3,738 1 .3% 3.57 130,760 2.8% 1950 5,158 38.0% 4.72 216,224 2.4% 1960 11 ,492 122.8% 23.47 703,925 1 . 6% 1970 116,400 912.9% 26.73 1 ,420,386 8.2% 1980 172,200 47.9% 27.20 1 ,931 ,570 8.9% 1981 173,393 1 .7% 27.20 1 ,972,724 8.8% 1982 175,714 1 .3% 27.20 1 ,993,831 8.8% 1983 178,706 1 .8% 27.20 2,036,390 8.8% 1984 179,990 .7% 27.20 2,066,498 8.7% 1985 180,000 .0% 27.20 2,074,326 8.7% 1986 184,280 2.47. 27.20 2, 145,709 8.6% 1987 187,000 1 .5% 27.20 2,195,652 8.5% 1988 187,740 0.47. 27.20 2,238,700 8.4% Source: Department of Development Services , City of Huntington Beach Employment and Industry In the early 1900' s, oil production brought many new settlers into the area, giving it a sound economic base on which to grow. Today, oil continues to remain a significant industry in the City. More than 20,000 barrels a day are produced from wells in Huntington Beach. Oil interests continue to contribute more than $4 million to the City each year in taxes , permits and fees. Close to 400 companies moved into Huntington Beach over the last four years, bringing 3,000 new jobs and continuing the industrial growth that has attracted close to 900 firms to the City. These firms employ over 40,000 workers in the businesses ranging from the highly sophisticated space technology of McDonnell Douglas Astronautics Company to the diversity of craft j industries making surf boards , pottery and stained glass . The two areas zoned for industrial development are the Northwestern Industrial Complex and the Gothard Street Industrial Corridor. Predominant uses of the Northwestern Industrial Complex include light manufacturing, warehousing and some support commercial . This area' s principal products are space technology, computer hardware and software, metal fabrication, electronic components, medical supplies , precision instruments and oil field equipment. The Gothard Street Industrial Corridor contains numerous 10 to 20 acre industrial parks and hosts a wide variety of light manufacturing, warehousing and research development firms . A-2 The City of Huntington Beach is part of the Orange County Metropolitan Statistical Area. Set forth below are two tables presenting certain information relating to employment and unemployment in that Area. Table A-2 WAGE AND SALARY EMPLOYMENT Orange County Metropolitan Statistical Area 1986-89 Annual Averages ACTUAL FORECAST 1986 1987 1988 1989 TOTAL, ALL INDUSTRIES 1 ,048,800 1 ,094,700 1 ,134,900 1 ,123,800 Agriculture 8,600 9,000 9,800 9,500 TOTAL NONAGRICULTURE 1 ,040,200 1 ,085, 100 1 , 125,000 1 , 114,300 Mining 2,100 1 ,800 1 ,500 1 ,800 Construction 56,200 62,500 65,500 60,900 Manufacturing 241 ,700 248,300 253,900 248,000 Nondurable Goods 62,100 65,300 67,400 64,500 Durable Goods 179,600 183,000 186,500 183,500 Transportation, Public Utilities 35,800 34,500 35,600 35,900 Wholesale Trade 62,100 64,400 68,300 67, 100 Retail Trade 197,000 206,200 215,900 213,700 Finance, Insurance, Real Estate 85,000 91 ,000 92,700 90,500 Services 250,400 262,600 272,300 276, 100 Government 112,000 114,400 11.9,4000 120,300 Federal 14,700 15,000 15,300 15,600 State and Local 97,300 99, 500 104, 100 104,700 Aerospace 94,800 96,000 97,700 94,600 Note: Detail may not add to totals due to independent rounding. Source: California Employment Development Department Civilian Labor Force, Employment, and Unemployment Orange County Metropolitan Statistical Area 1986-89 Annual Averages ACTUAL FORECAST 1986 1987 1988 1989 Civilian Labor Force 1 ,243,800 1 ,294,000 1 ,345,600 1 ,456,800 Employment 1 ,194,300 1 ,251 ,900 1 ,304,700 1 ,401 ,600 Unemployment 49,500 42 , 100 40,900 45,200 Unemployment Rate 4.0% 3.3% 3.0% 3. 1% Source:' California Employment Development Department A-3 1► TABLE A-3 CITY OF HUNTINGTON BEACH Largest Non-Government Employers, 1988 Company Number Employed ; McDonnell Douglas 8,768 Weiser Lock 1 ,065 C&D Plastic 500 Cambro Manufacturing Company 400 Humana Hospital /Huntington Beach 306s Pacifica Hospital 290 Dickenson Pacific 100 Soutwest Quilted 100 Source: Business License Division, City of Huntington Beach Commercial Activity . The variety of commercial locations ranges from small neighborhood convenience centers to the community' s regional mall , Huntington Center, at Beach Boulevard and the San Diego Freeway and the newly constructed mixed use Charter Centre. Beach Boulevard offers six miles of commercial uses, including thirteen major automobile dealerships , numerous specialty centers and many restaurants. The City' s most unique shopping centers include Old World, Seacliff Village and Peter' s Landing. Old World features shops that specialize in imported goods, handcrafted items , unusual gifts and delicacies . The atmosphere is enhanced by cobblestone walkways , arcade rides and strolling musicians . Close to the center of town, Seacliff Village has created a Cape Cod atmosphere that has received architectural acclaim. Its sculptures, murals and ceramic tile walkways , combined with quality shops and restaurants , have created a special environment which has become a favorite among local residents . Peter' s Landing, on the water' s edge in Huntington Harbour, is modeled after the coastal community of Saint Tropez, France. This center features marina boat rides, a unique architectural environment and excellent restaurants. In addition to these specialty centers , more than 35 neighborhood shopping centers are located conveniently throughout the community. A-4 Table A-4 sets forth State of California statistics on commercial activity in the City for the past seven calender years. TABLE A-4 CITY OF HUNTINGTON BEACH Total Taxable Transactions and Number of Sales Permits (in thousands of dollars) Retail Total Taxable Issued Sales Increase in Year Sales Transactions Permits Total Sales 1981 $ 743,217 $ 905,201 4,521 -- 1982 750,405 923, 123 5,027 2.0% 1983 886,921 1 ,043,898 5,265 13. 1 1984 1 ,013,546 1 ,212,802 5,537 16.2 1985 1 , 137,845 1 ,348,247 5,656 11 .2 1986 1 ,212,666 1 ,455,290 6,041 7.9 1987 1 ,277,401 1 ,544,775 6,263 6. 1 1988 1 ,229, 134 1 ,521 ,595 6,314 .8 Source: State Board of Equalization, Taxable Sales in California. TABLE A-5 CITY OF HUNTINGTON BEACH Building Permit Valuation Estimated Number Valuation of of New Fiscal Building Percent Construction Percent Year Permits Change (000' s) Change 1982-83 2,539 (21 .4) 52,458 ( 10.0) 1983-84 2,776 9.3 110,747 111 . 1 1984-85 3, 163 13.9 142,336 28.5 1985-86 3, 173 0.3 133,579 (6.2) 1986-87 4,098 29.2 92,230 (31 .0) 1987-88 4,666 13.9 177,297 92.2 Source: Community Development Department, City of Huntington Beach and The Findley Reports on California Financial -Institutions . A-5 i t Transportation The community has excellent vehicle access to the surrounding region via Pacific Coast Highway (State Highway 1 ) , Beach Boulevard (State Highway 39) and the San Diego Freeway (Interstate 405) . Besides these primary routes , the City is also served by a grid system of major north-south and east-west i arterial streets that allow easy access in all directions . Huntington Beach residents , businesspeople and visitors are just minutes away from both John Wayne and Long Beach Airports , Long Beach Harbor and Santa Ana' s Amtrak Station. Los Angeles International and Ontario International Airports are less than an hour' s drive away from Huntington Beach. Education and Health Care The Huntington Beach public school system provides instruction in basic skills, and advanced instruction in specialized areas at both the elementary and high school levels. Individual education is also emphasized. Two community colleges are located in Huntington Beach. Golden West and Coastline Colleges offer day and evening classes leading to degrees and certificates in all standard subjects . Golden West College has an enrollment approaching 50,000, and is also the home of KOCE, Orange County' s public broadcasting television station. Coastline College schedules its courses at various times during the day, in the evenings , and on weekends for the convenience of its students . The community is also close to a number of other colleges and universities in nearby cities . The University of California in Irvine and the California State Universities at Long Beach and Fullerton are all within one-half hour driving time. Local health care is provided by two full-service, acute-care hospitals and numerous clinics , health-maintenance organizations , convalescent hospitals and other medical facilities . Humana Hospital and Pacifica Community Hospital together provide over 250 beds and offer the latest in sophisticated diagnostic techniques, fully equipped emergency rooms and clinical laboratories, as well as special facilities for intensive care, coronary care , pediatrics, orthopedics and outpatient care. Humana Hospital serves as headquarters for City paramedic training and is the base hospital for paramedic calls. Pacifica Community is the center of an extensive medical-hospital complex that contains their renowned non-profit Cancer Detection Center which provides low-cost screening on an out-patient basis as a public service to the community. Huntington Beach has over 300 practicing doctors , dentists , optometrists , chiropractors , physical therapists and other medical professionals located conveniently throughout the City. Recreation Huntington Beach has the- Pacific Ocean as its primary natural resource . Nine miles of public beaches and one of the best surfs in the world bring nearly 10 million visitors into the community each year. In addition to surfing, swimming and boating, the beach area has paved trails exclusively for bicyclists and joggers , volleyball courts and barbeques for cookouts . The City' s Municipal Pier draws over a million people a year for fishing, sightseeing, or dining in one of the nearby restaurants . A-6 The City' s public beaches are not the only places for recreation in Huntington Beach. The community enjoys over 50 parks , each with a variety of recreational facilities. Central Park, the City' s largest inland recreation area, offers an equestrian center and miles of riding trails , lakes for fishing and boating, jogging and physical fitness courses , and a variety of well maintained bail fields, courts and playgrounds. Other recreational amenities within the City' s Public Park System include two golf courses , 72 tennis courts, five swimming pools and a boating marina. Recreation programs and other activities for children, adults and families are conducted in three dozen parks throughout the year. Softball , baseball , soccer, volleyball , football and other organized league sports are offered for children and adults at various times of the year. Community centers are maintained at many local parks where activities are organized and information is disseminated. They host a wide variety of recreational and educational classes and serve as meeting places for various community groups. Many other community facilities are located in or adjacent to the local parks , such as the Central Library and Cultural Resource Center within Central Park. Other major private or commercial recreational facilities in Huntington Beach include two country clubs , aerobic centers , equestrian centers, a bowling alley, movie theaters and a community playhouse. Nearby are many regional tourist attractions, including Disneyland, Knott' s Berry Farm, Anaheim Stadium, Los Alamitos Race Track, the Queen Mary, Lion Country Safari and others . A-7 (THIS PAGE INTENTIONALLY LEFT BLANK) r APPENDIX B AUDITED GENERAL FUND FINANCIAL STATEMENTS THE CITY OF HUNTINGTON BEACH General Fund Balance Sheet 6/30/85 6/30/86 6/30/87 6/30/88* ASSETS: Cash and investments $11 ,667,646 $ 9,401 ,307 $10,884,333 $12, 141 ,000 Taxes receivable 473,441 486,185 1 ,890,934 1 ,958,000 Accounts receivable 460,426 344,429 315,349 956,000 Interest receivable 73,280 51 ,763 -- -- Due from other funds 1 ,926,495 6,788,235 1 ,000,000 -- Due from other agencies 855,914 150,218 462,462 442,000 Inventory 148,906 -- 146,073 208,000 Deposits and other assets 209,937 179,200 -- 28,000 Advances to other funds -- -- 11 ,750,547 16 ,710,000 TOTAL ASSETS S15 .816.047 517 .401 .337 $26 .449.698 S32 .443 .000 LIABILITY AND FUND EQUITY LIABILITIES: Accounts payable $ 1 ,169,666 $ 1 ,180,524 $ 1 ,341 ,838 $ 1 ,241 ,000 Accrued Payroll (6/30/87 -88 Accrued Expenses) 1 ,600,646 1 ,933, 167 2,212,343 3,527,000 Deposits 689,785 558,628 776.,586 1 ,200,000 Deferred revenue 709,873 1 ,298,538 3,374,403 4, 126,000 TOTAL LIABILITIES $ 4, 169.970 S 4.970.857 $ 7.705 . 17Q 110.094.000 FUND EQUITY; Fund balances : Reserved $ 6,070,789 $ 8,832,663 $10,456,808 $15,984,000 Unreserved: Designated -- -- 1 ,563,034 4,919,000 Undersigned 5,575,288 3,597,817 6,724,686 1 ,446,000 f TOTAL FUND EQUITY 11 ,646,077 12,430,480 18,744,528 22,349,000 TOTAL LIABILITIES AND FUND EQUITY 515,881_6®047 517 .401 . 337 126 ,449 .695 S3 .4431QQ 1 * Rounded to nearest thousand. Source: Figures for all years from audited financial statements . B-1 General Fund Statement of Revenues , Expenditures and Changes in Fund Balance Year Ended Year Ended Year Ended Year Ended 6/30/85 6/30/86 6/30/87 6/30/88' REVENUES: Property taxes $17,073,983 $18,456, 192 $21 , 174,423 $21 ,827 ,000 Other taxes 25,923,113 27 ,622,057 28,698 ,414 30,021 ,000 Licenses and permits 3,591 ,493 3,042,450 3,308,990 3,276,000 Fines, forfeitures and penalties 2,093,975 1 ,973,670 2,095,714 2 ,335 ,000 From use of money and property 3,899 ,972 3 ,782,431 4,397 ,997 4,708 ,000 From other agencies 5,953,540 7 , 125,470 7 ,880,417 7 ,920,000 Charges for current services 2,202,185 2,525,401 2,799 ,219 3,208 ,000 Other 364, 156 735,484 456,006 1 ,410,000 TOTAL REVENUES 561 . 102 _417 S65.263 . 155 S70 .811 . 574 _705 ,0 EXPENDITURES: Current: City Counceil $ 128,635 $ 90,029 $ 82, 121 $ 78 ,000 City Administrator 633,514 488,064 555,452 633 ,000 City Treasurer 267,882 286,648 281 ,848 288 ,000 City Attorney 806,146 644,685 563,804 376,000 City Clerk 194,834 163,608 152 ,622 128 ,000 Administrative services 2,558,796 2,600,737 2,680,065 2 ,856,000 Development services 1 ,759,542 1 ,773,596 1 ,849 ,015 2 ,015,000 Fire 9,469,458 10,236,204 11 , 186,607 11 ,840,000 Police 17,114,924 18,729,315 20,511 ,085 22 ,357 ,000 Community services 5, 169,351 5,585,738 5,959 ,254 6,809,000 Public works 13,625,016 14,911 ,530 14,567 ,248 15 ,835 ,000 Non-departmental 4,867,215 6,795,596 7,708,794 7 ,040,000 Capital Outlay 3,098,315 2 , 186,520 1 ,027 ,809 977 ,000 TOTAL EXPENDITURES 559 . 693 .628 564 _a22 270 567 . 125 . 7Z4 71 . 232 .c'00 EXCESS OF REVENUES OVER EXPENDITURES 1 ,408,789 770,885 3 , 685 ,456 3 ,473 ,000 OTHER FINANCING SOURCES (USES) : Operating transfers in $2,795,907 $1 ,221 ,368 S 1 ,284,790 S 1 ,280 ,000 Proceeds of long-term debt 216 , 100 -- -- Operating transfers out ( 1 ,423,950) (1 ,423,950) (3,017 ,633) (2 , 137 ,000) Loss on investments -- ( 470,222) ( 362 ,000) TOTAL OTHER FIANCING SOURCES (USES) S 1 ,371 ,957 S 13 , 518 (S2 ,203 ,065) (S1 , 219 ,000) EXCESS OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES 2 ,780,746 784,403 1 ,482 ,391 2 ,254,000 B-2 General Fund Statement of Revenues , Exoenditures and Changes in Fund Balance (continued) Year Ended Year Ended Year Ended Year Ended ! 6/30/85 6/30/86 6/30/87 6/30/88* FUND BALANCE - BEGINNING OF THE YEAR 10,382,894 11 ,646,077 12,430,480 18,745,000 Prior Period adjustments -- -- 1 ,098,900 -- Residual equity transfers in 682,437 -- 3,732,757 1 ,350,000 Residual equity transfer out (2,200,000) -- -- -- FUND BALANCE - END OF YEAR $11 ,546 ,077 S12 .430.4R0 518 .74d. 528 52Z .342 n00 *Rounded to nearest thousand. Source: Figures for all years from audited financial statements . i B-3 i (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORXEYS AT LAW a CHARLES F. ADA%IS FOUR EMBARCADERO CE`TER STEPHEN R.CASALEGGIO SUITE 19:50 THOMAS A. DOW`NZ-Y SAIN FRANCISCO 94111 A.YDRIW C. HALL.JR. (415) J91-5780 KENNETH I. JONES TELECOPIER WILLIAM H. MADISON (415) 391-8784 BRIAN D. CVINT August 15, 1989 (415) 391-5785 PAUL J. THI.IMIG (415) 986-6008 SHARON STA.JTTON WHITE ROBERT J. BILL (1922-1988) City Council City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 OPINION: $ Certificates of Participation (1989 Public Parking Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach Members of the City Council: We have acted as special counsel in connection with the delivery by the City of Huntington Beach (the "City') of the Lease Agreement, dated as of August 1, 1989 (the 'Lease Agreement") by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation"), and the City. Pursuant to the Trust Agreement. dated as of August 1, 1989 (the "Trust Agreement") by and among the City, the Corporation and State Street Bank and Trust Company of California, N.A., as trustee thereunder (the "Trustee"), the Trustee has executed and delivered $ aggregate principal amount of certificates of participation (the "Certificates") evidencing direct, undivided fractional interests of the owners thereof in lease payments to be made by the City pursuant to the Lease Agreement (the "Lease Payments") which have been assigned by the Corporation to the Trustee pursuant to the Assignment Agreement, dated as of August 1. 1989 (the "Assignment Agreement") by and between the Corporation and the Trustee. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Lease Agreement and the Trust Agreement and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify such facts by independent investigation. Based upon the foregoing, we are of the opinion, under existing law. as follows: C-1 +r City �of Huntington Beach August 15, 1989 Page 2 1. The City is a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, with the power to enter into the Lease Agreement and the Trust Agreement and to perform the agreements on its part contained therein. I 2. The Lease Agreement and the Trust Agreement have been duly authorized, executed and delivered by the City and are the legal, valid and binding obligations of the City enforceable against the City in accordance with their respective terms. 3. The Certificates have been validly executed and delivered by the Trustee pursuant to the Trust Agreement and, by virtue of the Assignment Agreement, the owners of the Certificates are entitled to the benefits of the Lease Agreement. 4. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes ), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in this paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 which must be satisfied subsequent to the delivery of the Lease Agreement in order that such interest be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the Lease Agreement. We express no opinion regarding other federal tax consequences arising with respect to the Lease Agreement and the Certificates. 5. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Certificates and the enforceability of the Lease Agreement, the Assignment Agreement and the Trust Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases. Respectfully submitted, A Professional Law Corporation F8799 C-2 6 1801b-26 JHHW:CFA:dfs August 7,1989 F8660 AGREEMENT REGARDING REMOVAL OF PROPERTY FROM 1986 LEASE AGREEMENT THIS AGREEMENT REGARDING REMOVAL OF PROPERTY FROM 1986 LEASE AGREEMENT (this "Agreement") dated as of July 15, 1989, is by and between the CITY OF HUNTINGTON BEACH CIVIC CENTER IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and the CITY OF HUNTINGTON BEACH, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "City"), as lessee _ender such Lease Agreement; WITNESSETH.- WHEREAS, the City and the Corporation have previously entered into that certain Lease Agreement dated as of July 15, 1986, (the "1986 Lease") under which the City has leased from the Corporation certain land and improvements including the civic center of the City; and WHEREAS, the City has the right, under Section 5.11 of the 1986 Lease, at its option to remove property from the 1986 Lease under certain circumstances, but only if the City files with the Corporation and Security Pacific National Bank, as trustee (the "Trustee"), an appraisal by a qualified appraiser selected by the City stating that the appraised value of the property remaining subject to the 1986 Lease at least equals $20,000,000; and WHEREAS, the City has obtained and filed with the Corporation and the Trustee an appraisal of Mark W. Lames, M.A.I., dated as of March 17, 1989, (the "Appraisal") showing the appraised value of all land and improvements currently subject to the 1986 Lease, which demonstrates that a certain portion thereof, consisting of land and related public parking improvements, may be removed from the 1986 Lease such that the appraised value of the remaining land and related civic center improvements exceeds $20,000,000; and WHEREAS, the City wishes to remove such land and public parking improvements from the 1986 Lease at this time; 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: Section 1. Removal of Public Safety Property. Pursuant to Section 5.11 of the 1986 Lease, the City and the Corporation hereby amend Exhibit A to the 1986 Lease to read in its entirety as set forth in Exhibit A attached hereto and by this reference incorporated herein. The effect of such amendment shall be to remove from the 1986 Lease all of the land described in Exhibit B attached hereto and by this reference incorporated herein, together with all improvements, facilities and property situated thereon (the "Public Safety Property"). Such amendment shall become effective upon the recordation of a memorandum of this Agreement, containing such amended Exhibit A, in the Office of the Orange County Recorder. Section 2. Termination of 1986 Lease. Pursuant to Sections 4.6 and 5.11 of the 1986 Lease, upon the removal of the Public Safety Property from the 1986 Lease hereunder, the term of the 1986 Lease shall cease with respect to the Public Safety Property. Section 3. Title to Public Safety Property. Pursuant to Section 4.6 of the 1986 Lease, upon the removal of the Public Safety Property from the 1986 Lease hereunder, title to the Public Safety Property shall be vested in the City. Notwithstanding such provision, the City hereby agrees that title to the Public Safety Property shall remain in the Corporation, and shall not be vested in the City under the 1986 Lease. In consideration of such retention of title to the Public Safety Property by the Corporation, the Corporation hereby agrees to pay to the City the amount of $13,365,000, which constitutes the value thereof as shown in the Appraisal. Such amount shall be paid to the City from the proceeds of certificates of participation to be issued by the Corporation. Section 4. Recordation Hereof. The City and the Corporation shall cause to be filed in the Office of the Orange County Recorder a memorandum hereof showing the amendment of Exhibit A to the 1986 Lease in accordance with Section 1, such recordation to made as soon as practicable following the execution and delivery hereof. Section 5. Findings and Determinations. The City and the Corporation hereby find and determine that all things, conditions and acts required by the 1986 Lease and the laws of the State of California to exist, have happened and to have been performed precedent to the execution and delivery hereof and the consummation of the transactions contemplated herein do exist, have happened and have been performed. Section 6. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 7. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 8. Captions. The captions or headings in this Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Agreement. -2- IN WITNESS WHEREOF, the Corporation and the City have caused this Agreement to be executed in their respective names by their duly authorized officers, all as of the date first above written. CITY OF HUNTINGTON BEACH 0'�k By City Administrator (SEAL) Attest: By: City Clerk CITY OF HUNTINGTON BEACH CIVIC U"ROVEMENT CORPORATION By ft�ftRqa,.� Executive Director (SEAL) Attest: By Secretary —3— EXHIBIT A DESCRIPTION OF PROPERTY REMAINING UNDER 1986 LEASE BEING PORTIONS OF BLOCKS 1901 , 1903 , 2001 AND 2002 INCLUDING AND INCLUSIVE OF ALL OR PORTIONS OF SEVENTEENTH STREET AND PINE STREET, ALL OF TRACT NO. 12 IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON THE MAP RECORDED IN BOOK 9 , PAGE 13 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, TOGETHER WITH PARK STREET, UNION AVENUE AND THE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN "RESOLUTION NO. 3415" OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6 , 1972 IN BOOK 9956 , PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60 . 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840. 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE, 90 . 00 FEET IN WIDTH BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00119 ' 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45119 ' 06" EAST 24 . 04 FEET; THENCE SOUTH 89040 ' 54" EAST 166 . 03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 41038 ' 23" EAST 427 . 42 FEET ALONG SAID CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 89040 ' 54" EAST 137 . 05 FEET; THENCE NORTH 00019 ' 06" EAST 155. 89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE AVENUE TO THE CENTERLINE OF SAID oEVENTEENTH STREET; THENCE NORTH 41038 ' 23" EAST 134 . 38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12 ; THENCE NORTH 48121 ' 17" WEST 474 . 37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH 89040 ' 01" WEST 535. 29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE SOUTH 00020 ' 13" WEST 1266 . 12 FEET ALONG SAID EASTERLY LINE TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89039 ' 33" EP,ST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. A-1 EXHIBIT A (continued) EXCEPTING THEREFROM THAT PARCEL OF LAND DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60 . 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840 . 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90 . 00 FEET IN WIDTH , BOTH AS SHOWN ON SAID MAP OF TRACT NO . 12 ; THENCE NORTH 00019 . 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45°19 ' 06" EAST 24 . 04 FEET; THENCE SOUTH 89°40 ' 54" EAST 27 . 23 FEET TO A LINE PARALLEL WITH AND 245 . 00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 12.0 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 1.2 ; THENCE NORTH 00020 ' 13" EAST 683 . 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE: PARALLEL WITH AND 208 . 00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT 1;0. 12 ; THENCE NORTH 89140 ' 01" WEST 245 . 00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00020 ' 13" WEST 1058 . 12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89039 ' 33" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. CONTAINING AN AREA OF 10 . 00 ACRES , MORE OR LESS . A-2 EXHIBIT B DESCRIPTION OF PROPERTY TO BE REMOVED FROM 1986 LEASE BEING PORTIONS OF BLOCi;S 1902 , 1903 AND 2002 INCLUDING AND INCLUSIVE OF ALL OR PORTIONS OF SEVENTEENTH STREET AND UTICA STREET, ALL OF TRACT NO. 12 IN THE CITY OF HUNTINGTON BEACH, CCUNT�' OF ORANGE , STATE OF CALIFORNIA, AS SHOWN ON THE MAP RECORDED IN BOOK 9 , PAGE 13 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, TOGETHER WITH UNION AVENUE AND THE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN "RESOLUTION NO. 3415" OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH , A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6 , 1972 IN BOO K--9a56_,---E,&GE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60 . 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840 . 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90 . 00 FEET IN WIDTH , BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 001119 ' 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45119 ' 06" EAST 24 . 04 FEET; THENCE SOUTH 89040 ' 54" EAST 27 .23 FEET TO A LINE PARALLEL WITH AND 245. 00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00020 ' 13" EAST 683 . 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208 . 00 FEET SOUTHERLY OF ':HE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12 ; THENCE NORTH 89040 ' 01" WEST 245. 00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00020 ' 13" WEST 1058 . 12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89039 ' 33" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. CONTAINING AN AREA OF 5. 57 ACRES , MORE OR LESS . B-1 7 89-4L94C4 18019-23 JHifW:CFA:dfs August 8, 1989 F8492 When recorded, return to: Recorded at the request of FIRST AMER.TITLE INS.CO. Jones Hall Hill & White 8:00 A U 1141111 Four Embarcadero Center, Suite 1950 A.M. Official Records San Francisco, CA 94111 1 Orange County,California Attention: Ms. Katherine M. Lee Q Recorder SECOND AMENDMENT TO LEASE AGREEMENT THIS SECOND AMENDMENT TO LEASE AGREEMENT, dated July 15, 1989, is by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing the Nonprofit Public Benefit Corporation Law of the State of California, as lessor (the "Corporation"), and the CITY OF HUNTINGTON BEACH, a charter city and municipal corporation duly organized and existing under the constitution and laws of the State of California, as lessee (the "City"); WITNESSETH: WHEREAS, the Corporation has heretofore leased certain land and improvements to the City for civic center purposes of the City pursuant to that certain Lease Agreement dated as of July 15, 1986, by and between the Corporation and the City as disclosed pursuant to the Memorandum of Lease by and between the Corporation and the City recorded in the Orange County Recorder's Office on August 13, 1986, as Instrument Number 86-359343 (the "Lease Agreement"); and WHEREAS, the City has the right, under Section 5.11 of the Lease Agreement, at its option to remove property from the Lease Agreement under certain circumstances, but only if the City files with the Corporation and Security Pacific National Bank, as trustee (the `Trustee"), an appraisal by a qualified appraiser selected by the City stating that the appraised value of the property remaining subject to the Lease Agreement at least equals $20,000,000; and WHEREAS, the City has obtained and filed with the Corporation and the Trustee an appraisal of Mark W. Linnes, M.A.I., dated as of March 17, 1989, (the "Appraisal") showing the appraised value of all land and improvements currently subject to the Lease Agreement, which demonstrates that a certain portion thereof, consisting of land and related public parking improvements, may be removed from the Lease Agreement such that the appraised value of the remaining land and related civic center improvements exceeds $20,000,000; and WHEREAS, the City wishes to remove such land and public parking improvements from the Lease Agreement at this time; 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: SECTION 1. Amendment of Description of Project Site. Exhibit A to the Lease Agreement is hereby amended in its entirety to read as set forth in Appendix A hereto. SECTION 2. Actions to Implement Amendment. The City and the Corporation shall take all actions and execute and cause to be recorded this Second Amendment to Lease Agreement and any and all other documents necessary to accomplish the amendment of the Lease Agreement pursuant hereto. SECTION 3. Execution in Counterparts. This Second Amendment to Lease 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 instrument. SECTION 4. Applicable Law. This Second Amendment to Lease Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION b. Effective Date. The provisions of this Second Amendment to Lease Agreement and the amendments made hereby shall take effect from and after the date of execution of this Second Amendment to Lease Agreement by the parties hereto. -2- IN WITNESS WHEREOF, the Corporation has caused this Second Amendment to Lease Agreement to be executed in its name by its duly authorized officers and sealed with its seal; and the City has caused this Second Amendment to Lease Agreement to be executed in its name by its duly authorized officers and sealed with its seal, as of the date Second above written. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, as lessor By Executive Director (SEAL) Attest: By Secretary CITY OF HUNTINGTON BEACH, as lessee By ro-M�L City Administrator (SEAL) Attest: B �.r3ti'�9 City Clerk -3- STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On this loth day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the Executive Director and Secretary, respectively, of the City of Huntington Beach Civic Improvement'Corporation that executed the within instrument and acknowledged to me that the City of Huntington Beach Civic Improvement Corporation executed the same. (Notarial Seal) (signature) 0M=L s� No ary Public for the SALLY K. DANEKAS State of California NOTARY Pt�LJC•C ALFORNIA CITY AND COUNTY Of SAN f UNCISCO MY Cowes Eapi..Avp.22,IV�9 My commission expires: August 22, 1989 -4- STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On this loth day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the City Administrator and City Clerk, respectively, of the City of Huntington Beach that executed the within instrument and acknowledged to me that the City of Huntington Beach executed the same. (Notarial Seal) FIEAL (signature) OFW'L" S SALLY K DANEKAS N tary Public for the NOTARY PUKX-cAIFORMA State of California CITY AND COUNTY OF SAN FRANCISCO My Co-- Eapin&Aup 22.1989 My commission expires: August 22, 1989 -5- APPENDIX A All that certain real property in the City of Huntington Beach, County of Orange, described as follows: BEING PORTIONS OF BLOCKS 1901 , 1903 , 2001 AND 2002 INCLUDING AND INCLUSIVE OF ALL OR PORTIONS OF SEVENTEENTH STREET AND PINE STREET, ALL OF TRACT NO. 12 IN THE CITY OF HUNTINGTON BEACH , COUNTY OF ORANGE, STATE OF CALIFORNIA , AS SH014N ON THE MAP RECORDED IN BOOK 9 , PAGE 13 OF MISCEL'ANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, TOGETHER WITH PARK STREET , UNION AVENUE AND ThE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN "RESOLUTION NO. 3415" OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6 , 1972 IN BOOK 9956 , PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60. 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840. 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE, 90. 00 FEET IN WIDTH `r BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00019 ' 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45019 ' 06" EAST 24 . 04 FEET; THENCE SOUTH 89040 ' 54" EAST 166 . 03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 41038 ' 23" EAST 427 . 42 FEET ALONG SAID CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 89040 ' 54" EAST 137 .05 FEET; THENCE NORTH 00019 ' 06" EAST 155. 89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE AVENUE TO THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 41038 ' 23" EAST 134 .38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 48021 ' 17" WEST 474 . 37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12 ; THENCE NORTH W40 ' 01" WEST 535. 29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE SOUTH 00020 ' 13" WEST 1266 . 12 FEET ALONG SAID EASTERLY LINE TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89039133" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING . A-1 APPENDIX A (continued) EXCEPTING THEREFROM THAT PARCEL OF LAND DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60 . 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840. 00 FEET WESTERLY OF THE• CENTERLINE OF LAKE AVENUE 90 . 00 FEET IN WIDTH , BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00019 ' 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45019 ' 06" EAST 24 . 04 FEET ; 'THENCE SOUTH 89040 ' 54" EAST 27 . 23 FEET TO A LINE PARALLEL WITH AND 2.45. 00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAS' LINE OF MAIN STREET, 120 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00020 ' 13" EAST 683 . 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE; PARALLEL WITH AND 208 . 00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT I:O. 12 ; THENCE NORTH 89040 ' 01" WEST 245. 00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00020 ' 13" WEST 1058 . 12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89139 ' 33" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. CONTAINING AN AREA OF 10 . 00 ACRES, MORE OR LESS . A-2 8 69-429425 18019-23 JHHW:CFA:dfs August 8,-1989 F8857 Recorded at the request of When recorded, return to: FIRST AMER.TITLE INS.CO. Jones Hall Hill & White 8.00 A U G 141989 Four Embarcadero Center, Suite 1950 A.M. Official Records San Francisco, CA 94111 Orange County, California Attention: Ms. Katherine M. Lee t 9.GO c Q Recorder /s-2 a's 0 7 fl-v C` FIRST AMENDMENT TO ASSIGNMENT AGREEMENT THIS FIRST AMENDMENT TO ASSIGNMENT AGREEMENT, dated July 15, 1989, is by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing the Nonprofit Public Benefit Corporation Law of the State of California, as lessor (the "Corporation"), and SECURITY PACIFIC NATIONAL BANK, a national banking association organized and existing under the laws of the United States of America (the "Trustee"); WITNESSETH: WHEREAS, the Corporation has heretofore leased certain land and improvements to the City of Huntington Beach (the "City") for civic center purposes of the City pursuant to that certain Lease Agreement dated as of July 15, 1986, by and between the Corporation and the City as disclosed pursuant to the Memorandum of Lease by and between the Corporation and the City recorded in the Orange County Recorder's Office on August 13, 1986, as Instrument Number 86-359343 (the "Lease Agreement"); and WHEREAS, the Corporation has heretofore assigned to the Trustee certain of its rights under the Lease Agreement pursuant to that certain Assignment Agreement dated as of July 15, 1986, by and between the Corporation and the Trustee as disclosed pursuant to the Memorandum of Lease by and between the Corporation and the City recorded in the Orange County Recorder's Office on August 13, 1986, as Instrument Number 86-359344 (the "Assignment Agreement"); and WHEREAS, the City has the right, under Section 5.11 of the Lease Agreement, at its option to remove property from the Lease Agreement under certain circumstances, but only if the City files with the Corporation and the Trustee an appraisal by a qualified appraiser selected by the City stating that the appraised value of the property remaining subject to the Lease Agreement at least equals $20,000,000; and WHEREAS, the City has obtained and filed with the Corporation and the Trustee an appraisal of Mark W. Linnes, M.A.I., dated as of March 17, 1989, (the "Appraisal") showing the appraised value of all land and improvements currently subject to the Lease Agreement, which demonstrates that a certain portion thereof, consisting of land and related public parking improvements, may be removed from the Lease Agreement such that the appraised value of the remaining land and related civic center improvements exceeds $20,000,000; and WHEREAS, the City wishes to remove such:�,Jand and public parking improvements from the Lease Agreement at this time, and in connection therewith the Corporation and the Trustee wish to amend the Assignment Agreement to remove it of record against the property thereby removed; 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: SECTION 1. Amendment of Description of Project Site. Exhibit A to the Assignment Agreement is hereby amended in its entirety to read as set forth in Appendix A hereto. SECTION 2. Actions to Implement Amendment. The Trustee and the Corporation shall take all actions add=execute sad to. +ecosd' his First Amendment to Assignment Agreem@fff-�M any and all other documetiecessary to accomplish the amendment of the Leidsu t'eement pursuant hereto. SECTION 3. Execution in Counterparts. This First Amendment to Assignment 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 instrument. SECTION 4. Applicable Law. This First Amendment to Assignment Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 5. Effective Date. The provisions of this First Amendment to Assignment Agreement and the amendments made hereby shall take effect from and after the date of execution of this First Amendment to Assignment Agreement by the parties hereto. -2- IN WITNESS WHEREOF, the Corporation_ has caused this First Amendment to Assignment Agreement to be executed in its name by its duly authorized officers and sealed with its seal; and the City has caused this First Amendment to Assignment Agreement to be executed in its name by its duly authorized officers and sealed with its seal, as of the date First above written. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, as assignor By Paul E. Cook, Executive Director (SEAL) Attest: By Connie Brockway, Secretary SECURITY PACIFIC NATIONAL BANK, as assignee By Dennis Wong Vice President —3— IN WITNESS WHEREOF, the Corporation has caused this First Amendment to Assignment Agreement to be executed in its name by its duly authorized officers and sealed with its seal; and the City has caused this First Amendment to Assignment Agreement to be executed in its name by its duly authorized officers and sealed with its seal, as of the date First above written. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, as assignor By Paul E. Cook, Executive Director (SEAL) Attest: By Connie Brockway, Secretary SECURITY PACIFIC NATIONAL BANK, as aesigae By Dennis Wong Vice President L) —3— STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On this loth day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the persons who executed the within instrument as the Executive Director and the Secretary, respectively, of the City of Huntington Beach Civic Improvement Corporation, and acknowledged that such corporation execute it. r (Notarial Seal) " OFFICIAL SEAL (sl ature) SALLY K. DANEKAS NOrARYUBUC-cAUCru CITY AND COUNTY OF$�lN FRANgANCiSCO Notary Public for the State of California MY Comm Expim.Aug.22,1989 My commission expires: August 22, 1989 -4- STATE OF CALIFORNIA ) ss. COUNTY OF LOS ANGELES ) On this 1Oth day of August, in the year 1989, before me, Lydia Medram , a notary public in and for said County and State, residing therein, duly commissioned and sworn, personally appeared Dennis Wong known to me (or proved to me on the basis of satisfactory evidence) to be person who executed the within instrument as a Vice President of Security Pacific National Bank, and acknowledged that such bank executed it. s ----;- (Notarial Seal) � ., (signature) OFFICIAL SEAL �< LYDIA MEDRANO Notary Public-California Notary Public for the LOS ANGELES COUNTY State of California `.•....•.. My Comm.Exp.Mar.12,1991 My commission expires: March 12, 1991 • —5— APPENDIX A All that certain real property in the City of Huntington Beach, County of Orange, described as follows: BEING PORTIONS OF BLOCKS 1901 , 1903, 2001 AND 2002 INCLUDING AND INCLUSIVE OF ALL OR PORTIONS OF SEVENTEENTH STREET AND PINE STREET, ALL OF TRACT NO. 12 IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON THE MAP RECORDED IN BOOK 9 , PAGE 13 OF MISCELLANEOUS MAPS IN THE OFFICE OF .« -r THE COUNTY RECORDER OF SAID ORANGE COUNTY, TOGETHEI'f KITH PARKt.- STRE)✓'1 , -UNION AVENUE AND THE ALLEYS IN SAID BLOCKS' Xt SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN "RESOLUTIOId`-No -3415" OF'Alift-= THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, K tEK7IFIED CO All OF WHICH WAS RECORDED JANUARY 6 , 1972 IN BOOK 9956 ,` PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS : BEGINNING AT THE IN'TERSECTIO`' OF THE CENTERLINE OF UTICA STREET, 60. 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840. 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE, 90. 00 FEET IN WIDTH BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00°19 ' 06" EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45119 ' 06" EAST 24 .04 FEET: THENCE SOUTH 89040 ' 54" EAST 166.03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70 .00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 41°38 ' 23" EAST 427 . 42 FEET ALONG SAID CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 89040 ' 54" EAST 137 .05 FEET; THENCE NORTH 00019 ' 06" EAST 155. 89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE AVENUE TO THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 41038 ' 23" EAST 134 .38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 48021 ' 17" WEST 474 . 37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH 89040 ' 01" WEST 535. 29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120 . 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE SOUTH 00020 ' 13" WEST 1266 . 12 FEET ALONG SAID EASTERLY LINE TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89039 ' 33" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING . A-1 APPENDIX A (continued) EXCEPTING THEREFROM THAT PARCEL OF LAND DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60 . 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840 .00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90 . 00 FEET IN WIDTH , BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00119 ' 06" EAST 358 . 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45019 ' 06" EAST 24 . 04 FEET; 'THENCE SOUTH 89140 ' 54" EAST 27 . 23 FEET TO A LINE PARALLEL WITH AND 245. 00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120. 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 3.2; THENC-E NORTH 00020 ' 13" EAST 683 . 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208 .00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12; THENCE NORTH 89°40 ' 01" WEST 245 .00 FEET-ALONG SWI'gLAST MENTIONED PARALLEL LINE- TO SAID EASTERLY RIGHT OF 19AX _ LINE OF MAIN STREET; THENCE SOUTH 00020 ' 13" WEST 1058 . 12 FEES ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF-RAZIl UTICA STREET; THENCE SOUTH 89039 ' 33" EAST 200 . 89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. CONTAINING AN AREA OF 10 .00 ACRES , MORE OR LESS . A-2 9 STONE & YOUNGBERG MEMBERS PACIFIC STOCK EXCHANGE CERTIFICATE PURCHASE AGREEMENT $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Proportionate Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation This Certificate Purchase Agreement (the "Purchase Agreement") is made and entered into this 27th day of July, 1989, by and between Stone & Youngberg, as the underwriter for the within-described issue (the "Underwriter") , the City of Huntington Beach, California ("City") , and the Huntington Beach Civic Improvement Corporation (the "Corporation") , and receipt hereof is acknowledged by State Street Bank and Trust Company of California, N.A. , the trustee (the "Trustee") under that certain Trust Agreement entered into by the City, the Corporation and the Trustee, dated as of July 15, 1989 (the "Trust Agreement") , pursuant to which the Certificates described above (the "Certificates") are to be executed and delivered. Upon acceptance by the parties at or prior to 11 :59 o' clock p.m. , California time, on the date hereof, this Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the parties hereto. 1 . Upon the terms, conditions and representations set forth herein, the Underwriter hereby agrees to purchase, and the City hereby agrees to cause to be delivered to the Underwriter, all of the $15,025,000 aggregate principal amount of the Certificates, dated July 15, 1989 (such Certificates being more fully described in the Official Statement hereinafter described) , representing the undivided fractional interests of the owners thereof in the lease payments (the "Lease Payments") to be paid by the City pursuant to that certain Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement"), by and between the City and the Corporation, at an aggregate purchase price of $14,779,356.04, being 98.365% of the principal amount of the Certificates, (consisting of a par amount of $15,025,000 less an underwriter' s discount of $217,862.50 less an original issue discount of $114,000.00 plus accrued interest of $86,218.54) . Certain property (the "Project") has been removed from a lease entered into by the City and the Corporation in 1986 (the "1986 Lease") , and title to the Project has been retained by the Corporation under a certain Agreement Regarding Removal of Property from the 1986 Lease Agreement (the "Property Removal Agreement") . As compensation for the retention of title to the ONE CALIFORNIA STREET•SAN FRANCISCO,CALIFORNIA 94111 •(415)981-1314 Project, the Corporation has agreed under the Property Removal Agreement to pay the City the net proceeds of the Certificates. The City has agreed under the Lease Agreement to lease the Project back from the Corporation. The Lease Payments will be assigned to the Trustee pursuant to the Assignment Agreement dated as of July 15, 1989, by and between the Corporation and the Trustee (the "Assignment Agreement") . The Certificates shall be as authorized in, and shall be executed, delivered and secured under and pursuant to the Trust Agreement. The Certificates shall also be secured by Certificate proceeds in an amount equal to maximum annual debt service on the Certificates which will be deposited into a reserve fund (the "Reserve Fund") . Moneys in the Reserve Fund shall be available to pay debt service on the Certificates to the extent that Lease Payments are insufficient therefor. The Certificates shall represent the principal component of the Lease Payments, which shall mature on the dates and in the amounts set forth in Exhibit A hereto, and shall also represent the interest component of the Lease Payments, which is payable from July 15, 1989, at the rates set forth in Exhibit A hereto, and is to be paid on February 1 , 1990 and semiannually thereafter on August 1 and February 1 , through and including August 1 , 2019. The Underwriter agrees to make a public offering of the Certificates at the initial offering prices as set forth in the Official Statement hereinafter described, which prices may be changed from time to time by, and in the sole discretion of, the Underwriter. 2. The City shall deliver or cause to be delivered to the Underwriter, promptly after its acceptance hereof, an executed copy of the Official Statement relating to the Certificates (the "Official Statement"), substantially in the form of the Preliminary Official Statement dated July 20, 1989 (the "Preliminary Official Statement") , with only such changes therein as shall have been accepted by the Underwriter, and approved for distribution by respective resolutions of the City. The City hereby authorizes the use of copies of the Official Statement, the Trust Agreement, the Lease Agreement, the Property Removal Agreement and the Assignment Agreement in connection with the public offering and sale of the Certificates and hereby ratifies the prior distribution of the Preliminary Official Statement by the Underwriter. The Trust Agreement, the Lease Agreement and the Property Removal Agreement shall be executed and delivered substantially in the form heretofore reviewed by the Underwriter, with only such changes therein as shall be mutually agreed upon by the parties thereto and the Underwriter. 3. The City hereby represents and warrants to the Underwriter that: (a) The City is a municipal corporation and charter city duly organized and existing pursuant to the Constitution and laws of the State of California and has all necessary power and authority to enter into and perform its duties under the Lease Agreement, the Trust Agreement, the Property Removal Agreement and this Purchase Agreement, and, when executed and delivered by the respective parties thereto, the Lease Agreement, the Trust Agreement, the Property Removal Agreement and this Purchase Agreement will constitute legal , valid and binding obligations of the City enforceable in accordance with their respective terms; -2- (b) The execution and delivery of this Purchase Agreement, the Property Removal Agreement, the Lease Agreement and the Trust Agreement, and compliance with the various provisions thereof, will not conflict with, or constitute a breach of or default under, the City' s duties under said documents or any material law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which the City is subject or by which it is bound; (c) Except as may be required under the securities or blue sky laws of any state, there is no consent, approval , authorization or other order of, filing with, or certification by, any regulatory authority having jurisdiction over the City required for the consummation by the City of the other transactions contemplated by this Purchase Agreement; (d) There is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or, to the best knowledge of the City, threatened, against the City, nor to the best knowledge of the City is there any basis therefor, to restrain or enjoin the collection of the Lease Payments to be made pursuant to the Lease Agreement or in any way contesting or affecting the validity of this Purchase Agreement, the Trust Agreement, the Property Removal Agreement, the Assignment Agreement, the Certificates, or the Lease Agreement or contesting the powers of the City to enter into or perform its obligations under any of the foregoing to which it is a party; and (e) The information under the headings "THE PROJECT," "ESTIMATED SOURCES AND USES OF FUNDS," "THE CERTIFICATES," "CITY FINANCIAL INFORMATION," "LEASE AGREEMENT," "TRUST AGREEMENT," "PROPERTY REMOVAL AGREEMENT," "ASSIGNMENT AGREEMENT" and "ABSENCE OF LITIGATION" contained in the Preliminary Official Statement was, and in the Official Statement is, true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The City hereby agrees to cooperate with the Underwriter in endeavoring to qualify the Certificates for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that in no event shall the City be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject. 4. The obligations of the Underwriter under this Purchase Agreement are and shall be subject to the receipt on or prior to the date of the Official Statement of copies of the most recent audited financial statements for the City, together with such interim unaudited financial information as may be reasonably required by the Underwriter. 5. At 9:00 o'clock a.m. , California time, on August 15, 1989, or at such other time, or on such earlier or later date upon which the parties may mutually agree (the "Closing") , the Corporation will deliver or cause to be delivered to the Underwriter, at the offices of Jones Hall Hill& White, A Professional Law Corporation ("Special Counsel ") , Four Embarcadero Center, San -3- Francisco, California 94111 , or at such other place as the parties may mutually agree upon, the Certificates in definitive form, bearing CUSIP numbers, duly executed by the Trustee, registered in such names as the Underwriter shall provide to the Trustee not less than five business days prior to the Closing, together with the other documents mentioned herein. All expenses in relation to the printing of CUSIP numbers on said Certificates and the CUSIP Service Bureau charge for the assignment of said numbers shall be paid from the proceeds of the sale of the Certificates. The Underwriter will accept such delivery and pay the purchase price thereof as set forth in Section 1 hereof by certified or official bank check or checks in clearinghouse funds to the order of the Trustee, in an amount equal to the purchase price. The Certificates or temporary Certificates will be made available for checking and packaging one business day prior to the Closing at an office upon which the parties may mutually agree. 6. The Underwriter hereby enters into this Purchase Agreement in reliance upon the representations and warranties of the City contained herein and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the closing and upon the performance by the City of its obligations hereunder, both on the date hereof and as of the date of the closing. Accordingly, the obligations of the Underwriter under this Purchase Agreement to purchase, to accept delivery of and to pay for the Certificates shall be conditioned upon the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the closing, and shall also be subject to the following additional conditions: (a) The representations and warranties of the City contained herein shall be true, complete and correct on the date of Closing, as if made on and at the Closing; (b) At the Closing, the Trust Agreement, the Property Removal Agreement, the Assignment Agreement, the Lease Agreement and the Official Statement shall have been executed and delivered, shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter, and there shall be in full force and effect such resolutions as, in the Opinion of Special Counsel , shall be necessary in connection with the transaction contemplated hereby; (c) The Underwriter shall have the right to cancel its obligation to purchase the Certificates if, between the date hereof and the Closing, (1 ) legislation shall have been enacted by the Congress of the United States or the legislature of the State of California or shall have been reported out of committee of either body or be pending in committee of either body, or a decision shall have been rendered by a court of the United States or of the State of California or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service or by the California Franchise Tax Board or by any other State of California agency or department, with respect to federal or -4- California taxation upon revenues or other income of the general character to be derived by the Corporation or upon interest received with respect to obligations of the general character of the Certificates, which in the reasonable judgement of the Underwriter, materially and adversely affects the market for the Certificates, or (2) there shall exist any event which, in the reasonable judgement of the Underwriter, either M makes untrue or incorrect in any material respect as of such time any statement or information contained in the Official Statement or (ii ) is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect, or (iii ) there shall have occurred any outbreak of hostilities or other national or international calamity or crisis, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as, in the reasonable judgement of the Underwriter, would make it impracticable for the Underwriter to market or enforce contracts for the sale of the Certificates, or (iv) there shall be in force a general suspension of trading on the New York Stock Exchange or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction, or (v) a general banking moratorium shall have been declared by either federal , California or New York authorities having jurisdiction thereover, or (vi) there shall be any material adverse change in the affairs of the City, or (vii ) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or the charge to the net capital requirements of, underwriters established by the New York Stock Exchange, the Securities and Exchange Commission, any other federal agency of the Congress of the United States, or by Executive Order, or any agency of the State of California having jurisdiction thereover, or (viii ) an adverse event affecting the Project, the Corporation or the City occurs which, in the reasonable judgment of the Underwriter, requires or has required a supplement or amendment to the Official Statement; (d) At or prior to the Closing, the Underwriter shall receive the following documents, in each case satisfactory in form and substances to the Underwriter: (1) the final approving opinion, dated the date of Closing, of Special Counsel , accompanied by a supplementary opinion of the Special Counsel addressed to the Underwriter, dated the date of Closing, substantially to the effect that M the Purchase Agreement has been duly authorized, executed and delivered by the City and constitutes the legal , valid and binding agreement of the City enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (ii ) the statements contained in the Official Statement in the sections thereof entitled: "INTRODUCTION," "THE CERTIFICATES," "SECURITY FOR THE CERTIFICATES," "CERTIFICATES OWNERS' RISKS," "LEASE AGREEMENT," -5- "TRUST AGREEMENT," "PROPERTY REMOVAL AGREEMENT," "ASSIGNMENT AGREEMENT," "TAX EXEMPTION" and "APPROVAL OF LEGAL PROCEEDINGS" (insofar as such statements purport to summarize certain provisions of the legal documents and the Certificates) present an accurate summary of such provisions; and (iii ) the Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; (2) the opinion of the City Attorney, dated the date of Closing, to the effect that (i ) the City is a municipal corporation and charter city duly organized and validly existing under the Constitution and laws of the State of California; (ii) the Official Statement has been duly authorized, executed and delivered by the City and the information therein as to the City and the City' s obligations under the Trust Agreement, Property Removal Agreement and the Lease Agreement is correct and does not omit any statement which, in such counsel ' s opinion, should be included or referred to therein; (iii ) the resolution of the City approving and authorizing the execution and delivery of the Official Statement, the Trust Agreement, the Lease Agreement, the Property Removal Agreement and approving this Purchase Agreement, was duly adopted at one or more meetings of the city council of the City (the "Governing Body") which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; (iv) the execution and delivery of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, and the approval of this Purchase Agreement, and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any material agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the City is subject; (v) the Trust Agreement, the Lease Agreement, the Property Removal Agreement, and this Purchase Contract have been duly authorized, executed and delivered by the City, and constitute legal , valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, the application of equitable principles where appropriate or other laws affecting the enforcement of creditors' rights generally; (vi ) no litigation is pending or threatened to restrain or enjoin the payment of Lease Payments pledged under the Trust Agreement, in any way contesting or affecting the validity of the Certificates, the Lease Agreement, this Purchase Agreement, the Property Removal Agreement, the Assignment Agreement or the Trust Agreement, or in any way contesting the existence or powers of the City; (vii ) no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the date of Closing any statement or information concerning the City contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein concerning the City not misleading in any material respect; and (viii ) no authorization, approval , consent, or other order of the State of California or any other governmental authority or agency within the State of California is -6- required for the valid authorization, execution and delivery of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, the Official Statement and this Purchase Agreement; except that no opinion regarding the financial condition of the City shall be rendered by such counsel . The counsel for the City in rendering such opinions as referred to in clauses (2)(ii ) and (iv) alone, may reasonably rely upon such representations, statements, and where appropriate, certificates, as may be furnished by officials of the City having responsibilities with regard to the activities referred to in the aforementioned clauses; (3) an opinion of counsel to the Trustee, dated the date of Closing, to the effect that (i ) the Trustee is a national banking association with trust powers, duly created and lawfully existing under the laws of the United States of America; (ii) the Trustee has duly authorized by all necessary corporate action the execution, delivery and performance of the Trust Agreement and the Assignment Agreement and the acknowledgement of the Purchase Contract; (iii) the Trustee has all necessary trust powers required to carry out the trusts intended under the Trust Agreement; (iv) upon the execution and delivery of the Trust agreement and the Assignment agreement by an authorized officer of the Trustee, the Trust Agreement and the Assignment Agreement will constitute the valid and binding agreements of the Trustee, enforceable against the Trustee in accordance with their respective terms; and (v) the Certificates have been duly executed and delivered by the Trustee. Such opinion shall be subject to (i ) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally, including, without limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable subordination; (ii ) limitations imposed by general principles of equity upon the availability of equitable remedies or the enforcement of provisions of the legal documents; and the effect of judicial decisions which have held that certain provisions are unenforceable where their enforcement would violate the implied covenant of good faith and fair dealing, or would be commercially unreasonable; and (iii ) the effect of judicial decisions permitting the introduction of extrinsic evidence to modify the terms or the interpretation of the legal documents. (4) a certificate of an authorized officer of the Trustee, dated the date of Closing, to the effect that (i ) the Trustee is a national banking association duly organized and validly existing under the laws of the United States; (ii ) the general signature resolution of the Trustee approving and authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of the Certificates, the Trust Agreement, the Assignment Agreement and the acknowledgement of this Purchase Agreement, was duly adopted at meetings of the governing body of the Trustee; (iii ) to the best knowledge of the Trustee there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Trustee (a) to restrain or enjoin the execution or delivery of the Certificates or the collection of revenues pledged under the Assignment Agreement or the assignment of the Lease payments under the Assignment Agreement, (b) in any way contesting or affecting any authority for the execution and -7- delivery of the Certificates or the validity of the Certificates, the Trust Agreement, the Assignment Agreement, the Lease Agreement, the Property Removal Agreement or in any way contesting the existence or powers of the Trustee with respect to the execution or delivery of the Certificates or the security therefor wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Trust Agreement, the Assignment Agreement, the Property Removal Agreement or the Lease Agreement or the validity of the Certificates; (iv) the execution and delivery of the Certificates, the Assignment Agreement and the Trust Agreement and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the Trustee a breach of or default under any agreement or other instrument to which the Trustee is a party or by which it is bound or, to the best knowledge of the Trustee, any existing law, regulation, court order or consent decree to which the Trustee is subject; and (v) the Trust Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Trustee and the Certificates have been duly executed and delivered by the Trustee; (5) a certificate of the finance director or similar official of the City, dated the date of the Closing, substantially to the effect that (i ) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the Closing with the same effect as if made on the date of the Closing; (ii ) nothing has come to his or her attention which would lead said official to believe that the information contained therein relating to the City contains any untrue statement of material fact or omits to state any 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, said certificates otherwise being in form and substance acceptable to Special Counsel ; and (iii ) the City has complied with all the agreements and has satisfied all the conditions on its part to be performed or satisfied under this Purchase Agreement, the Trust Agreement, the Property Removal Agreement and the Lease Agreement at and prior to the Closing; (6) a certificate of an authorized officer of the Corporation, dated the date of Closing, substantially to the effect that: (i) the Corporation is a nonprofit public benefit corporation duly organized and existing under the laws of the State of California, with the full power and authority to enter into and perform the Trust Agreement, the Assignment Agreement, the Property Removal Agreement, and the Lease Agreement, to cause delivery of the Certificates pursuant to the Trust Agreement and to carry out and consummate the transactions contemplated by this Purchase Agreement, the Trust Agreement, the Property Removal Agreement, the Assignment Agreement, the Lease Agreement and the Official Statement; (ii ) to the best knowledge of the Corporation, after reasonable investigation, the execution and delivery of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, the Assignment Agreement and the Certificates and compliance on the Corporation' s part contained with the provisions therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgement, decree, -8- loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Corporation is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Corporation under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Trust Agreement, the Property Removal Agreement, the Assignment Agreement and the Lease Agreement; (iii ) to the best knowledge of the Corporation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Corporation affecting the existence of the Corporation or the titles of its officers to their respective offices or in any way contesting or affecting the validity or enforceability of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, the Assignment Agreement, the Certificates or this Purchase Agreement, or contesting the powers of the Corporation or its authority to issue, enter into, adopt or perform its obligations under any of the foregoing, wherein an unfavorable decision, ruling or finding would materially and adversely affect the validity or enforceability of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, the Assignment Agreement, the Certificates or this Purchase Agreement; and (iv) the Corporation will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (A) to qualify the Certificates for offer and sale under the blue sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (B) to determine the eligibility of the Certificates for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the Certificates; provided, however, that in no event shall the Corporation be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject; (7) copies of the Trust Agreement, the Property Removal Agreement, the Assignment Agreement and the Lease Agreement, in each case duly executed by the parties thereto; (8) definitive copies of the Official Statement, executed on the behalf of the City by the designated authorized representative of the City; (9) certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of the Certificates, the Assignment Agreement and the Trust Agreement and the acknowledgment of this Purchase Agreement; -9- (10) certified copies of the resolutions of the Governing Body of the City authorizing the execution and delivery of the Trust Agreement, the Lease Agreement, the Property Removal Agreement, the Official Statement and approving this Purchase Agreement; (11) copies of the Articles of Incorporation of the Corporation and certified copies of the Corporation' s by-laws and resolutions of its Board of Directors authorizing the execution and delivery of the Trust Agreement, the Lease Agreement, the Property Removal Agreement and the Assignment Agreement; (12) the opinion of counsel to the Corporation, dated the date of the Closing, as to the due authorization, execution and delivery by the Corporation of the Lease Agreement, the Property Removal Agreement, the Assignment Agreement and the Trust Agreement as to the legal , valid and binding nature thereof and as to the enforceability thereof in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws or equitable principles affecting the enforcement of creditors' rights generally, said opinion otherwise being in form and substance acceptable to Special Counsel and to counsel for the Underwriter; (13) evidence (whether written or telephonic) satisfactory to the Underwriter that the Certificates have been rated "A 1" by Moody' s Investors Service; (14) such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Special Counsel may reasonably request to evidence compliance by the Trustee, the City and the Corporation with legal requirements, the truth and accuracy, as of the time of Closing, of the representations of the City herein and in the Official Statement and the due performance or satisfaction by the Trustee, the City and the Corporation at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Trustee, the City and the Corporation. