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HomeMy WebLinkAboutAgenda Statement 1985/04/02 Item 13 COUNCIL AGENDA STATEMENT Item 13 Meeting Date 4/2/85 ITEM TITLE: Resolution 1/,//cc Approving, authorizing and directing execution of certain lease financing documents, authorizing and directing execution of a purchase agreement, approving a preliminary official statement and authorizing and directing certain actions with respect thereto SUBMITTED BY: Director of Financed REVIEWED BY: City Manager )0 (4/5ths Vote: Yes No x ) At its March 19, 1985 meeting, the City Council appropriated $298,410 and awarded a contract to Telecom Plus of California for the purchase of a NEAX 2400 Telecommunications System. The City Council also authorized staff to pursue financing for the Telecommunications System through the California Cities Financing Corporation. The following report describes and summarizes the proposed financing. RECOMMENDATION: That Council approve the resolution. BOARDS/COMMISSIONS RECOMMENDATION: Not applicable. DISCUSSION: Funding for the acquisition of the phone system is proposed through the California Cities Financing Corporation (CCFC) Pool Financing Program. The CCFC exists to facilitate credit pooling among cities needing to finance relatively small projects. By pooling their financing needs, participating agencies will reduce costs by sharing fixed overhead such as bond counsel , underwriting, printing, and by taking advantage of "big project" interest rates in the municipal securities market. This is the initial financing of the California Cities Financing Corporation. The participating cities, in addition to Chula Vista, are Lincoln, Lompoc, Oakdale, Orange and Orland, California. The City of Beaumont is included in the Preliminary OFficial Statement. However, Beaumont has withdrawn from the proposed financing because of pending legal complications with its project. The size of the certificate issue has been reduced to $6,890,000. This has little or no impact on the figures given below relating to Chula Vista's participation. The following is a description of the major elements of the financing. tf.96,,,,telt_eec_ -----1 4 Li, ..7/._ D - "� Page 2, Item 13 Meeting Date 4/Z/85 SIZE OF ISSUE It is anticipated that the initial financing of the California Cities Financing Corporation will be Certificates of Participation in the amount of $6,890,000. The City of Chula Vista's share of the financing is $375,000. Project Cost $300,000 Less Reinvestment Earnings ( 2,074) SubTotal $297,926 Reserve Account $ 52,500 Underwriters Discount 13,125 Costs of Issuance 11 ,449 Principal Amount of Certificates $375.000 The amount in the City's Reserve Account will be applied to make the City's final Lease Payments pursuant to the Lease Agreement. TERM AND PAYMENTS The term of the financing for Chula Vista is 5 years. The City will make semi-annual lease payments to the Trustee and it is estimated that the total net payments made by the City over the term of the financing will be $380,000. This results in a cost of financing and effective interest rate of 7.63% to the City of Chula Vista. INSURANCE AND RATING The Certificates of Participation issue will be insured by a municipal bond insurance company to guarantee against default by the Corporation. This will assure the highest available credit rating of AAA and will result in the lowest possible interest rate available in the municipal bond market. FINANCING DOCUMENTS The resolution before the City Council tonight authorizes and approves the following documents: 1 . Lease Agreement between the California Cities Financing Corporation and the participating cities. Pursuant to this agreement, the CCFC issues Certificates of Participation, uses the proceeds to acquire or construct the various cities' projects and leases the projects to the respective cities. The cities, as Lessees, agree to make annual Lease Payments to the Corporation via the Trustee. The cities Lease Payments are in an amount sufficient to service the debt on the Certificates of Participation. 2. Trust Agreement made by and among the California Cities Financing Corporation, the participating cities as Lessees, and the Trustee (First Interstate Bank) . Pursuant to the Trust Agreement, the Trustee acts as a depository for all funds. The Trustee receives and disburses .tom Page 3, Item 13 Meeting Date 4/2/85 the proceeds from the Certificates of Participation. The Trustee receives the lease payments from the cities and ensures that principal and interest payments are made when required to Certificate holders. The Trustee also prepares, executes and delivers the Certificates of Participation. Because of the length of the Trust Agreement one copy has been provided to the City Council office and one is on file in the City Clerk's office and Finance Department for further review. 3. Certificate Purchase Agreement. The Purchase Agreement is by and among the Underwriter (Merrill Lynch Capital Markets) , the Trustee (First Interstate Bank) , the California Cities Financing Corporation, and the participating cities. With this document, the Underwriter agrees to purchase all of the Certificates of Participation being issued by the California Cities Financing Corporation. 4. Preliminary Official Statement. The Official Statement is a legal disclosure document describing the cities and projects being financed, the structure of the financing, the roles of the various parties to the financing and is used as a marketing tool by the Underwriters to sell the Certificates. SCHEDULE The current schedule is for the certificates of participation to be sold on April 9, 1985. FISCAL IMPACT: The average annual payment by the City over the five-year term will be approximately $87,000. With the application of the reserve fund toward the final lease payments, the total net payments will be approximately $380,000. Effective interest rate is estimated to be 7.63%. WPC 0251G DRAFT 3//518 CALIFORNIA CITIES FINANCING CORPORATION CERTIFICATES OF PARTICIPATION (The Cities of Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale and Orland, California) CERTIFICATE PURCHASE AGREEMENT April 9, 1985 San Francisco, California 94145 Attention: Corporate Trust Department Ladies and Gentlemen: We, the undersigned, as representative of the Underwriters (the "Underwriters" ) , hereby offer to enter into this Certificate Purchase Agreement with you, (the "Trustee" ) , for the purchase by the Underwriters and sale by you of the Certifi- cates of Participation specified below. This offer is made subject to acceptance by the Trustee and approval by the Cities of Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale and Orland, California (the "Cities" ) prior to 11: 59 o' clock P.M. , California time, on the date hereof, and upon such acceptance, this Certificate Purchase Agreement (the "Purchase Agreement" ) shall be in full force and effect in accordance with its terms and shall be binding upon both the Trustee and the Underwriter. 1. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters hereby agree to purchase from the Trustee and the Trustee hereby agrees to sell to the Underwriters all (but not less than all) of the $ aggregate principal amount of the California Cities Financing Corporation Certificates of Participation (The Cities of Beaumont, Chula Vista, Lincoln., Lompoc, Oakdale and Orland, California) (the "Certificates" ) , dated April 1, 1985 (the Certificates being more fully described in the Official Statement hereinafter mentioned) , each evidencing proportionate interests of the registered owners thereof in the Lease Payments to be paid by one or more LAW 18-B ��ko 1 of the Cities (the "Lease Payments" ) , pursuant to the several Lease Agreements, dated as of April 1, 1985, (collectively, the "Lease Agreements" ) by and between each City and the California Cities Financing Corporation (the "Corporation" ) , at an aggregate purchase price of $ being percent of the par value of the Certificates plus interest accrued thereon from April 1, 1985, to the date of the Closing referred to in Section 6 hereof. The Certificates shall be as described in, and shall be executed, delivered and secured under and pursuant to the Trust Agreement, dated as of April 1, 1985 (the "Trust Agreement" ) among the Trustee, the Corporation and the Cities. The Certificates shall represent principal components of the Lease Payments, maturing on the dates and in the amounts set forth in Exhibit B hereto, and shall represent interest components of the Lease Payments, bearing interest from , 1985 at the rates set forth in Exhibit B hereto, payable , 1985, and semiannually thereafter on each and , 1985, and semiannually thereafter on each and , through and including , 1997 . The Underwriter agrees to make a public offering of the Certificates at the initial offering prices as set forth in the Official Statement, which prices may be changed from time to time by the Underwriters. 2 . The Corporation shall deliver to or cause to be delivered to us, promptly after your acceptance hereof, two copies of the Official Statement relating to the Certificates substantially in the form of the Preliminary Official Statement dated March , 1985 (the "Preliminary Official Statement" ) , with only such changes therein as shall have been accepted by us (the Official Statement dated April 1985, including the cover page and all appendices thereto, being herein referred to as the "Official Statement, " except that if the Official Statement has been amended between the date hereof and the date of Closing, the term "Official Statement" shall refer to the. Official Statement as so amended) , and approved for distribution by respective resolutions of the Corporation and each City. You authorize the use of copies of the Official Statement, the Trust Agreement, the Lease Agreements, the Assignment Agreement, by and between the Corporation and the Trustee, dated as of April 1, 1985 (the "Assignment Agreement" ) , and the several Agency Agreements by and between the Corporation and each of the Cities, dated as of April 1, 1985 (the "Agency Agreements" ) , in connection with the public offering and sale of the Certificates. You hereby ratify the prior distribution of the Preliminary Official Statement by the Underwriter. The Trust Agreement, the Lease Agreements, the LAW18-B �� 2 Assignment Agreement and Agency Agreements shall be executed and delivered substantially in the forms heretofore delivered to us, with only such changes therein as shall be mutually agreed upon by us. 3 . The Trustee represents to and agrees with the Underwriter that: (a) the Trustee is and will be at the date of Closing a national banking association duly organized and existing under the laws of the United States with the full power and authority (i ) to enter into and perform the Trust Agreement and the Purchase Agreement, and to perform its duties under the Lease Agreements, the Assignment Agreement and the Agency Agreements, (ii ) to deliver the Certificates pursuant to the Trust Agreement and this Purchase Agreement, and (iii) to carry out and consummate the transactions contemplated by this Purchase Agreement, the Trust Agreement, the Lease Agreement, the Assignment Agreement and the Agency Agreements and the Official Statement; (b) when delivered to and paid for by the Under- writer at the Closing in accordance with the provisions of this Purchase Agreement, the Certificates will have been duly executed, sold and delivered and will be entitled to the benefit and security of the Trust Agreement; (c) the execution and delivery of the Trust Agreement, the Assignment Agreement, the Certificates and this Purchase Agreement, and compliance with the provisions on the Trustee' s part contained 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 Trustee 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 Trustee 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 Assignment Agreement and the Certificates; (d) to the Trustee' s knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in LAW18-B \voV, 3 equity, before or by any court, governmental agency, public board or body, pending or threatened against the Trustee affecting the existence of the Trustee or the titles of its officers to their respective offices or • seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Certificates or the collection of revenues pledged or to be pledged to pay the principal components of, premium, if any, and interest components represented by the Certificates, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Trust Agreement, the Lease Agreements, the Assignment Agreement, the Agency Agreements, the Certificates or this Purchase Agreement, or contesting the powers of the Trustee 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 Trust Agreement, the Lease Agreements, the Assignment Agreement, the Agency Agreements, the Certificates or this Purchase Agreement; and (e) the Trustee 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 ( 1) to qualify the Certifi- cates 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 ) 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 Trustee 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. The execution and delivery of this Purchase Agreement by the Trustee shall constitute a representation by the Trustee to the Underwriter that the representations and warranties contained in this Section 3 are true as of the date hereof; provided that as to information furnished by the Corporation or the Cities pursuant to this Purchase Agreement and the Official Statement, the Trustee is relying on such information in making the Trustee' s representations and warranties; and as to all matters of law the Trustee is relying either on such information furnished by the Corporation or the LAW18-B �_, 4 Cities or on the advice of counsel to the Trustee; and provided further that no director, officer or employee of the Trustee shall be individually liable for the breach of any representation or warranty made by the Trustee in this Section 3 . If any of the provisions in this Section shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Purchase Agreement and such invalidity, illegality or unenforceability shall not affect any other provision of this Purchase Agreement, and this Purchase Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Trustee hereby declares that it would have entered into this Purchase Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any one or more provisions of this Section of this Purchase Agreement may be held illegal, invalid or unenforceable. 4. Each City represents and warrants to the Underwriter that: (a) Such City is a general law or charter city, as appropriate, 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 its Lease Agreement, the Trust Agreement, its Agency Agreement and this Purchase Agreement, and, when executed and delivered by the respec- tive parties thereto, its Lease Agreement, the Trust Agreement, its Agency Agreement and this Purchase Agreement will constitute legal, valid and binding obligations of such City in accordance with their respective terms. (b) The execution and delivery of this Purchase Agreement, such City' s Lease Agreement, its Agency Agreement and the Trust Agreement, and compliance with the various provisions thereof, will not conflict with, or constitute a breach of or default under, such City' s duties under said documents or any material law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which such 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 • LAW18-B ,` �� 5 jurisdiction over such City required for the execution, delivery and sale of the Certificates or the consummation by such 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 such City, threatened, against such City, nor to the best knowledge of such City is there any basis therefor, to restrain or enjoin the execution or delivery of the Certificates, or the collection of the Lease Payments to be made pursuant to its Lease Agreement, or in any way contesting or affecting the validity of this Purchase Agreement, the Trust Agreement, its Agency Agreement, the Certificates, the Assignment Agreement, the Insurance Policy or such City' s Lease Agreement or contesting the powers of such City to enter into or perform its obligations under any of the foregoing. (e) The information under the headings "Estimated Use of Proceeds, " "Description of the Projects, " "The Cities, " "Absence of Litigation" and "Financial Summaries for the Cities" contained in the Preliminary Official Statement was, and in the Official Statement is, true and correct in all material respects, to the extent such information relates to each City, 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, except that no City shall be deemed to have made such representation concerning Cities other than itself or concerning Projects other than its Project. (f) Each City agrees to cooperate with the Underwriters 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 Underwriters 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. 5 . The Underwriters' obligations 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 audited financial statements for each of the Cities for their LAW18-B �e�1 6 most recently completed fiscal years, together with such interim unaudited financial information as may be reasonably requested by the Underwriter. 6. At 9 :00 O' Clock A.M. , California time, on April 30, 1985, or at such other time or on such earlier or later date as we mutually agree upon (the "Closing" ) , the Trustee will deliver or cause to be delivered to us, at the offices of Jones, Hall, Hill & White, Suite 1950, Four Embarcadero Center, San Francisco, California 94111, or at such other place as we may mutually agree upon, the Certificates in definitive form (all of the Certificates to be lithographed with steel engraved borders) , 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 for by the Trustee from moneys provided by the Cities. 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 immediately available 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 we may mutually agree. 7 . The Underwriters hereby enter into this Purchase Agreement in reliance upon the representations and warranties of the Trustee contained herein, and the representations and warranties of the several Cities 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 Trustee, the Corporation and the Cities of their respective obligations hereunder, both on and as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obligations under this Purchase Agreement to purchase, to accept delivery of and to pay for the Certificates shall be conditioned upon the performance by the Trustee, the Corporation and the Cities of their respective 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 Trustee and each City contained herein shall be true, pr • LAW18-B 7 complete and correct on the date hereof and as of the Closing, as if made on and at the Closing; (b) at the Closing, the Trust Agreement, the Lease Agreements, the Assignment Agreement, the Agency Agreements, 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 us; and there shall be in full force and effect such resolutions as, in the opinion of Jones, Hall, Hill & White, A Professional Law Corporation, San Francisco, California ( "Special Counsel" ) , shall be necessary in connection with the transactions contemplated hereby; (c) the Underwriters shall have the right to cancel their obligation to purchase the Certificates if between the date hereof and the Closing, (i) 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 California taxation upon revenues or other income of the general character to be derived by the Trustee or upon interest received on obligations of the general character of the Certificates, which in the reasonable judgment of the Underwriter, materially adversely affects the market for the Certificates, or (ii ) there shall exist any event which, in the reasonable judgment of the Underwriters either (a) makes untrue or incorrect in any material respect as of such time any statement or information contained in the Official Statement or (b) is not reflected therein 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 judgment of the Underwriter, would make it LAW18-B � \:\\� 8 impracticable for the Underwriters 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 and be in favor, or (vi) there shall be any material adverse change in the affairs of the Corporation or any 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 or State agency of the Congress of the United States, or by Executive Order, or (viii ) an adverse event affecting any of the Projects, the Corporation or any of the Cities occurs which, in the reasonable judgment of the Underwriters, requires or has required a supplement or amendment to the Official Statement; (d) at or prior to the Closing, we shall receive the following documents, in each case satisfactory in form and substance to us and our counsel: (1) the unqualified approving opinion, with respect to the validity and tax-exempt status of the Certificates, dated the date of Closing, of Special Counsel, substantially in the form attached hereto as Exhibit H, accompanied by a supplementary opinion of Special Counsel, dated the date of Closing, substantially to the effect that (i) the Purchase Agreement has been duly approved by the City; ( ii ) the statements contained in the Official Statement in the sections thereof entitled: "The Certificates, " "Lease Agreements, " "Trust Agreement, " "Assignment Agreement, " "Agency Agreements, " and "Tax Exemption" (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 LAW18-B \,t'1` 9 • � L 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 Attorneys (or other counsel, as appropriate) of each of the Cities, dated the date of Closing, to the effect that (i) general law or charter city, as appropriate, duly organized and validly existing under the 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, its Lease Agreement and its Agency 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 each City approving and authorizing the execution and delivery of the Official Statement, the Trust Agreement, its Agency Agreement and its Lease Agreement and approving this Purchase Agreement 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; (iv) 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 of his knowledge, threatened against or affecting the City, to restrain or enjoin the payment of its Lease Payments or the assignment of the Lease Payments under the Assignment Agreement, or in any way contesting or affecting the validity of the Trust Agreement, its Lease Agreement, or its Agency Agreement wherein an unfavorable decision, ruling or finding would adversely affect. the validity and enforceability of the City' s obligations under the Trust Agreement, its Lease Agreement or its Agency Agreement; (v) the execution and delivery of the Trust Agreement, its Lease Agreement or its Agency Agreement and the approval of this Purchase Agreement, and compliance with the provisions thereof, under the circumstances contem- plated thereby and hereby, do not and will not in any material respect conflict with or constitute on the part of such City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which such City is subject; (vi) the Trust Agreement, its LAW18-B 10 Lease Agreement or its Agency Agreement have been duly authorized, executed and delivered by such City, and constitute legal, valid and binding agreements of such City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally; (vii) 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 Trust Agreement, its Lease Agreement, its Agency Agreement, the Official Statement and the approval of this Purchase Agreement; and (viii) the representations and warranties of such City as set forth herein are, as to all matters of law and after reasonable investigation, true and accurate at and as of the date of Closing as though made on such date; and such representation and warranties are, as to all other matters, true and accurate to the best knowledge of such counsel at and as of the date Closing as though made on such date; provided, however, that the City Attorneys (or other counsel, as appropriate) in rendering such opinions as referred to in sections (2) (ii) , (iv) , (v) and (viii ) hereof may reasonably rely upon such representations, statements and, where appropriate, certificates, as may be furnished by the City Officials having responsibilities with regard to the activities referred to in the aforementioned provisions; (3 ) the opinion of counsel to 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 Assignment Agreement, the Agency Agreements, the Trust Agreement and this Purchase Agreement was duly adopted at meetings of the governing body of the Trustee; ( iii) 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 of their knowledge, threatened against or affecting the Trustee to ,f);r LAW18-B ` 11 restrain or enjoin the execution or delivery of the Certificates or the collection of revenues pledged under the Trust Agreement or the assignment of the Lease Agreements under the Assignment Agreement, in any way contesting or affecting any authority for the sale of the Certificates or the validity of the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Lease Agreements, the Agency Agreements, or this Purchase Agreement, or in any way contesting the existence or powers of the Trustee with respect to the sale of the Certificates or the security therefor wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Official Statement, the Trust Agreement, the Lease Agreements, the Agency Agreements, the Assignment Agreement or this Purchase Agreement or the validity of the Certificates (iv) the execution and delivery of the Certificates, the Assignment Agreement, the Trust Agreement, and this Purchase Agreement and compliance with the provisions thereof, under the circumstances with the 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 any existing law, regulation, court order or consent decree to which the Trustee is subject; (v) the Assignment Agreement, the Trust Agreement, the Official Statement and this Purchase Agreement have been duly authorized, (and except as to the Official