HomeMy WebLinkAbout1988-06-07; City Council; 9468; Hosp Grove Debt IssueOF CARLSBAD — AGENf BILL
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DEPT. FIN
TITLE:
HOSP GROVE DEBT ISSUE
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RECOMMENDED ACTION:
Adopt Resolution No. S^~J^7 authorizing and directing execution of certain
lease financing documents and purchase agreement, and approving a preliminary
official statement and directing certain actions with respect thereto.
ITEM EXPLANATION
On May 3 , 1988 , the City Council directed staff to proceed with the issue of
long term debt to finalize the acquisition of Hosp Grove. Toward that end
Council is being asked to take two actions.
The first action will be to adopt the attached resolution authorizing or
approving the following documents:
1 . Approve Lease Agreement with the Carlsbad Public Improvement Corporation
for the lease of the Hosp Grove property.
2. Approve the Trust Agreement with Bank of California, the trustee for this
COP issue.
3 . Approve the Agency Agreement between the City and the Carlsbad Public
Improvement Corporation to allow the City to act as the agent for the
Corporation in the construction of the street and storm drains.
4 . Approve the Purchase Agreement with the underwriter setting the
underwriter's commission and maximum cost of the bond issue.
5 . Approve the preliminary Official Statement describing the issue and the
covenants made by the various parties to the transaction.
Council will then adjourn the City Council meeting and convene the first
meeting of the Carlsbad Public Improvement Corporation to take a series of
actions. A separate agenda and agenda bill has been prepared for this meeting.
This Corporation is similar in concept to the Building Authority which was
formed in the mid 1960 's to assist building this City Hall. The Corporation
acts as the issuer of debt which is then repaid through a lease agreement with
the City. The lease payments made to the Corporation are passed on to the
Certificate of Participation (COP) holders.
The Articles of Incorporation before the Council were drafted by our Bond
Council, Bill Madison of Jones Hall Hill and White, and have been reviewed by
the City Attorney.
Following these actions, the City staff and financing team will push the debt
issue along to a June 28 closing date. At that time the underwriter, Rauscher
£. Pierce Refsnes, will transfer funds to the City. On June 30 the short term
note sold last July will be paid off. The first payment of interest on the COP
will be due in February 1989 .
Page Two of ABfl
FISCAL IMPACT
The documents before the Council tonight do not set the exact interest rate on
this COP issue, therefore, the final cost of the issue is not yet known. The
pricing of the OOP's will be done at the time of the pre-closing, June 27,
1988. The underwriter's fee is set in the purchase contract at 1.5% of the
issue, or $15 for every $1,000 of bonds sold. This price was negotiated as
part of the package short term note/long terra debt underwriting agreement one
year ago. Although underwriter's fees differ on various types of debt issues,
the fee of 1.5% for this issue is not unreasonable. In addition, the
resolution sets maximum limits on interest rates and annual debt service
payments which limit the City's exposure to market changes. Should the
underwriter be unable to provide a bid at or below these limits, further
Council action would be required.
At the last Council meeting the annual debt service cost of this issue was
estimated to be close to $800,000 per year. Although the market is changing
constantly, this estimate is still realistic. (This debt service cost
represents the net cost to the City after considering interest earnings on the
debt service reserve funds held by the bank.) Recent market movements have
been in the wrong direction with rising interest rates on government bonds.
The 1988-89 Budget includes $400,000 for the payment of the first installment
on the debt service.
EXHIBITS
1. Resolution No,&&~W}authorizing and directing the execution of certain
lease financing documents and purchase agreement, and approving the
preliminary official statement and authorizing and directing certain
actions with respect thereto.
2. Lease Agreement
3. Trust Agreement
4. Agency Agreement
5. Purchase Agreement
6. Preliminary Official Statement
EXHIBIT 1
13061-03 JHHW:WHM:pch 05/13 M6700
pch 05/20/8S
pch 05/26/88
CITY OF CARLSBAD
RESOLUTION NO. 88-187
A RESOLUTION 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
RESOLVED, by the City Council of the City of Carlsbad (the "City"):
WHEREAS, the City has issued notes (the "Notes") in the principal amount of
$6,555,000 to acquire approximately 52 acres of a eucalyptus grove commonly known as
"Hosp Grove" for general municipal purposes and presently zoned open space; and
WHEREAS, the Notes mature on June 30, 1988, and the City wishes to complete
permanent financing for Hosp Grove and improvements to be made thereon; and
WHEREAS, the City and the City of Carlsbad Public Improvement Corporation
(the "Corporation") propose to enter into a lease agreement, dated as of June 1, 1988,
(the "Lease Agreement"), whereby the City will lease Hosp Grove (the "Site") to the
Corporation, and the Corporation has agreed to construct certain improvements to the
Site (the "Project"), and will lease the Project and the Site to the City, and the City will
lease the Project and the Site from the Corporation; and
WHEREAS, for the purpose of obtaining the moneys required to be deposited by it
with the Trustee to pay the Notes at maturity and to pay for financing the construction of
the Project, the Corporation proposes to assign and transfer certain of its rights under
the Lease Agreement to the Trustee, and in consideration of such assignment and the
execution of the Trust Agreement, the Trustee has agreed to execute and deliver
certificates of participation, each evidencing a fractional interest in the lease payments
made by the City under the Lease Agreement, to provide the moneys required herein to
be deposited by the Corporation;
WHEREAS, in connection therewith, it is in the public interest and for the public
benefit that the City authorize and direct execution of the Lease Agreement and certain
other financing documents in connection therewith; and
WHEREAS, pursuant to the City's authorization, Rauscher Pierce Refsnes, Inc.
(the "Underwriter") proposes to underwrite the financing and has prepared and presented
to the City a form of preliminary official statement containing information material to the
offering and sale of the certificates of participation described below (the "Preliminary
Official Statement"); and
WHEREAS, the documents below specified have been filed with the City, and the
members of the City Council, with the aid of its staff, have reviewed said documents;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1. The below-enumerated documents be and are hereby approved, and
the Mayor, the City Manager and the Finance Director are hereby separately authorized
and directed to execute said documents, with such changes, insertions and omissions as
may be approved by such official, and the City Clerk is hereby authorized and directed to
attest to such official's signature:
(a) a lease agreement, relating to the Site and the Project, between the
Corporation, as lessor, and the City, as lessee (the "Lease Agreement"), so long as
the stated term of the Lease Agreement does not extend beyond August 1, 2008,
so long as the principal amount of the Lease Agreement does not exceed
$9,000,000 and so long as the lease payments payable by the City under the Lease
Agreement in any twelve-month period, beginning on August 2 and ending on the
succeeding August 1, do not exceed $980,000;
(b) a trust agreement, by and among the Corporation, the City and The
Bank of California, National Association, San Francisco, California, as trustee (the
"Trustee"), relating to the financing and the execution and delivery of certificates
of participation evidencing the fractional interests of the owners thereof in lease
payments to be made by the City under the Lease Agreement (the "Certificates of
Participation"); and
(c) an Agency agreement, by and between the Corporation and the City,
pursuant to which the Corporation will appoint the City to act as its agent for the
purposes of the construction of the Project.
SECTION 2. A purchase agreement by and between the Underwriter and the City
relating to the purchase by the Underwriter of the Certificates of Participation, be and is
hereby approved, and the Mayor, the City Manager and the Finance Director are hereby
separately authorized and directed to execute said agreement, with such changes,
insertions and omissions as may be approved by such official, so long as the interest rate
with respect to the Certificates of Participation will not produce annual lease payments
payable under the Lease Agreement in any twelve-month period, beginning on August 2
and ending on the succeeding August 1, in excess of $980,000, so long as the principal
amount of the Certificates of Participation will not exceed $9,000,000 and so long as the
Underwriter's discount with respect to the Certificates does not exceed 1.5%.
SECTION 3. The Mayor, the City Manager, the Finance Director, or any deputy
or assistant of the City Manager designated by the City Manager, the City Clerk and
other officials of the City are hereby authorized and directed to execute such other
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agreements, documents and certificates as may be necessary to effect the purposes of this
resolution and the lease financing herein authorized.
SECTION 4. To the best of the City's knowledge, information and belief, the
Preliminary Official Statement contains no untrue statement of a material fact with
respect to the City or omits to state a material fact with respect to the City required to be
stated where necessary to make any statement made therein not misleading in the light
of the circumstances under which it was made.
SECTION 5. The Preliminary Official Statement is approved for distribution in
connection with the offering and sale of the Certificates of Participation.
SECTION 6. The Mayor, the City Manager or the Finance Director is authorized
to approve corrections and additions to the Preliminary Official Statement by supplement
or amendment thereto, or otherwise as appropriate, provided that any such corrections or
additions shall be necessary to cause the information contained therein to conform with
facts material to the Certificates of Participation, or to the proceedings of the City or such
corrections or additions are in form rather than in substance.
SECTION 7. The Mayor, the City Manager and the Finance Director are
separately authorized and directed to cause the Preliminary Official Statement to be
brought into the form of a final official statement (the "Final Official Statement") and to
execute said Final Official Statement, dated as of the date of the sale of the Certificates
of Participation, and the City Manager is authorized and directed to execute a statement
that the facts contained in the Final Official Statement, and any supplement or
amendment thereto (which shall be deemed an original part thereof for the purpose of
such statement) were, at the time of sale of the Certificates of Participation, true and
correct in all material respects and that the Final Official Statement did not, on the date
of sale of the Certificates of Participation, and does not, as of the date of delivery of the
Certificates of Participation, contain any untrue statement of a material fact with respect
to the City or omit to state material facts with respect to the City required to be stated
where necessary to make any statement made therein not misleading in the light of the
circumstances under which it was made. The Mayor, the City Manager or the Finance
Director, shall take such further actions prior to the signing of the Final Official
Statement as are deemed necessary or appropriate to verify the accuracy thereof.
SECTION 8. The Final Official Statement, when prepared, is approved for
distribution in connection with the offering and sale of the Certificates of Participation.
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I hereby certify that the foregoing resolution was duly adopted at a meeting of the
City Council of the City of Carlsbad duly held on the 7th day of June, 1988, by the
following vote:
AYES, and in favor of: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson
NOES: None
ABSENT:
City Clerk
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13061-03 JHHW:WHM:pch 05/12/PS- — M6694pch 05/20,
EXHIBIT 2
LEASE AGREEMENT
Dated as of June 1, 1988
by and between the
CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION, as Lessor
and the
CITY OF CARLSBAD, as Lessee
(HOSP GROVE PROJECT)
M6694
TABLE OF CONTENTS
AETICLE I
DEFINITIONS AND EXHIBITS
Section 1.1.
Section 1.2.
Definitions
Exhibits....
2
2
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the City
Section 2.2. Representations, Covenants and Warranties of Corporation
3
3
ARTICLE HI
DEPOSIT OF MONEYS; ACQUISITION
AND CONSTRUCTION OF THE PROJECT
Section 3.1. Deposit of Moneys ,
Section 3.2. Acquisition and Construction of Project
Section 3.3. Payment of Acquisition and Construction Costs
Section 3.4. Payment of Delivery Costs
Section 3.5. Unexpended Moneys
5
5
6
6
6
ARTICLE IV
AGREEMENT TO LEASE; TERM OF THIS
LEASE AGREEMENT; LEASE PAYMENTS
Section 4.1.
Section 4.2.
Section 4.3.
Section 4.4.
Section 4.5.
Section 4.6.
Section 4.7.
Lease
Term of Agreement...
Possession
Lease Payments
Quiet Enjoyment
Title
Additional Payments.
7
7
7
7
9
9
9
ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS
AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments 10
Section 5.2. Modification of Project and Site 10
Section 5.3. Public Liability and Property Damage Insurance 11
Section 5.4. Rental Interruption Insurance 11
Section 5.5. Title Insurance 12
Section 5.6. Insurance Net Proceeds; Form of Policies 12
Section 5.7. Advances 12
Section 5.8. Installation of City's Equipment 12
Section 5.9. Liens 13
Section 5.10. Private Business Use Limitation 13
Section 5.11. Private Loan Use Limitation 13
Section 5.12. Federal Guarantee Prohibition 13
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN;
USE OF NET PROCEEDS
Section 6.1. Eminent Domain 15
Section 6.2. Application of Net Proceeds 15
Section 6.3. Abatement of Lease Payments in the Event of Damage or
Destruction 15
ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.1. Disclaimer of Warranties 16
Section 7.2. Access to the Site and the Project 16
Section 7.3. Release and Indemnification Covenants 16
ARTICLE VIE
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by the Corporation 17
Section 8.2. Assignment and Subleasing by the City 17
Section 8.3. Amendment of this Lease Agreement 17
ARTICLE K
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined 18
Section 9.2. Remedies on Default 18
Section 9.3. No Remedy Exclusive 20
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses 20
Section 9.5. No Additional Waiver Implied by One Waiver 20
Section 9.6. Application of Proceeds 20
Section 9.7. Trustee and Certificate Owners to Exercise Rights 20
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit 21
Section 10.2. Purchase Option 21
Section 10.3. Mandatory Prepayment From Net Proceeds of Insurance or
Eminent Domain 22
Section 10.4. Credit for Amounts on Deposit 23
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices 24
Section 11.2. Binding Effect 24
Section 11.3. Severability 24
Section 11.4. Net-net-net Lease 24
Section 11.5. Further Assurances and Corrective Instruments 24
Section 11.6. Execution in Counterparts 25
Section 11.7. Applicable Law 25
Section 11.8. Corporation and City Representatives 25
Section 11.9. Captions 25
EXHIBIT B - DESCRIPTION OF THE SITE
EXHIBIT C - DESCRIPTION OF THE PROJECT
EXHIBIT D - SCHEDULE OF LEASE PAYMENTS
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease Agreement"), dated for convenience as of
June 1, 1988, by and between the CITY OF CARLSBAD PUBLIC IMPROVEMENT
CORPORATION, a nonprofit public benefit corporation organized and existing under the
laws of the State of California, as lessor (the "Corporation"), and the CITY OF
CARLSBAD, a municipal corporation and general law city organized and existing under
the laws of the State of California, as lessee (the "City");
WITNESSETH:
WHEREAS, the City has issued notes (the "Notes") in the principal amount of
$6,555,000 to acquire approximately 52 acres of a eucalyptus grove commonly known as
"Hosp Grove" for general municipal purposes and is currently zoned open space; and
WHEREAS, the Notes mature on June 30, 1988, and the City wishes to complete
permanent financing for Hosp Grove and improvements to be made thereon; and
WHEREAS, pursuant to a Lease Agreement the City will agree to lease Hosp
Grove (the "Site") to the Corporation, and the Corporation has agreed to construct certain
improvements to the Site (the "Project"), and to lease the Project and the Site to the City,
and the City will agree to lease the Project and the Site from the Corporation; and
WHEREAS, for the purpose of obtaining the moneys required to be deposited by it
with the Trustee to pay the Notes at maturity and to pay for financing the construction of
the Project, the Corporation proposes to assign and transfer certain of its rights under
the Lease Agreement to the Trustee, and in consideration of such assignment and the
execution of the Trust Agreement, the Trustee has agreed to execute and deliver
certificates of participation, each evidencing a fractional interest in the lease payments
made by the City under the Lease Agreement, to provide the moneys required herein to
be deposited by the Corporation; and
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants hereinafter contained and for other and valuable consideration, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.1. Definitions. The terms defined in Exhibit A attached hereto and by
this reference incorporated herein, as used and capitalized herein, shall, for all purposes
of this Lease Agreement, have the meanings ascribed to them in said Exhibit A unless
the context clearly requires some other meaning.
Section 1.2. Exhibits. The following exhibits are attached to, and by this
reference made a part of, this Lease Agreement:
Exhibit A: Definitions.
Exhibit B: The description of the real property constituting the Site.
Exhibit C: The description of the Project.
Exhibit D: The schedule of Lease Payments to be paid by the City
hereunder with respect to the Site and the Project, showing the
date and amount of each such Lease Payment.
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ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Corporation as follows:
(a) Due Organization and Existence. The City is a municipal corporation and
general law city duly organized and existing under the laws of the State.
(b) Authorization. The laws of the State authorize the City to enter into this
Lease Agreement, the Agency Agreement and the Trust Agreement and to enter into the
transactions contemplated by and to carry out its obligations under all of the aforesaid
agreements, and the City has duly authorized and executed all of the aforesaid
agreements.
(c) No Violations. Neither the execution and delivery of this Lease Agreement,
the Agency 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
City is now a party or by which the City is bound, or constitutes a default under any of
the foregoing, or results in the creation or imposition of any lien, charge or encumbrances
whatsoever upon any of the property or assets of the City, or upon the Site or the Project,
except Permitted Encumbrances.
(d) Execution and Delivery. The City has duly authorized and executed this
Lease Agreement in accordance with the laws of the State.
Section 2.2. Representations, Covenants and Warranties of Corporation. The
Corporation represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence. The Corporation is a nonprofit public benefit
corporation duly organized and existing under and by virtue of the laws of the State; has
power to enter into this Lease Agreement, the Agency Agreement, the Assignment
Agreement and the Trust Agreement; is possessed of full power to own and hold, improve
and equip real and personal property, and to lease and sell the same; and has duly
authorized the execution and delivery of all of the aforesaid agreements.
(b) No Encumbrances. The Corporation will not pledge the Lease Payments or
other amounts derived from the Project or the Site and from its other rights under this
Lease Agreement, and will not mortgage or encumber the Project or the Site, except as
provided under the terms of this Lease Agreement and the Trust Agreement.
(c) No Violations. Neither the execution and delivery of this Lease Agreement,
the Agency Agreement, the Assignment Agreement or the Trust Agreement, nor the
fulfillment of or compliance with the terms and conditions hereof or thereof, nor the
consummation of the transactions contemplated hereby or thereby, conflicts with or
results in a breach of the terms, conditions or provisions of any restriction or any
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agreement or instrument to which the Corporation is now a party or by which the
Corporation is bound, or constitutes a default under any of the foregoing, or results in the
creation or imposition of any lien, charge or encumbrance whatsoever upon any of the
property or assets of the Corporation, or upon the Project or the Site, except Permitted
Encumbrances.
(d) No Assignments. Except as provided herein, the Corporation will not assign
this Lease Agreement, its right to receive Lease Payments from the City, or its duties and
obligations hereunder to any other person, firm or corporation so as to impair or violate
the representations, covenants and warranties contained in this Section 2.2.
(e) Execution and Delivery. The Corporation has duly authorized and executed
this Lease Agreement in accordance with the laws of the State.
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ARTICLE m
DEPOSIT OF MONEYS; ACQUISITION
AND CONSTRUCTION OF THE PROJECT
Section 3.1. Deposit of Moneys. On the Closing Date, the Corporation shall cause
to be deposited with the Trustee the proceeds of sale of the Certificates, including accrued
interest. Pursuant to Section 2.07 of the Trust Agreement, the Reserve Requirement
shall be deposited with the Trustee in the Reserve Fund, a portion of the Lease Payments
payable by the City hereunder from June 1, 1988 to June 28, 1988, shall be deposited
with the Trustee in the Lease Payment Fund, an amount necessary to pay the principal
of and interest on the Notes at maturity shall be deposited in the Escrow Fund, amounts
estimated to be required to pay Delivery Costs shall be deposited in the Delivery Costs
Fund, and the remaining balance of said amount shall be deposited in the Acquisition
and Construction Fund.
Section 3.2. Acquisition and Construction of Project. The Corporation agrees to
acquire and construct the Project pursuant to the plans and specifications after the same
are submitted to and approved by the City. The Corporation shall appoint the City as- its
£gent for the purposes of acquisition and construction of the Project and in furtherance
•fhereof the Corporation and the City have entered into the Agency Agreement. The City,
as agent of the Corporation, shall cause the acquisition and construction of the street and
storm drain improvements, to be performed diligently to the end that the Project will be
'substantially completed in accordance with the aforesaid plans and specifications on or
prior to the Completion Date. The City 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 and Construction Costs shall
qttot result from such change, unless the City deposits in the Acquisition and Construction
'Fund an amount sufficient to pay such increase. In addition, in the event that the costs
of constructing, acquiring, delivering and installing the Project are greater than the
amount of money deposited in or transferred to the Acquisition and Construction Fund,
together with investment earnings thereon, the City agrees to deposit into the Acquisition
and Construction Fund an amount of money necessary to pay such increased Acquisition
and Construction Costs, but only from funds arising in the fiscal year in which the City
has entered into this Lease Agreement. The City agrees that upon substantial
completion of any portion of the Project it will take possession of that portion of the
Project under the terms and provisions of this Lease Agreement. No changes shall be
made in such plans and specifications unless such changes are approved in writing by the
City.
Upon completion of acquisition and construction of the Project, the City shall
deliver to the Trustee, as assignee of the Corporation, a Certificate of Completion thereof
executed by a City Representative.
If the (Corporation, for any reason whatsoever, cannot deliver possession of the
completed Project to the City by the Completion Date, this Lease Agreement shall not be
void or voidable, nor shall the Corporation be liable to the City for any loss or damage
resulting therefrom; but in such event the remaining Lease Payments pertaining to the
Project shall be abated, in the proportion that the Acquisition and Construction Cost of
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the portion of the Project not available for use by the City bears to the total Acquisition
and Construction Costs, with respect to the period between the Completion Date, and the
time when the Corporation is able to use such portion of the Project.
Section 3.3. Payment of Acquisition and Construction Costs. Payment for the
acquisition and construction of the Project, as well as all other Acquisition and
Construction Costs, shall be made from the moneys deposited in the Acquisition and
Construction Fund as provided in the Trust Agreement, which moneys shall be disbursed
for such purpose in accordance and upon compliance with Section 3.02 of the Trust
Agreement.
Section 3.4. Payment of Delivery Costs. Payment of Delivery Costs shall be made
from the moneys deposited with the Trustee in the Delivery Costs Fund, which moneys
shall be disbursed for such purpose in accordance and upon compliance with Section 3.04
of the Trust Agreement.
Section 3.5. Unexpended Moneys. The Corporation and the City acknowledge that
the Acquisition and Construction Fund and the Delivery Costs Fund have been created
for the benefit of the City. All unexpended moneys remaining in the Acquisition and
Construction Fund and not required for payment of Acquisition and Construction Costs
shall, on the Completion Date be transferred by the Trustee to the Lease Payment Fund
and credited to the Lease Payments as the same shall become due and payable.
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ARTICLE IV
AGREEMENT TO LEASE; TERM OF THIS
LEASE AGREEMENT; LEASE PAYMENTS
Section 4.1. Lease. The City hereby leases the Site to the Corporation, and the
Corporation hereby leases the Project and the Site back to the City, and the City hereby
leases the Project and the Site from the Corporation, upon the terms and conditions set
forth in this Lease Agreement.
Section 4.2. Term of Agreement. The Term of the Lease Agreement shall
commence on the date of recordation hereof, and shall end on August 1, 2008, unless
such term is extended as hereinafter provided. If on August 1, 2008, the Trust
Agreement shall not be discharged by its terms, or if the Lease Payments payable
hereunder shall have been abated at any time and for any reason, then the Term of the
Lease Agreement shall be extended until there has been deposited with the Trustee an
amount sufficient to pay obligations due under the Lease Agreement, but in no event
shall the Term of the Lease Agreement extend beyond August 1^ 2018. If prior to August
1, 2008, the Trust Agreement shall be discharged by its terms, the Term of the Lease
Agreement shall thereupon end.
Section 4.3. Possession. The City has taken possession of the Site and agrees to
take possession of the Project on the Completion Date, and the first Lease Payment shall
be due on January 15, 1989.
Section 4.4. Lease Payments.
(a) Obligation to Pay. Subject to the provisions of Articles VI and X hereof, the
City agrees to pay to the Corporation, its successors and assigns, as rental for the use
and occupancy of the Project and the Site during each Rental Period, the Lease Payments
(denominated into components of principal and interest) for the Project and the Site in
the respective amounts specified in Exhibit D hereto, to be due and payable on the
respective Lease Payment Dates specified in Exhibit D hereto. Any amount held in the
Lease Payment Fund on any Lease Payment Date (other than amounts resulting from the
prepayment of the Lease Payments in part but not in whole pursuant to Article X hereof
and other than amounts required for payment of past due principal or interest
represented by any Certificates not presented for payment) shall be credited towards the
Lease Payment then due and payable; and no Lease Payment need be made on any Lease
Payment Date if the amounts then held in the Lease Payment Fund are at least equal to
the Lease Payment then required to be paid. The Lease Payments for the Project and the
Site payable in any Rental Period shall be for the use of the Project and the Site for such
Rental Period.