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Agreement or if the Underwriter' s obligations shall be terminated for any reason permitted herein, this Purchase Agreement shall terminate and neither the Underwriter nor the City shall have any further obligation hereunder. 7. All reasonable expenses and costs of the City and the Corporation incident to the performance of its respective obligations in connection with the execution, delivery and sale of the Certificates to the Underwriter, including but not limited to the cost of printing of the Certificates (and full execution thereof) ; the cost of preparation, printing and/or word processing, reproduction, distribution and delivery of the Preliminary Official Statement, the Official Statement, the Trust Agreement, the Lease Agreement, the Property Removal Agreement and the Assignment Agreement; fees of consultants; fees of rating agencies; CUSIP Service Bureau fees and charges; fees and charges of Special Counsel ; and fees and expenses of the Trustee, counsel for the City and counsel for the Corporation, shall be paid -10- by the City. All expenses to be paid by the City pursuant to this Purchase Agreement may be paid from Certificate proceeds to the extent permitted by the Trust Agreement. Except as indicated above, all other out-of-pocket expenses of the Underwriter, including traveling and other expenses, shall be pair by the Underwriter. 8. Any notice or other communication to be given to the Underwriter may be given by delivering the same in writing to Stone & Youngberg, One California Street, San Francisco, CA 94111 , Attn: Public Finance Department. The approval of the Underwriter when required hereunder or the determination of their satisfaction as to any document referred to herein shall be in writing signed on behalf of Stone & Youngberg and delivered to you. 9. The Underwriter represents with respect to the Certificates and this Purchase Agreement as follows: (a) the Certificates may be initially offered when the Underwriter and the City have executed this Purchase Agreement; (b) the Underwriter may allow a dealer concession on sales to (i ) securities dealers, (ii ) dealer banks or divisions or departments of banks, (iii ) foreign banks or broker-dealers which (A) are registered as broker-dealers under the Securities Exchange Act of 1934 and agree in making sales of the Certificates in the United States of America that they will comply with the rules of the Municipal Securities Rulemaking Board, or (B) if not so registered, agree that they will not sell any Certificates in the United States of America, its territories or possessions, or to persons who are citizens thereof or residents therein, and in making other sales agree to comply with the Rules of Fair Practice of the National Association of Securities Dealers; (c) the Underwriter may change the public offering price and, in general , or in such specific cases as it may determine, any concession, commissions, allowances or reallowances; (d) the Underwriter agrees to mail or deliver an Official Statement to each person who purchases Certificates with or prior to final written confirmation of the sale to such person; (e) the Underwriter represents that is is registered as a broker-dealer or a municipal securities dealer under the Securities Exchange Act of 1934; and, (f) the Underwriter shall not be liable with respect to (i ) the issue, form, genuineness, validity, legality, enforceability or value of, or title to, the Certificates, (ii ) the validity of any instrument under or pursuant to which the Certificates may be issued, (iii ) any representations in the Purchase Agreement, (iv) the accuracy or completeness of the Preliminary Official Statement or the Official Statement, any memorandum, brochure or agreement, or any statements, reports or letters of others in connection with the Certificates, (v) the delivery of the Certificates or the performance by the City or others of -11- any agreement on its or their part, or (vi ) the qualification or registration of the Certificates for sale, or the legality of the Certificates for investment under the laws of any jurisdiction. The Underwriter shall not (except for such liability as it may have as an underwriter) be liable under any obligations, either express or implied, which are not herein expressly assumed. 10. This Purchase Agreement is made solely for the benefit of the City, the Corporation and the Underwriter (including the successors or assigns of the Underwriter) and no other persons, partnership, association or corporation shall acquire or have any right hereunder or by virtue hereof. All covenants and representations 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 and shall survive the delivery of and payment for the Certificates. 11 . This Purchase Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in such State. 12. This Purchase 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 instrument. STONE & YOUNGBERG f By: HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By: Executive Director Receipt Acknowledged By: THE CITY OF HUNTINGTON BEACH STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. By: City Administrator By: (0558h) -12- EXHIBIT A Maturity (August 1 ) Principal Amount Interest Rate Yield/Price 1990 $ 135,000.00 5.90% 100 1991 180,000.00 6.00% 100 1992 190,000.00 6. 10% 100 1993 205,000.00 6.20% 100 1994 215,000.00 6.30% 100 1995 230,000.00 6.40% 100 1996 245,000.00 6.50% 100 1997 260,000.00 6.55% 100 1998 275,000.00 6.60% 100 1999 295,000.00 6.65% 100 2000 315,000.00 6.70% 100 2001 335,000.00 6.75% 100 2002 360,000.00 6.80% 100 2003 385,000.00 6.85% 100 2019 11 ,400,000.00 7.00% 7.081% TOTAL: $15,025,000.00 —13— 10 18019-26 J H H W:C FA:FCN1 L 08/07/89 KM L4521 89-430638 RECORDING REQUESTED BY WHEN RECORDED, RETURN TO: FIRST AMERICAN TITLE INS. CO. Jones Hall Hill & White, RECORDED IN OFFICIAL RECORD:: A Professional Law Corporation OF ORANGE COUNTY. CALtF:0Ai PA Four Embarcadero Center, Suite 1950 San Francisco, CA 94111 ,3 25 PM AUG 14 '89 Attn: Ms. Katherine M. Lee FEIXEMPT n [� O .�C�7 0�-� V L/� COUNT. v� RECORDER THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT' TO SECTION 11922 OF THE CAI�IFORNIA REVENUE AND TAXATION CODE. :'TITS DOCUMENT IS E:�MPT FROM RECORDiNC FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. MEMORANDUM OF LEASE i m b A c s i c N nII E IV 7T This Memorandum of Lease is entered into as of July 15, 1989, by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California, as lessor, (the "Corporation") and the CITY OF HUNTINGTON BEACH, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessee, who agree as follows: Section 1. The Lease. The City leases from the Corporation and the Corporation leases to the City, certain real property described in paragraph 2 hereof, upon the terms and conditions, and for the term,-more fully set forth in the Lease Agreement of even date herewith between the Corporation and the City (the "Lease Agreement"), all of the provisions of which are hereby incorporated into this Memorandum of Lease by reference. Section 2. Leased Premises; Term. The real property leased by the Corporation to the City is located in the City of Huntington Beach, County of Orange, State of California, and is described more fully in Exhibit A attached to this Memorandum of Lease. The Lease Agreement is for a term commencing on July 15, 1989, and ending on the date on which the Lease Payments (as defined in the Lease Agreement) are paid in full or provisions made for such payment, but in any event not later than August 1, 2019. Section 3. Provisions Binding on Successors and Assigns. Subject to the provisions of the Lease Agreement relating to assignment and subletting, the Lease Agreement shall inure to the benefit of and shall be binding upon the Corporation and the City and their respective successors and assigns. Section 4. Purpose of Memorandum of Lease. This Memorandum of Lease is prepared for the purpose of recordation, and it in no way modifies the provisions of the Lease Agreement. 14�StSnJMEN� ��JZEE/�JEN� SEE �,r�l�t�b�t ��� �i` IN WITNESS WHEREOF, the Corporation has caused this Memorandum of Lease to be executed in its corporate name by its duly authorized officers and sealed with its corporate seal; and the City has caused this Memorandum of Lease to be executed in its corporate name by its duly authorized officers and sealed with its corporate seal, all as of the date first above written. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By 4h-��1E,4!0JWZ_ Paul E. Cook, Executive Director (SEAL) Attest: By t�e� Connie Brockway, Secretary CITY OF HUNTINGTON BEACH By Paul E. Cook, City Administrator (SEAL) Attest: By Connie Brockway, City Clerk -2- STATE OF CALIFORNIA ) ss. COUNTY OF ORANGE > On this loth day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the Executive Director and Secretary, respectively, of the City of Huntington Beach Civic Improvement Corporation that executed the within instrument and acknowledged to me that the City of Huntington Beach Civic Improvement Corporation executed the same. (Notarial Seal) (signature) OFFICIAL SEAL lary Public for the SALLY K. DANEKAS State of California NOTARYRIBUC.CAUFORMA CITY AND COUNTI OF SAN FuNC15C0 My Cantu Eapim$Aug 22.1 og9 My commission expires: August 22, 1989 -3- STATE OF CALIFORNIA ) ss. COUNTY OF ORANGE ) On this 10th day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the City Administrator and City Clerk, respectively, of the City of Huntington Beach that executed the within instrument and acknowledged to me that the City of Huntington Beach executed the same. (Notarial Seal) (signature) OFFICIAL SEAL 40tary Public for the SALLY K. DANEKAS State of California NOTARY PLOUC•CALIFORNIA CITY AND COUNTY OF SIN FRANCISCO MY Corm Evros Avg 22,I989 My commission expires: August 22, 1989 —4— EXHIBIT A PROPERTY DESCRIPTION The land referred to herein is situated in the State of California, County of Orange and is described as follows: THOSE PORTIONS OF BLOCKS 1902 , 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF TRACT NO. 12 AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989 OF SAID CITY COUNCIL, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60.00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 19 ' 06" EAST 358 .00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET; THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 20' 23" EAST 683.13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12; THENCE NORTH 89 DEG. 40' 01" WEST 245.00 FEET ALONG SAID LAST IlENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89 DEG. 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. A-i CERTIFICATE OF ACCEPTANCE This is to certify that the leasehold interest of certain property and improvements thereon leased under that certain Memorandum of Lease, dated as of July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation, as lessor, a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Public Benefit Law of the State of California (the "Corporation") and the City of Huntington Beach, as lessee, a charter city and municipal corporation, duly organized and existing under the Constitution and laws of the State of California (the "City"), recorded concurrently on the date hereof, is hereby accepted by the undersigned on behalf and by order of the City pursuant to authority conferred by Resolution NO. 6046, adopted by the City Council of the City on July 17, 1989, and the Corporation, as lessor, consents to recordation thereof by its duly authorized officer. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH By `Z� Connie Brockway, City Clerk ACCEPTED AND ACKNOWLEDGED: CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By _ ftu�t Paul E. Cook, Executive Director 11 J 18019-26 JHHW:CFA:dfs FINAL F8646 LEASE AGREEMENT Dated as of July 15, 1989 by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, as lessor and CITY OF HUNTINGTON BEACH, as lessee Relating to $15,025,000 Certificates of Participation (1989 Public Parldng Project Financing) LEASE AGREEMENT This Lease (this "Lease"), dated as of July 15, 1989, is by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and the CITY OF HUNTINGTON BEACH, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "City"); WITNESSETH. WHEREAS, the Corporation has been formed for the purpose of assisting the City in financing the acquisition and construction of property which is of benefit to the City; and WHEREAS, the Corporation has previously financed the acquisition of land and certain civic center and public safety improvements from the proceeds of the $20,000,000 aggregate principal amount of Certificates of Participation (Civic Center Project) dated as of July 15, 1986, and has leased such land and improvements to the City pursuant to the Lease Agreement dated as of July 15, 1986 (the "1986 Lease"); and WHEREAS, pursuant to Section 5.11 of the 1986 Lease, the City and the Corporation have previously removed certain land and improvements used for police and public safety purposes (the "Project") from the 1986 Lease, and in consideration of the retention by the Corporation of title to the Project, the Corporation has agreed to pay to the City the amount of $13,365,000 which the City intends to apply to pay the costs of various municipal improvements within the City; and WHEREAS, in order to provide funds sufficient to enable the Corporation to make such payment to the City, the Corporation has agreed to lease the Project back to the City hereunder and to assign and transfer to the Trustee certain of its rights hereunder, and in consideration of such assignment and the execution of the Trust Agreement dated as of July 15, 1989, by and among the City, the Corporation and State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the Trustee has agreed to execute and deliver the $15,025,000 aggregate principal amount of Certificates of Participation (1989 Public Parking Project Financing), each evidencing a direct, undivided fractional interest in the Lease Payments to be paid by the City under this Lease; NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: ARTICLE I DEFLVITIONS SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease shall have the respective meanings specified in Section 1.01 of the Trust Agreement. In addition, the following terms heretofore defined in this Lease and the following terms defined in this Section 1.1 shall, for all purposes of this Lease, have the respective meanings herein specified. "Lease Payment Date" means the twenty-fifth (25th) calendar day of the month immediately preceding an Interest Payment Date. "Lease Payments" means the amounts payable by the City pursuant to Section 4.4(a), including any prepayment thereof pursuant to Article X. "Permitted Encumbrances" means, as of any time:. (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid pursuant to Article V; (b) this Lease, the Assignment Agreement, and any other agreement or document contemplated or permitted hereunder, (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; and (d) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Project for the purposes intended by the City. "Project" means the land described more particularly in Exhibit A hereto, as Exhibit A may be amended from time to time pursuant to the provisions of Sections 3.3 or 8.3, together with all of the improvements, facilities and other real property situated on such land as of the Closing Date or added thereto following the Closing Date pursuant to Section 5.2. "Rental Period" means each period during the Term of this Lease commencing on and including the day immediately following an Interest Payment Date and extending to and including the next succeeding Interest Payment Date. "Term of this Lease" means the time during which this Lease is in effect, as provided in Section 4.2. "Trust Agreement" means the Trust Agreement dated as of July 15, 1989, by and among the Trustee, the Corporation and the City, together with any duly authorized and executed amendments thereto. -2- SECTION 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. -3- ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES SECTION 2.1. Covenants, Representations and Warranties of the City. The City makes the following covenants, representations and warranties to the Corporation as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The City is a charter city and municipal corporation duly organized and validly existing under the Constitution and laws of the State of California, has full legal right, power and authority to enter into this Lease and the Trust Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery of this Lease and the Trust Agreement. (b) Due Execution. The representatives of the City executing this Lease and the Trust Agreement are fully authorized to execute the same. (c) Valid, Binding and Enforceable Obligations. This Lease and the Trust Agreement have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding agreements of the City enforceable against the City in accordance with their respective terms. (d) No Conflicts. The execution and delivery of this Lease, the Trust Agreement, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease and the Trust Agreement or the financial condition, assets, properties or operations of the City or its properties. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease or the Trust Agreement, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. -4- (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease or the Trust Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease or the Trust Agreement or the financial conditions, assets, properties or operations of the City or its properties. SECTION 2.2. Covenants, Representations and Warranties of the Corporation. The Corporation makes the following covenants, representations and warranties to the City as of the date of execution and delivery of this Lease: (a) Due Organization and Existence. The Corporation is a nonprofit corporation duly organized and validly existing under the Nonprofit Public Benefit Corporation Law of the State of California, has full legal right, power and authority to enter into this Lease, the Trust Agreement and the Assignment Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the Corporation has duly authorized the execution and delivery of this Lease, the Trust Agreement and the Assignment Agreement. (b) Due Execution. The representatives of the Corporation executing this Lease, the Trust Agreement and the Assignment Agreement are frilly authorized to execute the same. (c) Valid, Binding and Enforceable Obligations. This Lease, the Trust Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Corporation and constitute the legal, valid and binding agreements of the Corporation with the Corporation, enforceable against the Corporation in accordance their respective terms. (d) No Conflicts. The execution and delivery of this Lease, the Trust Agreement and the Assignment Agreement, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Corporation is a party or by which it or its properties are otherwise subject or bound, or result in the -5- creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Corporation, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, the Trust Agreement and the Assignment Agreement or the financial condition, assets, properties or operations of the Corporation or its properties. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Corporation, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease, the Trust Agreement or the Assignment Agreement, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Corporation after reasonable investigation, threatened against or affecting the Corporation or the assets, properties or operations of the Corporation which, if determined adversely to the Corporation or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease, the Trust Agreement or the Assignment Agreement, or upon the financial condition, assets, properties or operations of the Corporation, and the Corporation is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, the Trust Agreement or the Assignment Agreement or the financial conditions, assets, properties or operations of the Corporation or its properties. —6— ARTICLE III DEPOSIT OF MONEYS; SUBSTITUTION OF THE PROJECT SECTION 3.1. Deposit of Moneys. On the Closing Date, the Corporation shall cause the proceeds of sale of the Certificates to be deposited with the Trustee. Pursuant to Section 4.01 of the Trust Agreement, from the proceeds of sale of the Certificates .the amount of$1,215,605.72 shall be deposited in the Reserve Fund, the interest components of the Lease Payments in the amount of $86,218.54 shall be deposited in the Lease Payment Fund, and the amount of $13,477,531.78 shall be deposited in the Program Fund. SECTION 3.2. Payment of Amounts to City. The Corporation hereby agrees to apply the proceeds deposited in the Program Fund, in the amount of$13,365,000, to pay all amounts due and owing to the City under the Agreement Regarding Removal of Property from 1986 Lease Agreement dated as of July 15, 1989, by and between the Corporation and the City. SECTION 3.3. Substitution of Project. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of this Lease, to substitute other land, facilities, improvements or other property (the "Substitute Project") for the Project or portion thereof (the "Former Project"), provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution: (a) The City shall file with the Corporation and the Trustee an amended Exhibit A which adds thereto a description of the Substitute Project and deletes therefrom the description of the Former Project; (b) the City shall certify in writing to the Corporation and the Trustee that the estimated fair market value and the estimated fair rental value of the Substitute Project are at least equal to the estimated fair market value and the estimated fair rental value, respectively, of the Former Project, all as shown in the report or opinion of an M.A.I. appraiser selected by the City; (c) The City shall certify in writing to the Corporation and the Trustee that the Substitute Project serves the public purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California; (d) The City shall certify in writing to the Corporation and the Trustee that the estimated useful life of the Substitute Project at least extends to the date on which the final Lease Payment becomes. due and payable hereunder; and -7- (e) The Substitute Project shall not cause the City to violate any of its covenants, representations and warranties made herein or in the Trust Agreement. From and after the date on which all of the foregoing conditions precedent to such substitution are satisfied, the Term of this Lease shall cease with respect to the Former Project and shall be continued with respect to the Substitute Project, and all references herein to the Former Project shall apply with full force and effect to the Substitute Project. The City shall not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution. —8— ARTICLE IV AGREEMENT TO LEASE; TERM OF THIS LEASE; LEASE PAYMENTS SECTION 4.1. Lease. The Corporation hereby leases the Project to the City and the City hereby leases the Project from the Corporation, upon the terms and conditions set forth in this Lease. SECTION 4.2. Term. The Term of this Lease shall commence on the Closing Date and, subject to the provisions of Section 6.2, shall end on the date on which the Trust Agreement shall be discharged pursuant to and in accordance with Section 13.01 thereof, but under any circumstances not later than August 1, 2029. SECTION 4.3. Possession. The City hereby agrees to take possession of the Project hereunder on the Closing Date. SECTION 4.4. Lease Payments. (a) Obligation to Pay. Subject to the provisions of Sections 6.2 and 6.3 and the provisions of Article X, the City agrees to pay to the Corporation, its successors and assigns, the Lease Payments (denominated into components of principal and interest) in the respective amounts specified in Exhibit B, to be due and payable on the Interest Payment Dates immediately following each of the respective Lease Payment Dates specified in Exhibit B, and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in such- Exhibit. Any amount held in the Lease Payment Fund on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole pursuant to Article X and other than amounts required for payment of past due principal or interest represented by any Certificates not presented for payment) shall be credited towards the Lease Payment then required to be paid hereunder; and no Lease Payment need be deposited with the Trustee on any Lease Payment Date if the amounts then held in the Lease Payment Fund are at least equal to the Lease Payment then required to be deposited with- the Trustee. The Lease Payments payable for the Project in any Rental Period shall be for the use of the Project during such Rental Period. (b) Effect of Prepayment. In the event that the City prepays all Lease Payments in full pursuant to Sections 10.2, 10.3 or 10.4, the City's obligations under this Lease shall thereupon cease and terminate, including but not limited to the City's obligation to pay Lease Payments under this Section 4.4. In the event that the City prepays the Lease Payments in part but not in whole pursuant to Sections 10.2, 10.3 or 10.4, the principal components of the remaining Lease Payments shall be reduced on a pro rata basis in integral multiples of $5,000; and the interest component of each remaining Lease Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Certificates thereby prepaid pursuant to Sections 3.01(b) or 3.01(c) of the Trust Agreement, as the case may be. (c) Rate on Overdue Payments. In the event the City fails to make any of the payments required in this Section 4.4, the payment in default shall continue as an -9- 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, from the date of default to the date of payment at the rate of eight percent (8%) per annum. (d) Fair Rental Value. The Lease Payments during each Rental Period shall constitute the total rental for the Project for such Rental Period, and shall be paid by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Project during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments represent the fair rental value of the Project. In making such determination, consideration has been given to the appraised value of the Project as set forth in the appraisal of Mark W. Linnes, M.A.I., dated March 17, 1989, other obligations of the parties under this Lease, the uses and purposes which may be served by the Project and the benefits therefrom which will accrue to the City and the general public from the Project.. (e) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City, subject to the provisions of Sections 6.2, 6.3 and 10.1. The City covenants to take such action as may be necessary to include all Lease Payments in each of its annual budgets during the Term of this Lease and to make the necessary annual appropriations for all such Lease Payments. Annually, the City will furnish to the Trustee a certificate of the City Representative stating that the Lease Payments have been included in the final budget of the City for the current Fiscal Year, to the full extent required hereunder, such certificate to be filed within thirty (30) days after the adoption of such budget and in any event no later than September 1 in the calendar year in which the City adopts such budget. 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. (f) Assignment. The City understands and agrees that all Lease Payments have been assigned by the Corporation to the Trustee in trust, pursuant to the Assignment Agreement, for the benefit of the Owners of the Certificates, and the City hereby assents to such assignment. The Corporation hereby directs the City, and the City hereby agrees to pay to the Trustee at its Trust Office, all payments payable by the City pursuant to this Section 4.4 and all amounts payable by the City pursuant to Article X. SECTION 4.5. Quiet Enjoyment. At all times during the Term of this Lease, the Corporation shall provide the City with quiet use and enjoyment of the Project and the City shall peaceably and quietly have and hold and enjoy the Project, without suit, trouble or hindrance from the Corporation, except as expressly set forth in this Lease. The Corporation will, at the request of the City and at the City's cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Corporation may lawfully do so. Notwithstanding the foregoing, the Corporation shall have the right to inspect the Project as provided in Section 7.2. SECTION 4.6. Title; Vesting in City. At all times during the Term of this Lease, the Corporation shall hold title to the Project and any and all additions which -10- comprise fixtures, repairs, replacements or modifications thereto, except for those fixtures, repairs, replacements or modifications which are added thereto by the City at its own expense and which may be removed without damaging the Project and except for any items added to the Project by the City pursuant to Section 5.9. Upon the termination of this Lease, or upon the deposit by the City of security for all unpaid Lease Payments pursuant to Section 10.1, all right, title and interest of the Corporation in and to the Project shall be transferred to and vested in the City. The Corporation agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. SECTION 4.7. Additional Payments. In addition to the Lease Payments, the City shall pay when due all costs and expenses incurred by the Corporation to comply with the provisions of the Trust Agreement, including without limitation all Costs of Issuance (to the extent not paid from amounts on deposit in the Program Fund), annual compensation due to the Trustee and all of its reasonable costs payable as a result of the performance of and compliance with its duties under the Trust Agreement, and all costs and expenses of attorneys, auditors, engineers and accountants. -11- ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS SECTION 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease, as part of the consideration for the rental of the Project, all improvement, repair and maintenance of the Project shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Project, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Project resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Corporation agrees to provide only the Project, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease, except as specifically provided in such Sections. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Corporation or the City affecting 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 Term of this Lease as and when the same become due. The City may, at the City's 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 unless the Corporation shall notify the City that, in its reasonable opinion, by nonpayment of any such items the interest of the Corporation in the Project will be materially endangered or the Project or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Corporation with full security against any loss which may result from nonpayment, in form satisfactory to the Corporation and the Trustee. SECTION 5.2. Modification of Project. The City shall, at its own expense, have the right to remodel the Project or to make additions, modifications and improvements to the Project. All additions, modifications and improvements to the Project shall thereafter comprise part of the Project and be subject to the provisions of this Lease. Such additions, modifications and improvements shall not in any way damage the Project or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Project, upon completion of any additions, modifications and improvements made thereto pursuant to this Section, shall be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or remain against the Project for labor or materials furnished in connection with any remodeling, additions, modifications, -12- improvements, repairs, renewals 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 Project, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Corporation with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Corporation. The Corporation will cooperate fully in any such contest, upon the request and at the expense of the City. SECTION 5.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease, but only if and to the extent available at reasonable cost from reputable insurers, a standard comprehensive general insurance policy or policies in protection of the Corporation, City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Project. Such policy or policies shall provide coverage in such liability limits, and shall be subject to such deductibles, as shall be sufficient in the reasonable judgment of the City taking into account the nature and scope of the operations and affairs of the City. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such liability insurance shall be applied by the City toward extinguishment or satisfaction of the liability with respect to which paid. SECTION 5.4. Fire and Extended Coverage Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, insurance against loss or damage to the Project by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, and earthquake insurance (but as to such earthquake insurance only if such insurance is available from reputable insurers at reasonable cost in the opinion of the City). Such extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount at least equal to the replacement cost of the property insured thereunder, but in any event the aggregate coverage of all such policies shall not be required to exceed the aggregate principal amount of the Outstanding Certificates. Such insurance may be subject to deductible clauses of not to exceed the greater of $100;000 or ten percent (10%) of said replacement cost for any one loss. The Net Proceeds of such insurance shall be applied as provided in Section 6.2. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. SECTION 5.5. Rental Interruption Insurance. The City shall procure, and maintain or cause to be maintained, throughout the Term of this Lease, rental -13- interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Project as a result of any of the hazards covered in the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during the current or any future Fiscal Year. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund, and shall be credited towards the payment of the Lease Payments in the order in which due and payable. SECTION 5.6. Recordation and Filing; Title Insurance. On the Closing Date the City shall, at its expense, (a) cause this Lease or a memorandum thereof in form and substance approved by Bond Counsel, to be recorded against the Project, and (b) obtain a CLTA title insurance policy in an amount at least equal to the aggregate principal amount of the Certificates, insuring the City's leasehold estate hereunder in the Project, subject only to Permitted Encumbrances. All Net Proceeds received under any such title insurance policy shall be deposited with the Trustee in the Lease Payment Fund and shall be credited towards the prepayment of the remaining Lease Payments pursuant to Section 10.3. SECTION 5.7. Form of Insurance Policies. Each policy of insurance required by Sections 5.4, 5.5 and 5.6 shall name the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease. All such policies shall provide that the Trustee shall be given thirty (30) days' notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. The City shall cause to be delivered to the Trustee annually, within sixty (60) days following the close of each Fiscal Year, a certificate stating whether all of the insurance policies required by this Lease are in full force and effect. In the event that any insurance required pursuant to Sections 5.3, 5.4 or 5.5 shall be provided in the form of self-insurance, the City shall file with the Trustee annually, within ninety (90) days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. In the event that any such insurance shall be provided in the form of self-insurance by the City, the City shall not be obligated to make any payment with respect to any insured event except from such reserves. SECTION 5.8. Advances. If the City shall fail to perform any of its obligations under this Article V, the Corporation shall take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as additional rental hereunder, with interest at the rate of eight percent (8%) per annum. SECTION 5.9. Installation of City's Equipment. 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 -14- installed other items of equipment or other personal property in or upon the Project. All such items shall remain the sole property of the City, 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 the Project resulting from the installation, modification or removal of any such items. Nothing in this Lease shall prevent the City from purchasing or leasing items to be installed pursuant to this Section under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Project. SECTION 5.10. Liens. The City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Project, other than 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. The City shall reimburse the Corporation for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. —15— ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1. Application of Net Proceeds. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Project by fire or other casualty shall be paid to the Trustee, as assignee of the Corporation under the Assignment Agreement, and deposited in the Insurance and Condemnation Fund to be applied as set forth in Section 6.01 of the Trust Agreement. The Net Proceeds of any eminent domain award with respect to the Project resulting from any event described in Section 6.1 shall be paid by the City to the Trustee and deposited in the Insurance and Condemnation Fund to be applied as set forth in Section 6.02 of the Trust Agreement. SECTION 6.2. Termination or Abatement Due to Eminent Domain. If all of the Project shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of this Lease shall cease with respect to the Project as of the day possession shall be so taken. If less than all of the Project shall be taken permanently, or if all of the Project or any part thereof shall be taken temporarily, under the power of eminent domain, (a) this Lease shall continue in full force and effect with respect to the Project and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a partial abatement of Lease Payments, in an amount to be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Project. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under this Section 6.2 to the extent that amounts in the Reserve Fund are available to pay Lease Payments which would otherwise be abated under this Section 6.2, it being hereby declared that such amounts constitute a special fund for the payment of the Lease Payments. SECTION 6.3. Abatement Due to Damage or Destruction. The amount of Lease Payments shall be abated during any period in which by reason of damage or destruction (other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy by the City of the Project or any portion thereof. The amount of such abatement shall be agreed upon by the City and the Corporation such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Project not damaged or destroyed. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease shall continue in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under this Section 6.3 to the extent that the proceeds of hazard insurance, rental interruption insurance or amounts in the Reserve Fund are available to pay Lease Payments which would otherwise be abated under this Section 6.3, it being hereby declared that such proceeds and amounts constitute a special fund for the payment of the Lease Payments. -16- ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS SECTION 7.1. Disclaimer of Warranties. THE CORPORATION MAKES NO AGREEMENT, 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 PROJECT OR ANY PORTION THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT OR ANY PORTION THEREOF. THE, CITY ACKNOWLEDGES THAT THE CORPORATION IS NOT A MANUFACTURER OF ANY PORTION OF THE PROJECT OR A DEALER THEREIN, THAT THE CITY LEASES THE PROJECT AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. In no event shall the Corporation be liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease or the Trust Agreement for the existence, furnishing, functioning or City's use of the Project. SECTION 7.2. Access to the Project. The City agrees that the Corporation and any Corporation Representative, and the Corporation's successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Project or any portion thereof. The City further agrees that the Corporation, any Corporation Representative and the Corporation's successors or assigns shall have such rights of access to the Project or any portion thereof as may be reasonably necessary to cause the proper maintenance of the Project in the event of failure by the City to perform its obligations hereunder. SECTION 7.3. Release and Indemnification Covenants. The City shall and hereby agrees to indemnify and save the Corporation and the Trustee and their respective officers, agents, successors and assigns harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Project by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (c) any negligence or wilful misconduct of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Project, (d) any intentional misconduct or negligence of any sublessee of the City with respect to the Project, or (e) the payment of amounts from the Program Fund. No indemnification is made under this Section or elsewhere in this Lease for willful misconduct, negligence, or breach of duty under this Lease by the Corporation or the Trustee, or their respective officers, agents, employees, successors or assigns. -17- ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1. Assignment by the Corporation. The Corporation's rights under this Lease, including the right to receive and enforce payment of the Lease Payments, have been assigned to the Trustee pursuant to the Assignment Agreement, to which assignment the City hereby consents. SECTION 8.2. Assignment and Subleasing by the City. This Lease may not be assigned by the City. The City may sublease the Project or portion thereof, but only with the written consent of the Corporation (which consent shall not be unreasonably withheld), and subject to all of the following conditions: (a) This Lease and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City. (b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Corporation and the Trustee a true and complete copy of such sublease. (c) No such sublease by the City shall cause the Project to be used for a purpose other than as may be authorized under the provisions of the laws of the State of California. (d) The City shall furnish the Corporation and the Trustee with a written opinion of Bond Counsel stating that such sublease does not cause the interest components of the Lease Payments to become includable in gross income for purposes of federal or State of California personal income taxation. SECTION 8.3. Amendment of Lease Agreement. The Corporation and the City may at any time amend or modify any of the provisions of this Lease, but only: (a) upon the filing with the Trustee of an opinion of Bond Counsel stating that such amendment will not materially adversely affect the interests of the Certificate Owners, or with the prior written consents of the Owners of a majority in aggregate principal amount of the Outstanding Bonds; or (b) without the consent of the Trustee or any of the Certificate Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreements of the City contained in this Lease, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Corporation and the City may deem necessary or desirable, provided that, in the opinion of Bond -18- Counsel, such modifications or amendments shall not materially adversely affect the interests of the Owners of the Certificates; (iii) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest represented by any of the Certificates under the Tax Code, in the opinion of Bond Counsel; (iv) to amend the description of the Project to reflect accurately the property originally intended to be included therein, or in connection with any substitution pursuant to Section 3.3. including, without limiting the generality of the foregoing, to amend the description of the Project to reflect accurately the final description thereof, or (v) to obligate the City to pay additional amounts of rental hereunder for the use and occupancy of the Project, but only if such additional amounts of rental shall be pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which shall be applied to finance the acquisition, construction, improvement or equipping of any additions to or modifications of the Project or any portion thereof. -19- ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.1. Events of Default Defined. Any one or more of the following events shall constitute an Event of Default hereunder: (a) Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein, and the continuation of such failure for a period of three (3) days. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clause (a), for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 60-day period, such failure shall not constitute an Event of Default if the City shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time. (c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift 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 acts which may hereafter be enacted. SECTION 9.2. Remedies on Default. Upon the occurrence of an Event of Default, the Corporation may exercise any and all remedies available or granted to it pursuant to law or hereunder, including the right to exercise any and all rights of entry upon or repossession of the Project, and also, at its option, with or without such entry, to terminate this Lease; provided, however, that no termination shall be effected either by operation of law or acts of the parties hereto except upon express written notice from the Corporation to the City terminating this Lease, as provided below. Upon the occurrence of an Event of Default and notwithstanding any entry by the Corporation, the Corporation may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Corporation may have): (a) Maintain this Lease in frill force and effect and recover rent and other monetary charges as they become due without terminating the City's right to possession of the Project, regardless of whether or not the City has abandoned the Project. In the event the Corporation elects not to terminate this Lease, it shall have the right and the City hereby irrevocably appoints the Corporation as its agent and attorney-in-fact for such purpose to -20- attempt to relet the Project at such rent, upon such conditions and for such term, so long as the tax-exempt status of the interest components of Lease Payments is preserved, and to do all other acts to maintain or preserve the Project, including the removal of persons or property therefrom or taking possession thereof, as the Corporation deems desirable or necessary, and the City hereby waives any and all claims for any damages that may result to the Project thereby; provided, however, that no such actions shall be deemed to terminate this Lease and the City shall continue to remain liable for any deficiency that may arise out of such reletting, payable at the same time and manner as provided for Lease Payments. (b) Terminate the City's right to possession of the Project by giving a written notice of termination to the City. On the date specified in such notice (which shall be not less than three (3) days after the giving of such notice) the City's right to possession under this Lease shall terminate and the City shall surrender possession of the Project to the Corporation, unless on or before such date all arrears of rental and all other sums payable by the City hereunder, and all costs and expenses incurred by or on behalf of the Corporation hereunder, including attorneys' fees incurred in connection with such defaults, shall have been paid by the City and all other defaults or breaches hereunder by the City at the time existing shall have been fully remedied to the satisfaction of the Corporation. 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 which would have been earned after termination until the time of award exceeds the amount of such rental loss that the City proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rental for the balance of the term hereof after the time of award exceeds the amount of such rental loss that the City proves could be reasonably avoided; and (iv) any other amount necessary to compensate the Corporation for all the detriment proximately caused by the City's failure to perform its obligations hereunder 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 clause (i) and (ii) above is computed by allowing interest at the rate of twelve percent (12%) per annum). The worth at the time of award of the amount referred to in clause (iii) above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (M. SECTION 9.3. No Remedy Exclusive. No remedy herein conferred 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 the occurrence of any Event of 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 IX it shall not -21- be necessary to give any notice, other than such notice as may be required in this Article IX or by law. SECTION 9.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to this Lease should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. SECTION 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. SECTION 9.6. Application of Proceeds. All proceeds received from the re- lease of the Project under this Article IX, after payment therefrom of all expenses incurred in the collection thereof, and all other amounts derived by the Corporation or the Trustee as a result of the occurrence of an Event of Default, shall be transferred to the Trustee promptly upon receipt thereof and shall be deposited by the Trustee in the Lease Payment Fund to be applied to the Lease Payments in order of Lease Payment Date. SECTION 9.7. Trustee and Certificate Owners to Exercise Rights. Such rights and remedies as are given to the Corporation under this Article IX have been assigned by the Corporation to the Trustee under the Assignment Agreement, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the Certificates as provided in the Trust Agreement. -22- ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 10.1. Security Deposit. Notwithstanding any other provision of this Lease, the City may on any date secure the payment of the Lease Payments in whole or in part by depositing with the Trustee an amount of cash which, together with amounts on deposit in the Lease Payment Fund, the Insurance and Condemnation Fund and the Reserve Fund, is either (a) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit B, or (b) invested in whole or in part in Federal Securities in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due pursuant to Section 4.4(a) or when due on any optional prepayment date pursuant to Section 10.2, as the City shall instruct at the time of said deposit. In the event of a security deposit pursuant to this Section with respect to all unpaid Lease Payments, and notwithstanding the provisions of Section 4.2, (a) the Term of this Lease shall continue, (b) all obligations of the City under this Lease, and all security provided by this Lease for said obligations, shall thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made all of the Lease Payments from such security deposit, and (c) title to the Project shall vest in the City on the date of said deposit automatically and without further action by the City or the Corporation. Said security 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. SECTION 10.2. Optional Prepayment. The City may exercise its option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, on any date on or after August 1, 1999, by paying a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with the interest component of the Lease Payment required to be paid on such date and together with a prepayment premium equal to the aggregate premium required to be paid upon the corresponding prepayment of the Certificates pursuant to Section 3.01(a) of the Trust Agreement. Such prepayment price shall be deposited by the Trustee in the Lease Payment Fund to be applied to the prepayment of Certificates pursuant to Section 3.01(a) of the Trust Agreement. The City shall give the Trustee written notice of its intention to exercise its option not less than forty-five (45) days in advance of the prepayment date. SECTION 10.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall be obligated to prepay the principal components of the Lease Payments in whole or in part on any date, from and to the extent of any Net Proceeds of insurance award or eminent domain award with respect to the Project theretofore deposited in the Lease Payment Fund for such purpose pursuant to Article VI hereof and Article VI of the Trust Agreement. The City and the Corporation hereby agree that such Net Proceeds, to the extent remaining after payment of any delinquent Lease Payments, shall be credited towards the City's obligations under this Section 10.3. -23- SECTION 10.4. Credit for Amounts on Deposit. In the event of prepayment of the principal components of the Lease Payments in full under this Article X, such that the Trust Agreement shall be discharged by its terms as a result of such prepayment, at the written election of the City filed with the Trustee any or all amounts then on deposit in the Lease Payment Fund, the Program Fund or the Reserve Fund shall be credited towards the amounts then required to be so prepaid. -24- ARTICLE XI MISCELLANEOUS SECTION 11.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in registered or certified form with postage fully prepaid: If to the City: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: City Administrator If to the Corporation: City of Huntington Beach Civic Improvement Corporation 2000 Main Street Huntington Beach, California 92648 Attention: Executive Director If to the Trustee: State Street Bank and Trust Company of California, N.A. 725 South Figueroa Street, Suite 975 Los Angeles, California 90017 Attention: Corporate Trust Department The City, the Corporation and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 11.2. Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Corporation and the City and their respective successors and assigns. SECTION 11.3. Severability. In the event any provision of this Lease shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 11.4. 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 rettim to the Corporation, free and clear of any expenses, charges or set- offs whatsoever. SECTION 11.5. 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 hereby leased or intended so to be or for carrying out the expressed intention of this Lease. -25- SECTION 11.6. Execution in Counterparts. This Lease may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 11.7. Applicable Law. This Lease shall be governed by and construed in accordance with the laws of the State of California. SECTION 11.8. Corporation and City Representatives. Whenever under the provisions of this 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 a Corporation Representative and for the City by a City Representative, and any party hereto shall be authorized to rely upon any such approval or request. SECTION 11.09. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease. -26- IN WITNESS WHEREOF, the Corporation and the City have caused this Lease to be executed in their respective names by their duly authorized officers, all as of the date first above written. CITY OF HUNTINGTON BEACH, as lessee By City Administrator (SEAL) Attest: By: City Clerk CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, as lessor By IC6—�t Executive Director (SEAL) Attest: By Secretary —27— EXHIBIT A DESCRIPTION OF THE PROJECT LAND All that certain real property situated in the City of Huntington Beach, State of California. described as follows: THOSE PORTIONS OF BLOCKS 1902, 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF TRACT NO. 12 AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE ALLEYS IN SAID BLACKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989 OF SAID CITY COUNCIL, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60. 00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90. 00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 19 ' 06" EAST 358 .00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET; THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 20' 13" EAST 683. 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208 .00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLACK 2002 OF SAID MAP OF TRACT NO. 12 ; THENCE NORTH 89 DEG. 40' 01" WEST 245.00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89 DEG. 39 ' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. r A-1 EXHIBIT B SCHEDULE OF LEASE PAYMENTS Lease Principal Interest Lease Payment Date Component Component Payment January 25, 1990 -0- $563,294.47 $563,294.47 July 25, 1990 $ 135,000.00 517,311.25 652,311.25 January 25, 1991 -0- 513,328.75 513,328.75 July 25, 1991 180,000.00 513,328.75 693,328.75 January 25, 1992 -0- 507,928.75 507,928.75 July 25, 1992 190,000.00 507,928.75 697,928.75 January 25, 1993 -0- 502,133.75 502,133.75 July 25, 1993 205,000.00 502,133.75 707,133.75 January 25, 1994 -0- 495,778.75 495,778.75 July 25, 1994 215,000.00 495,778.75 710,778.75 January 25, 1995 -0- 489,006.25 489,006.25 July 25, 1995 230,000.00 489,006.25 719,006.25 January 25, 1996 -0- 481,646.25 481,646.25 July 25, 1996 245,000.00 481,646.25 726,646.25 January 25, 1997 -0- 473,683.75 473,683.75 July 25, 1997 260,000.00 73,683.75 733,683.75 January 25, 1998 -0- 465,168.75 465,168.75 .. July 25, 1998 275,000.00 465,168.75 740,168.75 January 25, 1999 -0- 456,093.75 456,093.75 July 25, 1999 295,000.00 456,093.75 751,093.75 January 25, 2000 -0- 446,285.00 446,285.00 July 25, 2000 315,000.00 446,285.00 761,285.00 January 25, 2001 -0- 435,732.50 435,732.50 July 25, 2001 335,000.00 435,732.50 770,732.50 January 25, 2002 -0- 424,426.25 424,426.25 July 25, 2002 360,000.00 424,426.25 784,426.25 January 25, 2003 -0- 412,186.25 412,186.25 July 25, 2003 385,000.00 412,186.25 797,186.25 January 25, 2004 -0- - 399,000.00 399,000.00 July 25, 2004 410,000.00 399,000.00 809,000.00 January 25, 2005 -0- 384,650.00 384,650.00 July 25, 2005 435,000.00 384,650.00 819,650.00 January 25, 2006 -0- 369,425.00 369,425.00 July 25, 2006 470,000.00 369,425.00 839,425.00 January 25, 2007 -0- 352,975.00 352,975.00 July 25, 2007 500,000.00 352,975.00 852,975.00 January 25, 2008 -0- 335,475.00 335,475.00 July 25, 2008 535,000.00 335,475.00 870,475.00 January 25, 2009 -0- 316,750.00 316,750.00 July 25, 2009 575,000.00 316,750.00 891,750.00 B-2 Lease Principal Interest Lease Payment Date Component Component Payment January 25, 2010 -0- $296,625.00 $ 296,625.00 July 25, 2010 615,000.00 296,625.00 911,625.00 January 25, 2011 -0- 275,100.00 275,100.00 July 25, 2011 655,000.00 275,100.00 930,100.00 January 25, 2012 -0- 252,175.00 252,175.00 July 25, 2012 700,000.00 252,175.00 952,175.00 January 25, 2013 -0- 227,675.00 227,675.00 July 25, 2013 750,000.00 227,675.00 977,675.00 January 25, 2014 -0- 201,425.00 201,425.00 July 25, 2014 805,000.00 201,425.00 1,006,425.00 January 25, 2015 -0- 173,250.00 173,250.00 July 25, 2015 860,000.00 173,250.00 1,033,250.00 January 25, 2016 -0- 143,150.00 143,150.00 July 25, 2016 920,000.00 143,150.00 1,063,150.00 January 25, 2017 -0- 110,950.00 110,950.00 July 25, 2017 985,000.00 110,950.00 1,095,950.00 January 25, 2018 -0- 76,475.00 76,475.00 July 25, 2018 1,055,000.00 76,475.00 1,131,475.00 January 25, 2019 -0- 39,550.00 39,550.00 July 25, 2019 1,130,000.00 39,550.00 1,169,550.00 B-3 12 18019-26 JHHW:CFA:dfs August 9. 