Statement) executed and delivered by the Trustee and constitute the legal valid and binding agreements of the Trustee, enforceable in accordance with their terms; except as the enforcement thereof may be limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally, and except that no opinion need be expressed as to the availability of equitable remedies, if any are sought; and (vi) the representations of the Trustee as set forth in this Purchase Agreement are, as to all matters of law, and after reasonable investigation, true and accurate at and as of the date of the Closing as though made on such date; and such representations and warranties are, as to all other matters, true and accurate to the best knowledge of such counsel at and as of the date of the Closing as though made on such date; and LAW18-B 12 • (4) the opinion of Buchalter, Nemer, Fields, Chrystie & Younger, Los Angeles, California, counsel for the Underwriter, dated the date of Closing, to the effect that (a) the Certificates are exempt from registration under the Securities Act of 1933 , as amended, and the Trust Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (b) nothing has come to their attention which would lead them to believe that the Official Statement (excluding therefrom the financial statements and the statistical data included in the Official Statement, as to which no opinion need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (5 ) a certificate or certificates, dated the date of Closing, signed by the City Attorney (or other counsel, as appropriate) of each of the Cities in form and substance satisfactory to us, to the effect that to the best of his or her knowledge as based on and limited by the representations, statements, and, where appropriate, certificates as may have been furnished by City officials described in item (2) above: (a) no litigation is pending or threatened (i) to restrain or enjoin the delivery of any of the Certificates or the collection of Lease Payments pledged under the Trust Agreement, ( ii ) in any way contesting or affecting the validity of the Certificates, the Cities' Lease Agreement, its Agency Agreement, this Purchase Agreement or the Trust Agreement, or (iii) in any way contesting the existence or powers of the City; and (b) 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; (6) a certificate of an authorized officer of the Trustee, dated the date of Closing, confirming as of such date, the representations and warranties of the Trustee contained in this Purchase Agreement • LAW18-B 13 (other than those contained in the opinion of counsel to the Trustee referred to in Section 7(d) (3 ) ) ; (7) a copy of each of the Trust Agreement, the Lease Agreements, the Assignment Agreement, and the Agency Agreements duly executed by the parties thereto; (8) a certified copy 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 Trust Agreement, the Assignment Agreement and this Purchase Agreement; (9) a certified copy of the resolution of each City authorizing or approving the execution and delivery of the Trust Agreement, its Lease Agreement, its Agency Agreement, the Official Statement and approving this Purchase Agreement; (10) a certificate of the finance director or similar official of each of the Cities, dated the date of the Closing, substantially to the effect that nothing has come to his or her attention which would lead said official to belief that, as to the financial information and statistical data included in the Official Statement, the material contained therein relating to such 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 certificate otherwise being in form and substance acceptable to Special Counsel and counsel to the Underwriters; ( 11) a certificate of an authorized officer of the Corporation, dated the date of Closing, confirming as of such date, the representations and warranties of the Corporation contained in this Purchase Agreement (other than those contained in the opinion of counsel to the Corporation referred to in Section 7(d) ( 17) ) ; ( 12 ) definitive copies of the Official Statement, executed on the behalf of each of the Cities by the Treasurer, City Manager, or other tOo LAW18-B �� 14 designated official of each City and on behalf of the Corporation by the President of the Corporation; (13 ) copies of the Joint Powers Agreement 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 Agency Agreements, the Assignment Agreement, the Lease Agreements and approving the Official Statement and this Purchase Agreement; (14) copies of the Policy, executed by the authorized representatives of the Insurer, together with evidence satisfactory to the Underwriters, which may be in the form of an opinion of counsel to the Insurer, that the Insurance Policy is the valid, legal and binding obligation of the Insurer, enforceable in accordance with its 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 evidence otherwise being in form and substance acceptable to Special Counsel and to counsel for the Underwriters; (15) 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 Agreements, the Trust Agreement, the Assignment Agreement and the Agency Agreements, 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 Underwriters; ( 16) evidence satisfactory to us of various Project invoices and contracts with respect to the Projects as described in the Official Statement, accompanied by a certificate of an authorized officer of the affected City that the copies are true and accurate copies, that the same are in full force and effect and provide for the acquisition and LAW18-B � � 15 installation of the Projects as described in the Official Statement at the prices set forth in the Official Statement; ( 17) copies of the Blue Sky Survey, dated as of March _, 1985, prepared by our counsel; ( 18) evidence (whether written or telephonic) satisfactory to the Underwriter that the Certificates have been rated "AAA" by Standard & Poor' s Corporation; and ( 19) such additional legal opinions, certifi- cates, proceedings, instruments and other documents as we or Special Counsel may reasonably request to evidence compliance by the Trustee, the Cities and the Corporation with legal requirements, the truth and accuracy, as of the time of Closing, of the representations of the Trustee, the Cities and the Corporation herein and in the Official Statement and the due performance or satisfaction by the Trustee, the Cities 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 Cities and the Corporation. If the Trustee shall be unable to satisfy the conditions to the Underwriters' obligations 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 Underwriters nor the Trustee shall have any further obligation hereunder. 8. All reasonable expenses and costs of the Trustee incident to the performance of its obligations in connection with the execution, delivery and sale of the Certificates to the Underwriters, including the cost of printing of the Certificates (and full execution thereof) , the Preliminary Official Statement, the Official Statement and the Blue Sky Memorandum, in reasonable quantities, fees of consultants, fees of rating agencies, CUSIP Service Bureau charges, and fees and expenses of Special Counsel and fees and expenses of the Trustee and Counsel for the Cities, shall be paid by the Cities. All expenses to be paid by the Cities 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 Underwriters, including traveling and other expenses and the fees and • LAW18-B 16 expenses of their counsel, including fees and expenses related to Blue Sky matters, shall be paid by the Underwriters . 9 . Any notice or other communication to be given to the Trustee under this Purchase Agreement may be given by delivering the same in writing at your address set forth above and any such notice or other communications to be given to the Underwriters may be given by delivering the same in writing to Merrill Lynch Capital Markets, Suite 2050, 400 South Hope Street, Los Angeles, California 90071, Attention: John Fitzgerald, Managing Director. Notice to the other parties shall be as shown on Exhibit A attached hereto and made a part hereof by reference. The approval of the Underwriters when required hereunder or the determination of their satisfaction as to any document referred to herein shall be in writing singed on behalf of Merrill Lynch Capital Markets and delivered to you. 10. The Underwriters, Merrill Lynch Capital Markets and Stone & Youngberg, agree between themselves with respect to the Certificates and this Purchase Agreement as follows: (a) You designate us to act as your agents in fact in consummating the transactions contemplated by the Purchase Agreement, in accordance with the terms and conditions thereof. (b) The Certificates may be initially offered when we, the Cities and the Corporation shall have executed the Purchase Agreement. (c) Merrill Lynch Capital Markets 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 ( "MSRB" ) , or (2 ) 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. (d) Merrill Lynch Capital Markets may -change the public offering price and, in general, or in such specific LAW18-B , 17 cases as it may determine, any concession, commissions, allowances or reallowances. (e) Merrill Lynch Capital Markets 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. (f) Each of us represents to the other that it is registered as a broker-dealer or a municipal securities dealer under the Securities Exchange Act of 1934. (g) Neither of us shall be liable to the other 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 either of the Cities or others of any agreement on its or their part,, or (vi) the qualification or registration of the Certificates for sale, or the legality of the Certifi- cates for investment under the laws of any jurisdiction. Neither of us shall be liable to the other, nor shall either (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. 11. This Purchase Agreement is made solely for the benefit of the Trustee, the the Corporation, the Cities and the Underwriters (including the successors or assigns of the Underwriters) and no other persons, partnership, association or corporation shall acquire or have any right hereunder or by virtue hereof. All representations and agreements of the Trustee 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. 12 . This Purchase Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in such State. LAW18-B 18 13 . 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. MERRILL LYNCH CAPITAL MARKETS By: John Fitzgerald Managing Director STONE & YOUNGBERG By: as Trustee By: Trust Officer Approved: CALIFORNIA CITIES FINANCING CORPORATION By: Chairman CITY OF BEAUMONT By: City Manager CITY OF CHULA VISTA By: City Manager CITY OF CULVER CITY By: City Manager CITY OF LINCOLN By: City Manager LAW18-B __�\�1� 19 CITY OF LOMPOC By: City Manager CITY OF OAKDALE By: City Manager CITY OF ORLAND By: City Manager LAW18-B 0 20 • EXHIBIT A NOTICES Mr. Michael Duersch City of Beaumont 550 East 6th Street Beaumont, California 92223 Mr. Lyman Christopher City of Chula Vista City Hall 276 4th Avenue Chula Vista, California 92010 Mr. Richard Ramirez City of Lincoln 511 5th Street Lincoln, California 95648 Mr. John Walk City of Lompoc 100 Civic Center Plaza Lompoc, California 93438 Mr. Bruce Bannerman Oakdale Redevelopment Agency 280 North 3rd Avenue Oakdale, California 95361 Mr. Ted Schoettger City of Orange 300 East Chapman Avenue Orange, California 92666 Mr. Al Calonico City of Orland 501 Walker Street Orland, California 95963 LAW18-B 21 • EXHIBIT B LEASE PAYMENTS AND INTEREST RATES YEAR ENDING INTEREST APRIL 1 PRINCIPAL INTEREST RATE 1986 1987 1988 1989 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 2020 2021 2022 2023 2024 2025 TOTAL: $ $ LAW18-B � _� 22 • (TICACTIVE)90900A,002,005 St: 90900A Fmt 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Camp: 22-Mar-85 05:58 Sea: 1 CITY OF BEAUMONT /b5 TR HEL CHEL Chk: 167254 166653 Output (OA) 22-Mar-85 06:57 PHA j, Jeffries Banknote Company Los Angeles (213) 742-8800 Proof of March 22, 1985 002 PRELIMINARY OFFICIAL STATEMENT DATED APRIL 4, 1985 NEW ISSUE RATING: Standard & Poor's: P. I Moody's: °s (See "Rating" herein) In the opinion of Jones Hall Hill& White,A Professional Law Corporation,San Francisco.California,Special Counsel,under `a existing laws, regulations, rulings and judicial decisions, the portion of each Lease Payment due under the Lease Agreements ▪ designated as and comprising interest and received by the owners of the Certificates of Participation is exempt from income S taxation by the United States of America and from personal income taxation imposed by the State of California. • i 59,165,000* 4- CERTIFICATES OF PARTICIPATION e,O CALIFORNIA CITIES FINANCING CORPORATION, POOL I • THE CERTIFICATES EVIDENCE PROPORTIONATE INTERESTS OF THE OWNERS THEREOF IN LEASE PAYMENTS TO BE MADE TO THE _"m CALIFORNIA CITIES FINANCING CORPORATION — BY ONE OR MORE OF THE 2 Zl 'CITIES OF BEAUMONT, CHULA VISTA, LINCOLN, LOMPOC, OAKDALE, ORANGE AND ORLAND, CALIFORNIA 14 re s r-- Dated: April 1, 1985 Due: August 1,as shown below ':` Interest due with respect to the Certificates is payable semiannually on February 1 and August 1 of each year,commencing r.'o I February 1,1986(the first interest payment to include ten months'interest),by check or draft of First Interstate Bank of California. Los Angeles,California,the Trustee,mailed to the registered owners of record at the addresses shown on the Certificate registration t . books maintained by the Trustee. Principal of the Certificates is payable upon surrender of the Certificates at maturity at the principal corporate trust office of the Trustee.The Certificates are to be delivered as fully registered certificates in the denominations –'v° of 55,000 each or any integral multiple thereof(and in irregular denominations if necessary in connection with a partial redemption). A.... The Certificates are subject to optional redemption and to mandatory redemption prior to maturity, as herein. Each City has covenanted under its Lease Agreement that as long as its Project is available for the City's use,it will take such • action as may be necessary to include all of its Lease Payments in its annual budget and to make the necessary annual appropriations a " therefor.The obligations of the Cities to make Lease Payments do not constitute obligations of the Cities for which the Cities are ,., obligated to levy or pledge any form of taxation or for which the Cities have levied or pledged any form of taxation.Neither the e a. Certificates nor the obligations of the Cities to make Lease Payments under the Lease Agreements constitute debt of the Cities,the " State of California or any of its political subdivisions within the meaning of the Constitution of the State of California or otherwise,or „= a pledge of the faith and credit of the Cities,or of any of them. S a' will issue its policy simultaneously with the delivery of the Certificates, insuring payment of all ,-.3 I principal and interest payments with respect to the Certificates.See"Certificate Payment Insurance" herein. w j MATURITY SCHEDULE* Maturity Principal Interest Maturity Principal Interest v_. (August 1) Amount Rate (August I) Amount Rate u 1986 S 295,000 % 1994 S 55.000 % 1987 860,000 1995 65,000 1988 905,000 1996 75,000 r` a 1989 960,000 • 1997 75.000 • " 1990 1,035,000 1998 85,000 .- 1991 1,020,000 1999 100.000 1992 465,000 2000 105,000 1993 55,000 2001 115,000 S1,665,000 % Term Certificates due August 1,2010 ..a $1,230,000 % Term Certificates due August 1. 2015 ''▪ = e . (Price: 100% plus accrued interest from April I. 19851 The Certificates maturing in each of the years identified above represent proportionate interests of the registered owners thereof in V'a Lease Payments to be made by one or more of the Cities in the proportions indicated herein under the heading"The Certificates— '9' t General Provisions." o t .. The Certificates are offered to the public by the Underwriters when.as and if issued and received,subject to the approval as to E-» their legality by Jones Hall Hill & White, A Professional Law Corporation. San Francisco, California, Special Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriters by Buchalter,Vemer. Fields.Chrystie& e 's Younger, a Professional Corporation, Los Angeles, California. It is anticipated that the Certificates in definitive form will be e,.. available for delivery in Los Angeles. California, on or about April 30, 1985. - J Merrill Lynch Capital Markets Stone & Youngberg ~ ° Dated: April ...., 1985 *Subject to change. (TICACTIVE190900A,002,005 Sr 90900A Fmt 90900A JEFFRIES C.P.V. COMPANY (213)742-8800 Comp: 22-Mar-85 11.03 Sea: 2 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 073215 057447 Output (CO) 22-Mar-85 11:05 PHA 003 No dealer,broker,salesperson or other person has been authorized by the Corporation or the Cities 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 Corporation or the Cities. 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 sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriters. 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 Cities since the date hereof. TABLE OF CONTENTS Page Pale I Summary Statement Location Map ii Certificate Payment Insurance 17 iii The Corporation 17 Introduction 1 The Cities 17 Estimated Use Of Proceeds 2 City Financial Information 18 Description Of The Projects 2 Budgetary Process 18 City of Beaumont 2 Assessed Valuation and Tax Collections.... 18 City of Chula Vista 2 Constitutional Amendments Affecting City City of Lincoln 2 Revenues 19 City of Lompoc 3 Financial Summaries for the Cities 20 City of Oakdale 3 City of Beaumont 21 City of Orange 3 City of Chula Vista 22 City of Orland 3 City of Lincoln 23 The Certificates 3 City of Lompoc 24 General Provisions 3 City of Oakdale 25 Optional Redemption 4 City of Orange 26 Mandatory Redemption 5 City of Orland 27 Source of Payment for the Certificates 6 Tax Exemption 28 Lease Payments 7 Certain Legal Matters 28 Lease Agreements 9 Absence Of Litigation 28 Lease Payments 10 Rating 28 IInsurance and Eminent Domain 11 Availability Of Documents 28 Default and Remedies 12 Underwriting 28 Other Provisions 13 Miscellaneous 28 Termination 13 Appendix A — Form of Insurance Policy A-1 ' Trust Agreement 13 Appendix B — Form of Legal Opinion B-1 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. (TICACTIVE)90900A,002,005' St 90900A Fmt 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 05:58 Seri: 3 CITY OF BEAUMONT /05 TR HEL CHEL Chk: 112613 027066 Output (OA) 22-Mar-85 06:57 PHA 004 SUMMARY STATEMENT THIS SUMMARY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION 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 acquisition of various projects,consisting of equipment and related im- provements (the "Project" or the "Projects") to be leased to the Cities of Beaumont,Chula Vista,Lincoln,Lompoc,Oakdale,Orange and Orland(the "Cities")under separate Lease Agreements with the California Cities Financ- ing Corporation(the"Corporation"). Security for the Certificates Each City is obligated under a Lease Agreement to make Lease Payments (the "Lease Payments") as the rental for its Project. Each Certificate represents a direct and proportionate interest of the owner thereof in Lease Payments to be made by one or more of the Cities as specified in such Certificate.Each City has covenanted under a Lease Agreement that as long as its Project is available for the City's use it will take such action as may be necessary to include its Lease Payments in its annual budget and to make the necessary annual appropriations therefor. Under California law,the obliga- tion of each City to make Lease Payments(other than to the extent that funds are available for such purpose in accounts established under the Trust Agree- ment for each City from proceeds of the Certificates)may be abated in whole or in part if a City does not have full use and possession of its Project. A Reserve Account is established for each City from Certificate proceeds for the benefit of the Certificate owners in the amount listed herein for each City. The Reserve Accounts which have been established for each of the Cities are not pooled, and one City's Reserve Account is not available to make up a deficiency in the payment of Certificates caused by another City's failure to pay its Lease Payments.In addition,no City has covenanted to pay any other City's unpaid Lease Payments or to make up any deficit in the payment to Certificate owners which occurs by reason of another City's nonpayment of its Lease Payments. For this reason, one City's default in the payment of its Lease Payments will cause a default in payment (after that City's Reserve Account has been depleted)on any outstanding Certificates which represent an interest in the Lease Payments to be made by that City,even though the remaining Cities continue to pay their Lease Payments in a timely manner. Pursuant to Agreement, the Corporation will assign to the Trustee for the benefit of the owners of the Certificates its rights under all of the Lease Agreements,including(a)its rights to receive amounts payable by each of the Cities under the Lease Agreements and (b) its rights to enforce amounts payable upon default,but excepting certain rights to indemnification and the payment of expenses. Insurance Payment of principal and interest with respect to the Certificates are insured by a policy to be issued by simultaneously with the delivery of the Certificates. Form of Certificates Fully registered forth in denominations of$5,000 each or any integral mul- tiple thereof(and in irregular denominations if necessary in connection with a partial redemption). - Redemption The Certificates are subject to optional and redemption prior to maturity as described herein. I The Corporation The Corporation was created as a nonprofit public benefit corporation to serve the financing needs of various cities in California, including the Cities. The Cities The Cities'are all general law cities located within the State of California. THE OBLIGATIONS OF THE CITIES TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREE- MENTS ARE OBLIGATIONS PAYABLE FROM EACH CITY'S GENERAL FUND OR ANY OTHER SOURCE OF FUNDS LEGALLY AVAILABLE TO SUCH CITIES FOR THE PAYMENT OF LEASE PAYMENTS.THE OBLIGATIONS OF THE CITIES TO PAY LEASE PAYMENTS DO NOT CONSTITUTE OBLIGATIONS OF THE CITIES FOR WHICH THE CITIES ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITIES HAVE LEVIED OR PLEDGED ANY FORM OF TAXATION.THE OBLIGATIONS OF THE CITIES TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENTS DO NOT CONSTITUTE DEBTS OR INDEBTEDNESS OF THE CITIES,THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTI- TUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. ii (TICACTIVE)90900A,002,005 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 05:58 Seq: 4 CITY OF BEAUMONT i OS TR HEL CHEL Chk: 123352 165342 Output (OA) 22-Mar-8S 10:54 PHA • 105 [NEW MAP TO COME] iii (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 1 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 026710 130634 Output (OA) 22-Mar-85 09:15 PHA )06 OFFICIAL STATEMENT S9,165,000* I CERTIFICATES OF PARTICIPATION CALIFORNIA CITIES FINANCING CORPORATION, POOL I The Certificates Evidence Proportionate Interests of the Owners Thereof in Lease Payments to be Made to the CALIFORNIA CITIES FINANCING CORPORATION By One or More of the CITIES OF BEAUMONT, CHULA VISTA, LINCOLN, LOMPOC, 1 OAKDALE, ORANGE AND ORLAND, CALIFORNIA INTRODUCTION The purpose of this Official Statement, which includes the cover page, Table of Contents and Appendices (the "Official Statement"), is to provide certain information concerning the sale and delivery of Certificates of Participation (California Cities Financing Corporation) (the "Certificates") in an aggregate principal amount of $9,165,000,* representing the direct and proportionate interests of the registered owners thereof (the "Owners") in Lease Payments (the "Lease Payments") to be made by one or more of the Cities of Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale, Orange and Orland, California (the "Cities") as the rental for certain projects (the "Projects") leased from the California Cities Financing ` Corporation (the "Corporation") pursuant to separate Lease Agreements, each dated as of April 1, 1985 (the "Lease Agreements"). The Certificates are being executed and delivered pursuant to a Trust Agree- ment, dated as of April 1, 1985 (the "Trust Agreement"), by and among the Cities, the Corporation and ' First Interstate Bank of California, Los Angeles, California, as trustee (the "Trustee"). Each Certificate represents a direct and proportionate interest of the Owners thereof in the Lease Payments to be made by one or more of the Cities in the percentages as specified in such Certificate (see"The Certificates—General Provisions"). Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee, for the benefit of the Owners, its rights under all of the Lease Agreements, including (a) its rights to amounts payable by each of the Cities under the Lease Agreements and (b) its rights to enforce payment of amounts due upon Idefault, but excluding certain rights to indemnification and to the payment of fees and expenses. In general, the Cities are required to pay to the Trustee specified Lease Payments for use of the Projects, which amounts are intended to be sufficient in both time and aggregate amount to pay, when due, the principal of and interest with respect to the Certificates (see "Lease Agreements — Lease Payments").. In its Lease Agreement, each City has covenanted that it will take such action as may be necessary to include all Lease Payments with respect to its Project in its annual budget and to make the necessary annual appropriations therefor. The obligation of each City to make Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Certificates nor the obligation of each City to make Lease Payments constitutes an indebtedness of such City, the Corporation, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The Corporation has no taxing power. For certain financial information with respect to the Cities, see"City Financial Information" herein. For a discussion of certain amendments to the Constitution of the State of California and their impact on the Cities, see the heading "Constitutional Amendments Affecting City Revenues" under "City Financial Information" herein. (the "Insurer") will issue its policy (the "Policy") simultaneously with the 1 delivery of the Certificates, insuring payment of the principal and interest payments with respect to the Certificates. For a discussion of the Policy, see "Certificate Payment Insurance" herein. * Subject to change. '�- 1\ � 1 L (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:03 Seq: 2 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 141355 172612 Output (CO) 22-Mar-85 10:07 PHA ESTIMATED USE OF PROCEEDS* The proceeds to be received from the sale of the Certificates (other than accrued interest which will be deposited in the capitalized interest subaccount of the respective Lease Payment Accounts) are estimated to be applied as follows: City Type of Use Chula of Proceeds Beaumont Vista Lincoln Lompoc Oakdale Orange Orland Total Project cost $1,700,000 $300,000 $710,000 $1,823,500 $385,000 $2,000,000 $200,000 $7,117,900 Less reinvestment earnings(1) (170,921) (2,074) (0) (132,354) (12,868) (196.285) (5,168) (519,670) Subtotal 1,529,079 297,926 710,000 1,691,146 372,132 1,803,715 194,832 6,598,230 Reserve account 238,875 52,500 96,250 323,400 53,025 359,100 27,300 1,150,450 Capitalized interest(2) 341,083 0 0 159,048 42,882 256,087 16,116 815.216 Underwriter's discount 79,625 13,125 30,625 80,850 17,675 89,775 9,100 320,775 Costs of issuance(3) 86,338 11,449 38,125 55,556 19,286 55,523 12,652 280,329 Principal amount of Certificates $2,275,000 $375,000 $875,000 $2,310,000 $505,000 $2,565,000 $260,000 $9,165.000 (1) Based upon assumed interest rates between 8.5 percent and 10 percent, depending upon length of investments, on the Acquisition Fund, 10 percent on the Lease Payment Account and 11.25 percent or 11.5 percent, depending upon final maturity, on the Reserve Account balances during each City's Project acquisition period (accounts are defined herein under the heading "Trust Agreement"). (2) Interest is capitalized in whole through December 1, 1986 for the City of Beaumont, through February 1, 1985 in respect to $1,830,000 principal amount of Certificates and through February 1, 1987 in respect to $480,000 principal amount of Certificates for the City of Lompoc, in whole through April 1, 1986 for the City of Oakdale, in whole through February 1, 1987 in respect to $2,170,000 principal amount of Certificates and in part through August 1, 1987 in respect to $395,000 principal amount of Certificates for the City of Orange and in whole through January 1, 1986 for the City of Orland. No interest is capitalized for the other Cities. (3) Includes insurance premiums due the Insurer. DESCRIPTION OF THE PROJECTS Proceeds from the sale of the Certificates will be used by the Cities to acquire and install certain equipment and improvements necessary or convenient for the operation of the Cities.The following provides a description of this equipment and related improvements. City of Beaumont The City of Beaumont will construct a 500 gallon per day capacity wastewater treatment plant and an approximately 12,800 foot sewer interceptor from the new plant to the existing plant at an estimated cost of $2,370,000, with an expected completion date of September 1, 1986. Of the total cost, $1,700,000 will be financed from proceeds of the Certificates and the remainder will be paid from other available City funds. City of Chula Vista The City of Chula Vista will acquire and install a telecommunications system at an expected cost of $300,000, with installation expected to be complete by June 30, 1985. 3 City of Lincoln The City of Lincoln will fund construction of an approximately four mile 16 inch water line at an estimated cost of $450,000, acquisition and installation of approximately 1,579 water meters at existing residential homes at an estimated cost of$200,000 and acquisition of a jet fuel truck at a cost of$60,000 for a total cost of $710,000. The construction and installation projects are expected to be complete by June 1, 1985 and the City has already taken delivery of the truck. * Subject to change. \\qt1 2 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 3 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 017644 147366 Output (OA) 22-Mar-85 09:15 PHA • City of Lompoc IThe City of Lompoc will acquire general purpose and specialized vehicles for various City departments at an expected aggregate cost of $1,823,500, with delivery expected at different times through November, 1986. 309 City of Oakdale IThe City of Oakdale will make improvements to three City-owned parking areas and will construct a park and landscape an area of street right of way at an expected aggregate cost of$385,000, with all work expected to be complete by January 15, 1986. City of Orange Proceeds from the sale of the Certificates will be used by the City of Orange to fund acquisition of three fire pumpers at an estimated total cost of $445,000, with delivery expected by October, 1985; fund Iacquisition of one fire aerial truck at an estimated cost of $325,000, with delivery expected by December, 1986; fund construction of a water reservoir at an estimated cost of$690,000, with completion expected in June, 1986; and fund construction of two water wells at an estimated total of $540,000, with completion I expected in June, 1986. The expected aggregate cost of all the aforesaid construction and acquisitions is $2,000,000. • to City of Orland The City of Orland will construct a city hall and police department building of approximately 4,000 square feet on a City owned lot located in its downtown commercial area. Construction contract bids are expected to be opened by May 1, 1985, and a contract awarded on May 15, 1985. Construction is expected to begin June 1, 1985, and conclude October 1, 1985. Total cost is anticipated to be $250,000, of which $200,000 will be financed with proceeds of the Certificates. 01 THE CERTIFICATES General Provisions The Certificates will be issued in the aggregate principal amount of$9,165,000,* will be dated April 1, 1985, will bear interest from that date at the rates per annum set forth on the cover page hereof, payable semiannually on August 1 and February 1, commencing February 1, 1986 (the first interest payment to include ten months' interest) (individually, a "Payment Date"), and will mature on August 1 in each of the designated years in the principal amounts shown on the cover hereof. The Certificates represent interests of the Owners thereof in the Lease Payments to be made by one or more of the Cities. The total amount of each payment of principal or interest made to the Owner of a Certificate maturing in each year, including mandatory redemption of term Certificates, is comprised of * Subject to change. 0_, , Ql 3 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 4 CITY OF BEAUMONT /05 TR HEL CHEL Chk: 031056 107422 Output (OA) 22-Mar-8.; 09:15 PHA • interests in Lease Payments paid by the Cities on the Payment Dates occurring in the years set forth below, in the following proportions: City* Due in Beaumont Chula Vista Lincoln Lompoc Oakdale Orange Orland Total 1986 100% 1987 100 1988 100 1989 100 1990 100 1991 100 1992 100 1993 100 1994 100 1995 100 1996 100 1997 100 1998 100 1999 100 2000 100 2001 100 2002 100 2003 100• 2004 100 2005 100 • 2006 100 2007 • 100 2008 100 2009 100 2010 100 2011 100 2012 100 2013 100 2014 100 2015 100 * Subject to change. The Certificates will be executed and delivered in fully registered form, without coupons, in the denominations of $5,000 each or any integral multiple thereof. Subsequent to a mandatory redemption affecting all or a portion of the Certificates, the Owner of any Certificate which has been redeemed in part may be issued one Certificate not evenly divisible by$5,000. Principal with respect to the Certificates will be payable at the principal corporate trust office of the Trustee. Interest with respect to the Certificates will be payable by check or draft mailed to the registered owner of record at the address shown on the Certificate registration books maintained by the Trustee for such purposes. 2 Optional Redemption The Certificates maturing on or before August 1, 1991, are not subject to optional redemption prior to maturity. The Certificates maturing on or after August 1, 1992, are subject to optional redemption prior to maturity on or after August 1, 1991, at the option of the Cities, as a whole or in part (but not in a total redemption amount of less than $20,000), in inverse order of maturity and by lot within a maturity, on any 4 (TICACTIVE)90900A,006,037 St: 90900A Fmt 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 5 CITY OF BEAUMONT ,OS TR HEL CHEL Chk: 070517 112642 Output (OA) 22-Mar-85 09:15 PHA IPayment Date, from prepayments of Lease Payments at the following prices, expressed as percentages of the principal amount to be redeemed, plus accrued interest to the redemption date: Redemption Dates Redemption Prices August 1, 1991, and February 1, 1992 102% August 1, 1992, and February 1, 1993 101 August 1, 1993, and thereafter 100 Mandatory Redemption ( The term Certificates maturing on August 1, 2010, are subject to mandatory redemption by lot, commencing August 1, 2002, from the principal component of lease payments deposited in the Lease Payment Account on August 1 in each of the years and in the amounts as follows without premium: Year Amount' Year Amount* 2002 $125,000 2007 $195,000 2003 135,000 2008 215,000 2004 155,000 2009 240,000 2005 160,000 2010 260,000 2006 180,000 The term Certificates maturing on August 1, 2015, are also subject to mandatory redemption by lot, commencing August 1, 2011, from the principal component of lease payments deposited in the Lease Payment Account on August 1 in each of the years and in the amounts as follows without premium: Year Amount* Year Amount* 2011 $200,000 2014 $270,000 2012 220,000 2015 295,000 2013 245,000 The Certificates are subject to mandatory redemption in whole or in part, without premium (but not in a total redemption amount of less than $20,000), at the principal amount to be redeemed, plus accrued interest to the date of redemption, as follows: 1. In the event the Trustee receives net proceeds of any insurance award resulting from damage or destruction to all or a portion of a City's Project and such City certifies to the Trustee that repair, replacement or improvement of the damaged or destroyed part of such Project is not economically feasible or in the best interest of such City, then such net proceeds will be used to redeem on the earliest possible Payment Date that portion of the Certificates representing interests in such City's Lease Payments; provided, that no such redemption will occur unless such net proceeds, together with funds then on hand in such City's Acquisition Account, Lease Payment Account and Reserve Account (such accounts are described herein under the heading "Trust Agreement") and available proceeds, if any, of the Policy, are sufficient to redeem that portion of the Certificates representing interests in such City's Lease Payments. 2. In the event the Trustee receives net proceeds from any eminent domain proceedings relating to all or a portion of a City Project, such net proceeds will be used to redeem, on the earliest possible Interest Payment Date, all or part of that portion of the Certificates representing interests in such City's Lease Payments. In the event such Lessee certifies to the Trustee that its Project has been taken in part pursuant to such eminent domain proceedings and that the remaining portion of its Project is still useful for the purposes originally intended,the net proceeds from such eminent domain proceedings (except to the extent that such proceeds are used to repair or replace such Project in the manner described in the Lease Agreement) will be used to redeem that portion of the Certificates representing interests in such City's Lease Payments, in an amount equal to the amount of such net proceeds. In such event, such City's Lease Payment obligations will be proportionately abated under its Lease * Subject to change. \\411 5 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 6 CITY OF BEAUMONT !OS TR HEL CHEL Chk: 001063 166330 Output (OA) 22-Mar-85 09:15 PHA • Agreement, provided that the resulting Lease Payments will be sufficient to pay all of that portion of principal and interest on the remaining outstanding Certificates which represent interests in such City's Lease Payments. In the event such Lessee certifies to the Trustee that its Project has been taken in whole pursuant to such eminent domain proceedings or has been taken in part to such extent that the remaining portion of such Project is no longer useful for the purposes intended, the remaining Lease Payment obligations of such City will be abated in full under its Lease Agreement. In such event, there can be no assurance made that the amount of eminent domain net proceeds and other moneys available will be sufficient to redeem all of that portion of the Certificates representing interests in such City's Lease Payments which are called for redemption. 113 When redemption is authorized or required, the Trustee shall give to the Owners written notice of the redemption of the Certificates. Such notice shall specify: (a) the designated portion of such Owner's Certificates to be redeemed, (b) the date of redemption, and (c) the place or places where the redemption will be made. Such notice shall further state that on the specified redemption date there shall become due and payable upon each Certificate to be redeemed the portion of the principal amount of such Certificate to be redeemed, together with interest accrued to said redemption date, and that from and after such redemption date interest with respect thereto shall cease to accrue and be payable. Notice of such redemption shall be given by mailing, postage prepaid, not more than sixty (60) days nor less than twenty-five (25) days prior to said date of redemption (except that only ten (10) days notice shall be required in the event of redemption pursuant to (3) or (4) above), copies thereof to the Owners of any Certificates, whose Certificates or a portion thereof are to be redeemed. Any defect in the mailing of such notice shall not affect the validity of the proceedings for the redemption of any Certificates or portion thereof with respect to which adequate notice has been given. Notice having been given as aforesaid,.and the moneys for the redemption, including interest to the applicable redemption date, having been set aside in the Redemption Fund created under the Trust Agreement, the portion of the Certificates to be redeemed shall become due and payable on said redemption date,and,upon presentation and surrender of such Certificates at the office or offices specified in said notice, said portion of such Certificates shall be paid at the unpaid principal amount with respect thereto, plus any unpaid and accrued interest to said redemption date. If,on said redemption date, moneys for the redemption of such portion of the Certificates to be redeemed, together with interest to said redemption date, shall be held by the Trustee so as to be available therefor on such redemption date, and, if notice of redemption thereof shall have been given as aforesaid, then, from and after said redemption date, interest with respect to such portion of the Certificates to be redeemed shall cease to accrue and become payable. Upon surrender of any Certificate for redemption of a portion of the total principal amount thereof the Trustee shall execute and deliver to the Owner thereof a new Certificate or Certificates (one of which may be in an Irregular Denomination), in an amount equal in aggregate principal amount to the unredeemed portion of the Certificate surrendered and of the same interest rate and principal Payment Date. If redemption results in any change in the proportionate interest in the total principal and interest payments to be made on such Certificate or Certificates which is related to each City, such change shall be reflected on the new Certificate or Certificates. 14 Source of Payment For the Certificates Each Certificate represents a proportionate interest in the collective Lease Payments to be made by one or more of the Cities to the Corporation under such City's Lease Agreement (See "The Certificates — General Provisions" to detefmine the Cities' percentage share of payments made with respect to the various Certificate maturities). The Corporation, pursuant to the Assignment Agreement, will assign its rights under the Lease Agreements to the Trustee for the benefit of the Owners of the Certificates, including its right to receive Lease Payments thereunder and its right to exercise such rights and remedies as may be necessary to enforce Lease Payments when due or otherwise to protect its interests in the event of a default by any City. Principal and interest due with respect to the Certificates will be made from the Lease Payments payable by each City for the use and possession of its Project, rental interruption insurance 6 N. 1 �� � (TICACTIVE)90900A,006,037 St 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 7 CITY OF BEAUMONT !OS TR HEL CHEL Chk: 172472 042143 Output (OA) 22-Mar-85 09:15 PHA proceeds, insurance net proceeds pertaining to a Project to the extent that such net proceeds are not used for repair or replacement, interest or other income derived from the investment of the funds and accounts held by the Trustee for the Cities pursuant to the Trust Agreement, or in certain instances from the Reserve IAccounts established by the Trust Agreement or from payments made by the Insurer pursuant to the Policy. Each City has covenanted under its Lease Agreement to make Lease Payments for the use and possession of its Project and to take such action each year as may be necessary to include all Lease Payments in its annual budget and annually to appropriate an amount necessary to make such Lease Payments. The amounts payable to the Trustee are to be used to make the payments of principal and interest with respect to the Certificates. Under California law, even though the Lease Agreement for each City becomes effective as of the date of the Certificates, the obligation of each City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in such City's Capitalized Interest Subaccount of its Lease Payment Account, Reserve Account and, in the case of termination of such City's Lease Agreement or partial prepayment of such City's Lease Payments, such City's Acquisition I . Account) must be abated in whole or in part if the City does not have full use and possession of its Project. The obligation of each City to make Lease Payments does not constitute an obligation of such City for which such City is obligated to levy or pledge any form of taxation. Neither the Certificates nor the obligation of each City to make Lease Payments constitutes an indebtedness of such City, the State of California or any of its political subdivisions within the meaning of the Constitution of the State of California or otherwise or a pledge of the faith and credit of such City. A Reserve Fund is established under the Trust Agreement. Within the Reserve Fund there are established separate Reserve Accounts for each City which are required to be funded from proceeds of the Certificates in the amount listed for each City in the table on page 2 hereof. Amounts in the Reserve Account of each City are to be used only for the payment of Lease Payments to the extent amounts in that City's Lease Payment Account are insufficient therefor. No City's Reserve Account is available to make up a deficiency in the Lease Payment Account of any other City. See the discussion under the heading "Trust Agreement — Reserve Accounts." IPursuant to the Trust Agreement, the Corporation will assign to the Trustee for the benefit of the Owners its rights under all of the Lease Agreements, including (a) its rights to receive amounts payable by I the Cities under the Lease Agreements and (b) its rights to enforce amounts payable upon default, but excepting certain rights to indemnification and the payment of expenses. I Under the Policy, the Insurer will insure payment of principal and interest payments with respect to the Certificates. See the discussion under the heading "Certificate Payment Insurance." i 5 Lease Payments Lease Payments are required to be made by the Cities under the Lease Agreements each January 15 and July 15 (individually, a "Due Date") for use and possession of the Project for the annual period commencing on the August 2 preceding such January 15 and terminating the August 1 immediately following such July 15. Lease Payments will be funded in whole from the proceeds of the Certificates for the City of Beaumont through December 1, 1986; Lease Payments will be funded in whole from the proceeds of the Certificates for the City of Lompoc through February 1, 1986, and in part through February 1, 1987; Lease Payments will be funded in whole from the proceeds of the Certificates for the City of Oakdale through April 1, 1986; Lease Payments will be funded in whole from the proceeds of Certificates for the City of Orange through February 1, 1987, and in part through August 1, 1987; and Lease Payments will be funded in whole from the proceeds of the Certificates for the City of Orland through January I, 1986. It is I expected that the funding of Lease Payments for these Cities will adequately provide for the period up to and including the dates on which such Cities shall have full use and possession of their Projects. Each Lease Agreement requires that Lease Payments be deposited in the related Lease Payment Account maintained by the Trustee. Pursuant to the Trust Agreement, prior to each Payment Date the Trustee will transfer from each City's Lease Payment Account to the Certificate Payment Account created under the Trust Agreement, an amount equal to the Lease Payments due from such City on the preceding \1aiL (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 8 CITY OF BEAUMONT 'OS TR HEL CHEL Chk: 061700 044350 Output (OA) 22-Mar-85 10:42 PHA Due Date. On each Payment Date, the Trustee will withdraw from the Certificate Payment Account the aggregate amount Of such Lease Payments of the Cities and will apply such amounts to make principal and interest payments with respect to the Certificates, sufficient to meet the following annual amortization schedule: Year Ending Total August 1 Principal* Interest* Payments11)* 1986 $ 295,000.00 1987 860,000.00 1988 905,000.00 1989 960,000.00 1990 1,035,000.00 1991 1,020,000.00 1992 465,000.00 1993 55,000.00 1994 55,000.00 1995 65,000.00 1996 75,000.00 1997 75,000.00 1998 85,000.00 1999 100,000.00 2000 105,000.00 2001 115,000.00 2002 125,000.00 2003 135,000.00 2004 155,000.00 2005 160,000.00 2006 180,000.00 2007 195,000.00 2008 215,000.00 2009 ' 240,000.00 2010 260,000.00 2011 200,000.00 2012 220,000.00 2013 245,000.00 2014 270,000.00 2015 295,000.00 Total $9,165,000.00 *Subject to change. (1) See "The Certificates — General Provisions" to determine the percentage of total payments in each year which are comprised of the Lease Payments made by each City. 8 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 9 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 000023 065422 Output (OA) 22-Mar-85 09:15 PHA Estimated Annual Lease Payments for each City are shown below: Year Ending City August 1 Beaumont' Chula Vista' Lincoln' Lompoc' Oakdale' Orange' Orland' 1986 S 286,725.00 $ 97,833.33 $ 114,728.33 S 434,650.00 5 67,185.00 5 241,633.00 S 36,716.67 1987 235,043.75 91,050.00 92,021.25 452,913.00 51,363.75 631,225.00 28,512.50 1988 233,843.75 91,850.00 91,421.25 444,913.00 51,063.75 634,225.00 28,212.50 1989 232,543.75 91,975.00 90,771.25 444,763.00 55,738.75 628,025.00 27,887.50 1990 236,143.75 91,375.00 90,071.25 446,663.00 55,038.75 632.675.00 27,537.50 1991 234,268.75 — 89,321.25 450,088.00 54,288.75 631,800.00 27,162.50 1992 232,268.75 — 88,521.25 449,238.00 53,488.75 — 26,762.50 1993 235,206.25 — 87,696.25 — 52,663.75 — 26,350.00 1994 232,656.25 — 86,846.25 — 51,813.75 — 25,925.00 1995 235,046.25 — 90,976.25 — 50,943.75 — 25,490.00 1996 236,931.25 — 89,641.25 — 55,053.75 — 25.045.00 1997 233,331.25 — 88,291.25 — 53,703.75 — 24,595.00 1998 234,691.25 — 86,926.25 — 52,338.75 — 29,140.00 1999 235,551.25 — 90,546.25 — 55,958.75 — 28,220.00 2000 235,901.25 — 88,686.25 — 54,098.75 — 27,290.00 2001 235,731.25 — 91,806.25 — 52,218.75 — 26,350.00 2002 235,031.25 — 89,431.25 — 55,318.75 — 25,400.00 2003 233,775.00 — 87,025.00 — 52,912.50 — 29,437.50 2004 237,037.50 — 89,618.75 — 55,506.25 — 27,993.75 2005 234,337.50 — 86,731.25 — 52,618.75 — 26,550.00 2006 236,156.25 — 88,843.75 — 54,731.25 — 25,106.25 2007 232,012.50 — 90,475.00 — 51,362.50 — 28,662.50 2008 232,387.50 — 91,625.00 — 52,993.75 — 26,737.50 2009 236,800.00 — 87,293.75 — 54,143.75 — 29,812.50 2010 234,768.75 — 87,962.50 — 54,812.50 — 27,406.25 2011 231,775.00 — 88.150.00 — — — — 2012 232,637.50 — 87,787.50 — — — — 2013 232,037.50 — 91,937.50 — — — — 2014 234,975.00 — 90,112.50 — — — 2015 235.962.50 — 87,800.00 — — — — Total $7,085,578.00 $464,083.00 $2,703,066.00 $3,123,175.00 $1,351,361.00 $3,399,583.00 $688,302.98 1 6 LEASE AGREEMENTS The following is a brief outline of certain provisions contained in the several Lease Agreements between the Cities, as lessees, and the Corporation, as lessor, and is not to be considered a full statement pertaining thereto. Reference is made to the Lease Agreements for the complete text thereof. Copies of said documents are available from the Corporation upon written request, therefor. The Corporation will enter into a Lease Agreement with each City. The Corporation agrees under each Lease Agreement to cause funds to be deposited with the Trustee in an Acquisition Account created under the Trust Agreement to provide for acquisition and installation of the related City's Project. Each City agrees, as agent of the Corporation, to enter into purchase orders and contracts and provide for the complete acquisition and installation of its Project. Each City has agreed that it will cause the work under said contracts to be diligently performed after the deposit of such funds with the Trustee and has agreed that its Project will be acquired and installed in accordance with specifications approved by the City on or prior to a date specified in such City's Lease Agreement (the "Completion Date"). The Completion Date for the City of Beaumont is December 1, 1986; for the City of Chula Vista is October 1, 1985; for the City of Lincoln is September 1, 1985; for the City of Lompoc in respect to $1,435,900 of acquisitions is February 1, 1986 and in respect to $387,600 of acquisitions is February 1, 1987; for the City of Oakdale is April 1, 1986; for the City of Orange is February 1, 1987 in respect to $1,675,000 of acquisitions and August 1, 1987 in respect to $325,000 of acquisitions; and for the City of Orland is January 1, 1986. Each City agrees that upon substantial acquisition and installation of any portion of its Project, it will take possession of that portion under the terms and provisions of its Lease Agreement. Each City, upon completion of acquisition, ' construction and installation of any discrete portion of its Project reasonably satisfactorily to such City, but in any event not later than 30 days following completion of such acquisition and installation, is required to * Subject to change. __w.