(b) Effect of Prepayment. In the event that the City prepays all remaining Lease
Payments in full pursuant to Article X hereof, the City's obligations under this Lease
Agreement shall thereupon cease and terminate, including but not limited to the City's
obligation to pay Lease Payments under this Section 4.4; subject however, to the
provisions of Section 10.1 hereof in the case of prepayment by application of a security
deposit. In the event that the City prepays the Lease Payments in part but not in whole
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pursuant to Section 10.2 hereof, pursuant to Section 10.3 hereof as a result of any
insurance or condemnation award with respect to any portion of the Site or the Project,
or pursuant to Section 10.4 hereof as a result of excess funds in the Acquisition and
Construction Fund, such prepayment shall be credited entirely towards the prepayment
of the Lease Payments as follows: (i) the principal components of each remaining such
Lease Payments shall be reduced on a pro rata basis in integral multiples of $5,000 (in
inverse order of payment date in the case of a prepayment pursuant to Section 10.4
hereof); and (ii) the interest component of each remaining such Lease Payments shall be
reduced by the aggregate corresponding amount of interest which would otherwise be
payable with respect to the Certificates thereby redeemed pursuant to Sections 4.01(a),
(b) or (c), as the case may be, of the Trust Agreement.
(c) Rate on Overdue Payments. In the event the City should fail to make any of
the payments required in this Section 4.4, the payment in default shall continue as an
obligation of the City until the amount in default shall have been fully paid, and the City
agrees to pay the same with interest thereon, to the extent permitted by law, from the
date of default to the date of payment at the rate of twelve percent (12%) per annum.
Such interest, if received, shall be deposited in the Lease Payment Fund.
(d) Fair Rental Value. The Lease Payments for the Project and the Site for each
Rental Period shall constitute the total rental for the Project and the Site for each Rental
Period and shall be paid by the City in each Rental Period for and in consideration of the
right of the use and occupancy of, and the continued quiet use and enjoyment of, the
Project and the Site during each Rental Period. The parties hereto have agreed and
determined that the total Lease Payments for the Project and the Site represent the fair
rental value of the Project and the Site. In making such determination, consideration has
been given to the obligations of the parties under the Lease Agreement, the uses and
purposes which may be served by the Project and the Site and the benefits therefrom
which will accrue to the City and the general public.
«;
(e) Budget and Appropriation. The City covenants to take such action as may be
necessary to include all Lease Payments due hereunder in each of its budgets during the
Term of this Lease Agreement and to make the necessary annual appropriations for all
such Lease Payments. The covenants on the part of the City herein contained shall be
deemed to be and shall be construed to be duties imposed by law and it shall be the duty
of each and every public official of the City to take such action and do such things as are
required by law in the performance of the official duty of such officials to enable the City
to carry out and perform the covenants and agreements in this Lease Agreement agreed
to be carried out and performed by the City.
(f) Assignment. The City understands and agrees that all Lease Payments have
been assigned by the Corporation to the Trustee in trust, pursuant to the Assignment
Agreement, for the benefit of the Owners of the Certificates, and the City hereby assents
to such assignment. The Corporation hereby directs the City, and the City hereby agrees
to pay to the Trustee at the Principal Corporate Trust Office of the Trustee, all payments
payable by the City pursuant to this Section 4.4 and all amounts payable by the City
pursuant to Article X hereof.
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Section 4.5. Quiet Enjoyment. During the Term of the Lease Agreement, the
Corporation shall provide the City with quiet use and enjoyment of the Project and the
Site, and the City shall, during such Term, peaceably and quietly have and hold and
enjoy the Project and the Site without suit, trouble or hindrance from the Corporation,
except as expressly set forth in this Lease Agreement. The Corporation will, at the
request of the City and at the City's cost, join in any legal action in which the City
asserts its right to such possession and enjoyment to the extent the Corporation may
lawfully do so. Notwithstanding the foregoing, the Corporation shall have the right to
inspect the Project and the Site as provided in Section 7.2. hereof.
Section 4.6. Title. During the Term of the Lease Agreement, the Corporation
shall hold fee title to the Project and any and all additions which comprise fixtures,
repairs, replacements or modifications to the Project or the Site, except for those fixtures,
repairs, replacements or modifications which are added to the Project or the Site by the
City at its own expense and which may be removed without damaging the Project and
except for any items added to the Project or the Site by the City pursuant to Section 5.9
hereof.
If the City prepays the Lease Payments in full pursuant to Article X hereof or
makes the security deposit permitted by Section 10.1 hereof, or pays all Lease Paymentstaring the Term of the Lease Agreement as the same become due and payable, all right,
tie and interest of the Corporation in and to the Project and the Site shall be
transferred to and vested in the City. The Corporation agrees to take any and all steps
and execute and record any and all documents reasonably required by the City to
consummate any such transfer of title.
a-V
I Section 4.7. Additional Payments. In addition to the Lease Payments, the City
§hall pay when due all costs and expenses incurred by the Corporation to comply with
the provisions of the Trust Agreement, including without limitation all Delivery Costs (to
file extent not paid from amounts on deposit in the Delivery Costs Fund), compensation
due to the Trustee and all costs and expenses of auditors, engineers and accountants.
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ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS
AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the
Term of this Lease Agreement, as part of the consideration for the rental of the Project
and the Site, all improvement, repair and maintenance of the Project and the Site shall
be the responsibility of the City and the City shall pay for or otherwise arrange for the
payment of all utility services, if any, supplied to the Project and the Site which may
include, without limitation, power, gas, telephone, light, heating, water and all other
utility services, and shall pay for or otherwise arrange for the payment of the cost of the
repair and replacement of the Project and the Site resulting from ordinary wear and tear
or want of care on the part of the City or any assignee or sublessee thereof. In exchange
for the Lease Payments herein provided, the Corporation agrees to provide only the
Project and the Site, as hereinbefore more specifically set forth. The City waives the
benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such
waiver shall not limit any of the rights of the City under the terms of this Lease
Agreement.
The City shall also pay or cause to be paid all taxes and assessments of any type
or nature, if any, charged to the Corporation or the City affecting the Project and the Site
or the respective interests or estates therein; provided that with respect to special
assessments or other governmental charges that may lawfully be paid in installments
over a period of years, the City shall be obligated to pay only such installments as are
required to be paid during the Term of the Lease Agreement as and when the same
become due.
~- The City may, at the City's expense and in its name, in good faith contest any
such taxes, assessments, utility and other charges and, in the event of any such contest,
may permit the taxes, assessments or other charges so contested to remain unpaid during
the period of such contest and any appeal therefrom unless the Corporation shall notify
the City that, in the opinion of Independent Counsel, by nonpayment of any such items,
the interest of the Corporation in the Project and the Site will be materially endangered
or the Project or any part thereof will be subject to loss or forfeiture, in which event the
City shall promptly pay such taxes, assessments or charges or provide the Corporation
with full security against any loss which may result from nonpayment, in form
satisfactory to the Corporation and the Trustee.
Section 5.2. Modification of Project and Site. The City shall, at its own expense,
have the right to remodel the Project and the Site or to make additions, modifications
and improvements to the Project and the Site. All additions, modifications and
improvements to the Project, but not any additional buildings or improvements, shall
thereafter comprise part of such Project and Site and be subject to the provisions of this
Lease Agreement. Such additions, modifications and improvements shall not in any way
damage the Project and the Site or cause them to be used for purposes other than those
authorized under the provisions of State and federal law; and the Project and the Site,
upon completion of any additions, modifications and improvements made thereto
pursuant to this Section 5.2, shall be of a value which is not substantially less than the
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value of the Project and the Site immediately prior to the making of such additions,
modifications and improvements. The City will not permit any mechanic's or other lien to
be established or remain against the Project or the Site for labor or materials furnished in
connection with any remodeling, additions, modifications, improvements, repairs,
renewals or replacements made by the City pursuant to this Section 5.2; provided that if
any such lien is established and the City shall first notify or cause to be notified the
Corporation of the City's intention to do so, the City may in good faith contest any lien
filed or established against the Project or the Site, and hi such event may permit the
items so contested to remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom and shall provide the Corporation with full security
against any loss or forfeiture which might arise from the nonpayment of any such item, in
form satisfactory to the Corporation. The Corporation will cooperate fully in any such
contest, upon the request and at the expense of the City.
Section 5.3. Public Liability and Property Damage Insurance. The City shall
maintain or cause to be maintained, throughout the Term of the Lease Agreement during
the time the Project is under construction or is completed (but during the period of
construction of the Project only if such insurance is not provided by a Contractor),
insurance policies, including a standard comprehensive genferal insurance policy or
policies in protection of the City, the Corporation and the Trustee, including their
respective 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 construction or operation of the Project and the Site. Said policy or policies shall
provide coverage hi 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
jiff a single limit policy in the amount of $3,000,000 covering all such risks. Such liability
insurance may be maintained as part of or in conjunction with any other liability
insurance coverage carried by the City, and may be maintained in the form of self-
insurance by the City. The Net Proceeds of such liability insurance shall be applied
toward extinguishment or satisfaction of the liability with respect to which the insurance
proceeds shall have been paid.
Section 5.4. Rental Interruption Insurance. The City shall procure, and maintain
through the Term of the Lease Agreement during the time the Project is under
construction or is completed, rental interruption or use and occupancy insurance to cover
loss, total or partial, of the use of any structures constituting any part of the Project
during the Term of the Lease Agreement as a result of any earthquake or earth
movement, in an amount at least equal to Lease Payments attributable to the Project for
a period of eighteen months. The Net Proceeds of such insurance shall be paid to the
Trustee and deposited hi the Lease Payment Fund, and shall be credited towards the
payment of the Lease Payments in the order in which such Lease Payments come due
and payable.
The City shall be permitted to self-insure for rental interruption or use and
occupancy insurance required above, so long as:
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(1) the City segregates within its funds an amount designated as a reserve for
such loss; and
(2) the City's liability under such self-insurance is limited to amounts on hand in
such segregated reserve; and
(3) the combined coverage under such self-insurance program and any other
rental interruption or use and occupancy insurance are equal to the miniumum insurance
coverage indicated above.
Section 5.5. Title Insurance. The City shall provide, at its own expense, on or
before the Closing Date, a CLTA title insurance policy in the amount of not less than
dollars ($ ), insuring the
City's leasehold estate in the Project and the Site, subject only to Permitted
Encumbrances. All Net Proceeds received under said policy shall be deposited with the
Trustee in the Lease Payment Fund and shall be credited towards the prepayment of the
remaining Lease Payments pursuant to Section 10.3 hereof.
Section 5.6. Insurance Net Proceeds; Form of Policies. The policy of insurance
required by Section 5.4 hereof shall provide that all proceeds thereunder shall be payable
to the Trustee and applied as provided in Section 6.2 hereof. On or before July 1 of each
year, the City shall certify to the Trustee that all policies of insurance and any
statements of self-insurance are in conformance with the requirements of this Lease
Agreement. The City shall have the adequacy of any insurance reserves reviewed at
least annually by the City's risk manager or an independent insurance consultant and
shall maintain reserves in accordance therewith. The City shall pay or cause to be paid
when due the premiums for all insurance policies required by this Lease Agreement. 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 or adequacy of any
insurance herein required and shall be fully protected in accepting payment on account of
such insurance or any adjustment, compromise or settlement of any loss agreed to by the
Trustee.
Section 5.7. Advances. If the City shall fail to perform any of its obligations
under this Article V 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, and the
City shall be obligated to repay all such advances as soon as possible, with interest at the
rate of twelve percent (12%) per annum from the date of the advance to the date of
repayment.
Section 5.8. Installation of City's Equipment. The City may at any time and from
time to time, in its sole discretion and at its own expense, install or permit to be installed
items of equipment or other personal property in or upon any portion of the Project and
the Site. All such items shall remain the sole property of the City, in which neither the
Corporation nor the Trustee shall have any interest, and may be modified or removed by
the City at any time provided that the City shall repair and restore any and all damage
to the Project or the Site resulting from the installation, modification or removal of any
such items. Nothing in this Lease Agreement shall prevent the City from purchasing or
leasing items to be installed pursuant to this Section 5.8 under a lease or conditional sale
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agreement, or subject to a vendor's lien or security agreement, as security for the unpaid
portion of the purchase price thereof, provided that no such lien or security interest shall
attach to any part of the Project or the Site.
Section 5.9. Liens. The City shall not, directly or indirectly, create, incur, assume
or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with
respect to the Project or the Site, other than the respective rights of the Corporation and
the City as provided herein and Permitted Encumbrances. Except as expressly provided
in this Article V, the City shall promptly, at its own expense, take such action as may be
necessary to duly discharge or remove any such mortgage, pledge, lien, charge,
encumbrance or claim, for which it is responsible, if the same shall arise at any time.
The City shall reimburse the Corporation for any expense incurred by it in order to
discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim.
Section 5.10. Private Business Use Limitation. The City shall assure that (i) not
in excess of ten percent (10%) of the Net Proceeds of the Certificates is used for Private
Business Use if, in addition, the payment of more than ten percent (10%) of the principal
or ten percent (10%) of the interest components of Lease Payments due during the Term
of the Lease Agreement is, under the terms of this Lease Agreement or any underlying
arrangement, directly or indirectly, secured by any interest in property used or to be used
for a Private Business Use or in payments in respect of property used or to be used for a
Private Business Use or is to be derived from payments, whether or not to the City, in
respect of property or borrowed money used or to be used for a Private Business Use; and
(ii) and that, in the event that both (A) in excess of five percent (5%) of the Net Proceeds
of the Certificates are used for a Private Business Use, and (B) an amount in excess of
five percent (5%) of the principal or five percent (5%) of the interest components of Lease
Payments due during the Term of the Lease Agreement is, under the terms of this Lease
Agreement or any underlying arrangement, directly or indirectly, secured by any interest
|n property used or to be used for said Private Business Use or in payments in respect of
property used or to be used for said Private Business Use or is to be derived from
payments, whether or not to the City, in respect of property or borrowed money used or
to be used for said Private Business Use, then said excess over said five percent (5%) of
Net Proceeds of the Certificates used for a Private Business, Use shall be used for a
Private Business Use related to the governmental use of the Project.
Section 5.11. Private Loan Use Limitation. The City shall assure that not hi
excess of five percent (5%) of the Net Proceeds of the Certificates is used, directly or
indirectly, to make or finance a loan (other than loans constituting Nonpurpose
Obligations or assessments) to persons other than state or local government units.
Section 5.12. Federal Guarantee Prohibition. The City shall not take any action
or permit or suffer any action to be taken if the result of the same would be to cause the
Lease Payments to be "federally guaranteed" within the meaning of section 149(b) of the
Code and Regulations promulgated thereunder.
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ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN;
USE OF NET PROCEEDS
Section 6.1. Eminent Domain. If all of the Project and the Site shall be taken
permanently under the power of eminent domain or sold to a government threatening to
exercise the power of eminent domain, the Term of this Lease Agreement shall cease as of
the day possession shall be so taken. If less than all of the Project and the Site shall be
taken permanently, or if all of the Project or the Site or any part thereof shall be taken
temporarily under the power of eminent domain, (1) this Lease 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 partial
abatement of Lease Payments as a result of the application of the Net Proceeds of any
eminent domain award to the prepayment of the Lease Payments hereunder, in an
amount to be agreed upon by the City and the Corporation such that the resulting Lease
Payments represent fair consideration for the use and occupancy of the remaining usable
portion of the Project and the Site.
Section 6.2. Application of Net Proceeds.
(a) From Insurance Award. The Net Proceeds of any insurance award resulting
from any damage to or destruction of any portion of the Project by fire or other casualty
shall be paid by the City to the Trustee, as assignee of the Corporation under the
Assignment Agreement, and deposited in the Insurance and Condemnation Fund by the
Trustee and applied as set forth in Section 7.01 of the Trust Agreement.
(b) From Eminent Domain Award. The Net Proceeds of any eminent domain
award resulting from any event described in Section 6.1 hereof shall be paid by the City
to the Trustee, as assignee of the Corporation under the Assignment Agreement, and
deposited in the Insurance and Condemnation Fund and applied as set forth in Section
7.02 of the Trust Agreement.
Section 6.3. Abatement of Lease Payments in the Event of Damage or
Destruction. The amount of Lease Payments shall be abated, during any period in which
by reason of damage or destruction (other than by eminent domain which is hereinbefore
provided for) there is substantial interference with the use and occupancy by the City of
the Project (other than any portions of the Project described in Section 5.2 hereof) or the
Site or any portion thereof. The amount of such abatement shall be agreed upon by the
City and the Corporation such that the resulting Lease Payments represent fair
consideration for the use and occupancy of the portions of the Project and the Site not
damaged or destroyed. Such abatement shall continue for the period commencing with
such damage or destruction and ending with the substantial completion of the work of
repair or reconstruction. In the event of any such damage or destruction, this Lease
Agreement shall continue in full force and effect and the City waives any right to
terminate this Lease Agreement by virtue of any such damage and destruction.
Notwithstanding the foregoing, there shall be no abatement of Lease Payments under
this Section 6.3 to the extent that the proceeds of rental interruption insurance or
amounts in the Reserve Fund are available to pay Lease Payments which would
otherwise be abated under this Section 6.3, it being hereby declared that such proceeds
and amounts constitute special funds for the payment of the Lease Payments.
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ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.1. Disclaimer of Warranties. The Corporation makes no warranty or
representation, either express or implied, as to the value, design, condition,
merchantibility or fitness for any particular purpose or fitness for the use contemplated
by the City of the Project or the Site, or any other representation or warranty with
respect to the Project or the Site. In no event shall the Corporation be liable for
incidental, indirect, special or consequential damages in connection with or arising out of
this Lease Agreement, the Agency Agreement or the Trust Agreement for the existence,
furnishing, functioning or the City's use of the Project or the Site.
Section 7.2. Access to the Site and the Project. The City agrees that the
Corporation and any Corporation Representative, and the Corporation's successors or
assigns, shall have the right at all reasonable times to enter upon and to examine and
inspect the Project and the Site. The City further agrees that the Corporation, any
Corporation Representative, and the Corporation's successors pr assigns shall have such
rights of access to the Project and the Site as may be reasonably necessary to cause the
|proper maintenance of the Project and the Site in the event of failure by the City to
perform its obligations hereunder.
Section 7.3. Release and Indemnification Covenants. The City shall and hereby
agrees to indemnify and save the Corporation and its officers, agents, successors and
I assigns harmless from and against all claims, losses and damages, including legal fees
:>and expenses, arising out of (i) the use, maintenance, condition or management of, or
from any work or thing done on the Project or the Site by the City, (ii) any breach or
^default on the part of the City in the performance of any of its obligations under this
|Lease Agreement, (iii) any act or negligence of the City or of any of its agents,
contractors, servants, employees or licensees with respect to the Project or the Site, (iv)
any act or negligence of any sublessee of the City with respect to the Project or the Site,
or (v) the acquisition and construction of the Project or the authorization of payment of
the Acquisition and Construction Costs and Delivery Costs by the Corporation. No
indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for
willful misconduct, negligence, or breach of duty under this Lease Agreement by the
Corporation, its officers, agents, employees, successors or assigns.
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ARTICLE
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by the Corporation. The Corporation's rights under this
Lease Agreement, including the right to receive and enforce payment of the Lease
Payments to be made by the City under this Lease Agreement have been assigned to the
Trustee pursuant to the Assignment Agreement.
Section 8.2. Assignment and Subleasing by the City. This Lease Agreement may
not be assigned by the City. The City may sublease the Project and the Site or any
portion thereof, but only with the written consent of the Corporation and subject to all of
the following conditions:
(i) This Lease Agreement and 'the obligation of the City to make Lease Payments
hereunder shall remain obligations of the City; and
(ii) The City shall, within thirty (30) days after the delivery thereof, furnish or
cause to be furnished to the Corporation and the Trustee a true and complete copy of
such sublease; and
(iii) No such sublease by the City shall cause the Project or the Site to be used for
a purpose other than as may be authorized under the provisions of the Constitution and
laws of the State; and
(iv) The City shall furnish the Corporation and the Trustee with a written opinion
of nationally recognized bond counsel, which shall be an Independent Counsel, stating
that such sublease does not cause the interest components of the Lease Payments to
become subject to federal income taxes or State personal income taxes.
Section 8.3. Amendment of this Lease Agreement. Without the prior written
consent of the Trustee, the City will not alter, modify or cancel, or agree or consent to
alter, modify or cancel this Lease Agreement, excepting only such alteration or
modification as may be permitted by Article X of the Trust Agreement.
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ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined. The following shall be "events of default"
under this Lease Agreement and the terms "events of default" and "default" shall mean,
whenever they are used in this Lease Agreement, with respect to the Project or the Site,
any one or more of the following events:
(i) Failure by the City to pay any Lease Payment or other payment required to be
paid hereunder at the time specified herein.
(ii) Failure by the City to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in clause (i)
of this Section 9.1, for a period of thirty (30) days after written notice specifying such
failure and requesting that it be remedied has been given to the City by the Corporation,
the Trustee, or the Owners of not less than five percent (5$>) in aggregate principal
amount of Certificates then outstanding; provided, however, if the failure stated in the
Jnotice can be corrected, but not within the applicable period, the Corporation, the Trustee
ibid such Owners shall not unreasonably withhold their consent to an extension of such
tune if corrective action is instituted by the City within the applicable period and
diligently pursued until the default is corrected.
(iii) The filing by the City of a voluntary petition in bankruptcy, or failure by the
;City promptly to lift any execution, garnishment or attachment, or adjudication of the
'City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by
the City into an agreement of composition with creditors, or the approval by a court of
competent jurisdiction of a petition applicable to the City in any proceedings instituted
under the provisions of the Federal Bankruptcy Act, as amended, or under any similar
acts which may hereafter be enacted.
Section 9.2. Remedies on Default. Whenever any event of default referred to in
Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the
Corporation to exercise any and all remedies available pursuant to law or granted
pursuant to this Lease Agreement; provided, however, that notwithstanding anything
herein or in the Trust Agreement to the contrary, there shall be no right under any
circumstances to accelerate the Lease Payments or otherwise declare any Lease
Payments not then in default to be immediately due and payable. Each and every
covenant hereof to be kept and performed by the City is expressly made a condition and
upon the breach thereof the Corporation may exercise any and all rights of entry and re-
entry upon the Project and the Site, and also, at its option, with or without such entry,
may terminate this Lease Agreement; provided, that no such termination shall be effected
either by operation of law or acts of the parties hereto, except only in the manner herein
expressly provided. In the event of such default and notwithstanding any re-entry by the
Corporation, the City shall, as herein expressly provided, continue to remain liable for
the payment of the Lease Payments and/or damages for breach of this Lease Agreement
and the performance of all conditions herein contained and, in any event such rent and/or
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damages shall be payable to the Corporation at the time and in the manner as herein
provided, to wit:
(a) In the event the Corporation does not elect to terminate this Lease Agreement
in the manner hereinafter provided for in subparagraph (b) of this Section 9.2, the City
agrees to and shall remain liable for the payment of all Lease Payments and the
performance of all conditions herein contained and shall reimburse the Corporation for
any deficiency arising out of the re-leasing of the Project and the Site, or, in the event
the Corporation is unable to re-lease the Project and the Site, then for the full amount of
all Lease Payments to the end of the Term of the Lease Agreement, but said Lease
Payments and/or deficiency shall be payable only at the same time and in the same
manner as hereinabove provided for the payment of Lease Payments hereunder,
notwithstanding such entry or re-entry by the Corporation or any suit in unlawful
detainer, or otherwise, brought by the Corporation for the purpose of effecting such re-
entry or obtaining possession of the Project and the Site or the exercise of any other
remedy by the Corporation. The City hereby irrevocably appoints the Corporation as the
agent and attorney-in-fact of the City to enter upon and re-lease the Project and the
Site in the event of default by the City in the performance of any covenants herein
contained to be performed by the City and to remove all personal property whatsoever
situated upon the Project and the Site to place such property in storage or other suitable
place in the County of San Diego, for the account of and at the expense of the City, and
the City hereby exempts and agrees to save harmless the Corporation from any costs,
loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing
of the Project and the Site and the removal and storage of such property by the
Corporation or its duly authorized agents in accordance with the provisions herein
contained. The City hereby waives any and all claims for damages caused or which may
be caused by the Corporation in re-entering and taking possession of the Project and the
Site as herein provided and all claims for damages that may result from the destruction
of or injury to the Site or the Project and all claims for damages to or loss of any property
belonging to the City that may be in or upon the Project and the Site. The City agrees
that the terms of this Lease Agreement constitute full and sufficient notice of the right of
the Corporation to re-lease the Project and the Site in the event of such re-entry without
effecting a surrender of this Lease Agreement, and further agrees that no acts of the
Corporation in effecting such re-leasing shall constitute a surrender or termination of
this Lease Agreement irrespective of the term for which such re-leasing is made or the
terms and conditions of such re-leasing, or otherwise, but that, on the contrary, in the
event of such default by the City the right to terminate this Lease Agreement shall vest
in the Corporation to be effected in the sole and exclusive manner hereinafter provided
for in subparagraph (b) hereof. The City further waives the right to any rental obtained
by the Corporation hi excess of the Lease Payments and hereby conveys and releases
such excess to the Corporation as compensation to the Corporation for its services in re-
leasing the Project and the Site.