1989 F8648 WHEN RECORDED, RETURN TO: 89--430638 Jones Hall Hill & White Four Embarcadero Center, Suite 1950 San Francisco, California 94111 Attention: Ms. Katherine M. Lee E-:x A r b (T- ASSIGNMENT AGREEMENT Relating to $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) THIS ASSIGNMENT AGREEMENT, made and entered into as of July 15, 1989, is by and between the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation") and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the "Trustee"); WITNESSETH. In the joint and mutual exercise of their powers, in consideration of the mutual .covenants herein contained, and for other valuable consideration, the parties hereto recite and agree as follows: Section 1. Recitals. (a) The Corporation and the City of Huntington Beach (the "City") have entered into an agreement entitled "Lease Agreement", dated as of July 15, 1989, (the "Lease Agreement") whereby the Corporation has agreed to lease to the City, and the City has agreed to lease from the Corporation, the Project (as said term is more particularly defined in the Lease Agreement) in the manner and on the terms set forth in the Lease Agreement, which terms include, without limitation, the obligation of the City to pay Lease Payments (as defined in the Lease Agreement) to the Corporation, in consideration of the City's use and enjoyment of the Project under the Lease Agreement. a (b) Under the Lease Agreement, the Corporation is required to cause to be deposited with the Trustee, certain sums of money to be credited, held and applied in accordance with the Lease Agreement and with a Trust Agreement dated as of July 15, 1989, (the "Trust Agreement") by and among the Corporation, the City and the Trustee. (c) Upon delivery of the Lease Agreement, the Corporation is required to deposit with the Trustee, in addition to other moneys to be deposited with the Trustee, moneys necessary to make certain payments to the City under the Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1986, by and between the City and the Corporation. For the purpose of obtaining such moneys, the Corporation is willing to convey to certain persons (the "Owners") direct, undivided fractional interests in the Lease Payments, such interests to be evidenced by the $15,025,000 aggregate principal amount of Certificates of Participation therein (1989 Public Parking Project Financing) (the 'Certificates"). In order to make such interests marketable on terms acceptable to the Corporation, the Corporation is willing to assign and transfer its rights under the Lease Agreement to the Trustee for the benefit of the Owners of the Certificates. The proceeds of sale of the Certificates are anticipated by the Corporation to be sufficient to permit the Corporation to make the deposits required tinder the Lease Agreement and the Trust Agreement and to permit the Corporation to make such payments to the City. (d) Each of the parties has authority to enter into this Assignment Agreement, and has taken all actions necessary to authorize its officers to execute it. Section 2. Assignment. The Corporation hereby transfers, assigns and sets over to the Trustee, for the benefit of the Owners of Certificates executed and delivered under the Trust Agreement, all of the Corporation's rights under the Lease Agreement (excepting only the Corporation's rights under Sections 5.8, 7.3 and 9.4 of the Lease Agreement), including without limitation (a) the right to receive and collect all of the Lease Payments from the City under the Lease Agreement, (b) the right to receive and collect any proceeds of any insurance maintained thereunder, of any condemnation award (or proceeds of sale under threat of condemnation) paid with respect to the Project, and (c) the right to exercise such rights and remedies conferred on the Corporation pursuant to the Lease Agreement as may be necessary or convenient (i) to enforce payment of the Lease Payments and any other amounts required to be deposited in the Lease Payment Fund or the Insurance and Condemnation Fund established under the Trust Agreement, or (ii) otherwise to protect the interests of the Owners in the event of a default by the City under the Lease Agreement. All rights assigned by the Corporation shall be administered by the Trustee in accordance with the provisions of the Trust Agreement and for the benefit of the Owners of Certificates. Section 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of securing the payments due pursuant to the Lease Agreement and Trust Agreement to, and the rights under the Lease Agreement and Trust Agreement of, the Owners of the Certificates delivered pursuant to the Trust Agreement, all subject to the provisions of the Tnist Agreement. The recitals contained herein are those of the Corporation and not of the Trustee, and the Trustee assumes no responsibility for the correctness thereof. Section 4. Conditions. This Assignment Agreement shall confer no rights or impose no duties upon the Trustee beyond those expressly provided in the Lease Agreement and Trust Agreement. -2- IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their officers thereunto duly authorized as of the day and year first written above. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION BY 4e� Executive Director Attest: By: _ zz Secretary STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By 43��7c uthorized Officer -3- STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On this loth day of August, in the year 1989, before me, Sally K. Danekas, a notary public, duly commissioned and sworn, personally appeared Paul E. Cook and Connie Brockway, known to me (or proved to me on the basis of satisfactory evidence) to be the persons who executed the within instrument as the Executive Director and the Secretary, respectively, of the City of Huntington Beach Civic Improvement Corporation, and acknowledged that such corporation executed it. (Notarial Seal) Igo (signature) OFFICIAL SEAL SALLY K. DANEKAS NOTARYFLeuc'��'NA Notary Public for the CITY AND COUNTY OF SAN FRANCISCO lie MY Canny Ex4WVA Aug II.1989 State of California My commission expires: August 22, 1989 -4- STATE OF CALIFORMA ) ss. COUNTY OF LOS ANGELES ) On this 8th day of August, in the year 1989, before me, Evelyn T. Furukawa , a notary public in and for said County and State, residing therein, duly commissioned and sworn, personally appeared Stephen xivero known to me (or proved to me on the basis of satisfactory evidence) to be person who executed the within instrument as an Authorized Officer of State Street Bank and Trust Company of California, N.A., and acknowledged that such bank executed it. (Notarial Seal) T-71CiAL SEAL (signature) EV;LYN T FURUKAWA _ :. . a Notary Public for the j Lc- ANGEL COUNT? State of California t,y Comm. eapir-s .!AR 26, 1993 _—_ _ __ My commission expires: March 26, 1993 -5- EXHIBIT A PROPERTY DESCRIPTION The land referred to herein is situated in the State of California, County of Orange and is described as follows: THOSE PORTIONS OF BLOCKS 1902 , 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF TRACT NO. 12 AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956, PAGE , 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989 OF SAID CITY COUNCIL, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60.00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF �- THE CENTERLINE OF LAKE AVENUE 90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 19' 06" EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET; THENCE SOUTH 89 DEG. 40 ' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 20' 13" EAST 683.13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 206.00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLACK 2002 OF SAID MAP OF TRACT NO. 22; THENCE NNORTH 99 DEG. 40' 010 WEST 245.00 FEET ALONG SAID LKST MENTIONED PARALLEL LIKE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89 DEG. 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING. A-1 13 NEW ISSUE Ratings: Moody's Aaa S&P AAA BIG Insured (See"Ratings" herein) In the opinion of Jones Hall Hill &White, A Professional Law Corporation, San Francisco, California, Special Counsel, subject, however to certain qualifications described herein, under existing law, the portion of lease payments paid by the City and designated as and comprising interest and received by the owners of the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, although it is included in adjusted net book income and current earnings in computing the alternative minimum tax imposed on certain corporations.In the further opinion of Special Counsel, such interest is exempt from California personal income taxes. See "TAX EXEMPTION"herein. $5,510,000 Certificates of Participation (Dispatch System, Telephone System and Computer Equipment Project) Evidencing the Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the Huntington Beach Public Financing Authority Dated: March 1, 1989 Due: February 1, as shown below The Certificates of Participation (Dispatch System, Telephone System and Computer Equipment) (the "Certif- icates") are being sold, executed, and delivered to provide for the acquisition of certain communication and related equipment for police and fire facilities, a telephone system and a mainframe computer (the "Equipment") by the Huntington Beach Public Financing Authority(the"Authority").The Equipment will be leased to the City of Huntington Beach(the "City") by the Authority. The Certificates are deliverable in fully registered form in the denomination of$5,000 or any integral multiple thereof. Principal of the Certificates will be payable at the principal corporate trust office of First Interstate Bank of California,the Trustee and registrar of the Certificates(the"Trustee"),in Los Angeles,California. Interest represented by the Certificates is payable semiannually on February 1 and August 1 of each year, commencing August 1, 1989. Payment of interest represented by the Certificates shall be made by check or draft mailed to the registered owners at their addresses appearing on the Certificate registration books as of the 15th day of the month preceding each Interest Payment Date. The Certificates are subject to mandatory redemption prior to maturity, as described herein. The City has entered into a Lease Agreement(the "Lease Agreement")with the Authority under which the City has covenanted that as long as the Equipment is available for the City's use,it will take such action as may be necessary to include and maintain all payments under the Lease (the"Lease Payments")for the Equipment in its annual budget, and to make the necessary appropriations therefor. See"SECURITY FOR THE CERTIFICATES". The obligation of the City to make Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation. Neither the Certificates nor the obligation of the City to make Lease Payments constitute an indebtedness of the State of California,the City of Huntington Beach or any other political subdivision of the State or the City, within the meaning of the Constitution of the State of California or otherwise. Payment of the principal and interest with respect to the Certificates when due will be guaranteed by a municipal bond insurance policy to be issued simultaneously with the delivery of the Certificates by BOND INVESTORS GLAR/'r,NTY INSURANCE COMPANY MATURITY SCHEDULE* Maturity Principal Interest Yield/ Maturity Principal Interest Yield/ February 1 Amount Rate Price February 1 Amount Rate Price 1992..................... $ 960,000 6.75% 100% 1995..................... $1,170,000 6.90% 100% 1993..................... 1,025,000 6.80 100 1996..................... 1,255,000 6.95 100 1994..................... 1,100,000 6.85 100 The Certificates are offered when,as and if sold,executed and delivered,subject to the approval as to their legality by Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, Special Counsel. It is anticipated that the Certificates will be available in definitive form for delivery in San Francisco,California,on or about April 5, 1989. Stone & Youngberg Dated: March 23, 1989 HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY CITY OF HUNTINGTON BEACH City Council and Members of the Authority Wes Bannister, Chairman of the Authority and Mayor of the City Tom Mays, Vice Chairman of the Authority and Mayor Pro Tem of the City Jim Silva Peter Green Don McAlister Grace Winchell John Erskine City and Agency Staff Paul E. Cook, City Administrator Robert Franz, Deputy City Administrator Connie Brockway, City Clerk Don Watson, Treasurer Gail Hutton, City Attorney Trustee First Interstate Bank of California Los Angeles Bond Counsel Jones Hall Hill & White, A Professional Law Corporation San Francisco, California - i - TABLE OF CONTENTS Page Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 TheEquipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Estimated Sources and Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Security for the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Certificate Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Certificate Owners ' Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 City Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Assignment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Approval of Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 General Information on the City Its Economy . . . . . . . . . . . . . . . . . . . . . . Appendix A Audited General Fund Financial Statements of the City . . . . . . . . . . . . Appendix B Specimen Municipal Bond Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . Appendix C Debt Service Reserve Endorsement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix D -ii- No dealer, broker, salesperson or other person has been authorized by the City or the Authority 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, the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall , under any circumstances, create any implication that there has been no change in the affairs of the Authority or the City since the date hereof. All summaries of the Lease Agreement, 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. OTHER THAN WITH RESPECT TO INFORMATION CONCERNING BIG CONTAINED UNDER THE CAPTION "CERTIFICATE INSURANCE" HEREIN, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEE SUPPLIED OR VERIFIED BY BIG, AND BIG MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (i) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (ii ) THE VALIDITY OF THE CERTIFICATES; OR (iii) THE TAX STATUS OF THE INTEREST ON THE CERTIFICATES. - iii - LOCATION MAP I r._-_•---•—•_•_--•-------------- � San Bernadine,County i Loa Angel"County j� 1 `•� _._._. J 1 Jr.. 1 � Amak" 1 '\ Bivonido County I ow(;z COTJny 1 HUNTINGTON BEACH t> . N*w"n Basub i• ----------------------- 1 San Diego County i r 1 i i i 1V SUMMARY STATEMENT THIS SUMMARY IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND THE OFFERING OF THE CERTIFICATES TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. Purpose: The Certificates are being sold to provide for the acquisition by the Authority of certain communication and related equipment for the police and fire facilities, a telephone system and a mainframe computer for the City of Huntington Beach. The Equipment will be leased by the Authority to the City. Security for the Certificates: Each Certificate represents an undivided fractional interest of the owner thereof in Lease Payments to be made by the City as the rental for the Equipment pursuant to a Lease Agreement with the Authority. The City is legally required under the Lease to make Lease Payments for any Equipment which has been purchased from any source of available funds in each year, subject to abatement in the event of damage or eminent domain. The annual Lease Payments are equal to the annual principal and interest due with respect to the Certificates. The City has covenanted in the Lease Agreement to take such action each year as may be necessary to include all Lease Payments in its annual budget and to make annual appropriations for all Lease Payments. Under California law, the obligation of the City to make Lease Payments (other than to the extent that funds are available for such purpose in accounts established from proceeds of the Certificates or to the extent that the City receives moneys from the proceeds of insurance or condemnation awards) may be abated in whole or in part if the Equipment is damaged or destroyed or taken in eminent domain proceedings . A line of credit has been established with Swiss Bank Corporation, New York Branch, for the benefit of the Certificate owners in the amount of maximum annual Lease Payments to be drawn on in the event Lease Payments are not paid by the City at the times and in the amounts set forth in the Lease Agreement. Pursuant to the Assignment Agreement, the Authority has assigned to the Trustee for the benefit of the Certificate owners its right to receive Lease Payments and its rights to enforce payment of Lease Payments upon default. Form of Certificates: The Certificates will be issued in fully registered form without coupons in the denomination of $5,000 each or any integral multiple thereof. Redemption: The Certificates are subject to mandatory redemption as a whole or in part, on any date, at par plus accrued interest without premium, in the event of damage to the Equipment or a taking by eminent domain if the proceeds of insurance or condemnation are not used to replace or restore the Equipment. (See "THE CERTIFICATES" herein.) City of Huntington Beach: The City of Huntington Beach is a coastal community of 27.7 square miles located approximately 35 miles south of Los Angeles in Orange County. The City is a Charter City with a Council-Administrator form of government and a current population of approximately 187,000. - v - THE OBLIGATION OF THE CITY TO MAKE PAYMENTS UNDER THE LEASE AGREEMENT IS PAYABLE AS SET FORTH ABOVE. NEITHER THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS NOR THE CERTIFICATES WILL CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF. THE LEASE AGREEMENT DOES NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS PLEDGED TO THE PAYMENT OF LEASE PAYMENTS OR TO THE PRINCIPAL AND INTEREST WITH RESPECT TO THE CERTIFICATES. NEITHER THE OFFICERS OR DIRECTORS OF THE LESSOR, CITY OFFICERS NOR ANY PERSONS EXECUTING THE CERTIFICATES OR THE LEASE AGREEMENT SHALL BE LIABLE PERSONALLY ON THE CERTIFICATES OR SUBJECT TO ANY PERSONAL LIABILITY BY REASON OF THE EXECUTION THEREOF. - vi - $5,510,000 CERTIFICATES OF PARTICIPATION (Dispatch System, Telephone System and Computer Equipment Project) Evidencing the Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the Huntington Beach Public Financing Authority INTRODUCTION The purpose of this Official Statement is to provide certain information concerning the sale and delivery of Certificates of Participation (Dispatch System, Telephone System and Computer Equipment Equipment) (the "Certificates") , in the aggregate principal amount of $5,510,000. The Certificates represent the undivided fractional interests of the owners thereof in certain Lease Payments to be made by the City of Huntington Beach, California (the "City") for the use and possession of a computer aided dispatch system for the City' s police and fire departments , a telephone system and a mainframe computer (the "Equipment") pursuant to a Lease Agreement, dated as of March 1 , 1989 (the "Lease Agreement" or "Lease") , between the City and the Huntington Beach Public Financing Authority (the "Authority") . The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of March 1 , 1989 (the "Trust Agreement") by and between the City, the Authority and First Interstate Bank of California, as trustee (the "Trustee") . The Certificates evidence the undivided fractional interests of the owners thereof in Lease Payments payable by the City, as lessee, to the Trustee, as assignee of the Authority, for the use and possession of the Equipment. Pursuant to an Assignment Agreement, dated as of March 1 , 1989 (the "Assignment Agreement") the Authority has assigned to the Trustee for the benefit of the owners of the Certificates all its rights to receive amounts payable by the City under the Lease ("Lease Payments") and its rights to enforce payment of all amounts due in the event of a default by the City. The net proceeds of the Certificates will be used by the Authority to purchase the Equipment. See the section entitled "THE EQUIPMENT" for information on the Equipment. The City is required under the Lease to make Lease Payments for any Equipment which has been purchased from any source of legally available funds in each year, subject to abatement under certain circumstances. The Lease Payments are designed to be sufficient in both time and amount to pay, when due, the principal and interest represented by the Certificates. The City has covenanted in the Lease to take such action as may be necessary to include the -1- Lease Payments in its annual budgets and has further covenanted to make the necessary annual appropriations for all such Lease Payments. The amount of Lease Payments which the City is obligated to pay under the Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction or eminent domain proceedings, there is interference with the City' s use and possession of the Equipment. Lease Payments will not be abated to the extent moneys sufficient to pay Lease Payments are received from the Reserve Fund, any account established from the proceeds of the Certificates or from the proceeds of rental interruption insurance or condemnation awards. Such adjustment or abatement will end with the substantial completion of repair, replacement or reconstruction of the Equipment. THE EQUIPMENT The net proceeds of the Certificates will be used to purchase a computer aided dispatch ("CAD") system for the City' s Police and Fire Departments , a telephone system and a mainframe computer. The estimated costs for this Equipment are as follows: CAD System - Hardware and Software $2,453,500 - Site Preparation 60,000 - Supplies 50,000 - Contract and Implementation 225,000 - Data Conversion 70,000 - Contingency (5% of Equipment) 122,700 Subtotal $2,981 ,200 Telephone System $ 900,000 Mainframe Computer $ 900,000 Total Equipment Costs $4,781 ,200 The City has entered into a contract with McDonnell Douglas Corporation through McDonnell Douglas Computer Systems (together referred to as "McDonnell Douglas") under which McDonnell Douglas will install and maintain the CAD system. The City began paying McDonnell Douglas for professional assistance related to the CAD system in December, 1988. Site preparation was completed in January, 1989 and Data Conversion in February, 1989. The CAD hardware and software will be purchased and installed over a nine month period which began in February, 1989. The CAD system should be completed and operators fully trained by the end of November, 1989. The City' s existing telephone system is approximately ten years old. The system is at capacity and is not meeting the needs of all City departments. The existing system will be replaced with a system capable of handling both voice and data communications . The new system will feature more efficient technology and greater capacity. The City expects that the new system will be fully installed and operable before the end of the 1989-90 fiscal year. -2- The City will also replace its mainframe computer with a more efficient model containing greater capacity. The City' s current mainframe computer is seven years old and has been expanded to its ultimate capability. Although there are no urgent deficiencies regarding current systems on the existing mainframe, there is a backlog of new enhanced applications that cannot be processed due to the capacity problems. In fact, a major upgrade of the City' s accounting and general ledger system has been programmed but cannot be installed due to capacity problems. The capacity problems have resulted from newer technologies and user demands for integrated and on-line capabilities. These increasing demands have been met in the past by upgrading the capacity of the existing mainframe system. As indicated, this option has been pursued to its limit. An upgrade is necessary to be able to use new, more powerful , integrated, user friendly fourth generation products. These products will be used not only in most new application development within the City by the Data Processing staff, but will also be available to all departments for ad hoc reporting and simple program generation. Table 1 below illustrates the projected purchase schedule for the Equipment. TABLE 1 CITY OF HUNTINGTON BEACH PROJECTED EQUIPMENT PURCHASES C.A.D. Total Cumulative Date System Telephone Computer Purchases Total Purchases 3/l/89 $ 596,771 $ 0 $ 0 $ 596,771 $ 596,771 4/l /89 1 ,424,316 0 0 1 ,424,316 2,021 ,087 5/l/89 120,001 0 0 120,001 2,141 ,088 6/1 /89 128,446 0 0 128,446 2,269,534 7/l /89 84,126 90,000 14,000 188,126 2,457,660 8/l /89 187,295 90,000 14,000 291 ,295 2,748,955 9/l /89 131 ,016 90,000 14,000 235,016 2,983,971 10/l /89 127,471 0 14,000 141 ,471 3,125,442 11 /1 /89 131 ,983 450,000 14,000 595,983 3,721 ,425 12/l /89 49,775 90,000 14,000 153,775 3,875,200 l /l /90 0 90,000 14,000 104,000 3,979,200 2/l/90 0 0 14,000 14,000 3,993,200 3/l /90 0 0 14,000 14,000 4,007,200 4/l /90 0 0 14,000 14,000 4,021 ,200 5/l /90 0 0 14,000 14,000 4,035,200 6/l /90 0 0 14,000 14,000 4,049,200 7/1/90 0 0 14,000 14,000 4,063,200 8/l/90 0 0 14,000 14,000 4,077,200 9/l /90 0 0 14,000 14,000 4,091 ,200 10/l/90 0 0 14,000 14,000 4,105,200 11/1/90 0 0 14,000 14,000 4,119,200 12/1/90 0 0 662,000 662,000 4,781 ,200 Totals $2,981 ,200 $900,000 $900,000 $4,781 ,200 -3- ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the sale of the Certificates are set forth below: SOURCES OF FUNDS Principal Amount of Certificates $5,510,000 Accrued Interest 35,681 TOTAL SOURCES $5,545,681 USES OF FUNDS Bond Insurance Premium $ 50,244 Lease Payment Fund (1 ) 570,901 Underwriter' s Discount 68,875 Acquisition Fund (2) 4,855,661 TOTAL USES $5,545,681 (1 ) Including accrued interest in the amount of $35,681 and capitalized interest in the amount equal to the sum of the first three debt service payments on the Certificates ($535,220) . (2) Includes costs associated with the issuance of the Certificates, including legal fees, Trustee' s fees and printing costs. THE CERTIFICATES The Certificates will be sold, executed and delivered in the aggregate principal amount of $5,510,000. Each Certificate shall be dated as of March 1 , 1989 and interest represented thereby shall be payable at the rates set forth on the cover page hereof from the Interest Payment Date (defined below) next preceding the date of execution thereof, unless: (i ) it is executed as of an Interest Payment Date, in which event interest represented thereby shall be payable from the date thereof; (ii ) it is executed before July 16, 1989, in which event interest represented thereby shall be payable from March 1 , 1989; or (III ) it is executed after a Record Date and before the following Interest Payment Date, in which event interest represented thereby shall be payable from such Interest Payment Date. The Interest Payment Dates are August 1 , 1989 and the first day of each February and August thereafter as long as any Certificates are outstanding. The Record Date is the 15th day of the month preceding each Interest Payment Date. The Certificates will mature on February 1 in each year of the designated years and in the principal amounts shown below: -4- MATURITY SCHEDULE Certificates Principal Certificates Principal Maturing February 1 Amount Maturing February 1 Amount 1992 $ 960,000 1995 $1 , 170,000 1993 1 ,025,000 1996 1 ,255,000 1994 1 ,100,000 The Certificates will be executed and delivered in fully registered form without coupons, in the denomination of $5,000 or any integral multiple thereof. Principal and premium, if any, payable with respect to the Certificates will be payable at the corporate trust office of the Trustee in Los Angeles, California. Payment of interest with respect to the Certificates shall be made by check or draft mailed to the registered owner as of the Record Date. Mandatory Redemption The Certificates are subject to mandatory redemption in whole or in part on any Interest Payment Date, at a redemption price equal to par plus accrued interest, without premium, upon a mandatory prepayment of Lease Payments made by the City under the following conditions: (i ) if the Equipment is damaged or destroyed, from insurance proceeds in excess of the amount (if any) which the City elects to use to repair the Equipment, or from all net insurance proceeds if the City elects not to repair the Equipment; or (ii ) from proceeds of condemnation awards with respect to the Equipment. In the event that less than all of the remaining Lease Payments are prepaid, the Trustee shall select Certificates for redemption among each maturity on a rho rata basis and from within each maturity by lot. Notice of Redemption When redemption is required, the Trustee shall give notice to the owners of the Certificates, at the expense of the City, of the redemption of the Certificates. Such notice shall specify: (a) that the whole or a designated portion thereof (in the case of redemption of a Certificate in part but not in whole) are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made. Such notice shall further state that on the specified payment date there shall become due and payable with respect to each Certificate to be redeemed, the principal thereof together with interest accrued to said payment date, and that from and after such payment date interest thereon shall cease to accrue and be payable. -5- Notice of redemption shall be mailed to the respective owners of any Certificates designated for redemption at their addresses appearing on the Certificate registration books, at least thirty (30) days but not more than sixty (60) days prior to the redemption date; provided that neither the failure to mail such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of Certificates. Lease Payments The Lease requires the City to make Lease Payments to the Authority fifteen days immediately preceding each Interest Payment Date ("Lease Payment Dates") , which payments have been assigned to the Trustee. The first three Lease Payments will be made with Certificate proceeds deposited in the Lease Payment Fund at the time of closing as capitalized interest. The Lease provides that the City shall not be obligated to make Lease Payments for a given item of Equipment for any period during which the Equipment is unusable by the City due to damage, destruction or eminent domain. During such a period, however, the Trustee is obligated to pay amounts relating to principal and interest on the certificates from the Lease Payment Fund, the Reserve Fund or the Insurance and Condemnation Fund. Lease Payments with respect to the portions of the Equipment which have not been damaged or condemned shall continue unabated. The City will obtain rental interruption insurance in an amount equal to not less than the maximum remaining scheduled Lease Payments in any future twenty-four month period to insure against an interruption in Lease Payments because of damage to the Equipment. See "LEASE AGREEMENT" herein. The Lease requires that Lease Payments be deposited in the Lease Payment Fund maintained by the Trustee. On each Interest Payment Date, the Trustee will withdraw from the Lease Payment Fund the aggregate amount of such Lease Payments and will apply such amounts to make payments with respect to the Certificates represented in Table 2 below. (Such amounts shall be modified by the Trustee to reflect a partial prepayment of Lease Payments under the Lease. ) TABLE 2 LEASE PAYMENTS ON THE CERTIFICATES For the Year Ending Total February 1 Principal Interest Payments 1990 $346,319 $ 346,319 1991 377,803 377,803 1992 $ 960,000 377,803 1 ,337,803 1993 1 ,025,000 313,003 1 ,338,003 1994 1 ,100,000 243,303 1 ,343,303 1995 1 ,170,000 167,953 1 ,337,953 1996 1 ,255,000 87,223 1 ,342,223 -6- Sources of Lease Payments Lease Payments made by the City to the Authority which are not payable from Certificate proceeds are payable from any revenues available to the City except certain special fund revenues which are legally restricted as to use. It is the intent of the City that the City' s primary source of funds for Lease Payments will be its General Fund. However, the City is obligated to make Lease Payments from any lawfully available funds. SECURITY FOR THE CERTIFICATES Each Certificate represents an undivided fractional interest in Lease Payments made by the City under the Lease. The Authority, pursuant to the Assignment Agreement, will assign all its right, title and interest in the Lease to the Trustee for the benefit of the owners of the Certificates, including its right to receive Lease Payments and insurance and condemnation proceeds thereunder and its rights to exercise all the rights and remedies conferred on the Authority under the Lease. The City is obligated to make Lease Payments from annual appropriations of all funds lawfully available therefor. Neither the full faith and credit nor the taxing power of the City, the State of California or any of their political subdivisions are pledged to make Lease Payments under the Lease. The Lease Payments are calculated to be sufficient to pay, when due, the principal and interest represented by the Certificates. The Lease provides that the City shall take action each fiscal year as may be necessary to include all Lease Payments in its annual budget and to make annual appropriations therefor. Under California law, even though the Lease becomes effective as of the date of the Certificates, the obligation of the City to make Lease Payments with regard to a particular item of Equipment (other than to the extent that funds to make Lease Payments are available in the Lease Payment Fund or the Reserve Fund) may be abated in whole or in part to the extent the City does not have use and possession of the Equipment due to damage, destruction or eminent domain. The City will not be obligated to make Lease Payments on the portion of the Equipment which it does not have use and possession of. However, the City' s obligation to make Lease Payments for other portions of the Equipment which it does have full use and possession of shall continue unabated. As provided in the Lease, the covenants of the City thereunder shall be deemed by the City to be and shall be ministerial duties imposed by law. It shall be the duty of each and every public official of the City to take such action and to 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. Lease Payments of advance rental have been capitalized from Certificate proceeds and deposited into the Lease Payment Fund in an amount sufficient to provide funds for the payment of the first three Lease Payments. The amount of Lease Payments of advance rental funded from Certificate proceeds is $535,220. -1- A line of credit has been established with Swiss Bank Corporation, New York Branch, for the benefit of the Certificate owners in the amount of maximum Lease Payments due in any fiscal year (the "Reserve Requirement") to serve as a reserve fund (the "Reserve Fund") to be drawn on in the event Lease Payments are insufficient to pay debt service on the Certificates. CERTIFICATE INSURANCE Set forth below is a brief summary of certain information concerning Bond Investors Guaranty Insurance Company ("BIG") and the terms of the municipal bond insurance policy (defined below as the "Policy") . Information with respect to BIG has been supplied to the City by BIG. The following discussion does not purport to be complete and is qualified in its entirety by reference to the Policy. BIG has made a commitment to issue a municipal bond insurance policy (the "Policy") relating to the Certificates , effective as of the date of issuance of the Certificates . By the terms of the Policy, BIG agrees to pay that portion of the principal and interest in respect of the Certificates which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the City. In respect to the principal amount of a Certificate, the term "Due for Payment" refers to the amount due on the stated maturity date and does not refer to any amount of principal which is due at an earlier date by reason of a call for redemption. In respect of the interest associated with a Certificate, the term "Due for Payment" refers only to the amount due on the stated interest payment date. "Nonpayment" in respect of a Certificate means the failure of the City to have provided sufficient funds to the paying agent for payment in full of all principal and interest Due for Payment in respect of such Certificate. The term "Nonpayment" shall also include any payment of principal or interest made to a Certificate Holder by or on behalf of the City which has been recovered from such Certificate Holder pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final , nonappealable order of a court having competent jurisdiction. In the event that interest or principal in respect of a Certificate is Due for Payment but is unpaid by reason of Nonpayment by the City thereof, BIG will make payments to its agent, Bankers Trust Company (the "Insurance Trustee") , in amounts equal to such unpaid amounts of principal and interest not later than one business day after BIG has been notified by the Certificate Holder or the paying agent that such Nonpayment has occurred (but not earlier than the date such payment is due) . The Insurance Trustee will disburse to the Certificate Holder the amount of principal and interest which is then Due for Payment but is unpaid upon receipt by the Insurance Trustee of evidence of the Certificate Holder' s right to receive payment of such principal and interest, including any appropriate instruments of assignment, whereupon all of the rights to payment of such principal or interest when Due for Payment shall vest in BIG. In the event that BIG shall make any payments of principal and interest in respect of any of the Certificates pursuant to the terms of the Policy, and the certificates are accelerated pursuant to the terms of the Trust Agreement -8- or pursuant to applicable law, BIG may, at any time and at its sole option, pay to any Certificate Holders all or a portion of amounts due on the Certificates prior to the stated maturity dates thereof. In addition, Bond Investors Guaranty has agreed to pay to Swiss Bank Corporation acting through its New York Branch or its successor, that portion of the Note which shall become due for payment pursuant to the terms of the Note and the Credit Agreement but shall be unpaid by the City in accordance with the terms of the Note and Credit Agreement. The Policy is unconditional and non-cancellable and will remain in force so long as the Certificates insured by such Policy remain outstanding. See "Appendix C - Specimen Municipal Bond Insurance Policy" . BIG, a stock insurance company incorporated in Illinois, is a wholly-owned subsidiary of Bond Investors Group, Inc. , a Delaware insurance holding company. Bond Investors Group, Inc. is owned by the following investors: American International Group, Inc. , Salomon Inc, Bankers Trust New York Corporation, Xerox Credit Corporation and Government Employees Insurance Company. The investors of Bond Investors Group, Inc. are not obligated to pay the debts of, or the claims against, BIG. As of December 31 , 1988, the total policyholders ' surplus of BIG was approximately $154,254,791 (audited) and total admitted assets were approximately $346,286,494 (unaudited) as reported to the Insurance Department of the State of Illinois. Standard & Poor' s Corporation has rated the claims-paying ability of BIG "AAA". Moody' s Investors Service rates all Certificates insured by BIG "Aaa" and short-term obligations insured by BIG "MIG 1 " . The address of BIG' s administrative offices and its telephone number are 70 Pine Street, 53rd Floor, New York, New York 10270 and (212) 412-7000. CERTIFICATE OWNERS' RISKS City Lease Payments The City' s Lease Payments are not secured by any pledge of taxes or other revenues of the City, but are payable from all funds lawfully available to the City. In the event the City' s revenue sources are less than its total obligations, the City could choose to fund other municipal services and payment obligations before making Lease Payments. The same result could occur if, because of state constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues . See "CITY FINANCIAL INFORMATION - Constitutional Limitations on Taxes" . However, the City has covenanted in the Lease to budget for, appropriate and make the Lease Payments, subject to abatement under certain circumstances, for the Equipment, which provides essential public services to the City. -9- 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 obligation 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 has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. Limited Recourse on Default If the City defaults on its obligations to make Lease Payments , the Trustee may have limited ability to re-let the Equipment so as to preserve the tax-exempt nature of the interest component of the Lease Payments and Certificates . In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease. The City will only be liable for Lease Payments on an annual basis , and the Trustee would be required to seek a separate judgment each year for that year' s defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Interruption of Use and Occupancy for Extended Period If because of damage to all or a portion of the Equipment, the City is unable to use and possess the Equipment, the City' s Lease Payments will be abated such that the resulting Lease Payments represent fair consideration for the remaining portions of the Equipment. If the Equipment cannot be repaired or replaced during the period of time the City' s rental interruption insurance will pay in lieu of Lease Payments plus the period funds are available from the Reserve Fund, there may be no source for payments represented by the Certificates. CITY FINANCIAL INFORMATION Each Certificate represents an undivided fractional interest in Lease Payments to be made by the City under the Lease Agreement with the Authority. The obligation of the City to make such Lease Payments is payable by the City from annual appropriations of the City from all funds lawfully available therefor. Organization The City has a seven-member city council elected at large, and the current members are: Wes Bannister, Mayor and Chairman of the Authority; Tom Mays, Mayor Pro Tem and Vice Chairman of the Authority; Jim Silva, Peter Green, Don -10- McAlister, Grace Winchell and John Erskine. The City Council appoints the City Administrator, who acts in the capacity of chief executive officer. This post is held by Paul E. Cook. Assessed Valuation and Property Taxes Table 2 sets forth an eight-year history of Huntington Beach' s Assessed Valuation. Over the eight years shown, the City' s Assessed Valuation has increased at an average annual rate of approximately 7.76 percent. The 1988-89 Assessed Valuation is 4.8 percent higher than that of 1987-88 even though the State Assessed Valuation used in 1988-89 was substantially less than that used in 1987-88 due to a change in State law (See footnote 2) . Secured Assessed Valuation increased 11 percent in 1988-89 over the previous fiscal year. Table 3 sets forth the City' s secured tax levy for each of the past six years ended June 30, 1988. The table also includes the dollar amount and percentage of delinquencies as of June 30 of each year. TABLE 3 CITY OF HUNTINGTON BEACH Assessed Valuation History 1981-82 -- 1988-89 0) Fiscal State Percent Year Secured Assessed Unsecured Total Increase 1981-82 $4,608,702,866 $322,527,240 $288,452,654 $5,219,682,760 -- 1982-83 5,179,181 ,975 330,030,190 374,691 ,841 5,883,904,006 12.7% 1983-84 5,559,791 ,250 362,185,700 370,949,364 6,292,926,314 7.0 1984-85 5,940,642,022 426,592,970 466,570,592 6,833,805,584 8.6 1985-86 6,519,922,590 450,742,080 441 ,125,438 7,411 ,790,108 8.5 1986-87 7,019,854,076 475,467,220 504,939,681 8,000,260,977 7.9 1987-88 7,457,614,000 487,793,000 436,502,000 8,381 ,909,000 4.8 1988-89(2) 8,288,586,074 3,062,550 490,187,309 8,781 ,835,933 4.8 (1 ) Includes homeowners' exemptions and state supplemental subventions . (2) State Assessed valuation in 1988-89 excludes all utilities except railroads. State law was changed to provide that tax revenues derived from all utility property assessed by the State except railroad property shall not be based on the valuation of these properties, but instead on revenue in the previous year. Assessed valuations are therefore not determined for such properties. Tax revenues derived from railroad property are based on the assessed valuation of such property, and this valuation is included. Source: California Municipal Statistics , Inc. -11- TABLE 4 CITY OF HUNTINGTON BEACH Tax Levies and Delinquencies, 1982-83 -- 1987-88 Property Tax Levies and Collections Fiscal Secured Total — Delinquency — Unsecured Total —Delinquencies— Year Total Levy Collections Amount Percent Total Levy Collections Amount Percent 1982-83 $11,405,210 $11,116,699 $288,511 2.53 $ 960,008 $ 908,666 $51,342 5.35 1983-84 11,402,791 11 ,664,690 430,471 3.78 982,118 942,305 25,543 2.60 1984-85 12,418,398 11,633,797 424,700 3.42 1,032,103 955,100 33,094 3.21 1985-86 13,607,853 12,780,632 452,047 3.32 1 ,130,254 1,059,541 39,631 3.51 1986-87 15,088,967 14,447,882 572,469 3.79 1,186,690 1,100,619 44,496 3.75 1987-88 16,055,000 15,419,000 580,000 3.61 1,250,000 1 ,180,000 46,000 3.68 Source: County of Orange Note: Delinquency does not necessarily equal the levy amounts minus the collections since there are always collections of amounts levied in prior years. 1987-88 rounded to nearest thousand. -12- Bonded Indebtedness Table 4 sets forth the City' s direct and overlapping bonded indebtedness as of February 1 , 1989. TABLE 5 CITY OF HUNTINGTON BEACH Bonded Indebtedness 1988-89 Assessed Valuation: $8,580,201 ,414 (after deducting $201 ,634,519 redevelopment tax allocation increment) DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1 ) Debt 2/l /89 Orange County 7.883% $ 138,740 Orange County Building Authorities 7.883 15,395,558 Orange County Flood Control District 7.885 604,385 Metropolitan Water District 1 .599 8,402,105 Municipal Water Dist. of Orange Co. Water Facilities Corp. 12.400 8,537,400 Orange County Sanitation Districts #1 , 2 & 3 Certificates of Participation 5.253 6,072,468 Orange County Sanitation District # 3 11 . 168 7,706 Orange County Sanitation District #11 99.943 162,907 Coast Community College District Authority 30. 138 6,217,469 Los Alamitos Unified School District 1 .698 12,056 Huntington Beach Union High School District 70. 196 1 ,312,665 Fountain Valley School District 30.642 1 ,401 ,871 Huntington Beach School District 96.760 1 ,015,980 Ocean View School District 93. 123 2,123,204 City of Huntington Beach 100. 2,615,000 City of Huntington Beach Building Authorities 100. 28,640,000 (2) City of Huntington Beach 1915 Act Bonds 100. 1 ,653,905 TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT $84,313,419 (3) Less: MWDOC Water Facilities Corp. (100% self-supporting) 8,537,400 Orange County Sanitation District #3 (100% self-supporting) 7,706 TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT $75,768,313 (1 ) Includes $5,510,000 certificates of participation to be sold. (2) Excludes 1915 Act bonds to be sold. (3) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 1988-89 Assessed Valuation: Direct Debt ($31 ,255,000) 0.36% Total Gross Debt 0.98% Total Net Debt 0.88% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District. . . . . . . . . . . . . . . .$4,237,350 Fountain Valley School District. . . . . . . . . . . .$1 ,506,054 Ocean View School District. . . . . . . . . . . . . . . . .$1 ,732,088 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/88: $30,901 ,907 Source: California Municipal Statistics, Inc. -13- Constitutional Limitations on Taxes On June 6, 1978, California voters approved Proposition 13, the Jarvis-Gann initiative, which added Article XIIIA to the California Constitution. The principal thrust of Article XIIIA is to limit the amount of ad valorem tax on real property to 1% of "full cash value" as determined by the County Assessor. Article XIIIA defines "full cash value" to mean "the County Assessor' s valuation of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment period." Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, and to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster. Additionally, Article XIIIA has been amended to provide that there would be no increase in the full cash value base in the event that property title is transferred from one member of the same immediate family to another member. Article XIIIA exempts from the l% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1 , 1978, and 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. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax laws resulting in increased tax revenues. In September 1978, the California Supreme Court upheld the general validity of Article XIIIA against a series of challenges which attacked the Jarvis-Gann initiative 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. On November 6, 1979, the California voters approved Proposition 4, the Gann initiative, which added Article XIIIB to the California Constitution. The principal effect of Article XIIIB is to limit the annual appropriations of the State and 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. The "base year" for establishing such appropriation limit is the 1978-79 fiscal year and the limit is to be adjusted annually to reflect change in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes , and benefit payments from retirement, unemployment insurance and disability insurance funds . Proceeds -14- of taxes include, but are not limited to, all tax revenues and the proceeds to an entity of government from (1 ) regulatory licenses, user charges and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation) and (2) the investment of tax revenues. Article XIIIB 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. While the tax rate is assumed to decline to one percent of taxable value and remain constant in subsequent years, current law permits taxing entities deriving revenues from the one percent rate to reduce their levies under certain circumstances. It is the apparent intent of the law to insulate the other taxing entities and redevelopment agencies from the affects of such reductions on their property tax revenues. On November 4, 1987, an initiative statute (known as Proposition 62) was approved by the voters of the State which (i ) requires that any tax for general government purposes imposed on local governmental entities such as the City be approved by resolution or ordinance adopted by a two-thirds vote of the government entity' s legislative body and by a majority vote of the electorate of the governmental entity, (ii ) requires that any special tax (defined as taxes levied for other than general government purpose) imposed by a local government entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii ) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by local government entities except as permitted by Article XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (vi ) requires that any tax imposed by a local governmental entity on or after August 1 , 1985, be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988. A recent decision of a State Court of Appeal (City of Westminster v. County of Orange) has declared that the provisions of Proposition 62 requiring majority vote approval of the electorate for general fund taxes are unconstitutional . A petition for review of the decision was filed with the State Supreme Court on October 21 , 1988. The petition was denied by the Court on December 15, 1988, making the Court of Appeal decision final . Financial Statements The City of Huntington Beach Comprehensive Annual Financial Reports for the fiscal years ending June 30, 1985, 1986, 1987 and 1988 are available upon request from the City Finance Director, 2000 Main Street, Huntington Beach, California. The City is audited annually by an independent auditor. Set forth in Appendix B are the General Fund Balance Sheets dated June 30, 1985, 1986, 1987 and 1988 and the General Fund Statements of Revenues, Expenditures and Changes in Fund Balances for the fiscal years ending June 30, 1985, 1986, 1987 and 1988. The City' s financial statements for the General Fund are prepared on the modified accrual basis of accounting. -15- LEASE AGREEMENT Lease of Project The Authority agrees to lease the Equipment to the City pursuant to the Lease Agreement. The term of the Lease Agreement begins on the date of recordation thereof and ends only after all of the Lease Payments have been made. Acquisition of the Equipment The Authority agrees to acquire, deliver and install the Equipment pursuant to the requirements of the City. The City, as agent of the Authority under a certain Agency Agreement entered into by and between the Authority and the City (the "Agency Agreement") , will arrange for the acquisition, delivery and installation of all items of the Equipment and the City shall enter into one or more contracts or purchase orders providing for the acquisition, delivery and installation of such Equipment, and the City will , in all respects in accordance with the Agency Agreement supervise and provide for, or cause to be supervised and provided for, as agent for the Authority, the complete acquisition, delivery and installation of such Equipment. The City has agreed pursuant to the Agency Agreement that the respective items of the Equipment will be acquired, delivered and installed on or before the respective final acquisition dates set forth in Table 1 herein. The City agrees that upon acquisition, delivery and installation of any item of the Equipment it will take possession of that item of the Equipment under the terms and provisions of the Lease. Upon completion of acquisition, delivery and installation of all of the items of Equipment satisfactory to the City, the City shall deliver to the Trustee the Certificate of Completion. If the Authority, for any reason whatsoever, cannot deliver possession of any item of the Equipment to the City on or before the expected acquisition date therefor specified in Table 1 herein, the Lease shall not be void or voidable, nor shall the Authority be liable to the City for any loss or damage resulting therefrom; but in such event the remaining Lease Payments for such item of Equipment shall be abated with respect to the period between such date and the time when the Authority is able to tender possession of such item of the Equipment to the City; provided, that in the event the Authority has not delivered all of the Project to the City by January 1 , 1991 , the City shall first (i ) use its best efforts to substitute, in accordance with the provisions of Section 3.4 of the Lease, items of equipment for the the items of Equipment not yet acquired; and second, if such substitution cannot be accomplished, (ii ) deposit (from funds other than amounts resulting from a drawn under the Credit Agreement) to the Lease Payment Fund an amount equal to the Lease Payment due on February 1 , 1991 and on each Interest Payment Date thereafter until all the Equipment is acquired or such substitution is accomplished. Notwithstanding the foregoing sentence, however, there shall be no abatement of Lease Payments to the extent that moneys on deposit in the Reserve Fund (or drawn under the Line of Credit) , the Lease Payment Fund or proceeds of rental interruption insurance, or moneys derived from any person -16- as a result of any defect or delay in the acquisition, delivery or installation of such item of the Equipment, are available to pay the amount which would otherwise be abated. Lease Payments; Abatement The City has agreed to pay the Lease Payments, as rental for the use and possession of the Equipment. Commencing July 15, 1989 and continuing each January 15 and July 15 thereafter until the Certificates have been redeemed in full , the City shall make the Lease Payments. The City has agreed to take such actions as may be necessary to include Lease Payments in its annual budgets and to appropriate the Lease Payments in each year during the term of the Lease Agreement, and to provide the Trustee with certifications that the Lease Payments have been included in the City' s budgets. In addition, the City has agreed to pay compensation due to the Trustee, and all costs and expenses of auditors, engineers and accountants, but excluding costs of issuance paid out of Certificate proceeds. The Lease Payments shall be abated during any period in which, due to damage, destruction or eminent domain there is substantial interference with the City' s use and possession of the Equipment. The amount of such abatement shall be in the proportion that the damaged or destroyed components of Equipment bears to all of the Equipment. Such abatement shall continue for a period commencing with such damage or destruction and ending with the substantial completion of repair or replacement of the damaged or destroyed Equipment. In the event of any such damage or destruction, this Lease shall continue in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction. Notwithstanding the foregoing sentence, however, there shall be no abatement of Lease Payments to the extent that moneys on deposit in or available through the Reserve Fund and the Lease Payment Fund, or moneys derived from the net proceeds of rental interruption insurance are available to pay the amount which would otherwise be abated. The City covenants to contest any eminent domain award which is insufficient to redeem at par the Certificates relating to such item of Equipment so condemned. Application of Net Proceeds from Insurance or Eminant Domain (a) The net proceeds of any insurance award resulting from any damage to or destruction of any item of the Equipment by fire or other casualty, and the net proceeds of any eminent domain proceeding resulting in the taking of any item of the Equipment, shall be deposited in the Insurance and Condemnation Fund by the Trustee promptly upon receipt thereof and, if a representative of the City notifies the Trustee in writing of the City' s determination that the replacement, repair, restoration, modification or improvement of such item of the Equipment is not economically feasible or in the best interest of the City, then such Net Proceeds shall be promptly transferred by the Trustee to the Lease Payment Fund and applied to the prepayment of Lease Payments. (b) Notwithstanding the foregoing, however, the City may exercise its option to replace, repair, restore, modify or improve any item of Equipment only if (i ) the net proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient therefor, -17- (ii ) in the event such damage or destruction results in an abatement of Lease Payments, a representative of the City certifies and covenants to the Authority that such replacement, repair, restoration, modification or improvement can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds will be available to pay in full all Lease Payments coming due during such period and (iii ) no diminution of Lease Payments shall result. (c) All net proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Lease Payment Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the Equipment by the city, upon receipt of a requisition acceptable to the Trustee signed by a representative of the City stating with respect to each payment to be made (i ) the requisition number, (ii ) the name and address of the person, firm or corporation to whom payment is due, (iii ) the amount to be paid and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal , and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. Any balance of the net proceeds deposited in the Insurance and Condemnation Fund remaining after such work has been completed shall be paid to the City. Title Throughout the term of the Lease, title to the Equipment, and to each and every portion thereof, shall remain vested in the Authority, subject to Permitted Encumbrances. Permitted Encumbrances are defined to include (i ) ad valorem taxes and assessments not then due and payable, or which the City may allow to remain unpaid pursuant to Section 5. 1 of the Lease Agreement; (ii ) the Lease Agreement and the Assignment Agreement; and (iii ) any right or claim of any mechanic, laborer, materialman, supplier, vendor not field or perfected in the manner prescribed by law, other than a lien arising through any of the Contractors as defined in the Lease Agreement. Maintenance, Utilities, Taxes and Modifications The City, at its own expense, has agreed to maintain or cause to be maintained the Equipment in good repair; the Authority has no responsibility for such repair. The City has the power to make additions, modifications and improvements to the Equipment which do not damage or reduce its value to a value substantially less than that which existed prior to such modification or improvement. Any such additions , modifications or improvements that constitute fixtures will automatically become subject to the Lease Agreement. The City must pay or cause to be paid all utility charges with respect to the Equipment, as well as any taxes and assessments, if any, which it is legally obligated to pay. Insurance The Lease Agreement requires the City to maintain or cause to be maintained the following insurance against risk of physical damage to the Equipment and other risks for the protection of the Certificate Owners, the Authority, the Trustee and BIG: -18- M Public Liability and Property Damage Insurance. Throughout the term of the Lease, a standard comprehensive general liability insurance policy or policies in protection of the City, the Authority and its members, officers, agents and employees, and the Trustee. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by the operation or ownership of the Equipment. Said policy or policies shall provide coverage in the minimum liability limits of $1 ,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in a single accident or event, subject to a deductible of not to exceed $200,000 (unless the City participates in a pooled self insurance program for liability insurance and has unencumbered funds on hand of at least $1 ,000,000, in which ase such deductible may be $1 ,000,000) , and in a minimum amount of $500,000 for damage to property (subject to a deductible clause of not to exceed $200,000) resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City, and may be maintained in the form of self-insurance by the City. The net proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the net proceeds of such insurance shall have been paid. (ii ) Fire and Extended Coverage Insurance. Throughout the term of the Lease, insurance against loss or damage to any item of the Equipment by fire or lightning, with extended coverage and vandalism and malicious mischief insurance, and, subject to the immediately following paragraph herein, earthquake insurance. Said extended coverage insurance shall , as nearly as practicable, also cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to one hundred percent (100%) of the replacement cost of the Equipment, or the principal component of the Lease Payments then remaining unpaid, whichever is greater (except that such insurance may be subject to deductible clauses of not to exceed $250,000 for any one loss and earthquake insurance may be subject to a deductible clause of not to exceed ten percent (10%) of paid replacement cost for any one loss) . Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried or required to be carried by the City, and may be maintained in the form of self-insurance by the City. The net proceeds of such insurance shall be applied as provided in Section 6.2(a) of the Lease Agreement. Commercial earthquake insurance coverage shall be provided and maintained by the City if, in the opinion of an Independent Insurance Consultant, as defined in the Lease Agreement, such insurance is available from reputable insurance companies at a reasonable cost. In the event such earthquake insurance shall at any time during the term of the Lease Agreement not be commercially available under reasonable terms as -19- determined in the manner described above, the City shall not be obligated to maintain commercial earthquake insurance during the period of such unavailability; provided, however, that (a) in the event of an uninsured loss to the Equipment resulting from earthquake, the City shall apply for and use its best efforts to obtain financial assistance from the United States of America and from the State of California to be used for the repair, reconstruction or replacement of such Equipment and (b) the City shall maintain rental interruption insurance with respect to earthquake hazards in an amount equal to the maximum Lease Payments payable in any twenty-four month period. The City covenants that in the event of damage or destruction of the Equipment by earthquake not covered by a commercial insurance policy, the City will (i ) repair or replace the Equipment or (ii ) retire all of the principal components of Lease Payments then remaining unpaid from moneys, if any, legally available therefor. If commercial earthquake insurance is not available pursuant to the above section, the City shall establish and maintain a self-insurance fund separate and segregated from other accounts of the City equal to 17% of the principal amount of the Certificates then outstanding. (iii ) Rental Interruption or Use and Occupancy Insurance. Throughout the term of the Lease, from and after the closing date of the Certificates, rental interruption or use and occupancy insurance to insure against abatement of Lease Payments as a result of any of the hazards covered in Section (ii ) above, in an amount sufficient to pay the maximum Lease Payments of the City payable in any twenty-fourmonth period. The City may not provide self-insurance in lieu of the insurance requirement by this section. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City; provided that the Lease Payments are specifically covered by such insurance. The proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund, and shall be applied to the payment of Lease Payments in the order in which such Lease Payments become due and payable. Each policy of insurance obtained pursuant to or required by sections (ii ) and (iii ) hereof shall provide that all proceeds thereunder shall be payable to the Trustee for the benefit of the Certificate holders. The City shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease, and shall promptly furnish or cause to be furnished to the Trustee evidence of such payments. All such policies shall provide that the Trustee shall be given not less than thirty (30) days' notice of each expiration, any intended cancellation and any intended reduction of the coverage provider thereby. The Trustee shall not be responsible for the sufficiency of any insurance required in the Lease and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. The City shall cause to be delivered to the Trustee and BIG annually evidence satisfactory to the Trustee and to BIG that the insurance policies required by the Lease are in full force and effect. -20- (A) Subject to Section (B) below, any self-insurance maintained by the City pursuant to the foregoing sections, shall comply with the following terms: (i ) the self-insurance program shall be acceptable to BIG; (ii ) the self-insurance program shall be approved by an Independent Insurance Consultant; (iii ) the self-insurance program shall include an actuarially sound claims reserve fund out of which each self-insured claim shall be paid; the adequacy of each such fund shall be evaluated on an annual basis by the Independent Insurance Consultant; and any deficiencies in any self-insurance claims fund shall be remedied in accordance with the recommendation of the Independent Insurance Consultant; (iv) the self-insurance claims fund shall be held in a separate trust fund by an independent trustee who may be the Trustee serving as such under the Trust Agreement; and (v) in the event the self-insurance program shall be discontinued, the actuarial soundness of its claims reserve fund, as determined by the Independent Insurance Consultant, shall be maintained. (B) The City may self insure for liability insurance required by Section 5.3 of the Lease Agreement without complying with the requirements of subsection (A) above so long as the City maintains on hand in its general fund unencumbered funds at least equal to $1 ,000,000. Substitution or Acquisiton of Additional Equipment The City shall have the right in its sole discretion to amend the list of items of Equipment contained in Exhibit B of the Lease Agreement for the purpose of (a) removing any item of Equipment and substituting in its place another item or items of Equipment, or (b) adding additional items of Equipment without removing any item of Equipment therefrom. Any such amendment shall be subject to each of the following requirements: (x) in the event of a substitution of one or more items of Equipment for another, each new item of Equipment shall have a final acquisition date which is not later than the final acquisition date of the item of Equipment for which substituted, and shall have a useful life which is not shorter than the useful life of the item of Equipment for which substituted; (y) in the event of an addition (rather than a substitution) of an additional item of Equipment, each new item of Equipment shall have a final acquisition date not later than January 1 , 1991 , and shall have a useful life which expires on or after February 1 , 1997; and (z) no diminution in Lease Payments shall result. Assignment; Subleases The Authority has assigned certain of its rights under the Lease Agreement to the Trustee pursuant to the Assignment Agreement. The City may not assign any of its rights in the Lease Agreement, and may sublease all or a portion of -21- the Equipment only under the conditions contained in the Lease Agreement, including the condition that such sublease not cause the interest component of the Lease Payments to become subject to federal or State of California personal income taxes. Events of Default Each of the following constitutes an "event of default" under the Lease Agreement: M Failure by the City to make any Lease Payment or other payment required under the Lease Agreement at the time specified in the Lease Agreement. (ii ) Failure by the City or the Authority to comply with any covenant, condition or agreement in the Lease Agreement or the Trust Agreement, other than as described in M above, and the continuance of such failure or default for a period of 30 days after written notice thereof has been given to the City by the Trustee, the Authority or the Owners of not less than 5% in aggregate principal amount of outstanding Certificates, provided that if the failure stated in the notice cannot be corrected within such 30 day period, the Trustee, the Authority and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within such 30 day period and diligently pursued until the default is corrected; or (iii ) The filing by the City of a voluntary petition in bankruptcy instituted under the provisions of the Federal Bankruptcy Statute, as amended, or under any similar acts which may hereafter be enacted. Upon the occurrence and continuance of any event of default, the Authority may at its option elect to terminate the Lease Agreement or, with or without such termination, re-enter, take possession of the Equipment and re-let the Equipment. If the Authority does not elect to terminate the Lease Agreement, the City remains liable to pay all Lease Payments as they come due and liable for damages resulting from such event of default. If the Authority does elect to terminate the Lease Agreement, the City nevertheless agrees to pay the Authority all costs, losses or damages howsoever arising or occurring payable at the same time and in the same manner as Lease Payments. Any amounts collected by the Authority from the reletting of the Equipment shall be credited towards the City' s unpaid Lease Payments. Any net proceeds of re-leasing or other disposition of the Equipment are required to be deposited in the Lease Payment Fund and applied to Lease Payments in order of payment date. Pursuant to the Assignment Agreement, the Authority assigns all of its rights with respect to remedies in an event of default to the Trustee, so that all such remedies shall be exercised by the Trustee and the Certificate Owners as provided in the Trust Agreement. The Trustee has no right to accelerate Lease Payments and, due to the essential nature of the Equipment to the City' s governmental functions, it is uncertain whether a court would permit the exercise of the remedies of repossession or re-letting. -22- TRUST AGREEMENT Trustee The Trustee is appointed pursuant to the Trust Agreement and is authorized to prepare, execute and deliver the Certificates and to act as a depository of amounts held thereunder. The Trustee is required to make deposits into and withdrawals from funds, and invest amounts held under the Trust Agreement in accordance with the City' s instructions. Funds The Trust Agreement creates the Acquisition Fund, the Lease Payment Fund, the Reserve Fund and the Insurance and Condemnation Fund to be held in trust by the Trustee. Acquisition Fund. The balance of the proceeds of the sale of the Certificates after certain deposits are made to the Lease Payment Fund and the Reserve Fund will be deposited in the Acquisition Fund and disbursed by the Trustee, upon the written order of the Authority, to pay (i) the costs associated with the issuance of the Certificates, such as printing costs, initial fees of the Trustee, certificate insurance premiums, legal fees, costs of credit ratings and consulting fees and (ii ) the costs incurred in the acquisition of the Equipment directly or to reimburse the City for its costs incurred in the acquisition of the Equipment. Upon filing by or on behalf of the Authority with the Trustee of a Certificate of Completion pursuant to Section 3.2 of the Lease, stating that all acquisition costs have been paid, the Trustee shall transfer to the Lease Payment Fund the balance of moneys remaining in the Acquisition Fund, to be credited to the payment of Lease Payments. Lease Payment Fund. (i ) The Trustee shall establish 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 Authority 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, (ii ) There shall be deposited in the Lease Payment Fund as capitalized interest on the Closing Date the amount equal to the sum of the first three Lease Payments ($535,220) . All funds held in the Lease Payment Fund, including capitalized interest, shall only be invested in United States Obligations maturing not later than the date on which such funds are needed to make Lease Payments. (iii ) The City shall make Lease Payments to the Trustee fifteen days immediately preceding each date on which debt service is to be paid on the Certificates. The Trustee shall deposit such Lease Payments in the Lease Payment Fund. -23- If, on the fifteenth day (or if the fifteenth day is not a business day, then on the business day next preceding the fifteenth day) prior to an Interst Payment Date the Trustee determines that there will be insufficient funds in the funds and accounts available to pay the principal of or interest on the Certificates on such payment day, the Trustee shall immediately notify BIG. Such notice shall be by telephone, promptly confirmed in writing, and shall specify the amount of the anticipated deficiency, the Certificates to which such deficiency will be applicable and whether payment due on such Certificates will be deficient as to principal or interest, or both. All amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and interest with respect to the Certificates as the same shall become due and payable. Any surplus remaining in the Lease Payment Fund, after redemption and payment of all Certificates, including accrued interest (if any) and payment of any applicable fees to the Trustee, or provision for such redemption or payment having been made to the satisfaction of the Trustee, shall be withdrawn by the Trustee and remitted to the City. Reserve Fund. The Reserve Fund will initially consist of a line of credit (the "Line of Credit") issued by Swiss Bank Corporation, New York Branch, (the "Bank") for the benefit of Certificate owners in the amount of maximum annual Lease Payments. If fifteen days prior to an Interest Payment Date, there are insufficient moneys in the Lease Payment Fund to pay principal and interest then due, the Trustee shall draw on the Line of Credit in the amount necessary to make such payment. Such draw on the Line of Credit plus interest which accrues at the prime lending rate set by the Bank shall be evidenced by a certain note (the "Note") issued pursuant to the Credit Agreement (defined below) which shall be repaid within one year by the City with the first available Lease Payments. Draws on the Line of Credit and repayment of such draws shall be governed by a certain credit agreement entered into between the City, the Bank and BIG (the "Credit Agreement") . The Credit Agreement expires in April , 1995 unless renewed by the Bank. In the event the Credit Agreement is not renewed or is terminated as permitted under its terms , Lease Payments shall be increased on each Lease Payment Date after such non-renewal or termination by one-tenth of the Reserve Requirement until the value of investment securities within the Reserve Fund shall equal the Reserve Requirement. Such an increase in Lease Payments will also occur if the value investment securities in a funded Reserve Fund falls below the Reserve Requirement. Insurance and Condemnation Fund. Any net proceeds of insurance or condemnation awards with respect to the Equipment will be deposited in the Insurance and Condemnation Fund. Moneys on deposit in such Fund, in the event of an insurance award, shall be used, as directed by the City, either to replace or repair the Equipment or be transferred to the Lease Payment Fund and applied to the prepayment of Lease Payments. However, if Equipment is damaged or destroyed, such net proceeds may only be used to replace or repair the Equipment if they are sufficient, together with other available moneys, therefor and if in the event of an abatement of Lease Payments a representative of the City certifies that such repair or replacement can be -24- fully completed within a period not in excess of the period for which lease payments can be covered by rental interruption insurance. If such moneys are not so sufficient, they shall be deposited in the Lease Payment Fund and used to prepay Lease Payments. Any moneys in the Insurance and Condemnation Fund (including investment earnings) remaining after the repair or replacement of the Equipment is completed shall be paid to the City. Investment of Funds The Trustee is required to invest and reinvest all moneys held under the Trust Agreement, in Investments Securities as defined therein, consisting of: 1 . Direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to payments of principal and interest by the United States of America, including (in the case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States Obligations; and (c) the underlying United States obligations are held in safekeeping in a special account, segregated from the custodian' s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated. The obligations described in this paragraph are hereinafter called "United States Obligations". 2. Obligations issued or guaranteed by the following instrumentalities or agencies: (a) Federal Home Loan Banks; (b) Government National Mortgage Association; (c) Farmers Home Administration; (d) Federal Home Loan Mortgage Corporation; (e) Federal Housing Administration; and (f) Federal National Mortgage Association. 3. Direct and general long-term obligations of any state or commonwealth of the United States, to the payment of which the full faith and credit of the state or commonwealth is pledged and that are rated "Aaa" by Moody' s Investors Service (hereinafter referred to as "Moody' s") and "AAA" by Standard & Poor' s Corporation (hereinafter referred to as "S&P") . 4. Direct and general short-term obligations of any state or commonwealth, to the payment of which the full faith and credit of the state or commonwealth is pledged and that are rated in the highest rating category by Moody' s and S&P. -25- 5. Interest-bearing demand or time deposits issued by state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation (FDIC) or by savings and loan associations that are members of the Federal Savings and Loan Insurance Corporation (FSLIC) . These deposits must (a) be continuously and fully insured by FDIC or FSLIC and be with banks whose debt is rated at least P-1 or Aa by Moody' s and at least A-1+ or AA by S&P, or (b) be secured by United States Obligations at the levels described in the Trust Agreement and (if such deposits have maturities of not more than 365 days) be with banks the short-term debt of which is rated "A-1+" by S&P and P-1 by Moody' s or (if such deposits have maturities of more than 365 days) be with banks the long-term debt of which is rated "AA" or better by S&P and "Aa" or better by Moody' s. The United States Obligations must be held by the Trustee (who shall not be the provider of the collateral ) , or any Federal Reserve Bank or authorized depository, as custodian for the Trustee. The Trustee shall have a perfected first lien in the United States Obligations serving as collateral , such collateral shall be free from all third-party liens and claims, and failure to maintain the requisite collateral level after the restoration period described in the Trust Agreement shall entitle the Trustee to liquidate the collateral . 6. Repurchase agreements, the maturities of which are 30 days or less, entered into with financial institutions such as banks or trust companies organized under state law or national banking associations , insurance companies, or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Security Investors Protection Corporation or with a dealer or parent holding company, in each such case the debt of which is rated at least "A" or "A-l" by S&P and at least "A" or "P-1 " by Moody' s. Such repurchase agreements shall be in respect of United States Obligations and (except repurchase agreements with institutions whose debt or commercial paper is rated "AAA" or "A-1+" by S&P and "Aaa" or "P-1 " by Moody' s) shall be collateralized by United States Obligations the fair market value of which, together with the fair market value of the repurchase agreement securities , shall be maintained at the levels described in the Trust Agreement, and the provisions of the repurchase agreement shall meet the following additional criteria; 1 . the Trustee (who shall not be the provider of the collateral ) or a third party acting solely as agent for the Trustee has possession of the United States Obligations; 2. failure to maintain the requisite collateral levels will require the Trustee to liquidate the United States Obligations immediately; 3. the Trustee has a perfected, first priority security interest in the United States Obligations; and 4. the United States Obligations are fee and clear of third-party liens, and in the case of an SIPC broker, were not acquired pursuant to a repurchase or reverse repurchase agreement. -26- 7. Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody' s and meeting the following conditions: (a) the municipal obligations are (i) not to be redeemed prior to maturity or the Trustee has been given irrevocable instructions concerning their calling and redemption and (ii ) the issuer has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (b) the municipal obligations are secured by cash or United States Obligations that may be applied only to interest, principal , and premium payments of such municipal obligations; (c) the principal of and interest on the United States Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities on the municipal obligations; (d) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; and (e) the United States Obligations (plus any cash in the escrow fund) are not available to satisfy any other claims , including those against the trustee or escrow agent. 8. Prime commercial paper of a United States corporation, finance company or banking institutions if such commercial paper is rated at least "P-1 " by Moody' s and at least "A-1+" by S&P and if such commercial paper is stated to mature in not more than 270 days. 9. Shares of a diversified open-end management investment company (as defined in the Investment Company Act of 1940) or shares in a regulated investment company (as defined in Section 851 (a) of the Internal Revenue Code of 1986, as amended) that is a money market fund that has been rated in the highest rating category by S&P. 10. State pooled investment funds approved by BIG and invested in any one or more of the investments described in paragraphs 1 through 9 of this definition; provided that any share or unit participation in such funds hall be held directly by, or registered in the name of, the Trustee. Events of Default. Upon the occurrence of an event of default by the City under the Lease Agreement, the Trustee may, and upon request of the owners of at least 5% in outstanding principal amount of the Certificates, will exercise any and all remedies available at law or pursuant to the Lease Agreement. The Owner of any Certificate then outstanding may institute any suit, action, or other proceeding in equity or at law for the protection or enforcement of any right under the Lease Agreement or Trust Agreement if and only if (a) such Owner has previously given the Trustee written notice of such event of default, (b) over 50% in aggregate principal amount of the outstanding Certificates have made written request of the Trustee to exercise such powers , (c) the Trustee shall have been offered reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Trustee shall not have complied with such request for 60 days following receipt of such written request and such tender of indemnity. -27- Amendment. The Trust Agreement or the Lease Agreement may be amended only by agreement among the parties thereto without the consent of the Owners of the Certificates but only (i ) to cure, correct or supplement any ambiguous or defective provision, (ii ) in regard to questions arising thereunder, which shall not adversely affect the interest of the Trustee or such Owners, (iii ) to make such additions , deletions or modifications as may be necessary or appropriate to assure compliance with section 148(f) of the Internal Revenue Code of 1986 relating to required rebate of Excess Investment Earnings to the United States or otherwise as may be necessary to assure the exclusion from gross income for federal income tax purposes of the interest component of Lease Payments and the interest payable with respect to the Certificates. Any other amendment shall require the approval of the Owners of at least 60% in aggregate principal amount of the Certificates then outstanding, provided that no such amendment shall (a) extend the maturity or time of interest payment, or reduce the interest rate, amount of principal or premium payable on, any Certificate without such Owner' s consent; (b) reduce the percentage of Owners of Certificates required to consent to any amendment or modification; or (c) modify any of the Trustee' s rights or obligations without its consent. Notwithstanding any provision of the Trust Agreement to the contrary, BIG shall at all times be deemed the exlusive owner of all insured Certificates for the purposes of all approvals, consents, waivers, institution of any action, and the direction of all remedies. No event of default shall be waived without BIG' s consent. BIG shall be notified (i ) in advance of the execution of any supplemental trust agreement and of any amendment, change or modifications of the Lease in the event consent of Certificate holders is not required, (ii ) immediately upon the occurrence of any event of non-appropriations, any event of default under any of the financing documnents or of any event that with notice and/or with the lapse of time could become an event of default under any of the financing documents, and (iii ) of any redemption of Certificates at the same time that the owners of the Certificates to be redeemed are notified. In addition, all notices , reports, certificates and opinions to be delivered to or by the Trustee or to the Certificate holders or available at the request of the Certificate holders pursuant to the Trust Agreement and any supplemental trust agreement shall also be delivered to BIG. ASSIGNMENT AGREEMENT Pursuant to the Assignment Agreement, the Authority transfers, assigns and sets over to the Trustee, for the benefit of the Owners of the Certificates, all of the Authority' s rights under the Lease Agreement (subject to certain exceptions) , including the right of the Authority to receive and collect amounts payable under the Lease Agreement, its right to receive and collect proceeds of condemnation and insurance awards and the right to exercise rights and remedies of the Authority in the Lease Agreement to enforce payments of amounts thereunder. The Trustee accepts such assignment for the purpose of securing such payments due to and rights of the Owners of the Certificates, subject to the provisions of the Trust Agreement. -28- TAX EXEMPTION In the opinion of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, Special Counsel , subject, however, to the qualifications set forth below, under existing law, the interest payable with respect to the Certificates is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes) , such interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginning after December 31 , 1989). The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the issuance of the Certificates in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Certificates. Special Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Certificates. Prospective purchasers of the Certificates should be aware that (i ) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certificates or, in the case of a financial institution, that portion of the Certificate**owner' s interest expense allocated to interest payable with respect to the Certificates , (ii ) with respect to insurance companies subject to the tax imposed by section 831 of the Code, for taxable years beginning after December 31 , 1986, section 832(b)(5)(6)(i ) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Certificates , (iii ) for taxable years beginning after December 31 , 1986 and before January 1 , 1992, interest on the Certificates earned by some corporations could be subject to the environmental tax imposed by section 59A of the Code, (iv) for taxable years beginning after December 31 , 1986, interest on the Certificates earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (v) passive investment income, including interest on the Certificates, may be subject to federal income taxation under section 1375 of the Code for subchapter S corporations that have subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such subchapter S corporation is passive investment income and (vi ) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest payable with respect to the Certificates. In the further opinion of Special Counsel , such interest is exempt from California personal income taxes. -29- APPROVAL OF LEGAL PROCEEDINGS The legality of the sale, execution and delivery of the Certificates is subject to the approval of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, acting as Special Counsel . A copy of such legal opinion will be printed on each Certificate. ABSENCE OF LITIGATION At the time of delivery of and payment for the Certificates, the Authority and the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, against the Authority or the City affecting their existence or the titles of their respective offices or seeking to restrain or to enjoin the sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Lease, the Assignment Agreement, or any action of the Authority or City contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the Authority or City or their authority with respect to the Certificates or any action of the Authority or City contemplated by any of said documents, nor, to the knowledge of the Authority or City, is there any basis therefor. RATINGS Standard & Poor' s Corporation and Moody' s Investors Service, Inc. have assigned their municipal bond ratings of "AAA" and "Aaa" , respectively, to this issue of Certificates with the understanding that upon delivery of the Certificates, a policy insuring the payment when due on the principal of and interest on the Certificates will be issued by Bond Investors Guaranty. UNDERWRITING The Certificates will be purchased from the Trustee by Stone & Youngberg as underwriter (the "Underwriter") , under a Purchase Contract dated March 17, 1989 (the "Purchase Contract") , pursuant to which the Underwriter agrees to purchase all of the Certificates for an aggregate purchase price of $5,541 ,125 plus accrued interest from March 1 , 1989 to the delivery date thereof. The initial public offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing Certificates into investment trusts) , dealer banks, banks acting as agents and others at prices lower than said public offering prices. -30- MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the owners of the Certificates . The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF HUNTINGTON BEACH By /s/ Paul E. Cook Executive Director of the Authority and City Administrator -31- (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX A GENERAL INFORMATION ON THE CITY AND ITS ECONOMY The following information is presented as general background data. The Certificates are payable solely from Lease Payments made by the City of Huntington Beach and other sources as described herein. The taxing power of the City of Huntington Beach, the State of California or any political subdivision thereof is not pledged to the payment of the Certificates. See Section "The Certificates". Introduction The City of Huntington Beach is a coastal community of 27.7 square miles located approximately 35 miles south of Los Angeles in Orange County. Lying equidistant between Ventura and San Diego, the City has direct access to a market area of almost 12 million people. The City was incorporated on February 17, 1909. Huntington Beach is a charter city. Its first charter was adopted in May, 1937, and revised in November, 1982. The City is primarily a residential community with a balance of commercial and industrial activities. Some of the City' s diverse land uses include oil production, the Huntington Center Mall , a Southern California Edison electrical power plant, and a municipal pier. Huntington Beach has an extensive transportation network, excellent education and health services, and abundant recreation facilities -- notably, its public beaches. Huntington Beach enjoys a mild Mediterranian—like climate. Prevailing ocean breezes provide clean, clear air, warm sunny days and cool , crisp nights. Summer temperatures range from 75 to 80 degrees, while winter days are 60 to 70 degrees. Yearly rainfall is approximately 12 inches and humidity averages 65%. The City' s nine miles of public beaches attract many visitors throughout the year. Population For several years during the 1970' s, Huntington Beach was the fastest growing city in the United States. Results of the 1980 census indicated Huntington Beach' s population was 170,486, an increase of approximately 47 percent from the 1970 results. The City is currently the third largest in the County with a population of approximately 187,000. A-1 TABLE A-1 CITY OF HUNTINGTON BEACH AND ORANGE COUNTY Population Orange City Population Percent Square County as a Percent of Year Population Increase Miles Population County Population 1910 815 3.57 34,436 2.4% 1920 1 ,687 107.0% 3.57 61 ,375 2.7% 1930 3,690 119.0% 3.57 118,647 3. 1% 1940 3,738 1 .3% 3.57 130,760 2.9% 1950 5, 158 38.0% 4.72 216,224 2.4% 1960 11 ,492 122.8% 23.47 703,925 1 .6% 1970 116,400 912.9% 26.73 1 ,420,386 8.2% 1980 172,200 47.9% 27.20 1 ,931 ,570 8.9% 1981 173,393 0.7% 27.20 1 ,972,724 8.8% 1982 175,714 1 .3% 27.20 1 ,993,831 8.8% 1983 178,706 1 .7% 27.20 2,036,390 8.8% 1984 179,990 .7% 27.20 2,066,498 8.7% 1985 180,000 .0% 27.20 2,074,326 8.7% 1986 184,280 2.4% 27.20 2,145,709 8.6% 1987 187,000 1 .5% 27.20 2,195,652 8.5% 1988 187,000 0.4y. 27.20 2,238,700 8.4% Source: Department of Development Services, City of Huntington Beach Employment and Industry In the early 1900' s, oil production brought many new settlers into the area, giving it a sound economic base on which to grow. Today, oil continues to remain a significant industry in the City. More than 20,000 barrels a day are produced from wells in Huntington Beach. Oil interests continue to contribute more than $4 million to the City each year in taxes , permits and fees. Close to 400 companies moved into Huntington Beach over the last four years, bringing 3,000 new jobs and continuing the industrial growth that has attracted close to 900 firms to the City. These firms employ over 40,000 workers in the businesses ranging from the highly sophisticated space technology of McDonnell Douglas Astronautics Company to the diversity of craft industries making surf boards , pottery and stained glass. The two areas zoned for industrial development are the Northwestern Industrial Complex and the Gothard Street Industrial Corridor. Predominant uses of the Northwestern Industrial Complex include light manufacturing, warehousing and some support commercial . This area' s principal products are space technology, computer hardware and software, metal fabrication, electronic components , medical supplies , precision instruments and oil field equipment. The Gothard Street Industrial Corridor contains numerous 10 to 20 acre industrial parks and hosts a wide variety of light manufacturing, warehousing and research development firms. A-2 The City of Huntington Beach is part of the Orange County Metropolitan Statistical Area. Set forth below are two tables presenting certain information relating to employment and unemployment in that Area. TABLE A-2 WAGE AND SALARY EMPLOYMENT Orange County Metropolitan Statistical Area 1986-1989 Annual Averages ACTUAL FORECAST 1986 1987 1988 1989 TOTAL, ALL INDUSTRIES 1 ,048,800 1 ,094,700 1 ,134,900 1 ,123,800 Agriculture 8,600 9,000 9,800 9,500 TOTAL NONAGRICULTURE 1 ,040,200 1 ,085,100 1 ,125,000 1 ,114,300 Mining 2,100 1 ,800 1 ,500 1 ,800 Construction 56,200 62,500 65,500 60,900 Manufacturing 241 ,700 248,300 253,900 248,000 Nondurable Goods 62,100 65,300 67,400 64,500 Durable Goods 179,600 183,000 186,500 183,500 Transportation, Public Utilities 35,900 34,500 35,600 35,900 Wholesale Trade 62,100 64,400 68,300 67,100 Retail Trade 197,000 206,200 215,900 213,700 Finance, Insurance, Real Estate 85,000 91 ,000 92,700 90,500 Services 250,400 262,600 272,300 276,100 Government 112,000 114,400 119,400 120,300 Federal 14,700 15,000 15,300 15,600 State and Local 97,300 99,500 104,100 104,700 Aerospace 94,800 96,000 97,700 94,600 Note: Detail may not add to totals due to independent rounding. Source: California Employment Development Department Civilian Labor Force, Employment, and Unemployment Orange County Metropolitan Statistical Area 1986-89 Annual Averages ACTUAL FORECAST 1986 1987 1988 1989 Civilian Labor Force 1 ,243,800 1 ,294,000 1 ,347,000 1 ,345,200 Employment 1 ,194,300 1 ,251 ,900 1 ,297,100 1 ,294,200 Unemployment 49,500 42,100 49,900 61 ,000 Unemployment Rate 4.0% 3.3% 3.7% 4.5% Source: California Employment Development Department A-3 TABLE A-3 CITY OF HUNTINGTON BEACH Largest Non—Government Employers 1988 Company Number Employed McDonnell Douglas 8,768 General Telephone 1 ,065 C&D Plastic 500 Cambro Manufacturing Company 400 Humana Hospital /Huntington Beach 306 Pacifica Hospital 290 Dickenson Pacific 100 Southwest Quilted 100 Source: Business License Division, City of Huntington Beach Commercial Activity The variety of commercial locations ranges from small neighborhood convenience centers to the community' s regional mall , Huntington Center, at Beach Boulevard and the San Diego Freeway and the newly constructed mixed use Charter Centre. Beach Boulevard offers six miles of commercial uses , including thirteen major automobile dealerships , numerous specialty centers and many restaurants. The City' s most unique shopping centers include Old World, Seacliff Village and Peter' s Landing. Old World features shops that specialize in imported goods, handcrafted items, unusual gifts and delicacies. The atmosphere is enhanced by cobblestone walkways, arcade rides and strolling musicians . Close to the center of town, Seacliff Village has created a Cape Cod atmosphere that has received architectural acclaim. Its sculptures , murals and ceramic tile walkways, combined with quality shops and restaurants, have created a special environment which has become a favorite among local residents . Peter' s Landing, on the water' s edge in Huntington Harbour, is modeled after the coastal community of Saint Tropez, France. This center features marina boat rides , a unique architectural environment and excellent restaurants . In addition to these specialty centers , more than 35 neighborhood shopping centers are located conveniently throughout the community. A-4 Table A-4 sets forth State of California statistics on commercial activity in the City for seven calendar years. TABLE A-4 CITY OF HUNTINGTON BEACH Total Taxable Transactions and Number of Sales Permits (in thousands of dollars) Retail Total Taxable Issued Sales Increase in Year Sales Transactions Permits Total Sales 1981 $ 743,217 $ 905,201 4,521 -- 1982 750,405 923,123 5,027 2.0% 1983 886,921 1 ,043,898 5,265 13.1 1984 1 ,013,546 1 ,212,802 5,537 16.2 1985 1 ,137,845 1 ,348,247 5,656 11 .2 1986 1 ,212,666 1 ,455,290 6,041 7.9 1987 1 ,277,401 1 ,544,775 6,263 6.1 Source: State Board of Equalization, Taxable Sales in California. TABLE A-5 CITY OF HUNTINGTON BEACH Building Permit Valuation Estimated Number Valuation of of New Fiscal Building Percent Construction Percent Year Permits Change (000' s) Change 1982-83 2,539 (21 .4) 52,458 (10.0) 1983-84 2,776 9.3 110,747 111 . 1 1984-85 3,163 13.9 142,336 28.5 1985-86 3,173 0.3 133,579 (6.2) 1986-87 4,098 29.2 92,230 (31 .0) 1987-88 4,666 13.9 177,297 92.2 Source: Community Development Department, City of Huntington Beach and The Findley Reports on California Financial Institutions. Transportation The community has excellent vehicle access to the surrounding region via Pacific Coast Highway (State Highway 1 ) , Beach Boulevard (State Highway 39) and the San Diego Freeway (Interstate 405) . Besides these primary routes , the City is also served by a grid system of major north-south and east-west arterial streets that allow easy access in all directions. A-5 Huntington Beach residents, businesspeople and visitors are just minutes away from both John Wayne and Long Beach Airports, Long Beach Harbor and Santa Ana' s Amtrack Station. Los Angeles International and Ontario International Airports are less than an hour' s drive away from Huntington Beach. Education and Health Care The Huntington Beach public school system provides instruction in basic skills, and advanced instruction in specialized areas at both the elementary and high school levels. Individual education is also emphasized. Two community colleges are located in Huntington Beach. Golden West and Coastline Colleges offer day and evening classes leading to degrees and certificates in all standard subjects. Golden West College has an enrollment approaching 50,000, and is also the home of KOCE, Orange County' s public broadcasting television station. Coastline College schedules its courses at various times during the day, in the evenings, and on weekends for the convenience of its students. The community is also close to a number of other colleges and universities in nearby cities. The University of California in Irvine and the California State Universities at Long Beach and Fullerton are all within one-half hour driving time. Local health care is provided by two full-service, acute-care hospitals and numerous clinics, health-maintenance organizations , convalescent hospitals and other medical facilities. Humana Hospital and Pacifica Community Hospital together provide over 250 beds and offer the latest in sophisticated diagnostic techniques , fully equipped emergency rooms and clinical laboratories, as well as special facilities for intensive care, coronary care, pediatrics, orthopedics and outpatient care. Humana Hospital serves as headquarters for City paramedic training and is the base hospital for paramedic calls. Pacifica Community is the center of an extensive medical-hospital complex that contains their renowned non-profit Cancer Detection Center which provides low-cost screening on an out-patient basis as a public service to the community. Huntington Beach has over 300 practicing doctors , dentists, optometrists, chiropractors, physical therapists and other medical professionals located conveniently throughout the City. Recreation Huntington Beach has the Pacific Ocean as its primary natural resource. Nine miles of public beaches and one of the best surfs in the world bring nearly 10 million visitors into the community each year. In addition to surfing, swimming and boating, the beach area has paved trails exclusively for bicyclists and joggers, volleyball courts and barbeques for cookouts. The City' s Municipal Pier draws over a million people a year for fishing, sight-seeing, or dining in one of the nearby restaurants . The City' s public beaches are not the only places for recreation in Huntington Beach. The community enjoys over 50 parks, each with a variety of recreational facilities . Central Park, the City' s largest inland recreation area, offers an equestrian center and miles of riding trails, lakes for A-6 fishing and boating, jogging and physical fitness courses, and a variety of well maintained ball fields, courts and playgrounds. Other recreational amenities within the City' s Public Park System include two golf courses, 72 tennis courts, five swimming pools and a boating marina. Recreation programs and other activities for children, adults and families are conducted in three dozen parks throughout the year. Softball , baseball , soccer, volleyball , football and other organized league sports are offered for children and adults at various times of the year. Community centers are maintained at many local parks where activities are organized and information is disseminated. They host a wide variety of recreational and educational classes and serve as meeting places for various community groups . Many other community facilities are located in or adjacent to the local parks, such as the Central Library and Cultural Resource Center within Central Park. Other major private or commercial recreational facilities in Huntington Beach include two country clubs, aerobic centers, equestrian centers, a bowling alley, movie theaters and a community playhouse. Nearby are many regional tourist attractions, including Disneyland, Knott' s Berry Farm, Anaheim Stadium, Los Alamitos Race Track, the Queen Mary, Lion Country Safari and others. A-7 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX B AUDITED GENERAL FUND FINANCIAL STATEMENTS THE CITY OF HUNTINGTON BEACH General Fund Balance Sheet 6/30/85 6/30/86 6/30/87 6/30/88* ASSETS: Cash and investments $11 ,667,648 $ 9,401 ,307 $10,884,333 $12,141 ,000 Taxes receivable 473,441 486,185 1 ,890,934 1 ,958,000 Accounts receivable 460,426 344,429 315,349 956,000 Interest receivable 73,280 51 ,763 -- -- Due from other funds 1 ,926,495 6,788,235 1 ,000,000 -- Due from other agencies 855,914 150,218 462,462 442,000 Inventory 148,906 -- 146,073 208,000 Deposits and other assets 209,937 179,200 -- 28,000 Advances to other funds -- -- 11 ,750,547 16,710,000 TOTAL ASSETS $15.816.047 $17.401 .337 $26,449.698 $32.443.000 LIABILITY AND FUND EQUITY LIABILITIES: Accounts payable $ 1 ,169,666 $ 1 ,180,524 $ 1 ,341 ,838 $ 1 ,241 ,000 Accrued Payroll (6/30/87 —88 Accrued Expenses) 1 ,600,646 1 ,933,167 2,212,343 3,527,000 Deposits 689,785 558,628 776,586 1 ,200,000 Deferred revenue 709,873 1 ,298,538 3,374,403 4,126,000 TOTAL LIABILITIES $ 4.169.970 $ 4.970.857 $ 7.705.170 $10.094.000 FUND EQUITY; Fund balances: Reserved $ 6,070,789 $ 8,832,663 $10,456,808 $15,984,000 Unreserved: Designated -- -- 1 ,563,034 4,919,000 Undersigned 5,575,288 3,597,817 6,724,686 1 ,446,000 TOTAL FUND EQUITY 11 ,646,077 12,4301480 18,744,528 22,349,000 TOTAL LIABILITIES AND FUND EQUITY $15.816.047 $17.401 .337 $26.449.698 132.443.000 * Rounded to nearest thousand. Source: Figures for all years from audited financial statements . B-1 General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Year Ended Year Ended Year Ended Year Ended 6/30/85 6/30/86 6/30/87 6/30/88* REVENUES: Property taxes $17,073,983 $18,456,192 $21 ,174,423 $21 ,827,000 Other taxes 25,923,113 27,622,057 28,698,414 30,021 ,000 Licenses and permits 3,591 ,493 3,042,450 3,308,990 3,276,000 Fines, forfeitures and penalties 2,093,975 1 ,973,670 2,095,714 2,335,000 From use of money and property 3,899,972 3,782,431 4,397,997 4,708,000 From other agencies 5,953,540 7,125,470 7,880,417 7,920,000 Charges for current services 2,202,185 2,525,401 2,799,219 3,208,000 Other 364,156 735,484 456,006 1 ,410,000 TOTAL REVENUES $61 ,102.417 $65.263.155 j70.811 .180 $74.705.000 EXPENDITURES: Current: City Counceil $ 128,635 $ 90,029 $ 82,121 $ 78,000 City Administrator 633,514 488,064 555,452 633,000 City Treasurer 267 ,882 286,648 291 ,848 288,000 City Attorney 806,146 644,685 563,804 376,000 City Clerk 194,834 163,608 152,622 128,000 Administrative services 2,558,796 2,600,737 2,680,065 2,856,000 Development services 1 ,759,542 1 ,773,596 1 ,849,015 2,015,000 Fire 9,469,458 10,236,204 11 ,186,607 11 ,840,000 Police 17,114,924 18,729,315 20,511 ,085 22,357,000 Community services 5,169,351 5,585,738 5,959,254 6,809,000 Public works 13,625,016 14,911 ,530 14,567,248 15,835,000 Non-departmental 4,867,215 6,795,596 7,708,794 7,040,000 Capital Outlay 3,098,315 2, 186,520 1 ,027,809 977,000 TOTAL EXPENDITURES $59,693,628 54.49 270 $67. 125.724 $71 ,232 ,000 EXCESS OF REVENUES OVER EXPENDITURES 1 ,408,789 770,885 3,685,456 3,473,000 OTHER FINANCING SOURCES (USES) : Operating transfers in $2,795,907 $1 ,221 ,368 $ 1 ,284,790 $ 1 ,280,000 Proceeds of long-term debt -- 216,100 -- -- Operating transfers out (1 ,423,950) (1 ,423,950) (3,017,633) (2,137,000) Loss on investments -- -- ( 470,222) ( 362,000) TOTAL OTHER FIANCING SOURCES (USES) $ 1 ,371 ,957 $ 13,518 ($2,203,065) ($1 ,219,000) EXCESS OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES 2,780,746 784,403 1 ,482,391 2,254,000 B-2 General Fund Statement of Revenues , Expenditures and Changes in Fund Balance (continued) Year Ended Year Ended Year Ended Year Ended 6/30/85 6/30/86 6/30/87 6/30/88* FUND BALANCE - BEGINNING OF THE YEAR 10,382,894 11 ,646,077 12,430,480 18,745,000 Prior period adjustments -- -- 1 ,098,900 -- Residual equity transfers in 682,437 -- 3,732,757 1 ,350,000 Residual equity transfer out (2,200,000) -- -- -- FUND BALANCE - END OF YEAR $11 .646.077 $12,430,480 $18.744.528 $22.349.000 *Rounded to nearest thousand. Source: Figures for all years from audited financial statements. i I i i B-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C BOND INVESTORS GUARANTY INSURANCE COMPANY 70 PINE STREET NEW YORK,NEW YORK 10270 MUNICIPAL BOND INSURANCE POLICY Issuer of Bonds: Policy Number: Description of Bonds: Premium: Bond Investors Guaranty Insurance Company("Bond Investors Guaranty"), a stock insurance company, in consideration of the payment of the premium and subject to the terms and conditions contained herein or addeAereto, hereby uncondi- tionaIIy and irrevocably agrees to pay to Bankers Trust Company, or its successor, as its agent(the"Insurance Trustee"), for the benefit of any Owner(as hereinafter defined)that portion of the principal of W-fin"'teiest on the above-described Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpa went byAe issuer(11 as hereinafter defined). Bond Investors Guaranty will make such payments to the Insur a Tr 'tee w`it�m on e,�ineslslba followin the dayon which Bond Investors Guaranty shall have received Notice of'IIonpaymen (a he inaft d red), �io+nd�ed, however, that Bond Investors Guaranty shall not be required tom uayrt�eint a Tier t9an th�yda�nwresuch principal of or in- terest on a Bond is Due for Payment. The Insu ee T tee 11 dis�urseo th Owner tmount of principal of and interest on the Bond which is then Due a bs b t;� ++aid reasari o,lV a ment b the Issuer but only upon Y P ,�� Y Y Y P receipt by the Insurance Trustee, ' rea naat f; or,Nto i f ev ce of the Owner's right to receive payment of the principal or interest th ue for Ym , udin� any test is of assignment, in form satisfactory to the In- surance Trustee, trap rin t BoN Invt�tors ara�ity�I of a wner's rights to payment of such principal or interest then Due for Payme t. o h d7ssbutaei�nent, ors Guaranty shall become the owner of the Bond, appurte- nant coupon, if any, r n p me e t of p� cipal r interest on such Bond and shall be fully subrogated to all of the Owner's rights thereu r, incl g t Own ' right to payment thereof. This Policy is non-canc lab for n reason. The premium on this Policy is not refundable for any reason, including the payment of the Bonds prio it maturity. This Policy does not insure against nonpayment of any redemption, acceleration or prepayment premium which may at any time be due(except as provided below)with respect to any Bond, nor against any risk other than Nonpayment. As used herein, the term"Owner"means, as to a particular Bond, the person other than the Issuer or any party whose agree- ment with the Issuer constitutes the underlying security for the Bonds, who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof."Due for Payment"means,when referring to the principal of a Bond, the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption(other than by mandatory sink- ing fund redemption), acceleration or other advancement of maturity and means,when referring to interest on a Bond, the stated date for payment of interest. "Nonpayment"in respect of a Bond means the failure of the Issuer to have provided suf- ficient funds to the paying agent for payment in full of all principal and interest Due for Payment on such Bond. The term "Nonpayment"shall also include any payment of principal or interest made to an Owner by or on behalf of the Issuer of such Bond which has been recovered from such Owner pursuant to the United State Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice"means telephonic or telegraphic notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an C-1 Page 1 of 2 Owner or a paying agent for the Bonds to Bond Investors Guaranty."Business Day"means any day other than a Saturday, Sunday or a day on which the Insurance Trustee is authorized by law to remain closed. In Witness Whereof, Bond Investors Guaranty has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective and binding upon Bond Investors Guaranty by virtue of the countersignature of its duly authorized representative the day of , 19 . BOND INVESTORS GUARANTY INSURANCE COMPANY ///P AN—NS 0�9 CORPORATE SEAL � 0 y i ILLINOIS ,� 1 \ :' \09 I � 1959 040 President S� ary V uthortzecfRepresentativ lso-11 Bankers Trust Comp nowlc es\ t it r eed`to pelf\,he duties of Insurance Trustee under this Policy. V �,,,� Authorized Officer Form No. BIG 31 (03/85) C-2 Page 2 of 2 APPENDIX D BOND INVESTORS GUARANTY INSURANCE COMPANY 70 PINE STREET NEW YORK,NEW YORK 10270 DEBT SERVICE RESERVE ENDORSEMENT Attached to and Part of Policy Number Issued by Bond Investors Guaranty Insurance Company. Bond Investors Guaranty Insurance Company, in consideration of the payment of the premium under the Policy and sub- ject to the terms and conditions contained herein, hereby unconditionally and irrevocably agrees to pay to:* °e or its successor (the "Obligee"), that portion of the note'(the "Note") issued pursuant to,the credit agreement, dated 19 , by and between the Issuer and the Obligee(the"Credit Agreement")which shall become due for payment pursuant to the terms of the Note and the Credit Agreement,but shall be unpaid by the Issuer in accordance with the terms of the Note and Credit Agreement. Bond Investors Guaranty will make such payments to the Obligee within fifteen days from the day on which Bond Investors Guaranty shall have received"notice from the Obligee that the Note, or any portion thereof, is due and unpaid. Such notice shall be given by telephone or telegraph, subsequently confirmed in a signed writing, or in writing by registered or certified mail. Bond Investors Guaranty will disburse to the Obligee the amount of the Note which is then due for payment and un- paid by the Issuer but only upon receipt by Bond Investors Guaranty, in form reasonably satisfactory to it, of evidence of the Obligee's right to receive payment of the Note, including any instruments of assignment, in form satisfactory to Bond In- vestors Guaranty, transferring toBond Investors Guaranty all of the Obligee's rights to payment of such Note. Upon such disbursement, Bond Investors Guaranty shall be fully subrogated to all of the Obligee's rights under the Credit Agreement and the Note, including the Obligee's right to payment thereof in accordance with the terms of the Note and the Credit Agreement. This Endorsement forms a part of the Policy to which it is attached, effective on the date hereof and subject to all other terms and conditions contained therein. In Witness Whereof, Bond Investors Guaranty Insurance Company has caused this Endorsement to be affixed with a fac- simile of its corporate seal and to be executed in its name by the facsimile signatures of its duly authorized officers to become effective and binding upon Bond Investors Guaranty Insurance Company by virtue of the countersignature of its duly author- ized representative the day of , 19 . ��,/„_.BOND INVESTORS GUARANTY INSURANCE COMPANY .. = 0GP \ Oi••CORPORATE SEAL o \ \ o 2 •, ILLINOIS 0 President Secretary Authorized Representative *Enter description of Obligee. Form No. BIG 105 (02/87) Pagel of 1 18019-26 JHHW:CFA:dfs FINAL F8647 TRUST AGREEMENT Dated as of July 15, 1989 by and among STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as trustee CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION and the CITY OF HUNTINGTON BEACH Relating to $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) TRUST AGREEMENT THIS AGREEMENT, dated as of July 15, 1989, is by and among STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking association organized and existing under the laws of the United States of America (the "Trustee"), the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, a nonprofit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation'), and the CITY OF HUNTINGTON BEACH, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California (the "City"); WITNESSETH. WHEREAS, the Corporation has been formed for the purpose of assisting the City in financing the acquisition, construction and equipping of property which is of benefit to the City; and WHEREAS, the Corporation has previously financed the acquisition of land and certain civic center and public safety improvements from the proceeds of the $20,000,000 aggregate principal amount of Certificates of Participation (Public Parking Project) dated as of July 15, 1986, and has leased such land and improvements to the City pursuant to the Lease Agreement dated as of July 15, 1986 (the "1986 Lease"); and WHEREAS, pursuant to Section 5.11 of the 1986 Lease, the City and the Corporation have previously removed certain land and improvements used for police and public safety purposes (the "Project") from the 1986 Lease, and in consideration of the retention by the Corporation of title to the Project, the Corporation has agreed to pay to the City the amount of$13,365,000 which the City intends to apply to pay the costs of various municipal improvements within the City; and WHEREAS, in order to provide funds for such purposes the Corporation proposes to assign and transfer to the Trustee certain of its rights under the Lease Agreement, and in consideration of such assignment and the execution of this Trust Agreement, the Trustee has agreed to execute and deliver Certificates of Participation (1989 Public Parking Project Financing) in the aggregate principal amount of $15,025,000, each evidencing a direct, undivided fractional interest in the Lease Payments to be made by the City under the Lease Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Trust Agreement, have the meanings herein specified. In addition, all terms defined in the Lease Agreement and not otherwise defined herein shall have the respective meanings specified in the Lease Agreement. "Assignment Agreement" means the Assignment Agreement, dated as of July 15, 1989, by and between the Corporation as assignor and the Trustee as assignee, as originally executed or as thereafter amended pursuant to any duly authorized and executed amendments thereto. "Bond Counsel" means Jones Hall Hill &White, A Professional Law Corporation, any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code. "Business Day" means a day of the week on which the Trustee is not required or authorized to remain closed and on which the New York Stock Exchange is open. "Certificate Proceeds", when used with reference to the Certificates, means the face amount of the Certificates, plus accrued interest and premium, if any, less original issue discount and less the proceeds thereof deposited in the Reserve Fund. "Certificates" means the $15,025,000 aggregate principal amount of Certificates of Participation (1989 Public Parking Project Financing), to be executed and delivered pursuant hereto. "City" means the City of Huntington Beach, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California. "City Representative" means the Mayor, City Administrator or Assistant City Administrator of the City, or any other person authorized by resolution of the City Council of the City to act on behalf of the City under or with respect to this Agreement. "Closing Date" means August 15, 1989, being the day when the Certificates, duly executed by the Trustee, are delivered to the Original Purchaser. "Corporation" means the City of Huntington Beach Civic Improvement Corporation, a nonprofit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California. "Corporation Representative" means the Chairman, Executive Director, Assistant Executive Director, Secretary or Treasurer of the Corporation, or any other person authorized by resolution of the Board of Directors of the Corporation to act on behalf of the Corporation under or with respect to this Agreement. -2- "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation relating to the execution and delivery of the Lease Agreement or the execution, sale and delivery of the Certificates, including but not limited to filing and recording costs, settlement costs, printing costs, reproduction and binding costs, initial fees and charges of the Trustee (which shall include legal fees and the first annual administration fee of the Trustee), financing discounts, legal fees and charges, insurance fees and charges, financial and other professional consultant fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. "Event of Default" means an event of default under the Lease Agreement, as defined in Section 9.1 thereof. "Excess Investment Earnings" means an amount equal to the sum of the following: (a) the excess of(i) the aggregate amount earned from the Closing Date on all Nonpurpose Investments in which Gross Proceeds are invested (other than amounts attributable to such excess), over (ii) the amount which would have been earned if the Yield on such Nonpurpose Investments (other than amounts attributable to such excess) had been equal to the Yield on the Lease Payments; plus (b) any income attributable to the excess described in the preceding clause (a). "Federal Securities" means any of the following which are noncallable and which at the time of investment are legal investments under the laws of the State of California for trust funds held by the Trustee: (a) direct general 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 of the United States of America); and (b) obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. "Fiscal Year" means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period by the City as its fiscal year pursuant to written notice filed with the Trustee. "Gross Proceeds" means the sum of the following amounts: (a) original proceeds, namely the proceeds remaining from the sale of the Certificates, including accrued interest, until said amounts are expended by payment to persons other than the City or by reimbursement for such payment made, prior to the Closing Date, in contemplation of the City's entering into the Lease Agreement as evidenced by the written records of the City, and excluding underwriter's discount and amounts used to pay Costs of Issuance, and excluding original proceeds which become transferred proceeds (determined in accordance with applicable Tax Regulations) of obligations issued to refund the Lease Agreement in whole or in part; -3- (b) investment proceeds, namely amounts received at any time from the investment of any proceeds described in the preceding clause (a), or from the investment of amounts described in this clause (b), in Nonpurpose Investments, increased by the amount of any profits and decreased (if necessary, below zero) by the amount of any losses on such investments, excluding such amounts which become transferred proceeds (determined in accordance with applicable Tax Regulations) of obligations issued to refund the Certificates in whole or in part; (c) sinking fund proceeds, namely amounts, other than amounts described in the preceding clauses (a) and (b), which are held in the Lease Payment Fund and any other fund or account to the extent that the City reasonably expects to use such other fund or account to pay principal or interest represented by the Certificates; (d) amounts in the Reserve Fund or in any other fiend established as a reasonably required reserve or for payment of principal or interest represented by the Certificates; (f) Investment Property pledged as security for payment of principal or interest represented by the Certificates; (g) amounts received with respect to loans made from proceeds described in the preceding clause (a), financing leases entered into for property acquired with such proceeds and other obligations acquired to carry out the governmental purposes of the Certificates; (h) any amounts, other than amounts described elsewhere in this definition, used to pay the principal or interest represented by the Certificates; and W amounts received as a result of the investment of amounts described in the preceding clauses (a) through (h). "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service", 30 Montgomery Street, loth Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10006; Moody's Investors Service "Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; 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 called bonds as the City may designate in a written request delivered to the Trustee. "Insurance and Condemnation Fund" means the fund by that name to be established and held by the Trustee pursuant to Section 6.01. "Interest Payment Date" means February 1, 1990, and the first day of each February and August thereafter so long as any Certificates are Outstanding. —4— "Investment Property" means any security (as such term is defined in Section 165(g)(2)(A) or (B) of the Tax Code), obligation, annuity or investment-type property, excluding, however, obligations (other than specified private activity bonds as defined in Section 57(a)(5)(c) of the Tax Code) the interest on which is excludable from gross income for federal income tax purposes under Section 103 of the Tax Code. "Lease Agreement" means the Lease Agreement, dated as of July 15, 1989, by and between the Corporation as lessor and the City as lessee, as originally executed or as thereafter amended pursuant to any duly authorized and executed amendments thereto. "Lease Payment Fund" means the fund by that name established and held by the Trustee pursuant to Section 5.02. "Lease Payments" means all payments required to be paid by the City pursuant to Section 4.4(a) of the Lease Agreement including any prepayment thereof pursuant to Article X of the Lease Agreement. "Minimum Rating" means a rating of A or better by Moody's. In the event the rating system of Moody's with respect to any particular Permitted Investment does not including a rating category of A, the term"A or better" as used in the preceding sentence shall mean the highest general rating category applicable to such Permitted Investment (determined without regard to any refinement or gradation of such rating category by a numerical modifier, a plus or a minus sign, or otherwise). "Moody's" means Moody's Investors Service, its successors and assigns. "Net Proceeds" means any insurance proceeds or eminent domain award (including any proceeds of sale to a governmental entity under threat of the exercise of eminent domain powers), paid with respect to the Project, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof. "Nonpurpose Investment" means any Investment Property which is acquired with the Gross Proceeds and is not acquired in order to carry out the governmental purposes of the Lease Agreement. "Original Purchaser" means Stone & Youngberg, as original purchaser of the Certificates. "Outstanding", when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 13.04) all Certificates theretofore executed and delivered by the Trustee under this Agreement except - (a) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) Certificates deemed to have been paid pursuant to Section 13.01; and -5- (c) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to Section 2.08. "Owner", when used with respect to a Certificate means the person in whose name the ownership of such Certificate shall be registered on the Registration Books. "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein: (a) Federal Securities; (b) any of the following obligations or indebtedness issued or guaranteed by any of the following federal agencies and entities: (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates of the Federal Home Loan Mortgage Corporation; (iii) mortgage-backed securities or senior debt obligations of the Federal National Mortgage Association; or (iv) senior debt obligations of the Student Loan Marketing Association. (c) interest-bearing demand or time deposits (including certificates of deposit) in federal or state chartered savings and loan associations or in national or State banks (including the Trustee) provided that either: (i) the obligations of such association or bank or the obligations of the holding company of such association or bank have a Minimum Rating; or (ii) such deposits are fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation; (d) obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations have a Minimum Rating; (e) commercial paper which has a Minimum Rating or which is backed by a letter of credit or line of credit which has a Minimum Rating; (f) money market funds the policy of which is to invest in Federal Securities; (g) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System and the obligations of which commercial bank or the obligations of the holding company of which have a Minimum Rating; (h) obligations the interest on which is excludable from gross income for federal income taxation purposes under Section 103 of the Tax Code, and which has a Minimum Rating; and -6- W investment agreements which are the obligations of, or which are secured or guaranteed by the obligations of, a financial institution whose long-term unsecured obligations have a Minimum Rating. "Private Business Use" means use directly or indirectly in a trade or business carried on by a natural person or in any activity carried on by a person other than a natural person, excluding, however, use by a governmental unit and use as a member of the general public. "Program Fund" means the fund by that name established and held by the Trustee pursuant to Section 4.02. "Purchase Price", for the purpose of computation of the Yield of the Lease Payments, has the same meaning as the term "issue price in Sections 1273(b) and 1274 of the Tax Code, and, in general, means the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of the Certificates are sold or, if the Certificates are privately placed, the price paid by the original purchaser of the Certificates or the acquisition cost of such original purchaser. The term "Purchase Price," for the purpose of computation of the Yield of Nonpurpose Investments, means the fair market value of the Nonpurpose Investments on the date of use of Gross Proceeds for acquisition thereof, or if later, on the date that Investment Property constituting a Nonpurpose Investment becomes a Nonpurpose Investment of the Certificates. "Rebate Account" means the account by that name established pursuant to Section 7.06(b). "Record Date" means the close of business on the fifteenth (15th) day of the month preceding each Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. "Registration Books" means the records maintained by the Trustee pursuant to Section 2.12 for registration of the ownership and transfer of ownership of the Certificates. "Reserve Fund" means the fund by that name established and held by the Trustee pursuant to Section 4.03. "Reserve Requirement" means, as of the date of any calculation, an amount equal to the lesser of(a) ten percent (10%) of the original aggregate principal amount of the Certificates, or (b) the maximum amount of Lease Payments (excluding Lease Payments with respect to which the City shall have posted a security deposit pursuant to Section 10.1 of the Lease Agreement) coming due in the current or any future Fiscal Year. "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 LaSalle Street, Chicago, Illinois 60605, Fax-(312) 663-2343; Philadelphia Depository Trust Company, -7- Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Dex-(215) 496-5058; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in a written request of the City delivered to the Trustee. "Tax Code" means the Internal Revenue Code of 1986. Any reference herein to a provision of the Tax Code shall include all applicable Tax Regulations promulgated with respect to such provision. "Tax Regulations" means temporary and permanent regulations promulgated under the Tax Code. "Term Certificates" means the Certificates maturing on August 1, 2019. "Term of the Lease Agreement" means the time during which the Lease Agreement is in effect, as provided in Section 4.2 of the Lease Agreement. "Trust Agreement" means this Trust Agreement, as originally executed or as thereafter amended pursuant to any amendments hereto permitted to be made hereunder. "Trust Office" means the corporate trust office of the Trustee at 725 South Figueroa Street, Los Angeles, California 90017, or at such other address or addresses designated by the Trustee in written notice filed with the City, the Corporation and the Owners. "Trustee" means State Street Bank and Trust Company of California, N.A., or any successor thereto acting as Trustee pursuant to this Trust Agreement. "Yield" means that yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the case of Nonpurpose Investments which require payments in a form not characterized as principal and interest) on a Nonpurpose Investment or on the Lease Payments, produces an amount equal to the Purchase Price of such Nonpurpose Investment or the Lease Payments, as the case may be, all computed as prescribed in the Tax Code. Section 1.02. Legal Authority. 