�.W s.w._..._ . _ ._.._ ._ 0 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 10 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 030246 027433 Output (OA) 22-Mar-85 09:15 PHA deliver to the Trustee certification that any discrete portion of its Project has been acquired, installed and accepted and that all Project acquisition costs have been paid (a "Certificate of Completion"). Each City may change its Project specifications so long as such change does not reduce the value of its Project or substantially alter the nature of its Project, and so long as such City deposits in its Acquisition Account sufficient funds to pay for any increase in costs of its Project resulting from such change. In the event that the costs of acquiring a City's Project are greater than the amount of funds deposited in or transferred to such City's Acquisition Account, together with investment earnings thereon, such City has agreed to deposit into its Acquisition Account (but only from revenues arising in such City's 1984-1985 fiscal year) sufficient funds to pay such increased Project acquisition costs. Title to each Project will be retained by the Corporation except for those modifications added to such Project by the related City which may be removed without damaging such Project and which are otherwise permitted under the related Lease Agreement. When each City has paid all of the Lease Payments relating to its Project or upon deposit of the security deposit as provided for in the Lease Agreement, title to such Project shall be transferred to and vest in such City. The Corporation and the Cities agree that each City's Lease Agreement shall be deemed to be effective as to each component of its Project as it is acquired, constructed or installed, and upon acceptance of each discrete portion of the Project, each City agrees that its Lease Payments represent fair rental value for such discrete portion of the Project. Lease Payments Each City is required under its Lease Agreement to make Lease Payments each Due Date for use and possession of its Project. Under California law, even though the Lease Agreement for each City becomes effective as of the date of the Certificates, the obligation of each City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in such City's Capitalized Interest Subaccount of its Lease Payment Account, Reserve Account and, in the case of termination of such City's Lease Agreement or partial prepayment of such City's Lease Payments, such City's Acquisition Account) must be abated in whole or in part if there is substantial interference (other than by eminent domain) with the use and possession of the City's Project. Each City is obligated to prepay Lease Payments under its Lease Agreement (a) from amounts on hand with the Trustee or from insurance proceeds, to effect mandatory redemption of the Certificates in the event that any portion of such City's Project has not been acquired by such City's Acceptance Deadline Date; or (b) in the event of damage or destruction to such City's Project, from net proceeds of insurance as described herein under the heading "The Certificates — Redemption." Lease Payments may be made from any source of legally available funds of each City. Each City covenants to take all necessary action to include all of its Lease Payments in its annual budget and to make the necessary annual appropriations for all such Lease Payments. 7 The amount of Lease Payments which a City is obligated to pay under its Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction there is substantial interference with such City's use and possession of its Project. Such adjustment or abatement will end with the substantial completion of repair or reconstruction of such Project. Each Lease Agreement requires the 1 related City to maintain throughout the term of the Lease Agreement, rental interruption insurance to cover loss of the use of any part of its Project as the result of damage or destruction from such hazards as are normally covered by extended coverage property insurance, in an amount sufficient to pay the maximum annual amount of Lease Payments. Net proceeds, if any, of such insurance will be deposited with the Trustee and credited against succeeding Lease Payments as they become due. In addition, funds in such City's Reserve Account may be used by the Trustee to make payments with respect to the Certificates in the event Lease Payments received from such City by the Trustee are insufficient to pay such City's proportion- ate share of principal and interest with respect to the Certificates as such amounts become due. If damage or destruction to such Project results in abatement or adjustment of such Lease Payments and the resulting Lease Payments, together with rental interruption insurance proceeds and moneys in such City's Reserve 10 (I L° (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85, 08:53 Seq: 11 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 023023 015327 Output (OA) 22-Mar-85 09:15 PHA Account are insufficient to pay such City's proportionate share of all payments of principal and interest due with respect to the Certificates during the period that such project is being repaired or reconstructed, such City will have no obligation to pay to the Trustee the amount necessary to cover such deficiency and no remedy against such City is available to the Trustee or the owners of the Certificates, under the related Lease Agreement or the Trust Agreement, for nonpayment under such circumstances. Notwithstanding such limitation with respect to such City's Lease Payment obligation, the Insurer's coverage of the scheduled Certificate Payments will not be affected by such abatement or adjustment and the amount necessary to cover such deficiency is insured by the Insurer under the Policy. See the discussion under the I heading "Certificate Insurance." I Insurance and Eminent Domain Each City agrees to maintain or cause to be maintained with respect to its Project comprehensive general public and property damage insurance, fire insurance with extended coverage, earthquake insurance (except that earthquake insurance is not required on those components of the Projects comprised of mobile components, such as rolling stock) and, if such Project is located in a flood hazard zone, flood insurance. Each City also agrees to maintain rental interruption insurance covering loss of the use of any part of its Project in an amount equal to the maximum annual amount of Lease Payments due under such City's Lease Agreement. All required insurance may include self-insurance (if approved by the Trustee, upon recommendation of a qualified insurance consultant) and customary deductible amounts, and must be maintained under policies requiring at least thirty (30) days' prior written notice before expiration,cancellation or reduction of the coverage provided thereby. Insurance proceeds will be made payable to the Trustee (except in the case of public liability and property damage insurance) and in the case of any Project, damage insurance must be payable in the amount of the full replacement cost of the relatcd Project. Each City, when so requested by the Trustee or the Insurer, shall deliver or cause to be delivered annually to the Trustee or the Insurer evidence that the insurance policies required by its Lease Agreement are in full force and effect. The net proceeds of any insurance award resulting from any damage or destruction to all or any I discrete portion of a City's Project shall be deposited with the Trustee in the Insurance and Condemnation Fund created under the Trust Agreement. Within 120 days of such deposit such City shall submit a net proceeds certificate (the "Net Proceeds Certificate") certifying to the Trustee either (a) that such net proceeds are to be utilized for the repair, replacement or improvement of the damaged or destroyed portion of its Project and sufficient funds, together with such net proceeds, have been appropriated to pay the total cost of such repair, replacement or improvement, or (b) that repair, replacement or improvement of the damaged or destroyed portion of its Project is not economically feasible or in the best interest of such City. If such certification is to the effect of(a) above, the Trustee will disburse such net proceeds to such City in accordance with the Trust Agreement in order for the City to cause its Project to be repaired, replaced or improved to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished with said net proceeds. If such certification is to the effect of (b) above, the Trustee will transfer such net proceeds to the Redemption Fund created under the Trust Agreement to be applied to the redemption of Certificates as described herein under the heading "The Certificates — Redemption." If all of such City's Project has been damaged or destroyed, such City shall have the option to cause net proceeds to be applied to the redemption of Certificates only if such net proceeds, together with funds then on hand in such City's Acquisition Account, Lease Payment Account and Reserve Account, and the net proceeds, if any, are sufficient to prepay in full the entire unpaid principal amount of such City's Lease Payments. The net proceeds of any eminent domain proceedings with respect to the Projects which are received by the Trustee shall be deposited into the Insurance and Condemnation Fund. Within 120 days after such deposit, such City shall submit a Net Proceeds Certificate to the Trustee stating either (a) that eminent domain proceedings have taken its Project in whole or in part, but to the extent that the remaining portion of such Project is no longer useful for the purposes originally intended, or (b) that eminent domain proceedings have taken its Project in part and that the remaining portion of its Project is still useful for the purposes < ..\\(\1L 11 (TICACTIVE)90900A,006,037 St: 9000A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 12 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 114135 152003 Output (OA) 22-Mar-85 09:15 PHA originally intended. If the Certificate is to the effect of (a) above, the Trustee shall transfer such net proceeds to the Redemption Fund to be used for the redemption of Certificates. If the Certificate is to the effect of(b) above, the Trustee shall transfer such net proceeds to the Redemption Fund to be used for the redemption of Certificates, except that such net proceeds may be disbursed by the Trustee to the affected City upon further certification that the repair or replacement of its Project is desired by the City. Such disbursements will be made upon receipt of requisitions and further certifications of engineers and other documents as the Trustee may reasonably require in order to cause the Project to be repaired, replaced or improved to at least the same good order, repair and conditions as it was in prior to the eminent domain proceedings, insofar as the same may be accomplished with said net proceeds.The Trustee shall transfer any excess net proceeds to the City's Lease Payment Account to be credited against such City's next Lease Payment. is - Default and Remedies The following constitute "events of default" under each of the Lease Agreements: (a) failure by a City to pay any Lease Payment or other payment required to be paid thereunder at the time specified therein; (b) failure by a City to observe and perform any covenant,condition or agreement on its part to be observed or performed, other than as referred to in clause (a) above, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to such City by the Corporation, the Trustee, or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Corporation, the Trustee and such Owners will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by such City within the applicable period and diligently pursued until the default is corrected; and (c) the filing by a City of a voluntary petition in bankruptcy, or failure by a City promptly to lift any execution,garnishment or attachment, or adjudication of a City as a bankrupt, or assignment by a City for the benefit of creditors, or the entry by a City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to a City in any proceeding instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted. An event of default by one City under its Lease Agreement will not result in the declaration of an event of default under the Lease Agreement with any other City. Upon the happening of an event of default specified in (a) or (c) above, the Corporation shall upon the written request of the Owners of a majority of the principal amount of the Certificates then outstanding, or, upon the occurrence of an event of default specified in (b) above may, proceed to: (a) protect and enforce the defaulting City's Lease Agreement by such judicial proceedings as the Corporation or its assignee shall deem most effectual, either by suit in equity or by action at law, whether for the specific performance of any covenant or agreement contained in such Lease Agreement, or in aid of the exercise of any power granted in such Lease Agreement, or to enforce any other legal or equitable right vested in the Corporation or its assignee by such Lease Agreement or by law; (b) take possession of the defaulting City's Project and exclude such City from using it until the default is cured, holding such City liable for the Lease Payments and other amounts payable by such City prior to such taking of its Project under and pursuant to its Lease Agreement and the curing of such default; or (c) take whatever action at law or in equity may appear necessary or desirable to enforce its rights as the owner of the defaulting City's Project, including termination of such City's Lease Agreement and the repossession and sale of such Project; provided, except where such termination results from failure by such City to pay its Lease Payments, or results from the City's failure to budget, appropriate eN L 12 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 13 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 051740 067650 Output (OA) 22-Mar-85 09:15 PHA or otherwise make funds lawfully available to pay Lease Payments due in any fiscal year of such City, the Trustee shall not terminate such City's Lease Agreement without first obtaining consent from the Insurer. 19 Other Provisions Each City has the right to remodel its Project or to make modifications and additions to it, provided such modifications do not damage such Project, substantially alter its nature, cause it to be used for unauthorized purposes or reduce its value to a value substantially less than that existing prior to such modifications. All such additions and modifications become part of such Project and subject to the provisions of the related Lease Agreement. Each City is responsible for the improvement, repair, and maintenance of its Project and shall pay or arrange for payment of the cost of repair and replacement resulting from ordinary wear and tear, or want of care on the part of each such City. Each City shall pay, or cause to be paid, any taxes relating to its Project as due. The Corporation makes no warranty, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or use by any City of its Project or any part thereof. Each City has all rights with respect to the warranties of the contractors regarding its Project, and the right to enforce such warranties against the contractors. The Corporation and any Corporation Representative, and the Corporation's successors or Assigns has the right at all reasonable times to examine and inspect the Projects dnd to have reasonable access to the Projects to cause their proper maintenance in the event of failure by the Cities, or any of them, to perform their obligations. The Corporation has assigned its rights (except certain rights to indemnification and the payment of expenses) under the Lease Agreements to the Trustee pursuant to the Assignment Agreement. The Cities may assign their rights under their respective Lease Agreements,or sublease their respective Projects, under certain conditions contained in the Lease Agreements. Termination 1 Each Lease Agreement terminates (a) upon the payment or prepayment by the related City of all Lease Payments due during the term of such Lease Agreement or (b) upon a default by the related City and the I Corporation's or its successors' and assigns', election to terminate the Lease Agreement. 20 ! TRUST AGREEMENT The following is a brief outline of certain provisions contained in the Trust Agreement by and among the Cities, the Corporation and the Trustee, and is not to be considered a full statement pertaining thereto. Reference is made to the Trust Agreement for the complete text thereof A copy of said document is available from the Corporation upon written request. The Trustee is appointed pursuant to the Trust Agreement to act as a depository of amounts held thereunder. The Trust Agreement authorizes the Trustee to prepare, execute and deliver the Certificates. Transfers of the Certificates are to be registered in a register maintained by the Trustee. The Trust Agreement creates several types of accounts to be maintained by the Trustee for the benefit of the Corporation and the Cities. One account of each type described below is established for each City and its related Project. Except as otherwise noted, funds held by the Trustee in accounts for one City are not available for the benefit of any other City. Acquisition Accounts—A portion of the proceeds of the sale of the Certificates will be deposited in an Acquisition Account for each City. Amounts in each Acquisition Account will be disbursed by the Trustee to complete acquisition and installation of the related Project. Upon completion of a City's Project, any amounts remaining in that City's Acquisition Account will be transferred to such City's Lease Payment Account, to be applied as a credit against subsequent Lease Payments due by that City. Upon occurrence of one of the events which will result in termination of a City's Lease Agreement, as described herein under the 01 13 (TICACTIVE)90900A,006,037 St 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 14 CITY OF BEAUMONT /05 TR HEL CHEL Chk: 120630 025534 Output (OA) 22-Mar-85 09:15 PHA heading "Lease Agreements — Termination," the Trustee will not make any further disbursements from such City's Acquisition Account and all amounts at the time in such Acquisition Account will be transferred, as provided in the Trust Agreement, to such City's Lease Payment Account, to be credited against such City's Lease Payment obligations or to such City's Redemption Account to be applied to redemption of the Certificates as described herein under the heading "The Certificates — Redemption." Lease Payment Accounts—The Trustee will deposit in each City's Lease Payment Account all Lease Payments received from such City, proceeds of rental interruption insurance maintained by such City and any other amounts required by the related Lease Agreement or the Trust Agreement. From proceeds of the Certificates, the Trustee will deposit into the Capitalized Interest Subaccount of the Lease Payment Account of the City of Beaumont an amount to be used for payment of such City's accrued Lease Payment obligations through December 1, 1986; into the Capitalized Interest Subaccount of the Lease Payment Account of the City of Lompoc an amount to be used for payment of all of such City's Lease Payment obligations through February 1, 1986, in respect to $1,830,000 principal amount of Certificates, plus all such City's Lease Payment obligations through February 1, 1987, in respect to $480,000 principal amount of Certificates; into the Capitalized Interest Subaccount of the Lease Payment Account of the City of Oakdale an amount to be used for payment of such City's accrued Lease Payment obligations through April 1, 1986; into the Capitalized Interest Subaccount of the Lease Payment Account an amount to be used for payment of all of such City's Lease Payment obligations through February 1, 1987, in respect to $2,170,000 principal amount of Certificates, plus all City's Lease Payment obligations through August 1, 1987, in respect to $395,000 principal amount of Certificates; and into the Capitalized Interest Subaccount of the Lease Payment Account of the City of Orland an amount to be used for payment of all of such City's Lease Payment obligations through January 1, 1986. In the event that on a Due Date there is not on deposit in a City's Lease Payment Account an amount (excluding earnings during such City's Project acquisition period) equal to such City's Lease Payment obligation payable on such Due Date, then the Trustee shall immediately transfer from such City's Reserve Account to its Lease Payment Account an amount necessary to increase the balance of the Lease Payment Account to an amount equal to such Lease Payment obligations. In the event that there are insufficient Ifunds available in such City's Reserve Account for such purpose, the Trustee shall file a notice with the Insurer as described herein under the heading "Certificate Payment Insurance." The Trustee will withdraw from each City's Lease Payment Account (including its Capitalized Interest Subaccount) on each Payment Date an amount equal to the Lease Payments due from that City on the Due Date preceding such Payment Date. All such sums withdrawn from the Lease Payment Accounts will be deposited in the Certificate Payment Account. II Certificate Payment Account—The Trustee will withdraw from the Certificate Payment Account, on each Payment Date, an amount equal to the interest and principal components of payments due with respect to the Certificates on that date and will immediately apply the same to the payment of such principal and interest to the Owners of the Certificates. If on any Payment Date the balance in the Certificate Payment Account is less than the amount of principal and interest due to the Owners of the Certificates, the Trustee shall apply the money on hand in the Certificate Payment Account to the payment of interests in Lease Payments of the Cities from whose Lease Payment Accounts such moneys were withdrawn (but only to the extent of such withdrawals) and, with respect to each such City's Lease Payments, first to the payment of interest past due, pro rata if necessary, and second to the payment of principal past due, pro rata if necessary. Reserve Accounts — Each Reserve Account will be initially funded from the proceeds of the Certificates in an amount equal to the related City's reserve requirement. If on any Due Date moneys on hand in a City's Lease Payment Account (excluding earnings prior to such City's Completion Date) do not equal such City's Lease Payment required to be deposited with the Trustee on such Due Date, the Trustee shall immediately transfer moneys from such City's Reserve Account to such City's Lease Payment Account to make up such deficiency. Upon receipt of any delinquent Lease Payments from such City, such City's IReserve Account shall be replenished. \\` 1 14 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 15 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 113402 035202 Output (OA) 22-Mar-85 09:15 PHA • At any time that the balance in a City's Reserve Account and Lease Payment Account equal all Lease Payments remaining under such City's Lease Agreement, the Trustee will transfer all amounts in such Reserve Account to such Lease Payment Account to be applied to the payment of such Lease Payments as they become due and payable, and such City shall be deemed to have paid all Lease Payments due under its Lease Agreement. In the event that Lease Payments of a City are to be prepaid from net proceeds of insurance or in connection with the termination of the Lease Agreement or partial prepayment of such City's Lease Payments, in order to cause redemption of Certificates (as described herein under the heading "The Certificates — Redemption"), the amount on hand in such City's Reserve Account shall be reduced to an amount equal to the maximum annual amount of Lease Payments due from such City under its revised Lease Payment schedule, or a "minor portion" (as determined according to Section 103(c) of the Internal Revenue Code of 1954, as amended) of the total principal portion of such City's Lease Payments remaining unpaid, whichever is less (the "Reduced Reserve Requirement"), and the Trustee shall transfer the balance of such Reserve Account to such City's Lease Payment Account. Insurance and Condemnation Fund — In the event the Trustee receives net proceeds of insurance in connection with damage or destruction of a City's Project, such proceeds will be deposited in the Insurance and Condemnation Fund and will be applied by the Trustee as described herein under the heading "Lease Agreements — Insurance." Costs of Issuance Account — A portion of the proceeds from the sale of the Certificates will be deposited with the Trustee in a Costs of Issuance Account and shall be applied to pay costs of the issuance and sale of the Certificates upon the receipt of a signed invoice approved by the Corporation's authorized representative. Any funds remaining in this account after all such costs have been paid will be transferred to the Lease Payment Accounts of the Cities, in the same proportion as the total principal portion of Lease Payments payable by each City under its Lease Agreement bears to the total principal portion of the Lease Payments represented by the Certificates when originally executed and delivered. During the acquisition period for each City's Project, all interest income accruing to that City's Lease Payment Account and Reserve Account shall be transferred to such City's Acquisition Account. Thereafter, earnings on a City's Reserve Account shall be transferred to such City's Lease Payment Account. Interest income on each City's other accounts will be retained in the account in which it is earned and shall be applied for the purpose for which such account was established. 