(b) In an event of default hereunder, the Corporation at its option may terminate
this Lease Agreement and re-lease all or any portion of the Project and the Site. In the
event of the termination of this Lease Agreement by the Corporation at its option and in
the manner hereinafter provided on account of default by the City (and notwithstanding
any re-entry upon the Project or the Site by the Corporation in any manner whatsoever
or the re-leasing or sale of the Project or the Site), the City nevertheless agrees to pay to
the Corporation all costs, loss or damages howsoever arising or occurring payable at the
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same time and in the same manner as is herein provided in the case of payment of Lease
Payments. Any surplus received by the Corporation from such re-leasing shall be the
absolute property of the Corporation and the City shall have no right thereto, nor shall
the City be entitled to any credit in the event of a deficiency in the rentals received by the
Corporation from the Project and/or the Site. Neither notice to pay rent or to deliver up
possession of the premises given pursuant to law nor any proceeding in unlawful detainer
taken by the Corporation shall of itself operate to terminate this Lease Agreement, and
no termination of this Lease Agreement on account of default by the City shall be or
become effective by operation of law, or otherwise, unless and until the Corporation shall
have given written notice to the City of the election on the part of the Corporation to
terminate this Lease Agreement. The City covenants and agrees that no surrender of the
Project and/or the Site or of the remainder of the Term of this Lease Agreement or any
termination of this Lease Agreement shall be valid in any manner or for any purpose
whatsoever unless stated or accepted by the Corporation by such written notice.
Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved
to the Corporation is intended to be exclusive and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Lease 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 IX it shall not be
necessary to give any notice, other than such notice as may be required in this Article DC
or by law.
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either
party to this 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
|noneys or the enforcement or performance or observance of any obligation or agreement
on the part of the defaulting party herein contained, the defaulting party agrees that it
will on demand therefor pay to the nondefaulting party the reasonable fees of such
attorneys and such other expenses so incurred by the nondefaulting party.
Section 9.5. No Additional Waiver Implied by One Waiver. In the event any
agreement contained in this Lease 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 hereunder.
Section 9.6. Application of Proceeds. All net proceeds received from the re-lease
or other disposition of the Project and the Site under this Article DC, and all other
amounts derived by the Corporation or the Trustee as a result of an event of default
hereunder, shall be transferred to the Trustee promptly upon receipt thereof and shall be
deposited by the Trustee in the Lease Payment Fund to be applied to the Lease Payments
in order of payment date.
^>-•*Section 9.7. Trustee and Certificate Owners to Exercise Rights. Such rights and
remedies as are given to the Corporation under this Article DC have been assigned by the
Corporation to the Trustee under the Trust Agreement, to which assignment the City
hereby consents. Such rights and remedies shall be exercised by the Trustee and the
Owners of the Certificates as provided in the Trust Agreement.
-19-
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit. Notwithstanding any other provision of this Lease
Agreement, the City may on any date secure the payment of all or a portion of the Lease
Payments remaining due by a deposit with an escrow holder under an escrow deposit and
trust agreement as referenced in Section 14.01(b) of the Trust Agreement, of: (a) in the
case of a security deposit relating to all Lease Payments, either (i) an amount which,
together with amounts on deposit in the Lease Payment Fund, the Insurance and
Condemnation Fund and the Reserve Fund, 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 D, or (ii) Federal Securities specified in
clause (A) of the definition thereof, 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 moneys or Federal Securities
specified in clause (A) of the definition thereof then on deposit and interest earnings
thereon in the Lease Payment Fund, the Insurance and Condemnation Fund and the
Reserve Fund, be fully sufficient to pay all unpaid Lease Payments on their respective
Interest Payment Dates; or (b) in the case of a security deposit relating to a portion of the
Lease Payments, a certificate executed by a City Representative designating the portion
of the Lease Payments to which the deposit pertains, and either (i) an amount which is
sufficient to pay the portion of the Lease Payments designated in such City
Representative's certificate, including the principal and interest components thereof, or
(ii) Federal Securities, together with cash, if required, in such amount as will, together
with interest to be received thereon, if any, in the opinion of an independent certified
public accountant, be fully sufficient to pay the portion of the Lease Payments designated
in the aforesaid City Representative's certificate.
In the event of a deposit pursuant to this Section 10.1 as to all Lease Payments,
all obligations of the City under this Lease Agreement shall cease and terminate,
excepting only the obligation of the City to make, or cause to be made, all payments from
the deposit made by the City pursuant to this Section 10.1, and title to the Project shall
vest in the City on the date of said deposit automatically and without further action by
the City or the Corporation. Said deposit and interest earnings thereon shall be deemed
to be and shall constitute a special fund for the payments provided for by this Section
10.1 and said obligation shall thereafter be deemed to be and shall constitute the
installment purchase obligation of the City for the Project. Upon said deposit, the
Corporation will execute or cause to be executed any and all documents as may be
necessary to confirm title to the Project in accordance with the provisions hereof. In
addition, the Corporation hereby appoints the City as its agent to prepare, execute and
file or record, in appropriate offices, such documents as may be necessary to place record
title to the Project in the City.
Section 10.2. Purchase Option.
The Corporation hereby grants an option to the City to prepay the principal
component of the Lease Payments in full, by paying the stipulated value of the Project set
forth in Exhibit D hereto, or hi part, but not in an amount of less than $20,000, together,
-20-
in any event, with a percentage of the portion of such principal component of Lease
Payments prepaid equal to the percentages set forth below:
Prepayment Period Premium
July 15, 1998 through July 14, 1999 2.0%
July 15, 1999 through July 14, 2000 1.5
July 15, 2000 through July 14, 2001 1.0
July 15, 2001 through July 14, 2002 0.5
July 15, 2002 and thereafter 0
Said option may be exercised with respect to Lease Payments in whole at any time
or in part on any Lease Payment Date commencing July 15, 1998. Said option shall be
exercised by the City by giving written notice to the Corporation and the Trustee of the
exercise of such option at least forty-five (45) days prior to said Lease Payment Date.
Such option shall be exercised in the event of prepayment in full, by depositing with said
notice cash in an amount, which, together with amounts then on deposit in the Reserve
Fund, the Insurance and Condemnation Fund and the Lease Payment Fund, will be
sufficient to pay the stipulated value of the Project and the Site on said Lease Payment
Date as set forth in Exhibit D hereto, together with any Lease Payments then due but
unpaid, or, in the event of prepayment in part, by depositing with said notice an amount
divisible by $5,000 equal to the amount desired to be prepaid (but not less than $20,000)
together with any Lease Payments then due but unpaid. In the event of prepayment in
part, the partial prepayment shall be applied against Lease Payments in inverse order of
their Interest Payment Date. Lease Payments due after any such partial prepayment
shall be in the amounts set forth in a revised Lease Payment schedule which shall be
provided by, or caused to be provided by, the Trustee to the City pursuant to Section
4.01(d) of the Trust Agreement and which shall represent an adjustment to the schedule
set forth in Exhibit D attached hereto taking into account said partial prepayment.
Section 10.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent
Domain. The City shall be obligated to prepay the Lease Payments allocable to the
Project and the Site, in whole on any date or hi part on any Lease Payment Date, from
and to the extent of any Net Proceeds of an insurance or condemnation award with
respect to the Project or the Site theretofore deposited in the Lease Payment Fund for
such purpose pursuant to Article VI hereof and Article VII of the Trust Agreement. The
City and the Corporation hereby agree that such Net Proceeds, to the extent remaining
after payment of any delinquent Lease Payments, shall be credited towards the City's
obligations under this Section 10.3.
Section 10.4. Credit for Amounts on Deposit. In the event of prepayment of the
principal components of the Lease Payments in full under this Article X, such that the
Trust Agreement shall be discharged by its terms as a result of such prepayment, all
amounts then on deposit in the Lease Payment Fund, the Acquisition and Construction
Fund or the Reserve Fund shall be credited towards the amounts then required to be so
prepaid.
-21-
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, certificates or other communications hereunder
shall be sufficiently given and shall be deemed to have been received 48 hours after
deposit in the United States mail in first class form with postage fully prepaid:
If to the City: City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Manager
If to the Corporation: City of Carlsbad
Public Improvement Corporation
1200 Elm Avenue
Carlsbad, California 92008
Attention: President
If to the Trustee: The Bank of California
400 California Street
San Francisco, California 94107
Attention: Vice President
The Corporation, the City and the Trustee, by notice given hereunder, may
designate different addresses to which subsequent notices, certificates or other
communications will be sent.
Section 11.2. Binding Effect. This Lease Agreement shall inure to the benefit of
and shall be binding upon the Corporation and the City and their respective successors
and assigns.
Section 11.3. Severability. In the event any provision of this 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 11.4. Net-net-net Lease. This Lease Agreement shall be deemed and
construed to be a "net-net-net lease" and the City hereby agrees that the Lease
Payments shall be an absolute net return to the Corporation, free and clear of any
expenses, charges or set-offs whatsoever.
Section 11.5. Further Assurances and Corrective Instruments. The Corporation
and the City agree that they will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and such
further instruments as may reasonably be required for correcting any inadequate or
incorrect description of the Project or the Site hereby leased or intended so to be or for
carrying out the expressed intention of this Lease Agreement.
-22-
Section 11.6. Execution in Counterparts. This 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 11.7. Applicable Law. This Lease Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 11.8. Corporation and City Representatives. Whenever under the
provisions of this Lease Agreement the approval of the Corporation or the City is
required, or the Corporation or the City is required to take some action at the request of
the other, such approval or such request shall be given for the Corporation by an
Corporation Representative and for the City by a City Representative, and any party
hereto shall be authorized to rely upon any such approval or request.
Section 11.9. Captions. The captions or headings in this Lease Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any
provisions or Section of this Lease Agreement.
-23-
IN WITNESS WHEREOF, the Corporation has caused this Lease Agreement to be
executed in its corporate name by its duly authorized officers and sealed with its
corporate seal; and the City has caused this Lease Agreement to be executed in its name
by its duly authorized officers and sealed with its corporate seal, as of the date first
above written.
CITY OF CARLSBAD
PUBLIC IMPROVEMENT CORPORATION,
as Lessor
President
(SEAL)
Attest:
Secretary
CITY OF CARLSBAD,
as Lessee
By,
Mayor
(SEAL)
Attest:
City Clerk
-24-
EXHIBIT A
DEFINITIONS
"Acquisition and Construction Costs" means all costs of payment of, or
reimbursement for, acquisition and construction of the Project, including but not limited
to, architect and engineering fees, construction contractor payments, costs of feasibility
and other reports, inspection costs, performance bond premiums and permit fees.
"Acquisition and Construction Fund" means the fund by that name
established and held by the City pursuant to Article III of the Trust Agreement.
"Agency Agreement" means that certain Agency Agreement, dated as of June 1,
1988, by and between the Corporation and the City.
"Assignment Agreement" means the Assignment Agreement, dated as of June 1,
1988, by and between the Corporation and the Trustee, together with any duly
Authorized and executed amendments thereto.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State are closed or are required to close or a day on
which the New York Stock Exchange is closed.
>: "Certificate of Completion" means the certificate of a City Representative
certifying that the Project has been acquired and constructed by the City and that all
Acquisition and Construction Costs have been paid.
"Certificates" means the $ aggregate principal amount of certificates of
participation to be executed and delivered pursuant to the Trust Agreement.
"City" means the City of Carlsbad, a municipal corporation and general law city
organized and existing under the laws of the State.
"City Representative" means the City Manager of the City or any other person
authorized by resolution of the City Council of the City to act on behalf of the City under
or with respect to the Lease Agreement, the Trust Agreement and the Corporation
Agreement.
"Closing Date" means the date upon which there is an exchange of the
Certificates for the proceeds representing the purchase of the Certificates by the Original
Purchaser.
"Code* means the Internal Revenue Code of 1986.
"Completion Date" means the earlier of (i) the date of substantial completion of
acquisition and construction of the Project as evidenced by the filing with the Trustee of a
Certificate of Completion, and (ii) June 1, 1991.
"Contractor" means the contractor(s) or vendor(s) from whom the Corporation or
the City on behalf of the Corporation has ordered or caused to be ordered or with whom
the Corporation or the City on behalf of the Corporation has contracted or caused to be
contracted for the acquisition and construction of the Project.
"Corporation" means the City of Carlsbad Public Improvement Corporation, a
nonprofit public benefit organized and existing under and by virtue of the laws of the
State.
"Corporation Representative" means the President of the Corporation, or any
other person authorized by resolution of the Corporation to act on behalf of the
Corporation under or with respect to the Lease Agreement, the Trust Agreement, the
Agency Agreement and the Assignment Agreement.
"Debt Service" means the scheduled principal and interest components of Lease
Payments, payable during the period of computation, excluding amounts scheduled
during such period which relate to principal which has been retired before the beginning
of such period.
"Delivery Costs" means all items of expense directly or indirectly payable by or
reimbursable to the City or the Corporation relating to the execution and delivery of the
Lease Agreement, the Trust Agreement, the Agency Agreement and the Assignment
Agreement or the execution, sale and delivery of the Certificates, including but not
limited to filing and recording costs, settlement costs, printing costs, reproduction and
binding costs, initial fees and charges of the Trustee, financing discounts, legal fees and
charges, insurance fees and charges, financial and other professional consultant fees,
costs of rating agencies for credit ratings, fees for execution, transportation and
safekeeping of the Certificates and charges and fees in connection with the foregoing.
"Delivery Costs Fund" means the fund by that name established and held by the
Trustee pursuant to Article in of the Trust Agreement.
"Escrow Fund" means the fund by that name established and held by the Trustee
pursuant to Section 6.06 of the Trust Agreement
"Event of Default" means an event of default under the Lease Agreement, as
defined in Section 9.1 thereof.
"Federal Securities" means any of the following which are noncallable and which
at the tune of investment are legal investments under the laws of the State for trust
funds held by the Trustee:
(a) direct general obligations of (including obligations issued or held in book entry
form on the books of the Department of the Treasury of the United States of America), or
obligations the payment of principal of and interest on which are guaranteed by, the
United States of America; or
Exhibit A
Page 2
(b) any of the following obligations of the following agencies of the United States
of America: (i) direct obligations of the Export-Import Bank; (ii) certificates of beneficial
ownership issued by the Farmers Home Administration; (iii) participation certificates
issued by the General Services Administration; (iv) mortgage-backed bonds or pass-
through obligations issued and guaranteed by the Government National Mortgage
Association; (v) project notes issued by the United States Department of Housing and
Urban Development; and (vi) public housing notes and bonds guaranteed by the United
States of America.
"Fiscal Year" means the twelve-month period beginning on July 1 of any year
and ending on June 30 of the next succeeding year, or any other twelve-month period
selected by the City as its fiscal year.
"Gross Proceeds" means the sum of the following amounts:
(a) original proceeds, namely, net amounts (after payment of all expenses of
executing and delivering the Lease Agreement and the Certificates) received by or for the
City as a result of the sale of the Certificates, excluding original proceeds which become
transferred proceeds (determined in accordance with applicable Regulations) of
obligations issued to refund in whole or in part the Lease Payments;
":'*'
(b) investment proceeds, namely, amounts received at any time by or for the City,
such as interest and dividends, resulting from the investment of any original proceeds (as
referenced in paragraph (a) above) or investment proceeds (as referenced in this
[paragraph (b)) in Nonpurpose Obligations, increased by any profits and decreased (if
necessary, below zero) by any losses on such investments, excluding investment proceeds
which become transferred proceeds (determined in accordance with applicable
Regulations) of obligations issued to refund in whole or in part the Lease Payments;
•V** (c) sinking fund proceeds, namely, amounts, other than original proceeds or
investment proceeds (as referenced in paragraphs (a) and (b) above) of the Certificates,
which are held in any Lease Payment Fund and any other fund to the extent that the
City reasonably expects to use such other fund to pay Lease Payments;
(d) amounts in the Reserve Fund and in any other fund established as a
reasonably required reserve or replacement fund;
(e) Investment Property pledged as security for payment of Lease Payments by an
ultimate obligor or a related person or by the City;
(f) amounts, other than as specified in this definition, used to pay Lease
Payments; and
(g) amounts received as a result of investing amounts described in this definition.
"Independent Counsel" means an attorney duly admitted to the practice of law
before the highest court of the state in which such attorney maintains an office and who
is not an employee of the Corporation, the Trustee or the City.
Exhibit A
PageS
"Information Services" means Financial Information, Inc.'s "Daily Called Bond
Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention:
Editor; Kenny Information Services' "Called Bond Service," 55 Broad Street, 28th Floor,
New York, New York 10004; Moody's "Municipal and Government," 99 Church Street,
8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard
& Poor's "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004; or
to such other addresses and/or such other national information services providing
information or disseminating notices of redemption of obligations such as the Certificates.
"Insurance and Condemnation Fund" means the fund by that name
established and held by the Trustee pursuant to Section 7.01 of the Trust Agreement.
"Interest Payment Date" means the first day of each February and August,
commencing February 1, 1989, so long as any Certificates are Outstanding.
"Investment Property" means any security (as said term is defined in section
165(g)(2)(A) or (B) of the Code), obligation, annuity or investment-type property,
excluding, however, obligations the interest on which is exempt from income tax under
section 103 of the Code.
"Lease Agreement" means the Lease Agreement, dated as of June 1, 1988, by
and between the Corporation and the City, together with any duly authorized and
executed amendments thereto.
"Lease Payments" means all payments required to be paid by the City pursuant
to Section 4.4 of the Lease Agreement, including any prepayment thereof pursuant to
Article X of the Lease Agreement, which payments consist of an interest component and
a principal component.
• "Lease Payment Date" means the fifteenth (15th) day of July and January in
each year during the Term of the Lease Agreement, commencing January 15, 1989.
"Lease Payment Fund" means the fund by that name established and held by
the Trustee pursuant to Section 5.02 of the Trust Agreement.
"Moody's" means Moody's Investors Service, or its successors.
"Net Proceeds," when used with respect to insurance or condemnation proceeds,
means any insurance proceeds or condemnation award paid with respect to the Project or
the Site, to the extent remaining after payment therefrom of all expenses incurred in the
collection thereof. "Net Proceeds," when used with reference to the Certificates, means
the face amount of the Certificates, plus accrued interest and premium, if any, less
original issue discount and less proceeds deposited in the Reserve Fund.
"Nonpurpose Obligation" means any Investment Property which is acquired
with the proceeds of the Certificates and is not acquired in order to carry out the
governmental purpose of the Lease Agreement.
"Notes" means the Notes of the City issued on July 16, 1987 in the principal
amount of $6,555,000, and maturing June 30, 1988.
Exhibit A
Page 4
"Original Purchaser" means Rauscher Pierce Refsnes, Inc., as original
purchaser of the Certificates.
"Outstanding", when used as of any particular time with respect to Certificates,
means (subject to the provisions of Section 10.03 of the Trust Agreement) all Certificates
theretofore executed and delivered by the Trustee under the Trust Agreement except -
(a) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee
for cancellation;
(b) Certificates for the payment or redemption of which funds or Federal
Securities in the necessary amount shall have theretofore been deposited with the
Trustee (whether upon or prior to the maturity or redemption date of such Certificates),
provided that, if such Certificates are to be redeemed prior to maturity, notice of such
redemption shall have been given as provided in Section 4.03 of the Trust Agreement or
provision satisfactory to the Trustee shall have been made for the giving of such notice;
and
(c) Certificates in lieu of or in exchange for which other Certificates shall have
been executed and delivered by the Trustee pursuant to Section 2.09 of the Trust
Agreement.
"Owner" or "Certificate Owner" or "Owner of a Certificate", or any similar
term, when used with respect to a Certificate means the person in whose name such
Certificate shall be registered.
"Permitted Encumbrances" means, as of any particular time: (a) liens for
general ad valorem taxes and assessments, if any, not then delinquent, or which the City
may, pursuant to provisions of Article V of the Lease Agreement, permit to remain
unpaid; (b) the Assignment Agreement; (c) the Lease Agreement; (d) any right or claim of
any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the
manner prescribed by law; (e) easements, rights of way, mineral rights, drilling rights
and other rights, reservations, covenants, conditions or restrictions which exist of record
as of the Closing Date and which the City certifies in writing will not materially impair
the use of the Site for the Project; and (f) easements, rights of way, mineral rights,
drilling rights and other rights, reservations, covenants, conditions or restrictions
established following the date of recordation of the Lease Agreement and to which the
Corporation and the City consent in writing.
"Permitted Investments" means any of the following which at the time of
investment are legal investments under the laws of the State for the moneys proposed to
be invested therein:
(a) Federal Securities;
(b) Any of the following obligations of federal agencies not guaranteed by the
United States of America: (i) debentures issued by the Federal Housing Administration;
(ii) participation certificates or senior debt obligations of the Federal Home Loan
Mortgage Corporation or Farm Credit Banks (consisting of Federal Land Banks, Federal
Intermediate Credit Banks, or Banks for Cooperatives); (iii) mortgage-backed securities
Exhibit A
PageS
or senior debt obligations of the Federal National Mortgage Association; or (iv) credit-
backed or senior debt obligations of the Student Loan Marketing Association.
(c) interest-bearing demand or time deposits (including certificates of deposit) in
federal or State chartered savings and loan associations or in federal or State banks
(including the Trustee), provided that (i) the obligations of such savings and loan
association or bank or the obligations of the holding company of such savings and loan
association or bank carry one of the three highest Rating Categories by Moody's and
S&P, or (ii) such deposits are insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation;
(d) obligations issued by any corporation organized and operating within the
United States of America having assets in excess of $500,000,000, which obligations
carry one of the three highest long-term Rating Categories provided by Moody's and
S&P;
(e) repurchase agreements with any bank, savings institution or trust company
(including the Trustee) which is insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation, or with any broker-dealer with
retail customers which falls under Securities Investors Protection Corporation protection,
provided that such repurchase agreements are fully secured by Federal Securities or
obligations of any agency or instrumentality of the United States of America, and
provided further that (i) such collateral is held by the Trustee or any agent acting solely
for the Trustee during the term of such repurchase agreement, (ii) such collateral is not
subject to liens or claims of third parties, (iii) such collateral has a market value
(determined at least once every 30 days) at least equal to the amount invested hi the
repurchase agreement, (iv) the Trustee has a perfected first security interest in the
collateral, (v) the agreement shall be for a term not longer than 180 days and (vi) the
failure to maintain such collateral at the level required in (iii) above will require the
Trustee to serve notice to the other party to correct such deficiency. If such deficiency is
not corrected, the Trustee is directed to liquidate the collateral;
(f) money market funds comprised exclusively of Federal Securities;
(g) commercial paper having original maturities of not more than 180 days and
rated hi the highest Rating Category by Moody's and S&P;
(h) bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as bankers acceptances, which have a maturity of not more than 270
days and which are eligible for purchase by the Federal Reserve System and the
obligations of which commercial bank or the obligations of the holding company of which
carry one of the three highest long-term Rating Categories by Moody's and S&P; and
(i) tax-exempt obligations rated in one of the three highest rating categories by
Moody's and S&P.
"Principal Corporate Trust Office" means the corporate trust office of the
Trustee at 400 California Street, San Francisco, California, or at such other address
designated by the Trustee in written notice filed with the City and the Corporation in
writing.
Exhibit A
Page6
"Private Business Use" means use directly or indirectly in a trade or business
carried on by a natural person or in any activity carried on by a person other than a
natural person, excluding, however, use by a governmental unit and use as a member of
the general public.
"Project" means the improvements to be constructed on the Site, all as more
particularly described in Exhibit C attached to the Lease Agreement.