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. -8- ARTICLE II THE CERTIFICATES OF PARTICIPATION Section 2.01. Authorization. The Trustee is hereby authorized and directed upon written request from the Corporation to prepare, execute and deliver, to the Original Purchaser, Certificates in the aggregate principal amount of Fifteen Million Twenty-Five Thousand Dollars ($15,025,000). The Certificates shall evidence direct, undivided fractional ownership interests of the Owners thereof in the Lease Payments. Section 2.02. Date. Each Certificate shall be dated as of July 15, 1989, and interest represented thereby shall be payable from the Interest Payment Date next preceding the date of execution thereof, unless: (a) it is executed on or before the first Record Date, in which event interest represented thereby shall be payable from July 15, 1989, or (b) it is executed after a Record Date and on or before the following Interest Payment Date, in which event interest represented thereby shall be payable from such Interest Payment Date; provided, however, that if, as of the date of execution of any Certificate, interest represented by any Certificate is in default, interest represented by such Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to such Certificate. Section 2.03. Terms of Certificates. Principal represented by the Certificates shall be payable on August 1 in each of the respective years and in the respective amounts, and interest represented thereby shall be computed at the respective rates, as follows: Maturity Date Principal Interest Maturity Date Principal Interest (August 1) Amount Rate (August 1) Amount Rate 1990 $135,000 5.90% 1998 $ 275,000 6.60% 1991 180,000 6.00 1999 295,000 6.65 1992 190,000 6.10 2000 315,000 6.70 1993 205,000 6.20 2001 330,000 6.75 1994 215,000 6.30 2002 360,000 6.80 1995 230,000 6.40 2003 385,000 6.85 1996 245,000 6.50 2019 11,400,000 7.00 1997 260,000 6.55 Section 2.04. Fully Registered Form; 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, except that no Certificate shall represent principal payable in more than one year. The Certificates shall be numbered from R-1 upwards. Interest represented by the Certificates shall be payable on each Interest Payment Date to and including the date of maturity or prepayment, whichever is earlier, as provided in Section 2.09. Said interest shall represent the portion of Lease Payments designated as interest and coming due on each of the respective Interest Payment Dates. -9- The share of the portion of Lease Payments designated as interest with respect to any Certificate shall be computed by multiplying the portion of Lease Payments designated as principal represented by such Certificate by the rate of interest represented by such Certificate (on the basis of a 360-day year of twelve 30-day months). Section 2.05. Form of Certificates. The Certificates shall be substantially in the form set forth in Exhibit A attached hereto and by this reference incorporated herein. Section 2.06. Execution. The Certificates shall be executed by and in the name of the Trustee by the manual signature of an authorized signatory of the Trustee. If any person whose signature appears on any Certificate ceases to be an authorized signatory before the date of delivery of said Certificate, such signature shall nevertheless be as effective as if such person had remained an authorized signatory until such date. Section 2.07. Transfer and Exchange. (a) Transfer of Certificates. The registration of any Certificate may, in accordance with its terms, be transferred upon the Registration Books 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 Trust Office of the Trustee, 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 registration of transfer, the Trustee shall execute and deliver a new`Certificate or Certificates representing the same maturity, interest rate and aggregate principal amount, in any authorized denominations. (b) Exchange of Certificates. Certificates may be exchanged at the Trust Office of the Trustee, for a like aggregate principal amount of Certificates representing other authorized denominations of the same interest rate and maturity. The City shall pay all costs of the Trustee incurred in connection with any such exchange, except that the Trustee may require the payment by the Certificate Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. (c) Limitations on Transfer or Exchange. The Trustee may refuse to transfer or exchange either (i) any Certificate during the fifteen-day period prior to the date established by the Trustee for the selection of Certificates for prepayment, or (ii) the portion of any Certificate which the Trustee has selected for prepayment pursuant to the provisions of Section 3.02. Section 2.08. Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate shall become mutilated, the Trustee, at the expense of the Owner of such Certificate, shall execute and deliver a new Certificate of like principal amount, interest rate and maturity in replacement for the Certificate so mutilated, btit only upon surrender to the Trustee of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it and destroyed by the Trustee, who shall thereupon deliver a certificate of destruction to the City. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft must be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and, if an indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of like principal amount, interest rate -10- and maturity and numbered as the Trustee shall determine in lieu of and in replacement for the Certificate so lost, destroyed or stolen. The Trustee may require payment of an appropriate fee for each replacement Certificate delivered under this Section 2.08 and of the expenses which may be incurred by the Trustee in carrying out the duties under this Section 2.08. Any Certificate issued under the provisions of this Section 2.08 in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally entitled to the benefits of this Agreement with all other Certificates secured by this Agreement. The Trustee shall not be required to treat both the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the principal amount of Certificates which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be treated as one and the same. Notwithstanding any other provision of this Section 2.08, in lieu of delivering a replacement for a Certificate which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Certificate upon receipt of indemnity satisfactory to the Trustee. Section 2.09. Payment. Payment of interest represented by any Certificate on any Interest Payment Date shall be made to the person appearing on the Registration Books as the Owner thereof as of the close of business on the Record Date immediately preceding such Interest Payment Date, such interest to be paid by check or draft mailed to such Owner, by first class mail postage prepaid, at his address as it appears on the Registration Books; provided, however, that at the written request of the Owner of Certificates in an aggregate principal amount of $1,000,000 or more filed with the Trustee as of any Record Date, interest represented by such Certificates shall be payable to such Owner by wire transfer of immediately available funds to such account in the United States as shall be specified in such written request. The principal and prepayment price represented by any Certificate at maturity or upon prior prepayment shall be payable in lawful money of the United States of America upon surrender of such Certificate at the Trust Office of the Trustee. Section 2.10. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Agreement to be signed or executed by Certificate Owners may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Owners in person or by their attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust company or other depository for such Certificates. Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be sufficient for any purpose of this Agreement (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company located within the United States of America, or of any notary public, or other officer authorized to take acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such instruments acknowledged before him the execution thereof. Where any such instrument is executed -11- 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 and the amount, the maturity and the numbers of such Certificates and the date of his holding the same shall be proved by the Registration Books. Nothing contained in this Section 2.10 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 suffered to be done by the Trustee pursuant to such request or consent. Section 2.11. Temporary Certificates. The Certificates may be issued in temporary form exchangeable for definitive Certificates when ready for delivery. Any temporary Certificates may be printed, lithographed or typewritten, shall be of Authorized Denominations, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Trust Agreement as may be appropriate. Every temporary Certificate shall be executed by the Trustee upon the same conditions and in substantially the same manner as the definitive Certificates. If the Trustee delivers temporary Certificates it will execute and deliver definitive Certificates as promptly thereafter as practicable, and thereupon the temporary Certificates shall be surrendered, for cancellation, in exchange therefor at the Trust Office of the Trustee who shall execute and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Trust Agreement as definitive Certificates executed and delivered hereunder. Section 2.12. Registration Books. The Trustee shall keep or cause to be kept sufficient records for the registration and registration of transfer of the Certificates, which shall at all reasonable times be open to inspection by the City and the Corporation during regular business hours; 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 the Registration Books, Certificates as hereinbefore provided. -12- ARTICLE III PREPAYMENT OF CERTIFICATES Section 3.01. Prepayment. (a) Optional Prepayment. The Certificates maturing on or before August 1, 1999, are not subject to optional prepayment prior to the respective stated maturities. The Certificates maturing on or after August 1, 2000, are subject to optional prepayment in whole, or in part among maturities on a pro rata basis and by lot within a maturity, on any date on or after August 1, 1999, from prepayments of the Lease Payments made at the option of the City pursuant to Section 10.2 of the Lease Agreement, at a prepayment price (expressed as a percentage of the principal amount to be prepaid), together with accrued interest represented thereby to the date fixed for prepayment, as follows: Prepayment Period Prepayment (Dates Inclusive) Price August 1, 1999 through July 31, 2000 102.0% August 1, 2000 through July 31, 2001 101.5 August 1, 2001 through July 31, 2002 101.0 August 1, 2002 through July 31, 2003 100.5 August 1, 2003 and thereafter 100.0 (b) Prepayment From Net Proceeds of Insurance or Condemnation. The Certificates are subject to mandatory prepayment on any date, in whole, or in part among maturities on a pro rata basis and by lot within a maturity, from the Net Proceeds of insurance or eminent domain proceedings credited towards the prepayment of the Lease Payments by the City pursuant to Section 10.3 of the Lease Agreement, at a prepayment price equal to 100% of the principal amount to be prepaid,together with accrued interest represented thereby to the date fixed for prepayment, without premium. (c) Sinking Fund Prepayment. The Term Certificates are also subject to mandatory sinking fund prepayment by lot on August 1 in each year beginning August 1, 2004, from the principal components of the Lease Payments required to be paid with respect to each of such dates, at a prepayment price equal to 100% of the principal amount to be prepaid, together with accrued interest represented thereby to the prepayment date, without premium, as follows: -13- Sinking Fund Prepayment Date Principal Amount (August 1) To Be Prepaid 2004 $ 410,000 2005 435,000 2006 470,000 2007 500,000 2008 535,000 2009 575,000 2010 615,000 2011 655,000 2012 700,000 2013 750,000 2014 805,000 2015 860,000 2016 920,000 2017 985,000 2018 1,055,000 2019 (Maturity) 1,130,000 Notwithstanding the foregoing provisions of this subsection (c), in the event that some but not all of the Term Certificates have been redeemed pursuant to subsections (a) or (b) above, the aggregate principal amount of Term Certificates to be redeemed under this subsection (c) in each future year shall be reduced on a pro rata basis in integral multiples of $5,000 as determined by the City (notice of which determination shall be given by the City to the Trustee). Section 3.02. Selection of Certificates for Prepayment. Whenever provision is made in this Agreement for the prepayment of Certificates and less than all Outstanding Certificates of any maturity are called for prepayment, the Trustee shall select Certificates of such maturity for prepayment by lot. For the purposes of such selection, Certificates shall be deemed to be composed of $5,000 portions, and any such portion may be separately prepaid. The Trustee shall promptly notify the City and the Corporation in writing of the Certificates or portions thereof so selected for prepayment. Section 3.03. Notice of Prepayment. When prepayment is authorized or required pursuant to Section 3.01, the Trustee shall give notice of the prepayment of the Certificates on behalf and. at the expense of the City. Such notice shall state the prepayment date and prepayment price and, if less than all of the then Outstanding Certificates are to be called for prepayment, shall designate the numbers of the Certificates to be prepaid by giving the individual number of each Certificate or by stating that all Certificates between two stated numbers, both inclusive, have been called for prepayment or by stating that all of the Certificates of one or more maturities have been called for prepayment, and shall require that such Certificates be then surrendered, at the option of the respective Owners thereof, at the Trust Office of the Trustee for prepayment at said prepayment price, giving notice also that further interest represented by the Certificates will not accrue after the prepayment date. Such notice shall further state that on the specified date there shall become due and payable, the principal and premium, if any, represented by each Certificate together with accrued interest -14- represented thereby to said date, and that from and after such date interest represented thereby shall cease to accrue and be payable. Notice of such prepayment shall be mailed by first class mail with postage prepaid, to any one or more of the Information Services and to the Securities Depositories, and to the Owners of Certificates designated for prepayment at their respective addresses appearing on the Registration Books, at least thirty (30) days but not more than sixty (60) days prior to the prepayment date, which notice shall, in addition to setting forth the above information, set forth, in the case of each Certificate called only in part, the portion of the principal represented thereby which is to be prepaid; provided, however, that neither failure to receive such notice so mailed nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the prepayment of such Certificates or the cessation of accrual of interest represented thereby from and after the prepayment date. Section 3.04. Partial Prepayment of Certificates. Upon surrender of any Certificate prepaid in part only, the Trustee shall execute, authenticate and deliver to the Owner thereof, at the expense of the City, a new Certificate or Certificates 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. Section 3.05. Effect of Notice of Prepayment. Moneys for the prepayment (including the interest to the applicable date of prepayment), of Certificates having been set aside in the Lease Payment Fund, the Certificates shall become due and payable on the date of such prepayment, and, upon presentation and surrender thereof at the Trust Office of the Trustee, said Certificates shall be paid at the unpaid principal amount (or ` applicable portion thereof) represented thereby 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 represented thereby to said date of prepayment, shall be held by the Trustee so as to be available therefor on such date of prepayment, then, from and after said date of prepayment, interest represented by the Certificates shall cease to accrue and become payable. All moneys held by 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, and shall be held by the Trustee in cash uninvested. All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of this Article III shall be cancelled upon surrender thereof and delivered to the City pursuant to Section 13.10. Section 3.06. Purchase of Certificates. In lieu of prepayment of Certificates as provided in this Article III, amounts held by the Trustee for such prepayment shall, at the written request of the City Representative, be applied by the Trustee to the purchase of Certificates at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the City may in its discretion direct, but not to exceed the prepayment price which would be payable if such Certificates were prepaid. The aggregate principal amount of Certificates of the same maturity purchased in lieu of prepayment pursuant to this Section 3.06 shall not exceed the aggregate -15- principal amount of Certificates of such maturity which would otherwise be subject to such prepayment. -16- ARTICLE IV DISPOSITION OF PROCEEDS; PROGRAM FUND AND RESERVE FUND Section 4.01. Application of Proceeds. The proceeds received by the Trustee from the sale of the Certificates on the Closing Date shall forthwith be set aside by the Trustee in the following respective funds and in the following order of priority: (a) The Trustee shall deposit the amount of$86,218.54 in the Lease Payment Fund, constituting accrued interest represented by the Certificates. (b) The Trustee shall deposit the amount of $1,215,605.72 in the Reserve Fund, constituting the initial amount of the Reserve Requirement. (c) The Trustee shall deposit the amount of $13,477,531.78 in the Program Fund. Section 4.02. Program Fund. The Trustee shall establish a special fund designated as the "Program Fund". The Trustee shall disburse moneys in the Program Fund upon receipt. of a requisition signed by the Corporation Representative, for the purpose of paying or reimbursing the payment of the amounts due and payable to the City under the Agreement Regarding Removal of Property, dated as of July 15, 1989, by and between the City and the Corporation, and for payment of the Costs of Issuance. Each such requisition shall: (a) identify the total amount of such costs to be paid pursuant to such requisition for payment of Costs of Issuance or amounts due under said Agreement, including all items of cost in such detail as may be available to the Corporation or the City, as the case may be; (b) state with respect to such disbursement (i) the requisition number, (ii) the amount to be disbursed for payment of such costs, and (iii) that each item of cost identified therein has been properly incurred, and is a proper charge against the Program Fund and has not been the basis of any previous disbursement; and (c) be accompanied by an invoice, if any. The Trustee may conclusively rely on requisitions submitted in accordance with this Section 4.02 as complete authorization for the disbursements made pursuant thereto. On the date which is three (3) months following the Closing Date, the Trustee shall withdraw all remaining moneys in the Program Fund and deposit such moneys in the Lease Payment Fund to be applied by the Trustee to pay the Lease Payments as they come due and payable. Section 4.03. Reserve Fund. The Trustee shall establish a special fiend designated as the "Reserve Fund" to be held by the Trustee in trust for the benefit of the City and the Owners of the Certificates, and applied solely as provided herein. Moneys in the Reserve Fund shall be held in trust as a reserve for the payment when due of the Lease Payments on behalf of the City. All amounts on deposit in the Reserve Fund at any time in excess of the Reserve Requirement, and all amounts derived from the investment of amounts.in the Reserve Fund which are not required to be retained therein -17- to maintain the Reserve Requirement, shall be transferred by the Trustee to the Lease Payment Fund. If on any Interest Payment Date the moneys available in the Lease Payment Fund do not equal the amount of the Lease Payment then coming due and payable, the Trustee shall apply the moneys available in the Reserve Fund to make such payments on behalf of the City by transferring the amount necessary for this purpose to the Lease Payment Fund. Upon receipt of any delinquent Lease Payment with respect to which moneys have been advanced from the Reserve Fund, such Lease Payment shall be deposited in the Reserve Fund to the extent of such advance. If on any Interest Payment Date the moneys on deposit in the Reserve Fund and the Lease Payment Fund (excluding amounts required for payment of principal, interest and prepayment premium, if any, represented by any Certificates theretofore having come due but not presented for payment) are sufficient to pay or prepay all Outstanding Certificates, including all principal, interest and prepayment premiums (if any) represented thereby, the Trustee shall, upon the written request of the City, transfer all amounts then on deposit in the Reserve Fund to the Lease Payment Fund to be applied for such purpose to the payment of the Lease Payments on behalf of the City. Any amounts remaining in the Reserve Fund on the date of payment in full, or,provision for such payment as provided in Section 13.01, of all obligations represented by the Outstanding Certificates and all amounts then due and owing to the Trustee, shall be withdrawn by the Trustee and at the written request of the City applied towards such payment or paid to the City. -18- ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.01. Assignment of Rights in Lease Agreement. The Corporation has in the Assignment Agreement transferred, assigned and set over to the Trustee certain of its rights under the Lease Agreement, including but not limited to all of the Corporation's rights to receive and collect all of the Lease Payments and all other amounts required to be deposited in the Lease Payment Fund. All Lease Payments 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 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 (1) Business Day after the receipt thereof, and all such Lease Payments and such other amounts shall be forthwith deposited by the Trustee upon the receipt thereof in the Lease Payment Fund, except as provided in Section 4.03. Section 5.02. Establishment of Lease Payment Fund. The Trustee shall establish a special fund designated 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 City and the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, . except only as provided in this Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set forth. Section 5.03. Deposits. Except as provided in Section 4.03, there shall be deposited in the Lease Payment. Fund all Lease Payments received by the Trustee, including any moneys received by the Trustee for deposit therein pursuant to Sections 4.01(a), 5.01 or Article VI hereof, or Article X of the Lease Agreement, and any other moneys required to be deposited therein pursuant to the Lease Agreement or pursuant to this Agreement. Section 5.04. Application of Moneys. All amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal, interest and prepayment premiums (if any) represented by the Certificates as the same shall become due and payable, in accordance with the provisions of Article II and Article III. Section 5.05. Surplus. Any surplus remaining in the Lease Payment Fund, after prepayment and payment of all Certificates, including premiums and accrued interest (if any) and payment of any applicable fees and expenses to the Trustee, or provision for such prepayment or payment having been made to the satisfaction of the Trustee, shall be withdrawn by the Trustee and remitted to the City. -19- ARTICLE VI INSURANCE AND CONDEMNATION FUND Section 6.01. Establishment of Insurance and Condemnation Fund; Application of Net Proceeds of Insurance Award. Any Net Proceeds of insurance against accident to or destruction of the Project collected by the City in the event of any such accident or destruction shall be paid to the Trustee pursuant to Section 6.1 of the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in a special fund designated as the "Insurance and Condemnation Fund" which the Trustee shall thereupon establish. If the City determines and notifies the Trustee in writing of its determination, within ninety (90) days following the date of such deposit, that the replacement, repair, restoration, modification or improvement of the Project is not economically feasible or in the best interests of the City, then such Net Proceeds shall be promptly transferred by the Trustee to the Lease Payment Fund and applied to the prepayment of Lease Payments pursuant to Section 10.3 of the Lease Agreement and the corresponding prepayment of Certificates pursuant to Section 3.01(b). In the event of damage or destruction of the Project in full, such Net Proceeds may be transferred to the Lease Payment Fund to be used to redeem Outstanding Certificates only if such Net Proceeds, together with other available moneys, are sufficient to cause the prepayment of Outstanding Certificates in an aggregate principal amount equal to the aggregate unpaid principal components of the unpaid Lease Payments allocable to the Project. All Net Proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Lease Payment Fund shall be applied to the prompt replacement, repair, restoration, modification or,improvement of the damaged or destroyed portions of the Project by the City, upon receipt of written requisitions of the City stating with respect to each payment to be made (a) the name and address of the person,firm or corporation to whom payment is due, (b) the amount to be paid and (c) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. Any balance of the Net Proceeds remaining after the City.shall file a written certificate with the Trustee stating that such work has been completed shall be paid to the City. Section 6.02. Deposit and Application of Net Proceeds of Eminent Domain Award. If all or any part of the Project shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the Net Proceeds therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund, pursuant to Section 6.1 of the Lease Agreement, and shall be applied and disbursed by the Trustee as follows: (a) If the City has given written notice to the Trustee of its determination (i) that such eminent domain proceedings have not materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, and (ii) that such proceeds are not needed for repair, replacement or rehabilitation of the Project, the Trustee shall transfer such proceeds to the -20- Lease Payment Fund to be credited towards the payment of the Lease Payments as the same become due and payable. (b) If the City has given written notice to the Trustee of its determination that (i) such eminent domain proceedings have not materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, and (ii) such proceeds are needed for repair, replacement or rehabilitation of the Project, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing of requisitions of the City Representative meeting the requirements of Section 6.01. (c) If (i) less than all of the Project shall have been taken in such eminent domain proceedings or sold to a government threatening the use of eminent domain powers, and if the City has given written notice to the Trustee of its determination that such eminent domain proceedings have materially affected the interest of the City in the Project or the ability of the City to meet any of its financial obligations under the Lease Agreement, or (ii) all of the Project shall have been taken in such eminent domain proceedings, then the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited toward the prepayment of the Lease Payments allocable to the Project pursuant to Section 10.3 of the Lease Agreement and applied to the corresponding prepayment of Certificates in the manner provided in Section 3.01(b). In making any such determination whether to repair, replace or rehabilitate the Project under this Section 6.02, the City may obtain, but shall not be required to obtain, at its expense, the report of an independent engineer or other independent professional consultant, a copy of which shall be filed with the Trustee. Any such determination by the City shall be final. Section 6.03. Cooperation. The Corporation and the Trustee (in its capacity as loss payee under any policy of insurance) shall cooperate fully with the City at the expense of the City in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Project or any portion thereof. -21- ARTICLE VII MONEYS IN FUNDS; INVESTMENTS;ARBITRAGE REBATE Section 7.01. Held in Trust. The moneys and Permitted Investments held by the Trustee under this Trust Agreement, other than moneys and Permitted Investments held in the Rebate Account, are irrevocably held in trust for the benefit of the City and the Owners of the Certificates solely 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, the City or the Owner of any Certificates. Section 7.02. Investments Authorized. Upon the written request of the City filed with the Trustee from time to time, moneys held by the Trustee in any fund or account hereunder shall be invested and reinvested by the Trustee in Permitted Investments selected by the City and specified in such written request of the City, which mature not later than the date such moneys are required or estimated by the City to be required to be expended hereunder. In the absence of any written request of the City directing the investment of uninvested moneys held by the Trustee hereunder, the Trustee shall invest such moneys in Federal Securities or in Permitted Investments described in clause (c) of the definition thereof, which mature not later than the date such moneys are required or estimated by the Trustee to be required to be expended hereunder. Such investments, if registrable, shall be registered in the name of the Trustee, as trustee or in the name of its nominee, and shall be held by the Trustee. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Section 7.02. Such investments and reinvestments shall be made giving full consideration to the time at which funds are required to be available. The Trustee may act as purchaser or agent in the making or disposing of any investment. Whenever in this Agreement any moneys are required to be transferred by the City to the Trustee, such transfer may be accomplished by transferring a like amount of Permitted Investments. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder upon the written request of the City. Section 7.03. Accounting. The Trustee shall furnish to the City, not less than monthly, an accounting (in the form customarily used by the Trustee) of all investments made by the Trustee. 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 Section 7.02. Section 7.04. .Allocation of Earnings. Subject to the provisions of Section 4.03, any income, profit or loss on such investments shall be deposited in or charged to the respective funds from which such investments were made. Section 7.05. Valuation and Disposition of Investments. For the purpose of determining the amount in any fund, the value of Permitted Investments credited to such fund shall be calculated at the lesser of(a) the par amount thereof or (b) the cost thereof, excluding accrued interest and brokerage commissions, if any; except that any Permitted Investments having a maturity of more than five (5) years from the date of investment shall be valued at least annually at the market value thereof. _22_ The Trustee may sell at the best price reasonably obtainable, 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 fluid to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any such Permitted Investment. Section 7.06. Rebate of Excess Investment Earnings to United States. (a) Obligation to Calculate Excess Investment Earnings. The City shall calculate or cause to be calculated, and shall provide or cause to be provided written notice to the Trustee of, the Excess Investment Earnings described in paragraph (a) of the definition thereof at the times and in the manner required pursuant to all applicable requirements of the Tax Code and the Tax Regulations. (b) Deposits to Rebate Account; Rebate to United States. The Trustee shall establish and hold a special account to be known as the Rebate Account separate and apart from all other funds and accounts established hereunder. Following the calculation by the City of the amount of Excess Investment Earnings at any time pursuant to the preceding subsection (a), the City shall pay to the Trustee for deposit in the Rebate Account an amount equal to the cumulative Excess Investment Earnings (if any) since the prior distribution to the United States pursuant to this subsection (b). The City shall file with the Trustee a written notice directing the payment from the Rebate Account of an amount equal to Excess Investment Earnings to the United States of America in installments at such times and in such amounts as shall be required under the Tax Code and the Tax Regulations. Payments to the United States of America shall be made to the address prescribed by the Tax Regulations, together with such reports and statements, completed by the City and delivered to the Trustee, as may be prescribed by the Tax Regulations. The City shall provide the Trustee with written notice of the address to which such payments are to be forwarded and shall provide the Trustee with all such completed reports and statements. In the event that amounts on deposit in the Rebate Account are insufficient to make any payment to the United States of America required pursuant to this subsection (b), the City shall make such payment when due hereunder, from any funds which are lawfully available for such purpose. (c) Investment Transactions. The City shall assure that Excess Investment Earnings are not paid or disbursed except as required in this Section 7.06. To that end the City shall assure that investment transactions are on an arm's length basis. In the event that Nonpurpose Investments consist of certificates of deposit or investment contracts, investment in such Nonpurpose Investments shall be made in accordance with the procedures described in applicable Tax Regulations as from time to time in effect. (d) Maintenance of Records. The City shall keep or cause to be kept, and retain or cause to be retained for a period of six (6) years following the retirement of the Certificates, records of the determinations made pursuant to this Section 7.06. (e) Engagement of Professional Services. In order to provide for the administration of this Section 7.06, the City may provide for the employment of -23- independent attorneys, accountants and consultants compensated on such reasonable basis as the City may deem appropriate. (f) Trustee's Reliance on City. The Trustee shall conclusively be entitled to rely upon all calculations and directions made and furnished by the City under this Section 7.06, and the Trustee shall not incur any liability whatsoever in acting upon and as instructed by such calculations and directions. The Trustee shall have no duty or obligation with respect to the matters contained in this Section 7.06, other than to follow the directions set forth in the written directions of the City. (g) Modification of this Section. Any of the provisions of this Section 7.06 may be amended, modified or deleted in any manner whatsoever in the event that the City shall cause to be filed with the Trustee written directions making such amendment, modification or deletion, which written directions are executed by a City Representative and are accompanied by an opinion of Bond Counsel stating that such amendment, modification or deletion will not cause interest represented by the Certificates to be includable in gross income of the Certificate Owners for federal income tax purposes. -24- ARTICLE VM THE TRUSTEE Section 8.01. Appointment of Trustee. State Street Bank and Trust Company of California, N.A. is hereby appointed Trustee by the Corporation and the City for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Agreement. The Corporation and the City agree that any successor Trustee shall have a corporate trust office in the State of California, shall have a combined capital and surplus of at least Fifty Million Dollars ($50,000,000), and shall be subject to supervision or examination by Federal or state authority, so long as any Certificates are Outstanding. 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 8.01 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. The Trustee is hereby authorized to pay or prepay the Certificates when duly presented for payment at maturity, or on prepayment, or on purchase by the Trustee as directed by the City prior to maturity in accordance with Section 3.06, and to cancel all Certificates upon payment thereof. The Trustee shall keep accurate•records of all fiends administered by it and of all Certificates paid and discharged. The Trustee shall be compensated for its services rendered pursuant to the provisions of this Agreement. Section 8.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Trust Agreement, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee, prior to the occurrence of an Event of Default and after curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement. In case an Event of Default has occurred(which has not been cured or waived) the Trustee may exercise such of the rights and powers vested in it by this Trust Agreement, and shall use the same degree of care and skill in their exercise as is required of a prudent man. (b) No provision in this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such fiends or adequate indemnity against such risk or liability is not reasonably assured to it. (c) The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers and the Trustee shall not be responsible for any misconduct or negligence on the part of any attorney, agent or receiver appointed with reasonable care. The Trustee shall be entitled to advice of counsel -25- concerning all matters of trust and its duty hereunder and shall be protected in any action taken or suffered by it hereunder in reliance on such advice. (d) The Trustee shall not be responsible for any recital herein, or in the Certificates, or for any of the supplements thereto or instruments of further assurance, or for the sufficiency of the security for the Certificates issued hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the Corporation or the City under the Lease Agreement. 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 Article VII of this Trust Agreement. (e) The Trustee shall not be accountable for the use of any Certificates delivered hereunder. The Trustee may become the Owner of Certificates secured hereby with the same rights which it would have if not the 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 aggregate principal amount of the Certificates then Outstanding. M In the absence of bad faith on its part, the Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken or omitted to be taken by the Trustee in good faith pursuant to this Trust Agreement upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any Certificate,` shall be conclusive and binding upon all future Owners of the same Certificate and upon Certificates issued in exchange therefor or in place thereof. (g) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed by a Corporation Representative or a City Representative as sufficient evidence of the facts therein contained and prior to the occurrence of an Event of Default of which the Trustee has been given notice or is deemed to have notice, as provided in Section 8.02(i) hereof, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed by it to be necessary or advisable, but shall in no case be bound to secure the same. The Trustee may accept a certificate of a Corporation Representative or a City Representative to the effect that an authorization in the form therein set forth has been adopted by the -26- Corporation or the City, as the case may be, as conclusive evidence that such authorization has been duly adopted, and is in full force and effect. (h) The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers, directors, employees and agents. Q) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the City to make any of the Lease Payments to the Trustee required to be made by the City pursuant to the Lease Agreement or failure by the Corporation or the City to file with the Trustee any document required by this Trust Agreement or the Lease Agreement to be so filed subsequent to the delivery of the Certificates, unless the Trustee shall be specifically notified in writing of such default by the Corporation, the City or the Owners of at least twenty-five percent (25%) in aggregate principal amount of Certificates then Outstanding and all notices or other instruments required by this Trust Agreement to be delivered to the Trustee must, in order to be effective, be delivered at the Trust Office of the Trustee, and in the absence of such notice so delivered the Trustee may conclusively assume there is no Event of Default except as aforesaid. Q) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect the Project, including all books, papers and records of the Corporation or the City pertaining to the Project and the Certificates, and to take such memoranda from and with regard thereto as may be desired. (k) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (1) Notwithstanding anything elsewhere in this Trust Agreement with respect to the execution of any Certificates, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Trust Agreement, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition so that by the terms hereof required as a condition of such action, by the Trustee deemed desirable for the purpose of establishing the right of the Corporation to the execution of any Certificates, the withdrawal of any cash, or the taking of any other action by the Trustee. (m) Before taking any action referred to in Section 12.02 hereof the Trustee may require that a satisfactory indemnity bond be furnished by the Owners of the Outstanding Certificates, or any of them, for the reimbursement of all expenses to which it may be put and to protect it -27- against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any such action. (n) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. The Trustee shall not be under any liability for interest on any moneys received hereunder except such as may be agreed upon, other than interest derived from investments made or required to be made pursuant to Section 7.02. (o) The Trustee shall not be responsible for the sufficiency of the Lease Agreement, its right to receive moneys pursuant to the Lease Agreement, or the value of or title to the premises constituting the Project. (p) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement. Section 8.03. Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to payment and reimbursement by the City for reasonable fees for its services rendered hereunder and all advances, counsel fees (including expenses) and other expenses reasonably and necessarily made or incurred by the Trustee in connection with such services. Upon an Event of Default, but only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of, premium, if any, and interest on any Certificate upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it respectively. Section 8.04. Notice to Certificate Owners of Default. If an Event of Default occurs of which the Trustee has been given or is deemed to have notice, as provided in Section 8.02(i), then the Trustee shall promptly give written notice thereof by first class mail, postage prepaid, to the Owner of each Outstanding Certificate, unless such Event of Default shall have been cured before the giving of such notice; provided, however that unless such Event of Default consists of the failure by the City to make any Lease Payment when due, the Trustee may elect not to give such notice to the Certificate Owners if and so long as the Trustee in good faith determines that withholding such notice is not adverse to the best interests of the Certificate Owners. Section 8.05. Removal of Trustee. The City may, upon at least thirty (30) days' prior written notice and with the consent of the Corporation, remove the Trustee initially appointed, and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee and the Corporation, and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company meeting the requirements set forth in Section 8.01. -28- Section 8.06. Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty days' written notice by registered or certified mail to the City and the Corporation. Upon receiving such notice of resignation, the City shall promptly appoint a successor Trustee. 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 City shall mail notice thereof to the Certificate Owners at their respective addresses set forth on the Registration Books. Section 8.07. Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 8.05 or 8.06, respectively, the City shall promptly appoint a successor Trustee. In the event the City shall for any reason whatsoever fail to appoint a successor Trustee within thirty (30) days following the delivery to the Trustee of the instrument described in Section 8.05 or within thirty (30) days following the receipt of notice by the City pursuant to Section 8.06, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of Section 8.01. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the City purporting to appoint a successor Trustee following the expiration of such ninety- day period. Section 8.08. Merger or Consolidation. Any company or 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 y party or any company or association to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company or association shall be eligible under Section 8.01, shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 8.09. Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also the Corporation and the City an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the written request of the Corporation, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should any instrument in writing from the Corporation be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Corporation. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article VIH, shall be filed or recorded by the successor Trustee in each recording office where the Assignment Agreement shall have been filed or recorded. -29- Section 8.10. Non—Liability of Trustee. The recitals, statements and representations by the City and the Corporation contained in this Trust Agreement or in the Certificates shall be taken and construed as made by and on the part of the City and the Corporation, as the case may be, and not by the Trustee, and the Trustee does not assume, and shall not have, any responsibility or obligation for the correctness of any thereof. The Trustee makes no representation or warranty, express or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operatign, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City or Corporation of the Project. In no event shall the Trustee be liable for special or consequential damages in connection with or arising from the Lease Agreement for the existence, furnishing or use of the Project. The Trustee shall not be: (a) responsible for the sufficiency or enforceability of the Lease Agreement or the assignment under the Assignment Agreement of its rights to receive Lease Payments; (b) deemed to have knowledge of any Event of Default unless and until it shall have actual knowledge thereof or except as provided in Section 8.02(i); and (c) accountable for the use or application by the City or Corporation of any funds which the Trustee has released under this Trust Agreement. The Trustee shall not be answerable for the exercise of any discretion or power under this Trust Agreement or for anything whatever in connection with the funds and accounts established hereunder, except only for its own negligence or willful misconduct. Section 8.11. Actions Through Agents. The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, 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. Section 8.12. Nature of Trust Engagement. The Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Trust Agreement and no implied covenants or obligations shall be read into the Trust Agreement against the Trustee. In accepting the trusts hereby created, the Trustee acts solely as Trustee and not in its individual capacity. All persons, including without limitation the Owners, the City and the Corporation having any claim against the Trustee arising from the Trust Agreement shall look only to the funds and accounts hereunder for payment except as otherwise provided herein; provided, however, that nothing in this sentence is intended or shall be construed to apply to, or limit the source of payment of, claims against the Trustee arising from the negligence or willful default of the Trustee. Under no circumstances shall the Trustee be liable in its individual capacity for payment of the obligations represented by the Certificates. -30- ARTICLE EK MODIFICATION OR AMENDMENT Section 9.01. Amendments Permitted. This Agreement and the rights and obligations of the Owners of the Certificates 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 13.04, shall have been filed with the Trustee. No such modification or amendment shall (a) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate represented thereby or extending the time of payment of interest, or reducing the amount of principal represented thereby or reducing any premium payable upon the prepayment thereof, with the express consent of the Owner of such Certificate, or (b) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification hereof, or (c) modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 9.02. This Agreement and the rights and obligations of the Owners of the Certificates 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 (a) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power herein reserved to the Corporation or the City, (b) to cure, correct or supplement any ambiguous or defective provision contained herein, (c) in regard to questions arising hereunder, as the parties hereto or thereto may deem necessary or desirable and which shall not, in the opinion of Bond Counsel, materially adversely affect the interests of the Owners of the Certificates, (d) to modify the description of the Project to reflect accurately the description of the property intended to be included therein, or (e) if and to the extent permitted in the opinion of Bond Counsel filed with the Trustee, the City and the Corporation, to delete or modify any of the provisions hereof relating to the exemption from federal income taxation of interest represented by the Certificates. Any such supplemental agreement shall become effective upon execution and delivery by the parties hereto. Section 9.02. Procedure for Amendment with Written Consent of Certificate Owners. This Agreement may be amended by supplemental agreement as provided in this Section 9.02 in the event the consent of the Owners of the Certificates is required pursuant to Section 9.01. A copy of such supplemental agreement, together with a request to the Certificate Owners for their consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his address as set forth on the Registration Books, but failure to mail copies of such supplemental agreement and request 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 consents of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section 13.04) and a notice shall have been mailed as hereinafter in this -31- Section provided. 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 2.10. 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 of the notice of adoption thereof, 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 conclusive proof of the matters therein stated. Such supplemental agreement shall become effective upon the mail of such last-mentioned notice, and such supplemental agreement shall be deemed conclusively binding upon the parties hereto and the Owners of all Certificates at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60) day period. Section 9.03. Effect of Supplemental Agreement. From and after the time any supplemental agreement becomes effective pursuant to this Article IX, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto 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 for any and all purposes. Section 9.04. 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 IX shall bear a notation, by endorsement or otherwise, in form approved by the Trustee, as to-such action. In that case, upon demand on the Owner of any Certificate Outstanding at such effective date and presentation of his Certificate for the purpose at the Trust Office of the Trustee, a suitable notation shall be made on such Certificate. The Trustee may determine that the delivery of substitute Certificates, so modified as in the opinion of the Trustee is necessary to conform to such Certificate Owners' action, which substitute Certificates shall thereupon be prepared, executed and delivered. In that case, upon demand on the Owner of any Certificate then Outstanding, such substitute Certificate shall be exchanged at the Trust Office of the Trustee, without cost to such Owner, for a Certificate of the same character then Outstanding, upon surrender of such Outstanding Certificate. -32- Section 9.05 Amendatory Endorsement of Certificates. The provisions of this Article IX shall not prevent any Certificate Owner from accepting any amendment as to the particular Certificates held by him, provided that proper notation thereof is made on such Certificates. -33- ARTICLE X OTHER COVENANTS Section 10.01. Compliance With Lease Agreement. The City covenants and agrees with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. The Corporation covenants and agrees with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. 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 Agreement by the Corporation thereunder. The Corporation and the City, immediately upon receiving or giving any notice, communication or other document in any relating to or affecting their respective estates, or either of them, in the Project, 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 10.02. 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 public agency, 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 10.03. Prosecution and Defense of Suits. The City shall promptly, upon request of the Trustee or any Certificate 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 Project, 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 indemnify and save the Trustee and every Certificate 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 10.04. Recordation and Filing. The City shall record and file the Lease Agreement or a memorandum thereof, the Assignment Agreement and all such documents as may be required by law (and shall take all further actions which may be necessary or be reasonably required by the Trustee), all in such manner, at such times and in such places as may be required by law in order fully to preserve, protect and perfect the security of the Trustee and the Certificate Owners. Section 10.05. Tax Covenants. (a) Private Business Use Limitation. The City shall assure that not in excess of ten percent (10%) of the Certificate Proceeds is used for Private Business Use if such use would cause the obligations represented by the -34- Certificates to be "private activity bonds" within the meaning of Section 141(a) of the Tax Code. (b) Private Loan Limitation. The City shall assure that no more than five percent (5%) of the Certificate Proceeds are used, directly or indirectly, to make or finance a loan (other than loans constituting nonpurpose obligations as defined in the Tax Code or constituting assessments) to persons other than state or local government units. (c) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the obligations of the City under the Lease Agreement to be "federally guaranteed" under and within the meaning of Section 149(b) of the Tax Code. (d) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Certificates which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the obligations of the City under the Lease Agreement to be "arbitrage bonds" under and within the meaning of Section 148(a) of the Tax Code. Section 10.06. Further Assurances. The Corporation and the City will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement and the Lease Agreement, and for the better assuring and � confirming unto the Owners of the Certificates the rights and benefits provided herein. -35- ARTICLE XI MUTATION OF LIABILITY Section 11.01. Limited Liability of City. Except for the payment of Lease Payments when due in accordance with the Lease Agreement and the performance of the other covenants and agreements'of the City contained in the Lease Agreement and this Trust Agreement, the City shall have no pecuniary obligation or liability to any of the other parties or to the Owners of the Certificates 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, except as expressly set forth herein. Section 11.02. No Liability of the Corporation for Trustee Performance. Neither the City nor the Corporation shall have any obligation or liability to any of the other parties or to the Owners of the Certificates with respect to the performance by the Trustee of any duty imposed upon it under this Agreement. Section 11.0& Indemnification of Trustee. The Corporation and the City shall indemnify and save the Trustee, its directors, officers, agents and employees harmless from and against all claims, losses, costs, expenses, liability and damages,including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on, the Project by the Corporation or the City, (b) any breach or default on the part of the Corporation or the City in the performance of any of their respective obligations under this Trust Agreement and any other agreement made and entered into for purposes of the Project, (c) any act of negligence of the Corporation or the City or of any of their respective agents, contractors, servants, employees, licensees with respect to the Project, (d) any,act of negligence of any assignee of, or purchaser from the Corporation or the City or of any of its or their respective agents, contractors, servants, employees or licensees with respect to the Project, (e) the authorization of payments from the Program Fund, (f) the actions of any other party, including but not limited to the ownership, operation or use of the Project by the Corporation or the City, or (g) the Trustee's exercise and performance of its powers and duties hereunder. No indemnification will be made under this Section 11.03 or elsewhere in this Trust Agreement for willful misconduct or negligence under this Trust Agreement by the Trustee, its officers, agents, employees, successors or assigns. The Corporation's and the City's obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates. Section 11.04. Opinion of Counsel. Before being required to take any action, the Trustee may, at the expense of the City, require an opinion of Independent Counsel acceptable to the Trustee, or an opinion of Bond Counsel acceptable to the Trustee with respect to any federal tax matters, 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 on any such opinion or certificate obtained by the Trustee. Section 11.05. Limitation of Rights to 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 of the Certificates, any legal or equitable right, remedy or claim under or in -36- 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 said Owners. -37- ARTICLE XII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS Section 12.01. Assignment of Rights. Pursuant to the Assignment Agreement the Corporation has transferred, assigned and set over to the Trustee all of the Corporation's rights and duties in and to the Lease Agreement (excepting only the Corporation's rights under Sections 5.8, 7.3 and 9.4 thereof), including without limitation all of the Corporation's rights to exercise such rights and remedies conferred on the Corporation pursuant to the Lease Agreement as may be necessary or convenient (a) to enforce payment of the Lease Payments and any other amounts required to be deposited in the Lease Payment Fund or the Insurance and Condemnation Fund, and (b) otherwise to exercise the Corporation's rights and take any action to protect the interests of the Trustee or the Certificate Owners in an Event of Default. Section 12.02. 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, and at the written direction of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding shall, exercise any and all remedies available-pursuant to law or granted pursuant to the Lease Agreement; provided, however, that notwithstanding anything herein or in the Lease Agreement to the contrary, there shall be no right under any circumstances to accelerate the maturities of the Certificates or otherwise to declare any Lease Payment not then in default to be immediately due and payable. Section 12.03. Application of Funds. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article XII or Article IX of the Lease Agreement shall be applied by the Trustee in the order following upon presentation of the several Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses of the Trustee and of the Certificate Owners in declaring such Event of Default and in taking any remedial action with respect thereto, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment of the whole amount then owing and unpaid with respect to the Certificates for principal and interest, with interest on the overdue principal and installments of interest at the net effective rate per annum then represented by the Outstanding Certificates (but such interest on overdue installments of interest shall be paid only to the extent fiends are available therefor following payment of principal and interest and interest on overdue principal, as aforesaid), and in case such moneys shall be insufficient to pay in fiill the whole amount so owing and unpaid with respect to the Certificates, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other -38- installment of interest, ratably to the aggregate of such principal and interest. Section 12.04. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of a majority in principal amount of the Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights or duties hereunder. Section 12.05. Non—waiver. Nothing in this Article XII or in any other provision of this Agreement or in the Certificates, shall affect or impair the obligation of the City, which is absolute and unconditional, to pay or prepay the Lease Payments as provided in the Lease Agreement. 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 XH to the Trustee or to the Owners of Certificates may be exercised from time to time and as often as shall be deemed expedient by the Trustee or the Certificate Owners. Section 12.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Certificate 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 12.07. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder,whether upon its own discretion or upon the request of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding, it shall have full power, in the exercise of its discretion for the best interests 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 discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, without the consent of a majority in aggregate principal amount of the Certificates Outstanding. Section 12.08. Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate issued 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 hereunder; (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 -39- proceeding in its own name; (c) said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (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 Certificates of any remedy hereunder; it being understood and intended that no one or more Owners of Certificates 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 that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates. Section 12.09. Possession of Certificates by Trustee Not Required. All rights and remedies granted to or exercisable by the Trustee hereunder or under the Lease Agreement may be exercised by the Trustee without possession of any of the Certificates or the production thereof at the trial or other proceeding relative thereto, and any suit, action or proceeding instituted by the Trustee hereunder or under the Lease Agreement shall be brought in its name for the benefit of all of the Owners of such Certificates, subject to the provisions of this Trust Agreement. -40- ARTICLE XIII DISCHARGE; ADNIINISTRATIVE PROVISIONS Section 13.01. Discharge Hereof. If and when the obligations represented by any Outstanding Certificates shall be paid and discharged in any one or more of the following ways: (a) by well and truly paying or causing to be paid the principal of and interest and redemption premiums (if any) represented by such Certificates as and when the same become due and payable; or (b) by depositing with the Trustee or any other fiduciary, under an escrow deposit and trust agreement, security for the payment of Lease Payments relating to such Certificates as more particularly described in Section 10.1 of the Lease Agreement, said security to be held by the Trustee or such other fiduciary on behalf of the City to be applied by the Trustee or by such other fiduciary to pay or prepay such"Lease Payments as the same become due, pursuant to Section 10.1 of the Lease Agreement notwithstanding that such Certificates shall not have been surrendered for payment, all rights hereunder of the Owners of such Certificates and all obligations of the Corporation, the Trustee and the City with respect to such Certificates shall cease and terminate, ,f,.. except only the obligations of the Trustee under Sections 2.07 and 2.08, and the obligation 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 paragraph (b) of this Section, to the Owners of such Certificates not so surrendered and paid all sums represented thereby when due and in the event of deposits pursuant to paragraph (b), such Certificates shall continue to represent direct, undivided fractional interests of the Owners thereof in the Lease Payments. Any funds held by the Trustee, at the time of discharge of the obligations represented by all Outstanding Certificates as a result of one of the events described in paragraphs (a) or (b) of this Section, which are not required for the payment to be made to Owners, shall, upon payment in fiill of all fees and expenses of the Trustee (including attorneys' fees) then due, be paid over to the City. Section 13.02. Records. The Trustee shall keep complete and accurate records of all moneys received and disbursed under this Agreement, which shall be available for inspection by the City, the Corporation, and any Owner, or the agent of any of them, at any reasonable time during regular business hours. Section 13.03. Notices. All written notices to be given under this Agreement shall be given by mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective upon deposit in the United States mail, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth below: -41- If to the City: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: City Administrator If to the Corporation: City of Huntington Beach Civic Improvement Corporation 800 Huntington Beach Public Boulevard Danville, California 94526 Attention: Executive Director If to the Trustee: State Street Bank and Trust Company of California, N.A. 725 South Figueroa Street Los Angeles, California 90017 Attention: Corporate Trust Department The City, the Corporation and the Trustee may designate any fiurther or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 13.04. Disqualified Certificates. In determining whether the Owners of the requisite aggregate principal amount of Certificates have concurred in any demand, request, direction, consent or waiver under this Indenture, Certificates which are owned or held by or for the account of the City (but excluding Certificates held in any employees' retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided, however, that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver, only Certificates which the Trustee knows to be so owned or held shall be disregarded. Section 13.05. Payment of Certificates After Discharge of Trust Agreement. Notwithstanding any provisions of this Trust Agreement, but subject to any applicable laws of the State of California relating to the escheat of funds or property, any moneys held by the Trustee in trust for the payment of the principal or interest represented by any Certificates and remaining unclaimed for two (2) years after the principal represented by all of the Certificates has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Trust Agreement), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Certificates became due and payable, shall be repaid to the City free from the trusts created by this Trust Agreement upon receipt of an indemnification agreement acceptable to the City and the Trustee indemnifying the Trustee with respect to claims of Owners of Certificates which have not yet been paid, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the City as aforesaid, the Trustee may (at the cost of the City) first mail, by first class mail postage prepaid, to the Owners of Certificates which have not yet been paid, at the respective addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Certificates so payable and not presented -42- and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof. Section 13.06. Governing Law. This Agreement shall be construed and governed in accordance with the laws of the State of California, without giving effect to principles of conflicts of law of the State of California. Section 13.07. Binding Effect; Successors. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Whenever in this Agreement either the Corporation, the City or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the Corporation, the City, the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 13.08. Corporation and City Representatives. Whenever under the provisions of this Agreement the Corporation or the City is required or permitted to take some action, including but not limited to the giving of any approval or the execution of some request, direction or other instrument, such action shall be made on behalf of the Corporation by a Corporation Representative and on behalf of the City by a City Representative, and any party hereto shall be fully authorized to rely upon any such action by a Corporation Representative or a City Representative. Section 13.09. 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 13.10. Delivery of Cancelled Certificates. Whenever in this Agreement provision is made for the surrender to or cancellation by the Trustee of any Certificates, the Trustee shall cancel and, if so directed in writing by the City Representative, destroy such Certificates and shall deliver a certificate of destruction with respect thereto to the City. Section 13.11. 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 13.12. 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 13.13. 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 -43- 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. —44— IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By Ass'istot Vice President CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By Executive Director (SEAL) Attest: By: Secretary CITY OF HUNTINGTON BEACH By City Administrator (SEAL) Attest: By: City Clerk -45- EXHIBIT A [FORM OF CERTIFICATE OF PARTICIPATION] CERTIFICATE OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interest of the Owner Hereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental For Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation RATE OF INTEREST: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP: July 15, 1989 REGISTERED OWNER: PRINCIPAL AMOUNT: THIS IS TO CERTIFY THAT the Registered Owner identified above, or registered assigns, as the registered owner (the "Registered Owner") of this Certificate of Participation (the "Certificate") is the owner of a direct, undivided fractional interest in lease payments (the "Lease Payments") payable under the Lease Agreement dated as of July 15, 1989, (the "Lease Agreement") by and between the City of Huntington Beach Civic Improvement Corporation, a nonprofit corporation duly organized and existing under the Constitution and laws of the State of California (the "Corporation"), and the City of Huntington Beach, a charter city and municipal corporation duly organized and existing under the laws of the State of California (the •"City"), which Lease Payments and certain other rights and interests under the Lease Agreement have been assigned to First Interstate Bank of California, as trustee (the "Trustee"), having a corporate trust office in Los Angeles, California (the "Trust Office"). The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Lease Agreement, on the Maturity Date identified above, the Principal Amount identified above representing a direct, undivided fractional share of the portion of the Lease Payments designated as principal, and to receive on February 1, 1990, and semiannually thereafter on February 1 and August 1 of each year (the "Interest Payment Dates") until payment in full of said principal, the Registered Owner's direct, undivided fractional share of the Lease Payments designated as interest coming due during the interest period immediately preceding each of the Interest Payment Dates; provided that A-1 interest represented hereby shall be payable from the Interest Payment Date next preceding the date of execution of this Certificate unless (a) this Certificate is executed after the close of business on the fifteenth day of the month immediately preceding an Interest Payment Date(a "Record Date") and on or before such Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (b) unless this Certificate is executed on or before January 15, 1990, in which event interest shall be payable from the Original Issue Date identified above. The Registered Owner's share of the portion of the Lease Payments designated as interest is the result of the multiplication of the aforesaid share of the portion of the Lease Payments designated as principal by the Rate of Interest per annum identified above, calculated on the basis of a 360-day year comprised of twelve 30-day months. Principal represented hereby is payable in lawful money of the United States of America, upon presentation hereof at the Trust Office of the Trustee. Interest represented hereby is payable by check or draft mailed by the Trustee on each Interest Payment Date to the Registered Owner at such Owner's address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the preceding month; provided, however, that at the written request of the owner of Certificates in an aggregate principal amount of $1,000,000 or more filed with the Trustee as of any Record Date, interest represented by such Certificates shall be payable by wire transfer of immediately available funds to such account as shall be specified in such written request. This Certificate has been executed and delivered by the Trustee pursuant to the terms of a Trust Agreement by and among the Trustee, the Corporation and the City, dated as of July 15, 1989 (the "Trust Agreement"). The City has certified that it is authorized to enter into the Lease Agreement and the Trust Agreement under the laws of the State of California, for the purpose of leasing certain land and public improvements from the Corporation. Reference is hereby made to the Lease Agreement and the Trust Agreement (copies of which are on file at the Trust Office of the Trustee) for a description of the terms on which the Certificates are delivered, the rights thereunder of the owners of the Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease Agreement, the Registered Owner of this Certificate, by acceptance hereof, assents and agrees to all of the provisions of the Lease Agreement and the Trust Agreement. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL, FOR ALL PURPOSES, HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. The Trustee has no obligation or liability to the owners of the Certificates to the pay the principal or interest represented the Certificates other than from the funds provided pursuant to the Lease Agreement and the Trust Agreement. The Trustee is obligated solely to administer, for the benefit of the owners of the Certificates, the various funds and accounts established under the Trust Agreement and to perform its other duties as set forth in the Trust Agreement. The City has certified, recited and declared that all things, conditions and acts required by the laws of the State of California, the Lease Agreement and the Trust Agreement to exist, to have happened and to have been performed precedent to and in A-2 the delivery of the Certificates, do exist, have happened and have been performed in due time, form and manner as required by law. A-3 IN WITNESS WHEREOF, this Certificate has been executed and delivered by First Interstate Bank of California, as trustee, acting pursuant to the Trust Agreement. Execution Date: FIRST INTERSTATE BANK OF CALIFORNIA, as Trustee By Authorized Signatory r A-4 (FORM OF REVERSE OF CERTIFICATE) The City is obligated under the Lease Agreement to pay the Lease Payments from any source of available funds, subject to certain exceptions as set forth in the Lease Agreement. 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 obligation of the City to pay the 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 Certificates maturing on or before August 1, 1999, are not subject to optional prepayment prior to their respective stated maturities. The Certificates maturing on or after August 1, 2000, are subject to optional prepayment in whole, or in part on a pro rata basis among maturities and by lot within a maturity, on any date on or after August 1, 1999, from prepayments of the Lease Payments made at the option of the City pursuant to the Lease Agreement, at a prepayment price (expressed as a percentage of the principal amount to be prepaid), together with accrued interest represented thereby to the date fixed for prepayment, as follows: Prepayment Period Prepayment (Dates Inclusive) Price August 1, 1999, through July 31, 2000 102.0% August 1, 2000, through July 31, 2001 101.5 August 1, 2001, through July 31, 2002 101.0 August 1, 2002, through July 31, 2003 100.5 August 1, 2003 and thereafter 100.0 The Certificates are subject to mandatory prepayment on any date, in whole, or in part among maturities on a pro rata basis and by lot within a maturity, from the net proceeds of insurance or eminent domain proceedings credited towards the prepayment of the Lease Payments by the City pursuant to the Lease Agreement, at a prepayment price equal to 100% of the principal amount to be prepaid, together with .accrued interest represented thereby to the date fixed for prepayment, without premium. The Certificates maturing on August 1, 2019, are also subject to mandatory sinking fund prepayment by lot on August 1 in each year beginning August 1, 2004, from the principal components of the Lease Payments required to be paid with respect to each of such dates, at a prepayment price equal to 100% of the principal amount to be prepaid, together with accrued interest represented thereby to the prepayment date, without premium, as follows: A-5 Sinking Fund Prepayment Date Principal Amount (August 1) To Be Prepaid 2004 410,000 2005 435,000 2006 470,000 2007 500,000 2008 535,000 2009 575,000 2010 615,000 2011 655,000 2012 700,000 2013 750,000 2014 805,000 2015 860,000 2016 920,000 2017 985,000 2018 1,055,000 2019 (Maturity) 1,130,000 As provided in the Trust Agreement, notice of prepayment shall be mailed by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before the prepayment date, to the registered owners of the Certificate to be prepaid, but neither failure to receive such notice nor any defect in the notice so mailed shall affect ' t1 ' the sufficiency of the proceedings for prepayment or the cessation of accrual of interest represented thereby. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest represented hereby shall cease to accrue from and after the date fixed for prepayment. This Certificate is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges, if any, 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 will be delivered to the transferee in exchange herefor. The City, the Corporation and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not this Certificate shall be overdue, and the City, the Corporation and the Trustee shall not be affected by any notice to the contrary. 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 owners of a majority in aggregate principal amount of the Certificates then outstanding, and may be amended without such consent under certain circumstances; provided that no such amendment shall extend the fixed maturity of any Certificate or reduce the interest or principal represented thereby, without the express consent of the owner of such Certificate. A-6 (FORM OF ASSIGNMENT) For value received the undersigned do(es) hereby sell, assign and transfer unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within-mentioned registered Certificate and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by a Note: The signature(s) on this Assignment must member firm of the New York Stock correspond with the name(s) as written on the Exchange or a commercial bank or trust face of the within Certificate in every particular, company. without alteration or enlargement or any change whatsoever. A-7 14 18019-26 JHHW:CFA:KML 08/09/89 KML4510 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION INCUMBENCY AND SIGNATURE CERTIFICATE — CITY The undersigned hereby state and certify: (i) that they are the duly elected, qualified and acting Mayor and City Clerk, respectively, of the City of Huntington Beach, a charter city and municipal corporation, duly organized and validly existing under the Constitution and the laws of the State of California (the "City") and, as such, are familiar with the facts herein certified and are authorized to certify the same; (ii) that the following are now, and have continuously been since the dates of the beginning of their respective current terms of office shown below, the duly elected or appointed, qualified and acting members of the City Council of the City, and the dates of the beginning and ending of their respective current terms of office are hereunder correctly designated opposite their names: Beginning Date Ending Date Members of Current Term of Current Term Wes Bannister November, 1986 November, 1990 Tom Mays November, 1986 November, 1990 Jim Silva November, 1988 November, 1992 Peter Green November, 1988 November, 1992 Don MacAllister November, 1988 November, 1992 Grace Winchell November, 1986 November, 1990 John Erskine November, 1986 November, 1990 (iii) that the signatures set forth opposite the names and titles of the following persons are the true and correct specimen, or are the genuine, signatures of such persons, each of whom holds the office designated below: Name/Title Signature Wes Bannister, Mayor Paul E. Cook, City Administrator Robert J. Franz, Deputy City Administrator/Administrative Services Donald L. Watson, Treasurer ,�� Connie Brockway, City Clerk (iv) that, for and on behalf of the City, the within-named City Administrator has executed and the within-named City Clerk has attested to each of the following agreements: (a) Agreement Regarding Removal of Property From 1986 Lease Agreement, dated as of July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation and the City, (b) Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (c) Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City, and (e) Trust Agreement, dated as July 15, 1989, by and among State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the Corporation and the City; -2- (v) and, that for and on behalf of the City, the within—named City Administrator has executed the Certificate Purchase Agreement, dated July 27, 1989, by and among Stone & Youngberg, the Corporation, the City, and acknowledged by the Trustee. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH Y Wes Bannister, Mayor [SEAL] By Connie Brockway, City Clerk —3— 2 18019-26 JHHW:CFA:dfs August 14, 1989 F8889 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided and Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE AS TO ARBITRAGE I, the undersigned Deputy City Administrator/Administrative Services of the City of Huntington Beach, California (the "City") being the person duly charged, with others, with the responsibility for the delivery on behalf of the City of the Lease Agreement, dated as of July 15, 1989, (the "Lease") by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation") as lessor and the City as lessee, which Lease is being delivered this day, hereby certify as follows: (1) The Lease is executed and delivered under and pursuant to the laws of the State of California to enable the City to lease certain police and public safety facilities, together with related land and facilities (the "Project"), to be used for the governmental and proprietary functions of the City. Pursuant to the Lease, the City agrees to lease the Project from the Corporation for a total principal cost of$15,025,000 and the Corporation agrees to lease the Project to the City. In consideration of the Lease, the City agrees to pay semiannual lease payments (the "Lease Payments") to the Corporation or its assignee, which Lease Payments include an interest component. (2) On the basis of the facts, estimates and circumstances in existence on the date hereof, I reasonably expect the following with respect to the Lease and the proceeds thereof: (a) Under the Lease, the Corporation shall cause to be deposited with State Street Bank and Trust Company of California, N.A. as trustee (the "Trustee"), the amount of $15,025,000, less original issue discount and underwriter's discount on the sale of certificates of participation, plus accrued interest from the date of the Lease to the date hereof(see subparagraphs (b) and (c) below). (b) Pursuant to an Assignment Agreement, dated as of July 15, 1989, the Corporation has assigned its rights to receive Lease Payments to the Trustee and pursuant to a Trust Agreement, dated as of July 15, 1989, the Trustee has agreed to authenticate and deliver to the purchasers thereof certificates of participation (the "Certificates") evidencing direct, undivided and fractional interests of the owners thereof in the Lease Payments to be made by the City. Amounts received from the sale of the Certificates will be deposited by the Trustee in the respective funds and in the respective amounts set forth in subparagraph (c) below. (c) The Certificates were sold to Stone & Youngberg (the "Underwriters") at their face amount ($15,025,000.00), less underwriter's discount of $217,862.50, less original issue discount of$114,000.00, plus accrued interest of$86,218.54, for total net proceeds of $14,779,356.04. Of such amount, $1,215,605.72 will be deposited in the Reserve Fund, $86,218.54 will be deposited in the Lease Payment Fund, and the remaining $13,477,531.78 will be deposited in the Program Fund. The net proceeds of the Certificates, together with interest earnings thereon, except to the extent that such interest earnings are subject to requirements for rebate to the federal government, will not exceed the amount necessary for the governmental purposes of the Lease, namely, for the payment of costs of acquisition and construction of certain public parking improvements to be constructed within the City (the "Improvements"), for the establishment of a reasonably required reserve fund and for the payment of costs of issuance relating to the Certificates. (d) The proceeds of the Certificates deposited in the Program Fund will be disbursed to the City on the date hereof in the amount of $13,365,000 in consideration of the acquisition of the Project by the Corporation. Amounts remaining in the Program Fund will be used for the payment of legal, printing and other costs of issuance relating to the Certificates, and will be fully expended within three (3) months of the date hereof. Amounts deposited in the Program Fund will be invested without yield limitations. Interest earnings and profits resulting from investment will be retained in the Program Fund and used for the purposes thereof. (e) Amounts paid to the City from the Program Fund as set forth in paragraph (d) will be loaned by the City to the Redevelopment Agency of the City of Huntington Beach (the "Agency") and deposited by the Agency in a segregated fund (the "Improvements Fund") and used by the Agency for the payment of costs and expenses of acquisition and construction of the Improvements. The Agency has entered into a contract for construction of the Improvements, which contract is in excess of $100,000 and constitutes a substantial binding commitment of the Agency to commence and complete the Improvements. The Agency will proceed with due diligence to completion of the Improvements. Completion is expected by August, 1991, which date is within three (3) years of the date hereof. Amounts deposited in the Improvements Fund will be invested without yield restrictions until completion of the Improvements, not to exceed three (3) years from the date hereof. Interest earnings and profits resulting from investment of amounts in the Improvement Fund will be deposited in such Fund and used for the purposes thereof. Amounts, if any, remaining in the Improvements Fund upon completion of the Improvements will be applied to the acquisition, construction and improvement of additional capital improvements to be used for the municipal purposes of the City and the Agency. (f) The Agency is a political subdivision of the State of California with the power of eminent domain. The loan (the "Loan") made by the City to the Agency pursuant to the preceding paragraph (e) will constitute an obligation the interest -2- on which is excludable from gross income under the Internal Revenue Code of 1986 (the "Code"). The yield on the Loan will be 10.00%, based on a purchase price equal to par amount thereof($13,365,000). (g) The amount ($1,215,605.72) deposited in the Reserve Fund constitutes the "Reserve Requirement", being maximum annual Lease Payments. The Reserve Requirement is less than ten percent (10c7) of the aggregate principal components of Lease Payments, less than maximum annual Lease Payments, less than 125 percent of annual average Lease Payments and less than 10 percent of the initial offering price of the Certificates (see subparagraph (k) below). The underwriter has represented that the establishment of the Reserve Fund in the amount of the Reserve Requirement was vital to the marketing of the Certificates. Amounts deposited in the Reserve Fund will be invested without yield limitations. Interest earnings and profits resulting from said investment, to the extent not required to maintain the Reserve Requirement in the Reserve Fund, will be transferred to the Lease Payment Fund and used for the purposes thereof. (h) Lease Payments will be paid by the City semiannually to the Trustee, and will be deposited by the Trustee in the Lease Payment Fund held to be used to make semiannual payments due with respect to the Certificates. The Lease Payment Fund is being established primarily to achieve a proper matching of revenues (consisting primarily of annual general fund appropriations and certain interest earnings) and debt service (that is, Lease Payments and payments with respect to the Certificates) in each year. Amounts deposited in the Lease Payment Fund will be expended within thirteen (13) months of the date of deposit, and the Lease Payment Fund will be depleted at least once a year except for a reasonable carryover amount not to exceed the greater of one-twelfth (1/12th) of annual Lease Payments or one year's interest earnings on such Fund. Amounts in the Lease Payment Fund will be invested without yield restrictions. Interest earnings and profits resulting from investment of amounts in the Lease Payment Fund will be retained therein and used for the purposes of such Fund. (i) The City has covenanted in the Trust Agreement to comply with requirements for rebate of excess investment earnings to the United States. Periodically, the rebatable amount will be computed and an amount equal thereto will be paid by the City to the Trustee for deposit in the Rebate Account. Amounts in the Rebate Account will be invested without yield restrictions and, together with interest earnings thereon, will be transmitted when and as due to the federal government in compliance with rebate requirements and are not expected to be used for Lease Payments. 0) The Lease will not constitute a "private activity bond" within the meaning of Section 141(a) of the Code, the average maturity of the Certificates is greater than five (5) years and none of the interest rates represented by the Certificates will vary during the term of the Lease. As a consequence of the foregoing, investment earnings, if any, on the Lease Payment Fund will be excluded for the purposes of computation of the amount required to be rebated to the federal government as described in subparagraph (h) above without regard to total earnings on such Fund. -3- (k) The yield of the Lease Payments is 7.02057518% determined on the basis of regularly scheduled Lease Payments and a purchase price of the Certificates of$14,997,218.54. Such purchase price is equal to the face amount of the Certificates ($15,025,000.00), plus accrued interest of$86,218.54, less original issue discount of $114,000.00. The Underwriter has represented that a substantial amount of the Certificates of each maturity, other than the Certificates maturing on August 1, 2019, was sold at a price of par, plus accrued interest; and that a substantial amount of the Certificates maturing on August 1, 2019, was sold at a price of par less $114,000.00. (1) The City will pay Lease Payments from current amounts in its general funds. Moneys in the general funds of the City in excess of annual Lease Payments are not expected to be available to pay Lease Payments. The general funds do not constitute sinking funds and, if invested will be invested without yield limitations. (m) No portion of the proceeds of the Certificates will be used as a substitute for other funds (replacement funds) which are otherwise expected to be available to be used as a source of financing for any part of the cost of the Improvements or for Lease Payments, and which have been or will be invested in securities, obligations, annuity contracts or other investment-type property having a yield in excess of the yield of the Lease Payments. (n) Except as specified herein, no funds which have been or will be used to acquire directly or indirectly securities, obligations, annuity contracts or other investment-type property producing a yield in excess of the yield of the Lease Payments have been or will be pledged to the payment of Lease Payments. (o) The transaction contemplated herein does not represent an exploitation of the difference between tax-exempt and taxable interest rates and the execution and delivery of the Lease and the Certificates is not occurring sooner than otherwise necessary, nor is the Lease in a principal amount greater than otherwise necessary or to be outstanding longer than otherwise necessary. (3) The City has not received notice that its Certificate as to Arbitrage may not be relied upon with respect to its own issues nor has it been advised that any adverse action by the Commissioner of the Internal Revenue Service is contemplated. -4- On the basis of the foregoing, it is not expected that the proceeds of the Certificates will be used in a manner that would cause the Lease to be an arbitrage bond within the meaning of section 148 of the Code and applicable regulations. To the best of my knowledge, information and belief, the expectations herein expressed are reasonable and there are no facts, estimates or circumstances, other than those expressed herein, that would materially affect the expectations herein expressed. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of August, 1989. ob rt J. Franz Deputy, City Adm, str or/ Administrative Se ' es _5_ 3 18019-26 JHHW:CFA:KML 08/14/89 KML4509 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION OFFICER'S CERTIFICATE OF CITY The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Deputy City Administrator/Administrative Services of the City of Huntington Beach, a charter city and municipal corporation, duly organized and existing under the Constitution and laws of the State of California (the "City"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that he is duly designated as a "City Representative" of the City, as such term is defined in that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the City of Huntington Beach Civic Improvement Corporation (the "Corporation"), and the City; (iii) that, on July 17, 1989, the City Council of the City duly adopted Resolution No. 6046, entitled "A Resolution of the City Council of the City of Huntington Beach Approving (1) Removal of Public Safety Property from 1986 Lease Agreement, (2) Approving Lease of Such Property Back from City of Huntington Beach Civic Improvement Corporation (3) Approving Related Agreements, Official Statement and Sale of Not to Exceed $16,000,000 Certificates of Participation," which resolution has not been amended, supplemented, rescinded or repealed and is in full force and effect as of the date hereof; (iv) that the City has duly authorized the execution, delivery and performance of the following agreements (herein collectively, the "Agreements"): (a) Agreement Regarding Removal of Property, dated as of July 15, 1989, by and between the Corporation and the City, (b) Second Amendment to Lease Agreement, dated as July 15, 1989, by and between the Corporation and the City, (c) Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement"), by and between the Corporation and the City, (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City, (e) Trust Agreement, and (f) Certificate Purchase Agreement, dated July 27, 1989, by and among Stone & Youngberg, the Corporation, the City and acknowledged by the Trustee; (v) that the representations and warranties of the City contained in the Agreements are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof; (vi) that nothing has come to his attention which would lead him to believe that the information contained in the Official Statement relating to the above-captioned Certificates of Participation relating to the City 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 light of the circumstances under which they were made, not misleading; (vii) that the City has complied with all the agreements and has satisfied all the conditions on its part to be performed or satisfied under the Agreements at or prior to the date hereof; (viii) that all things, conditions and acts required by the laws of the State of California, the Lease Agreement and the Trust Agreement to exist to have happened and to have been performed precedent to and in the delivery of the captioned Certificates of Participation, do exist, have happened and have been performed by the City in due time, form and manner as required by law; (ix) that the City's employer identification number for tax purposes is 95-6000723; and (x) that for calendar year 1989 and including the Information Return for Tax- Exempt Governmental Bond Issues, Form 8038-G, filed with the Internal Revenue Service for the Lease Agreement, the City has filed two (2) Information Returns, Form 8038-G, with the Internal Revenue Service, Philadelphia, Pennsylvania 19255. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH i By i Roe J. Franz, Deputy i y Administr or/ Administrative Servi -2- 4 18019-26 JHHW:CFA:KML 08/14/89 KML4507 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE REGARDING USE OF PROCEEDS The undersigned does hereby state and certify as follows: (i) that he is the Deputy city Administrator/Administrative Services of the City of Huntington Beach (the "City"), is authorized to execute this certificate on behalf of the City and is knowledgeable with respect to the matters set forth herein; (ii) that (a) the City is, on the date hereof, entering into a $15,025,000 principal amount Lease Agreement, dated as of July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation, as lessor (the "Corporation"), and the City, as lessee (the "Agreement") for the purpose of providing financing for the acquisition and improvements of certain properties (the "Project"); and (b) that pursuant to a Trust Agreement, dated as of July 15, 1989, by and among the Corporation, the City and State Street Bank and Trust Company of California, N.A., as trustee, said trustee is executing and delivering $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) (the "Certificates"), evidencing direct, undivided fractional shares in the obligation of the City to make lease payments under the Agreement (the "Lease Payments"); (iii) that of the proceeds of the Certificates, the amount of $13,477,531.78 will be deposited in the Program Fund; (iv) that set forth in Part I of Exhibit A attached hereto and by this reference incorporated herein is a detailed description of the Project and set forth in Part II of Exhibit A is a description of all private uses of the Project other than use by members of the public generally and use by governmental units; (v) that no portion of the proceeds of the Certificates will be used for the purposes of making a loan to any person other than a governmental unit; and (vi) that it is intended that the interest component of Lease Payments be excluded from the gross income of the owners of the Certificates, that the firm of Jones Hall Hill & White, A Professional Law Corporation, is rendering an opinion on the date hereof to said effect, and that, in rendering said opinion, said firm is relying, among other things, upon the statements made herein and in Exhibit A. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of August, 1989. By (i Robert J. FriLnz, Deputy City Administrator/ Administrative Services -2- EXHIBIT A DESCRIPTION OF PROJECT 1. Describe Project, including all components, in detail: (a) Main Street Parking Structure - Land acquisition, relocation assistance, demolition of buildings in 200 block of Main Street, Huntington Beach. Design and construction of 805 space parking structure and 30,000 square feet (approximate) of commercial space on cleared land. (b) Parking Structure North of Pier - Design and construction of 700 to 1,000 space parking structure north of the Huntington Beach Municipal Pier, including landscaping, public beach/service road access, public "Surf Museum" and related design and improvements for reconstruction of Municipal Pier. 2. Describe any expected private business use of the Project other than use of the Project by members of the public generally or by governmental units. Examples of private business use include: use through leases, subleases, ownership interests, management contracts, service contracts, such as contracts for janitorial services, food services, maintenance and operation; use through output contracts, such as contracts for the provision of water, electricity or energy; use through consumption contracts, such as contracts for the acceptance of waste or wastewater disposal; use through location of privately-owned equipment in a defined area, such as photocopying equipment, vending machines, computer equipment, printing equipment, public telephones and teller machines; use through sales of personal products and services in a defined area, such as newsstands, candy and smoke shops and shoeshine stands; use through the provision of utilities through privately- owned conduits or wires; use through advertising displays; use through storage arrangements; and use through rights to possess and control identified space. Certain property will be leased for private commercial development, in an amount less than 10% of the principal amount of the Certificates. -3- 5 18019-26 JHHW:CFA:KML 08/15/89 KML4490 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION WRITTEN REQUEST OF THE CITY TO TRUSTEE REGARDING INVESTMENTS The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Deputy City Administrator/Administrative Services of the City of Huntington Beach, a charter city and municipal corporation, duly organized and existing under the Constitution and laws of the State of California (the "City"), and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same; (ii) that he is duly designated as a "City Representative" of the City, as such term is defined in that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among State Street Bank and Trust Company of California, N.A., as ` W trustee (the "Trustee"), the City of Huntington Beach Civic Improvement Corporation, and the City; (iii) that he has read Sections 7.01 through 7.06 of the Trust Agreement and the definitions contained in the Trust Agreement of the capitalized terms used in said Sections; (iv) that, pursuant to Section 7.02 of the Trust Agreement, the undersigned, on behalf of the City, hereby requests the Trustee to invest this date in Permitted Investments (as that term is defined in the Trust Agreement), the amounts set forth on Exhibit A attached hereto and by this reference incorporated herein, from deposits made this date of the net proceeds of the $15,025,000 aggregate principal amount of Certificates of Participation (1989 Public Parking Project Financing), executed and delivered this date by the Trustee (the "Certificates"), into the funds established pursuant to the Trust Agreement; and (v) that all of said Permitted Investments are comprised of securities traded on established markets and are to be acquired by the Trustee in arm's length transactions for their fair market value without regard to the relationship of the yield of such investments to the yield of the Certificates. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH By &Xtl- vioaerT Jd Fr z Depuiy City A inist r r/ Administrativ s-2- EXHIBIT A Amount Description Principal Interest Purchase Fund of Deposit by Name Amount Maturity Rate Price Lease Payment Fund S 86,218.54 State Street Bank Internal S 86,218.54 Daily Variable 100% Money Market Account Reserve Fund S 1,215,605,72 State Street Bank Internal S 1,215,605.72 Daily Variable 100% Money Market Account Program Fund $13,477,531.78 State Street Bank Internal $13,477,531.78 Daily Variable 100% Money Market Account The undersigned hereby acknowledges that the foregoing investment instructions have been complied with and will settle on August 16, 1989. Dated: August 15, 1989 STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By h rized Officer 6 CITY OF HUNTINGTON BEACH 2000 MAIN STREET CALIFORNIA 92648 RISK MANAGEMENT DIVISION S.I.C. 9-010 (714) 536-5990 Issued 8/15/89 CERTIFICATE OF SELF-INSURANCE This is to certify that the City of Huntington Beach, California is a self-insured public entity. The City is self-insured for liability and worker's compensation. Suitable cash reserves to afford coverage for uninsured losses are maintained at $1,000,000. The City will furnish ten (10) days written notice of any changes in the above. ATTEST: APPROVED AS TO FORM: Connie Brockway Gai Hutton City Clerk City Attorney INITIATING DEPARTMENT: Edward H. Thompson Risk Manager This form is provided to State Street Bank and Trust Company of Calif- ornia, N.A., 725 South Figueroa Street, Suite 975, Los Angeles, Calif- ornia 90017 in conjuntion with the City of Huntington Beach Civic Improvement Corporation's Public Parking Project. Address inquiries regarding City insurance coverage and limits to the Risk Manager. All claims shall be filed with the City Clerk, 2000 Main Street, Huntington Beach, California 92648. 12 Frank B.Hall do Co.of California Northern Division One Market Plaza Spear Street Tower, Suite 2100 August 15 , 1989 San Francisco, California 9410 -1'89 City Council of the City of Huntington Beach 2000 Main Street Huntington Beach , CA 92648 State Street Bank and Trust Company of California, N . A . 725 South Figueroa Street , Suite 975 Los Angeles , CA 90017 $ 15 , 025 , 000 CERTIFICATES OF PARTICIPATION (1989 PUBLIC PARKING PROJECT) EVIDENCING THE DIRECT, UNDIVIDED FRACTIONAL INTERESTS OF THE OWNERS THEREOF IN LEASE PAYMENTS TO BE MADE BY THE CITY OF HUNTINGTON BEACH, AS THE RENTAL FOR CERTAIN PROPERTY PURSUANT TO A LEASE AGREEMENT WITH THE CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION Ladies and Gentlemen : We act as the Liability Insurance Broker for the City of Huntington Beach (the "City" ) , and, in that capacity, have reviewed and are familiar with the requirements as to insurance pursuant to Article V of that certain Lease Agreement , dated as of July 15, 1989 , by and between the City of Huntington Beach City Improvement Corporation and the City . In our opinion , the insurance policy required of the City by Section 5 . 3 of said Lease Agreement is presently in full force and effect in all respects in accordance with said Section and Section 5 . 7 of said Lease Agreement . Evidence of such insurance policy is attached hereto and , by this reference , incorporated herein . Sincerely, Mia M . Mitchell Account Executive Public Entity Division MMM :msm attachment Telephone (4151 543-9360 Telecop:er (415) 542-5628 Telex 4937656 (use p'ef x 71 v.,!th WU on10 ERTIFICATE OF COVERAGE IBBUE DOE JMM1DDrM August 15, 1989 NIRDOUC" ASS aRTMATE s MM AS A MATTER OP WINOW►TION OMLT A&D*M tf MO MNNTS MOM THE OFff ICATE NNDLOm im orwhPICATt DOES NOT MN1NO.MR" J3 Frank B. Hall & Co. of California OR AM THECW*W MAPPORMEYTHEMroRANOW Northern Division ANTNORITIE=AIWOROINOOOVOME one Market Plaza Spear Street Tower, Suite 2100 �� A BIG INDEPENDENT ams EXCESS POOL San Francisco, CA 94105 COMPANY aINrNINtED Lrrmn City of Huntington Beach COMPANY C City of Huntington Beach Civic Inprovement Corporation COMPANY p 2000 14a.in Street Huntington Beach, CA 92648 FERNY E VVERAOEi THIS IS TO CENNTIPY THAT THE POLICIES OR MEMORANDUMS OP OOVERAW LIWW KLOW HANS EEL+MNED TO THE NIISLIRED WW1D ADM Poll THE POLICY OR IQrIORAHOLIM PIPWO M OSCATO,NOTWI W&NOINO ANY REOUIRENNENT.TERM OR DONOITIo+N OF ANY CONTRACT OR OTHER DOOMONT wrtN RELICT TO WHICH THIS CERTIFICATE MAY a ISSNLD OR MAT PERTAIN,THE COYEMAn AP/Omm BY THt POLICY OR MEMORAMOLIM DOCRIEtD NIRtM119 SLIGAICT TO ALLIM TIMMIL E=UJI EIDNt AND CONDITIONS of SUCH POLJCY on MEMORANDUM. L1cctL On a MtM�NDDAUM Me.P a�i+o°Aw NNOLLIM AFL Umm IN TgOUWD5 COIRRAoti WimelR OAT9("maxom DATEIMWOONYI MCC=p XW B001 7-1-89 7-1-90 UTY p � A CLA IMS MAN OCCURIMENCE M A ro : , OOMONEa OW 80"4r AW FAWW n M OTHER THAN UMBRELLA FOtaI� Cramp A 01MSNMIDS Mtwrn 0WOMAOE A mass • '+IORt VW*COM00ENSAMON aw sMW111IR" f rAW" ll of AND 0 MRAGE B • BMFLOYER's LLABILITY OrwlEa B m"Nu R Mto - 00 Bafalwlref Eft WWW of 9- R OEBCILIFT"OF 0►EIIATIONNL0rA BEMs As respects the City of Huntington Beach Civic Improvement Corporation's Public Parking Project, this Certificate is issued for coverage evidence purposes only. NRTIFICATE MOLDER CANCELLATION State Street Bank and Trust Company YDATE 11 MCF.TM OWMW A RIOAMNMI1LL DMAVORTOTOMAIL of California, N. A. •OATewmms"MOT1ICeTOT14="WemWLWWm1DTOTWLaT.@W IAAL/IE TO MALL ELNDu Mona ENNALL tMPo11 MO o1LwATIop OR LIADILITY OP 725 Figueroa Street, Suite 975 ANT NDMO WON TM COMPANY.MJT0IO MJM I MM OR A"O& Los Angeles, CA 90017 ArfLroRaM � .+NNEt, Ilia M. M.itchell, Account Executive 4$9 ROBERT F. DRIVER COMPANY, INC. •COMPLETE INSURANCEIBOND SERVICE 3636 BIRCH STREET,SUITE 230,NEWPORT BEACH, CALIFORNIA 92660.2619•(714) 756.0271 FAX 714 756-2713 August 15, 1989 City Council of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 State Street Bank and Trust Company of California, N.A. 725 South Figueroa Street, Suite 975 Los Angeles, CA 90017 RE: $15,025,000 Certificates of Participation (1989 Public Parking Project) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as the Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: We act as the Property Insurance Broker for the City of Huntington Beach (the "City") and that capacity have reviewed and are familiar with the requirements as to insurance pursuant to Article V of that certain Lease Agreement as of July 15, 1989, by and between the City of Huntington Beach, Civic Improvement Corporation and the City. In our opinion, the insurance required of the City by Sections, 5.4 and 5.5 of said Lease Agreement are presently in full force and effect in all respects in accordance with said Sections and Section 5.7 of said Lease Agreement. Evidence of such insurance policies are attached hereto and by this reference incorporated herein. Very Truly yours, ROBERT F. DRIVVEEJRR COMPANY, INC. Sharon W. Nash Vice President HOME OFFICE 1620 FIFTH AVENUE, SAN DIEGO. CALIFORNIA 92101-2703•(619)238-1828 a1:11ia�. EVIDENCE OF PROPERTY INSURANCE DA18y'T1_Wfgq CP THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY. Pn�OUCER COMPANY .ERT F DRIVE$ COMPANY INC SEE ATTACHED SCHEDULE OF 3636 BIRCH STREET #230 INSURANCE COMPANIES NEWPORT BEACH, CA 92660 714) 756-0271 CODE SUB-CODE INSURED LOAN NUMBER POLICY NUMBER CITY OF HUNTINGTON BEACH, CITY OF PER ATTACHED HUNTINGTON BEACH CIVIC IMPROVEMENT EFFECTIVE DATE(Min/DD/YY) EXPIRATION DATE(Min/DD/YY) TERM UNTIL TERMINATED CORP. 6-5-89 6-5-90 IF CHECKED 2000 MAIN STREET THIS REPLACES PRIOR EVIDENCE DATED: PROPERTY INFORMATION LOCATION/DESCRIPTION REAL PROPERTY, POLICE BUILDING NO. 2, 2000 MIN STREET, HUNTINGTON BEACH, CA PER SITE PLAN ATTACHED. COVERAGE INFORMATION COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTIBLE ALL RISK OF IDRECT PHYSICAL LOSS WITH STANDARD POLICY $50 MIL $10,000* EXCLUSIONS APPLICABLE. PER OCCUR- EARTHQUAKE AND FLOOD INCLUDED. RENCE ANNUAL AGGREGATE APPLICABLE SEPARATELY TO EARTH- *EXCEPT: EARTHQUAKE 5% WITH MINIMUM PER OCCURRENCE QUAKE & OF $100,000 FOR EARTHQUAKE AND FLOOD. FLOOD MARKS(Including Spscll Conditions) REAL PROEPRTY AND ONE YEAR LEASE PAYMENTS ARE INSURED. CANCELLATION THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS,AND RULES IN EFFECT FOR EACH POLICY PERIOD. SF%LBAYS THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW. ADDITIONAL INTEREST 4,7 NAME AND ADDRESS NATURE OF INTEREST MORTGAGEE ADDITIONAL INSURED .TE STREET BANK AND TRUST .,OMPANY OF CA, N.A. X LOSS PAYEE (OTHER) 725 S. FIGUEROA STREET SIGNATURE OF AUTHORIZED AGENT OF COMPANY LOS ANGELES, CA 90017 ACORD 27 2/88 '� J C ACORD CORPORATION 1988 I SCHEDULE OF INSURERS I. PRIMARY LAYER LIMIT OF LIABILITY: $10,000,000 PER OCCURRENCE AND IN THE ANNUAL AGGREGATE EACH AS RESPECTS EARTHQUAKE AND FLOOD EXCESS OF DEDUCTIBLES. INSURERS AND ASSIGNED PERCENT OF LIMIT OF POLICY NUMBERS PARTICIPATION LIABILITY COMMONWEALTH INSURANCE CO. 50% $ 51000,000 CWMP 3323 LLOYDS UNDERWRITERS AND 50% 5,000,000 CERTAIN COMPANIES CERTIFICATE NO. 1922 1002 $10,000,000 II. FIRST EXCESS LAYER LIMIT OF LIABILITY: $20,000,000 PER OCCURRENCE AND IN THE ANNUAL AGGREGATE EACH AS RESPECTS EARTHQUAKE AND FLOOD EXCESS OF $10,000,000 PRIMARY EXCESS OF UNDERLYING DEDUCTIBLES. INSURERS AND ASSIGNED PERCENT OF LIMIT OF POLICY NUMBERS PARTICIPATION LIABILITY CONTINENTAL INSURANCE CO. 25.02 $ 51000,000 SFC 2983315 HOUSTON CASUALTY COMPANY 25.02 5,000,000 9HP 10623 LLOYDS UNDERWRITERS AND 22.52 4,500,000 CERTAIN COMPANIES CERTIFICATE NO. 1923 UNITED FIRE 6 CASUALTY CO. 15.0% 3,000,000 UIM 461122 NORTH AMERICAN SPECIALTY 12.5% 2,500,000 NA 00127 100.0% $20,000,000 PAGE 1 OF 2 III. SECOND EXCESS LAYER LIMIT OF LIABILITY: $20,000,000 PER UCCURRENCE AND IN THE ANNUAL AGGREGATE EACH AS RESPECTS EARTHQUAKE AND FLOOD EXCESS OF $30,000,000 PER OCCURRENCE A.\D IN THE ANNUAL AGGREGATE EACH AS RESPECTS EARTHQUAKE AND FLOOD EXCESS OF L'N-DERLYING DEDUCTIBLES. INSURERS AND ASSIGNED PERCENT OF LIMIT OF POLICY NUMBERS PARTICIPATION LIABILITY COhMON"WEALTH INSURANCE CO. 50Z $10,000,000 0411P 3 3 2 4 FIREMAN'S FUND INSURANCE CO. 502 10,000,000 XSP 0003973 100% $20,000,000 ISSUED TO: CITY OF HUNTINGTON BEACH, ET AL SHERWOOD INSURANCE SERVICES BY: L�-- [AUT#6RIZED REPRESENTATIVE] /ggf PAGE 2 OF 2 • �' Form 4388FLI NS (Rev. May 1, 1942) z LENDER'S LOSS PAYABLE ENDORSEMENT 1. Loss or damage, if any, under this policy, shall be paid to the Payee a&med on the ftret page of ULis polity, its successors and assigns, hereinafter referred to as "the Lender", in whatever form or capacity its interests may appear and whether said interest be vested in said Lender in its individual or in its disclosed or undisclosed fiduciary or representative capacity,or otherwise,or vested in a nominee or trustee of said Lender. 2. The insurance under this policy, or any rider or endorsement attached thereto, as to the interest only of the Lender, its succes- sors and assigns. shall not be invalidated nor suspended: (a) by any error, omission, or change respecting the ownership, description, possession, or location of the subject of the insurance or the interest therein,or the title thereto; (b) by the commencement of foreclosure proceedings or the giving of notice of sale of any of the property covered by this policy by virtue of any mortgage or trust deed; (c) by any breach of warranty.act.omission, neglect,or non-compliance with any of the provisions of this policy, including any and all riders now or hereafter attached thereto, by the named insured, the borrower, mortgagor, trustor, vendee, owner, tenant. warehouseman, cus- todian,occupant,or by the agents of either or any of them or by the happening of any event permitted by them or either of them, or their agents,or %hick they failed to prevent, whether occurring before or after the attachment of this endorsement,or whether before or after a loss, which under the provisions of this policy of insurance or of any rider or endorsement attached thereto would invalidate or sus- pend the insurance as to the named insured, excluding herefrom, however, any acts or omissions of the Lender while exercising active control and management of the property. 3 In the event of failure of the insured to pay any premium or additional premium which shall be or become due under the terms of this policy or on account of any change in occupancy or increase in hazard not permitted by this policy, this Company agrees to give written notice to the Lender of such non-payment of premium after sixty (60) days from and within orte hundred and twenty (120) days after due date of such premium and it is a condition of the continuance of the rights of the Lender hereunder that the Lender when so notified in %riling by this Company of the failure of the insured to pay such premium shall pay or cause to be paid the premium due within ten (10) days iollowing receipt of the Company',demand in writing therefor. If the Lender shall decline to pay said premium or additional premium, the rights of the Lender under this Lender's Loss Payable Endorsement shall not be terminated before ten (10) days after receipt of said written notice by the Lender 4. Whenever this Company shall pay w the Lender any sum for loss or damage under this policy and shall claim that as to the insured no liahility therefor exists. this Company, at its option, may pay to the Lender the whole principal sum and interest and other indebtedness due or to become due from the insured, whether secured or unsecured. (with refund of all interest not accrued). and this Company, to the extent of such payment, shalt thereupon receive a full assignment and transfer, without recourse. of the debt and all rights and securities held as collateral thereto. S. If there be any other insurance upon the within described property,this Company shall be liable under this policy as to the Lender for the proportion of such loss or damage that the sum hereby insured bears to the entire insurance of similar character on said property under policies held by, payable to and expressly consented to by the Lender. Any Contribution Clause included in any Fallen Building Clause Waiver or any Extended Coverage Endorsement attached to this contract of insurance is hereby nullified,and also any Contribu- tion Clause in any other endorsement or rider attached to this contract of insurance is hereby nullified except Contribution Clauses for the compliance with which the insured has received reduction in the rate charged or has received extension of the coverage to include hazards other than fire and compliance with such Contribution Clause is made a part of the consideration for insuring such other hazards. The Lender upon the payment to it of the full amount of its claim, will subrogate this Company (pro rata with all other insurers con- tributing to said payment) to all of the Lender's rights of contribution under said other insurance. 6. This Company reserves the right to cancel this policy at any time. as provided by its terms, but in such case this policy shall continue in force for the benefit of the Lender for ten (10) days after written notice of such cancellation is received by the Lender and shall then cease i. This policy shall remain in full force and effect as to the interest of the Lender for a period of ten (10) days after its expiration unless an acceptable policy in renewal thereof with loss thereunder payable to the Lender in accordance with the terms of this Lender's Loss Payable Endorsement. shall have been issued by some insurance company and accepted by the Lender. 8. Should legal title to and beneficial ownership of any of the property covered under this policy become vested in the Lender or its agents, insurance under this policy shall continue for the term thereof for the benefit of the Lender but, in such event, any privileges granted by this Lender's Loss Payable Endorsement which are not also granted the insured under the terms and conditions of this policy and/or under other riders or endorsements attached thereto shall not apply to the insurance hereunder as respects such property. 9. All notices herein provided to be given by the Company to the Lender in connection with this policy and this Lender's Loss Payable Endorsement shall be mailed to or delivered to the Lender at its office or branch described on the first page of the policy. Approved: Board of Fire Underwriters of the Pacific, California Bankers' Association, Committee on Insurance. FRO ,;CTY OF HB/FJB�IC WOF T0:7562713 AUG 91 1989 3:54PM P.03 MAIN STREET POLICE PARKING Q '•r• PARKING dc PARKING r � NO SCALE PARKING SITE PLAN i ADMINISTRATION 2 POLICE DEVELOPMENT WIN0 4 COUNCIL CHAMBER 7 St AMEBIC Foi m No.1084(10173) �� 9 California Land Title Association Standard Coverage Policy Form Copyright 1973 P k 0 P E K i' i( SEP 0 1 ;ANAGEMENT POLICY OF TITLE INSURANCE ISSUED BY First American Title Insurance Company SUBJECT C46CHEDULE B AND THE CONDITIONS AND STIPULATIONS HEREOF,FIRST AMERICAN TITLE INSURANCE COMPANY,a California corporation,herein called the Company,insures the insured,as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A,and costs, attorneys"fees and expenses which the Company may become obligated to pay hereunder,sustained or incurred by said insured by reason of: 1. Title to the estate or interest described in Schedule A being vested other than as stated therein: 2. Any defect in or lien or encu brace on such title; 3. Unmarketability of such title; o `. 4. Any lack of the ordinary right of an abutting owner for access to at least one physically open street or highway if the land, in fact,abuts upon one or more such streets or highways; and in addition,as to an insured lender only: 5. Invalidity of the lien of the insured mortgage upon said estate or interest except to the extent that such invalidity, or claim thereof, arises out of the transaction v enoed by the insured mortgage and is based upon a. usury,or b. any consumer credit protection or truth in lending law; 6. Priority of any lien or encumbrance over the lien of the insured mortgage, said mortgage being shown in Schedule B in the order of its priority;or 7. Invalidity of any assignment of the insured mortgage, provided such assignment is shown in Schedule B. y IN WITNESS WHEREOF, First American Title Insurance Company has caused this policy to be signed and sealed by its duly authorized officers as of Date of Policy shown in Schedule A. First American Title Insurance Company BY PRESIDENT ATTEST ' 4,� C. � ,�� SECRETARY CONDITIONS AND STIPULATIONS .)EFINITION OF TERMS (iii) the amount paid by any governmental interest or the lien of the insured mortgage, as in- The following terms when used in this policy agency or instrumentality,if such agency or instru- cared, including but not limited to executing cor- mean: mentality is the insured claimant, in acquisition of rective or other documents. such estate or interest in satisfaction of its insur- (a) "insured": the insured named in Schedule ance contract or guaranty. 4. PROOF OF LOSS OR DAMAGE — A, and, subject to any rights or defenses the Com- LIMITATION OF ACTION pany may have had against the named insured, (b) CONTINUATION OF INSURANCE those who succeed to the interest of such insured AFTER CONVEYANCE OF TITLE In addition to the notices required under Para- by operation of law as distinguished from purchase The coverage of this policy shall continue in graph 3 (b) of these Conditions and Stipulations,a including,but not limited to,heirs,distributees,de- force as of Date of Policy,in favor of an insured so Proof of loss or damage,signed and sworn to by the visees, survivors, personal representatives, next of long as such insured retains an estate or interest in insured claimant shall be furnished to the Corr, kin, or corporate or fiduciary successors. The term the land,or owns an indebtedness secured by a pur- pany within 90 days after the insured claimant "insured" also includes(i)the owner of the indebt- chase money mortgage given by a purchaser from shall ascertain or determine the facts giving rise to edness secured by the insured mortgage and each such insured, or so long as such insured shall have such loss or damage. Such proof of loss or damage successor in ownership of such indebtedness (re- liability by reason of covenants of warranty made shall describe the defect in,or lien or encumbrance serving, however, all rights and defenses as to any by such insured in any transfer or conveyance of on the title, or other matter insured against by this such successor who acquires the indebtedness by such estate or interest; provided, however, this Policy which constitutes the basis of loss or dam- operation of law as described in the first sentence policy shall not continue in force in favor of any and, when appropriate, state the basis of of this subparagraph (a) that the Company would purchaser from such insured of either said estate or calculating the amount of such loss or damage. have had against the successor's transferor), and interest or the indebtedness secured by a purchase Should such proof of loss or damage fail to further includes (ii) any governmental agency or instrumentality which is an insurer or guarantor money mortgage given to such insured. state facts sufficient to enable the Company to under an insurance contract or guaranty insuring or 3. DEFENSE AND PROSECUTION OF determine its liability hereunder, insured claimant, at of guaranteeing said indebtedness,or any part thereof, ACTIONS — NOTICE OF CLAIM TO BE the ton requestal informatti Company, shall furnish h adddi whether named as an insured herein or not, and GIVEN BY AN INSURED CLAIMANT suction on may reasonably be (iii) the parties designated in paragraph 2 (a) of necessary to make such determination. these Conditions and Stipulations. (a) The Company,at its own cost and without No right of action shall accrue to insured undue delay, shall provide for the defense of an lit until 30 days after such roof of loss or (b) "insured claimant": an insured claiming insured in litigation to the extent that such liti caman un y P toss or damage hereunder. tion involves an all damage shall have been furnished. ga aged defect, lien, y this Failure to furnish such proof of loss or damage Itg "insured lender the owner of an insured prance or other matter insured against by this mortgage. po1icY' th sll liability Company under policy as to suchterminate any or damage. (d) "insured mortgage": a mortgage shown in Ib1 The insured shall notify the Company Schedule B. the owner of which is named as an in- promptly in writing (i) in case of any litigation as 5. OPTIONS TO PAY OR OTHERWISE SETTLE cared in Schedule A. set forth in (a) above, 00 in case knowledge shall CLAIMS AND OPTIONS TO PURCHASE IN— le) "khowled actual knowledge, come to an insured hereunder of any claim of title DEBTEDNESS ge": ge, not con- or interest which is adverse to the title to the estate The Company p pay a structive knowledge or notice which may be im y shall have the option to �d to an insured b reason of an or interest or the lien of the insured mortgage, as y y public records. insured, and which might cause loss or damage for otherwise settle for or in the name of at insured If1 "land": the land described, specifically or which the Company may be liable by virtue of this claimant any claim insured against, or to fermi reference in Schedule C, and improvements af- policy,or(iii) if title to the estate or interest or the hate all liability and obligations of the Company 'fixed thereto which by law constitute real property; lien of the insured mortgage,as insured,is rejected hereunder i paying or tendering payment ge the P P tY; amount of insurance under this policy together provided, however, the term "land" does not in- as unmarketable. If such prompt notice shall not with any costs, attorneys' fees and expenses in- clude any area excluded by Paragraph No. 6 of be given to the Company, then as to such insured curved up to the time of such payment or tender Part I of Schedule B of this Policy. all liability of the Company shall cease and termi- of payment by the insured claimant and authorized Hate in regard to the matter or matters for which by the Company. In case loss or damage is claimed Ig) "mortgage mortgage, deed of trust, such prompt notice is required;provided,however, under this policy by the owner of the indebtedness trust deed, or other security instrument. that failure to notify shall in no case prejudice the secured by the insured mortgage,the Company shall (h) "public records": those records which by rights of any such insured under this policy unless have the further option to purchase such indebted- law impart constructive notice of matters relating the Company shall be prejudiced by such failure ness for the amount owingthereon together p g and then only to the extent of such prejudice. all costs, attorne s fees d expenseswhich Nthe th to the land. attorneys' Z. lal CONTINUATION OF INSURANCE (c) The Company shall have the right at its Company is obligated hereunder to pay. If the AFTER ACQUISITION OF TITLE BY own cost to institute and without undue delay Company offers to purchase said indebtedness as INSURED LENDER prosecute any action or proceeding or c do a any shall transfer andtahsssion sa,d indebted of such ness and nthe other act which in its opinion may be necessary or 9 If this policy insures the owner of the indebt- desirable to establish the title to the estate or inter- mortgage and any collateral securing the same to edness secured by the insured mortgage,this policy est or the lien of the insured mortgage,as insured; the Company upon payment therefor as herein shall continue in force as of Date of Policy in favor and the Company may take any appropriate action, provided. Upon such offer being made by the of such insured who acquires all or any part of the whether or not it shall be liable under the terms of Company, all liability and obligations of the Com- estate or interest in the land described in Schedule this policy, and shall not thereby concede liability pany hereunder to the owner of the indebtedness C by foreclosure, trustee's sale,conveyance in lieu or waive any provision of this policy. secured by said insured mortgage, other than the of foreclosure, or other legal manner which dis- obligation to purchase said indebtedness pursuant charges the lien of the insured mortgage,and if such (d) Whenever the Company shall have brought to this paragraph,are terminated. insured is a corporation, its transferee of the estate any action or interposed a defense as required or 6 DETERMINATION AND PAYMENT OF LOSS or interest so acquired, provided the transferee is Permitted by the provisions of this policy, the the parent or wholly owned subsidiary of such in- Company may pursue any such litigation to final (a) The liability of the Company under this sured;and in favor of any governmental agency or determination by a court of competent jurisdiction policy shall in no case exceed the least of: instrumentality which acquires all or any part of the and expressly reserves the right, in its sole discre- estate or interest pursuant to a contract of insur- tion,to appeal from any adverse judgment or order. W the actual loss of the insured claimant; ance or guaranty insuring or guaranteeing the in- (a) In all cases where this policy or debtedness secured by the insured mortgage. After P Y Permits or o (it) the amount of insurance stated to quires the Company to prosecute or provide for Schedule A, or, if applicable, the amount of m- any such acquisition the amount of insurance here- the defense of any action or proceeding, the in- surance as defined in paragraph 2 (a) hereof: or under, exclusive of costs, attorneys' fees and ex- sured hereunder shall secure to the Company the penses which the Company may be obligated to right to so prosecute or provide defense in such (iii) if this policy;nsures the owner of the pay,shall not exceed the least of: action or proceeding, and all appeals therein, and indebtedness secured by the insured mortgage,and (i) the amount of insurance stated in permit the Company to use,at its option, the name Provided said owner is the insured claimant, the of such insured for such purpose. Whenever re- amount of the unpaid principal of said indebted- quested A; ness, plus interest thereon: provided such amount quested the Company, such insured shall give shall not include any additional principal indebted- the indebtedness plus interest thereon,ass deter-r- the Company,at the Company's expense,all reason-able aid 111 in any such action or proceeding in (i i) the amount of the unpaid p ness created subsequent to Date of Policy, except d mined under paragraph 6 (a) (iii) hereof, expenses effecting settlement, securing evidence, obtaining as to amounts advanced to protect the lien of theinsured mortgage and secured thereby. of foreclosure and amounts advanced to protect witnesses, or prosecuting or defending such action the lien of the insured mortgage and secured by or proceeding, and (2) in any other act which in (b) The Company will pay, in addition to any said insured mortgage at the time of acquisition of the opinion of the Company may be necessary or loss insured against by this policy, all costs im- such estate or interest in the land;or desirable to establish the title to the estate or posed upon an insured in litigation carried on by (Continued on inside back cover) CONDITIONS AND STIPULATIONS (Continued from inside front cover) Company for such insured, and all costs, or (b) a mortgage hereafter executed by an insured 11. LIABILITY LIMITED TO THIS POLICY ...,rneys' fees and expenses in litigation carried which is a charge or lien on the estate or interest on by such insured with the written authorization described or referred to in Schedule A, and the This instrument together with all endorse- of the Company. amount so paid shall be deemed a payment under ments and other instruments,if any,attached here this policy. The Company shall have the option to to by the Company is the entire policy and con- (c) When the amount of loss or damage has tract between the insured and the Company. been definitely fixed in accordance with the con- apply to the payment of any such mortgage any ditions of this policy, the loss or damage shall be amount that otherwise would be payable hereunder Any claim of loss or damage, whether or not payable within 30 days thereafter. to the insured owner of the estate or interest cov- based on negligence, and which arises out of the ered by this policy and the amount so paid shall be status of the lien of the insured mortgage or of the 7. LIMITATION OF LIABILITY deemed apayment under this policy to said insured title to the estate or interest covered hereby, or owner. any action asserting such claim, shall be restricted No claim shall arise or be maintainable under The provisions of this paragraph 9 shall not to the provisions and conditions and stipulations of this policy(a)if the Company,after having received apply to an owner of the indebtedness secured by this policy. notice of an alleged defect, lien or encumbrance in- the insured mortgage, q unless such insured acquires No amendment of or endorsement to this sured against hereunder, by litigation or other- wise, removes such defect, lien or encumbrance or title said estate or interest in satisfaction of said policy can made except by writing endorsed establishes the title,or the lien of the insured mort- indebtedness or any part thereof. hereon attached hereto signed by either the President, a Vice President, the Secretary, an gage, as insured, within a reasonable time after 10. SUBROGATION UPON PAYMENT OR Assistant Secretary, or validating officer or author. receipt of such notice;(b) in the event of litigation SETTLEMENT ized signatory of the Company. until there has been a final determination by a court of competent jurisdiction,and disposition of Whenever the Company shall have paid or No payment shall be made without producinc all appeals therefrom,adverse to the title or to the settled a claim under this policy, all right of sub- this policy for endorsement of such payment un, lien of the insured mortgage, as insured, as pro- rogation shall vest in the Company unaffected by less the policy be lost or destroyed, in which cast vided in paragraph 3 hereof; or (c) for liability any act of the insured claimant, except that the proof of such loss or destruction shall be furnishec voluntarily admitted or assumed by an insured owner of the indebtedness secured by the insured to the satisfaction of the Company. without prior written consent of the Company. mortgage may release or substitute the personal 12. NOTICES, WHERE SENT liability of any debtor or guarantor, or extend or S. REDUCTION OF INSURANCE; TERMINA— otherwise modify the terms of payment, or re- All notices required to be given the Company TION OF LIABILITY lease a portion of the estate or interest from the and any statement in writing required to be fur lien of the insured mortgage, or release any niched the Company shall be addressed to it at it! All payments under this policy, except pay- collateral security for the indebtedness, provided home office at 421 North Main Street,Santa Ana ment made for costs, attorneys'fees and expenses, such act occurs prior to receipt by such insured California, 92701, or to the office which issued shall reduce the amount of the insurance pro tanto; of notice of any claim of title or interest adverse this policy. provided,however,if the owner of the indebtedness to the title to the estate or interest or the priority secured by the insured mortgage is an insured here- of the lien of the insured mortgage and does not under,then such payments,prior to the acquisition result in any loss of priority of the lien of the in- of title to said estate or interest as provided in sured mortgage. The Company shall be subrogated paragraph 2 (a) of these Conditions and Stipula- to and be entitled to all rights and remedies which ,ns,shall not reduce pro tanto the amount of the such insured claimant would have had against any li prance afforded hereunder as to any such in- person or property in respect to such claim had this red, except to the extent that such payments policy not been issued, and the Company is here- reduce the amount of the indebtedness secured by authorized and empowered to sue,compromise by such mortgage. or settle in its name or in the name of the insured ' to the full extent of the loss sustained by the Com- Payment in full by any person or voluntary pany. If requested by the Company, the insured satisfaction or release of the insured mortgage shall shall execute any and all documents to evidence terminate all liability of the Company to an insured the within subrogation. If the payment does not owner of the indebtedness secured by the insured cover the loss of such insured claimant, the Com- mortgage, except as provided in paragraph 2 (a) pany shall be subrogeted to such rights and reme- hereof. dies in the proportion which said payment bears to 9. LIABILITY NONCUMULATIVE the amount of said loss,but such subrogation shall be in subordination to an insured mortgage. If loss It is expressly understood that the amount of should result from any act of such insured claimant, insurance under this policy,as to the insured owner such act shall not void this policy, but the Com- of the estate or interest covered by this policy,shall pany, in that event, shall as to such insured be reduced by any amount the Company may pay claimant be required to pay only that part of any under any policy insuring (a) a mortgage shown or losses insured against hereunder which shall exceed referred to in Schedule B hereof which is a lien the amount, if any,lost to the Company by reason on the estate or interest covered by this policy, of the impairment of the right of subrogation. CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) SCHEDULE A TOTAL FEE FOR TITLE, EXAMINATION AND TITLE INSURANCE $13,500. 