2 The Trustee is required to invest and reinvest all moneys held under the Trust Agreement upon instructions from a representative of the related City, in investments of the nature described below: (a) United States Treasury notes, bonds, bills or certificates of indebtedness, sr those obligations for which the faith and credit of the United States are pledged for the payment of principal and interest ("Federal Securities"); (b) Obligations of, or guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America; (c) Certificates of deposit, time deposits or demand deposits with any bank or savings institution qualified as a depository of public funds in the State of California, including the Trustee or any affiliate thereof, provided that such certificates of deposit, time deposits or demand deposits, if not insured by the Federal Deposit Insurance Corporation ("FDIC") or the Federal Savings and Loan Insurance Corporation ("FSLIC"), are fully secured by Federal Securities; (d) Bank repurchase agreements with financial institutions insured by FDIC or FSLIC, or any broker-dealer with "retail customers" which falls under the Securities Investors Protection Corporation jurisdiction, provided: (i) the overcollateralization is at a level acceptable to Standard & Poor's ' Corporation and Moody's Investors Service, Inc., (ii) the Trustee, or a third party acting solely as agent for the Trustee, shall have possession of such obligations, (iii) the Trustee shall have perfected a first priority security interest in such obligations, (iv) such obligations are free and clear of claims of third \kO L 15 (TICACTIVE)90900A,006,037 St: 900OOA Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 16 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 175754 035702 Output (OA) 22-Mar-85 09:15 PHA parties, and (v) failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral; and 1, (e) Money market funds rated in the highest category by Standard & Poor's Corporation and Moody's Investors Service, Inc. Upon the occurrence of an event of default by any City under its Lease Agreement, the Trustee, as assignee of the Corporation, shall exercise the remedies provided under such Lease Agreement and any other remedies which Trustee may have by contract or law. The Trustee is directed by the Trust Agreement, upon written request of the Corporation, to prepare, execute and deliver to the Underwriters, the Certificates in the aggregate principal amount of 59,165,000.* The Trust Agreement contains procedures for transfers of the Certificates, for regulations with respect to exchanges and transfers, for conditions of delivery of temporary Certificates, for procedures for Certifi- cates which are mutilated,lost, destroyed or stolen,for evidence of signatures of Owners and of ownership of Certificates and for procedures with respect to payment of Certificates. The Trustee shall not be required to transfer or exchange any Certificate during the fifteen days preceding any Payment Date nor to transfer or exchange any Certificate after the mailing of notice calling such Certificate or portion thereof for redemption, nor during the fifteen days preceding the giving of such notice of redemption. The Trustee is appointed as a paying agent for the Certificates. Principal of the Certificates is payable at the principal office of the Trustee. Interest with respect to the Certificates is payable by check or draft of the Trustee mailed to the owner of record, on the Payment Date therefor, at the address shown on the Certificate register required to be maintained by the Trustee. The Trust Agreement contains certain provisions limiting the liability of the parties thereto, including the following pruvisions: (a) neither the Corporation nor the Cities shall have any obligation or liability to the Owners with respect to the performance by the Trustee of duties imposed upon it by the Trust Agreement; (b) except as provided in the Trust Agreement, neither the Trustee nor Corporation shall have any obligation or liability to the Owners with respect to the payment of the Lease Payments by the Cities when due, or with respect to the performance by the Cities of any other covenant made by them in the Lease Agreements; and (c) neither the Trustee nor the Corporation shall be responsible for the sufficiency of the Lease Agreements or of the assignment made to it of rights to receive moneys pursuant to said Lease Agreements, or the value of or title to the Projects, or the Policy. Neither the Trustee nor the Corporation shall be responsible or liable for any loss suffered in connection with any investment of funds made by it under the terms of and in accordance with the Trust Agreement. 23 No Owner of any Certificate,executed and delivered under the Trust Agreement,shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under the Trust Agreement, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default under a Lease Agreement; (b) the Owners of at least a majority in aggregate principal amount of all the Certificates then outstanding shall have made written request of the Trustee to exercise its powers or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. The right of any Owner of any Certificate to receive payment of said Owner's proportionate interest in the Lease Payments as the same become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner. * Subject to change. . ��� 16 (TICACTIVE)90900A,006,037 St: 90900A Fmt 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 seq: 11 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 000353 070151 Output (OA) 22-Mar-85 09:15 PHA The Trust Agreement may be amended at any time without the consent of any of the Owners, but only to cure any ambiguity or defective provision or to clarify any questions not inconsistent with the Trust Agreement and which shall not adversely affect the interests of the Owners of the Certificates. The Trust Agreement may otherwise be amended by written consent among all parties, but no such amendment shall become effective as to the Insurer or the Owners of the Certificates then outstanding unless and until approved by the Insurer and the Owners of a majority in aggregate principal amount of the Certificates then outstanding, and no amendment shall impair the right of any Owner to receive his proportionate share of any Lease Payment without his consent. The Trust Agreement terminates and becomes void when principal and interest due with respect to the Certificates has been paid in full or provision for payment thereof has been made by the deposit of cash or Federal Securities in an amount sufficient (together with interest earnings thereon) to pay said principal and interest. 24 I CERTIFICATE PAYMENT INSURANCE [TO COME] 26 1 THE CORPORATION The Corporation is a nonprofit public benefit corporation organized under the provisions of the California Corporations Code for the purpose of assisting California cities and public agencies in tax- exempt lease financings for their municipal improvements. THE CITIES The seven Cities making Lease Payments evidenced by the Certificates are Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale, Orange and Orland. All of these cities are general law cities,except for the City of Chula Vista, a charter city. The City of Beaumont is located in the County of Riverside, the City of Chula Vista is located in the County of San Diego,the City of Lincoln is located in the County of Placer, the City of Lompoc is located in the County of Santa Barbara, the City of Oakdale is located in the County of Stanislaus, the City of Orange is located in the County of Orange, and the City of Orland is located in the County of Glenn. Population statistics for the cities are summarized in the following table, along with comparisons for the State of California and the United States. Area Population for Years 1980 through 1984 Year Area 1980 1981 1982 1983 1984 Beaumont 6,818 6,963 7,296 7,561 7,567 Chula Vista 83,927 84,364 86,597 88,023 89,370 Lincoln 4,132 4,229 4,343 4,483 4,880 Lompoc 26,150 26,450 27,550 28,300 28,700 Oakdale 8,500 8,673 8,914 9,094 9,167 Orange 91,189 94,322 94,524 96,154 97,197 Orland 3,973 4,105 4,205 4,403 4,486 State of California 23,979,800 24,395,100 24,469,500 24,959,000 25,332,300 United States 228,497,100 229,800,000 232,000,000 233,736,000 235,524,300 Source: Population of the Cities is from California Department of Finance for January 1 of each year. State and U.S. population is from S&MM Survey of Buying Power. 17 (TICACTIVE)90900A,006,037 St: 90900A Fmt 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 18 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 002325 170314 Output (OA) 22-Mar-85 09:15 PHA • CITY FINANCIAL INFORMATION Each City covenants annually to budget and appropriate sufficient funds to pay all Lease Payments due under its Lease Agreement. See "The Certificates — Source of Payment for the Certificates" herein. For further information concerning the financial condition of the Cities refer to annual audit reports on file with the respective City Clerks. 27 Budgetary Process The fiscal period of each City except the City of Lompoc begins on the first day of July of each year and ends on the thirtieth day of June of the following year. The fiscal period of the City of Lompoc begins on the first day of July of each odd numbered year and ends on the thirtieth day of June two years thereafter. At such date as the City Manager or City Administrator (the "City Executive") determines, each department head must furnish to the City Executive an estimate of revenues and expenditures for such department for the ensuing fiscal period, detailed in such manner as may be prescribed by the City Executive. In preparing the proposed budget, the City Executive reviews the estimates, holds conferences thereon with the respective department heads, and revises the estimates as he deems advisable. Approximately thirty days prior to the beginning of each fiscal period, the City Executive submits to the City Council the proposed budget. After reviewing and making such revisions as it deems advisable, the City Council determines the time for the holding of a public hearing thereon and causes to be published a notice thereof not less than ten days prior to the hearing date. Copies of the proposed budget are available for inspection by the public in the office of the City Clerk at least ten days prior to the hearing. At the conclusion of the public hearing, the City Council further considers the proposed budget and makes any revision therefor that it deems advisable. For each fiscal period beginning July 1, it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the Council. From the effective date of the budget, the several amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Executive may transfer the appropriations of a fund from one object or purpose to another within the same department. All appropriations lapse at the end of the fiscal period to the extent that they have not been expended, lawfully encumbered or carried forward by action of the City Council. At a public meeting after the adoption of the budget in each of the Cities, the Council may amend or supplement the budget by motion adopted by the majority vote of Council. Proposition 13 effectively prohibits California cities from issuing general obligation debt (see "Consti- • tutional Amendments Affecting City Revenues"). The City Council of each City employs, at the beginning of each fiscal period, an independent certified public accountant who, at such time or times as specified by the City Council, at least once a fiscal period, and at such other times as he shall determine, examines the combined financial statements of each City in accordance with generally accepted auditing standards, including such tests of the accounting records and such other auditing procedures as such accountant considers necessary. As soon as practicable after the end of the fiscal period, a final audit and report is submitted by such accountant to the Council and a copy of the financial statements as of the close of the fiscal period is available. to Assessed Valuation and Tax Collections Ad Valorem Property Taxation Prior to fiscal year 1981-1982, all properties generally were assessed by the County Assessor at 25 percent of full cash value (market value). The State Board of Equalization assessed public utility properties at 25 percent of full cash value. Since fiscal year 1981-82 all property has been assessed using full cash value. The Constitution of the State of California (the "State") and various statutes provide exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, nonprofit hospitals, and charitable institutions. 18 (TICACTIVE)90900A,006,037 St 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 08:53 Seq: 19 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 104415 077770 Output (OA) 22-Mar-85 09:15 PHA State law allows exemptions from ad valorem property taxation of $7,000 of full owner occupied dwellings. However, the State reimburses all local taxing authorities for the loss of revenues imputed to these exemptions. In addition, although business inventories were removed from the tax rolls beginning with fiscal year 1980-81, State subvention is provided on a calculated base to reimburse local taxing agencies for this reduction of taxable properties. The California Community Redevelopment Law authorized redevelopment agencies to issue bonds payable from the allocation of tax revenues resulting for increases in assessed valuations of properties within designated project areas. In effect, in such project areas local taxing authorities such as the Cities realize tax revenues only on the frozen base assessed valuations. Final assessed values are available on or about August 15 of each fiscal year. Secured Property Taxes State and county taxes are due and become delinquent each year in all counties of the State as follows: First installment due November 1st. Delinquent after December 10th. Second installment due February 1st. Delinquent after April 10th. The entire tax may be paid at the time the first installment is due. For the 1983-84 tax year, a penalty of ten percent is added to the first installment if not paid on or before December 10th; and ten percent to the second installment if not paid on or before April 10th, together with ten dollars costs also added for each described parcel. At the end of the first year of delinquency, property is sold to the State. In redeeming property for delinquent taxes, penalties are added at the rate of 1.5 percent per month, with $5.00 redemption fee on each separately valued parcel sold to the State. If nal redeemed at the end of five years from July 1st of the year first becoming delinquent, the property will be deeded to the State of California, and may thereafter be sold at public auction. Delinquent taxes may be paid in installments by paying 20 percent yearly increments of the amount to redeem; subsequent payments draw interest on the unpaid balance.at the rate of ' percent per month from the date of previous payment on property which went one year delinquent prior to June 15, 1984; a rate of one percent per month on property which went one year delinquent from June 15, 1974 through June 14, 1982; and a rate of 1.5 percent per month on property which went one year delinquent on or after June 15, 1982. Deeded property may not be placed on the installment plan, however, it can still be redeemed in full until sold at public auction. Property deeded to the State for delinquent tax may be purchased at public auction by individuals. The County Tax Collector shall auction such property within two years after such property has been deeded to the State. Unsecured Property Taxes Taxes on property assessed on the unsecured roll as unsecured property (separate from real estate) are billed as soon as assessed. Taxes on the roll as of July 31st, if unpaid, become delinquent on August 31st. Taxes added to the roll after July 31st, if unpaid, become delinquent the last day of the month following the month in which they were added. A 10 percent penalty attaches to the taxes when they become delinquent and if unpaid at the end of the second succeeding month a 1.5 percent penalty is added on the first day of each month until paid or court judgment is entered. 9 Constitutional Amendments Affecting City Revenues On June 6, 1978, California voters approved Proposition 13, a statewide initiative relating to the taxation of real property which added Article XIIIA to the California Constitution. Among other things, the Proposition: (a) limits ad valorem property taxes on all real property to 1 percent of the full cash value of the property; (b) exempts existing voter approved bonded indebtedness from the 1 percent limitation; (c) defines "full cash value" as the Assessor's appraised value of real property as of March 1, 1975, adjusted by • (TICACTIVE)9O9O0A,OO6,O37 St: 9O9O0A Fmt: 9O9O0A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Sep: 20 CITY OF BEAUMONT !OS TR HEL CHEL Chk: 136541 127563 Output (CO) 22-Mar-85 10:38 PHA • changes in the Consumer Price Index—not to exceed 2 percent per year; (d) permits establishment of a new "full cash value" when there is new construction or a change in ownership; (e) permits the reassessment, up to the March 1, 1975 value, of property which was not current on the 1975-76 assessment roll; (f) requires counties to collect the 1 percent property tax and to "apportion according to law to the districts within the counties"; (g) prohibits new ad valorem taxes on real property, or sale taxes, or transaction taxes, on the sale of real property; (h) permits the imposition of special taxes by local agencies,other than those prohibited, by a two-thirds (2/3) vote of the "qualified electors" of such agencies; and (i) requires a two-thirds (2/3) vote of all members of both houses of the Legislature for any changes in State taxes which would result in increased revenues. An initiative constitutional amendment entitled "Limitation of Government Appropriations" was approved by California voters on November 6, 1979. Under the amendment, which adds Article XIIIB to the California Constitution, state and local government agencies are subject to an annual "appropriations limit," and are prohibited from spending "appropriations subject to limitation" above that limit. "Ap- propriations subject to limitation" consist of "tax revenues," state subventions, and certain other funds (together herein referred to as proceeds of taxes). The amendment does not affect the appropriation of money excluded from the definition of "appropriations subject to limitation," such as debt service on indebtedness existing or authorized by January 1, 1979 or subsequently authorized by the voters and appropriations mandated by the court. The amendment also excludes from limitation the appropriation of proceeds from regulatory licenses, user charges, or other fees to the extent that such proceeds equal "the costs reasonably borne by such entity in providing the regulation, product, or service." In general terms, the amendment provides that the appropriations limit will be based on certain 1978-79 expenditures and will be adjusted annually to reflect changes in cost of living, population, and transfer of financial responsibility of providing services from one governmental unit to another. The amendment also provides that if an agency's revenues in any year exceed the amount which is appropriated by such agency in compliance with the initiative, the excess must be returned during the next two fiscal years by revising tax rates or fee schedules. Each of the Cities believes it is presently fulfilling all obligations under Article XIIIB of the California Constitution. 130 Financial Summaries for the Cities The General Fund is a budget unit specifically defined under California law which serves as the main financing instrument for general governmental activities in California cities. Summaries of financial statements for the General Fund of each City follow. 20 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 21 CITY OF SEAUMONT %OS TR HEL CHEL Chk: 022200 133634 Output (CO) 22-Mar-85 10:38 PHA CITY OF BEAUMONT [To Come] . The following table summarizes General Fund revenues, expenditures, transfers, and ending fund balances for the City of Beaumont for fiscal years 1979-80 through 1983-84. . City of Beaumont Summary of General Fund Revenues and Expenditures Years Ended June 30, ' 1980 1981 1982 1983 1984 Revenues Property taxes $ 265,603 $ 209,288 $ 271,871 $ 310,571 $ 308,928 Other taxes 486,160 12,245 560,720 736,039 830,567 Licenses, permits and fees 67,484 185,194 169,177 16,053 18,477 Fines, forfeits and penalties 7,513 8,554 4,246 13,972 Use of money and property 120,562 66,238 61,673 47,476 69,242 Intergovernmental revenues 225,273 724,598 540,111 148,639 139,944 Charges for current services 190,774 265,925 314,512 330,387 439,036 Other revenues 54,851 55,982 55,845 18,530 23,145 Total revenues $1,410,707 $1,526,983 $1,982,463 $1,611,941 $1,843,711 Expenditures General government 172,997 689,167 554,567 594,545 826,303 Public safety 605,430 699,737 765,501 772,381 763,811 Public works 598,058 259,268 943,903 549,651 463,113 Culture and recreation 31,865 45,614 61,209 95,052 95,373 Total expenditures $1,408,350 $1,693,785 $2,325,180 $2,011,629 $2,148,600 Excess of revenues over (under) Expenditures 2,357 (166,803) (342,717) (399,688) (304,889) Operating transfers in (out) 329,556 476,784 378,132 433,205 Excess of revenues over uses $ 2,357 $ 162,753 $ 134,067 $ (21,556) $ 128,316 Fund balance $ 230,427 $ 393,180 $ 527,247 $ 436,552 $ 530,303 Source: City of Beaumont. 1 111.41,1 IV t)`/UYUUH,UU6, '/U`tJUH hmt: `fUYUUH Y. I•UNII'HIVY iZ1J)/4Z-di$UU Lomp: EL-Mar-u9 iu:u9 seq: cc CITY OF BEAUMONT /05 TR HEL CHEL Chk: 167627 150541 Output (CO) 22-Mar-85 10:07 PHA CITY OF CHULA VISTA The City of Chula Vista was incorporated in 1911 and became a charter city in 1951. The City utilizes the Council-Manager form of government. The City Council is composed of four members and an elected Mayor. The City Manager is appointed by the City Council. Chula Vista is located on the shore of San Diego Bay about eight miles south of San Diego City and seven miles north of Mexico. The City is the second most populous of San Diego County. The State Department of Finance estimated the City population to be 89,370 as of January 1, 1984. Hundreds of commercial and industrial firms currently operate the Chula Vista, offering workers in most professional fields a variety of occupational and business opportunities in one of San Diego County's fastest growing areas, the South Bay. There are over 30 industrial plants in Chula Vista including the manufacture of aerospace components, marine products, transportation equipment, apparel, building mater- ials and food processing. The following table summarizes General Fund revenues, expenditures, transfers and ending fund balances for the City of Chula Vista for fiscal years 1979-80 through 1983-84. City of Chula Vista Summary of General Fund Revenues and Expenditures Years Ended June 30, 1980 1981 1982 1983 1984 Revenues: Property taxes $ 2,512,357 $ 2,720,215 $ 2,935,972 $ 3,094,961 $ 3,421,680 Sales tax 3,807,801 3,921,668 4,587,319 4,475,484 4,967,106 Utility users tax 1,322,805 1,334,459 1,436,884 1,444,029 1,454,619 Property transfer 91,426 61,729 48,301 59,010 109,829 Room occupancy 281,646 328,216 382,795 444,869 560,264 Business licenses 194,932 203,610 214,056 226,364 264,877 Franchises 410,576 521,599 599,767 771,652 868,636 Licenses and permits 280,900 170,766 196,314 294,764 580,533 Fines, forfeitures and penalties 264,922 337,303 311,437 317,090 357,526 Revenue from other agencies 3,315,475 3,011,265 2,347,210 2,573,795 2,409,784 Revenue from use of money and property 606,199 870,018 1,192,931 1,379,617 1,318,741 Charges for current services 317,090 441,758 351,893 314,911 613,672 Miscellaneous 95,994 75,865 108,017 168,661 142,226 Total revenues $13,502,123 $13,998,471 $1 4,712,896 $15,565,207 $17,069,493 Expenditures: General government 2,000,029 2,243,738 2,508,511 2,578,535 2,834,092 Public safety 5,606,292 6,278,451 6,882,926 7,326,081 7,728,665 Public works 3,055,962 3,666,062 3,817,942 3,659,409 3,954,559 Parks and recreation 1,257,475 1,515,620 1,595,907 1,638,621 1,807,748 Public library 862,455 999,364 978,430 1,070,109 1,208,506 Total expenditures $12,782,213 $14,703,235 $15,783,716 $16,472,755 $17,533,570 Excess of revenues over (under) expenditures $ 719,910 $ (704,764) $(1,070,820) $ (907,548) $ (464,077) Transfers from (to) other funds 1,361,929 439,393 2,347,949 1,346,380 1,551,093 Excess (deficiency) of revenues over uses $ 2,081,839 $ (265,371) $ 1,277,129 $ 438,832 $ 1,087,016 Fund balance $ 6,245,938 $ 5,980,567 $ 7,257,696 $ 7,696,528 $ 8,783,544 Source: City of Chula Vista. °t1 22 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:03 Seq: 23 CITY OF BEAUMONT ;OS TR HEL CHEL Chk: 164612 070750 Output (CO) 22-Mar-85 10:07 PHA 3 I CITY OF LINCOLN The City of Lincoln is a community of approximately 4,880 people, located in the County of Placer, California near the City of Sacramento. The City is located on State Route 65, and has convenient access to the Cities of Roseville, Sacramento, Reno and San Francisco. Lincoln Municipal Airport serves the City. Incorporated in 1890, the City of Lincoln is a general law city and operates under the Council-Manager form of government. The City Council consists of five members elected at large. The Mayor is appointed by the City Council from among its members. The following table summarizes General Fund revenues, expenditures, transfers, and ending fund balances for the City of Lincoln for fiscal years 1979-80 through 1983-84. 