"Rating Category" means, with respect to any Permitted Investment, one or
more of the generic categories of rating by Moody's or S&P applicable to such Permitted
Investment, without regard to any refinement or graduation of such rating category by a
plus or minus sign.
"Registration Books" means the records maintained by the Trustee pursuant to
Section 2.12 of the Trust Agreement for registration of the ownership and transfer of
ownership of the Certificates.
"Regular Record Date" means the close of business on the fifteenth (15th) day of
the month preceding each Interest Payment Date, whether or not such fifteenth (15th)
day is a Business Day.
"Regulations" means temporary and permanent regulations promulgated under
the Code.
"Rental Period" means each twelve-month period during the Term of the Lease
Agreement commencing on August 2 in any year and ending on August 1 in the next
succeeding year except that the first Rental Period shall mean the period starting on
June 1, 1988 and ending on August 1, 1989.
"Reserve Fund" means the fund by that name established and held by the
Trustee pursuant to Section 6.01 of the Trust Agreement.
"Reserve Requirement" means an amount equal to $ .
"S&P" means Standard & Poor's Corporation, of New York, New York, or its
successors.
"Securities Depositories" means The Depository Trust Company, 711 Stewart
Avenue, Garden City, New York 11530, Fax-(516) 227-4039 or 4190; Midwest Securities
Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago,
Illinois 60605, Fax-(312) 663-2343; Philadelphia Depository Trust Company,
Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103,
Attention: Bond Department, Dex-(215) 496-5058; or to such other addresses and/or
such other registered securities depositories holding substantial amounts of obligations of
types comprising the Certificates.
"Site" means all of that certain real property located in the City described in
Exhibit B to the Lease Agreement, on which the Project is to be constructed.
"State" means the State of California.
Exhibit A
Page?
"Term of the Lease Agreement" means the time during which the Lease
Agreement is in effect, as provided in Section 4.2 of the Lease Agreement.
"Trust Agreement" means the Trust Agreement, dated as of June 1, 1988, by and
among the City, the Corporation and the Trustee, together with any duly authorized
amendments thereto.
"Trustee" means The Bank of California, N.A., or any successor thereto, acting as
Trustee pursuant to this Trust Agreement.
Exhibit APageS
EXHIBITS
DESCRIPTION OF THE SITE
Situated in the City of Carlsbad, County of San Diego, State of California, and
described as follows:
[TO COME]
Exhibit B
EXHIBIT C
DESCRIPTION OF THE PROJECT
[TO COME]
Exhibit C
EXHIBIT D
SCHEDULE OF LEASE PAYMENTS
SEMI-ANNUAL ANNUAL S
TIPULATED
DATE PRINCIPAL INTEREST TOTAL TOTAL VALUE
01/15/89
07/15/89
01/15/90
07/15/90
01/15/91
07/15/91
01/15/92
07/15/92
01/15/93
07/15/93
01/15/94
07/15/94
01/15/95
07/15/95
01/15/96
07/15/96
01/15/97
07/15/97
01/15/98
07/15/98
01/15/99
07/15/99
01/15/00
07/15/00
01/15/01
07/15/01
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Exhibit D
13061-03 JHHW:WHM:pch 05/1: M6696
pch 05/20;^
EXHIBIT 3
TRUST AGREEMENT
Dated as of June 1, 1988
by and among
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION, as Trustee,
the
CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION
and the
CITY OF CARLSBAD
(HOSP GROVE PROJECT)
M6696
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions 2
Section 1.02. Authorization 2
Section 1.03. Exhibits 2
ARTICLE H • •>«•
THE CERTIFICATES OF PARTICIPATION
tSection 2.01. Authorization 3
Section 2.02. Date; Payment of Interest 3
Section 2.03. Maturity; Interest Rates 3
Section 2.04. Form of Certificates; Interest 4
Section 2.05. Form 4
Section 2.06. Execution 4
Section 2.07. Application of Proceeds 4
-Section 2.08. Transfer and Exchange 5
(Section 2.09. Certificates Mutilated, Lost, Destroyed or Stolen... 5
^Section 2.10. Payment 5
^Section 2.11. Execution of Documents and Proof of Ownership 6
Section 2.12. Registration Books 6
ARTICLE IE
ACQUISITION AND CONSTRUCTION FUND;
DELIVERY COSTS FUND
Section 3.01. Acquisition and Construction Fund 7
Section 3.02. Payment of Acquisition and Construction Costs 7
Section 3.03. Delivery Costs Fund 8
Section 3.04. Payment of Delivery Costs 8
Section 3.05. Transfers of Unexpended Proceeds 8
ARTICLE IV
REDEMPTION OF CERTIFICATES
Section 4.01. Redemption 10
Section 4.02. Selection of Certificates for Redemption 11
Section 4.03. Notice of Redemption 11
Section 4.04. Partial Redemption of Certificate 12
Section 4.05. Purchase of Certificates 12
Section 5.01.
Section 5.02.
Section 5.03.
Section 5.04.
Section 5.05.
ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Assignment of Rights in Lease Agreement 13
Establishment of Lease Payment Fund 13
Deposits 13
Application of Moneys 13
Surplus 13
ARTICLE VI
RESERVE FUND; ESCROW FUND
Section 6.01. Establishment of Reserve Fund 14
Section 6.02. Deposit 14
Section 6.03. Transfers of Excess 14
Section 6.04. Application in Event of Deficiency in Lease Payment Fund 14
Section 6.05. Transfer To Make All Lease Payments 14
Section 6.06. Establishment of Escrow Fund 14
Section 6.07. Deposit 15
Section 6.08. Payment of the Notes 15
Section 6.09. Transfer of Excess 15
Section 6.10. Investment of Escrow Fund 15
ARTICLE VH
INSURANCE AND CONDEMNATION FUND;
INSURANCE; EMINENT DOMAIN
Section 7.01. Establishment of Insurance and Condemnation Fund;
Application of Net Proceeds of Insurance Award 16
Section 7.02. Application of Net Proceeds of Eminent Domain Award 16
Section 7.03. Cooperation 17
11
ARTICLE VHI
MONEYS IN FUNDS; INVESTMENT; REBATE
Section 8.01. Held in Trust 18
Section 8.02. Investments Authorized 18
Section 8.03. Accounting 18
Section 8.04. Allocation of Earnings 18
Section 8.05. Valuation and Disposition of Investments 19
Section 8.06. No Arbitrage 19
Section 8.07. Application of Investment Earnings; Rebate of Excess
Investment Earnings to United States 19
ARTICLE DC
THE TRUSTEE
Section 9.01. Appointment of Trustee 22
Section 9.02. Acceptance of Trusts 22
Section 9.03. Fees, Charges and Expenses of Trustee 24
Section 9.04. Notice to Certificate Owners of Default 24
Section 9.05. Intervention by Trustee 25
Section 9.06. Removal of Trustee 25
Section 9.07. Resignation by Trustee 25
Section 9.08. Appointment of Successor Trustee 25
Section 9.09. Merger or Consolidation 25
Section 9.10. Concerning any Successor Trustee 26
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted 27
Section 10.02. Procedure for Amendment with Written Consent of
Certificate Owners 27
Section 10.03. Disqualified Certificates 28
Section 10.04. Effect of Supplemental Agreement 28
Section 10.05. Endorsement or Replacement of Certificates Delivered After
Amendments 29
Section 10.06. Amendatory Endorsement of Certificates 29
ARTICLE XI
COVENANTS; NOTICES
Section 11.01. Compliance With and Enforcement of Lease Agreement 30
Section 11.02. Observance of Laws and Regulations 30
Section 11.03. Prosecution and Defense of Suits 30
Section 11.04. Recordation and Filing 30
Section 11.05. City Budgets 30
Section 11.06. Further Assurances 31
ill
ARTICLE XH
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of City 32
Section 12.02. No Liability of City or Corporation for Trustee Performance 32
Section 12.03. Indemnification of Trustee 32
Section 12.04. Limitation of Rights to Parties and Certificate Owners 32
ARTICLE XHI
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights 33
Section 13.02. Remedies 33
Section 13.03. Application of Funds 33
Section 13.04. Institution of Legal Proceedings 34
Section 13.05. Non-waiver 34
Section 13.06. Remedies Not Exclusive 34
Section 13.07. Power of Trustee to Control Proceedings 34
Section 13.08. Limitation on Certificate Owners' Right to Sue 34
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Defeasance 36
Section 14.02. Records 36
Section 14.03. Notices 36
Section 14.04. Governing Law 37
Section 14.05. Binding Effect; Successors 37
Section 14.06. Execution in Counterparts 37
Section 14.07. Delivery of Cancelled Certificates 37
Section 14.08. Headings 37
Section 14.09. Waiver of Notice 37
Section 14.10. Separability of Invalid Provisions 37
EXHIBIT A - Definitions
EXHIBIT B - Form of the Certificates
IV
TRUST AGREEMENT
THIS TRUST AGREEMENT, made and entered into as of June 1, 1988, by and
among THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of America (the
"Trustee"), the CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION, a
nonprofit public benefit corporation organized and existing under the laws of the State of
California (the "Corporation"), and the CITY OF CARLSBAD, a municipal corporation
and general law city organized and existing under the laws of the State of California (the
"City"),
WITNESSETH:
WHEREAS, the City has issued notes (the "Notes") in the principal amount of
$6,555,000 to acquire approximately 52 acres of a eucalyptus grove commonly known as
"Hosp Grove" for general municipal purposes and presently zoned open space; and
%
WHEREAS, the Notes mature on June 30, 1988, and the City wishes to complete
permanent financing for Hosp Grove and improvements to be made thereon; and
WHEREAS, the City and the Corporation have entered into a lease agreement
|Jated as of the date hereof (the "Lease Agreement"), whereby the City has agreed to lease
flosp Grove (the "Site") to the Corporation, and the Corporation has agreed to construct
certain improvements to the Site (the "Project"), and to lease the Project and the Site to
the City, and the City has agreed to lease the Project and the Site from the Corporation;
and
WHEREAS, for the purpose of obtaining the moneys required to be deposited by it
with the Trustee to pay the Notes at maturity and to pay for financing the construction of
the Project, the Corporation proposes to assign and transfer certain of its rights under
the Lease Agreement to the Trustee, and in consideration of such assignment and the
execution of this Trust Agreement, the Trustee has agreed to execute and deliver
certificates of participation, each evidencing a fractional interest in the lease payments
made by the City under the Lease Agreement, to provide the moneys required herein to
be deposited by the Corporation;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The terms defined in Exhibit A attached hereto and by
this reference incorporated herein, as used and capitalized herein, shall, for all purposes
of this Trust Agreement, have the meanings ascribed to them in said Exhibit A unless the
context clearly requires some other meaning.
Section 1.02. Authorization. Each of the parties hereby represents and warrants
that it has full legal authority and is duly empowered to enter into this Trust Agreement,
and has taken all actions necessary to authorize the execution of this Trust Agreement by
the officers and persons signing it.
Section 1.03. Exhibits. The following exhibits are attached to, and by reference
made a part of, this Trust Agreement:
Exhibit A: Definitions.
Exhibit B: Form of the Certificates.
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ARTICLE H
THE CERTIFICATES OF PARTICIPATION
Section 2.01. Authorization. The Trustee is hereby authorized and directed upon
written request from the Corporation to prepare, execute and deliver, to the Original
Purchaser, Certificates in an aggregate principal amount of
dollars ($ ) evidencing undivided fractional
interests of the Owners thereof hi the Lease Payments.
Section 2.02. Date; Payment of Interest. Each Certificate shall be dated as of
June 1, 1988. Interest with respect thereto shall be payable from the Interest Payment
Date next preceding the date of execution thereof, unless: (i) it is executed as of an
Interest Payment Date, in which event interest with respect thereto shall be payable from
such Interest Payment Date; or (ii) it is executed after a Regular Record Date and before
the following Interest Payment Date, in which event interest with respect thereto shall be
payable from such Interest Payment Date; or (iii) it is executed on or before January 15,
1989, in which event interest with respect thereto shall be payable from June 1, 1988;
provided, however, that if, as of the date of any Certificate, interest is in default with
Respect to any Outstanding Certificates, interest represented by such Certificate shall be
payable from the Interest Payment Date to which interest has previously been paid or
l&ade available for payment with respect to the Outstanding Certificates.
?
Section 2.03. Maturity; Interest Rates. The Certificates shall mature on August 1
in each of the respective years, and in the respective amounts, and interest represented
^hereby shall be computed at the respective rates, as follows:
!'.
?; Maturity Date Principal Interest
(August 1) Amount Rate
1989 $ %
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2008
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Section 2.04. Form of Certificates; Interest. The Certificates shall be delivered hi
the form of fully registered Certificates without coupons in the denomination of $5,000 or
any integral multiple thereof, except that no Certificate may have principal maturing in
more than one year. The Certificates shall be assigned such alphabetical and numerical
designation as shall be deemed appropriate by the Trustee.
Interest represented by the Certificates shall be payable on each Interest Payment
Date to and including the date of maturity or redemption, whichever is earlier, as
provided in Section 2.10 hereof. Said interest shall represent the portion of Lease
Payments designated as interest and coming due during the six-month period preceding
each Interest Payment Date with respect to the Certificates. The fractional share of the
portion of Lease Payments designated as interest with respect to any Certificate shall be
computed by multiplying the portion of Lease Payments designated as principal with
respect to such Certificate by the rate of interest applicable to such Certificate (on the
basis of a 360-day year of twelve 30-day months).
Section 2.05. Form. The Certificates shall be substantially in the form set forth in
Exhibit B attached hereto and by this reference incorporated herein.
Section 2.06. Execution. The Certificates shall be executed by and in the name of
the Trustee by the manual signature of an authorized officer of the Trustee. If any officer
whose signature appears on any Certificate ceases to be such officer before the date of
delivery of said Certificate, such signature shall nevertheless be as effective as if the
officer had remained in office until such date.
Section 2.07. Application of Proceeds. The proceeds received by the Trustee from
the sale of the Certificates, including accrued interest, in the aggregate amount of
$ shall forthwith be set aside by the Trustee in the following respective
funds and accounts:
(a) The Trustee shall deposit in the Lease Payment Fund an amount equal to
$ , representing accrued interest in the amount of $ , from
June 1, 1988 to the Closing Date, plus capitalized interest for Lease Payments
attributable to the Project in the amount of $ from the Closing Date to
(b) The Trustee shall deposit in the Escrow Fund an amount equal to $_
representing the amount necessary to pay the principal of and interest of the Notes at
maturity.
(c) The Trustee shall deposit in the Reserve Fund an amount equal to
$ (the Reserve Requirement).
(d) The Trustee shall deposit in the Delivery Costs Fund an amount equal to
(e) The Trustee shall deposit the remainder of said proceeds in an amount equal
to $ , in the Acquisition and Construction Fund.
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Section 2.08. Transfer and Exchange.
(a) Transfer of Certificates. The registration of any Certificate may, in accordance
with its terms, be transferred upon the Registration Books by the person in whose name
it is registered, in person or by his attorney duly authorized in writing upon surrender of
such Certificate for cancellation at the corporate trust office of the Trustee, accompanied
by delivery of a written instrument of transfer in a form approved by the Trustee, duly
executed. Whenever any Certificate or Certificates shall be surrendered for registration
of transfer, the Trustee shall execute and deliver a new Certificate or Certificates for like
aggregate principal amount.
(b) Exchange of Certificates. Certificates may be exchanged at the Principal
Corporate Trust Office of the Trustee for a like aggregate principal amount of Certificates
of other authorized denominations of the same maturity. The Trustee may require the
payment by the Certificate Owner requesting such exchange of any tax or other
governmental charge required to be paid with respect to such exchange.
Section 2.09. Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate
shall become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall
execute and deliver a new Certificate of like tenor, maturity and number in exchange and
Substitution for the Certificate so mutilated, but only upon surrender to the Trustee of
|pe Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee
sliall be cancelled by it and redelivered by the Trustee to the City. If any Certificate shall
be lost, destroyed or stolen, evidence of such loss, destruction or theft shall be submitted
to the Trustee, and, if such evidence is satisfactory to the Trustee and if an indemnity
satisfactory to the Trustee shall be given, the Trustee, at the expense of the Certificate
0wner, shall execute and deliver a new Certificate of like tenor and maturity and
numbered as the Trustee shall determine in lieu of and in substitution for the Certificate
so lost, destroyed or stolen. The Trustee may require payment of the expenses which
iaay be incurred by the Trustee in carrying out the duties under this Section 2.09. Any
Certificate executed and delivered under the provisions of this Section 2.09 in lieu of any
Certificate alleged to be lost, destroyed or stolen shall be equally and fractionally entitled
to the benefits of this Trust Agreement with all other Certificates secured by this Trust
Agreement. The Trustee shall not be required to treat both the original Certificate and
any replacement Certificate as being Outstanding for the purpose of determining the
principal amount of Certificates which may be executed and delivered hereunder or for
the purpose of determining any percentage of Certificates Outstanding hereunder, but
both the original and replacement Certificate shall be treated as one and the same.
Notwithstanding any other provision of this Section 2.09, in lieu of delivering a new
Certificate which has been mutilated, lost, destroyed or stolen, and which has matured or
has been called for redemption, the Trustee may make payment with respect to such
Certificate.
Section 2.10. Payment. Payment of interest due with respect to any Certificate on
any Interest Payment Date shall be made to the person appearing on the Registration
Books as the, Owner thereof as of the Regular Record Date immediately preceding such
Interest Payment Date, such interest to be paid by check or draft mailed to such Owner
at his address as it appears on the Registration Books or at such other address as he
may have filed with the Trustee for that purpose or by wire transfer to the Owners of
$1,000,000 or more in principal amount of the Certificates. The principal, interest and
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redemption price with respect to the Certificates at maturity or upon prior redemption
shall be payable in lawful money of the United States of America upon surrender of the
Certificates at the Principal Corporate Trust Office of the Trustee.
Section 2.11. Execution of Documents and Proof of Ownership. Any request,
direction, consent, revocation of consent, or other instrument in writing required or
permitted by this Trust Agreement to be signed or executed by Certificate Owners may be
in any number of concurrent instruments of similar tenor, and may be signed or executed
by such Owners in person or by their attorneys or agents appointed by an instrument in
writing for that purpose, or by any bank, trust company or other depository for such
Certificates. Proof of the execution of any such instrument, or of any instrument
appointing any such attorney or agent, and of the ownership of Certificates shall be
sufficient for any purpose of this Trust Agreement (except as otherwise herein provided),
if made in the following manner:
(a) The fact and date of the execution by any Owner or his attorney or agent of
any such instrument and of any instrument appointing any such attorney or agent, may
be proved by a certificate, which need not be acknowledged or verified, of an officer of any
bank or trust company located within the United States of America, or of any notary
public, or other officer authorized to take acknowledgments of deeds to be recorded in
such jurisdictions, that the persons signing such instruments acknowledged before him
the execution thereof. Where any such instrument is executed by an officer of a
corporation or association or a member of a partnership on behalf of such corporation,
association or partnership, such certificate shall also constitute sufficient proof of his
authority.
(b) The fact of the ownership of Certificates by any person and the amount, the
maturity and the numbers of such Certificates and the date of his holding the same shall
be proved by the Registration Books.
Nothing contained in this Article II shall be construed as limiting the Trustee to
such proof, it being intended that the Trustee may accept any other evidence of the
matters herein stated which the Trustee may deem sufficient. Any request or consent of
the Owner of any Certificate shall bind every future Owner of the same Certificate hi
respect of anything done or suffered to be done by the Trustee in pursuant of such
request or consent.
Section 2.12. Registration Books. The Trustee shall keep or cause to be kept, at
its Principal Corporate Trust Office, sufficient records for the registration and
registration of transfer of the Certificates, which shall at all reasonable times be open to
inspection by the City and the Corporation; and, upon presentation for such purpose, the
Trustee shall, under such reasonable regulations as it may prescribe, register or transfer
or cause to be registered or transferred, on the Registration Books, Certificates as
hereinbefore provided.
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ARTICLE HI
ACQUISITION AND CONSTRUCTION FUND;
DELIVERY COSTS FUND
Section 3.01. Acquisition and Construction Fund. The Trustee shall establish a
special fund designated as the "Acquisition and Construction Fund"; shall keep such fund
separate and apart from all other funds and moneys held by it; and shall administer such
fund as provided herein and in the Lease Agreement. There shall be deposited in the
Acquisition and Construction Fund from the proceeds of sale of the Certificates required
to be deposited therein pursuant to Section 2.07(e) hereof and any other funds from time
to time deposited with the Trustee for such purpose.
Section 3.02. Payment of Acquisition and Construction Costs.
(a) Amounts in the Acquisition and Construction Fund shall be disbursed for
Acquisition and Construction Costs. Disbursements from the Acquisition and
Construction Fund shall be made by the Trustee upon receipt of a sequentially numbered
requisition requesting disbursement executed or approved by a City Representative.
Subject to subsections (b) and (c) hereof, each such certificate shall:
(i) set forth the amounts to be disbursed for payment or reimbursement of
previous payments of Acquisition and Construction Costs and the person or
persons to whom said amounts are to be disbursed;
I'$•> (ii) state that the amounts to be disbursed constitute Acquisition and
f Construction Costs, that said amounts are required to be disbursed pursuant to a
' contract entered into therefor by or on behalf of the Corporation or the City, or
i were necessarily and reasonably incurred; and that said amounts are not being
paid in advance of the time, if any, fixed for payment;
(iii) state that no amount set forth in the certificate was included in any
certificate requesting disbursement previously filed with the Trustee pursuant to
this Section 3.02;
(iv) state the portion, if any, of the Net Proceeds of the Certificates to be
used for a Private Business Use or to make or finance a loan (other than a loan
constituting a Nonpurpose Obligation or assessment) to other than a state or local
governmental unit;
(v) state that there has been compliance with sections 5.11 and 5.12 of the
Lease Agreement relating to the Private Business Use limitation and the private
loan limitation; and
(vi) state that the amount remaining in the Acquisition and Construction
Fund, together with interest earnings thereon or deposited therein, will, after
payment of the amount set forth in the certificate requesting disbursement, be
sufficient to pay all remaining Acquisition and Construction Costs as then
estimated.
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(b) Each certificate requesting disbursement which is submitted pursuant to
subsection (a) and which relates to disbursement for a construction portion of the Project
shall be accompanied by the certificate of an architect or engineer employed by the City
approving the certificate requesting disbursement and certifying that (i) insofar as such
certificate relates to payment for work, materials, equipment or supplies, such work was
actually performed, or such materials, equipment or supplies were actually installed in
furtherance of the construction of the Project or delivered to the appropriate site for such
purpose, or delivered for storage or fabrication at a place approved by the City, and (ii)
as of the date of said certificate requesting disbursement an identified percentage of the
Project has been completed.
(c) Each certificate requesting disbursement which is submitted pursuant to
subsection (a) and which relates to payment to a Contractor shall be accompanied by a
certificate of said Contractor stating that no liens have been imposed on the Project as a
result of said construction except liens that have not yet ripened or that would attach by
operation of law.
Section 3.03. Delivery Costs Fund. The Trustee shall establish a special fund
designated as the "Delivery Costs Fund"; shall keep such fund separate and apart from
all other funds and moneys held by it; and shall administer such fund as provided herein
and in the Lease Agreement. There shall be deposited in the Delivery Costs Fund the
proceeds of sale of the Certificates required to be deposited therein pursuant to Section
2.07(c) hereof and any other funds from time to time deposited with the Trustee for such
purpose.
Section 3.04. Payment of Delivery Costs. The moneys in the Delivery Costs Fund
shall be disbursed to pay the Delivery Costs, upon the written order of a City
Representative executed and delivered to the Trustee directing such disbursements.
The Trustee shall disburse moneys in the Delivery Costs Fund only upon a receipt
of a sequentially numbered requisition signed by a City Representative setting forth the
amounts to be disbursed for payment or reimbursement of Delivery Costs and the name
and address of the person or persons to whom said amounts are to be disbursed, stating
that the amounts to be disbursed are for Delivery Costs properly chargeable to the
Delivery Costs Fund.
The Trustee shall be responsible for the safekeeping and investment of the moneys
held in the Delivery Costs Fund, the payment thereof hi accordance with this Section
3.04, but the Trustee shall not be responsible for such requisitions.
Upon payment of all Delivery Costs, but in no event later than October 1, 1988,
the Trustee shall transfer any moneys then remaining in the Delivery Costs Fund to the
Acquisition and Construction Fund, the Delivery Costs Fund shall be closed and the
Trustee shall no longer be obligated to make payments from such fund.