00 AMOUNT OF INSURANCE: $15, 025, 000. 00 DATE OF POLICY: AUGUST 14, 1989 AT 3:25 P.M. 1. NAME OF INSURED: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. , A NATIONAL BANKING ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, AS TRUSTEE FOR THE OWNERS OF THE CERTIFICATES OF PARTICIPATION, AND THE CITY OF HUNTINGTON BEACH. 2. THE ESTATE OR INTEREST REFERRED TO HEREIN, IS AT DATE OF POLICY VESTED IN: CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, A NONPROFIT CORPORATION, AS TO A FEE; AND CITY OF HUNTINGTON BEACH, A CHARTER CITY AND MUNICIPAL CORPORATION, AS TO A LEASEHOLD ESTATE. 3. THE ESTATE OR INTEREST IN THE LAND DESCRIBED IN SCHEDULE C AND WHICH IS COVERED BY THIS POLICY IS: A FEE, AND AN UNRECORDED LEASE DATED JULY 15, 1989, EXECUTED BY CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, A NONPROFIT CORPORATION, AS LESSOR, AND CITY OF HUNTINGTON BEACH, A CHARTER CITY AND MUNICIPAL CORPORATION, AS LESSEE, FOR THE TERM, AND UPON THE TERMS COVENANTS AND CONDITIONS PROVIDED THEREIN, AS DISCLOSED BY MEMORANDUM OF LEASE RECORDED AS INSTRUMENT NO. 89-430638 OF OFFICIAL RECORDS. PAGE 2 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) SCHEDULE B THIS POLICY DOES NOT INSURE AGAINST LASS OR DAMAGE, NOR AGAINST COSTS, ATTORNEYS' FEES OR EXPENSES, ANY OR ALL OF WHICH ARISE BY REASON OF THE FOLLOWING: PART ONE: 1. TAXES OR ASSESSMENTS WHICH ARE NOT SHOWN AS EXISTING LIENS BY THE RECORDS OF ANY TAXING AUTHORITY THAT LEVIES TAXES OR ASSESSMENTS ON REAL PROPERTY OR BY THE PUBLIC RECORDS. PROCEEDINGS BY A PUBLIC AGENCY WHICH MAY RESULT IN TAXES OR ASSESSMENTS, OR NOTICES OF SUCH PROCEEDINGS, WHETHER OR NOT SHOWN BY THE RECORDS OF SUCH AGENCY OR BY THE PUBLIC RECORDS. 2. ANY FACTS, RIGHTS, INTERESTS OR CLAIMS WHICH ARE NOT SHOWN BY PUBLIC RECORDS BUT WHICH COULD BE ASCERTAINED BY AN INSPECTION OF THE LAND OR BY MAKING INQUIRY OF PERSONS IN POSSESSION THEREOF. 3. EASEMENTS, LIENS OR ENCUMBRANCES, OR CLAIMS THEREOF, WHICH ARE NOT SHOWN BY THE PUBLIC RECORDS. 4 . DISCREPANCIES, ' CONFLICTS IN BOUNDARY LINES, SHORTAGE IN AREA, ENCROACHMENTS, OR ANY OTHER FACTS WHICH A CORRECT SURVEY WOULD DISCLOSE, AND WHICH ARE NOT SHOWN BY THE PUBLIC RECORDS. 5. (A) UNPATENTED MINING CLAIMS; (B) RESERVATIONS OR EXCEPTIONS IN PATENTS OR IN ACTS AUTHORIZING THE ISSUANCE THEREOF; (C) WATER RIGHTS, CLAIMS OR TITLE TO WATER, WHETHER OR NOT THE MATTERS EXCEPTED UNDER (A) , (B) , OR (C) ARE SHOWN BY THE PUBLIC RECORDS. 6. ANY RIGHT, TITLE, INTEREST, ESTATE OR EASEMENT IN LAND BEYOND THE LINES OF AREA SPECIFICALLY DESCRIBED OR REFERRED TO IN SCHEDULE C, OR IN ABUTTING STREETS, ROADS, AVENUES, ALLEYS, LANES, WAYS OR WATERWAYS, BUT NOTHING IN THIS PARAGRAPH SHALL MODIFY OR LIMIT THE EXTENT TO WHICH THE ORDINARY RIGHT OF AN ABUTTING OWNER FOR ACCESS TO A PHYSICALLY OPEN STREET OR HIGHWAY IS INSURED BY THIS POLICY. PAGE 3 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) 7. ANY LAW, ORDINANCE OR GOVERNMENTAL REGULATION (INCLUDING BUT NOT LIMITED TO BUILDING AND ZONING ORDINANCES) RESTRICTING OR REGULATING OR PROHIBITING THE OCCUPANCY, USE OR ENJOYMENT OF THE LAND, OR REGULATING THE CHARACTER, DIMENSIONS OR LOCATION OF ANY IMPROVEMENT NOW OR HEREAFTER ERECTED ON THE LAND, OR PROHIBITING A SEPARATION IN OWNERSHIP OR A CHANGE IN THE DIMENSIONS OR AREA OF THE LAND OR ANY PARCEL OF WHICH THE LAND IS OR WAS A PART, WHETHER OR NOT SHOWN BY THE PUBLIC RECORDS AT DATE OF POLICY, OR THE EFFECT OF ANY VIOLATION OF ANY SUCH LAW, ORDINANCE OR GOVERNMENTAL REGULATION, WHETHER OR NOT SHOWN BY THE PUBLIC RECORDS AT DATE OF POLICY. S. RIGHTS OF EMINENT DOMAIN OR GOVERNMENTAL RIGHTS OF POLICE POWER UNLESS NOTICE OF THE EXERCISE OF SUCH RIGHTS APPEARS IN THE PUBLIC RECORDS. 9. DEFECTS, LIENS, ENCUMBRANCES, ADVERSE CLAIMS, OR OTHER MATTERS (A) WHETHER OR NOT SHOWN BY THE PUBLIC RECORDS AT DATE OF POLICY, BUT CREATED, CAUSED, SUFFERED, ASSUMED OR AGREED TO BY THE INSURED CLAIMANT; (B) NOT SHOWN BY THE PUBLIC RECORDS AND NOT OTHERWISE EXCLUDED FROM COVERAGE BUT KNOWN TO THE INSURED CLAIMANT EITHER AT DATE OF POLICY OR AT THE DATE SUCH CLAIMANT ACQUIRED AN ESTATE OR INTEREST INSURED BY THIS POLICY OR ACQUIRED THE INSURED MORTGAGE AND NOT DISCLOSED IN WRITING BY THE INSURED CLAIMANT TO THE COMPANY PRIOR TO THE DATE SUCH INSURED CLAIMANT BECAME AN INSURED HEREUNDER; (C) RESULTING IN NO LOSS OR DAMAGE TO THE INSURED CLAIMANT; (D) ATTACHING OR CREATED SUBSEQUENT TO DATE OF POLICY; OR (E) RESULTING IN LOSS OR DAMAGE WHICH WOULD NOT HAVE BEEN SUSTAINED IF THE INSURED CLAIMANT' HAD BEEN A PURCHASER OR ENCUMBRANCER FOR VALUE WITHOUT KNOWLEDGE. PART TWO: 1. GENERAL AND SPECIAL TAXES FOR THE FISCAL YEAR 1989-1990, A LIEN NOT YET PAYABLE. 2. THE LIEN OF SUPPLEMENTAL TAXES ASSESSED PURSUANT TO CHAPTER 3 .5 COMMENCING WITH SECTION 75 OF THE CALIFORNIA REVENUE AND TAXATION CODE. 3. THE DEDICATION TO PUBLIC USE, ALL PUBLIC HIGHWAYS, PARKS, COURTS, COMMONS, AND OTHER GROUND SHOWN ON THE MAP OF SAID TRACT INTENDED FOR PUBLIC USE, EXCEPT THE RIGHTS TO THE USE OF SAID STREETS, AVENUES AND ALLEYS FOR WATER PIPES AND CONDUITS, RAILROADS, PAGE 4 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) TELEPHONE POLES, WIRES AND CONDUITS, AND INCIDENTAL PURPOSES, AS INDORSED ON THE MAP OF SAID TRACT. 4. AN OIL AND GAS LEASE, COVERING LOTS 16, 18 AND 20 IN BLOCK 1903, DATED AUGUST 28, 1939, EXECUTED BY AND BETWEEN VENTURE OIL COMPANY, AS LESSOR, AND C. R. PRICE AND COMPANY, AS LESSEE, UPON THE TERMS, COVENANTS AND CONDITIONS THEREIN CONTAINED, RECORDED SEPTEMBER 28, 1939 IN BOOK 1015, PAGE 116 OF OFFICIAL RECORDS; RECORD REFERENCE IS HEREBY MADE FOR FULL PARTICULARS. THE LESSEE'S INTEREST IN AND TO SAID LEASEHOLD ESTATE HAS BEEN ASSIGNED TO PETER B. ROTHSCHILD, A SINGLE MAN, BY MESNE ASSIGNMENTS OF RECORD. SAID LEASEHOLD ESTATE IS SUBJECT TO THE FOLLOWING: (1) AN UNRECORDED AGREEMENT, DATED NOVEMBER 25, 1935, BETWEEN VENTURE OIL COMPANY, A CORPORATION, FIRST PARTY, AND STANDARD OIL COMPANY OF CALIFORNIA, A CORPORATION, SECOND PARTY, RELATING TO THE SALE OF OIL PRODUCED FROM SAID LAND, A NOTICE OF WHICH WAS RECORDED DECEMBER 7, 1935 IN BOOK 793, PAGE 150 OF OFFICIAL RECORDS. (2) AN UNRECORDED NATURAL GAS LEASE, DATED OCTOBER 18, 1939, EXECUTED BY C. R. PRICE AND COMPANY, A CALIFORNIA CORPORATION, AS LESSOR, AND THE TEXAS COMPANY, A CALIFORNIA CORPORATION, AS LESSEE, UPON THE TERMS, COVENANTS AND CONDITIONS THEREIN CONTAINED, AS DISCLOSED BY A MEMORANDUM OF SAID LEASE RECORDED MAY 27, 1940 IN BOOK 1045, PAGE 217 OF OFFICIAL RECORDS; RECORD REFERENCE IS HEREBY MADE FOR FULL PARTICULARS. NOTE: ALL RIGHT, TITLE AND INTEREST OF THE TEXAS COMPANY HAS PASSED TO TEXACO, INC. (3) AN UNRECORDED LETTER AGREEMENT, DATED AUGUST 17, 1954 , ADDRESSED TO H. A. HARTH, JR. , EXECUTED BY VENTURE OIL COMPANY, WHEREIN "VENTURE OIL COMPANY AGREED TO REDUCE THE ROYALTY FROM 20% TO 1/8TH SHOULD A NEW WELL BE DRILLED ON THE ABOVE DESCRIBED OIL AND GAS LEASE, NOT USING ANY PART OF THE OLD HOLE", AS DISCLOSED BY AN INSTRUMENT RECORDED MARCH 5, 1958 IN BOOK 4219, PAGE 161 OF OFFICIAL RECORDS. 5. AN AGREEMENT DATED FEBRUARY 11, 1952, RECORDED FEBRUARY 20, 1952 IN BOOK 2290, PAGE 414 OF OFFICIAL RECORDS, BY AND BETWEEN THE HUNTINGTON BEACH COMPANY, AS FIRST PARTY, AND STANDARD OIL COMPANY OF CALIFORNIA, AS SECOND PARTY, RECITING, AMONG OTHER THINGS, THAT A CERTAIN OIL AND GAS LEASE, DATED JANUARY 7, 1921, EXECUTED BY SAID PARTIES, COVERING LAND OTHER THAN BLOCK 1903, AND WHICH LEASE WAS PAGE 5 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) RECORDED FEBRUARY 1, 1921 IN BOOK 19, PAGE 126 OF LEASES, IS HEREBY MODIFIED AND AMENDED TO INCLUDE UNDER THE TERMS AND PROVISIONS OF SAID LEASE, LOTS 2 TO 14 INCLUSIVE AND LOTS 17 AND 22 IN BLOCK 1903. MATTERS OF RECORD, IF ANY, AFFECTING THE LEASEHOLD ESTATE ON SAID OTHER LAND, HAVE NOT BEEN EXAMINED OR COVERED. BY A QUITCLAIM DEED DATED OCTOBER 31, 1973, RECORDED NOVEMBER 19, 1973 IN BOOK 10994, PAGE 716 OF OFFICIAL RECORDS, STANDARD OIL COMPANY OF CALIFORNIA, AS TO SAID LOTS 2 THROUGH 14 INCLUSIVE AND LOTS 17 AND 22 IN BLOCK 1903, QUITCLAIMED SAID OIL AND GAS LEASE OF JANUARY 7, 1921 AND THE AMENDMENT AGREEMENT OF FEBRUARY 11, 1952 ONLY "TO THE USE AND OCCUPANCY OF THE SURFACE AND SUBSURFACE TO A DEPTH OF 500 FEET VERTICALLY BELOW THE SURFACE. " 6. THE EFFECT OF AN UNRECORDED NATURAL GAS CONTRACT, DATED MAY 23, 1952, - BETWEEN SNYDER & HOFF, AS PRODUCERS, AND FULLERTON OIL COMPANY, INSOFAR AS IT PERTAINS TO LOT 2 OF BLOCK 1903 OF THE HEREIN DESCRIBED AND OTHER LAND, AS DISCLOSED IN A CONVEYANCE AND ASSIGNMENT DATED NOVEMBER 30, 1954, FROM FULLERTON OIL & GAS CORPORATION, A DELAWARE CORPORATION, TO MONTEREY OIL COMPANY, A DELAWARE CORPORATION, RECORDED DECEMBER 3, 1954 IN BOOK 2885, PAGE 102 OF OFFICIAL RECORDS. THE RECORDS DO NOT DISCLOSE THE SOURCE OF THE INTEREST OF SAID PRODUCERS. NO REPORT IS MADE AS TO MATTERS OF RECORD, IF ANY, AFFECTING THE INTERESTS OF THE PARTIES TO SAID TRANSACTION. 7. AN UNRECORDED LEASE, DATED JANUARY 7, 1955, BETWEEN HUNTINGTON BEACH COMPANY, A CORPORATION, AND SOUTHWEST EXPLORATION COMPANY, A CORPORATION, UPON THE TERMS, COVENANTS AND CONDITIONS THEREIN CONTAINED, AS DISCLOSED IN AN AGREEMENT MODIFYING SAID LEASE, DATED FEBRUARY 16, 1955, EXECUTED BY SAID PARTIES, RECORDED MARCH 3, 1955 IN BOOK 2982 , PAGE 251 OF OFFICIAL RECORDS. SAID AGREEMENT RECITES, AMONG OTHER THINGS, THAT SAID LEASE IS MODIFIED TO THE EXTENT THAT SAID SECOND PARTY AGREES NOT TO BOTTOM ANY WELLS BELOW THE TAR ZONE WITHIN 150 FEET OF LOTS 2 AND 4 OF SAID BLOCK 1903. S. ANY RESTRICTIONS COVERING THE FUTURE USE OF SAID LAND, AS DISCLOSED BY A "STATEMENT FOR A REDEVELOPMENT PROJECT", RECORDED AS INSTRUMENT NO. 82-350908 OF OFFICIAL RECORDS, COVERING THE HEREIN DESCRIBED AND OTHER LAND. 9. AN EASEMENT OVER A 15 FOOT WIDE STRIP FOR UTILITY PURPOSES, THE CENTERLINE OF SAID STRIP BEING DESCRIBED AS FOLLOWS: PAGE 6 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) C01 MENCING AT THE INTERSECTION OF THE CENTERLINE OF SAID SEVENTEENTH STREET 70.00 FEET IN WIDTH AND THE NORTHERLY LINE OF UTICA STREET, 60. 00 FEET IN WIDTH AS SHOWN ON SAID MAP; THENCE EAST 17.51 FEET ALONG THE NORTHERLY LINE OF SAID UTICA STREET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 48 DEG. 41' 00" WEST 38. 65 FEET TO A LINE PARALLEL WITH AND NORTHWESTERLY 25.50 FEET FROM THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 41 DEG. 19 ' 00" EAST 199.31 FEET ALONG SAID PARALLEL LINE TO A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90. 00 FEET WIDE AS SHOWN ON SAID MAP, AS EXCEPTED IN A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ORDERING THE VACATION OF PORTIONS OF SEVENTEENTH STREET, MANSION AVENUE, PINE STREET, AND THE ALLEYS IN BLOCKS 1901 AND 1902 LOCATED IN TRACT 12 RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF OFFICIAL RECORDS. 10. AN UNRECORDED LEASE DATED JULY 15, 1989, EXECUTED BY CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, A NONPROFIT CORPORATION, AS LESSOR, AND CITY OF HUNTINGTON BEACH, A CHARTER CITY AND MUNICIPAL CORPORATION, AS LESSEE, FOR THE TERM, AND UPON THE TERMS COVENANTS AND CONDITIONS PROVIDED THEREIN, AS DISCLOSED BY MEMORANDUM OF LEASE RECORDED AUGUST 14, 1989 AS INSTRUMENT NO. 89-430638 OF OFFICIAL RECORDS . 11. AN ASSIGNMENT AGREEMENT EXECUTED BY THE CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION, A NONPROFIT CORPORATION AND STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. , PER THE TERMS, COVENANTS AND CONDITIONS CONTAINED THEREIN, AS DISCLOSED OF RECORD BY A MEMORANDUM OF LEASE RECORDED AUGUST 14, 1989 AS INSTRUMENT NO. 89-430638 OF OFFICIAL RECORDS. PAGE 7 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) SCHEDULE C THE LAND REFERRED TO IN THIS POLICY IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF HUNTINGTON BEACH, AND IS DESCRIBED AS FOLLOWS: THOSE PORTIONS OF BLOCKS 1902, 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF TRACT NO. 12 AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989 OF SAID CITY COUNCIL, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60.00 FEET IN WIDTH AND A LINE PARALLEL WITH AND 840. 00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 19 ' 06" EAST 358. 00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19 , 06" EAST 24. 04 FEET; THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120. 00 FEET IN WIDTH AS SHOWN ON SAID MAP OF TRACT NO. 12 ; THENCE NORTH 00 DEG. 20' 13" EAST 683 . 13 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208 .00 FEET SOUTHERLY OF THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12 ; THENCE NORTH 89 DEG. 40' 01" WEST 245. 00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89 DEG. 39 ' 33" EAST 200.89 FEET I,LONG SAID CENTERLINE TO THE POINT OF BEGINNING. MS PAGE 8 ENDORSEMENT ATTACHED TO POLICY NO. OR-1528307 ISSUED BY FIRST AMERICAN TITLE INSURANCE COMPANY PARAGRAPH 1 OF THE CONDITIONS AND STIPULATIONS OF THIS POLICY IS HEREBY AMENDED BY DELETING THEREFROM SUBPARAGRAPH (A) AND SUBSTITUTING IN LIEU THEREOF THE FOLLOWING: (a) "INSURED": THE PARTY OR PARTIES NAMED AS INSURED, TOGETHER WITH EACH SUCCESSOR IN OWNERSHIP OF ANY OF THE CERTIFICATES OF PARTICIPATION REFERRED TO IN SCHEDULE B, PART II, PARAGRAPH 11 OF THIS POLICY, RESERVING HOWEVER, ALL RIGHTS AND DEFENSES THE COMPANY MAY HAVE HAD AGAINST THE NAMED INSURED AS TO ANY SUCCESSOR TO AN INSURED WHO ACQUIRES AN INTEREST BY OPERATION OF LAW AS DISTINGUISHED FROM PURCHASE. PARAGRAPH 1 OF THE CONDITIONS AND STIPULATIONS OF THIS POLICY IS FURTHER HEREBY AMENDED BY ADDING SUBPARAGRAPH (i) THERETO TO READ AS FOLLOWS: (i) "CERTIFICATE OF PARTICIPATION" OR "CERTIFICATES OF PARTICIPATION": THE CERTIFICATES OF PARTICIPATION REFERRED TO IN SCHEDULE B, PART II, PARAGRAPH 11 OF THIS POLICY. PARAGRAPH 5 OF THE CONDITIONS AND STIPULATIONS OF SAID POLICY IS HEREBY AMENDED BY DELETING THE PRINTED TEXT THEREOF AND SUBSTITUTING IN LIEU THEREOF THE FOLLOWING: THE COMPANY SHALL HAVE THE OPTION TO PAY OR OTHERWISE SETTLE FOR OR IN THE NAME OF THE INSURED ANY CLAIM INSURED AGAINST, OR TO TERMINATE ALL LIABILITY AND OBLIGATIONS OF THE COMPANY HEREUNDER BY PAYING OR TENDERING PAYMENT OF THE AMOUNT OF INSURANCE UNDER THIS POLICY TOGETHER WITH ANY COSTS, ATTORNEYS ' FEES AND EXPENSES INCURRED UP TO THE TIME OF SUCH PAYMENT OR TENDER OF PAYMENT BY THE INSURED AND AUTHORIZED BY THE COMPANY. IN CASE LOSS OR DAMAGE IS CLAIMED UNDER THIS POLICY BY AN INSURED OWNER OR LEGAL HOLDER OF ANY OF THE CERTIFICATES OF PARTICIPATION REFERRED TO IN SCHEDULE B, PART II, PARAGRAPH 11, THE COMPANY SHALL HAVE THE FURTHER OPTION TO PURCHASE SUCH CERTIFICATE OF PARTICIPATION OR CERTIFICATES OF PARTICIPATION FOR THE AMOUNT OWING THEREON TOGETHER WITH ALL COSTS, ATTORNEYS ' FEES AND EXPENSES WHICH THE COMPANY IS OBLIGATED HEREUNDER TO PAY. IF THE COMPANY OFFERS TO PURCHASE SUCH CERTIFICATE OF PARTICIPATION OR CERTIFICATES OF PARTICIPATION AS HEREIN PAGE 1 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) PROVIDED, SUCH INSURED SHALL TRANSFER, ASSIGN AND DELIVER SAID CERTIFICATE OF PARTICIPATION OR CERTIFICATES OF PARTICIPATION, AND ANY COLLATERAL SECURING THE SAME TO THE COMPANY UPON PAYMENT AS HEREIN PROVIDED. UPON SUCH OFFER BEING MADE BY THE COMPANY, ALL LIABILITY AND OBLIGATIONS OF THE COMPANY HEREUNDER TO SAID OWNER OR LEGAL HOLDER OF SAID CERTIFICATE OF PARTICIPATION OR CERTIFICATES OF PARTICIPATION, OTHER THAN THE OBLIGATION TO PURCHASE SUCH CERTIFICATE OF PARTICIPATION OR CERTIFICATES OF PARTICIPATION PURSUANT TO THIS PARAGRAPH, ARE TERMINATED. ANY LOSS UNDER THIS POLICY SHALL BE PAYABLE TO THE INSURED AS THEIR RESPECTIVE INTERESTS MAY APPEAR. IF PAYMENT IS MADE TO ANY OWNER OR LEGAL HOLDER OF ANY OF SAID CERTIFICATES OF PARTICIPATION, SUCH PAYMENT SHALL BE MADE RATABLY WITH OTHER CERTIFICATE OF PARTICIPATION HOLDERS. PAYMENT BY THE COMPANY TO ANY OWNER OR LEGAL HOLDER OF ANY SAID CERTIFICATES OF PARTICIPATION SHALL REDUCE PRO TANTO THE LIABILITY OF THE COMPANY UNDER THIS POLICY TO SUCH OWNER OR LEGAL HOLDER. FIRST AMERICAN TITLE INSURANCE COMPANY BY �• a. 7 C. L. KIRK - ASSISTANT SECRETARY CLTA FORM 112.2 (REV. 9-13-73) CLTA-LENDER-BONDHOLDER PAGE 2 ENDORSEMENT ATTACHED TO POLICY NO. OR-1528307 ISSUED BY FIRST AMERICAN TITLE INSURANCE COMPANY SAID POLICY IS AMENDED IN THE FOLLOWING PARTICULARS: A. PARAGRAPH 1 OF THE CONDITIONS AND STIPULATIONS IS HEREBY AMENDED BY ADDING SUBPARAGRAPH (i) AS FOLLOWS: (i) "LEASEHOLD ESTATE" : THE RIGHT OF POSSESSION FOR THE TERM OR TERMS DESCRIBED IN SCHEDULE A HEREOF SUBJECT TO ANY PROVISIONS CONTAINED IN THE LEASE WHICH LIMIT SUCH RIGHT OF POSSESSION. B. PARAGRAPH 12 OF THE CONDITIONS AND STIPULATIONS IS HEREBY RENUMBERED AS PARAGRAPH 14. C. THE CONDITIONS AND STIPULATIONS ARE AMENDED BY ADDING PARAGRAPHS 12 AND 13 AS FOLLOWS: 12. VALUATION OF ESTATE OF INTEREST INSURED IF, IN COMPUTING LOSS OR DAMAGE INCURRED BY THE INSURED, IT BECOMES NECESSARY TO DETERMINE THE VALUE OF THE ESTATE OR INTEREST INSURED BY THIS POLICY, SUCH VALUE SHALL CONSIST OF THE THEN PRESENT WORTH OF THE EXCESS, IF ANY, OF THE FAIR MARKET RENTAL VALUE OF SUCH ESTATE OR INTEREST, UNDIMINISHED BY ANY MATTERS FOR WHICH CLAIM IS MADE, FOR THAT PART OF THE TERM STATED IN SCHEDULE A HEREIN THEN REMAINING PLUS ANY RENEWAL OR EXTENDED TERM FOR WHICH' A VALID OPTION TO RENEW OR EXTEND IS CONTAINED IN THE LEASE, OVER THE VALUE OF THE RENT AND OTHER CONSIDERATION REQUIRED TO BE PAID UNDER THE LEASE FOR THE SAME PERIOD. 13. MISCELLANEOUS ITEMS OF LOSS IN THE EVENT THE INSURED LENDER ACQUIRES ALL OR ANY PART OF THE ESTATE OR INTEREST IN THE LAND DESCRIBED IN SCHEDULE C IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 2 OF THESE CONDITIONS AND STIPULATIONS AND THEREAFTER IS EVICTED FROM POSSESSION OR IF AN INSURED OWNER IS EVICTED FROM POSSESSION OF ALL OR PART OR THE LAND BY REASON OF ANY MATTERS INSURED AGAINST BY THIS POLICY, THE FOLLOWING, IF APPLICABLE, SHALL BE INCLUDED IN COMPUTING LASS OR DAMAGE INCURRED BY THE INSURED, BUT NOT TO THE EXTENT THAT THE SAME ARE INCLUDED IN THE VALUATION OF THE ESTATE OR INTEREST INSURED BY THIS POLICY. PAGE 1 CLTA STANDARD COVERAGE OR-1528307 POLICY - (1973) (A) THE REASONABLE COST OF REMOVING AND RELOCATING ANY PERSONAL PROPERTY WHICH THE INSURED HAS THE RIGHT TO REMOVE AND RELOCATE, SITUATED ON THE LAND AT THE TIME OF EVICTION, THE COST OF TRANSPORTATION OF SUCH PERSONAL PROPERTY FOR THE INITIAL TWENTY-FIVE MILES INCURRED IN CONNECTION WITH SUCH RELOCATION, AND THE REASONABLE COST OF REPAIRING SUCH PERSONAL PROPERTY DAMAGED BY REASON OF SAID REMOVAL AND RELOCATION. THE COSTS REFERRED TO ABOVE SHALL NOT EXCEED IN THE AGGREGATE THE VALUE OF THE PERSONAL PROPERTY PRIOR TO ITS REMOVAL AND RELOCATION. "PERSONAL PROPERTY", ABOVE REFERRED TO, SHALL MEAN CHATTELS AND PROPERTY WHICH BECAUSE OF ITS CHARACTER AND MANNER OF AFFIXATION TO THE LAND, CAN BE SEVERED THEREFROM WITHOUT CAUSING APPRECIABLE DAMAGE TO THE PROPERTY SEVERED OR TO THE LAND TO WHICH SUCH PROPERTY IS AFFIXED. (B) RENT OR DAMAGES FOR USE AND OCCUPANCY OF THE LAND PRIOR TO SUCH EVICTION WHICH THE INSURED AS OWNER OF THE LEASEHOLD ESTATE MAY BE OBLIGATED TO PAY TO ANY PERSON HAVING PARAMOUNT TITLE TO THAT OF THE LESSOR IN THE LEASE. (C) THE AMOUNT OF RENT WHICH, BY THE TERMS OF THE LEASE, THE INSURED MUST CONTINUE TO PAY TO THE LESSOR AFTER EVICTION FOR THE LAND, OR PART THEREOF, FROM WHICH THE INSURED HAS BEEN EVICTED. (D) THE FAIR MARKET VALUE, AT THE TIME OF SUCH EVICTION, OF THE ESTATE OR INTEREST OF THE INSURED IN ANY SUBLEASE OF ALL OR PART OF THE LAND CAUSED BY SUCH EVICTION. THE TOTAL LIABILITY OF THE COMPANY UNDER SAID POLICY AND ANY ENDORSEMENTS THEREIN SHALL NOT EXCEED, IN THE AGGREGATE, THE FACE AMOUNT OF SAID POLICY AND COSTS WHICH THE COMPANY IS OBLIGATED UNDER THE CONDITIONS AND STIPULATIONS THEREOF TO PAY. THIS ENDORSEMENT IS MADE A PART OF SAID POLICY AND IS SUBJECT TO THE SCHEDULES, CONDITIONS AND STIPULATIONS THEREIN EXCEPT AS MODIFIED BY THE PROVISIONS HEREOF. FIRST AMERICAN TITLE INSURANCE COMPANY BY ca. �• 7� C. L. KIRK - ASSISTANT SECRETARY CLTA LEASEHOLD OWNERS OR LENDERS POLICY FA-14 (EFF. 4/20/81) PAGE 2 04 23—Q: ("=/001 • 3'Tp�T--� Z. � _ I o. TRACT Z i Tee• 42 Tea• _ / / �� b (ABAND. PARK ST PARK O I s 21 --1 /7 -15/3 1/ 11 945 < v O M 2/ a 51 m —a. / 1 d,7 o, 9 (ABAND ALLEY/ y Q h (ABAND ALLEY) — ''A l 22 EG /8 v 16 14 / /0 B 6 4 22 20 i 1816 /4 /2 /0 B 6 � �s' se• ,' NO,/2 MAIN rr • d S c,/ + STREET J MA/N a -- -- -- .— STREET ; — MARCH 1948 TR. NO. 12 M.M. 9-13 NOTE - ASSESSOR'S BLOCK 9 ASSESSOR'S MAP' �- 02 PARCEL NUMBERS BOOK 23 PAGE 03 SHOWN /N CIRCLES COUNTY OF ORANGE ( _� First American Title Comparry This Map is tot Inturmatiur< 0111y JIle is Not Part of This Title Evidence Policy Title Insurance 45 ,E AMEBIC ti 9 4 � First American Title Insurance Company 8 18019-26 JHHW:CFA:KML 08/12/89 KML4504 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE OF MAILING FORM 8038—G I, Katherine M. Lee, hereby state and certify: That for and on behalf of the City of Huntington Beach, on the date hereof, I caused to be mailed via certified mail, postage prepaid, return receipt requested, an Information Return for Tax-Exempt Governmental Bond Issues, Form 8038-G, relating to the captioned Certificates of Participation, to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, a true copy of which Information Return is hereto attached. Dated: August 15, 1989 By , L ath rine M. Lee, on behalf o the City of Huntington Beach Form 8038-G Information Return for Tax-Exempt (December 1986) Governmental Bond Issues OMB No.1545-0720 Department of the Treasury ►Under Section 149(e) Expires 12-31-89 Internal Revenue Service (Use Form 8038•GC if issue price is under$100.000.) Reporting Authority Check box if Amended Return ► Lj I Issuer's name 2 Issuer's employer identification number CITY OF HUNTINGTON BEACH 95-6000723 3 Number and street 4 Report number 2000 Main Street G198 9 - 2 5 City or town,state.and ZIP code 6 Date of issue Huntington Beach, California 92648 August 15, 1989 � Type of Issue(check box(es)that applies) 7 Check box if bonds are tax or other revenue anticipation bonds► ❑ Issue Price 8 Check box if bonds are in the form of a lease or installment sale No. 9 ❑ Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ❑ Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ❑ Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ❑ Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ❑ Environment(including sewage bonds) . . . . . . . . . . . . . . . . . . . 14 ❑ Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ❑ Utilities . . . . . . . . . . . . . 16 9 Other.Describe(see instructions)► land acquisition, design and 14,911,000 construction, demolition of buildings, and landscaping of parking structures Descri tion of Bonds (a) (b) (c) Stated redemption Weighted (r) Net merest Maturity date Interest rate Issue pace price at maturity avers a maturit Yield cost 17 Final maturity . 08/01/2019 7.00 19118,700 1,130 000 MlIffffffIffAl 18 Entire issue . 149 911,000 15 9025 9000 20.146I ears 7.02057 7.0654 Uses of Original Proceeds of Issue(including underwriters'discount 19 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . 19 2 54 20 Proceeds used for bond issuance costs(including underwriters'discount) . . . . . . . . . . . 20 330 394.28 21 Proceeds used for credit enhancement . . . . . . . . . . . . . . . . . . . . . . 21 0.00 22 Proceeds allocated to reasonably required reserve or replacement fund . . . . . . . . . . 22 23 Proceeds used to refund prior issues . . . . . . . . . . . . . . . . . 23 0.00 24 Nonrefundin proceeds of the issue subtract lines 20,21,22,and 23 from line 18,column c 24 13,365,000.00 Descri tion of Refunded Bonds(complete this part only for refunding bonds 25 Enter the remaining weighted average maturity of the bonds to be refunded . . . . . . . . . ► n/a years 26 Enter the last date on which the refunded bonds will be called . . . . . . . . . . . . . ► n/a 27 Enter the dates the refunded bonds were issued No n/a Miscellaneous 28 Enter the amount(if any)of the state volume cap allocated to this issue . . . . . . . . . . ► n/a 29 Arbitrage rebate: a Check box if the small governmental unit exception to the arbitrage rebate requirement applies . . . . . . . . . . . . ❑ b Check box if the 6-month temporary investment exception to the arbitrage rebate requirement is expected to apply . . . . . ❑ c Check box if you expect to earn and rebate arbitrage profits to the U.S. . . . . . . . . . . . . . . . . . ❑X 30 Enter the amount of the bonds designated by the issuer under section 265(bX3XBXii) . . . . . ► n/a 31 Pooled financings: a Check box if any of the proceeds of this issue are to be used to make loans to other governmental units ► ❑ and enter the amount ► b Check box if this issue is a loan made from the proceeds of another tax-exempt issue ► ❑ and enter the name of the issuer ► and the date of the issue ► perl y e that I have examined t and accompanying schedules and statements,and to the best of my knowledge and belief. Please the r tr n plete Sign August 15, 1989' Deputy City Administrator/ Here ignatureot cer Date TaleAdministrative Services For Paperwork Reduct n Act Notice,see p ge 1 the Instructions. Form 8038-G (12-86) s o•..rwa.ee.r,aeMe onw: uar—u+sa�heaes 9 OFFICE OF '=`.'�sFn CITY ATTORNEY V P.O.BOX 2740 f�AIT1 2000 MAIN STREET HUNTINGTON BEACH CALIFORNIA 92647 GAIL HUTTON TELEPHONE City Attorney (714)536.5W5 August 15, 1989 Stone & Youngberg One California Street, Suite 2800 San Francisco, California 94111 RE: $15, 025, 000 Certificates of Participation (1989 Public Parking Project) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental. for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: I am the City Attorney for the City of Huntington Beach (the "City") , and in that connection I have examined certain records reflecting the actions taken by the City pertaining to the authorization, execution and delivery by the City of the following agreements (collectively, the "Agreements") : (a) Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City; (b) Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City; (c) Lease Agreement, dated as of July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City; (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City; (e) Trust Agreement, dated as of July 15, 1989, (the "Trust Agreement") , by and among State Street Bank and Trust Stone & Youngberg August 15, 1989 Page Two Company of California, N.A. , as trustee (the "Trustee") , the Corporation and the City; and (f) Certificate Purchase Agreement, dated July 27, 1989, (the "Purchase Agreement") , by and among Stone & Youngberg, the Corporation, the City and as acknowledged by the Trustee. Based upon such examination, I am of the opinion that: 1 . The City is a municipal corporation and charter city duly organized and validly existing under the Constitution and laws of the State of California. 2. The Official Statement, dated August 8, 1989, (the "Official Statement") , relating to the captioned Certificates of Participation executed and delivered this date by the Trustee (the "Certificates) , has been duly authorized, executed and delivered by the City and the information therein as to the City and the City' s obligations under the Agreements is correct and does not omit any statement which, in my opinion, should be included or referred to therein. 3 . Resolution No. 6046, adopted by the City Council of the City on July 17, 1989, approving and authorizing the execution and delivery of the Agreements and the Official Statement, was duly adopted at one or more meetings of the City Council of the City which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. 4 . The execution and delivery of the Agreements, and the approval of the Purchase Agreement, and compliance with the provisions thereof, under the circumstances contemplated therein, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any material agreement or instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the City is subject. 5 . The Agreements have been duly authorized, executed and delivered by the City and constitute legal, valid and binding obligations of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, the application of equitable principles where appropriate or other laws affecting the enforcement of creditors ' rights generally. 6 . No litigation is pending or threatened to restrain or enjoin the payment of Lease Payments (as such term is defined in the Stone & Youngberg August 15, 1989 Page Three Trust Agreement) pledged under the Trust Agreement, in any way contesting or affecting the validity of the Certificates, the Agreements or in any way contesting the existence or powers of the City. 7. No event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the date hereof any statement or information concerning the City contained in the Official Statement or is not reflected in the Official Statement but should but should be reflected therein in order to make the statements and information therein concerning the City not misleading in any material respect. 8. No authorization, approval, consent or other order of the State of California or any other governmental authority or agency within the State of California is required for the valid authorization, execution and delivery of the Agreements and the Official Statement . Very truly yours, GAIL HUTTON City Attorney 10 1 MARK W. LINNES MEMBER AMERICAN INSTITUTE OFREAL ESTATE APPRAISERS 9919 SOLEJAR DRIVE WHITTIER, CALIFORNIA 90603 (213) 691-6455 March 17 , 1989 I IMr. Robert Franz Deputy City Administrator I City of Huntington Beach 2000 Main Street Huntington Beach, Ca 92648 i RE: Real Estate Appraisal - Civic Center Site 1 Dear Mr. Franz: IAs requested by Mr. Dan Brennan, Real Property Manager, I have completed a valuation study for the Civic Center Site Complex I parcel at Main and Yorktown. Based on my investigations and studies, the fair market value of the property .sought', as of March 17 , 1989 is: ITOTAL CIVIC CENTER COMPLEX: $33 ,380,000 ' ALLOCATION ADMINISTRATION/DEVELOPMENT- WING/ ' 1 COUNCIL SITE: $20,015,000 POLICE AND JAIL BUILDING SITE: $13 , 365,000 ° On the following pages will be found a summary of the facts developed, and analysis and conclusions, which are the basis of the opinions expressed. Also included are the Certification and ' the Contingent and Limiting Cbnditions of this report. In my files are retained a report copy, worksheets , field notes, F maps and other data upon which my conclusions are partially based. Thank you for this opportunity to provide appraisal services. Respectfully submit d, k W. Li a Mar Linn es , MA I . ' F MWL:rk H.A. CIVIC CENTER C ERT][IF I CAT I ON I certify that, to the best of my knowledge and belief, . . . the statements of fact contained in this report are true and correct. the reported analyses, opinions, and conclusion are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. -- I have no present or prospective interest in the property thafrF-is • the subject of this report, and I have no personal interew6u-ner bias with respect to the parties involved. • my compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusion in, or the use of, this report my analyses, opinions, and conclusions were developed, and this - report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the.American Institute of Real Estate- Appraisers. the use of this report is subject to the requirements of the American Institute of Real Estate Appraisers relating to review by its duly authorized representatives. I am currently certified under the voluntary continuing education program of the American Institute of Real Estate Appraisers. I have made a personal inspection of the property that is the subject of this report. no one provided significant professional assistance to the person FF signing this report. C I� I 14R_ •..Aft Id o ,•. `.: OFFICE OF THE SECRETARY OF STATE CERTIFICATE OF STATUS DOMESTIC CORPORATION ..:.► 1, MARCH FONG EU, Secretary of State of the State of California, hereby certify: _ c, That on the 29th day of July 1986 CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION became incorporated under the laws of the State of California by filing its Articles of In- corporation in this office; and That no record exists in this office of a certificate of dissolution of said corporation - nor of a court order declaring dissolution thereof, nor of a merger or consolidation which terminated its existence; and That said corporation's corporate powers, rights and privileges are not suspended on the records of this office; and That according to the records of this office, the said corporation is authorized to exer- cise all its corporate powers, rights and privileges and is in good legal standing in the r State of California; and ,:ghat no information is available in this office on the financial condition, business-ac- tivity or practices of this corporation. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this 7th day of August , 1989 s` x , Secretary of state SEC/STATE FORM CE-112 (REV. 7-87) _ -'° 87 45931 axwe�aiam .c .::t;:a�^.a-uee�^ars�eeeavas�.'at:,,:r -nc-:r. zsa€�c�.w .. _xt: w�...�.,: «:y+.sarc +sn• x.,».k:,.. w.,:xz *r:,. z 18019-26 JHHW:CFA:KML 08/09/89 KML4518 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE REGARDING EFFECTIVENESS OF ARTICLES OF INCORPORATION AND BYLAWS The undersigned hereby states and certifies: (i) that she is the duly appointed, qualified and acting Secretary of the City of Huntington Beach Civic Improvement Corporation, a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that attached hereto is a true and correct copy of the Articles of Incorporation of the Corporation as certified by the Secretary of State of the State of California, including any and ail amendments thereto, duly adopted by the Board of .r... Directors of the Corporation; (iii) that attached hereto is a true and correct copy of the Bylaws of the Corporation, including any and all amendments thereto, duly adopted by the Board of Directors of the Corporation; and (iv) that the attached Articles of Incorporation and Bylaws and any and all amendments thereto remains in full force and effect as of the date hereof and have not otherwise been amended, modified or rescinded in any way. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By KozC� Connie Brockway, Secretary State California OFFICE OF THE SECRETARY OF STATE CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION I, MARCH FONG E U, Secretary of State of the State of California, hereby certify: That the annexed transcript was prepared by and in this office from the record on file, of which it purports to be a copy, and that it is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this n Aug: r Secretary of State sf SEC/STATE FORM CE•108 (REV. 4.76) -- S _ rfLa�lte*S4i SeM W M few d G4ea � JUL 2 90 lift ! i tt�xat�� Et. scat.�r�:ofr I Crff OF W VfnNGT.7fit BEACH CTVC M&PFXY4EMDff C-ORPWATXM "ns name of this Cary"-,Ww N CRy at Htwtng:on Beach (;Nit: Mr:provemer:t ; fa> :rt" Carpomtlon is a nonprofit p..bffo benefit =-porabw and is not ! vrgamml xr -lom (YCi tto Gain as any person. it is orgart°Sed Under :?,.e tsianpro& Pu.tQ Psn,-;4-,:d'cJratw=Law for publ.,c purpc.wst. :b) The 3pecif3r and prtrnary purposes of this Corporation are: 1 1. To rends* fmanciat as3lSt3nca to the C!:y of ? ,4Lv f%);lw Be-mli. Ca:iforrp 8. a poiZicai subdMwon of 'ia 'law a! Ca omta, '.Vwn o scmei+nY refefl'ed to iS ft by firl4MCin]. Ic,UtAfWbj. XOS&UC"h?G. 7'!pr�7Jir„ �eas:rg and *AAng bugdiv.%3. buoidAg improvs-omfr. -.Iciuspnvaw,. uti:ctes, tandsczpaig and cther pubic ;;;,orc;v m ias. tams, and acre ottm real or persofutf property �r lxo Cc'nsitt of ras4erts of Wo Cfty and sur wwling areas 2. To acquire by*Z.93. µwits C' ^Snww Se twi yf ,ycssoniu �caGerty o: at!y v x-WA rwom: to cw-owuct, ,acrn:s3 apt r:fods°y ax CO, im;xaW 01' t7fiferKtl- 9 3Cqu-i; Or 4,;yaVF �l'7f;, { rov hk"! :aa•:.-. s�_�� ::ss,9:R G;cd*cvm*r snake=r!y art rA w cf a.t� ^ucn M-11 cr t,.N"Iai pMes^, ilva:tasi_s to t r .:r M, a:• »as-be p°,::tiic. "C:r+Cr any cm C+ trxire�depart z;.t s. 6 3. ;rrrsx t+? cU�.rxst ,-d A^,;: crass r� t:zr, i lra,.. it; .:,:I J N } 4. To borrow IN necossary kinds to pay the c:.st C{ �y�5 � �..r_-x;.�np. acq;wrirx7, constructing, re�ciny�, aatant;amr;�, .v .� smprzding, mainpaif inn. equsppinq and o !at'nq such prcpertitrs and tacilitiea fix the noroin described pwposas,the in saotwd*fess 1^r *nich borrowod rnm*y may. but raced not, ;`st bo vode ssd btl seckir ras of the Corx"abon of any kind or -,naractw ;--s3vc4 a! any one or more iw s. whicn may be erV of unsecured or secured by any rnoM3ge. `.last �� NdeGge. orcumb-arxs cr other lien upon a acri of or as of ,y J pi-V r,iwc"a3srfs at ary"i e~or thereafter owned % cr acquired f;/tha3%�portiion. ` S. To conduce "s business and affairs so that if►a city wX have a benefr;a;tr!w ast in the Corporation. E. Ta roe" limmrd or condidonst gigs or grants in 3SY -elK xntwi, cr by wav of testamertary d"ses, besquesis oe ;rants n Xuust or oO".'se. funds of ai; kinds irciLding t propert/. both rsat. pwsonai and mixes, wfie'.ner onrcipal or ` i ar ?rtrs. mn-jibfe or ntsn,ii presant or future. ves ae cc cort::.ys:d. ;n order to carry an the purposes at the y j Car=xtioa. The rains vM a&-)r9s3 in L" ate of talifomia of this Corpora,:ow's tn&-W agsx�t f. tN - 'eiets of p- is: _ 5 C tv attorney 21C f !riam:; ftt r Hc.:,rr.;ax: Bsaclti. G�+rinma 92v-A8 :T (714)S-&_SS55 �e 1 Ttm foltr_wmg na-n W rwsor,shat!consb?u-te Iw sniUa1 jyrg yx Cf-rye Cxwation. !1 ' r. -,.ai*:-n:a gzi:4 . y `G• +-Mia Directc.,of Lisa Ox—rcxa*,ion ::RaJ be of such r.urnmr. and Sfl:!11 hold o ice ta, M zuctt Win% AS—,aY :)a soec-ftod in OV RYUws Of this t.,.YpL.vator1. V. (a) T►,iq st tX'SiPiZi40 and ooe:a'70 aXCl1:",7V8i'f 1C.iP Sias:;�.i v• .. wetf t-,?r.lrpcsel k:tt a the rrwa wrq of sscoon 1(.;(4)of to irterr;pi =.evunuo Ga:u. Tic�,vrlhst3rt'C7g a_'►y other prevision a lheae r'uoctes, the :.cxporattpn snatt not L` n y oa Any other pC:lvoia ilOt W, mitw to be cart-zed or. by the corwaUon ; �J� •. ` exarW..try tedoraL mcon+e tax under SesAk, 501(c)(41 cl,he lnLarnat Revenue Cade. 3 p c-er*,y ut is irrevaccab+y dGCi•ca,Bc;to Soc'.2:vra:Ltare Ft:"xs is � y and(A)p8.ft of Ma ret'nccw--,o rr a--s is of Cim;�C a.or;:.: l e io of am G're:ia+.officer a mt.mtf9r t.r°*'W:r to the t eneit of a~y Vivata person. ' No ub3tan.ty ra:, ur t*e actvtes of MS Corpora:r;;n sta.'s t onics+ o Carrying On propagapaa. or mhE;rrise mia-mo.;y r, 7tiluence�'c't'rWa6m, and lie C-w;C:a.'tcn slo3.'t rrat f >' partic:pa*or inteerene in asp;: campaiga:insludiN the publshing or icL`itwton cf CC t smiemc�sl a?matt ei any car. c'aie for pocsticat r RtSca. a r ' Lift. � i La) f'� rr;, s r� .ter.a his C rporation, it rnav, irs!^ts d any at its a334M Yo Om f ii`j cl Ou ,Tnc r. ez-:r. Ca-Iftrms. !i Fox arty rsasw 0* l.'r`: to u -iron or i:114irh%q to actsix '.h. .Slits ij -Jz �-abm, said Ft.'ws wfit tm r'_ tat An—r-ic-i _'S? ..c�s _'` ary p.oi4k:i3+ :lilt tY'S:E:r. .�,ar Jcr, a sc-+ :tt^.•Co`,:.^.0 r-:f!�Q"`C" .{ r"'t}Td.on VP.%A---:•` i% oigamv vi and +;+;;Er'3LL " . chanzahle .;oc:a: 3 pLrC-Sea acxt which has ° stab4st*d ISS S.'a-,33 f under SeCLon 501icy3t c' K-. r•,a:. .`ce=zlemal Rap--iue Code at iS54 as iir:'u;r.4JWC ,?;i + •:t y.; rye::•'A"tan w wirf.rx7 up of - Corpora;ia Ysye{� .2ii-An� WICr P*1174'-•`+3N Ci ii'l�l;"? ry .`ti9�Y7�;'i7t C:, aH tit��'� HJii; ;%dC:.,"::GS i,41v c +"1:S.iAf y..::.'L it�3_"S_ {.. f:-r.: •L !fir 8 a;:•• rE Sc'4: 7c'C..'t{ 9 .r m °f :!lz�.ie or ce:ix"4.fr�*. ; 3::� C: :.:^ 3- ,:,'L`9 - .. SR.r . 3 ?3 �a Air* rn n!) .SWZ a ,a:;fi'x 1. or airs __ ..,z i`tx trot. Lr :1 ? C: :c.i:rux' Zr,: fir,.. . . _.._.14-. - ?M .cns-.t.'.:ur+t _ - -P 1l axe (•,; t - .. r J1 00 seraWll 6UP060AI&LX PePsOQrs 0)"RIOCCAd tom,WS aft tV4 rph /J Sr'M I Avp u?'.1 r.Ka'uorx.jodjoa�j,to Sol i%Jv;i-- 3 PMJItoxa odtt.'y 'ut-F T2�rJ �rq g: Yrty�J}Q e0 p3&tTLj �o�73iE 4�, sui'�!iCut:3 i Yi Y �T Pw-uly GAQWUa uty "C-2-t8d W-4 bu*Q 'POueiz-%O t iAA '103!tJ3Fif1 SS3►.°+�M NO 1 6 ;q 1 : �k " '1 18019-13 JHHW:GFB GFBIOI8 BYLAWS OF CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION ARTICLE I Offices and Seal Section 1. Offices. The principal office of the Corporation for the transaction of business shall be City Hall , 200 Main Street, Huntington Beach, California 92648. The Board of Directors may, however, fix and change from time to time the principal office from one location to another by noting the change of address in the minutes of the meeting of the Board of Directors a, which the address was fixed or changed. The fixing or changing of such address shall not be deemed an amendment to these Bylaws. Section 2. Seal . The Corporation shall have a seal , consisting of two (2) concentric circles with the words "City of Huntington Beach Civic Improvement Corporation," with the date of incorporation of this Corporation. ARTICLE II Directors Section 1. Powers. Subject to the limitations of the Articles of Incorporation of this Corporation, the terms of these Bylaws, and the laws of the State of California, the powers of this Corporation shall be vested in and exercised by and its property controlled and its affairs conducted by the Board of Directors. Section 2. Number. The Corporation shall have seven (7) Directors. Directors are collectively to be known as the Board of Directors. The number of Directors may be changed by a Bylaw or amendment thereof duly adopted by the Board of Directors. Section 3. Selection, Tenure of Office and Vacancies. The members of the City Council of the City of Huntington Beach, California (the "City") shall constitute the Board of Directors of the Corporation, and each member of the City Council of the City shall be and remain a member of the Board of Directors of the Corporation for so long as such member remains a member of the City Council of the City. . Section 4. Compensation. Directors shall serve without compensation but each Director may be reimbursed his or her necessary and actual expenses, including travel incident to his services as Director, pursuant to resolution of the Board of Directors. Any Director may elect, however, to decline said reimbursement. Section 5. Organization Meetings. Immediately following the annual meeting of the Board of Directors or any special meeting of the Board of Directors at which Directors shall have been elected, the Directors shall meet for the purpose of organizing the Board, the election of officers and the transaction of such business as may come before the meeting. Pending such organization meeting, all officers of the Corporation shall hold over, except any officer required by law or these Bylaws to be a Director and who does not qualify as a Director. A Director elected at such meeting of the Board of Directors sha' 1 forthwith become a member of the Board of Directors for purposes of such organization. In the event such an organizational meeting shall not be held immediately following such meeting of the Board of Directors, it shall thereafter be held at the next regular meeting or at a special meeting and notice thereof shall be given in the manner provided in Section 9 of this Article for notice of special meetings. Section 6. Regular and Organizational Meetings. Regular meetings of the Board of Directors shall be held at such time as the Board may fix by resolution from time to time; provided, however, that at least one regular meeting shall be held each year and such meetings shall , in all respects, conform to provisions of the Ralph M. Brown Act, being Sections 54950 through 54961 of the Government Code of the State of California (the "Brown Act") . No notice of any organizational meeting of the Board of Directors, held r immediately following the annual meeting of the Board of Directors or on or after any special meeting of the Board of Directors shall have been elected, need be given; provided, that if such an organizational meeting is not held immediately following such meeting of the Board of Directors, then notice thereof shall be given in a manner provided in Section 9 of this Article, in the same manner as notice of special meetings. Section 7. Special Meetings. Special meetings of the Board of Directors shall be called, noticed and held in accordance with the provisions of Section 54956 of the Brown Act. Section 8. Quorum. A quorum shall consist of a majority of the members of the Board of Directors unless a greater number is expressly required by statute, by the Articles of Incorporation of this Corporation, or by these Bylaws. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present, shall be the act of the Board of Directors. Section 9. Order of Business. The order of business at the regular meeting of the Board of Directors and, so far as possible, at all other meetings of the Board of Directors, shall be essentially as follows, except as otherwise determined by the Directors at such meeting: (a) Report on the number of Directors present in person in order to determine the existence of a quorum. (b) Reading of the notice of the meeting and proof of the delivery or mailing thereof, or the waiver or waivers of notice of the meeting then filed, as the case may be. -2- (c) Reading of unapproved minutes of previous meetings of the Board of Directors and the taking of action with respect to approval thereof. (d) Presentation and consideration of reports of officers and committees. (e) Election of Directors. (f) Unfinished business. (g) New business. (h) Adjournment. Section 10. Resignation and Removal of Directors. Any Director of this Corporation may resign at any time by giving written notice to the President or to the Board of Directors; provided, however, in the event . of such resignation, such Director's position shall remain vacant until a new City Council member is elected to fill such Director' s position as City Council member. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any Director may be removed by the Board of Directors at any regular meeting or at any special meeting of the Board of Directors, the notice of which, among other things, indicates that the removal of one or more Directors identified therein shall be considered at such meeting by reason of such Directors' (1) unexcused absence for four consecutive meetings of the Board of Directors, or (2) commission of any act which tends to discredit the Corporation. Section 11. Nonliability for Debts. The private property of the Directors shall be exempt from execution or other liability for any debts, liabilities or obligations of the Corporation and no Director shall be liable or responsible for any debts, liabilities or obligations of the Corporation. Section 12. Indemnity by Corporation for Litigation Expenses of Officer, Director or Employee. Should any Director, officer or employee of the Corporation be sued, either alone or with others, because he is or was a director, officer or employee of the Corporation, in any proceeding arising out of his alleged misfeasance or nonfeasance in the performance of his duties or out of any alleged wrongful act against the Corporation or by the Corporation, indemnity for his reasonable expenses, including attorneys' fees incurred in the defense of the proceedings, may be assessed against the Corporation, its receiver, or its director by the court in the same or a separate proceeding if the person sued acted in good faith and in a manner such person reasonably believed to be in the best interests of the Corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful . The amount of such indemnity shall be so much of the expenses, including attorneys' fees, incurred in the defense of the proceeding, as the court determines and finds to be reasonable. -3- ARTICLE III Officers Section 1. Officers. The officers of the Corporation shall be a President, a Vice Presider, a Secretary and such other officers as the Board of Directors may appo nt. When the duties do not conflict, one person, other than the Presider`., may hold more than one of these offices. The Corporation may also have, at the di:screticn of the Board of Directors, one or more additional Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. In addition to such officers, the City Administrator of the City shall act ex officio as the Executive Director of the Corporation, and the Director of Finance of the City shall act ex officio as the Treasurer of the Corporation. Section 2. Election of Officers. The officers of the Corporation (other than the Treasurer and the Executive Director) shall be chosen by and shall serve at the pleasure of the Board of Directors and each shall hold office until any such officer shall resign or shall be removed or- otherwise disqualified to serve or any successor shall be elected and qualified to serve. Section 3. Subordinate Officers. The Board of Directors may elect or authorize the appointment of such other officers than those hereinabove mentioned as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws, or as the Board of Directors from time to time may authorize or determine. Section 4. Removal of Officers. Any officer may be removed, either with or without cause, by a majority of the Directors then in office at any regular or special meeting of the Board, or, except in the case of an officer chosen by the Board of Directors, by any officers upon whom such power of removal may be conferred by the Board of Directors. Should a vacancy occur in any office as a result of death, resignation,. removal , disqualification or any other cause, the Board of Directors may delegate the powers and duties of such office to any officers or to any Directors until such time as a successor for said office has been elected and appointed. Section 5. President. The President shall preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or be prescribed by the Bylaws. The President shall also be the chief corporate officer of the Corporation and shall , subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the Board of Directors. He shall be ex officio member of all standing committees, and shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws. -4- Section b. Vice President. In the absence or disability of the President, the Vice President, or the Vice Presidents in order of their ranks as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. The Vice Presidents shall have such other pcweY-s and perform such other duties as may from time to time te prescribed for them, respectively, by the Board of Directors or by these Bylaws. Section ?. ' Secretary. The Secretary shall keep or cause to be kept a book of minutes at the principal office or at such other place as the Board of Directors may order, of all meetings of the Directors, with the time and place of holding, whether regular or special , and if special , how authorized, the notice thereof given, the names of those present at Directors' meetings and the proceedings thereof. The Secretary shall give or cause to be given notice of all meetings of the Board of Directors of the Corporation, shall keep the corporate records in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors -or these Bylaws. Section S. Treasurer. The Treasurer shall keep and maintain or cause to be kept and maintained adequate and correct amounts of its assets, liabilities, receipts, disbursements, gains and losses. The books of account shall at all times be open to inspection by any Director. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Directors. He shall disburse the funds of the Corporation as shall be ordered by the Board of Directors, shall render to the President and the Directors whenever they shall request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, shall take proper vouchers for all disbursements of the funds of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws. Section 9. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and the Assistant Treasurers in the order of their seniority as specified by the Directors shall , in the absence or disability of the Secretary or the Treasurer, respectively, perform the duties and exercise the powers of the Secretary or Treasurer and shall perform such duties as the Board of Directors shall prescribe. ARTICLE IV Objects and Purposes Section 1. Nature of Objects and Purposes. The business of this Corporation is to be operated and conducted in the promotion of its objects and purposes as set forth in Article II of its Articles of Incorporation. Section 2. Dissolution. The Corporation may be dissolved by vote of the Directors, or by the action of the Board of Directors in accordance with the provisions of California law. Upon the dissolution or winding up of this -5- Corporation, and after payment or provision for payment, all debts and liabilities, the assets of this Corporation shall be distributed to the City. If for any reason the City is unable or unwilling to accept the assets of the Corporation, said assets will be distributed to the Federal Government; to a state or local government for public purposes; or to a nonprofit fund, foundation, or corporation which is organized and operated for charitable purposes and which has established its tax-exempt status under Section 501(c) (3) or 501(c) (4) of the Internal Revenue Code of 1954, as amended. Section 3. Merger . The Corporation may merge with other corporations organized solely for nonprofit purposes, qualified and exempt from Federal taxation pursuant to Section 501(c) (3) or 501(c) (4) of the Internal Revenue Code of 1954, as amended, and from State taxation, upon compliance with the provisions of California law relating to merger and consolidation. ARTICLE V General Provisions Section 1. Payment of Money, Signatures. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the Corporation and any and all securities owned by or held by the Corporation requiring signature for transfer shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by the Board of Directors. Section 2. Execution of Contracts. The Board of Directors, except as in the Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any contract or execute any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances and unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. Section 3. Fiscal Year. The fiscal year of the Corporation shall commence on the 1st day of July of each year and shall end on the 30th day of June of the next succeeding year. Section 4. Annual Audit. The affairs and financial condition of the Corporation shall be audited annually at the end of each fiscal year commencing with fiscal year 1985-1986 by an independent certified public accountant selected by the Board of Directors and a written report of such audit and appropriate financial statements shall be submitted to the Board of Directors prior to the next regular meeting of the Board of Directors of the Corporation following the completion of such audit. Additional audits may be authorized as considered necessary or desirable by the Board of Directors. -6- ARTICLE VI Exemot Activities Notwithstanding any other provisions of these Bylaws, no Director, officer, employee or representative of this Corporation shall take any action or carry on any activity by or on behalf of the Corporation not permitted to be taken or carried on by an organization exempt under Section 501(c) (3) or 501(c) (4) of the Internal Revenue Code of 1954, as amended, and the Regulations promulgated thereunder as they now exist or as they may hereafter be amended. ARTICLE VII Amendment to Bylaws These Bylaws may be amended by majority vote of the Board of Directors. ADOPTED by the Board of Directors of the City of Huntington Beach Civic Improvement Corporation on August 4, 1986. C", By Secretary -7- 3 18019-26 JHHW:CFA:KML 08/09/89 KML4514 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION INCUMBENCY AND SIGNATURE CERTIFICATE — CORPORATION The undersigned hereby state and certify: (i) that they are the duly appointed, qualified and acting President and Secretary, respectively, of the City of Huntington Beach Civic Improvement Corporation, a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and as such, are familiar with the facts herein certified and are authorized to certify the same: (ii) that the following are now and have continuously been since the dates of beginning of their respective current terms of office shown below, the duly appointed, qualified and acting Board of Directors of the Corporation, and the dates of the ending of their respective current terms of office are hereunder correctly designated opposite their names: Beginning Date Ending Date Members of Current Term of Current Term Wes Bannister November, 1986 November, 1990 Tom Mays November, 1986 November, 1990 Jim Silva November, 1988 November, 1992 Peter Green November, 1988 November, 1992 Don MacAllister November, 1988 November, 1992 Grace Winchell November, 1986 November, 1990 John Erskine November, 1986 November, 1990 (iii) that the signatures set forth opposite the names and titles of the following persons are the true and correct specimen, or are the genuine, signatures of such persons, each of whom holds the office designated below: Name/Title Signature Wes Bannister, President Paul E. Cook, Executive Director Donald L. Watson, Treasurer Connie Brockway, Secretary (iv) that for and on behalf of the Corporation, the within—named Executive Director has executed and the within—named Secretary has attested to each of the following agreements: (a) Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City of Huntington Beach (the "City"), (b) Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (c) Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City, (e) Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), and (f) Trust Agreement, dated as of July 15, 1989, by and among the Trustee, the Corporation and the City; —2— and on behalf of the Corporation, the within-named Executive ,e Certificate Purchase Agreement, dated July 27, 1989, by and erg, the Corporation, the City and acknowledged by the Trustee. CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By Wes Bannister, President [SEAL) By eO7 2t4 Connie Orockway, Secretary -3- 4 18019-26 JHHW:CFA:KML 08/09/89 KML4513 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION OFFICER'S CERTIFICATE — CORPORATION The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Executive Director of the City of Huntington Beach Civic Improvement Corporation, a nonprofit public benefit corporation duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that he is duly designated as a "Corporation Representative" of the Corporation, as such term is defined in that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the Corporation and the City of Huntington Beach (the "City"); (iii) that on July 5, 1989, the Board of Directors of the Corporation duly adopted Resolution No. 89-2, entitled "A Resolution of the Board of Directors of the Huntington Beach Civic Improvement Corp. Approving (1) Removal of Public Safety Property from 1986 Lease Agreement, (2) Lease of Such Property Back to City of Huntington Beach, (3) Related Agreements, & Official Statement and (4) Sale of Not to Exceed $16,000,000 Certificates of Participation," which resolution has not been amended, modified, supplemented, rescinded or repealed and is in full force and effect as of the date hereof; (iv) that the Corporation has duly authorized the execution, delivery and performance of the following agreements (herein collectively, the "Agreements"): (a) Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (b) Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City, (c) Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement"), by and between the Corporation and the City, (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City, (e) Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and the Trustee, (f) Trust Agreement, and (g) Certificate Purchase Agreement, dated July 27, 1989, by and among Stone & Youngberg (the "Underwriter"), the Corporation, the City and acknowledged by the Trustee; (v) that the Corporation has full power and authority (a) to enter into and perform the Agreements, (b) to cause delivery of the above__ - -'�,Dned Certificates of Participation (the "Certificates") pursuant to the Trust Agreei:— , ..rid (c) to carry out and consummate the transactions contemplated by the Agreements and the Official Statement, dated August 8, 1989, relating to the Certificates; (vi) that to the best knowledge of the Corporation, after reasonable investigation, the execution and delivery of the Agreements and the Certificates and compliance on the Corporation's part contained with the provisions therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Corporation is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Corporation under the terms of any such law, administration regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided in the Agreements; (vii) that to the best knowledge of the Corporation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Corporation affecting the existence of the Corporation or the titles of its officers to their respective offices or in any way contesting or affecting the validity or enforceability of the Agreements or the Certificates, or contesting the powers of the Corporation or its authority to issue, enter into, adopt or perform its obligations under any of the foregoing, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Agreements or the Certificates; and (viii) that the Corporation will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order to: (a) qualify the Certificates for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate, and —2— (b) determine the eligibility of the Certificates for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the Certificates; provided, however, that in no event shall the Corporation be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject; (ix) that all things, conditions and acts required by the laws of the State of California, the Lease Agreement and the Trust Agreement to exist to have happened and to have been performed precedent to and in the delivery of the Certificates, do exist, have happened and have been performed by the Corporation in due time, form and manner as required by law; and (x) that the representations and warranties of the Corporation contained in the Agreements were true and correct on and as of the respective dates of the Agreements and are hereby reaffirmed on and as of the date hereof as if made on and at the date hereof. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By Paul E. Cook, Executive Director -3- 5 18019-26 JHHW:CFA:KML 08/09/89 KML4517 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION WRITTEN REQUEST TO TRUSTEE The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Executive Director of the City of Huntington Beach Civic Improvement Corporation, a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Public Benefit Law of the State of California (the "Corporation"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (it) that he is duly designated as a "Corporation Representative" of the Corporation, as such term is defined in that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the Corporation and the City of Huntington Beach (the "City"); and (iii) that, pursuant to Section 2.01 of the Trust Agreement, the undersigned hereby requests the Trustee to prepare, execute and deliver Certificates of Participation substantially in the form attached as Exhibit A to the Trust Agreement in an aggregate principal amount of $15,025,000 (the "Certificates"), and to deliver the, Certificates to Stone & Youngberg (the "Underwriter") pursuant to the terms of the Certificate Purchase Agreement, dated July 27, 1989, by and among the Underwriter, the Corporation, the City and acknowledged by the Trustee. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By OW6 !E4!;; Paul E. Cook, Executive Director 6 _� 18019-26 JHHW:CFA:KML 08/09/89 KML4512 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION REQUISITION NO. 1 FOR DISBURSEMENT FROM PROGRAM FUND The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Treasurer of the City of Huntington Beach Civic Improvement Corporation, a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Public Benefit Corporation Law of the State of California (the "Corporation"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that he is duly designated as a "Corporation Representative" of the Corporation, as such term is defined that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), the Corporation and the City of Huntington Beach (the "City"); (iii) that the Trustee is hereby requested to disburse this date from the Program Fund established pursuant to Section 4.02 of the Trust Agreement for payment of the amounts due and payable to the City under the Agreement Regarding Removal of Property, dated July 15, 1989, by and between the Corporation and the City and for payment of Costs of Issuance (as such term is defined in the Trust Agreement), to each payee designated on the attached Exhibit A, the respective sum set forth opposite such designation; (iv) that each item of cost identified on the attached Exhibit A has been properly incurred, is a proper charge against the Program Fund and has not been the basis of any previous disbursement; and (v) that attached hereto are copies of invoices or statements of account in support of the disbursements being made pursuant to this Requisition. Dated: August 15, 1989 CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION By !�C/i�lli/��� i�dw•� Donald L. Watson, Treasurer EXHIBIT A PROGRAM FUND DISBURSEMENTS Payee Name and Address Purpose of Obligation Amount City of Huntington Beach Acquisition of Property $13,365,000.00 2000 Main Street Huntington Beach, CA 92648 Jones Hall Hill & White Special Counsel Fee and S 50,399.70 4 Embarcadero Center, Suite 1950 Reimbursable Expenses San Francisco, CA 94111 State Street Bank and Trust Trustee's Acceptance Fee ($2,500), $ 6,000.00 Company of California, N.A. and Annual Administration Fee ($3,500) 725 S. Figueroa Street, Suite 975 Los Angeles, CA 90017 A-1 cJONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAM' CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1950 THOMAS A. DOWNEY SAN FRANCISCO 94111 ANDREW C. HALL,JR. August 15, 1989 (415) 391-5780 KENNETH I.JONES TELECOPIER WILLIAM H. MADISON (41b) 391-5784 BRIAN D. OUINT (415) 391-5785 PAUL J. THIMMIG (415) 956-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) Mr. Donald L. Watson Treasurer City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 RE: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation INVOICE For Legal Services Rendered: 1% of the first $1,000,000 of principal $10,000.00 1/2% of the next $4,000,000 of principal 20,000.00 1/4% of the next $5,000,000 of principal 12,500.00 1/8% of the remaining $5,025,000 of principal 6,281.25 $48,781.25 For Reimbursable Expenses: Delivery & Messenger $421.70 GKL Corporate Search 39.75 Photocopies 557.00 Closing Costs 600.00 1,618.45 $50,399.70 7 OFFICE OF j116'oy CITY ATTORNEY P.O.BOX 2740 2000 MAIN STREET HUNTINGTON BEACH CALIFORNIA 92647 GAIL HUTTON TELEPHONE City Attorney (714)536-6555 August 15, 1989 Stone & Youngberg One California Street, Suite 2800 San Francisco, California 94111 RE: $15, 025, 000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: I am the City Attorney for the City of Huntington Beach (the "City") , acting as counsel to the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and in that connection I have examined certain records reflecting the actions taken by the Corporation pertaining to the authorization, execution and delivery of the following agreements (herein collectively, the "Agreements") : (a) Agreement Regarding Removal of Property from 1986 Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City; (b) Second Amendment to Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City; (c) Lease Agreement, dated as of July 15, 1989 , (the "Lease Agreement") , by and between the Corporation and the City; (d) Memorandum of Lease, dated as of July 15, 1989, by and between the Corporation and the City; (e) Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and State Street Bank and Trust Company of California, N.A. , as trustee (the "Trustee") ; Stone & Youngberg August 15, 1989 Page Two (f) Trust Agreement, dated as of July 15, 1989, by and among the Trustee, the Corporation and the City; and (g) Certificate Purchase Agreement, dated as of July 27, 1989, by and among Stone & Youngberg, the Corporation, the City and acknowledged by the Trustee. Based upon such examination, I am of the opinion that : 1. The Corporation is a nonprofit public benefit corporation, duly organized and existing under the Nonprofit Benefit Corporation Law of the State of California, with full power and authority to execute and perform its obligations under the Agreements . 2 . The Agreements have been duly authorized, executed and delivered by the Corporation and constitute legal, valid and binding obligations of the Corporation enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors ' rights generally. 3 . The execution and delivery of the Agreements by the Corporation with the provisions thereof, will not conflict with, or constitute a breach of or default under, the Corporation' s duties under the Agreements or any law, administrative regulation, court decree, resolution, charter, by-laws or other agreements to which the Corporation is subject or by which it is bound. 4 . To the best of my knowledge, there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the Corporation to restrain or enjoin the collection of the payments to be made pursuant to the Lease Agreement or contesting the powers of the Corporation to enter into or perform its obligations under any of the foregoing . 5 . Nothing has come to my attention to lead me to believe that the material contained in the Official Statement relating to the Corporation 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 light of the circumstances under which they were made, not misleading . Very truly yours, lV4 i)v GA I L �02 Counsel to the Corporation D STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. Certified Excerpt from Vote of Board of Directors VOTED: That Officers and employees of STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. are hereby authorized to exercise powers as hereinafter specified: To accept, execute, seal, acknowledge and deliver mortgages, indentures or other instruments, running to this Company as Trustee or in any other fiduciary capacity to secure bonds, notes or other obligations; to certify, authenticate and deliver bonds, notes or other obligations issued under mortgages, indentures or other instruments, running to this Company as Trustee or in any other fiduciary capacity or issued by a country, state, county, municipality or any subdivision or authority thereof; to agree to act as Paying Agent for notes issued by any country, state, county, municipality or any subdivision or authority thereof; or any public authority; and to countersign, authenticate and deliver promissory notes of and as agent for any issuer, by either: The Chairman of the Board The President A Senior Vice President A Vice President An Assistant Vice President The Secretary A Corporate Trust Officer I hereby certify that the foregoing is a true excerpt from a vote unanimously passed at a meeting of the Board of Directors of State Street Bank and Trust Company of California, N.A. duly called and held on August 27, 1986 as amended to date. GD-00009 (1) Certified Excerpt from Vote of Board of Directors Page Two I further certify that the said vote, as so amended, is in full force and effect and that the persons listed below have been duly elected to, and now hold the offices of State Street Bank and Trust Company of California, N.A. listed after their respective names: Name Title Signature E. L. Trottman Vice President Lynda A. Vogel Vice President Joni Frederick Asst. Vice President Stephen Rivero Asst. Vice President Evelyn T. Furukawa Asst. Secretary Jose Matamoros Asst. Secretary Date: AUG 1 5 1p89 Attest: PRES DENT (SEAL) GD-00009 (2) z 18019-26 JHHW:CFA:KML 08/12/89 KML4499 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION CERTIFICATE OF TRUSTEE The undersigned hereby states and certifies: (i) that he is a duly authorized officer of State Street Bank and Trust Company of California, N.A. in its capacity as trustee (the "Trustee") under that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among the Trustee, the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City of Huntington Beach (the "City"), and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same; (ii) that the Trustee is a national banking association duly organized and existing under the laws of the United States of America and has all necessary power and authority to enter into and perform its duties under the Trust Agreement and the Assignment Agreement, dated as of July 15, 1989 (the "Assignment Agreement"), by and between the Corporation and the Trustee; (iii) that the general signature resolution of the Trustee approving and authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of the above—captioned Certificates of Participation (the "Certificates"), the Trust Agreement, the Assignment Agreement and the acknowledgment of the Certificate Purchase Agreement, dated July 27, 1989, by and among Stone & Youngberg, the Corporation and the City, was duly adopted at meetings of the governing body of the Trustee; (iv) that there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or, to the best knowledge of such authorized officer of the Trustee, threatened against or affecting the Trustee (a) to restrain or enjoin the execution or delivery of the Certificates or the collection of revenues pledged under the Assignment Agreement, (b) in any way contesting or affecting any authority for the execution and delivery of the Certificates or the validity of the Certificates, the Trust Agreement or the Assignment Agreement or (c) in any way contesting the existence or powers of the Trustee with respect to the execution or delivery of the Certificates or the security therefor wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Trust Agreement and the Assignment Agreement or the validity of the Certificates; (v) that the execution and delivery of the Certificates, the Trust Agreement and the Assignment Agreement and compliance with the provisions thereof, under circumstances contemplated thereby, do not and will not conflict with or constitute on the part of the Trustee a breach of or default under any agreement or other instrument to which the Trustee is a party or by which it is bound or to the best knowledge of the Trustee, any existing law, regulation, court order or consent decree to which the Trustee is subject; and (vi) that the Trust Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Trustee and constitute the valid and binding agreements of the Trustee and the Certificates have been duly executed and delivered by the Trustee. Dated: August 15, 1989 STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By _ -4;f� thorize Officer -2- 3 18019-26 JHHW:CFA:KML 08/12/89 KML4600 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION TRUSTEE'S RECEIPT OF PROCEEDS The undersigned hereby states and certifies: (i) that he is an authorized officer of State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee") under that certain Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among the Trustee, the City of Huntington Beach Civic Improvement Corporation (the "Corporation"), and the City of Huntington Beach; 00 that on the date hereof the Trustee received from Stone & Youngberg, as underwriter (the "Underwriter") of the captioned Certificates of Participation (the "Certificates"), the sum of $14,779,356.04, and has deposited such amount into the following funds established pursuant to the Trust Agreement: $ 86,218.54 deposited into the Lease Payment Fund (representing accrued interest from July 15, 1989 to the date hereof) 1,215,605.72 deposited into the Reserve Fund 13,477,531.78 deposited into the Program Fund $14,779,356.04 TOTAL AMOUNT DEPOSITED THIS DATE (iii) that said total purchase price was computed as follows: $15,025,000.00 Principal Amount of Certificates (217,862.50) Less Underwriter's Discount (1.45%) (114,000.00) Less Original Issue Discount on Term Bonds 86,218.54 Plus Accrued Interest from July 15, 1989 to August 1, 1989 $14,779,356.04 TOTAL PURCHASE PRICE RECEIVED THIS DATE Dated: August 15, 1989 STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By ,AeThorized cer 4 MORRISON &, FOERSTER SAN FRANCISCO ATTORNEYS AT LAW NEW YORK ORANGE COUNTY WASHINGTON, D.C. WALNUT CREEK 333 SOUTH GRAND AVENUE LONDON PALO ALTO LOS ANGELES, CA 90071.3168 HONG KONG DENVER TELEPHONE (213)626-3800 TOKYO TELEFACSD&U (213)626-6955 TELEX 261823 MOFO UR August 15, 1989 City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Stone & Youngberg One California Street San Francisco, California 94111 Re: $15 ,025 ,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach Ladies and Gentlemen: . We have acted as counsel for State Street Bank and Trust Company of California, N.A. (the "Trustee'$) , in connection with the transactions contemplated by a trust agreement dated as of August 1, 1989 (the "Trust Agreement") by and among the City of Huntington Beach (the "City") , City of Huntington Beach Improvement Corporation (the "Corporation") and the Trustee relating to the execution and delivery of $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) evidencing the direct, undivided fractional interests of the Owners thereof in Lease Payments to be made by the City to the Corporation (the "Certificates") . We have examined originals or copies of the Trust Agreement, the Assignment Agreement dated as of August 1, 1989 (the "Assignment Agreement") between the Corporation, as assignor, and the Trustee and the form of the Certificates (collectively and severally, the "Documents" ) . Unless otherwise defined herein or unless the context otherwise requires , terms defined in the Documents shall have the same meanings herein. MORRISON & FOERSTER City of Huntington Beach Stone & Youngberg August 15 , 1989 Page 2 In addition, we have examined such records, documents, instruments, certificates of public officials and of the Trustee, and considered such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. We have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity with originals of all items submitted to us as copies. In making our examination of the Documents, we have assumed that each party to one or more of the Documents other than the Trustee has the power to enter into and perform its obligations thereunder, has duly authorized, executed and delivered such Documents, and that such Documents constitute the legal, valid and binding obligations of such party. We express no opinion as to the perfection or priority of any security interest or lien created by the Trust Agreement. our opinion in paragraph 1 below as to the lawful existence of the Trustee is based solely upon certificates of public officials of the United States and officers of the Trustee. We have made no independent investigation as to whether those certificates are accurate or complete. The opinions hereinafter expressed are subject to the following further qualifications: (a) The effect of bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally, including, without limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable subordination. , (b) Limitations imposed by general principles of equity upon the availability of equitable remedies or the enforcement of provisions of the Documents; and the effect of judicial decisions which have held that certain provisions are unenforceable where their enforcement would violate the implied covenant of good faith and fair dealing, or would be commercially unreasonable. MORRISON & FOERSTER City of Huntington Beach Stone & Youngberg August 15 , 1989 Page 3 (c) The effect of judicial decisions permitting the introduction of extrinsic evidence to modify the terms or the interpretation of the Documents. Based upon and subject to the foregoing, we are of the opinion that: 1. The Trustee is a national banking association with trust powers, duly created and lawfully existing under the laws of the United States of America. 2. The Trustee has duly authorized by all necessary corporate action the execution, delivery and performance of the Trust Agreement and the Assignment Agreement. 3 . The Trustee has all necessary trust powers required to carry out the trusts intended under the Trust Agreement. 4 . Upon the execution and delivery of the Trust Agreement and the Assignment Agreement by Mr. Stephen Rivero, Assistant Vice President of the Trustee, the Trust Agreement and the Assignment Agreement will constitute the valid and binding agreements of the Trustee, enforceable against the Trustee in accordance with their respective terms. We express no opinion as to matters governed by any laws other than the substantive laws of the State of California (without reference to its conflicts of laws rules) and federal laws of the United States of America which are in effect on the date hereof. This opinion is solely for your benefit and may not be relied on by, nor may copies be delivered to, any other person without our prior written consent. Respectfully submitted, E MUUdyS Investors Service 99 Church Street, New York,N.Y. 10007 July 17, 1989 Mr. Robert Franz Huntington Beach Civic Imp. Corp. 2000 Main St. , P.O. Box 148 Huntington Beach, California 92648 Dear Mr. Franz: We wish to inform you that our Rating Committee has assigned the rating of A 1 to the $14,975, 000 Huntington Beach-Huntington Beach Civic Improvement Corporation, California Certificates of Participation (1989 Public Parking Project) Dated 7/15/89 to be sold through negotiation July 24, 1989. We have also confirmed the ratings of the following issues listed below: A 1 to the Certificates of Participation (Civic Center Project) Dated 7/15/86. Aa to the Huntington Beach, General Obligation Bonds. A 1 to the Huntington Beach Parking Authority, Lease Rental Bonds. In order that we may maintain the currency of this rating over the period of the loan, we will require current financial and other updating information. We will appreciate your continued cooperation in the future. We would appreciate receiving a copy of the final Official Statement when available. Under separate cover you will be receiving a copy of our credit report on the above referenced bond sale. Should you have any questions regarding the above, please do not hesitate to contact Constance O'Dea at (212) 553-0300. Sincerely yours, Freda S. Joh son Executive Vice President COD:cn cc: Mr. Hunter Holding Stone & Youngberg 1 California St. , Suite 2800 San Francisco, California 94111 Moodys' Credit Report Huntington Beach, California - Huntington Beach Civic Improvement Corporation Juty 20, 1989 New Issue Lease Rental sale: $14.960,000 Certificates of Participation (1989 Public Parking Project Financing)dated July 15. 1989 date: Expected through negotiation July 26 Moody's rating: A 1 C Pffiftales or Partictp km (1989 Public Parking Prolocr) Dat*d July 16, 1969 Opinion: Strong financial performance,manageable level of economy combine to provide upper medium grade aggregate(case obligations and a favorable local security. key facts: Leal Factors: Project Operator: City of Huntington Beach. Lessor: Huntington Beach Civic Improvement Pledged Revenues: All revenues as defined in Corporation. the trust agreement expected to consist mainly of Lessee: City of Huntington Beach. city Icasc payments. Project: Sale and leaseback of city public safety Source of Revenues: Any lawfully available facilities to finance public parking facilities. (WWs• Lessee Factors: Revenues,FY 1988: 8.19E Population Growth, 1970-80: 47.0% General Fund Balance as% of Per Capita Income, 1985: $14,929 Revenues, FY 1988: 29.9% F.V.per Capita.FY 1989: $48,9fi9 Moody's Ratings: Median Family Income. 1980: $26.985 General Obligation Bonds: Ao Amount Outstanding: $2.3()5.(XX) Debt Burden: 1.0% City Lease Obligations. Debt per Capita: $492 Non-LOC-backed: Al Peak Lease Payment FY 1994 as%of City Lease Obligations. LOC-bucked: Aol analysis: The city's historically strong financial performance. be its extensive and popular beach front acreagc. resulting from conservative fiscal policies and a While in the last the city has profiled from this diverse revenue stream,and the vitality of the local resource mainly from visitor parking fees,the city economy arc key credit strengths.Located on the has recently embarked upon an aggressive rcdcvcl- southem California coast about 35 miles south of opmcnt plan to develop more fully its tourism- Los Angeles,the city's major resource continues to related revenues,as well as to incicase and rehabili- 2 Loose Rental July 20, 1989 Huntington Beach, California - Huntington Beach Civic Improvement Corporation tate commercial space and residential units.The With this issue.the peak aggregate lease payment current offering will finance further parking facili- places an increased but still manageable burden on tics to support these redevelopment efforts. the General Fund. Further,lease payments on the Assessed valuation has increased steadily for the current issue arc expected to be paid from parking last several years,mid socioeconomic indicators arc revenues,&W-u.ugh those revenues are not specifi- above norms.The dominance of an aerospace con- cally pledged.City officals report plans to issue tractor in the employment base,however,creates another$7.0 million in certificates within the next some vulnerability. year for a library expansion project.Lease burden The current offering will provide funds for new should remain manageable with that additional downtown parking facilities through the sale and debt. leaseback of an existing city property.The site was At this time,based on the credit factors discussed used,together with the city's civic center complex, above.we are confirming the All ratings on the in a previous asset transfer financing in 1986.How- 1968 lease rental bonds of the Huntington Beach ever,the 1986 lease,in anticipation that the subject Parking Authority,and on the 1972 lease rental sites would grow in valuation,allows for release of bonds of the Huntington Beach Public Facilities property in excess of the original amount of the Corporation.The Huntington Beach-Huntington financing.At closing,the current issue will be Beach Redevelopment Agency,1994 Certificates of secured by lease payments on the public safety Participation for the Emerald Cove Senior Citizens complex and the 1986 certificates will be secured by Housing Project,additionally secured by a letter of lease payments on the civic center complex.Other credit,are rated Aa 1.The 1988 revenue bonds of legal provisions are standard,with a Reserve Fund the Huntington Beach Public Financing Authority, fully funded at the maximum permitted by federal rated Boa,are secured solely by tax increment tax law and 12 months of rental interruption revenues of fourof the city's redevelopment project insurance. areas. Lease Rental July 20, 1989 3 Huntington Beach, California - Huntington Beach Civic Improvement Corporation details of bond Security: All revenues as defined in trust agree- Interest Rate: To be determined. sale: ment,expected to consist mainly of city rental Interest Payable: Semiannually beginning Febru- payments• ary 1,1990. Date Of Certificates: July 15,1989. Coll Features: Beginning August 1,1999 at Denomination: $5,000or any integral multiples 102%. thereof. Registrar and Paying Agent: State Street Bank Armual Moturities 8/1 (S 000) and Trust Company of California,N.A. Year Amount Year Amount Delivery: Within 30 days. 1990 $ 130 1999 $ 290 Bond Counsel: Jones,Hall,Hill,and White,San 1991 180 2000 310 Francisco. 1992 190 2001 330 Financial officer: Robert Franz,Chief,Adminis- 1993 200 2002 355 trative Services Department. 1994 215 2003 380 Auditor: Diehl,Evans and Co.,Santa Ana 1995 225 2004 405 (FY 1988). 1996 240 2005 435 1997 255 2019(term) 9,410 Managing Underwriter: Stone and Youngberg, 1998 275 San Francisco. rating history: Initial Rating: Al analyst: C.O'Dea Aoody's Investors Service,Inc.has used due care and notion in the preparation of this publication.The information herein has been obtained from sources believed to be accurate and reliable,but because of the possibility of human and mechanical error,its accuracy or completeness is not guaranteed.Moody's ratings are opinions,not recommendations to buy or sell, sad their accuracy is not guaranteed.A rating should be weighed solely as one factor in an investment decision,and you should make your own study and evaluation of any issuer whosc securities or debt obligations you consider buying or selling.Most issuers of oexporale bonds,municipal bonds and notes,preferred stock,and commercial paper which are rated by Moody's Investors Service,Inc.have,prior to receiving the rating,agreed to pay a fee to Moody's for the appraisal and rating services.7be fee ranges from S I,000 to$125,000. Copyright 0 1989 by Moody's Investors Service,Inc.Publishing and executive offices at 99 Church Street,New York,NY 10007 4 Lease Rental July 20, 1"9 Huntington Beach, California - Huntington Beach Civic Improvement Corporation the lessee: Coastal city,approximately 35 miles south of Los space contractor,however,creates some vulnerabil- Angeles,in Orange County.Large proportion of ity.Well-maintained financial operations with housing stock built since last census.Relatively trend of operating surpluses and ample General diversified employment base;dominance by aero- Fund balance. lessee debt Debt Statement as of 7/14/89 (S 000)ID factors: Amount Bonded debt outstanding General obligation bonds $2,305 Revenue bonds and notes payable 3,221 Gross bonded debt: $ 5,526 Lease rental obligations outstanding 33,468 Current offering (7/24/89) 14,960 Tax and revenue anticipation notes(due l 1/21/89) 5,000 Notes payable 2,138 Gross direct debt $61,092 Less: Revenue bonds and notes payable 3,221 Self-supporting certificates of participation M 4,523 t Tax and revenue anticipation notes 5,000 Direct net debt $48,348 Overlapping debt 41,946 Overall net debt $90294 M Excludes$26,775,000 revenue bands of Public Financing Authority seemed solely by bans paid from tax increment revenues of four of city's five redevelopment project areas,under 1985 Marks-Roos Losn Pooling AcL ®Emerald Cove Housing Project certificates of participation,payable solely by revenues of the project;warred by letter of credit;rated AOl. Debt Ratios Rate of Retirement ($000)El Net Per % Median Principal Amount Total Debt Debt Capita O Median F.V. O(%) Due (incl. new issue) % Direct $263 $470 0.6 1.3 In 5 years $ 8,115 16.8 Overall 492 719 1.0 2.5 In 10years 21,255 43.9 M Cities with population 100,000 to 199.999. M General obligation bonds and lease rental obligations. Lease Rental July 20, 1989 5 Huntington Beach, California - Huntington Beach Civic Improvement Corporation Lessee Supported Lease Obligations as of 3/3/89 ($ 000) Amount Amount Final Series Rating Issued Outstanding Maturity Huntington Beach Parking Authority 1968 lease rental A 1 $2,300 $825 1994 Huntington Beach Public Facilities Corp- Civic Center lease rental,dated 1/15f72 Attu 11,100 O Huntington Beach Public Facilities Corp- Central library lease rental,dated 9/1172 Al 5,000 3,000 1997 Hungtington Beach-Huntington Beach Redevelopment Agency,Certificates of Participation(Emerald Cove Housing Project),1984® MAW 4,600 4,523 1994 Huntington Beach-Huntington Beach Civic Improvement Corp.,Certificates of Participation(Civic Center Project)dated 7/15/86 Al 20,000 19,610 2016 Huntington Beach Pub.Fin.Auth.Cert.of Part.(Dispatch Sys.Tel.Sys.&Computer Proj.) dtd. 3/8/89 (BIG) Asa 5,510 5,510 2/1/96 Huntington Beach-Huntington Beach Civic Imp.Corp.Cent.of Part.(1989 Pub.Pkg. Proj.)dtd. 7/15/89(current offering) Al 14,960 14,960 7/1/19 m To be deferred 1996. m Additionally secured by Imer of eradit m Payable solely from revenues of the project Structure: Approximately level debt service at Future Financing/Capital Programs: Probable aggregate$6.1 million annually. issuance of$647 million COPS within next year for library expansion. security Certificate Security: Payable from all revenues as ed from proceeds;maximum permitted by federal provisions: defined in the trust agreement,expected to consist tax law. mainly of city lease payments. Additional Certificates: Standard;no provision. Flow of Funds: Standard;lease payments to be Authorized Investments: Fairly broad list;direct deposited into Lease Payment Fund and applied to obligations of U.S.government and its agencies; principal and interest as due.Separate Capitalized CDs;corporate obligations rated A or better;com- Interest Account within lease payment fund; mercial paper rated P1 ;tax-exempt obligations cat- amounts in account to be invested in federal securi- ed Aor better;money market funds;investment ties with maturities matched to lease payment agreements with financial institution rated A or dates,to be used only for lease payments ittributa- better. ble to unacquired portions of project. Key Lease Provisions: Rate Covenont: Standard;under lease,city cove- nants to annually budget and appropriate funds Source of Funds: Any legally available funds;as sufficient to meet lease payment requirements. such,lease payments are obligation of city's Gener- al Fund.Peak aggregate lease obligation of Reserve Requirement: Standard; an atnount $6,073,000 in fiscal 1994 represents a rclativcly equal to maximum annual debt service,fully fund- 6 Lease Rental July 20, 1989 Huntington Beach, California - Huntington Beach Civic Improvement Corporation high but manageable 8.1%of fiscal 1988 General which city exercises its right to release property in Fund revenues. excess of original value of 1986 certificates,or$20.0 Covenants: Typical covenants concerning city's million from 1986 Lease in order to sell and lease responsibility to annually budget and appropriate back such property to finance current project. amounts necessary for lease payments,to repair Acquisition Appraisal by MA 1 appraiser estimat- and maintain project,and to maintain insurance, mg fair rental value of total 1986 project at including one year of rental interruption insurance. $33,380,000;$13,365,000 attributable to Police and Also included are typical remedies of default. Jail site which backs current offering. Other Security Provisions: Agreement Regarding Removal of Property from 1986 Lease,under lessee Form of Government: Charter city,council-man- Pensions: Public Employees'Retirement System; administrative ager form of government. city contributed$4,390,000 for year ended June 30, factors: Employees: Represented by six bargaining units. 1988. Two-year agreements with majority;contracts set- Legislation/Referenda/Litigation: None tled through with all groups. reported. -noerty Huntington Beach )Rion and Assessed % Tax Rate/ Levy %Current ` tb^data: Fiscal Year Valuation(000) Change S1,000A.V. (000) ©Collected 1987 $8,000,261 7.9 El ID 96.3 1988 8,381,909 ®4.8 M ID 96.3 1989 8,781,836 4.8 El 0 - tD t.ocal units in California receive pro-rats portion of countywide S 10.00 per$1.000 full value for operational purposes. m Orange County. m Slower growth in A.V.results from drop in unsecured valuation. 1989 Full Valuation: $8,781,836,000 Average Annual Growth F.V., 1989 Equalization Rate: 100% 1986-89: 5.8% 1989 F.V.per Capita: $48,969 lessee economic Population: factors: Year Population Land Area Density(sq. mi.) City State U.S. 1950 0 0.00 - - - - 1960 0 0.00 - - 48.47 18.50 1970 115,960 26.60 4,359 - 27.07 13.32 1980 170,505 27.20 6,269 47.04 18.51 11.43 1982 176,314 27.20 6,482 3.41 4.06 2.27 1984 179,335 27.20 6,593 1.71 4.04 1.93 1986 183,620 27.20 6,751 2.39 5.30 0.97 Lease Rental July 20, 1989 7 Huntington Beach, California - Huntington Beach Civic Improvement Corporation Per Capita iiru:ome % Change Year Income city State U.S. 1969 $3,877 - - 1979 9,782 15231 129.50 138.37 1981 11,898 21.63 17.71 25.26 1983 12,868 8.15 7.96 12.11 1985 14,928 16.01 12.76 15.92 Population and Housing Characteristics: Norms U.S. 1970 1980 1111980 1980 Population: Median age 25.1 28.8 30.3 30.0 %school age 29.5 21.5 18.4 20.9 %working age 55.7 66.2 63.7 60.7 %65 and over 3.8 5.8 10.6 11.3 No. persons/household 3.4 2.8 2.6 2.75 Income: Median family income $12,922 $26,985 $21,949 $19,908 %below poverty level 5.1 6.5 11.0 12.5 Per capita income $3,877 $9,782 $8,508 $7,313 Housing: %owner occupied 71.4 57.5 52.2 64.4 %built before 1939 - 1.7 15.2 26.1 %built since last census 87.3 47.0 21.9 25.9 Owner occupied median value $28,679 $120,400 $87,838 $47,300 Median gross rent $165 $398 $295 $243 Occupied housing units $33,638 11$61,126 - - source:u.S.Census Bureau. m 197"0%change:81.7%. ®Noms are for aU cities with population greater than 20,000 in the Far West Region. 8 Lease Rental July 20, 1989 Huntington Beach, California - Huntington Beach Civic Improvement Corporation Labor Market Ctxtracferistics: Huntington Beach Labor Total % Unemployed Year Force Employment City State U.S. 1978 80,423 76,576 4.8 7.1 6.1 1979 85,313 81,941 4.1 6.2 5.8 1980 89,627 85,767 4.3 6.8 7.1 1981 108,197 103,220 4.6 7.4 7.6 1982 111,028 103,129 7.1 9.9 9.7 1983 113,693 106,417 6.4 9.7 9.6 1984 106,553 101,631 4.6 7.8 7.5 1985 110,923 106,168 4.3 7.2 72 1986 115,162 110,649 3.9 6.7 7.0 1987 119,944 115,998 3.2 5.8 6.2 1988 124,615 120,885 3.0 5.3 5.5 4/88 124,673 121,193 2.8 5.0 5.3 4/89 125,906 122,181 3.0 5.1 5.1 source:Department of Labor.Bureau of Labor statistics. Employees Employees t Largest Employers 1989 Largest Employers 1989 McDonnell Douglas 8,768 Pacifica Hospital 290 General Telephone 1,065 Cambro Manufacturing Company 400 C&.D Plastic 500 Dickenson Pacific 100 Huntington Humana Hospital 306 Southwest Quilted 100 Source:official SUternenL lessee financial Operating Funds Financial Performance (fiscal years ended 6/30 $ 000)O factors: % Change 1987 1988 1988-89 Revenues $74,185 91$78,716 6.1 Expenditures 72,803 77,349 6.2 Operating surplus© 1,482 2,254 - O General and Debt Service Fund s(modified accrual method of accounting). m General Fund only. ®Net of proceeds of long-tan debt. 1988 Sources of Revenue % 1988 items of Expenditure % Property taxes 30.3 Police and fire 44.2 Sales and use taxes 22.7 Public works 20.5 Utility uses tax 11.5 Community services 8.8 From other agencies 10.1 Debt service 4.6 Other 25.4 Other 21.9 Lease Rental July 20, 1989 9 Huntington Beach, California - Huntington Beach Civic Improvement Corporation General Fund Financial Position (fiscal years ended 6/30 S 000): 1987 1988 Cash and investments $10,884 $11,950 Operating loans - - Other current liabilities 9,640 11,936 Year-end cash surplus $1,244 $ 14 Receivables $15,520 $20,094 Fund balance $18,745 $22,349 Undesignated fund balance 6,725 911,466 m City officials eatimme ae"VaW 1vo4 Balance to anount to s275 million at June 30,1989. the issuer: Non-profit entity acting as financing vehicle. 152020D01 ■ z STONE & YOUNGBERG MEMBERS PACIFIC STOCK EXCHANGE August 15, 1989 City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Re: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interest of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: Stone & Youngberg, as underwriter for the $15,025,000 aggregate principal amount Certificates of Participation (1989 Public Parking Project Financing) , evidencing direct, undivided fractional interests of the owners thereof in lease payments to be made by the City of Huntington Beach (the "City") to the City of Huntington Beach Civic Improvement Corporation (the "Corporation") , as the rental for certain property pursuant to a Lease Agreement, dated as of July 15, 1989, by and between the Corporation and the City (the "Certificates") , hereby certifies that: (a) the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in in the capacity of underwriters or wholesalers) of each maturity of the Certificates is set forth on Exhibit A attached hereto and by this reference incorporated herein, at which price a substantial amount (at least ten percent) of the Certificates of each maturity were sold to the public, and (b) the establishment of the Reserve Fund in the amount of the Reserve Requirement ($1 ,215,605.72) was vital to the marketing of the Certificates at the rates at which they were marketed. That all capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in that certain Trust Agreement, dated as of July 15, 1989, by and among State Street Bank and Trust Company of California, N.A. , as trustee, the Corporation and the City. Very truly yours, STONE & YOUNGBERG By Title (0578h) ONE CALIFORNIA STREET•SAN FRANCISCO,CALIFORNIA 94111 •(415)981-1314 EXHIBIT A Maturity Principal Interest (August 1 ) Amount Rate Price* 1990 $ 135,000 5.90% 100.00% 1991 180,000 6.00 100.00 1992 190,000 6.10 100.00 1993 205,000 6.20 100.00 1994 215,000 6.30 100.00 1995 230,000 6.40 100.00 1996 245,000 6.50 100.00 1997 260,000 6.55 100.00 1998 275,000 6.60 100.00 1999 295,000 6.65 100.00 2000 315,000 6.70 100.00 2001 335,000 6.75 100.00 2002 360,000 6.80 100.00 2003 385,000 6.80 100.00 2019 11 ,400,000 7.00 99.00 * Stated as a percentage of par, accrued interest is included. Exhibit A-1 3 18019-26 JHHW:CFA:KML 08/12/89 KML4496 $15,025,000 CERTIFICATES OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION RECEIPT FOR CERTIFICATES OF PARTICIPATION The undersigned hereby states and certifies that, on behalf of Stone & Youngberg, he received this date from State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), under that certain Trust Agreement, dated as of July 15, 1989, by and among the Trustee, the City of Huntington Beach Civic Improvement Corporation and the City of Huntington Beach, fully registered Certificates of Participation in the aggregate principal amount of $15,025,000, dated as of July 15, 1989, executed and delivered this date by the Trustee pursuant to said Trust Agreement. Dated: August 15, 1989 STONE &YOUNGBERG, as Underwriter By - Title sow 4 i CERTIFICATE OF PARTICIPATION �- 6�,, (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interest of the '4 � =3 Owner Hereof in Lease Payments to be Made by the - °= CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease A w te8 eiCi€ : M ith CITY F O IUNTING a 7Q,,,N BEACH'...j.,.,.ICii:JMPROVEMEN PORATION D INTEREST: M ' ; 'TY ATE:: RATE OF A�'ll j�l E DATE: CUSIP: Y ��...1989 E { THIS IS TO CERTIFY THAT the Registered Owner idenulied above,or registered reason,ons,as the registered owner(the"Registered Owner")of this Certificate of Pe,ticipatien(the The Certificate has been—cuad antl daliveretl by the Trustee pursuant to the terms of a Trust Agreement by and among the Trustee,the Cor oration and the Cit,dated as of "Cart"'ate)Is In owner of a tlirecl.undivitled Iraclional interest in lease payments(the"Lease Payments"(payable under the Lease Agreement dated as of July 15.1989,(the"Lease July 15,1989(Ihe"Trust Agreement').The City has certified IM1at it Is authorized to enter Into the Lease Agreement antl the Trust A re ant under the laws of the Slate of Celda s o Agreement')by and between dhe City of Huntington Beach Civic Improvement Corporation,a nonprofit corporation duly organizetl and existing antler the Constitution antl laws of the State for the purpose of leasing certain lantl antl public improvements from the Corporation.Reference is hereby made m the Lease Agreement and the Trust Agreement(mpies of wfiich are Id Califorma(the"Corporator"),and the City of Hunungmn BeacM1,a charter city antl municipal corporation tluly orga,,ad antl existing under Ine COnsbbd,od and laws of the State of on file at the Trust Office of the Trustee)for a tlescription of the terms on which the Cedilicates are tleliveretl.the rights Ihereuntler of the owners of the eificates,then h:a,duties Caltlprnia(the"Ctry").wM1ich Lease Payments antl certain other rights an0 interests under IM1e Lease Agreement have been assigned to State Street Bank and Trust Company of Califomia, and immunities of the Trustee and Ine nghm and obligations of the Cdy under the Lease Agreement.The Registered Owner of this Cenilicals.by acceptance hereof.assents antl agrees N A.,as trustee(the'Trustee'),having a corporate truss office in Los Angeles.California(the"Trull Office"). to all et the prpuns of the Lease Agreement and the Trust Agree end. The Registered Ownor of this Cerblicad a entitled to receive,subject la the terms of the Lease Agreement,on the Matuiry Dada identified above,the Principal Amount idr ntified above g principal.antl Ip receive on February 1,1990,and semiannually thereafter on February REFE 1 BY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL, represending a tllrect,untlivitletl fractional share of Ihe portion of doe Lease Pa menu deli oared as R E THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. 1 and August 1 of each year IIM1e"Interest Paymend Dates")until payment in lull of said principal,the Registered Owner s direct,untlnided fractional share of Ihe Lease Payments designated s interest coming due tlunng the interest period immediately preceding each of Ihe Interest Payment Dates.provided that interest represented hereby shall be payable I,am In anon or liabilit to the owners al the Certificates to pa prints or mteresl re Payment Dade next preceding Ihe data of execution of Ibis Cemhcate unless bu mil Cerblicate is executed afler dM1e close of business on tM1e filleenN day of the mo ad Y y the pa presehad by the Certificates other the,Irom the funds provided pursuant on Interest Peymenl Date(a"Record Data)antl on or before such Interest Payment Date,in wM1ich event mteresl shall be payable Irom such Interest ante r he Trust Agreement.The Trustee is obligated solely to administer,for the benefit of the owners of the CerfiM1cates,the various funds and accounts established CertificalI.executed on or before January 15,1990,in which evend inlereat shall be payable from the Original Issue Date identified above.Tha Regist n s the n T gr tl tp perform Is other duties as set forth In the Trust Agreement. al Ihe Lease Payments tlesignadetl as interest is the result of the mulliplicalion of the aforesaid share of the portion of the Lease Payments tlesignatetl o y In st per an identified above.calculated on the basis of a 360dey year comprised of I--30day marthe Principal represented hereby is payable in y tetl and tleclaretl that all things.conditions and acts requiretl by the laws of the Stale of California.Ine Lease Agreement and the Trull Agreement to exist. ,I America,upon press lahan hereof at the Trust Did,of the Trustee Interest represented hereby is payable by check or draft mailed by Ihe Trustee at ant nave been performed precedent to and in Ihe delivery of the Cemflcates,do exist.have happened and have been perfarmetl in due time.le—and erannerrequ-cl tp dhe Registered Owner al such Owner's -dress as it appears on the registration books of Ine Trustee as of the close of bushes on the Iilleenln tlay of I ^g mo prove however.Ihal aI he.,,Iran request of the owner of Certificates in an aggregate principal amount of$1.000.000 or more filed with the Trustee as of any R -tares a by such Certificates shall be payable by wire transfer of immediately available funds to such accpunt as shall be specified in such written request in t les. IN WITNESS WHEREOF,this Certificate has been executed and d,livered by State Street Bank no Trust Company of California,N A.,as trustee,acting pursuant to the Trust Agreement, Execution Date: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. as Trustee BY µ AUTHORIZED SIGNATORY CERTIFICATE OF PARTICIPATION (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interest of the Owner Hereof in Lease Payments to be Made by the CITY OF HUNTINGTON BEACH As Rental for Certain Property Pursuant to a Lease Agreement with the CITY OF HUNTINGTON BEACH CIVIC IMPROVEMENT CORPORATION The City is obligated under the Lease Agreement to pay the Lease Payments from any Sinking Fund Sinking Fund source of available funds,subject to certain exceptions as set forth in the Lease Agreement. Prepayment Date Principal Amount Prepayment Date Principal Amount The obligation of the City to pay the Lease Payments does not constitute an obligation of the (August 1) To Be Prepaid (August 1) To Be Paid City for which the City is obligated to levy or pledge any form of taxation or for which the City 2004 $410,000 2012 $ 700,000 has levied or pledged any form of taxation.The obligation of the City to pay the Lease Payments 2005 410,000 2013 700,000 does not constitute a debt of the City,the State of California or any of its political subdivisions, 2005 435,000 2013 750:000 and does not constitute an indebtedness within the meaning of any constitutional or statutory 2006 470,000 2014 80560,000 debt limitation or restriction. 2008 535,000 2016 920,000 The Certificates maturing on or before August 1,1999,are not subject to optional prepay- 2009 575,000 2017 985,000 ment prior to their respective stated maturities.The Certificates maturing on or after August 2010 615,000 2018 1,055,000 1,2000,are subject to optional prepayment in whole,or in part on a pro rata basis among 2011 655,000 2019(Maturity) 1,130,000 maturities and by lot within a maturity,on any date on or after August 1,1999,from prepayments of the Lease Payments made at the option of the City pursuant to the Lease Agreement,at As provided in the Trust Agreement,notice of prepayment shall be mailed by first class a prepayment price(expressed as a percentage of the principal amount to be prepaid),together mail,postage prepaid,not less than thirty(30)nor more than sixty(60)days before the prepay- with accrued interest represented thereby to the date fixed for prepayment,as follows: ment date,to the registered owners of the Certificate to be prepaid,but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings Prepayment Period Prepayment for prepayment or the cessation of accrual of interest represented thereby. (Dates Inclusive) Price If this Certificate is called for prepayment and payment is duly provided therefor as specified August 1,1999,through July 31,2000 102.0% in the Trust Agreement,interest represented hereby shall cease to accrue from and after the August 1,2000,through July 31,2001 101.5 date fixed for prepayment. August 1,2001,through July 31,2002 101.0 This Certificate is transferable by the Registered Owner hereof,in person or by his attorney August 1,2002,through July 31,2003 100.5 duly authorized in writing,at the Trust Office of the Trustee,but only in the manner,subject August 1,2003,and thereafter 100.0 to the limitations and upon payment of the charges,if any,provided in the Trust Agreement and upon surrender and cancellation of this Certificate.Upon such transfer a new Certificate The Certificates are subject to mandatory prepayment on any date,in whole,or in part or Certificates,of authorized denomination or denominations,for the same aggregate principal among maturities on a pro rata basis and by lot within a maturity,from the net proceeds of amount will be delivered to the transferee in exchange herefor.The City,the Corporation and insurance or eminent domain proceedings credited towards the prepayment of the Lease the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all pur- Payments by the City pursuant to the Lease Agreement,at a prepayment price equal to 100% poses,whether or not this Certificate shall be overdue,and the City,the Corporation and the of the principal amount to be prepaid,together with accrued interest represented thereby to Trustee shall not be affected by any notice to the contrary. the date fixed for prepayment,without premium. To the extent and in the manner permitted by the terms of the Trust Agreement,the provi- The Certificates maturing on August 1,2019,are also subject to mandatory sinking fund sions of the Trust Agreement may be amended by the parties thereto with the written consent prepayment by lot on August 1 in each year beginning August 1,2004,from the principal com- of the owners of a majority in aggregate principal amount of the Certificates then outstanding, ponents of the Lease Payments required to be paid with respect to each of such dates,at a and may be amended without such consent under certain circumstances;provided that no such prepayment price equal to 100%of the principal amount to be prepaid,together with accrued amendment shall extend the fixed maturity of any Certificate or reduce the Interest or principal Interest represented thereby to the prepayment date,without premium,as follows: represented thereby,without the express consent of the owner of such Certificate. LEGAL OPINION I hereby certify that the following is a correct copy of the signed legal opinion of Jones Hall Hill&White,A Professional Law Corporation,San Francisco,California,addressed to the City of Huntington Beach,California,and on file in my office,dated the date of delivery of and payment for the Certificates therein described. �p/Jr�^� 4;4 CLERK v JONES HALL HILL & WHITE, CITY A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW FOUR EMBARCADERO CENTER SUITE 1950 SAN FRANCISCO,CA 94111 OPINION:$15,025,000 Certificates of Participation(1989 Public Parking Project Financing)Evidencing the Direct,Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach,as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation We have acted as special counsel in connection with the delivery by the City of Huntington Beach(the"City")of the Lease Agreement,dated as of July 15,1989,(the"Lease Agreement") by and between the City of Huntington Beach Civic Improvement Corporation(the"Corporation"),and the City.Pursuant to the Trust Agreement,dated as of July 15,1989(the"Trust Agreement") by and among the City,the Corporation and State Street Bank and Trust Company of California N.A.,as trustee thereunder(the"Trustee"),the Trustee has executed and delivered$15,025.000 aggregate principal amount of certificates of participation(the"Certificates")evidencing direct,undivided fractional interests of the owners thereof in lease payments to be made by the City pursuant to the Lease Agreement(the"Lease Payments")which have been assigned by the Corporation to the Trustee pursuant to the Assignment Agreement,dated as of July 15,1989(the"Assignment Agreement")by and between the Corporation and the Trustee.We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion,we have relied upon representations of the City contained in the Lease Agreement and the Trust Agreement and in the certified proceedings and other certifications of public officials furnished to us,without undertaking to verify such facts by independent investigation. Based upon the foregoing,we are of the opinion,under existing law,as follows: 1.The City is a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California,with the power to enter into the Lease Agreement and the Trust Agreement and to perform the agreements on Its part contained therein. 2.The Lease Agreement and the Trust Agreement have been duly authorized,executed and delivered by the City and are the legal,valid and binding obligations of the City enforceable against the City in accordance with their respective terms. 3.The Certificates have been validly executed and delivered by the Trustee pursuant to the Trust Agreement and,by virtue of the Assignment Agreement,the owners of the Certificates are entitled to the benefits of the Lease Agreement. 4.The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations;provided,however,that,for the purpose of computing the alternative minimum tax imposed on such corporations(as defined for federal income tax purposes),such interest is required to be taken into account in determining certain income and earn- ings.The opinions set forth in this paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 which must be satisfied subsequent to the delivery of the Lease Agreement in order that such interest be,or continue to be,excludable from gross income for federal income tax purposes.The City has covenanted to comply with such requirements.Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the Lease Agreement.We express no opinion regarding other federal tax consequences arising with respect to the Lease Agreement and the Certificates. 5.The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Certificates and the enforceability of the Lease Agreement,the Assignment Agreement and the Trust Agreement may be subject to bankruptcy,insolvency, reorganization,moratorium and other similar laws affecting creditors'rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with general principals of equity or otherwise in appropriate cases. Respectfully submitted, A Professional Law Corporation ASSIGNMENT For value received the undersigned doles)hereby sell,assign and transfer unto (Name,Address and Tax Identification or Social Security Number of Assignee) the within-mentioned registered Certificate and hereby irrevocably constitute(s)and appoint(s) attorney,to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: NOTE:Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a NOTE:The signatures) on this Assignment must correspond with the name(s) as written on the commercial bank or trust company. face of the within Certificate in every particular,without alteration or enlargement or any change whatsoever. F cJONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1050 THOMAS A. DOWNEY SAN FRANCISCO 94111 ANDREW C. HALL,JR. (415) 391-3780 HENNETH I. JONES August 15 1989 TELECOPIER WILLIAM H. MADISON gu (415) 391-5784 BRIAN D. QUINT (415) 391-5785 PAUL J. THIMMIG (415) 956-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) City Council City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 OPINION: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Members of the City Council: We have acted as special counsel in connection with the delivery by the City of Huntington Beach (the "City") of the Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement") by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation"), and the City. Pursuant to the Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement") by and among the City, the Corporation and State Street Bank and Trust Company of California, N.A., as trustee thereunder (the "Trustee"), the Trustee has executed and delivered $15,025,000 aggregate principal amount of certificates of participation (the "Certificates") evidencing direct, undivided fractional interests of the owners thereof in lease payments to be made by the City pursuant to the Lease Agreement (the "Lease Payments") which have been assigned by the Corporation to the Trustee pursuant to the Assignment Agreement, dated as of July 15, 1989 (the "Assignment Agreement") by and between the Corporation and the Trustee. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the. Lease Agreement and the Trust Agreement and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify such facts by independent investigation. City of Huntington Beach August 15, 1989 Page Two Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The City is a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, with the power to enter into the Lease Agreement and the Trust Agreement and to perform the agreements on its part contained therein. 2. The Lease Agreement and the Trust Agreement have been duly authorized, executed and delivered by the City and are the legal, valid and binding obligations of the City enforceable against the City in accordance with their respective terms. 3. The Certificates have been validly executed and delivered by the Trustee pursuant to the Trust Agreement and, by virtue of the Assignment Agreement, the owners of the Certificates are entitled to the benefits of the Lease Agreement. 4. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes ), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in this paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 which must be satisfied subsequent to the delivery of the Lease Agreement in order that such interest be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the Lease Agreement. We express no opinion regarding other federal tax consequences arising with respect to the Lease Agreement and the Certificates. 5. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Certificates and the enforceability of the Lease Agreement, the Assignment Agreement and the Trust Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases. Respectfully submitted, Professional Law Corporation KML4508 z JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1950 THOMAS A. DOWNEY SAN FRANCISCO 94111 ANDREW C. HALL,JR. (415) 391-5780 KENNETH I. JONES TELECOPIER WILLIAM H. MADISON (415) 391-5784 BRIAN D. OUINT August 15, 1989 (415) 3GI-5785 PAUL J. THIMMIG (415) 966-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) Stone &Youngberg One California Street, Suite 2800 San Francisco, California 94111 SUPPLEMENTAL OPINION: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interest Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: We have acted as special counsel in connection with the delivery by the City of Huntington Beach (the "City") of the Lease Agreement, dated as of July 15, 1989 (the "Lease Agreement"), by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation"), and the City. Pursuant to the Trust Agreement, dated as of July 15, 1989 (the "Trust Agreement"), by and among the City, the Corporation and State Street Bank and Trust Company of California, N.A., as trustee thereunder (the "Trustee"), the Trustee has executed and delivered $15,025,000 aggregate principal amount of certificates of participation (the "Certificates") evidencing direct, undivided fractional interests of the owners thereof in lease payments to be made by the City pursuant to the Lease Agreement which have been assigned by the Corporation to the Trustee pursuant to the Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and the Trustee. We have also reviewed the executed Certificate Purchase Agreement, dated July 27, 1989 (the "Purchase Agreement"), by and among Stone & Youngberg, the Corporation, the City and acknowledged by the Trustee. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. Stone & Youngberg August 15, 1989 Page Two As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Lease Agreement and the Trust Agreement and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The Purchase Agreement has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreement of the City enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. 2. The statements contained in the Official Statement, dated August 8, 1989, relating to the Certificates, in the sections thereof entitled: "INTRODUCTION," "THE CERTIFICATES," "SECURITY FOR THE CERTIFICATES," "CERTIFICATES OWNERS' RISKS," "LEASE AGREEMENT," "TRUST AGREEMENT," "PROPERTY REMOVAL AGREEMENT," "ASSIGNMENT AGREEMENT," "TAX EXEMPTION" and "APPROVAL OF LEGAL PROCEEDINGS" (insofar as such statements purport to summarize certain provisions of the legal documents and the Certificates) present an accurate summary of such provisions. 3. The Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended. Respectfully submitted, �S� Professional Law Corporation KML4495 3 JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1930 THOMAS A. DOWNEY SAN FRANCISCO 94111 ANDREW C. HALL.JR. (415) 391-8780 KENNETH I. JONES p ER WILLIAM H. MADISON August 15, 1989 T 5) 301-I78 (41b) 391-6784 BRIAN D. QUINT (415) 301-5785 PAUL J. THIMMIG (415) 956-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) Stone &Youngberg One California Street, Suite 2800 San Francisco, California 94111 RELIANCE LETTER Regarding Final Approving Legal Opinion: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with I the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: We have this day released to the City of Huntington Beach our final approving legal opinion with respect to the captioned Certificates of Participation. The foregoing opinion may be relied upon by Stone & Youngberg, as underwriter, to the same extent as if such opinion were addressed to it. Respectfully submitted, Professional Law Corporation KML4494 4 JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1950 THOMAS A. DOWNEY SAN FRANCISCO 94111 ANDREW C. HALL,JR. (415) 301-5780 KENNETH I. JONES August 15 1989 TELECOPIER , WILLIAM H. MADISON (415) 391-5784 BRIAN D. QUINT (415) 391-5785 PAUL J. THIMMIG (415) 956-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) State Street Bank and Trust Company of California, N.A. 725 South Figueroa Street, Suite 975 Los Angeles, California 90017 RELIANCE LETTER Regarding Final Approving Legal Opinion: $15,025,000 Certificates of Participation (1989 Public Parking Project Financing) Evidencing the Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the City of Huntington Beach, as Rental for Certain Property Pursuant to a Lease Agreement with the City of Huntington Beach Civic Improvement Corporation Ladies and Gentlemen: We have this day released to the City of Huntington Beach our final approving legal opinion with respect to the captioned Certificates of Participation. The foregoing opinion may be relied upon by State Street Bank and Trust Company of California, N.A., as trustee, to the same extent as if such opinion were addressed to it. Respectfully submitted, ^ l Professional Law Corporation KML4493 5 cJONES HALL HILL & WHITE, i A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAMS FOUR EMBARCADERO CENTER STEPHEN R.CASALEGGIO SUITE 1050 THOMAS A. DOWNEY SAN FR.ANCISCO 94111 ANDREW C. HALL,JR. (415) 391-5780 KENNETH I. JONES TE WILLIAM H. MADISON August 14, 1989 9 (415 ) 391-91-a7a578 4 BRIAN D. QUINT 1415) 391-5785 PAUL J. THIMMIG (415) 956-6308 SHARON STANTON WHITE ROBERT J. HILL (1922-1988) Mr. Randy Owens First American Title Insurance Company 114 East Fifth Street Santa Ana, California 92702 Re: City of Huntington Beach Revised Recording Instructions Order No. 1528307 Dear Randy: You are hereby instructed to record at 8:00 a.m., on Monday, August 14, 1989, in the office of the Orange County Recorder, the Second Amendment to Lease Agreement, dated July 15, 1989, by and between the City of Huntington Beach Civic Improvement Corporation (the "Corporation") and the City of Huntington Beach (the "City") and the First Amendment to Assignment Agreement, dated as of July 15, 1989, by and between the Corporation and Security Pacific National Bank. Upon recordation of the foregoing documents, please contact the undersigned with the instrument numbers and time of recordation. You are hereby instructed to record at 10:30 a.m. on Monday, August 14, 1989, in the office of the Orange County Recorder, the documents 1�sted below, in the order in which they are listed, which documents have heretofore been properly executed, acknowledged and are herewith transmitted: (a) Memorandum of Lease, by and between the Corporation and the City; and (b) Assignment Agreement, by and between the Corporation and State Street Bank and Trust Company of California, N.A., as trustee ("Trustee"). Please have the all the documents pre—approved by the County Recorder prior to recording and send to me, conformed copies of the above—mentioned documents. Mr. Randy Owens August 14, 1989 Page Two Also enclosed, for your files, is a certified copy of the authorizing resolution of the City and a certified copy of the authorizing resolution of the Corporation. It is our understanding that the recordation data regarding the aforementioned documents will be inserted into the CLTA Title Insurance Policy in the amount of $15,025,000, insuring the City's leasehold estate in the Project (as defined in the Lease Agreement) and the Trustee's interests, as the same appear, together with CLTA endorsement 112.2. It is our further understanding that you will cause said title insurance policy, together with seven (7) copies of same, to be delivered to our office at or soon after recordation. Your invoice for the title insurance premium and recording costs, if any, should be directed to Mr. Robert J. Franz, Deputy City Administrator, City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648. Please contact me as soon as possible on the morning of August 14, 1989 to verify the recording of the aforementioned documents and should you have any questions regarding the enclosed, please do not hesitate to contact me. Very truly yours, JKaierine M. Lee ject Coordinator Closing Department Ends. K M L4492/16019-26