32 City of Lincoln Summary of General Fund Revenues and Expenditures Years Ended June 30, 1980 1981 1982 1983 1984 Revenues and transfers: Property taxes $ 67,398 $111,757 $ 206,803 $227,316 $243,817 Other taxes 252,730 286,326 283,306 243,457 263,255 Licenses and permits 6,366 16,636 28,955 46,897 69,040 Fines and penalties - - 247 88 - Franchise fees - - - - 49,049 Interest 14,255 14,760 42,907 - 3,003 Other city receipts 18,026 9,117 - - - Revenue from other agencies 160,499 128,379 57,759 47,149 42,880 Charges for service 49,046 57,790 66,847 182,753 64,994 Rents and leases 150 - - - - Other cash receipts 8,955 - 7,579 70,902 28,008 Total 577,425 624,765 694,403 818,562 764,046 Expenditures and transfers: General government 399,070 298,738 - - - Public safety 199,504 350,974 - - - Public works 56,937 64,305 - - - City Council - - 35,792 39,041 44,155 City Administrator - - 60,241 44,325 57,771 City Clerk - - 52,984 39,974 44,116 City Attorney - - 47,292 27,180 38,586 City Treasurer - - 589 90 120 Engineering - - 44,112 61,583 67,844 Planning/community development - - 66,245 100,339 56,035 Police - - 384,139 310,866 381,416 Fire - - 62,371 50,622 43,641 Public works administration - - 21,527 - - Total 655,511 714,017 775,292 674,020 733,734 Transfers in - - 4,696 - 56,278 Transfers out - - (37,601) (44,672) (92,400) Excess (deficit) $(78,086) $(89,252) $(113,794) $ 99,870 $ (5,810) Fund balance $145,488 $ 56,236 $ (57,558) $ 42,312 $ 19,856 Source: City of Lincoln. �: -. t ` � � � 23 (TICACTIVE)90900A,006,037 St: 90900A Fret: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:03 Seq: 24 CITY OF BEAUMONT 'OS TR HEL CHEL Chk: 130350 172310 Output (CO) 22-Mar-85 10:07 PHA • • CITY OF LOMPOC Lompoc was incorporated on August 12, 1888, as a general law city. The Council-Administrator form of government provides for five council members, including a mayor, a mayor pro tern, and a city administrator appointed by the council. The City of Lompoc is located on 11 square miles in the northwest part of Santa Barbara County, about 150 miles northwest of Los Angeles. Lompoc is the third largest city in Santa Barbara County. Lompoc serves a primary trading area estimated at 51,000 persons and serves as the retail center for the southwest portion of the County. Santa Barbara County is an important agricultural county and over 75 percent of the world's flower seed production stems from the Lompoc Valley. The Lompoc Valley is also an important vegetable farming area. Two companies mine diatomaceous earth in the area; this production is used in filtration and as a base in cosmetics. The Valley also serves as a support city for Vandenberg Air Force Base, including the Western Test Range and SAC functions of the Air Force. The following table summarizes General Fund revenues, expenditures, transfers and ending fund balances for the City of Lompoc for fiscal years 1979-80 through 1983-84. City of Lompoc Summary of General Fund Revenues and Expenditures Years Ended June 30, 2 Years 1980 1981 1982-83 1984 • Revenues: Property taxes $ 899,977 $ 877,402 $2,302,462 $1,380,002 Sales tax 1,050,241 1,107,705 2,622,589 1,532,743 Property transfer 25,898 21,963 45,905 34,361 Room occupancy 92,885 114,471 330,867 210,846 Business licenses 98,189 111,918 248,669 121,595 Franchises 83,757 106,456 241,883 155,581 Licenses and permits 174,933 804,918 195,054 329,509 Fines, forfeitures and penalties 15,630 20,792 38,847 24,291 Revenue from other agencies 96,222 101,057 1,064,227 521,146 Revenue from use of money and property 115,807 151,106 320,248 318,188 Charges for current services 856,038 984,548 2,324,164 1,424,555 Miscellaneous 20,655 140,048 29,017 40,110 Total revenues 3,530,232 4,542,384 9,763,932 6,092,927 Expenditures: General government 1,302,696 990,795 3,236,169 1,775,288 Public safety 1,835,329 1,965,282 4,519,920 2,384,594 Public works 616,027 1,002,767 1,571,812 713,462 Parks, and recreation 373,208 430,282 968,672 533,096 Total expenditures 4,127,260 4,389,126 10,296,573 5,406,440 Excess of revenues over (under) expenditures (597,028) 153,258 (532,641) 686,487 Transfers from (to) other funds 157,969 320,348 588,805 321,581 Excess (deficiency) of revenues over uses $ (439,059) $ 473,606 $ 56,164 $ 999,068 Fund balance $1,260,709 $1,758,452 $1,843,506 $2,828,804 Source: City of Lompoc. (° 24 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Sep: 25 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 102432 122362 Output (CO) 22-Mar-85 10:38 PHA ■33 -, CITY OF OAKDALE Oakdale is a general law city incorporated in 1906 and operates under the Council/Administrator type of government. It is located approximately 15 miles northeast of the City of Modesto and 30 miles southeast of the City of Stockton. The current population is estimated to be slightly over 9,200 people. The area surrounding the City is noted for its production of livestock and poultry as well as fruits, nuts, tomatoes, and a variety of field crops. There are more than 20 manufacturing plants currently operating in or near the community. Among the leading products are poultry and food processing, chocolate products, feed, fire trucks, and lumber. Hunt-Wesson Foods operates a tomatoe canning plant in the city limits which employs about 1,500 people. The Hershey Foods Corporation also has a plant within the city limits which serves the far western states and employs approximately 800 people. Other major employers include the A. L. Gilbert Feed Company which employes 80 persons and FMC Van Pelt Fire Truck Company which employs approximately 55 persons. State Highways 108 and 120 pass through the City. Freight rail service is provided by Sierra Railroad which has reciprocal switching arrangements with Southern Pacific and Santa Fe Railroads. The following table summarizes General Fund revenues, expenditures, transfers and ending fund balances for the City of Oakdale for fiscal years 1979-80 through 1983-84. City of Oakdale Summary of General Fund Revenues and Expenditures Year Ended June 30, ! • 1980 1981 1982 1983 1984 Revenues: Property tax 5 387,199 $ 482,859 5 522,088 $ 538,632 $ 596,918 Sales tax 520,766 605,578 644,808 698,052 707,969 Property transfer 11,149 8,522 5,058 4,067 6,945 Room occupancy 9,794 10,829 11,167 12,086 15,814 Business license 48,155 49,273 38,624 47,620 48,492 Franchises 73,966 76,352 95,498 119,766 124,508 Licenses and permits 4,047 28,837 21,395 31,513 124,285 Fines, forfeitures and penalties 85,769 84,686 87,739 120,796 111,422 Revenues from other agencies 286,667 337,130 235,024 111,086 146,830 Revenues from use of money or property 100,349 111,834 54,072 26,649 48,225 Charge for current service 163,194 79,251 58,082 73,646 91,929 Miscellaneous 80,436 6,315 - - - Total revenues 1,771,491 1,881,466 1,773,554 1,783,914 2,023,337 Expenditures: General government 245,660 216,447 282,910 399,627 382,724 Public safety 905,329 886,720 1,132,795 1,066,112 1,253,463 Public works . 590,032 440,170 225,826 238,361 399,555 Parks, and recreation 170,726 200,054 242,028 181,410 196,756 Total expenditures 1,911,747 1,743,391 1,883,559 1,885,510 2,232,498 Excess of revenue over (under) expense (140,256) 138,075 (110,005) (101,596) (209,161) Transfers from other funds - - - - 373,083 Excess (deficiency) of revenues over uses S (140,256) $ 138,075 $ (110,005) 5 (101,596) 5 163,922 Fund balance $ 116,877 $ 254,952 $ 144,947 $ 43,351 $ 207,273 Source: City of Oakdale. R 01 '.4D 25 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 26 CITY OF BEAUMONT !OS TR HEL CHEL Chk: 023677 100567 Output (CO) 22-Mar-85 10:38 PHA 34 THE CITY OF ORANGE The community of Orange was founded in 1837 and incorporated in 1888. The City is a general law 1 City with a Council-Manager form of government. Every two years, the five City Council members are elected to four-year terms in alternate slates of three and two, with the Mayor being elected by the voters of the City. The Council appoints the City Manager, who heads the executive branch of government; the various departmental heads are appointed by the City Manager. The City encompasses an area of 22.6 square miles and is located in northwestern Orange County, about 32 miles southwest of downtown Los Angeles and about 94 miles north of San Diego. The City lies on a coastal plain which is bordered by the Pacific Ocean on the west and the Santa Ana Mountains on the east. The local economy is based on a broad range of activities which includes retail and wholesale trade; manufacturing; construction; and financial, professional and general services. The City is strategically situated in relation not only to Orange County's population but also to the economies to San Diego, Los Angeles, Riverside and San Bernardino Counties. Major freeways in and through the City provide consumers and employees who live far from the City of I Orange convenient access to commercial facilities, industry and recreational centers. Orange is also served by three railroads (the Southern Pacific, the Santa Fe, and the Union Pacific), by numerous truck carriers in Southern California and frequent daily bus service. Major airports in the area include John Wayne (12 miles south), Ontario International (20 miles northeast), Los Angeles International (35 miles northwest) and Long Beach (17 miles west). The following table summarizes General Fund revenues, expenditures, transfers and ending fund balances for the City of Orange for fiscal years 1979-80 through 1983-84. City of Orange Summary of Governmental Fund Revenues and Expenditures Years Ended June 30, 1980 1981 1982 1983 1984 Revenues: Property taxes $ 3,776,875 $ 4,000,599 $ 4,868,029 $ 5,326,211 $ 5,793,089 Sales tax 9,084,186 9,655,222 9,854,932 9,751,451 11,832,041 Property transfer 196,000 172,698 140,915 155,692 280,797 Room occupancy 252,939 227,162 226,680 249,363 519,669 Business licenses 446,654 488,012 504,899 525,128 • 741,265 Franchises 335,680 475,101 518,527 692,520 751,990 Licenses and permits 271,798 428,553 282,949 400,152 719,889 Fines, forfeitures and penalties813,956 912,755 977,457 1,030,612 998,101 Revenue - other agencies 7,191,516 6,521,008 5,049,896 6,016,307 5,353,896 Revenue - use of money and property 2,112,965 1,563,711 1,764,680 1,439,040 1,596,738 Charges - current services 1,959,531 2,046,599 1,984,366 2,797,047 4,292,584 Miscellaneous 387,938 555,019 2,134,515 • 598,835 254,001 Total revenues 26,830,038 27,046,439 28,307,845 28,982,358 33,134,060 Expenditures: General government 8,727,918 7,965,161 9,407,819 8,605,719 8,575,827 Public safety 10,169,297 11,224,639 12,503,815 13,338,224 13,817,020 Public works 4,940,441 5,758,735 4,839,424 5,689,733 6,625,798 Parks and recreation 2,210,975 2,654,855 2,903,738 2,805,015 2,661,800 Total expenditures $26,048,631 $27,603,390 $29,654,796 $30,438,691 $31,680,445 Excess of revenues over (under) expenditures 781,407 (556,951) (1,346,951) (1,456,333) 1,453,615 Transfers from other funds (1,730,820) 1,098,699 257,007 3,462,120 1,556,640 Excess (deficiency) of revenues over uses $ (949,413) $ 541,748 $(1,089,944) $ 2,005,787 $ 3,010,255 Fund balance $12,442,378 $12,497,460 $11,407,515 $12,966,331 $15,976,586 Source: City of Orange -\\`‘1 G 26 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 27 CITY OF BEAUMONT !OS TR HEL CHEL Chk: 045334 021776 Output (CO) 22-Mar-85 10:38 PHA • 35 s CITY OF ORLAND Orland was incorporated in 1909, as a general law city. The Council-Administrator form of government provides for five council members, including a Mayor, a Vice Mayor and a City Administrator appointed by the Council. Orland is located in Northern California, on Interstate 5, about 100 miles North of Sacramento. Orland is in an agricultural area and the primary employers in Orland deal with food processing and agricultural related services. The following table summarizes General Fund revenues, expenditures, transfers, and ending fund balances for the City of Orland for fiscal years 1979-80 through 1983-84. City of Orland Summary of General Fund Revenues and Expenditures Years Ended June 30, 1980 1981 1982 1983 1984 Revenues: Property taxes $ 217,185 S 260,479 $ 282,319 $ 275,141 $ 308,538 Other local taxes 453,425 388,679 381,065 405,539 439,772 Licenses and permits 16,244 15,269 10,598 4,817 1,687 Fines, forfeitures and penalties 23,372 18,088 19,628 15,249 15,569 Interest and rents 41,771 23,886 32,241 29,809 45,442 Revenue from other agencies 306,607 317,532 324,198 292,178 337,338 Charges for services 21,681 32,217 31,170 • 27,439 28,731 Other revenue 12,197 7,941 9,708 18,482 986 Water and sewer enterprise 135,451 182,801 - (1) - - Total revenues 1,227,933 1,246,892 1,090,927 1,068,654 1,178,063 , Expenditures: General government 211,855 108,218 123,178 108,782 120,329 Public safety 268,602 454,285 377,513 330,588 340,747 Public works 325,603 261,638 252,130 230,776 245,841 Library 119,363 145,832 159,411 146,670 150,336 Parks and recreation 226,282 181,623 191,523 126,846 131,282 Water and sewer enterprise 201,614 219,851 17,219 - - Total expenditures 1,353,319 1,371,447 1,120,974 943,662 988,535 Excess (deficiency) of revenues over expenditures . $ (125,386) $ (124,555) $ (30,047) S 124,992 S 189,528 Fund balances and reserves $ 347,980 $ 286,116 $ 256,069 $ 381,061 $ 570,589 ' (1) Enterprise accounts separated from General Fund after 1982. Source: City of Orland. • oil G 9" 27 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 28 CITY OF BEAUMONT OS TR HEL CHEL 01k: 117612 161771 Output (CO) 22-Mar-85 10:38 PHA • )36 TAX EXEMPTION In the opinion of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, Special Counsel, under existing laws, regulations, rulings and judicial decisions, the portion of each Lease Payment due under the respective Lease Agreements designated as and comprising interest and received by the Owners of the Certificates, is exempt from income taxation by the United States of America and from personal income taxation imposed by the State of California. CERTAIN LEGAL MATTERS 1 Jones Hall Hill & White,A Professional Law Corporation, San Francisco, California,Special Counsel, will render an opinion with respect to the validity and enforceability of the Lease Agreements and the Trust Agreement and as to the validity of the Certificates. Copies of such approving opinion will be available at the time of delivery of the Certificates. Certain legal matters will be passed upon for the Underwriters by Buchalter, Nemer, Fields, Chrystie & Younger, a Professional Corporation. ABSENCE OF LITIGATION There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Certificates, the Lease Agreements or the Trust Agreement or in any way contesting or affecting the validity of the foregoing or any proceedings of the Cities taken with respect to any of the foregoing. RATING Moody's Investors Service, Inc., and Standard & Poor's Corporation have assigned municipal ratings of and , respectively, to the Certificates. Each rating reflects only the view of such organization and an explanation of the significance of such ratings may be obtained from them as follows: Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007 (212) 553-0300; and Standard & Poor's Corporation, 25 Broadway, New York, New York 10004 (212) 208-8000. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agencies, if in the judgment of such rating agencies circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates. 37 AVAILABILITY OF DOCUMENTS Copies of the Lease Agreements and the Trust Agreement are available, upon request, from the Corporation, in care of Mr. Daniel B. Harrison, California Cities Financing Corporation, 1400 K Street, Suite 400, Sacramento, California 95814, telephone (916) 444-5790. UNDERWRITING The Certificates are being purchased by Merrill Lynch, Pierce, Fenner & Smith Incorporated and Stone & Youngberg (the "Underwriters"). The Underwriters have agreed to purchase the Certificates at a price of $ , plus accrued interest. The purchase agreement relating to the Certificates provides that the Underwriters will purchase all of the Certificates if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriters may offer and sell Certificates to certain dealers and others at prices lower than the offering price stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriters. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. ck- A16\7 ' 28 (TICACTIVE)90900A,006,037 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 10:34 Seq: 29 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 147616 031712 Output (CO) 22-Mar-85 10:38 PHA Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Cities and the purchasers or Owners of any of the Certificates. The execution and delivery of this Official Statement has been duly authorized by the Cities. CITY OF BEAUMONT, CALIFORNIA By: /s/ CITY OF CHULA VISTA, CALIFORNIA By: /s/ CITY OF LINCOLN, CALIFORNIA By: /s/ CITY OF LOMPOC, CALIFORNIA By: /s/ • CITY OF OAKDALE, CALIFORNIA By: /s/ CITY OF ORANGE, CALIFORNIA By: /s/ CITY OF ORLAND, CALIFORNIA By: /s/ Dated: April ..., 1985 29 (TICACTIVE)90900A,038,039 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 06:06 Seq: 1 CITY OF BEAUMONT /05 TR HEL CHEL Chk: 075233 041404 Output (OA) 22-Mar-85 09:20 PHA APPENDIX A [Form of Insurance Policy] A-1 (TICACTIVE)90900A,038,039 St: 90900A Fmt: 90900A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 22-Mar-85 06:06 Seq: 2 CITY OF BEAUMONT /OS TR HEL CHEL Chk: 147552 102244 Output (OA) 22-Mar-85 09:20 PHA 19 APPENDIX B FORM OF FINAL OPINION [Letterhead of Jones Hall Hill & White, A Professional Law Corporation] April 30, 1985 OPINION: $9,165,000 Certificates of Participation (California Cities Financing Corporation) Evidencing Proportionate Interests oIthe Owners Thereof in Lease Payments to be Made by the Cities of Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale, Orange and Orland, California, to the California Cities Financing Corporation. Members of the City Councils: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Cities of Beaumont, Chula Vista, Lincoln, Lompoc, Oakdale, Orange and Orland, California (the "Cities"), in connection with the authorization, execution and delivery by the Cities of the Lease Agree- ments, each dated as of April 1, 1985, by and between the California Cities Financing Corporation (the "Corporation") and each of the Cities (the "Lease Agreements"). We have also reviewed the executed Lease Agreements; the executed Trust Agreement, dated as of April 1, 1985, by and among , Los Angeles, California, as trustee (the "Trustee"), the Corporation and the Cities (the "Trust Agreement"); and such other information and documents as we consider necessary to render this opinion. Pursuant to the Trust Agreement, the Trustee has agreed to execute and deliver certificates of participation (the"Certificates of Participation"),evidencing proportionate interests in lease payments to be made by the Cities pursuant to the Lease Agreements (the"Lease Payments"). The obligations of the Cities to make Lease Payments under the Lease Agreements are obligations payable from any source of legally available funds of the respective Cities. Based upon the foregoing, we are of the opinion that the Lease Agreements and the Trust Agreement have been duly authorized, executed and delivered by the Cities and constitute valid and legally binding agreements of the Cities enforceable in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting the enforcement of creditors' rights, and subject to the limitations on legal remedies against cities in California, which include the limitation that judgments may not be enforced against funds held by a city which serve the public welfare and interest. We are further of the opinion that the Certificates of Participation have been validly executed and delivered by the Trustee pursuant to the Trust Agreement. We are further of the opinion that, under existing laws, regulations, rulings and judicial decisions, the portion of Lease Payments due under the Lease Agreements designated as and comprising interest and received by the owners of the Certificates of Participation, is exempt from income taxation by the United States of America, and from personal income taxation imposed by the State of California. Respectfully submitted, A Professional Law Corporation B-1 i ti. 13050-1 JHHW:WHM:mcb 03/11 /85 3120M :cmf 03/20/85 :rmb 03/21 /75 LEASE AGREEMENT CALIFORNIA CITIES FINANCING CORPORATION POOLED FINANCING ## I (CCFC I) • "-) TABLE OF CONTENTS Page SECTION 1 . 1 Definitions 2 SECTION 1 .2 Exhibits 2 SECTION 1 .3 Agreement to Lease 2 . SECTION 1 .4 Lease Payments 2 SECTION 1 .5 Notices 2 SECTION 1 .6 Terms and Conditions 2 Exhibit A - Definitions A-1 Exhibit B - Schedule of Lease Payments A-1 Exhibit C - Description of Project A-1 Exhibit D - Lease Terms and Conditions A-1 Exhibit E - Addresses for Notice Purposes Al- Exhibit F - Contracts Assigned to Corporation Al- Exhibit G - Description of Previously Acquired Portion of ProjectA-1 • (1 ) ISO\‘' n I LEASE AGREEMENT THIS AGREEMENT, dated as of the Dated Date, by and between the California Cities Financing Corporation, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California, as lessor (the "Corporation") , and the Lessee, a Political Subdivision of the State of California, duly organized and existing under the laws of the State of California (the "Lessee") ; W I T N E S S E T H: WHEREAS, the Lessee wishes to construct or acquire that certain property described in Exhibit C hereto (the "Project") and the Lessee is authorized pursuant to the laws of the State of California to enter into leasehold agreements for such purposes ; and WHEREAS, the Governing Body of the Lessee has determined that in order to accomplish such purposes it is necessary and desirable to construct or acquire the Project by leasing the same pursuant to this Agreement; and WHEREAS, the Corporation will cause to be deposited with the Trustee funds for the acquisition of the Project to be leased pursuant to this Agreement; 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 : • ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1 . 1 . Definitions . Unless the context otherwise requires, capitalized terms used herein and in the Lease Terms and Conditions have the meanings specified in Exhibit A. SECTION 1 .2. Exhibits. The following Exhibits are attached to, and by reference made a part of, this Agreement: Exhibit A: Definitions. Exhibit B: The schedule of Lease Payments to be paid by the Lessee to the Trustee, as assignee of the Corporation, showing the date and amount of each Lease Payment. Exhibit C: The description of the Project. Exhibit D: Lease Terms and Conditions. Exhibit E: Addresses for Notice Purposes. Exhibit F: Contracts Assigned to Corporation. Exhibit G: Description of Previously Acquired Portion of Project. SECTION 1 .3. Agreement to Lease. Corporation hereby agrees to lease the Project to the Lessee, and the Lessee hereby agrees to lease the Project from the Corporation. SECTION 1 .4 Lease Payments. As rental for the Project, the Lessee agrees to pay to the Corporation or its assigns, on the Due Dates, the Lease Payments, in the amounts shown on Exhibit B. SECTION 1 .5. Term of Agreement. The Term of the Agreement shall commence as of the Dated Date ## and shall end on the Termination Date, unless on such date any Certificates of Participation remain outstanding, in which case this Agreement shall remain in full force and effect while any Certificates of Participation are outstanding, or unless terminated prior thereto in accordance with Section 402 of the Lease Terms and Conditions. SECTION 1 .6. _ _:=Terms and Conditions. The parties hereto agree that this Lease Agreement is expressly subject to the provisions of the Lease Terms and Conditions attached hereto as Exhibit D, the provisions of which are herein incorporated as though fully set forth herein. 