Section 3.05. Transfers of Unexpended Proceeds. The Trustee is hereby directed
to transfer all unexpended moneys remaining in the Acquisition and Construction Fund
and not required for payment of Acquisition and Construction Costs on the Completion
Date to the Lease Payment Fund, to be credited to the Lease Payments as the same shall
become due and payable.
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I
-9-
ARTICLE IV
REDEMPTION OF CERTIFICATES
Section 4.01. Redemption.
(a) Optional Redemption. The Certificates maturing on and after August 1, 1999,
are subject to redemption in whole at any time or in part on any Interest Payment Date
(but not in a total redemption amount of less than $20,000 at any one time) in inverse
order of maturity and by lot within a maturity on or after August 1, 1998, at the
principal amount with respect thereto, together with the premium set forth below
(expressed as a percentage of the total amount redeemed), and accrued interest to the
date fixed for redemption, from the proceeds of optional prepayments of Lease Payments
made by the City pursuant to the Lease Agreement:
Redemption Period Premium
August 1, 1998 through July 31, 1999 2%
August 1, 1999 through July 31, 2000 1.5
August 1, 2000 through July 31, 2001 1.0
August 1, 2001 through July 31, 2002 0.5
August 1, 2002 and thereafter 0
Ob) Redemption From Net Proceeds of Insurance and Condemnation. The
Certificates are subject to mandatory redemption in whole on any date, or in part on any
Interest Payment Date among maturities such that approximately equal annual Lease
Payments prevail following such redemption and by lot within a maturity, from the net
proceeds of insurance or condemnation credited towards the prepayment of the Lease
Payments by the City pursuant to Section 10.3 of the Lease Agreement, at a redemption
price equal to the principal amount thereof to be redeemed together with accrued interest
to the date fixed for redemption, without premium.
(c) Mandatory Redemption. The Certificates maturing on August 1, 2008, are
subject to mandatory redemption on August 1 in each year on or after August 1, 1998,
from the principal components of the Lease Payments required to be paid by the City
pursuant to the Lease Agreement with respect to each such redemption date, at a
redemption price equal to the principal amount thereof to be redeemed together with
accrued interest thereon to the date fixed for redemption, without premium, as follows:
Principal Amount
Redemption Date of Certificates
(August 1) to be Redeemed
1998
1999
2000
2001
2002
2003
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2004
2005
2006
2007
2008 (Maturity)
In the event that the Trustee shall redeem Certificates in part but not in whole
pursuant to subsections (a) or (b) of this Section 4.01, the amount of the Certificates to
be redeemed in each subsequent year pursuant to this subsection (d) shall be reduced to
correspond to the principal components of the Lease Payments prevailing following such
redemption as determined pursuant to Section 4.4(b) of the Lease Agreement.
(d) Redemption Fund. Moneys to be used for redemption of Certificates shall be
deposited in a Redemption Fund, which shall be a special fund to be held in trust by the
Trustee, separate and apart from all other funds and accounts. Said moneys shall be set
aside in the Redemption Fund solely for the purpose of redeeming the Certificates in
advance of their maturity and shall be applied on or after the date designated for
redemption to the payment of principal and interest with respect to the Certificates to be
redeemed upon presentation and surrender of such Certificates.
Section 4.02. Selection of Certificates for Redemption. Whenever provision is
made in this Trust Agreement for the redemption of Certificates and less than all
putstanding Certificates are called for redemption, the Trustee shall select Certificates
ffor redemption from the Outstanding Certificates not previously called for redemption
feuch that the scheduled payments of principal represented by the Certificates in each
^Rental Period corresponds to the scheduled payments of the principal components of the
|Lease Payments following the corresponding prepayment of the Lease Payments pursuant
;to Sections 10.2, 10.3 or 10.4 of the Lease Agreement, as determined pursuant to Section
?4.4(b) of the Lease Agreement. The Trustee shall select Certificates for redemption
within a maturity by lot or in any other manner which the Trustee shall, in its sole
discretion, deem appropriate and fair. For the purposes of such selection, Certificates
shall be deemed to be composed of $5,000 portions, and any such portion may be
separately redeemed. The Trustee shall promptly notify the City and the Corporation in
writing of the Certificates so selected for redemption.
Section 4.03. Notice of Redemption. Unless waived by any Owner of Certificates
to be redeemed, official notice of any such redemption shall be given by the Trustee on
behalf of the City by mailing a copy of an official redemption notice by first class mail at
least thirty (30) days and not more than sixty (60) days prior to the date fixed for
redemption to the Owner of the Certificate or Certificates to be redeemed at the address
shown on the Registration Books or at such other address as is furnished in writing by
such Owner to the Trustee.
All official notices of redemption shall be dated and shall state: (i) the redemption
date, (ii) the redemption price, (iii) if less than all Outstanding Certificates are to be
redeemed, the identification (and, in the case of partial redemption, the respective
principal amounts) of the Certificates to be redeemed, (iv) that on the redemption date
the redemption price will become due and payable upon each such Certificate or portion
thereof called for redemption, and that interest with respect thereto shall cease to accrue
from and after said date, and (v) the place where such Certificates are to be surrendered
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for payment of the redemption price, which place of payment shall be the Principal
Corporate Trust Office of the Trustee.
Prior to any redemption date, the City shall deposit, or cause to be deposited, with
the Trustee an amount of money sufficient to pay the redemption price of all the
Certificates or portions of Certificates which are to be redeemed on that date.
Official notice of redemption having been given as aforesaid, the Certificates or
portions of Certificates so to be redeemed shall, on the redemption date, become due and
payable at the redemption price therein specified, and from and after such date (unless
the City shall default in the payment of the redemption price) interest with respect to
such Certificates or portions of Certificates shall cease to be payable. Upon surrender of
such Certificates for redemption in accordance with said notice, such Certificates shall be
paid by the Trustee at the redemption price. Installments of interest due on or prior to
the redemption date shall be payable as herein provided for payment of interest. Upon
surrender for any partial redemption of any Certificate, there shall be prepared for the
Owner a new Certificate or Certificates of the same maturity in the amount of the unpaid
principal. All Certificates which have been redeemed shall be cancelled and destroyed by
the Trustee and shall not be reissued.
Failure by any Owner to receive notice as hereinabove provided shall not affect the
validity of any such redemption.
Section 4.04. Partial Redemption of Certificate. Upon surrender of any Certificate
redeemed in part only, the Trustee shall execute and deliver to the Owner thereof, at the
expense of the City, a new Certificate or Certificates of authorized denominations equal in
aggregate principal amount to the unredeemed portion of the Certificate surrendered and
of the same interest rate and the same maturity.
Section 4.05. Purchase of Certificates. In lieu of redemption of Certificates as
provided in this Article TV, amounts held by the Trustee for such redemption shall also be
used at any time, upon the written request of a City Representative, for the purchase of
Certificates at public or private sale as and when and at such prices (including
brokerage, accrued interest and other charges) as the City may in its discretion direct,
but not to exceed the redemption price which would be payable if such Certificates were
redeemed. The aggregate principal amount of Certificates of the same maturity
purchased in lieu of redemption pursuant to this Section 4.06 shall not exceed the
aggregate principal amount of Certificates of such maturity which would otherwise be
subject to such redemption. Remaining moneys, if any, shall be deposited in the Lease
Payment Fund.
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ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.01. Assignment of Rights in Lease Agreement. The Corporation has, in
the Assignment Agreement, transferred, assigned and set over to the Trustee certain of
its rights and duties in the Lease Agreement, including but not limited to all of the
"Corporation's rights to receive and collect all of the Lease Payments and all other
amounts required to be deposited in the Lease Payment Fund pursuant to the Lease
Agreement or pursuant hereto. All Lease Payments and such other amounts to which
the Corporation may at any time be entitled shall be paid directly to the Trustee and all
of the Lease Payments collected or received by the Corporation shall be deemed to be
held and to have been collected or received by the Corporation as the agent of the
Trustee, and if received by the Corporation at any time shall be deposited by the
Corporation with the Trustee within one Business Day after the receipt thereof, and all
such Lease Payments and such other amounts shall be forthwith deposited by the
Trustee upon the receipt thereof in the Lease Payment Fund (except as provided in
Section 6.04 hereof).
•*:• Section 5.02. Establishment of Lease Payment Fund. The Trustee shall establish
|a special fund designated as the "Lease Payment Fund". All moneys at any time
^deposited by the Trustee in the Lease Payment Fund shall be held by the Trustee in trust
tfbr the benefit of the Owners of the Certificates. So long as any Certificates are
^Outstanding, neither the City nor the Corporation shall have any beneficial right or
Interest in the Lease Payment Fund or the moneys deposited therein, except only as
^provided in this Trust Agreement, and such moneys shall be used and applied by the
•(Trustee as hereinafter set forth.
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I Section 5.03. Deposits. There shall be deposited in the Lease Payment Fund all
I/ease Payments received by the Trustee (except as provided in Section 6.04 hereof),
including any moneys received by the Trustee for deposit therein pursuant to Sections
2.07(a), 4.01, 5.01 or Article VII hereof, or Article X of the Lease Agreement, and any
other moneys required to be deposited therein pursuant to~ the Lease Agreement or
pursuant to this Trust Agreement.
Section 5.04. Application of Moneys. All amounts in the Lease Payment Fund
shall be used and withdrawn by the Trustee solely for the purpose of paying the
principal, interest and redemption premiums (if any) with respect to the Certificates as
the same shall become due and payable, in accordance with the provisions of Article II
and Article IV hereof.
Section 5.05. Surplus. Any surplus remaining in the Lease Payment Fund, after
redemption and payment of all Certificates, including premiums and accrued interest (if
any) and payment of any applicable fees and expenses to the Trustee, or provision for
such redemption or payment having been made to the satisfaction of the Trustee, shall be
withdrawn by the Trustee and remitted to the City.
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ARTICLE VI
RESERVE FUND; ESCROW FUND
Section 6.01. Establishment of Reserve Fund. The Trustee shall establish a
special fund designated as the "Reserve Fund". All moneys at any time on deposit in the
Reserve Fund shall be held by the Trustee in trust for the benefit of the Owners of the
Certificates, and applied solely as provided herein.
Section 6.02. Deposit. There shall be deposited in the Reserve Fund an amount
equal to the Reserve Requirement, in accordance with Section 2.07(c). Moneys in the
Reserve Fund shall be held in trust as a reserve for the payment when due of all the
Lease Payments to be paid pursuant to the Lease Agreement.
Section 6.03. Transfers of Excess. On or before January 15 and July 15 in each
year, the Trustee shall transfer any moneys in the Reserve Fund then in excess of the
Reserve Requirement prior to the Completion Date, to the Acquisition and Construction
Fund, and thereafter to the Lease Payment Fund to be credited to the Lease Payments
next coming due and payable.
Section 6.04. Application hi Event of Deficiency in Lease Payment Fund. If on
any Interest Payment Date the moneys available in the Lease Payment Fund do not
equal the amount of the principal and interest and redemption premiums (if any) with
respect to the Certificates then coming due and payable, the Trustee shall apply the
moneys available in the Reserve Fund to make delinquent Lease Payments on behalf of
the City by transferring the amount necessary for this purpose to the Lease Payment
Fund. Upon receipt of any delinquent Lease Payment with respect to which moneys have
been advanced from the Reserve Fund, such Lease Payment shall be deposited in the
Reserve Fund to the extent of such advance.
Section 6.05. Transfer To Make All Lease Payments. If on any Interest Payment
Date the moneys on deposit in the Reserve Fund and the Lease Payment Fund (excluding
amounts required for payment of principal, interest and redemption premium, if any,
with respect to Certificates not presented for payment) are sufficient to pay all
Outstanding Certificates, including all principal, interest and redemption premiums (if
any), the Trustee shall, upon the written direction of a City Representative, transfer all
amounts then on deposit in the Reserve Fund to the Lease Payment Fund to be applied
to the payment of the Lease Payments on behalf of the City, and such moneys shall be
distributed to the Owners of Certificates in accordance with Article n of this Trust
Agreement. Any amounts remaining in the Reserve Fund upon payment in full of all
Outstanding Certificates, or upon provision for such payment as provided in Section
14.01, shall be withdrawn by the Trustee and paid to the City.
Section 6.06. Establishment of Escrow Fund. The Trustee shall establish a
special fund designated as the "Escrow Fund". All moneys at any time on deposit in the
Escrow Fund shall be held by the Trustee in trust for the holders of the Notes, and
applied solely as provided herein.
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Section 6.07. Deposit. There shall be deposited in the Escrow Fund an amount
equal to the amount necessary to pay the principal of and interest on the Notes at
maturity, as provided in Section 2.07(b).
Section 6.08. Payment of the Notes. The Trustee shall transfer to the Paying
Agent, on or before the maturity date of the Notes (June 30, 1988), an amount equal to
the principal of and interest on the Notes, in order to fully discharge the City's payment
obligation on the Notes.
Section 6.09. Transfer of Excess. The Trustee shall, after making the payment
referenced in Section 6.08, transfer any monies remaining in the Escrow Fund to the
Lease Payment Fund, and shall thereupon close the Escrow Fund.
Section 6.10. Investment of Escrow Fund. All monies held in the Escrow Fund
shall, until used for payment of the Notes, be invested in Permitted Investments
described in paragraph (f) of the definition thereof.
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ARTICLE VH
INSURANCE AND CONDEMNATION FUND;
INSURANCE; EMINENT DOMAIN
Section 7.01. Establishment of Insurance and Condemnation Fund; Application of
Net Proceeds of Insurance Award. Any Net Proceeds of insurance against accident to or
destruction of any part of the Project collected by the City in the event of any such
accident or destruction shall be paid to the Trustee by the City pursuant to Section 6.2(a)
of the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in a
special fund designated as the "Insurance and Condemnation Fund". If the City
determines and notifies the Trustee in writing of its determination, within ninety (90)
days following the date of such deposit, that the replacement, repair, restoration,
modification or improvement of the Project is not economically feasible or in the best
interest of the City, then such Net Proceeds shall be promptly transferred by the Trustee
to the Lease Payment Fund and applied to the prepayment of Lease Payments pursuant
to Section 10.3 of the Lease Agreement; provided, however, that in the event of damage
or destruction of the Project in full, such Net Proceeds may be transferred to the Lease
Payment Fund only if sufficient, together with other moneys available therefor, to cause
the prepayment of the principal components of all unpaid Lease Payments allocable to
the Project and the Site pursuant to Section 10.3 of the Lease Agreement. All Net
Proceeds deposited in the Insurance and Condemnation Fund and not so transferred to
the Lease Payment Fund shall be applied to the prompt replacement, repair, restoration,
modification or improvement of the damaged or destroyed portions of the Project by the
City, upon receipt of requisitions satisfactory to the Trustee signed by a City
Representative stating with respect to each payment to be made (i) the requisition
number, (ii) the name and address of the person, firm or corporation to whom payment is
due, (iii) the amount to be paid and (iv) that each obligation mentioned therein has been
properly incurred, is a proper charge against the Insurance and Condemnation Fund, has
not been the basis of any previous withdrawal, and specifying in reasonable detail the
nature of the obligation, accompanied by a bill or a statement of account for such
obligation. Any balance of the Net Proceeds remaining after such work has been
completed shall be paid to the City.
Section 7.02. Application of Net Proceeds of Eminent Domain Award. If all or
any part of the Project or the Site shall be taken by eminent domain proceedings (or sold
to a government threatening to exercise the power of eminent domain) the Net Proceeds
therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund
pursuant to Section 6.2(b) of the Lease Agreement and shall be applied and disbursed by
the Trustee as follows:
(a) If the City has given written notice to the Trustee of its determination that (i)
such eminent domain proceedings have not materially affected the operation of the
Project or the ability of the City to meet any of its obligations with respect to the Project
and the Site under the Lease Agreement, and (ii) that such proceeds are not needed for
repair or rehabilitation of the Project, the City shall so certify to the Trustee and the City
has given written notice to the Trustee of such determination, the Trustee, at the City's
request, shall transfer such proceeds to the Lease Payment Fund to be credited towards
the prepayments of the Lease Payments pursuant to Section 10.3 of the Lease Agreement
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and applied to the redemption of Certificates in the manner provided in Section 4.01(b)
hereof.
(b) If the City has given written notice to the Trustee of its determination that (i)
such eminent domain proceedings have not materially affected the operation of the
Project or the ability of the City to meet any of its obligations with respect to the Project
and the Site under the Lease Agreement, and (ii) such proceeds are needed for repair,
rehabilitation or replacement of the Project, the City shall so certify to the Trustee and
the Trustee, at the City's request, shall pay to the City, or to its order, from said
proceeds such amounts as the City may expend for such repair or rehabilitation, upon the
filing with the Trustee of requisitions of the City Representative in the form and
containing the provisions set forth in Section 7.01.
(c) If (i) less than all of the Project or the Site shall have been taken in such
eminent domain proceedings or sold to a government threatening the use of eminent
domain powers, and if the City has given written notice to the Trustee of its
determination that such eminent domain proceedings have materially affected the
operation of the Project or the ability of the City to meet any of its obligations with
respect to the Project and the Site under the Lease Agreement or (ii) all of the Project
and the Site shall have been taken in such eminent domain proceedings, then the Trustee
shall transfer such proceeds to the Lease Payment Fund to be credited toward the
^repayment of the Lease Payments pursuant to Section 10.3 of the Lease Agreement and
applied to the redemption of Certificates in the manner provided in 4.01(b) hereof.
(d) In making any determination under this Section 7.02, the City may obtain, but
shall not be required to obtain, at its expense, the report of an independent engineer or
ftther independent professional consultant, a copy of which shall be filed with the
Trustee. Any such determination by the City shall be final.
I Section 7.03. Cooperation. The Corporation and the Trustee shall cooperate fully
with the City at the expense of the City in filing any proof of loss with respect to any
insurance policy maintained pursuant to Article V of the Lease Agreement and in the
prosecution or defense of any prospective or pending condemnation proceeding with
respect to the Project or the Site or any portion thereof.
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ARTICLE
MONEYS IN FUNDS; INVESTMENT; REBATE
Section 8.01. Held in Trust. The moneys and investments held by the Trustee
under this Trust Agreement are irrevocably held in trust for the benefit of the Owners of
the Certificates and for the purposes herein specified, and such moneys, and any income
or interest earned thereon, shall be expended only as provided in this Trust Agreement,
and shall not be subject to levy or attachment or lien by or for the benefit of any creditor
of the Corporation, the Trustee, the City or any Owner of Certificates.
Section 8.02. Investments Authorized. Moneys held by the Trustee hereunder
may, and upon written order of a City Representative shall, be invested and reinvested
by the Trustee, to the maximum extent practicable, in Permitted Investments. If a City
Representative shall fail to so direct investments, the Trustee shall invest the affected
moneys in Federal Securities or, to the extent such investment is not possible, in
Permitted Investments described in paragraph (f) of the definition thereof. A City
Representative may, by written order filed with the Trustee, direct such investment of
moneys held by the Trustee in specific Permitted Investments. Such investments, if
registrable, shall be registered in the name of and held by the Trustee. The Trustee may
purchase or sell to itself or any affiliate, as principal or agent, investments authorized by
this Section 8.02. Such investments and reinvestments shall be made giving full
consideration to the time at which funds are required to be available. The Trustee may
act as purchaser or agent in the making or disposing of any investment.
Section 8.03. Accounting. The Trustee shall furnish to the City, not less than
monthly, an accounting of all investments made by the Trustee. The Trustee shall not be
responsible or liable for any loss suffered in connection with any investment of funds
made by it in accordance with Section 8.02 hereof.
Section 8.04. Allocation of Earnings. Subject to Section 8.07 hereof, all interest
or income received by the Trustee on investment of the Lease Payment Fund hereof shall,
prior to the Completion Date, be transferred to the Acquisition and Construction Fund
and thereafter shall be retained in the Lease Payment Fund and be applied to the
payment of delinquent payments due with respect to the Certificates, if any, and
otherwise as set forth herein. Subject to Section 8.07 hereof, all interest or income
received by the Trustee on investment of the Reserve Fund shall be retained in the
Reserve Fund in the event that amounts on deposit in the Reserve Fund are less than the
Reserve Requirement. Pursuant to Section 6.04 hereof, in the event that amounts then
on deposit in the Reserve Fund exceed the Reserve Requirement, such excess shall, prior
to the Completion Date, be transferred to the Acquisition and Construction Fund and
thereafter shall be transferred to the Lease Payment Fund. Transfers to the Lease
Payment Fund from the Reserve Fund shall be made by the Trustee on or prior to each
Lease Payment Date. Amounts retained or deposited in the Lease Payment Fund
pursuant to this Section 8.04 shall be applied as a credit against the Lease Payment due
by the City pursuant to the Lease Agreement on the Lease Payment Date following the
date of deposit. Subject to Section 8.07 hereof, all interest or income in the Acquisition
and Construction Fund shall be retained hi the Acquisition and Construction Fund until
the Acquisition and Construction Fund is closed pursuant to Section 3.05 hereof. Subject
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to Section 8.07 hereof, all interest or income in the Delivery Costs Fund shall be retained
in the Delivery Costs Fund until the Delivery Costs Fund is closed pursuant to Section
3.04 hereof.
Section 8.05. Valuation and Disposition of Investments. For the purpose of
determining the amount in any fund, all Permitted Investments credited to such fund
shall be valued by the Trustee at lower of cost or market (exclusive of accrued interest).
The Trustee may sell at the best price obtainable, or present for redemption, any
Permitted Investment so purchased by the Trustee whenever it shall be necessary in
order to provide moneys to meet any required payment, transfer, withdrawal or
disbursement from the fund to which such Permitted Investment is credited, and the
Trustee shall not be liable or responsible for any loss resulting from any such Permitted
Investment.
Section 8.06. No Arbitrage. The City shall not take, or permit or suffer to be
taken by the Trustee or otherwise, any action with respect to the proceeds of the
Certificates which if such action had been reasonably expected to have been taken, or had
been deliberately and intentionally taken, on the Closing Date would have caused the
Lease Agreement to be an "arbitrage bond" within the meaninj| of section 148(a) of the
Code and Regulations promulgated thereunder. ••
i Section 8.07. Application of Investment Earnings; Rebate of Excess Investment
Earnings to United States.
*'
I (A) Creation of Accounts. There are hereby created, to be held by the
| Trustee as separate accounts distinct from all other funds and accounts held by
f the Trustee under this Trust Agreement, the Investment Earnings Account and
the Excess Investment Earnings Account. All interest earnings and profits on
amounts in all funds and accounts established under this Trust Agreement, other
,1 than interest earnings on the Lease Payment Fund if such earnings hi any
$ Certificate Year are less than $100,000, shall, upon receipt by the Trustee, be
deposited in the Investment Earnings Account. Annually, within 30 days of the
last day of each Certificate Year the Trustee shall transfer from the Investment
Earnings Account to the Excess Investment Earnings Account for purposes of
ultimate rebate to the United States an amount equal to Excess Investment
Earnings, all as more particularly described in this Section. Following the
transfer referenced in the preceding sentence, the Trustee shall transfer all
amounts remaining in the Investment Earnings Account to the following funds and
accounts in the following order: (i) to the Acquisition and Construction Fund if
the Trustee has not received the Certificate of Completion with respect to the
Project, (ii)(l) to the Reserve Fund to the extent necessary to increase the amount
on deposit in the Reserve Fund to equal the Reserve Requirement, and (2) to the
Lease Payment Fund to be used for the payment of Lease Payments on the next
Payment Date, and for such purpose Lease Payments due from the City on such
date shall be credited by an amount equal to the amount so transferred.
(B) Definition of Excess Investment Earnings. The Trustee shall calculate
Excess Investment Earnings in accordance with subsection (C) and to pay an
amount equal to Excess Investment Earnings to the United States in accordance
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with subsection (D). The term "Excess Investment Earnings" means an amount
equal to the sum of:
(i) the excess of
(a) the aggregate amount earned from the date of delivery of the
Certificates on all Nonpurpose Obligations in which Gross Proceeds of the
Certificates are invested (other than amounts attributable to an excess
described hi this paragraph (i)), over
(b) The amount that would have been earned if the Yield on such
Nonpurpose Obligation (other than amounts attributable to an excess
described in this paragraph (i)) had been equal to the Yield on the
Certificates,
plus (ii) any income attributable to the excess described in
paragraph (i).
(C) Calculation of Excess. Within 30 days of the last day of the first
Certificate Year, the Trustee shall calculate the Excess Investment Earnings
referenced in paragraph (i) of section (B). Thereafter, within 30 days of the last
day of each Certificate Year and within thirty days after the payment in full of the
Certificates, the Trustee shall calculate the amount of excess Investment Earnings
referenced in paragraphs (i) and (ii) of subsection (B).
(D) Payment to the United States. The City shall direct the Trustee to pay
from the Excess Investment Earnings Account an amount equal to Excess
Investment Earnings to the United States in installments with the first payment
to be made no later than thirty (30) days after the end of the fifth Certificate Year
and with subsequent payments to be made not later than five (5) years after the
preceding payment was due. The City shall assure that each such installment is
an amount equal to at least 90 percent of the Excess Investment Earnings with
respect to the Certificates as of the close of the computation period. Not later
than sixty (60) days after the payment in full of the Lease Payments, the City
shall direct the Trustee to pay from the Excess Investment Earnings Account to
the United States 100 percent of the theretofore unpaid Excess Investment
Earnings. If there are any amounts remaining in the Excess Investment Earnings
Account following the payment required by the preceding sentence, the Trustee
shall transfer said amounts to the City to be used for any lawful purpose of the
City. The City or the Trustee shall remit payments to the United States at the
address prescribed by such Regulations. If, for any reason, amounts in the Excess
Investment Earnings Accounts are insufficient to make the payments to the
United States which are required by this subsection (D), the City shall assure that
such payments are made to the United States, on a timely basis, from any funds
lawfully available therefor.
(E) Further Obligation of the City. The City shall assure that Excess
Investment Earnings are not paid or disbursed except as required in this Section.
To that end the City shall assure that investment transactions are on an arm's-
length basis. In the event that Nonpurpose Investments consist of certificates of
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deposit or investment contracts, investment in such Nonpurpose Investments shall
be made in accordance with the procedures described in applicable Regulations as
from time to time in effect.
(F) Maintenance of Records. The Trustee shall keep, and retain for a
period of six (6) years following the payment in full of the Certificates, such
records of the determinations made pursuant to this Section 8.07 as are required
under Section 148(f) of the Code.
(G) Independent Consultants. In order to provide for the administration of
this Section 8.07, the City and the Trustee may provide for the employment of
independent attorneys, accountants and consultants compensated on such
reasonable basis as the City or the Trustee may deem appropriate and the Trustee
may rely conclusively upon and shall be fully protected from all liability in relying
on the opinions, calculations, determinations, directions and advice of such
attorneys, accountants and consultants employed hereunder.
(H) Fees and Expenses. The City shall be responsible for the payment of
any fees and expenses incurred by the Trustee or the City under or pursuant to
this Section 8.07.
(I) Administration. The City hereby appoints the Trustee to administer
the provisions of this Section 8.07 and the Trustee hereby accepts such
appointment, subject to the provisions of paragraph (G) above.
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ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee. The Bank of California, National
Association, a national banking association organized and existing under and by virtue of
the laws of the United States of America with its principal corporate trust office in San
Francisco, California, is hereby appointed Trustee by the Corporation and the City for the
purpose of receiving all moneys required to be deposited with the Trustee hereunder and
to allocate, use and apply the same as provided in this Trust Agreement. The
Corporation and the City agree that they will maintain a Trustee having a principal
corporate trust office in Los Angeles or San Francisco, California, with a combined
capital and surplus of at least fifty million dollars ($50,000,000), and subject to
supervision or examination by federal or State authority, so long as any Certificates are
Outstanding. If such bank or trust company publishes a report of condition at least
annually pursuant to law or to the requirements of any supervising or examining
authority above referred to then for the purpose of this Section 9.01, the combined capital
and surplus of such bank or trust company shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
The Trustee is hereby authorized to redeem the Certificates when duly presented
for payment at maturity, or on redemption, or on purchase by the Trustee prior to
maturity in accordance with Section 4.06 hereof, and to cancel all Certificates upon
payment thereof. The Trustee shall keep accurate records of all funds administered by it
and of all Certificates paid and discharged. The Trustee shall be compensated for its
services rendered pursuant to the provisions of this Trust Agreement.
Section 9.02. Acceptance of Trusts. The Trustee hereby accepts the trusts
imposed upon it by this Trust Agreement, and agrees to perform said trusts, but only
upon and subject to the following express terms and conditions:
The Trustee, prior to the occurrence of an Event of Default and after curing of all
Events of Default which may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Trust Agreement. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee may exercise such
of the rights and powers vested in it by this Trust Agreement, and shall use the same
degree of care and skill in their exercise, as a prudent and reasonable man would exercise
or use under the circumstances in the conduct of his own affairs.
No provision in this Trust Agreement shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers.
The Trustee may execute any of the trusts or powers hereof and perform the
duties required of it hereunder by or through attorneys, agents, or receivers and the
Trustee shall not be responsible for any misconduct or negligence on the part of any
attorney, agent or receiver appointed in accordance with the standard specified above,
and shall be entitled to advice of counsel concerning all matters of trust and its duty
hereunder.
-22-
The Trustee shall not be responsible for any recital herein, or in the Certificates,
or for any of the supplements thereto or instruments of further assurance, or for the
sufficiency of the security for the Certificates delivered hereunder or intended to be
secured hereby and the Trustee shall not be bound to ascertain or inquire as to the
observance or performance of any covenants, conditions or agreements on the part of the
Corporation or the City under the Lease Agreement. The Trustee shall not be
responsible or liable for any loss suffered in connection with any investment of funds
made by it in accordance with Article VIII of this Trust Agreement.
The Trustee shall not be accountable for the use of any Certificates delivered
hereunder. The Trustee may become the Owner of Certificates secured hereby with the
same rights which it would have if not the Trustee; may acquire and dispose of other
bonds or evidence of indebtedness of the City with the same rights it would have if it
were not the Trustee; and may act as a depositary for and permit any of its officers or
directors to act as a member of, or in any other capacity with respect to, any committee
formed to protect the rights of Owners of Certificates, whether or not such committee
shall represent the Owners of the majority in principal amount of the Certificates then
Outstanding.
In the absence of bad faith on its part, the Trustee shall be protected in acting
upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other
paper or document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons. Any action taken or omitted to be taken by the
Trustee in good faith pursuant to this Trust Agreement upon the request or authority or
consent of any person who at the time of making such request or giving such authority or
consent is the Owner of any Certificate, shall be conclusive and binding upon all future
Owners of the same Certificate and upon Certificates executed and delivered in exchange
therefor or in place thereof. The Trustee shall not be bound to recognize any person as
an Owner of any Certificate or to take any action at his request unless such Certificate
shall be deposited with the Trustee or satisfactory evidence of the ownership of such
Certificate shall be furnished to the Trustee.
As to the existence or non-existence of any fact or as to the sufficiency or validity
of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a
certificate signed by an Corporation Representative or a City Representative as sufficient
evidence of the facts therein contained and prior to the occurrence of an Event of Default
of which the Trustee has been given notice or is deemed to have notice, shall also be at
liberty to accept a similar certificate to the effect that any particular dealing, transaction
or action is necessary or expedient, but may at its discretion secure such further evidence
deemed by it to be necessary or advisable, but shall in no case be bound to secure the
same. The Trustee may accept a certificate of an Corporation Representative or a City
Representative to the effect that an authorization in the form therein set forth has been
adopted by the Corporation or the City, as the case may be, as conclusive evidence that
such authorization has been duly adopted, and is in full force and effect.
The permissive right of the Trustee to do things enumerated in this Trust
Agreement shall not be construed as a duty and it shall not be answerable for other than
its negligence or willful default. The immunities and exceptions from liability of the
Trustee shall extend to its officers, directors, employees and agents.
-23-
The Trustee shall not be required to take notice or be deemed to have notice of
any Event of Default hereunder except failure by the City to make any of the Lease
Payments to the Trustee required to be made by the City pursuant to the Lease
Agreement or failure by the Corporation or the City to file with the Trustee any
document required by this Trust Agreement or the Lease Agreement to be so filed
subsequent to the delivery of the Certificates, unless the Trustee shall be specifically
notified in writing of such default by the Corporation, the City or by the Owners of at
least five percent (5%) in aggregate principal amount of Certificates then Outstanding
and all notices or other instruments required by this Trust Agreement to be delivered to
the Trustee must, in order to be effective, be delivered at the Principal Corporate Trust
Office of the Trustee, and in the absence of such notice so delivered the Trustee may
conclusively assume there is no Event of Default except as aforesaid.
The Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the premises.
Notwithstanding anything elsewhere in this Trust Agreement with respect to the
execution of any Certificates, the withdrawal of any cash, the release of any property, or
any action whatsoever within the purview of this Trust Agreement, the Trustee shall
have the right, but shall not be required, to demand any showings, certificates, opinions,
appraisals or other information, or corporate action or evidence thereof, in addition so
that by the terms hereof required as a condition of such action, by the Trustee deemed
desirable for the purpose of establishing the right of the City to the withdrawal of any
cash, or the taking of any other action by the Trustee.
All moneys received by the Trustee shall, until used or applied or invested as
herein provided, be held in trust for the purposes for which they were received but need
not be segregated from other funds except to the extent required by law.
The Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Owners of a majority in
aggregate principal amount of the Outstanding Certificates relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Trust Agreement.
Before being required to take any action, the Trustee may require an opinion of
Independent Counsel acceptable to the Trustee, which opinion shall be made available to
the other parties hereto upon request, which counsel may be counsel to any of the parties
hereto, or a verified certificate of any party hereto, or both, concerning the proposed
action. If it does so in good faith, the Trustee shall be absolutely protected in relying
thereon.
Section 9.03. Fees, Charges and Expenses of Trustee. The Trustee shall be
entitled to payment and reimbursement for reasonable fees for its services rendered
hereunder and all advances, counsel fees (including expenses) and other expenses
reasonably and necessarily made or incurred by the Trustee in connection with such
services.
Section 9.04. Notice to Certificate Owners of Default. If an Event of Default
occurs of which the Trustee has been given or is deemed to have notice, then the Trustee
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shall promptly give written notice thereof by first class mail to the Owner of each
Certificate, unless such Event of Default shall have been cured before the giving of such
notice; provided, however that unless such Event of Default consists of the failure by the
City to make any Lease Payment when due, the Trustee may elect not to give such notice
if and so long as the Trustee in good faith determines that it is in the best interests of the
Certificate Owners not to give such notice.
Section 9.05. Intervention by Trustee. In any judicial proceeding to which the
Corporation or the City is a party which, in the opinion of the Trustee and its counsel,
has a substantial bearing on the interests of Owners of the Certificates, the Trustee may
intervene on behalf of the Certificate Owners, and shall do so if requested in writing by
the Owners of at least five percent (5%) of the aggregate principal amount of Certificates
then Outstanding. The rights and obligations of the Trustee under this Section 9.05 are
subject to the approval of a court of competent jurisdiction.
Section 9.06. Removal of Trustee. The City may, with the consent of the
Corporation, remove the Trustee initially appointed, and any successor thereto, by an
instrument or concurrent instruments in writing delivered to the Trustee and the
Corporation, and may appoint a successor or successors thereto; provided that any such
successor shall be a bank or trust company meeting the requirements set forth in Section
9.01 hereof.
|
k Section 9.07. Resignation by Trustee. The Trustee and any successor Trustee
may, at any time, resign by giving thirty (30) days' written notice by registered or
Certified mail to the City and the Corporation. Upon receiving such notice of resignation,
Jhe City shall promptly appoint a successor Trustee. Any resignation or removal of the
jjFrustee and appointment of a successor Trustee shall become effective upon acceptance of
Appointment by the successor Trustee. Upon such acceptance, the City shall mail notice
|hereof to the Certificate Owners at their respective addresses set forth on the
Jjegistration Books.
V,'
Section 9.08. Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 9.06 or 9.07 hereof, respectively, the City
shall promptly appoint a successor Trustee. In the event the City shall, for any reason
whatsoever, fail to appoint a successor Trustee within thirty (30) days following the
delivery to the Trustee of the instrument described in Section 9.06 hereof or within thirty
(30) days following the receipt of notice by the City pursuant to Section 9.07 hereof, the
Trustee may apply to a court of competent jurisdiction for the appointment of a successor
Trustee meeting the requirements of Section 9.01 hereof. Any such successor Trustee
appointed by such court shall become the successor Trustee hereunder notwithstanding
any action by the City purporting to appoint a successor Trustee following the expiration
of such thirty (30) day period.
Section 9.09. Merger or Consolidation. Any company or association into which
the Trustee may be merged or converted or with which it may be consolidated or any
company resulting from any merger, conversion or consolidation to which it shall be a
party or any company or association to which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided that such company or
association shall be eligible under Section 9.01 hereof, shall be the successor to the
Trustee and vested with all of the title to the trust estate and all of the trusts, powers,
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discretions, immunities, privileges and all other matters as was its predecessor, without
the execution or filing of any paper or further act, anything herein to the contrary
notwithstanding.
Section 9.10. Concerning any Successor Trustee. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its or his predecessor and
also the Corporation and the City an instrument in writing accepting such appointment
hereunder and thereupon such successor, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers, trusts, duties
and obligations of its predecessors; but such predecessor shall, nevertheless, on the
written request of the City, or of its successor, execute and deliver an instrument
transferring to such successor all the estates, properties, rights, powers and trusts of
such predecessor hereunder; and every predecessor Trustee shall deliver all securities
and moneys held by it as the Trustee hereunder to its successor. Should any instrument
in writing from the City be required by any successor Trustee for more fully and certainly
vesting in such successor the estate, rights, powers and duties hereby vested or intended
to be vested in the predecessor, any and all such instruments in writing shall, on request,
be executed, acknowledged and delivered by the City. The resignation of any Trustee and
the instrument or instruments removing any Trustee and appointing a successor
hereunder, together with all other instruments provided for in this Article IX, shall be
filed or recorded by the successor Trustee in each recording office where the Assignment
Agreement shall have been filed or recorded.
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ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted. This Trust Agreement and the rights and
obligations of the Owners of the Certificates and the Lease Agreement and the rights and
obligations of the parties thereto, may be modified or amended at any time by a
Supplemental agreement which shall become effective when the written consents of the
Owners of a majority percent in aggregate principal amount of the Certificates then
Outstanding, exclusive of Certificates disqualified as provided in Section 10.03 hereof,
shall have been filed with the Trustee. No such modification or amendment shall (1)
extend or have the effect of extending the fixed maturity of any Certificate or reducing the
interest rate with respect thereto or extending the time of payment of interest, or
reducing the amount of principal thereof or reducing any premium payable upon the
redemption thereof, without the express consent of the Owner of such Certificate, or (2)
reduce or have the effect of reducing the percentage of Certificates required for the
affirmative vote or written consent to an amendment or modification of the Lease
Agreement, or (3) modify any of the rights or obligations of the Trustee without its
written assent thereto. Any such supplemental agreement shall become effective as
provided in Section 10.02 hereof.
II This Trust Agreement and the rights and obligations of the Owners of the
Certificates and the Lease Agreement and the rights and obligations of the respective
Mmrties thereto, may be modified or amended at any tune by a supplemental agreement,
Jwtithout the consent of any such Owners, but only to the extent permitted by law and
Ipnly (1) to add to the covenants and agreements of any party, other covenants to be
jbbserved, or to surrender any right or power herein reserved to the Corporation or the
City, (2) to cure, correct or supplement any ambiguous or defective provision contained
herein or therein and which shall not, in the opinion of nationally recognized bond
counsel, adversely affect the interests of the Owners of the Certificates, (3) in regard to
questions arising hereunder or thereunder, as the parties hereto or thereto may deem
necessary or desirable and which shall not, in the opinion of nationally recognized bond
counsel, adversely affect the interests of the Owners of the Certificates, (4) to modify the
legal description either of the Site to conform to the requirements of title insurance or
otherwise to add or delete property descriptions to reflect accurately the description of
the parcels intended to be included therein; or (5) to make such additions, deletions or
modifications as may be necessary to assure exclusion from gross income for purposes of
Federal income taxation of the interest component of Lease Payments. Any such
supplemental agreement shall become effective upon execution and delivery by the
parties hereto or thereto, as the case may be.
Section 10.02. Procedure for Amendment with Written Consent of Certificate
Owners. This Trust Agreement and the Lease Agreement may be amended by
supplemental agreement as provided in this Section 10.02 in the event the consent of the
Owners of the Certificates is required pursuant to Section 10.01 hereof. A copy of such
supplemental agreement, together with a request to the Certificate Owners for their
consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his
address as set forth on the Registration Books, but failure to mail copies of such
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supplemental agreement and request shall not affect the validity of the supplemental
agreement when assented to as in this Section 10.02 provided.
Such supplemental agreement shall not become effective unless there shall be filed
with the Trustee the written consents of the Owners of sixty percent (60%) in aggregate
principal amount of the Certificates then Outstanding (exclusive of Certificates
disqualified as provided in Section 10.03 hereof) and a notice shall have been mailed as
hereinafter in this Section 10.02 provided. Each such consent shall be effective only if
accompanied by proof of ownership of the Certificates for which such consent is given,
which proof shall be such as is permitted by Section 2.11 hereof. Any such consent shall
be binding upon the Owner of the Certificate giving such consent and on any subsequent
Owner (whether or not such subsequent Owner has notice thereof) unless such consent is
revoked in writing by the Owner giving such consent or a subsequent Owner by filing
such revocation with the Trustee prior to the date when the notice hereinafter in this
Section 10.02 provided for has been mailed.
After the Owners of the required percentage of Certificates shall have filed their
consents to such supplemental agreement, the Trustee shall mail a notice to the Owners
of the Certificates in the manner hereinbefore provided in this Section 10.02 for the
mailing of such supplemental agreement of the notice of adoption thereof, stating in
substance that such supplemental agreement has been consented to by the Owners of the
required percentage of Certificates and will be effective as provided in this Section 10.02
(but failure to mail copies of said notice shall not affect the validity of such supplemental
agreement or consents thereto). A record, consisting of the papers required by this
Section 10.02 to be filed with the Trustee, shall be conclusive proof of the matters therein
stated. Such supplemental agreement shall become effective upon the mailing of such
last-mentioned notice, and such supplemental agreement shall be deemed conclusively
binding upon the parties hereto and the Owners of all Certificates at the expiration of
sixty (60) days after such filing, except in the event of a final decree of a court of
competent jurisdiction setting aside such consent in a legal action or equitable proceeding
for such purpose commenced within such sixty (60) day period.
Section 10.03. Disqualified Certificates. Certificates owned or held by or for the
account of the City or by any person directly or indirectly controlled or controlled by, or
under direct or indirect common control with the City (except any Certificates held in any
pension or retirement fund) shall not be deemed Outstanding for the purpose of any vote,
consent, waiver or other action or any calculation of Outstanding Certificates provided for
in this Trust Agreement, and shall not be entitled to vote upon, consent to, or take any
other action provided for in this Trust Agreement.
Section 10.04. Effect of Supplemental Agreement. From and after the tune any
supplemental agreement becomes effective pursuant to this Article X, this Trust
Agreement or the Lease Agreement, as the case may be, shall be deemed to be modified
and amended in accordance therewith, the respective rights, duties and obligations of the
parties hereto or thereto and all Owners of Certificates Outstanding, as the case may be,
shall thereafter be determined, exercised and enforced hereunder subject in all respects to
such modification and amendment, and all the terms and conditions of any supplemental
agreement shall be deemed to be part of the terms and conditions of this Trust
Agreement or the Lease Agreement, as the case may be, for any and all purposes.
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Each Certificate Owner shall certify to the Trustee whether the Certificates as to
which such consent is given are disqualified as provided in Section 10.03 hereof.
Section 10.05. Endorsement or Replacement of Certificates Delivered After
Amendments. The Trustee may determine that Certificates delivered after the effective
date of any action taken as provided in this Article X shall bear a notation, by
endorsement or otherwise, in form approved by the Trustee, as to such action. In that
case, upon demand of the Owner of any Certificate Outstanding at such effective date
and presentation of his Certificate for the purpose at the Principal Corporate Trust Office
of the Trustee, a suitable notation shall be made on such Certificate. The Trustee may
determine that the delivery of substitute Certificates, so modified as in the opinion of the
Trustee is necessary to conform to such Certificate Owners' action, which substitute
Certificates shall thereupon be prepared, executed and delivered. In that case, upon
demand of the Owner of any Certificate then Outstanding, such substitute Certificate
shall be exchanged at the Principal Corporate Trust Office of the Trustee, without cost to
such Owner, for a Certificate of the same character then Outstanding, upon surrender of
such Outstanding Certificate.
Section 10.06. Amendatory Endorsement of Certificates. The provisions of this
Article X shall not prevent any Certificate Owner from accepting any amendment as to
jthe particular Certificates held by him, provided that proper notation thereof is made on
luch Certificates.
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ARTICLE XI
COVENANTS; NOTICES
Section 11.01. Compliance With and Enforcement of Lease Agreement. The City
covenants and agrees with the Owners of the Certificates to perform all obligations and
duties imposed on it under the Lease Agreement. The Corporation covenants and agrees
with the Owners of the Certificates to perform all obligations and duties imposed on it
under the Lease Agreement.
The City will not do or permit anything to be done, or omit or refrain from doing
anything, in any case where any such act done or permitted to be done, or any such
omission of or refraining from action, would or might be a ground for cancellation or
termination of the Lease Agreement by the Corporation thereunder. The Corporation
and the City, immediately upon receiving or giving any notice, communication or other
document in any way relating to or affecting their respective estates, or either of them, in
the Site, which may or can in any manner affect such estate of the City, will deliver the
same, or a copy thereof, to the Trustee.
Section 11.02. Observance of Laws and Regulations. The City will well and truly
keep, observe and perform all valid and lawful obligations or regulations now or hereafter
imposed on it by contract, or prescribed by any law of the United States, or of the State,
or by any officer, board or commission having jurisdiction or control, as a condition of the
continued enjoyment of any and every right, privilege or franchise now owned or
hereafter acquired by the City, including its right to exist and carry on business as a
municipal corporation, to the end that such rights, privileges and franchises shall be
maintained and preserved, and shall not become abandoned, forfeited or in any manner
impaired.
Section 11.03. Prosecution and Defense of Suits. The City shall promptly, upon
request of the Trustee or any Certificate Owner, from time to time take such action as
may be necessary or proper to remedy or cure any defect in or cloud upon the title to the
Project and the Site, whether now existing or hereafter developing and shall prosecute all
such suits, actions and other proceedings as may be appropriate for such purpose and
shall indemnify and save the Trustee and every Certificate Owner harmless from all loss,
cost, damage and expense, including attorneys' fees, which they or any of them may incur
by reason of any such defect, cloud, suit, action or proceeding.
Section 11.04. Recordation and Filing. The City shall record and file the Lease
Agreement (or a memorandum thereof), the Assignment Agreement and all such
documents as may be required by law (and shall take all further actions which may be
necessary or be reasonably required by the Trustee), all in such manner, at such tunes
and in such places as may be required by law in order fully to preserve, protect and
perfect the security of the Trustee and the Certificate Owners.
Section 11.05. City Budgets. The City shall supply to the Trustee, on or about
July 1 in each year a written determination by a City Representative that the City has
made adequate provision in its proposed annual budget for the payment of Lease
Payments due under the Lease Agreement in the fiscal year covered by such budget.
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Such determination shall be made as soon as practicable after the first publication of any
notice of public hearing upon the proposed budget of the City and shall be made, in any
event, not later than the date fixed for any public hearing on the proposed budget. The
determination given by the City to the Trustee shall be that the amounts so budgeted are
fully adequate for the payment of all Lease Payments due under the Lease Agreement in
the annual period covered by such budget. If the amounts so budgeted are not at least
equal to the amount of the Lease Payments coming due and payable under the Lease
Agreement, the City will take such action as may be necessary to cause such annual
budget to be amended, corrected or augmented so as to include therein the amounts
required to be raised by the City in such period for the payment of Lease Payments
coming due and payable under the Lease Agreement and will notify the Trustee of the
proceedings then taken or proposed to be taken by the City. The City will keep the
Trustee advised of all budgetary proceedings thereafter taken by the City.
Section 11.06. Further Assurances. The Corporation and the City will make,
execute and deliver any and all such further resolutions, instruments and assurances as
may be reasonably necessary or proper to carry out the intention or to facilitate the
performance of this Trust Agreement and the Lease Agreement, or as may be requested
by the Trustee and for the better assuring and confirming .unto the Owners of the
Certificates and the Trustee the rights and benefits provided herein.