11 -2- .1 IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed in its corporate name by its duly authorized officer; and the Lessee has caused this Agreement to be executed in its name by its duly authorized officers and sealed with its corporate seal , as of the Dated Date. Attest: CALIFORNIA CITIES FINANCING CORPORATION By Secretary President (S E A L) LESSEE: Attest: By By Title City Clerk • • -3- 13050-1 JHHW:WHM:mcb 03/11 /85 3164M BDQ:rmb 03/21 /85 EXHIBIT A DEFINITIONS - CITY OF CHULA VISTA "Acquisition Costs" means, with respect to the Project, the contract price paid or to be paid to the Contractors therefor upon construction, acquisition or delivery of any portion of the Project and related equipment, in accordance with the purchase order or contract therefor, and includes reimbursement to the Lessee for Acquisition Costs paid by the Lessee prior to the date of this Agreement. Acquisition Costs include the costs of site acquisition, site preparation necessary for the installation of the Project, as well as the administrative, engineering, legal , financial and other costs incurred by the Lessee, the Corporation and the Contractors in connection with the acquisition, delivery, installation and financing by the Corporation of the Project. "Certificate of Completion" means a certificate of the Lessee Representative certifying that all equipment and other personal property constituting ## the Project has been acquired, installed and accepted by the Lessee, and that all Acquisition Costs have been paid. "Certificates of Participation" or "Certificates" means the Certificates of Participation to be executed and delivered pursuant to the Trust Agreement and which evidence a right to receive a proportionate share of Lease Payments and proceeds received on account of the Lease Agreements . "Closing Date" means the date on which the Certificates of Participation, duly executed by the Trustee, are delivered to the original purchaser thereof. "Completion Date" means September 1 , 1985. "Contractors" means the contractors or vendors from whom the Corporation or the Lessee on behalf of the Corporation has ordered or caused to be ordered or with whom the Corporation or the Lessee on behalf of the Corporation has contracted or caused to be contracted for the acquisition, installation or construction of the Project ##. "Corporation" means the California Cities Financing Corporation, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California. "Corporation -Representative" means the President, Vice President or any other officer of the Corporation designated by the Board of Directors of the Corporation as the Corporation Representative for purposes of this Agreement. Exhibit A Page 1 "Dated Date" means April 1 , 1985. "Due Dates" means January 15 and July 15, commencing September 15, 1986. "Federal Securities" means United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the full faith and credit of the United.States are pledged for the payment of principal and interest. "Governing Body" means the City Council of the Lessee. "Independent Counsel " means an attorney duly admitted to the practice of law before the highest court of the state in which such attorney maintains an office and who is not an employee of the Corporation, the Trustee or the Lessee. "Insurance and Condemnation Fund" means the fund by that name established and held by the Trustee pursuant to Section 2.9 of the Trust Terms and Conditions. "Insurance Policy" means that certain ## Municipal Bond Insurance Policy No. , issued by the Insurer guaranteeing payment of principal and interest with respect to the Certificate. "Insurer" means , and its successors and assigns. "Lease Agreement" or "Agreement" means this Lease Agreement, and any duly authorized and executed amendment hereto. "Lease Agreements" means the several Lease Agreements , each dated as of the Dated Date, between the Corporation and the Cities of Beaumont, Chula Vista, ## Lincoln, Lompoc, Oakdale, Orange and Orland, California, respectively. "Lease Payment" means any payment due from the Lessee to the Corporation under Section 1 .4 of the Lease Agreement and Section 403 of the Lease Terms and Conditions. ## "Lease Terms and Conditions" means those certain Lease Terms and Conditions attached to the Lease Agreement as Exhibit D. "Lessee" means the City of Chula Vista, California, a chartered city of the State of California, duly organized and existing under the laws of the State of California. "Lessee Representative" means the Mayor, City Manager, Assistant City Manager, Finance Director, ## or an assistant designated to any of the foregoing by the Governing Body of the Lessee to act on behalf of the Lessee under or with respect to this Agreement. Exhibit A N _� Page 2 "Lessee' s Acquisition Account" means the City of Chula Vista Acquisition Account established and held by the Trustee for the Lessee pursuant to Section 2.5 of the Trust Agreement. "Lessee' s Lease Payment Account" means the City of Chula Vista Lease Payment Account established and held by the Trustee for the Lessee pursuant to Section 2.7 of the Trust Agreement. ,r} "Lessee' s Reserve Account" means the City of Chula Vista Reserve Account established and held by the Trustee pursuant to Section 210 of the Trust Agreement. "Net Proceeds" means any insurance or condemnation proceeds paid with respect to the Project, remaining after payment therefrom of all expenses incurred in the collection thereof. "Owner" or "Certificate Owner" or "Owner of a Certificate," or any similar term, when used with respect to the Certificates , means the registered owner of any Certificate. "Payment Dates" means February 1 and August 1 , commencing February 1 , 1986. "Permitted Encumbrances" means, as of any particular time: (i ) liens for general ad valorem taxes and assessments , if any, not then delinquent, or which the Lessee may, pursuant to provisions of Article V of the Lease Terms and Conditions, permit to remain unpaid; (ii ) the Lease Agreement; and (iii ) ## the Trust Agreement. "Permitted Investments" means: (i) Federal Securities; (ii) Obligations of, or guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America; (iii) Certificates of deposit, time deposits or demand deposits with any bank or savings institution qualified as a depository of public funds in the State of California, including the Trustee or any affiliate thereof, provided that such certificates of deposit, time deposits or demand deposits, if not insured by -the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, are fully secured by Federal Securities; Exhibit A °\ Page 3 ( iv) Bank repurchase agreements with financial institutions insured by FDIC or FSLIC, or any broker-dealer with "retail customers" which falls under the Securities Investors Protection Corporation ("SIPC") jurisdiction, provided: (i ) the overcollateralization is at a level acceptable to Standard & Poor' s Corporation, ( ii ) the Trustee, or a third party acting solely as agent for the Trustee, shall have possession of such obligations, (iii ) the Trustee shall have perfected a first priority security interest in such obligations, (iv) such obligations are free and clear of claims of third parties , and (v) failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral ; and (v) Money market funds rated in the highest category by Standard & Poor' s Corporation. "Political Subdivision" means a public agency deemed to be a "political subdivision" of the State of California, as that term is used in Section 103 of the Code. "Principal Amount" means the total unpaid principal portion of the Lease Payments due under the Lease Agreement. "Project" means that certain property to be acquired from the proceeds of the Certificates deposited in the Lessee ' s Acquisition Account, as shown on Exhibit C to the Lease Agreement. "Reserve Fund" means the fund by that name established and held by the Trustee pursuant to Section 2. 10 of the Trust Agreement. "Term of the Agreement" or "Term" means the time during which the Lease Agreement is in effect, as provided for in Section 1 .5 of the Lease Agreement. "Termination Date" means August 1 , 1990. "Trust Agreement" means the Trust Agreement, dated as of the Dated Date, by and among the Trustee, the Lessees and the Corporation, and any duly authorized and executed amendment thereto. "Trustee" means the Trustee appointed under the terms of the Trust Agreement. Exhibit A Page 4 EXHIBIT B CITY OF CHULA VISTA SCHEDULE OF LEASE PAYMENTS Total Date Principal Interest Lease Payment • r�� Exhibit B EXHIBIT C DESCRIPTION OF PROJECT Exhibit C EXHIBIT E ADDRESSES FOR NOTICE If to the Lessee: City of Chula Vista 276 Fourth Avenue ga01O Chula Vista Cal ifornia30 A t t n: d3A,nj If to the Corporation: California Cities Financing Corporation 1400 K Street, Suite 400 Sacramento, California 95814 Attn: Secretary If to Trustee: First Interstate Bank of California 707 Wilshire Boulevard Los Angeles , California 90017 Attn: Corporate Trust Department If to Insurer: \\71 Exhibit E 13050-1 JHHW:WHM:mcb 03/11/85 3163M BDQ:rmb 03/21 /85 EXHIBIT D LEASE TERMS AND CONDITIONS Exhibit D \\ \ Page 1 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Definitions 13 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 201 Representations , Covenants and Warranties of the Lessee 14 SECTION 202 Representations , Covenants and Warranties of the Corporation 14 ARTICLE III DEPOSIT OF MONIES; ACQUISITION OF THE PROJECT SECTION 301 Deposit of Monies 16 SECTION 302 Acquisition of the Project 16 SECTION 303 Payment of Acquisition Costs 16 ARTICLE IV AGREEMENT TO LEASE; TERMINATION OF THE LEASE AGREEMENT; LEASE PAYMENTS; TITLE TO THE PROJECT SECTION 401 Agreement to Lease 18 SECTION 402 Termination of the Lease Agreement 18 SECTION 403 Lease Payments 19 SECTION 404 Possession and Enjoyment 20 SECTION 405 Title- to the Project 20 SECTION 406 Security Deposit 21 SECTION 407 Extraordinary Prepayment 21 Exhibit D Page 2 �� Page ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS SECTION 501 Maintenance and Taxes 22 SECTION 502 Modification of Project 22 SECTION 503 Public Liability and Property Damage Insurance 23 SECTION 504 Fire and Extended Coverage Insurance; Earthquake Insurance; Flood Insurance 23 SECTION 505 Rental Interruption Insurance 24 SECTION 506 Insurance Net Proceeds ; Form of Policies 24 SECTION 507 Advances 24 SECTION 508 Liens 25 SECTION 509 Eminent Domain 25 SECTION 510 Application of Net Proceeds . 25 SECTION 511 Abatement of Rental in the Event of Damage or Destruction 25 SECTION 512 Title Insurance 25 SECTION 513 Agreement to Pay Trustee' s Fees 25 ARTICLE VI DISCLAIMER OF WARRANTIES; ACCESS SECTION 601 Disclaimer of Warranties 26 SECTION 602 Lessee' s Right to Enforce Warranties 26 SECTION 603 Corporation Access to the Project 26 ARTICLE VII ASSIGNMENT, SUBLEASING AND INDEMNIFICATION SECTION 701 Assignment by the Corporation 27 SECTION 702 Assignment and Subleasing by the Lessee 27 SECTION 703 Release and Indemnification Covenants 27 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 801 Events of Default Defined 28 SECTION 802 Remedies on Default 28 SECTION 803 No Remedy Exclusive 29 SECTION 804 Agreement to Pay Attorneys ' Fees and Expenses 29 SECTION 805 No Additional Waiver Implied by One Waiver 29 Exhibit D Page 3 Page ARTICLE IX OPTION TO PREPAY SECTION 901 Purchase Option SECTION 902 Exercise of Option SECTION 903 Transfer of Title and Release of Corporation ' s Interest SECTION 904 Option to Prepay ARTICLE X MISCELLANEOUS SECTION 1001 Notices 30 SECTION 1002 Binding Effect 30 SECTION 1003 Severability 30 SECTION 1004 Amendments , Changes and Modifications 30 SECTION 1005 Net-net-net Lease 30 SECTION 1006 Further Assurances and Corrective Instruments 30 SECTION 1007 Execution in Counterparts 30 SECTION 1008 Applicable Law 30 SECTION 1009 Corporation and Lessee Representatives 31 SECTION 1010 Captions 31 • Exhibit D r�� Page 4 ARTICLE I DEFINITIONS Definitions. Unless the context otherwise requires , capitalized terms used herein shall have the meanings ascribed to them in Exhibit A to the. Lease Agreement. Exhibit D Page 5 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 201 . Representations , Covenants and Warranties of the Lessee. The Lessee represents , covenants and warrants to the Corporation as follows : (a) The Lessee is a duly organized and validly existing Political Subdivision ## . (b) The constitution and the laws of the State of California authorize the Lessee to enter into the Lease Agreement and the Trust Agreement and to enter into the transactions contemplated by and to carry out its obligations under each of the aforesaid Agreements , and the Lessee has duly authorized and executed each of the aforesaid Agreements in accordance with the laws of the State of California. (c) Neither the execution and delivery of the Lease Agreement or the Trust Agreement nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms , conditions or provisions of any restriction or any agreement or instrument to which the Lessee is now a party or by which the Lessee is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the Lessee, or upon the Project, except Permitted Encumbrances. SECTION 202. Representations, Covenants and Warranties of the Corporation. The Corporation represents, covenants and warrants to the Lessee as follows: (a) The Corporation is a nonprofit public benefit corporation duly organized, existing and in good standing under and by virtue of the laws of the State of California; has power to enter into the Lease Agreement ## and the Trust Agreement; is possessed of full power to own and hold real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of each of the aforesaid Agreements . (b) The Corporation will not pledge the Lease Payments or other amounts derived from the Project and from its other rights under the Lease Agreement, and will not encumber the Project, except as provided under the terms of the Lease Agreement ## and the Trust Agreement. (c) Neither the execution and delivery of the Lease Agreement ## or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms , conditions or provisions of any restriction or any agreement or Exhibit D � '�� Page 6 instrument to which the Corporation is now a party or by which the Corporation is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Corporation, or upon the Project, except Permitted Encumbrances. (d) Except as provided herein and in the Trust Agreement, the Corporation will not assign the Lease Agreement, its right to receive Lease Payments from the Lessee, or its duties and obligations under the Lease Agreement to any other person, firm or corporation so as to impair or violate the representations , covenants and warranties contained in this Section 202. ,dc\ Exhibit D Page 7 ARTICLE III DEPOSIT OF MONIES; ACQUISITION OF THE PROJECT SECTION 301 . Deposit of Monies . On the Closing Date, the Corporation shall cause to be deposited with the Trustee the amount specified in Section 2.3 of the Trust Agreement. Pursuant to the Trust Agreement, there shall be deposited in the ## Acquisition Accounts funds sufficient to pay Acquisition Costs. SECTION 302. Acquisition of the Project. The Lessee will , as agent of the Corporation, enter into purchase orders and contracts , and will supervise and provide for, or cause to be supervised and provided for, as agent for the Corporation, the complete acquisition, construction and installation of the Project. The Lessee agrees that it will cause the work under said contracts to be diligently performed after the deposit of funds with the Trustee pursuant to Section 2.3 of the Trust Agreement, and that the Project will be acquired and installed in accordance with the specifications approved by the Lessee on or prior to the Completion Date. The Lessee may change the specifications of the Project, so long as such change does not reduce the value of the Project or substantially alter the nature of the Project, and that any increase in Acquisition Costs shall not result from such change, unless the Lessee deposits in the Lessee' s Acquisition Account an amount sufficient to pay such increase. In addition, in the event that the costs of acquiring the Project are greater than the amount of money deposited in or transferred to the Lessee' s Acquisition Account, together with investment earnings thereon, the Lessee agrees to deposit into the Lessee' s Acquisition Account an amount of money necessary to pay such increased Acquisition Costs , but only from funds arising in the fiscal year in which the Lessee has entered into the Lease Agreement. The Lessee agrees that upon substantial acquisition and installation of any discrete portion of the Project, it will take possession of that portion of the Project under the terms and provisions of the Lease Agreement. The Lessee does hereby sell , assign and transfer to the Corporation all of its rights under the contracts with respect to the portions of the Project, if any, for which the Lessee has contracted prior to the Dated Date, which contracts are attached to the Lease Agreement as Exhibit F. The Lessee hereby agrees to transfer and convey to Corporation title to the portions of the Project, if any, acquired prior to the Dated Date, which portions of the Project are more particularly described in Exhibit G attached to the Lease Agreement. The parties agree that the Lease Agreement shall be deemed to be effective as to each component of the Project as it is acquired or installed, and upon acceptance of each substantial portion of the Project, the Lessee agrees that the Lease Payments shown on Exhibit B to the Lease Agreement (which Lease Payments include amounts allocable to the Lessee' s proportionate \A' Exhibit D Page 8 share of Costs of Issuance and the discount taken by the original purchaser of the Certificates) represent valid rental value for such substantial portion of the Project. SECTION 303. Payment of Acquisition Costs . Payment to the Contractors of the cost of acquiring, ## installing and constructing the Project , shall be made from the monies deposited in the Lessee ' s Acquisition Account as provided in Section 2.5 of the Trust Agreement, which shall be disbursed for this purpose in accordance and upon compliance with Section 301 of the Trust Terms and Conditions . • • Exhibit D \\L Page 9 • ARTICLE IV AGREEMENT TO LEASE; TERMINATION OF LEASE AGREEMENT; LEASE PAYMENTS; TITLE TO THE PROJECT SECTION 401 . Agreement to Lease. The Corporation hereby leases the Project to the Lessee, and the Lessee hereby leases the Project from the Corporation, upon the terms and conditions set forth ## in the Lease Agreement. SECTION 402. Termination of Lease Agreement. The Term of the Lease Agreement will terminate upon the earliest of any of the following events: (a) the payment or prepayment by the Lessee of all Lease Payments due during the Term of the Agreement; (b) the occurrence of an event of default under the Lease Agreement, and the termination of the Lease Agreement by the Corporation or its successors and assigns pursuant to Section 802(iii ) of the Lease Terms and Conditions; and (c) if the Project is taken in its entirety under the power of eminent domain or if such Project is taken in part under the power of eminent domain and the remaining portion is no longer useful for the purposes originally intended. Upon occurrence of any one of the foregoing events ## the Trustee will not make any further disbursements from the Lessee' s Acquisition Account and all amounts at the time in ## the Lessee's Acquisition Account will be transferred, as provided in the Trust Agreement, to the Lessee' s Lease Payment Account to be credited against the Lessee' s Lease Payment obligations or to the Lessee' s Redemption Account to be applied to redemption of the Certificates. SECTION 403. Lease Payments. The Lessee agrees to pay to the Corporation, or its successors or assigns, as rental for the use and possession of the Project, the Lease Payments on the Due Dates and in the amounts specified in Exhibit A to the Lease Agreement, provided that the Lessee shall receive a credit for any amounts on hand in the Lessee' s Lease Payment Account at the time any Lease Payment is due, and that at such time as the total of monies on hand in the Lessee' s Lease Payment Account and the Lessee's Reserve Account are equal to all Lease Payments remaining unpaid, such monies shall be applied by the Trustee, pursuant to Section 306(d) of the Trust Terms and Conditions, to such Lease Payments on behalf of the Lessee, and the Lessee shall not be required to make any further Lease Payments under the Lease Agreement. Exhibit D \(f\'\" Page 10 Lease Payments for each annual rental payment period during the Term of the Agreement shall constitute the total rental for said rental payment period, and shall be paid by the Lessee in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment, of the Project during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental represents the fair rental value of the Project. In making such determination, consideration has been given to the costs of acquisition, delivery, installation and financing of the Project, other obligations of the parties under the Lease Agreement, the uses and purposes which may be served by the Project and the benefits therefrom which will accrue to the Lessee and the general public. Each Lease Payment shall be paid in lawful money of the United States of America to or upon the order of the Corporation at the corporate trust office of the Trustee. Any Lease Payment accruing under the Lease Agreement which shall not be paid when due shall bear interest at the rate of ten percent (10%.) per annum from the date when the same is due under the Lease Agreement until ## paid, but in no event shall such rate exceed the legal rate of interest for such obligations. Lease Payments shall be paid from any source of legally available funds of the Lessee, and the Lessee covenants to take such action as may be necessary to include all Lease Payments due under the Lease Agreement in its annual budget, and to make the necessary annual appropriations for all such Lease Payments, which covenants of the Lessee shall be deemed to be, and shall be, ministerial duties imposed by law, and it shall be the duty of each and every public official of the Lessee 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 Lessee to carry out and perform the covenants made by the Lessee in the Lease Agreement. During the Term of the Agreement, the Lessee will furnish to the Trustee, no later than 20 days following adoption of the budget for that fiscal year, a certificate of the Lessee Representative that the Lease Payments due in that fiscal year have been included in the budget approved by the Governing Body for such fiscal year; or if no budget has been approved by August 15, the Lessee shall deliver to the Trustee ## no later than August 20 of such year, a certificate of the Lessee Representative that the Lease Payments due in that fiscal year have been appropriated by a resolution duly adopted by the Governing Body ## . To the extent that moneys are available in the Lessee' s Lease Payment Account ##, the Lessee' s Reserve Account and the Lessee' s Acquisition Account for such purpose,:- the Lessee agrees to pay Lease Payments regardless of whether or not it has acquired the Project or all or part of the Project has been damaged, destroyed or taken by eminent domain proceedings , but solely from such available moneys. SECTION 404. Possession and Enjoyment. During the Term of the Agreement, the Corporation shall provide the Lessee with quiet use and enjoyment of the Project, and the Lessee shall during such Term peaceably and Exhibit D \Q Page 11 quietly have and hold and enjoy the Project, without suit, trouble or hindrance from the Corporation, except as expressly set forth in the Lease Agreement. The Corporation will , at the request of the Lessee and at the Lessee' s cost, join in any legal action in which the Lessee 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 603 of the Lease Terms and Conditions. SECTION 405. Title to the Project. During the Term of the Agreement, title to the Project and any and all additions, replacements or modifications will be retained by the Corporation, except as provided below and except for those modifications which are added to the Project by the Lessee and which may be removed without damaging the Project. Upon receipt of title to any component of the Project for which a bill of sale may be delivered from a Contractor, the Corporation, or the Lessee on behalf of the Corporation, shall deliver to the Trustee a bill of sale to such component of the Project. The Lessee shall not have any right, title or interest in the Project or in any additions , repairs, replacements or modifications thereto except as expressly provided in the Lease Agreement. If the Lessee has paid all Lease Payments during the Term of the Agreement, or upon deposit of the security deposit as provided in Section 406 of the Lease Terms and Conditions, all right, title and interest of the Corporation in and to the Project shall be transferred to and vest in the Lessee. Additionally, if necessary, the Corporation shall authorize, execute and deliver to the Lessee a bill of sale in order to release any and all liens created under the provisions of the Lease Agreement and the Trust Agreement, and any other documents required to terminate the Lease Agreement and consummate such transfer of title and release of liens. The Corporation agrees to defend and eliminate any claims adverse to the title to the Project and to save and hold the Lessee harmless therefrom; provided that the Corporation' s obligations under this sentence shall not extend to claims arising out of actions by the Lessee or persons asserting claims under it; provided that the Lessee shall reimburse the Corporation for any costs incurred by the Corporation in defending or eliminating such claims , including reasonable attorneys' fees. SECTION 406. Security Deposit. Notwithstanding any other provision of the Lease Agreement, the Lessee may on any date secure the payment of Lease Payments by a deposit with the Trustee of: (1 ) an amount which, together with amounts on deposit in the Lessee' s Lease Payment Account and the Lessee' s Reserve Account, is-sufficient to pay all unpaid Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit B to the Lease Agreement, or (ii ) Federal Securities, together with cash, if required, in such amount as will , in the opinion of an independent certified public accountant, together with interest to accrue thereon and, if required, all or a portion of monies or Permitted Investments of such type then on deposit in the Lessee' s Lease Payment Account and Lessee' s Reserve Account, be fully sufficient to pay all \ \ Exhibit Page� D 12 unpaid Lease Payments on their respective Due Dates. In the event of a deposit pursuant to this Section, all obligations of the Lessee under the Lease Agreement and all security provided by the Lease Agreement for said obligations, shall cease and terminate, excepting only the obligation of the Lessee to make, or cause to be made, Lease Payments from the deposit made by the Lessee pursuant to this Section, and title to the Project shall vest in the Lessee on the date of said deposit automatically and without further action by the Lessee or the Corporation, provided that title shall be subject to the subsequent payment of Lease Payments from said deposit in accordance with the provisions of the Lease Agreement. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of the Lease Agreement. SECTION 407. Extraordinary Prepayment. The principal amount of Lease Payments allocable to any portion of the Project damaged or destroyed or taken under the power of eminent domain, unless such portion is repaired or replaced with Net Proceeds of insurance or condemnation as provided in Section 406 of the Trust Terms and Conditions , shall be prepaid from such Net Proceeds of insurance or condemnation ## paid to the Trustee and applied as provided in Section 305 of the Trust Terms and Conditions . • o�A� Exhibit D Page 13 ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS SECTION 501 . Maintenance and Taxes. Throughout the Term of the Agreement, 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 Lessee, and the Lessee 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 Lessee thereof. In exchange for the Lease Payments ##, the Corporation undertakes to provide only the Project, as hereinbefore more specifically set forth. The Lessee shall also pay or cause to be paid to the Corporation all taxes of any type or nature charged to the Corporation or affecting the Project or the respective interests or estates therein, including any sales tax, or affecting the amount available to the Corporation from Lease Payments received under the Lease Agreement for the retirement of the Certificates (including taxes or assessments assessed or levied by any governmental agency or district having power to levy taxes or assessments) ; provided that with respect to governmental charges that may lawfully be paid in installments over a period of years, the Lessee shall be obligated to pay only such installments as are required to be paid during the Term of the Agreement as and when the same become due. The Lessee, at the Lessee' s expense and in its name , may in good faith contest any such taxes and other charges and, in the event of any such contest, may permit the taxes or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Corporation shall notify the Lessee that, in the opinion of Independent Counsel , 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 Lessee shall promptly pay such taxes or charges or provide the Corporation with full security against any loss which may result from nonpayment, in form satisfactory to the Corporation. SECTION 502. Modification of Project. The Lessee shall , at its own expense, have the right to remodel the Project or to make additions and modifications thereto. All such additions and modifications shall thereafter comprise part of the Project and be subject to the provisions of the Lease Agreement. Such additions and modifications shall not in any way damage the Project, substantially alter its nature or cause it to be used for purposes other than those authorized under the provisions of State of California and federal law; and the Project, upon completion of any additions and modifications made pursuant to this Section, shall be of a value which is not ## less than the value of the Project immediately prior to the making of such additions or modifications. The Lessee will not permit any mechanic' s or other lien to be established or remain against the Project for labor or Exhibit D (k� Page 14 materials furnished in connection with any remodeling, additions, modifications , repairs, renewals or replacements made by the Lessee pursuant to this Section; provided that if any such lien is established and the Lessee shall first notify the Corporation of the Lessee' s intention to do so, the Lessee 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 Lessee. SECTION 503. Public Liability and Property Damage Insurance . The Lessee shall maintain or cause to be maintained, throughout the Term of the Agreement (but during the period of delivery and installation of the Project only if such insurance is not provided by the Contractors) , a standard comprehensive general insurance policy or policies in protection of the Corporation and the Lessee, and their members , officers , agents and employees. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the acquisition or operation of the Project. 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 each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy 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 or required to be carried by the Lessee, and may be maintained in the form of self-insurance by the Lessee. SECTION 504. Fire and Extended Coverage Insurance; Earthquake Insurance; Flood Insurance. The Lessee shall procure, or cause to be procured, and maintain throughout the Term of the Agreement (but during the period of delivery and installation of the Project only if such insurance is not provided by the Contractors) , insurance against loss or damage to any part of the Project by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance shall , as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft damage, vehicle damage, smoke, sprinkler damage, boiler explosion and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to 10070 of the replacement cost of the Project or the principal amount of Certificates then Outstanding relating to the Project, whichever is greater. 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 Lessee, and may be maintained in the form of self-insurance by the Lessee. Exhibit D 4,1(0 Page 15 The Lessee shall also procure, or cause to be procured, and maintained throughout the Term of the Agreement, insurance against loss or damage to any part of the Project by earthquake (except for components of the Project which are mobile, such as rolling stock) . In addition, if the Lessee is located in a flood hazard zone, the Lessee shall procure, or cause to be procured, and maintained throughout the Term of the Agreement, insurance against loss or damage to any part of the Project by flood. SECTION 505. Rental Interruption Insurance. The Lessee shall procure, and maintain throughout the Term of the Agreement, rental interruption insurance to cover loss , total or partial , of the use of any part of the Project as the result of any of the hazards covered in the insurance required by Section 504 hereof, in an amount sufficient to pay the maximum annual amount of Lease Payments due under the Lease Agreement. The Net Proceeds of such insurance shall be paid to the Trustee for deposit in the Lessee ' s Lease Payment Account and shall be credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. Such rental interruption insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the Lessee, and may be maintained in the form of self-insurance by the Lessee. SECTION 506 Insurance Net Proceeds ; Form of Policies . The policies of insurance required by Section 504 and 505 hereof shall provide that all proceeds thereunder shall be payable to the Trustee pursuant to a lender' s loss payable endorsement substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Corporation. The Net Proceeds of such insurance shall be paid to the Trustee to be applied as provided in Section 305 of the Trust Terms and Conditions or Section 505 hereof, as the case may be. All policies of insurance required by the Lease Agreement, and any statements of self-insurance, shall be in form satisfactory to the Trustee. The Lessee shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease Agreement, and shall promptly furnish or cause to be furnished evidence of such payments to the Trustee. 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 agreed to by the Trustee. The Lessee, when so requested by the Trustee ##, shall cause to be delivered to the Trustee ## annually evidence that the insurance policies required by the Lease Agreement are then in full force and effect. SECTION 507. Advances. If the Lessee shall fail to perform any of its obligations under this Article the Corporation may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money to the Lessee, and the Lessee shall be obligated to repay all such advances as soon as possible, with interest at the rate of 10% per annum from the date of the advance to the date of repayment, but in no event shall such rate exceed the legal rate of interest for such obligations. Exhibit D \N'A\ Page 16 SECTION 508. Liens. The Lessee shall not, directly or indirectly, create, incur, assume or suffer to exist any pledge, lien, charge, encumbrance or claim on or with respect to the Project, other than the respective rights of the Corporation and the Lessee as herein provided, and Permitted Encumbrances. Except as expressly provided in this Article, the Lessee 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 and when the same shall arise ## . The Lessee shall reimburse the Corporation for any expense incurred by it in order to discharge or remove any such pledge, lien, charge, encumbrance or claim. SECTION 509 Eminent Domain. If all or part of the Project is taken under the power of eminent domain, the Net Proceeds from any award resulting therefrom shall be deposited with the Trustee pursuant to Section 510(b) hereof and the Lessee Representative shall file a certificate with the Trustee as provided in Section 305 of the Trust Terms and Conditions. If the Project is taken in whole pursuant to such eminent domain proceedings or is taken in part to such extent that the remaining portion of the Project is no longer useful for the purposes originally intended, the remaining Lease Payment obligations of the Lessee will be abated in full and this Agreement shall thereupon be terminated. Otherwise, (1 ) this Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a proportionate abatement of Lease Payments to be agreed upon by the Lessee and the Corporation in order to reflect the portion of the Project available for use by the Lessee after such taking, as well as the crediting, if any, of Net Proceeds from any eminent domain award applied to Lease Payments pursuant to Section 510(b) hereof and Section 305 of the Trust Terms and Conditions . SECTION 510 Application of Net Proceeds . (a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Project by fire or other casualty shall be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to Section 2.9 of the Trust Agreement and Section 305 of the Trust Terms and Conditions. Upon such deposit the Lessee Representative shall file a certificate with the Trustee as provided in such Section and such Net Proceeds shall be applied by the Trustee as provided in such Section. (b) From Eminent Domain Award. The Net Proceeds of any eminent domain award resulting from any event described in Section 509 hereof shall be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to Section 2.9 of the Trust Agreement and Section 305 of the Trust Terms and Conditions. SECTION 511 . Abatement of Rental in the Event of Failure to Have Use and Possession of the Project. The amount of Lease Payments shall be abated, during any period during which by reason of damage or destruction (other Exhibit D 1'i,° Page 17 than by eminent domain which is provided for in Section 509 hereof) there is substantial interference with the use and possession of the Project by the Lessee. The extent of such abatement shall be agreed upon by the Lessee and the Trustee, as assignee of the Corporation, such that the resulting Lease Payments represent fair consideration for the use and possession of the portions of the Project not damaged or destroyed; provided, however , that such abatement shall not result so long as moneys in the Lessee's Lease Payment Account and the Lessee's Reserve Account and Net Proceeds of insurance and rental interruption insurance are sufficient to make Lease Payments when and as due, it being hereby declared that such moneys and Net Proceeds constitute special funds for the payment of Lease Payments . Such abatement or adjustment, if any, 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 Agreement shall continue in full force and effect and the Lessee waives any right to terminate this Agreement by virtue of any such damage and destruction. The amount of Lease Payments shall also be abated to the extent, if any, required by operation of law resulting from the Lessee' s failure to have use and possession of the Project. SECTION 512. Title Insurance. On the Closing Date , the Lessee shall deliver to the Trustee a title insurance policy insuring the Corporation fee title estate in the site relating to the Project, if any, ## in an amount equal to the total principal amount of Lease Payments due hereunder. SECTION 513. Agreement to Pay Trustee' s Fees . The Lessee agrees to pay to the Corporation the Lessee' s share of fees and expenses charged to the Corporation by the Trustee for the performance by the Trustee of its duties under the Trust Agreement, such share to be calculated according to the same proportion as the Principal Amount bears to the total principal amount of the Certificates of Participation. The Lessee shall not be obligated to pay any portion of the fees or expenses of the Trustee readily attributable to another Lessee. \ Exhibit D Page 18 ARTICLE VI DISCLAIMER OF WARRANTIES; ACCESS SECTION 601 . Disclaimer of Warranties . THE CORPORATION MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE LESSEE OF THE PROJECT OR ANY ITEM THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT OR ANY ITEM THEREOF. IN NO EVENT SHALL THE CORPORATION BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, IN CONNECTION WITH OR ARISING OUT OF THE LEASE AGREEMENT, OR THE TRUST AGREEMENT, FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR THE LESSEE'S USE OF THE PROJECT. SECTION 602. Lessee' s Right to Enforce Warranties . The Lessee shall have all rights with respect to the warranties of the Contractors with respect to the Project, and the right to enforce such warranties against the Contractors. If the Corporation is ever required or requested by the Lessee to enforce any warranty with respect to the Project on behalf of the Lessee, the Lessee shall reimburse the Corporation for any costs incurred by the Corporation in the enforcement of such warranty, including reasonable attorneys ' fees . SECTION 603. Corporation Access to the Project. The Lessee agrees that the Corporation and any Corporation Representative, and the Corporation' s successors or assigns, shall have the right at all reasonable times to examine and inspect the Project. The Lessee further agrees that the Corporation, any such Representative, and the Corporation' s successors or assigns shall have such rights of access to the Project as may be reasonably necessary to cause the proper maintenance of the Project in the event of failure by the Lessee to perform its obligations under the Lease Agreement. Exhibit D \CA Page 19 ARTICLE VII ASSIGNMENT, SUBLEASING AND INDEMNIFICATION SECTION 701 . Assignment by Corporation. The Corporation' s rights under the Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be made by the Lessee under the Lease Agreement, have been assigned to the Trustee pursuant to the Trust Agreement. SECTION 702. Assignment and Subleasing by the Lessee. The Lease Agreement may be assigned or subleased by the Lessee, provided, that any sublease or assignment shall be subject to all of the following conditions : (i ) The Lease Agreement and the obligation of the Lessee to make Lease Payments under the Lease Agreement shall remain obligations of the Lessee; and (ii ) The sublessee or assignee shall assume the obligations of the Lessee under the Lease Agreement to the extent of the interest subleased or assignment; and (iii ) The Lessee 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 or assignment; and (iv) No such sublease or assignment by the Lessee shall cause the Project to be used for a purpose other than a governmental or proprietary function authorized under the provisions of the Constitution (the charter of a city if there is a charter) and laws of the State of California; and (v) No such sublease or assignment shall cause the interest component of the Lease Payments due with respect to the Project to become subject to federal or State of California income taxes . SECTION 703. Release and Indemnification Covenants. The Lessee shall and hereby agrees to indemnify and save the Corporation harmless from and against all claims, losses and damages , including legal fees and expenses , arising out of (1 ) the use, maintenance, condition or management of, or from any work or thing done on the Project by the Lessee, (ii ) any breach or default on the part of the Lessee in the performance of any of its obligations under the Lease Agreement, (iii ) any act or negligence of the Lessee or of any of its agents, contractors , servants, employees or licensees with respect to the Project, (iv) any act or negligence of any assignee or sublessee of the Lessee, or of any agents, contractors, servants, employees or licensees of any assignee or sublessee of the Lessee with respect to the Project, or (v) the delivery, installation and acquisition of the Project or the authorization of payment of the Acquisition Costs by the Lessee. No indemnification is made by the Lessee under this Section or elsewhere in the Lease Agreement for willful misconduct, negligence, or breach of duty under The Lease Agreement by the Corporation, its officers , agents , employees, successors or assigns . Exhibit D Page 20 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 801 . Events of Default Defined. The following shall be "events of default" under the Lease Agreement and the terms "events of default" and "default" shall mean, whenever they are used in the Lease Agreement, with respect to the Project, any one or more of the following events: (1 ) Failure by the Lessee to pay any Lease Payment or other payment required to be paid under the Lease Agreement at the time specified therein. (ii ) Failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in clause (1 ) of this Section, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the Lessee by the Corporation, the Trustee, or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Corporation, the Trustee and such Owners will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Lessee within the applicable period and diligently pursued until the default is corrected. ( iii ) The filing by the Lessee of a voluntary petition in bankruptcy, or failure by the Lessee promptly to lift any execution, garnishment or attachment, or adjudication of the Lessee as a bankrupt, or assignment by the Lessee for the benefit of creditors , or the entry by the Lessee into an agreement of composition with creditors, or the • approval by a court of competent jurisdiction of a petition applicable to the Lessee in any proceedings instituted under the provisions of ## federal bankruptcy law, or under any similar acts which may hereafter be enacted. SECTION 802. Remedies on Default. Upon the occurrence and continuance of any event of default specified in Section 801 (i ) or 801 (iii ) , the Trustee, as assignee of the Corporation, shall proceed, with the consent of the Insurer or upon the occurrence of any event of default specified in Section 801 (ii ) , may proceed, with the consent of the Insurer, and upon written request of the Insurer or Owners of not less than a majority in aggregate principal amount of Certificates then outstanding shall proceed, to: (i ) Protect and enforce this Agreement by such judicial proceeding as the Corporation or its assignee shall deem most effectual , either by suit in equity or by action at law, whether for the specific performance Exhibit D \\ ' Page 21 of any covenant or agreement contained in the Lease Agreement, or in aid of the exercise of any power granted in the Lease Agreement, or to enforce any other legal or equitable right vested in the Corporation or its assignee by the Lease Agreement or by law; or (ii ) Take possession of the Project and exclude the Lessee from using it until the default is cured, holding the Lessee liable for the Lease Payments and other amounts payable by the Lessee prior to such taking of the Project under and pursuant to the Lease Agreement and the curing of such default; or (iii ) Take whatever action at law or in equity may appear necessary or desirable to enforce its rights as the owner of the Project, including termination of the Lease Agreement and the repossession and sale of the Project; provided the Trustee shall not terminate the ## Lease Agreement so long as the Insurance Policy is in effect. The rights of the Owners and Insurer hereunder are expressly subject to the limitations set forth in Sections 612 and 613 of the Trust Terms and Conditions . SECTION 803. 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 the Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Corporation to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 804. Agreement to Pay Attorneys ' Fees and Expenses . In the event either party to the Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of monies 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 805. No Additional Waiver Implied by One Waiver. In the event any covenant contained in the Lease Agreement 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 under the Lease Agreement. Ike Exhibit D w�`� Page 22 ARTICLE IX OPTION TO PURCHASE; OPTION TO PREPAY SECTION 901 Purchase Option. The Lessee shall have the option to purchase the Project on or after August 1 , 1991 , but only if it is not in default under Section 801 (i ) or (iii ) of the Lease Terms and Conditions with respect to the Project, and only in the manner provided in this Article. SECTION 902 Exercise of Option. The Lessee may exercise its option to purchase the Project on any February 1 or August 1 , commencing August 1 , 1991 , by paying a purchase price equal to the amount necessary to prepay the unpaid principal portion of Lease Payments in whole, plus premium, if any (as set forth in Section 904 hereof) , plus accrued interest on such principal portion to the applicable February 1 or August 1 set for redemption of the Certificates. Such purchase price shall be deposited by the Trustee in the Lessee' s Lease Payment Account to be applied to the redemption of Certificates pursuant to Section 512 of the Trust Terms and Conditions . The Lessee shall give the Corporation and the Trustee notice of its intention to exercise its option not less than sixty (60) days in advance of the date of exercise, and shall deposit with the Trustee on said date which is three business days or more prior to said February 1 or August 1 , an amount equal to the unpaid principal amount of Lease Payments , plus premium, if any, plus accrued interest on such principal portion of Lease Payments to such February 1 or August 1 . If the Lessee exercises its option to purchase the Project pursuant to this Section, any amount then on hand in the Lessee' s Reserve Account, the Lessee' s Lease Payment Account (excluding amounts required for payment of past due principal or interest with respect to Certificates not presented for payment) , and the Insurance and Condemnation Fund, shall be applied towards the payment of the applicable purchase price to be paid by the Lessee. If the Lessee shall have given notice to the Trustee of its intention to purchase the Project, but shall not have deposited the purchase price with the Trustee on the date specified in such notice, the Lessee shall continue to pay Lease Payments as if no such notice were given. SECTION 903 Transfer of Title and Release of Corporation ' s Interest. Upon exercise by the Lessee of its option to purchase the Project, all right, title and interest of the Corporation in and to the Project shall be transferred to the Lessee. SECTION 904 Option to Prepay. (i ) The Lessee shall have the option to prepay in whole or in part (but not in an amount of less than $20,000) the principal component of Lease Payments relating to Certificates maturing in the years identified below, on the following dates and in the following amounts , together with the premiums set forth below (to be applied against the principal amount prepaid) : v\tc Exhibit D Page 23 Prepayment Option Date Prepayment Premium August 1 , 1991 and February 1 , 1992 2% August 1 , 1992 and February 1 , 1992 1 August 1 , 1993 and thereafter 0 The Lessee shall give the Corporation and the Trustee notice of its intention to exercise its option not less than sixty (60) days in advance of the date of exercise and shall deposit with the Trustee on or prior to three (3) business days prior to said February 1 or August 1 , an amount equal to the principal component of Lease Payments being prepaid plus the applicable premium plus accrued interest to the date of redemption. In the event of the Lessee' s exercise of its option to prepay the principal component of Lease Payments, the amount of Lease Payments to be paid by the Lessee over the remaining term of the Lease Agreement shall be adjusted so as to reflect such prepayment of the principal component of Lease Payments . • (1\o Exhibit D \' Page 24 ARTICLE X MISCELLANEOUS SECTION 1001 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 when sent to the addresses shown on Exhibit E to the Lease Agreement. The Trustee, the Insurer, the Corporation and the Lessee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. SECTION 1002. Binding Effect. The Lease Agreement shall inure to the benefit of and shall be binding upon the Corporation and the Lessee and their respective successors and assigns . SECTION 1003. Severability. In the event any provision of the Lease 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 1004. Amendments , Changes and Modifications. The Lease Agreement may be amended or any of its terms modified with the written consent of the Lessee and the Corporation; provided, that no such amendment shall become effective unless approved by the Trustee. SECTION 1005. Net-net-net Lease. The Lease Agreement shall be deemed and construed to be a "net-net-net lease" and the Lessee hereby agrees that the Lease Payments shall be an absolute net return to the Corporation, free and clear of any expenses, charges or set-offs whatsoever. SECTION 1006. Further Assurances and Corrective Instruments . The Corporation and the Lessee 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 the Lease Agreement. SECTION 1007. - Execution in Counterparts . The 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 1008. Applicable Law. The Lease Agreement shall be governed by and construed in accordance with the laws of the State of California. Exhibit D Page 25 SECTION 1009. Corporation and Lessee Representatives. Whenever under the provisions of the Lease Agreement the approval of the Corporation or the Lessee is required, or the Corporation or the Lessee 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 Lessee by a Lessee Representative, and any party hereto shall be authorized to rely upon any such approval or request. . SECTION ' 1010. Captions. The captions or headings in the Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of the Lease Agreement. o' Exhibit D Page 26