Iv
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ARTICLE XH
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of City. Except for the payment of Lease
Payments when due in accordance with the Lease Agreement and the performance of the
other covenants and agreements of the City contained in the Lease Agreement and this
Trust Agreement, the City shall have no pecuniary obligation or liability to any of the
other parties or to the Owners of the Certificates with respect to this Trust Agreement or
the terms, execution, delivery or transfer of the Certificates, or the distribution of Lease
Payments to the Owners by the Trustee, except as expressly set forth herein.
Section 12.02. No Liability of City or Corporation for Trustee Performance.
Neither the City nor the Corporation shall have any obligation or liability to any of the
other parties or to the Owners of the Certificates with respect to the performance by the
Trustee of any duty imposed upon it under this Trust Agreement.
Section 12.03. Indemnification of Trustee. The City shall indemnify and save the
Trustee harmless from and against all claims, losses, costs, expenses, liability and
damages, including legal fees and expenses, arising out of (i) the use, maintenance,
condition or management of, or from any work or thing done on, the Project by the
Corporation or the City, (ii) any breach or default on the part of the Corporation or the
City in the performance of any of their respective obligations under this Trust Agreement
and any other agreement made and entered into for purposes of the Project, (iii) any act
of negligence of the Corporation or the City or of any of their respective agents,
contractors, servants, employees, licensees with respect to the Project, (iv) any act of
negligence of any assignee of, or purchaser from the Corporation or the City or of any of
its or their respective agents, contractors, servants, employees or licensees with respect
to the Project, (v) the authorization of payment or Delivery Costs or Acquisition and
Construction Costs, (vi) the actions of any other party, including but not limited to the
ownership, operation or use of the Project by the Corporation or the City, or (vii) the
Trustee's exercise and performance of its powers and .duties hereunder. No
indemnification will be made under this Section 12.03 or elsewhere in this Trust
Agreement for willful misconduct or negligence under this Trust Agreement by the
Trustee, its officers, agents, employees, successors or assigns. The City's obligations
hereunder shall remain valid and binding notwithstanding maturity and payment of the
Certificates.
Section 12.04. Limitation of Rights to Parties and Certificate Owners. Nothing in
this Trust Agreement or in the Certificates expressed or implied is intended or shall be
construed to give any person other than the City, the Corporation, the Trustee and the
Owners of the Certificates, any legal or equitable right, remedy or claim under or in
respect of this Trust Agreement or any covenant, condition or provision hereof; and all
such covenants, conditions and provisions are and shall be for the sole and exclusive
benefit of the City, the Corporation, the Trustee and said Owners.
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ARTICLE
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights. Pursuant to the Assignment Agreement,
the Corporation has transferred, assigned and set over to the Trustee all of the
Corporation's rights and duties in and to the Lease Agreement (excepting only the
Corporation's rights under Sections 5.8, 7.3 and 9.4 thereof), including without limitation
all of the Corporation's rights to exercise such rights and remedies conferred on the
Corporation pursuant to the Lease Agreement as may be necessary or convenient (i) to
enforce payment of the Lease Payments and any other amounts required to be deposited
in the Lease Payment Fund or the Insurance and Condemnation Award Fund, and (ii)
otherwise to exercise the Corporation's rights and take any action to protect the interests
of the Trustee or the Certificate Owners in an Event of Default.
Section 13.02. Remedies. If an Event of Default shall happen, then and in each
and every such case during the continuance of such Event of Default, the Trustee may,
and upon request of the Owners of a majority in aggregates principal amount of the
Certificates then Outstanding shall, exercise any and all remedies available pursuant to
law or granted pursuant to the Lease Agreement; provided, however, that
Notwithstanding anything herein or in the Lease Agreement to the contrary, there shall
|e no right under any circumstances to accelerate the maturities of the Certificates or
otherwise to declare any Lease Payment not then in default to be immediately due and
payable. In the event the City has defaulted under the Lease Agreement and the Trustee
|ias elected to sublease the Project and Site on behalf of the City or terminate the Lease
Agreement, the Trustee shall, to the extent reasonably possible, lease or sublease the
Site and the Project to the State of California or a political subdivision thereof.
£, Section 13.03. Application of Funds. All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article XIII or
Article DC of the Lease Agreement shall be applied by the Trustee in the order following
upon presentation of the several Certificates, and the stamping thereon of the payment if
only partially paid, or upon the surrender thereof if fully paid -
First, to the payment of the costs and expenses of the Trustee and of the
Certificate Owners hi declaring such Event of Default, including reasonable
compensation to its or their agents, attorneys and counsel, including all fees and
expenses past due; and
Second, to the payment of the whole amount then owing and unpaid with
respect to the Certificates for principal and interest, with interest on the overdue
principal and installments of interest at the rate of twelve percent (12%) per
annum (but such interest on overdue installments of interest shall be paid only to
the extent funds are available therefor following payment of principal and interest
and interest on overdue principal, as aforesaid), and in case such moneys shall be
insufficient to pay in full the whole amount so owing and unpaid with respect to
the Certificates, then to the payment of such principal and interest without
preference or priority of principal over interest, or of interest over principal, or of
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any installment of interest over any other installment of interest, ratably to the
aggregate of such principal and interest.
Section 13.04. Institution of Legal Proceedings. If one or more Events of Default
shall happen and be continuing, the Trustee in its discretion may, and upon the written
request of the Owners of a majority in principal amount of the Certificates then
Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to
protect or enforce its rights or the rights of the Owners of Certificates by a suit in equity
or action at law, either for the specific performance of any covenant or agreement
contained herein, or in aid of the execution of any power herein granted, or by mandamus
or other appropriate proceeding for the enforcement of any other legal or equitable
remedy as the Trustee shall deem most effectual in support of any of its rights or duties
hereunder.
Section 13.05. Non-waiver. Nothing in this Article XIII or in any other provision
of this Trust Agreement or in the Certificates, shall affect or impair the obligation of the
City to pay or prepay the Lease Payments as provided in the Lease Agreement, or affect
or impair the right of action, which is absolute and unconditional, of the Certificate
Owners to institute suit to enforce and collect such payment. No delay or omission of the
Trustee or of any Owner of any of the Certificates to exercise any right or power arising
upon the happening of any Event of Default shall impair any such right or power or shall
be construed to be a waiver of any such Event of Default or an acquiescence therein, and
every power and remedy given by this Article XIII to the Trustee or to the Owners of
Certificates may be exercised from time to time and as often as shall be deemed expedient
by the Trustee or the Certificate Owners.
Section 13.06. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee or to the Certificate Owners is intended to be exclusive of any
other remedy, and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing, at law or in equity or
by statute or otherwise.
Section 13.07. Power of Trustee to Control Proceedings. In the event that the
Trustee, upon the happening of an Event of Default, shall have taken any action, by
judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own
discretion or upon the request of the Owners of a majority in principal amount of the
Certificates then Outstanding, it shall have full power, in the exercise of its discretion for
the best interests of the Owners of the Certificates, with respect to the continuance,
discontinuance, withdrawal, compromise, settlement or other disposal of such action;
provided, however, that the Trustee shall not discontinue, withdraw, compromise or
settle, or otherwise dispose of any litigation pending at law or in equity, without the
consent of a majority in aggregate principal amount of the Certificates Outstanding.
Section 13.08. Limitation on Certificate Owners' Right to Sue. No Owner of any
Certificate issued hereunder shall have the right to institute any suit, action or
proceeding at law or in equity, for any remedy under or upon this Trust Agreement,
unless (a) such Owner shall have previously given to the Trustee written notice of the
occurrence of an Event of Default hereunder; (b) the Owners of at least twenty-five
percent (25%) in aggregate principal amount of all the Certificates then Outstanding shall
have made written request upon the Trustee to exercise the powers hereinbefore granted
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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.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of
Certificates of any remedy hereunder; it being understood and intended that no one or
more Owners of Certificates shall have any right in any manner whatever by his or their
action to enforce any right under this Trust Agreement, except in the manner herein
provided, and that all proceedings at law or in equity with respect to an Event of Default
shall be instituted, had and maintained hi the manner herein provided and for the equal
benefit of all Owners of the Outstanding Certificates.
The right of any Owner of any Certificate to receive payment of said Owner's
fractional interest in the Lease Payments as the same become due, or to institute suit for
the enforcement of such payment, shall not be impaired or affected without the consent of
such Owner, notwithstanding the foregoing provisions of this Section 13.05 or any other
provision of this Trust Agreement.
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AKTICLE XIV
MISCELLANEOUS
Section 14.01. Defeasance. If and when all Outstanding Certificates shall be paid
and discharged in any one or more of the following ways -
(a) by well and truly paying or causing to be paid the principal, and interest and
redemption premiums (if any) with respect to all Certificates Outstanding, as and when
the same become due and payable; or
(b) by depositing with an escrow holder security for the payment of Lease
Payments as more particularly described in Section 10.1 of the Lease Agreement, to be
applied to pay the Lease Payments as the same become due and payable and prepay the
Lease Payments in full on any prepayment date, pursuant to Section 10.1 of the Lease
Agreement -
then, notwithstanding that any Certificates shall not have been surrendered for payment,
all obligations of the Corporation, the Trustee and the City with respect to -all
Outstanding Certificates shall cease and terminate, except only the obligation of the City
to pay or cause to be paid, from Lease Payments paid by or on behalf of the City from
funds deposited pursuant to paragraph (b) of this Section 14.01, to the Owners of the
Certificates not so surrendered and paid all sums due with respect thereto, and in the
event of deposits pursuant to paragraph (b), the Certificates shall continue to represent
direct and fractional interests of the Owners thereof in Lease Payments under the Lease
Agreement.
Any funds held by the Trustee, at the time of one of the events described in
paragraphs (a) or (b) of this Section 14.01, which are not required for the payment to be
made to Owners, shall be paid over to the City.
Section 14.02. Records. The Trustee shall keep complete and accurate records of
all moneys received and disbursed under this Trust Agreement, which shall be available
for inspection by the City, the Corporation, and any Owner, or the agent of any of them,
at any time during regular business hours.
Section 14.03. Notices. All written notices to be given under this Trust
Agreement shall be given by mail or personal delivery to the party entitled thereto at its
address set forth below, or at such address as the party may provide to the other party in
writing from time to time. Notice shall be effective upon deposit in the United States
mail, postage prepaid or, in the case of personal delivery, upon delivery to the address set
forth below:
If to the City: City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Manager
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If to the Corporation: Public Improvement Corporation of
the City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: Executive Director
If to the Trustee: The Bank of California
400 California Street
San Francisco, California 94107
Attention: Vice President
Section 14.04. Governing Law. This Trust Agreement shall be construed and
governed in accordance with the laws of the State.
Section 14.05. Binding Effect; Successors. This Trust Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective successors and
assigns. Whenever in this Trust Agreement the Corporation, the City or the Trustee is
named or referred to, such reference shall be deemed to include the successors or assigns
thereof, and all the covenants and agreements in this Trust Agreement contained by or
on behalf of the Corporation, the City or the Trustee shall bind and inure to the benefit of
the respective successors and assigns thereof whether so expressed or not.
Section 14.06. Execution in Counterparts. This Trust Agreement may be
executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
Section 14.07. Delivery of Cancelled Certificates. Whenever in this Trust
Agreement provision is made for the surrender to or cancellation by the Trustee of any
Certificates, the Trustee shall deliver such cancelled Certificates to the City for
destruction or storage.
Section 14.08. Headings. The headings or titles of the several Articles and
Sections hereof, and any table of contents appended to copies hereof, shall be solely for
convenience of reference and shall not affect the meaning, construction or effect of this
Trust Agreement. All references herein to "Articles," "Sections," and other subdivisions
are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; and
the words "herein," "hereof," "hereunder" and other words of similar import refer to this
Trust Agreement as a whole and not to any particular Article, Section or subdivision
hereof.
Section 14.09. Waiver of Notice. Whenever in this Trust Agreement the giving of
notice by mail or otherwise is required, the giving of such notice may be waived in writing
by the person entitled to receive such notice and in any case the giving or receipt of such
notice shall not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
Section 14.10. Separability of Invalid Provisions. In case any one or more of the
provisions contained in this Trust Agreement or in the Certificates shall for any reason
be held to be invalid, illegal or unenforceable in any respect, then such invalidity,
illegality or unenforceability shall not affect any other provision of this Trust Agreement,
-37-
and this Trust Agreement shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein. The parties hereto hereby declare that they
would have entered into this Trust Agreement and each and every other section,
paragraph, sentence, clause or phrase hereof and authorized the delivery of the
Certificates pursuant thereto irrespective of the fact that any one or more sections,
paragraphs, sentences, clauses or phrases of this Trust Agreement may be held illegal,
invalid or unenforceable.
-38-
IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement
as of the date and year first above written.
THE BANK OF CALIFORNIA, N.A., as
Trustee
By
Authorized Officer
(SEAL)
Attest:
(SEAL)
Attest:
Secretary
City Clerk
CITY OF CARLSBAD
PUBLIC IMPROVEMENT CORPORATION
By
President
CITY OF CARLSBAD
By
Mayor
-39-
EXHIBIT A
DEFINITIONS
"Acquisition and Construction Costs" means all costs of payment of, or
reimbursement for, acquisition, construction, installation and equipping of the Project,
including but not limited to, architect and engineering fees, construction contractor
payments, costs of feasibility and other reports, inspection costs, performance bond
premiums and permit fees.
"Acquisition and Construction Fund" means the fund by that name
established and held by the City pursuant to Article III of the Trust Agreement.
"Agency Agreement" means that certain Agency Agreement, dated as of June 1,
1988, by and between the Corporation and the City.
"Assignment Agreement" means the Assignment Agreement, dated as of June 1,
1988, by and between the Corporation and the Trustee, together with any duly
authorized and executed amendments thereto.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State are closed or are required to close or a day on
which the New York Stock Exchange is closed.
"Certificate of Completion" means the certificate of a City Representative
certifying that the Project has been acquired, constructed, installed and equipped by the
City and that all Acquisition and Construction Costs have been paid.
"Certificates" means the $ aggregate principal amount of certificates of
participation to be executed and delivered pursuant to the Trust Agreement.
"Certificate Year" means the twelve month period beginning on the anniversary
of the Closing Date in each year and ending on the day prior to the anniversary date of
the Closing Date in the following year except that the first Certificate Year shall begin on
the Closing Date.
"City" means the City of Carlsbad, a municipal corporation and general law city
organized and existing under the laws of the State.
"City Representative" means the City Manager of the City or any other person
authorized by resolution of the City Council of the City to act on behalf of the City under
or with respect to the Lease Agreement, the Trust Agreement and the Corporation
Agreement.
"Closing Date" means the date upon which there is an exchange of the
Certificates for the proceeds representing the purchase of the Certificates by the Original
Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Completion Date" means the earlier of (i) the date of substantial completion of
acquisition, construction, installation and equipping of the Project as evidenced by the
filing with the Trustee of a Certificate of Completion, and (ii) June 1, 1991.
"Contractor" means the contractor(s) or vendor(s) from whom the Corporation or
the City on behalf of the Corporation has ordered or caused to be ordered or with whom
the Corporation or the City on behalf of the Corporation has contracted or caused to be
contracted for the acquisition and construction of the Project.
"Corporation" means the City of Carlsbad Public Improvement Corporation, a
nonprofit public benefit corporation organized and existing under and by virtue of the
laws of the State.
"Corporation Representative" means the President of the Corporation, or any
other person authorized by resolution of the Corporation to act on behalf of the
Corporation under or with respect to the Lease Agreement, the Trust Agreement, the
Agency Agreement and the Assignment Agreement.
| "Debt Service" means the scheduled principal and interest components of Lease
IPayments, payable during the period of computation, excluding amounts scheduled
Curing such period which relate to principal which has been retired before the beginning
jpf such period.
Ij "Delivery Costs" means all items of expense directly or indirectly payable by or
reimbursable to the City or the Corporation relating to the execution and delivery of the
Lease Agreement, the Trust Agreement, the Agency Agreement and the Assignment
JjAgreement or the execution, sale and delivery of the Certificates, including but not
limited to filing and recording costs, settlement costs, printing costs, reproduction and
binding costs, initial fees and charges of the Trustee, financing discounts, legal fees and
charges, insurance fees and charges, financial and other professional consultant fees,
costs of rating agencies for credit ratings, fees for execution, transportation and
safekeeping of the Certificates and charges and fees in connection with the foregoing.
"Delivery Costs Fund" means the fund by that name established and held by the
Trustee pursuant to Article III of the Trust Agreement.
"Escrow Fund" means the fund by that name established and held by the Trustee
pursuant to Section 6.06 of the Trust Agreement
"Event of Default" means an event of default under the Lease Agreement, as
defined in Section 9.1 thereof.
"Excess Investment Earnings Account" means the account by that name
established pursuant to Section 8.07 of this Trust Agreement.
"Federal Securities" means any of the following which are noncallable and which
at the time of investment are legal investments under the laws of the State for trust
funds held by the Trustee:
Exhibit A
Page 2
(a) direct general obligations of (including obligations issued or held in book entry
form on the books of the Department of the Treasury of the United States of America), or
obligations the payment of principal of and interest on which are guaranteed by, the
United States of America; or
(b) any of the following obligations of the following agencies of the United States
of America: (i) direct obligations of the Export-Import Bank; (ii) certificates of beneficial
ownership issued by the Farmers Home Administration; (iii) participation certificates
issued by the General Services Administration; (iv) mortgage-backed bonds or pass-
through obligations issued and guaranteed by the Government National Mortgage
Association; (v) project notes issued by the United States Department of Housing and
Urban Development; and (vi) public housing notes and bonds guaranteed by the United
States of America.
"Fiscal Year" means the twelve-month period beginning on July 1 of any year
and ending on June 30 of the next succeeding year, or any other twelve-month period
selected by the City as its fiscal year.
"Gross Proceeds" means the sum of the following amounts:
(a) original proceeds, namely, net amounts (after payment of all expenses of
executing and delivering the Lease Agreement and the Certificates) received by or for the
City as a result of the sale of the Certificates, excluding original proceeds which become
transferred proceeds (determined in accordance with applicable Regulations) of
obligations issued to refund in whole or in part the Lease Payments;
(b) investment proceeds, namely, amounts received at any time by or for the City,
such as interest and dividends, resulting from the investment of any original proceeds (as
referenced in paragraph (a) above) or investment proceeds (as referenced in this
paragraph (b)) in Nonpurpose Obligations, increased by any profits and decreased (if
necessary, below zero) by any losses on such investments, excluding investment proceeds
which become transferred proceeds (determined in accordance with applicable
Regulations) of obligations issued to refund in whole or in part the Lease Payments;
(c) sinking fund proceeds, namely, amounts, other than original proceeds or
investment proceeds (as referenced in paragraphs (a) and (b) above) of the Certificates,
which are held in any Lease Payment Fund and any other fund to the extent that the
City reasonably expects to use such other fund to pay Lease Payments;
(d) amounts in the Reserve Fund and in any other fund established as a
reasonably required reserve or replacement fund;
(e) Investment Property pledged as security for payment of Lease Payments by an
ultimate obligor or a related person or by the City;
(f) amounts, other than as specified in this definition, used to pay Lease
Payments; and
(g) amounts received as a result of investing amounts described in this definition.
Exhibit A
Page 3
"Independent Counsel" means an attorney duly admitted to the practice of
law before the highest court of the state in which such attorney maintains an
office and who is not an employee of the Corporation, the Trustee or the City.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond
Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention:
Editor; Kenny Information Services' "Called Bond Service," 55 Broad Street, 28th Floor,
New York, New York 10004; Moody's "Municipal and Government," 99 Church Street,
'8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard
& Poor's "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004; or
to such other addresses and/or such other national information services providing
information or disseminating notices of redemption of obligations such as the Certificates.
"Insurance and Condemnation Fund" means the fund by that name
established and held by the Trustee pursuant to Section 7.01 of the Trust Agreement.
"Interest Payment Date" means the first day of each February and August,
commencing February 1, 1989, so long as any Certificates are Outstanding.
"Investment Earnings Account" means the account by that name established
.pursuant to Section 8.07 of this Trust Agreement.
"Investment Property" means any security (as said term is defined in section
165(g)(2)(A) or (B) of the Code), obligation, annuity or investment-type property,
excluding, however, obligations the interest on which is exempt from income tax under
{section 103 of the Code.
.•{,
"Lease Agreement" means the Lease Agreement, dated as of June 1, 1988, by
and between the Corporation and the City, together with any duly authorized and
^executed amendments thereto.i'
"Lease Payments" means all payments required to be paid by the City pursuant
to Section 4.4 of the Lease Agreement, including any prepayment thereof pursuant to
Article X of the Lease Agreement, which payments consist of an interest component and
a principal component.
"Lease Payment Date" means the fifteenth (15th) day of March and September
in each year during the Term of the Lease Agreement, commencing September 15, 1988.
"Lease Payment Fund" means the fund by that name established and held by
the Trustee pursuant to Section 5.02 of the Trust Agreement.
"Moody's" means Moody's Investors Service of New York, New York, or its
successors.
"Net Proceeds," when used with respect to insurance or condemnation proceeds,
means any insurance proceeds or condemnation award paid with respect to the Project or
the Site, to the extent remaining after payment therefrom of all expenses incurred in the
collection thereof. "Net Proceeds," when used with reference to the Certificates, means
Exhibit A
Page 4
the face amount of the Certificates, plus accrued interest and premium, if any, less
original issue discount and less proceeds deposited in the Reserve Fund.
"Nonpurpose Obligation" means any Investment Property which is acquired
with the proceeds of the Certificates and is not acquired in order to carry out the
governmental purpose of the Lease Agreement.
"Notes" means the Notes of the City issued on July 16, 1987 in the principal
amount of $6,555,000, and maturing June 30, 1988.
"Original Purchaser" means Rauscher Pierce Refsnes, Inc., as original
purchaser of the Certificates.
"Outstanding", when used as of any particular time with respect to Certificates,
means (subject to the provisions of Section 10.03 of the Trust Agreement) all Certificates
theretofore executed and delivered by the Trustee under the Trust Agreement except -
(a) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee
for cancellation;
(b) Certificates for the payment or redemption of which funds or Federal
Securities in the necessary amount shall have theretofore been deposited with the
Trustee (whether upon or prior to the maturity or redemption date of such Certificates),
provided that, if such Certificates are to be redeemed prior to maturity, notice of such
redemption shall have been given as provided in Section 4.03 of the Trust Agreement or
provision satisfactory to the Trustee shall have been made for the giving of such notice;
and
(c) Certificates in lieu of or in exchange for which other Certificates shall have
been executed and delivered by the Trustee pursuant to Section 2.09 of the Trust
Agreement.
"Owner" or "Certificate Owner" or "Owner of a Certificate", or any similar
term, when used with respect to a Certificate means the person in whose name such
Certificate shall be registered.
"Permitted Encumbrances" means, as of any particular time: (a) liens for
general ad valorem taxes and assessments, if any, not then delinquent, or which the City
may, pursuant to provisions of Article V of the Lease Agreement, permit to remain
unpaid; (b) the Assignment Agreement; (c) the Lease Agreement; (d) any right or claim of
any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the
manner prescribed by law; (e) easements, rights of way, mineral rights, drilling rights
and other rights, reservations, covenants, conditions or restrictions which exist of record
as of the Closing Date and which the City certifies in writing will not materially impair
the use of the Site for the Project; and (f) easements, rights of way, mineral rights,
drilling rights and other rights, reservations, covenants, conditions or restrictions
established following the date of recordation of the Lease Agreement and to which the
Corporation and the City consent in writing.
Exhibit A
Page 5
"Permitted Investments" means any of the following which at the time of
investment are legal investments under the laws of the State for the moneys proposed to
be invested therein:
(a) Federal Securities;
(b) Any of the following obligations of federal agencies not guaranteed by the
United States of America: (i) debentures issued by the Federal Housing Administration;
(ii) participation certificates or senior debt obligations of the Federal Home Loan
Mortgage Corporation or Farm Credit Banks (consisting of Federal Land Banks, Federal
Intermediate Credit Banks, or Banks for Cooperatives); (iii) mortgage-backed securities
or senior debt obligations of the Federal National Mortgage Association; or (iv) credit-
backed or senior debt obligations of the Student Loan Marketing Association.
(c) interest-bearing demand or time deposits (including certificates of deposit) in
federal or State chartered savings and loan associations or in federal or State banks
(including the Trustee), provided that (i) the obligations of such savings and loan
association or bank or the obligations of the holding company of such savings and loan
association or bank carry one of the three highest Rating Categories by Moody's and
S&P, or (ii) such deposits are insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation;
(d) obligations issued by any corporation organized and operating within the
United States of America having assets in excess of $500,000,000, which obligations
carry one of the three highest long-term Rating Categories provided by Moody's and
S&P;
(e) repurchase agreements with any bank, savings institution or trust company
(including the Trustee) which is insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation, or with any broker-dealer with
retail customers which falls under Securities Investors Protection Corporation protection,
provided that such repurchase agreements are fully secured by Federal Securities or
obligations of any agency or instrumentality of the United States of America, and
provided further that (i) such collateral is held by the Trustee or any agent acting solely
for the Trustee during the term of such repurchase agreement, (ii) such collateral is not
subject to liens or claims of third parties, (iii) such collateral has a market value
(determined at least once every 30 days) at least equal to the amount invested in the
repurchase agreement, (iv) the Trustee has a perfected first security interest in the
collateral, (v) the agreement shall be for a term not longer than 180 days and (vi) the
failure to maintain such collateral at the level required in (iii) above will require the
Trustee to serve notice to the other party to correct such deficiency. If such deficiency is
not corrected, the Trustee is directed to liquidate the collateral;
(f) money market funds comprised exclusively of Federal Securities;
(g) commercial paper having original maturities of not more than 180 days and
rated in the highest Rating Category by Moody's and S&P;
(h) bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as bankers acceptances, which have a maturity of not more than 270
Exhibit A
Page 6
days and which are eligible for purchase by the Federal Reserve System and the
obligations of which commercial bank or the obligations of the holding company of which
carry one of the three highest long-term Rating Categories by Moody's and S&P; and
(i) tax-exempt obligations rated in one of the three highest rating categories by
Moody's and S&P.
"Principal Corporate Trust Office" means the corporate trust office of the
Trustee at 400 California Street, San Francisco, California, or at such other address
designated by the Trustee in written notice filed with the City and the Corporation in
writing.
"Private Business Use" means use directly or indirectly in a trade or business
carried on by a natural person or in any activity carried on by a person other than a
natural person, excluding, however, use by a governmental unit and use as a member of
the general public.
"Project" means the improvements to be constructed on the Site, all as more
particularly described in Exhibit C attached to the Lease Agreement.
"Rating Category" means, with respect to any Permitted Investment, one or
more of the generic categories of rating by Moody's or S&P applicable to such Permitted
Investment, without regard to any refinement or graduation of such rating category by a
plus or minus sign.
"Registration Books" means the records maintained by the Trustee pursuant to
Section 2.12 of the Trust Agreement for registration of the ownership and transfer of
ownership of the Certificates.
"Regular Record Date" means the close of business on the fifteenth (15th) day of
the month preceding each Interest Payment Date, whether or not such fifteenth (15th)
day is a Business Day.
"Regulations" means temporary and permanent regulations promulgated under
the Code.
"Rental Period" means each twelve-month period during the Term of the Lease
Agreement commencing on June 2 in any year and ending on June 1 in the next
succeeding year.
"Reserve Fund" means the fund by that name established and held by the
Trustee pursuant to Section 6.01 of the Trust Agreement.
"Reserve Requirement" means an amount equal to $ .
"S&P" means Standard & Poor's Corporation, of New York, New York, or its
successors.
"Securities Depositories" means The Depository Trust Company, 711 Stewart
Avenue, Garden City, New York 11530, Fax-(516) 227-4039 or 4190; Midwest Securities
Exhibit A
Page 7
Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago,
Illinois 60605, Fax-(312) 663-2343; Philadelphia Depository Trust Company,
Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103,
Attention: Bond Department, Dex-(215) 496-5058; or to such other addresses and/or
such other registered securities depositories holding substantial amounts of obligations of
types comprising the Certificates.
"Site" means all of that certain real property located in the City described in
Exhibit B to the Lease Agreement, on which the Project is to be constructed.
"State" means the State of California.
"Term of the Lease Agreement" means the time during which the Lease
Agreement is in effect, as provided in Section 4.2 of the Lease Agreement.
"Trust Agreement" means the Trust Agreement, dated as of June 1, 1988, by and
among the City, the Corporation and the Trustee, together with any duly authorized
amendments thereto.
"Trustee" means , or any successor thereto,
acting as Trustee pursuant to this Trust Agreement.
"Yield" means that yield which, when used in computing the present worth of all
payments of principal and interest (or other payments in the case of Nonpurpose
Obligations which require payments in a form not characterized as principal and interest)
on a Nonpurpose Obligation or on the Lease Payments produces an amount equal to the
Purchase Price of such Nonpurpose Obligation or the Certificates, all computed as
prescribed in applicable Regulations.
Exhibit A
PageS
EXHIBIT B
FORM OF THE CERTIFICATES
CERTIFICATE OF PARTICIPATION
(Hbsp Grove Project)
Evidencing an Undivided Fractional Interest of the Owner
Hereof in Lease Payments to be Made by the
CITY OF CARLSBAD, CALIFORNIA
As the Rental for Certain Property Pursuant
to a Lease Agreement With the
City of Carlsbad Public Improvement Corporation
NUMBER
R-
RATE OF INTEREST MATURITY DATE DATED DATE CUSIP
June 1, 1988
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
THIS IS TO CERTIFY THAT the registered owner identified above, or registered
assigns (the "Owner"), as the registered owner of this Certificate of Participation (the
"Certificate"), is the owner of an undivided, fractional interest in the right to receive
certain Lease Payments under and defined in that certain Lease Agreement (the "Lease
Agreement"), dated as of June 1, 1988, by between the Public Improvement Corporation
of the City of Carlsbad, a public body corporate and politic organized and existing under
the laws of the State of California (the "Corporation"), and the City of Carlsbad,
California, a municipal corporation and general law city organized and existing under the
laws of the State of California (the "City"), which Lease Payments, prepayments and
certain other rights and interests under the Lease Agreement have been assigned to The
Bank of California, N.A., as trustee (the "Trustee"), having its corporate trust office in
San Francisco, California.
The Owner of this Certificate is entitled to receive, subject to the terms of the
Lease Agreement, on the Maturity Date identified above, the Principal Amount identified
above, representing a portion of the Lease Payments designated as principal, and to
receive on August 1 and February 1 of each year, commencing February 1, 1989 (each, a
"Payment Date"), until payment in full of said Principal Amount, the Owner's fractional
share of the Lease Payments designated as interest coming due during the six months
immediately preceding each of the Payment Dates; provided that interest represented
hereby shall be payable from the Payment Date next preceding the date of execution of
this Certificate unless (i) this Certificate is executed on a Payment Date, in which event
interest shall be payable from such Payment Date, or (ii) this Certificate is executed after
the close of business on the fifteenth day of the month immediately preceding a Payment
Date, and prior to such Payment Date, in which event interest shall be payable from such
Payment Date, or (iii) unless this Certificate is executed on or before January 15, 1989, in
which event interest shall be payable from June 1, 1988. Said fractional share of the
portion of the Lease Payments designated as interest is the result of the multiplication of
the aforesaid portion of the Lease Payments designated as principal by the Rate of
Interest per annum identified above. Interest represented hereby is payable in lawful
money of the United States of America by check or draft of the Trustee mailed to the
Owner hereof at his address as it appears on the registration books of the Trustee, as of
the close of business on the fifteenth (15) day preceding each Payment Date, or at such
other address as the Owner may have filed with the Trustee for that purpose. Principal
represented hereby is payable upon presentation and surrender hereof at the corporate
trust office of the Trustee in San Francisco, California.
This Certificate has been executed and delivered by the Trustee pursuant to the
terms of a Trust Agreement by and among the Trustee, the Corporation and the City,
dated as of June 1, 1988 (the "Trust Agreement"). The City is authorized to enter into
the Lease Agreement and the Trust Agreement under the laws of the State of California.
Reference is hereby made to the Lease Agreement and the Trust Agreement (copies of
which are on file at the corporate trust office of the Trustee) for a description of the terms
on which the Certificates are delivered, the rights thereunder of the owners of the
Certificates, the rights, duties and immunities of the Trustee and the rights and
Obligations of the City under the Lease Agreement, all of the provisions of which the
Owner of this Certificate, by acceptance hereof, assents and agrees.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
CERTIFICATE SET FORTH ON THE REVERSE HEREOF WHICH FURTHER
PROVISIONS SHALL, FOR ALL PURPOSES, HAVE THE SAME EFFECT AS IF SET
FORTH IN THIS PLACE.
The Trustee has no obligation or liability to the registered owners of the
Certificates to make payments of principal or interest with respect to the Certificates.
The Trustee's sole obligations are to administer, for the benefit of the registered owners
of the Certificates, the various funds and accounts established under the Trust
Agreement.
The City has certified, recited and declared that all acts, conditions and things
required by the constitution and statutes of the State of California, the Lease Agreement
and the Trust Agreement to exist, to have happened and to have been performed
precedent to and in the delivery of this Certificate, do exist, have happened and have
been performed in due time, form and manner as required by law.
Exhibit B
Page 2
IN WITNESS WHEREOF, this Certificate has been executed by
, as trustee, acting pursuant to the Trust Agreement.
Date of Execution:
, as
Trustee
By
Authorized Signatory
Exhibit B
PageS
(FORM OF REVERSE OF CERTIFICATE)
The City is obligated under the Lease Agreement to pay Lease Payments from any
source of legally available funds and the City has covenanted in the Lease Agreement to
make the necessary annual appropriations therefor. The obligation of the City to pay the
Lease Payments does not constitute an obligation of the City for which the City is
obligated to levy or pledge any form of taxation or for which the City has levied or
pledged any form of taxation. The obligation of the City to pay Lease Payments does not
constitute an indebtedness within the meaning of any constitutional or statutory debt
limitation or restriction.
To the extent and in the manner permitted by the terms of the Trust Agreement,
the provisions of the Trust Agreement may be amended by the parties thereto with the
written consent of the owners of at least a majority percent in aggregate principal
amount of the Certificates then outstanding, and may be amended without such consent
under certain circumstances; provided that no such amendment shall impair the right of
any owner to receive, in any case, such owner's fractional share of any Lease Payment or
prepayment thereof in accordance with such owner's Certificate, without the consent of
such owner.
This Certificate is transferable by the Owner hereof, in person or by his attorney
duly authorized in writing, at the corporate trust office of the Trustee, but only in the
manner, subject to the limitations and upon payment of any charges provided in the
Trust Agreement and upon surrender and cancellation of this Certificate. Upon such
transfer, a new Certificate or Certificates of authorized denomination or denominations
for the same aggregate principal amount will be delivered to the transferee in exchange
herefor. The City, the Corporation and the Trustee may treat the Owner hereof as the
absolute owner hereof for all purposes, whether or not the payments represented by this
Certificate shall be overdue and the City, the Corporation and the Trustee shall not be
affected by any notice to the contrary.
The Certificates maturing on and after August 1, 1999, are subject to redemption
in whole at any time or in part on any Payment Date (but not in a total redemption
amount of less than $20,000 at any one time) in inverse order of maturity, and by lot
within a maturity, on or after August 1, 1999, at the principal amount thereof together
with the premium set forth below (expressed as a percentage of the total amount to be
redeemed), from the proceeds of optional prepayments of Lease Payments made by the
City pursuant to the Lease Agreement:
Redemption Period Premium
August 1, 1998 through July 31, 1999 2.0%
August 1, 1999 through July 31, 2000 1.5
August 1, 2000 through July 31, 2001 1.0
August 1, 2001 through July 31, 2002 0.5
August 1, 2002 and thereafter 0
The Certificates are subject to mandatory redemption in whole on any date, or in
part on any Payment Date, among maturities such that approximately equal annual
Lease Payments prevail following such redemption and by lot within a maturity, from the
Exhibit B
Page 4
net proceeds of an insurance or condemnation award credited towards the prepayment of
the Lease Payments by the City pursuant to the Lease Agreement, at a redemption price
equal to the principal amount thereof to be redeemed, without premium.
The Certificates maturing on August 1, 2008 are subject to mandatory redemption
on August 1 in each year on or after August 1, 1998, by lot, from the principal
components of the Lease Payments required to be paid by the City pursuant to the Lease
Agreement with respect to each such redemption date, at a redemption price equal to the
principal amount thereof to be redeemed, without premium, as follows:
Principal Amount
of Certificates Redemption Date
to be Redeemed (August 1)
1998 $
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 (Maturity) $
Notice of redemption, unless waived, is to be given by the Trustee by mailing an
official redemption notice by first class mail at least thirty (30) days and not more than
sixty (60) days prior to the date fixed for redemption to the registered owner of the
Certificate or Certificates to be redeemed at the address shown on the Certificate
registration books maintained by the Trustee or at such other address as is furnished in
writing by such registered owner to the Trustee. Notice of redemption having been given
as aforesaid, the Certificates or portions of Certificates so to be redeemed shall, on the
redemption date, become due and payable at the redemption price therein specified, and
from and after such date (unless the City shall default in the payment of the redemption
price) interest with respect to such Certificates or portions of Certificates shall cease to
be payable.
Exhibit B
Page 5
ASSIGNMENT
For value received the undersigned do(es) hereby sell,
assign and transfer unto
(Name, Address and Tax Identification Number of Assignee)
the within registered Certificate and hereby irrevocably constitute(s) and appoint(s)
attorney, to transfer the same on the Certificate register of
the Trustee with full power of substitution in the premises.
Dated: Signature:
Note: The signature(s) on this Assignment
must correspond with the name(s) as
written on the face of the within registered
Certificate in every particular without
alteration or enlargement or any change
whatsoever.
Signature Guaranteed:
Note: Signature(s) must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank, or trust
company.
Exhibit B
Page6
13061-03 JHHW:WHM:ct 05/13/8. M6699
ct 05/20/86
pch 05/26/8B EXHIBIT 4
AGENCY AGREEMENT
by and between the
CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION
and the
CITY OF CARLSBAD
Dated as of June 1, 1988
(HOSP GROVE PROJECT)
AGENCY AGREEMENT
THIS AGENCY AGREEMENT, made and entered into as of June 1, 1988, by and
between the CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION, a public
body corporate and politic organized and existing under the laws of the State of
California (the "Corporation"), and the CITY OF CARLSBAD, a municipal corporation and
general law city organized and existing under the laws of the State of California (the
"City");
WITNESSETH:
WHEREAS, the Corporation and the City have entered into a Lease Agreement,
dated as of the date hereof (the "Lease Agreement"), whereby the Corporation agrees to
lease certain improvements to Hosp Grove (the "Project") more particularly described in
Exhibit C attached to the Lease Agreement, to the City, and the City agrees to lease the
Project from the Corporation;
WHEREAS, it is in the interest of the Corporation and the City that the
Corporation appoint the City as its agent for the purposes of acquisition and
construction of the Project, and the Corporation has agreed in the Lease Agreement to
appoint the City as its agent for said purposes;
NOW, THEREFORE, in the joint and mutual exercise of their powers, and in
consideration of the above premises and of the mutual covenants herein contained and
for other valuable consideration, the parties hereto DO HEREBY AGREE as follows:
Section 1. Definitions. The terms capitalized in this Agency Agreement shall have
the meanings ascribed to them in the Lease Agreement and in the Trust Agreement,
dated as of the date hereof, among the Corporation, the City and The Bank of California,
National Association, as trustee (the "Trust Agreement").
Section 2. Appointment of City. The Corporation hereby appoints the City as its
agent to carry out all phases of the acquisition and construction of the Project, and the
City, as agent of the Corporation, assumes all rights, duties, responsibilities and liabilities
of the Corporation regarding supervision, acquisition and construction of the Project,
except as limited herein.
Section 3. Contracts, Bids and Payments. The City, as agent of the Corporation,
may enter into any purchase order, agreement or contract required for acquisition and
construction of the Project upon being assured that moneys sufficient for the payment
thereof are then on deposit in the Acquisition and Construction Fund created pursuant to
the Trust Agreement. The benefits of all bids received by the City for the Project shall be
and shall be deemed to be assigned by the City to the Corporation.
Section 4. Project Description. The City, as agent of the Corporation, shall have
the right to make any changes in the description of the Project or of any component
thereof whenever the City deems such changes to be necessary and appropriate;
provided, however, that the amounts in the Acquisition and Construction Fund are
sufficient to pay Acquisition and Construction Costs resulting from such changes.
Section 5. Supervision of Acquisition, Construction, Equipping and Installation.
The City, as agent of the Corporation, shall have sole responsibility for, and shall
supervise, acquisition and construction of the Project. The City shall monitor the
performance by any contractor to the extent the City deems appropriate. The City shall
permit the Corporation or its assignee to inspect the Project at any and all reasonable
times which are deemed appropriate by the Corporation or its assignee.
Section 6. Enforcement of Contracts. The Corporation hereby assigns to the City
all rights and powers to enforce and execute in its own name or the name of the
Corporation such purchase orders or contracts as are required for the Project which
enforcement may be at law or in equity; provided, however, that the assignment made by
the Corporation herein shall not prevent the Corporation or its assignee from asserting
said rights and powers in its own behalf following written notice to the City.
Section 7. Fixed Price. The Corporation shall not be responsible for payment of,
nor shall it pay nor permit to be paid by the Trustee pursuant to the Trust Agreement,
any amount for the Project in excess of the amount available therefor in the Acquisition
and Construction Fund held by Trustee pursuant to the Trust Agreement. The City shall
pay said excess amount to the extent of lawfully available funds.
Section 8. Inspection of Records. The Corporation shall have the right to inspect
periodically the books and records of the City relating to the Project, and the City shall
permit the Corporation to make such inspections thereof at all reasonable times as the
City shall deem appropriate.
Section 9. Time of Completion. The acquisition and construction of the Project
shall be completed by the Completion Date.
Section 10. Specifications. The City agrees that it will assure that the Project will
be acquired, constructed and installed in accordance with final plans and specifications
approved by the City. Upon completion of acquisition and construction of the Project,
the City will assure that there is filed with the Trustee a certificate executed by an
Authorized Officer of the City and stating that such acquisition and construction of the
Project has been completed in accordance with specifications therefor approved by the
City.
Section 11. Performance Security. The City may, if it deems appropriate, require
the provision of bid bonds or performance bonds in such percentage of the bid or
contract price as it deems desirable in advertising for and in awarding contracts or
making purchase orders.
-2-
IN WITNESS WHEREOF, the Corporation and the City have caused this Agency
Agreement to be executed in their respective names by their duly authorized officers, all
as of the date first above written.
CITY OF CARLSBAD PUBLIC
IMPROVEMENT CORPORATION
By
President
Attest
Secretary
CITY OF CARLSBAD
By
Mayor
Attest
City Clerk
-3-
EXHIBIT 5
Certificates of Participation
(Hosp Grove Project)
Evidencing the Undivided Fractional Interests of
the Owners Thereof in Lease Payments
to be made by the
CITY OF CARLSBAD, CALIFORNIA
As Rental for Certain Property
Pursuant to a
Lease Agreement with the
CITY OF CARLSBAD PUBLIC IMPROVEMENTS CORPORATION
PURCHASE CONTRACT
June , 1988
City of Carlsbad, California
1200 Elm Avenue
Carlsbad, California 92008
Ladies and Gentlemen:
The undersigned (the "Underwriter") hereby offers to enter
into this Purchase Contract (the "Purchase Contract") with you,
the City of Carlsbad, California (the "City"), for the purchase
by the Underwriter and execution and delivery to be caused by
you and The Bank of California, N.A., as trustee (the
"Trustee") under the Trust Agreement, dated as of June 1, 1988
between the City, the City of Carlsbad Public Improvements
Corporation (the "Corporation") and the Trustee (the "Trust
Agreement") of the Certificates of Participation described
herein. This offer is made subject to acceptance by you prior
to 11:00 o'clock p.m., California time, on the date hereof. If
this offer is not so accepted, this offer will be subject to
withdrawal by the Underwriter upon notice delivered to you at
any time prior to acceptance. Upon acceptance, this Purchase
Contract shall be in full force and effect in accordance with
its terms and shall be binding upon the City and the
Underwriter.
1739043/2
1. Purchase, Sale and Delivery of the Certificates.
(a) Subject to the terras and conditions and in
reliance upon the representations, warranties and
agreements set forth herein, the Underwriter hereby agrees
to purchase and the City agrees to cause the Trustee to
execute and deliver to the Underwriter all (but not less
than all) of the Certificates of Participation (Hosp Grove
Project) (the "Certificates") in aggregate principal amount
of $ , each evidencing undivided fractional
interests of the registered owners ("the Owners") thereof
in lease payments (the "Lease Payments") to be made by the
City pursuant to, and as defined in, the Lease Agreement
entered into as of June 1, 1988 (the "Lease Agreement"),
between the City and the Corporation, as the rental for
certain public facilities as more fully described and
defined in the Lease Agreement. The proceeds of the
Certificates will be used to pay on June 30, 1988 the
principal and interest due and payable on the City's
$6,555,000 1987 Notes and to construct street improvements
to certain thoroughfares in the City and corresponding
storm drains. The Corporation will assign certain of its
interests in the Lease Agreement, including the right to
receive Lease Payments, to the Trustee pursuant to the
Assignment Agreement, dated as of June 1, 1988 (the
"Assignment Agreement"), between the Corporation and the
Trustee. The City and the Corporation will enter into an
Agency Agreement, dated as of June 1, 1988, pursuant to
which the City will construct, or cause to be constructed,
those portions of the Project to be constructed (the
"Agency Agreement"). The aggregate purchase price for the
Certificates shall be par less $ ( %)
underwriting discount and $ original issue
discount plus accrued interest to the Closing Date (as
hereinafter defined).
The Certificates shall be substantially in the form
described in, and shall be executed, delivered and secured
under and pursuant to, and shall be payable and subject to
redemption as provided in, the Trust Agreement. The
Certificates will represent the payment of principal and
interest components of Lease Payments due under the Lease
Agreement from June l, 1988, with such interest payable
semiannually on February 1 and August l in each year
commencing on February 1, 1989.
A Preliminary Official Statement dated June , 1988
(including the cover page and all appendices, exhibits and
statements thereon or attached thereto being herein called
the "Preliminary Official Statement," and, with such
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changes as are accepted by the Underwriter being herein
called the "Official Statement") has been delivered to us
in connection with the Certificates.
The Certificates, the Trust Agreement and the
Assignment Agreement shall be collectively referred to
herein as the "Financing Documents," and the Financing
Documents and the Lease Agreement and the Agency Agreement
shall be collectively referred to herein as the "Legal
Documents."
(b) At 8:00 o'clock A.M., California time, on
June 28, 1988, or at such other time or on such other date
as we mutually agree upon (the "Closing Date"), the Trustee
will deliver or cause to be delivered to the Underwriter or
its representative, at a location or locations to be
designated by the Underwriter in New York, New York, the
Certificates in definitive form (all of the Certificates to
be lithographed with steel engraved borders and to bear
CUSIP numbers), duly executed, together with the other
documents mentioned herein. The Underwriter will accept
such delivery and pay the purchase price of the
Certificates as set forth in subparagraph (a) above by wire
transfer or by certified or official bank check or checks
payable in federal funds (such delivery and payment being
herein referred to as the "Closing") to the order of the
Trustee on behalf of the City in an amount equal to the
purchase price. The Certificates will be made available to
the Underwriter for inspection and packaging, at an office
which we may mutually agree upon, not less than two
business days prior to the Closing. The Certificates shall
be delivered as fully registered Certificates in such
denominations and registered in such names as the
Underwriter shall request by written notice not later than
four business days prior to the Closing Date.
(c) The Underwriter agrees to make a bona fide public
offering of the Certificates at the initial offering prices
set forth in the Official Statement, which prices may be
changed from time to time by the Underwriter after such
offering.
2. Representations, Warranties and Agreements of the City.
The City hereby represents, warrants and agrees with the
Underwriter as follows:
(a) both at the date hereof and at the date of
Closing, the statements and information contained in the
Official Statement pertaining to the City are and will be
1739043/2
true, correct and complete in all material respects and the
Official Statement does not and will not omit any statement
or information pertaining to the City which is necessary to
make the statements and information therein, in the light
of the circumstances under which they were made, not
misleading in any material respect;
(b) the City is and will be on the Closing Date a
municipal corporation and general law city of the State of
California organized and operating pursuant to the
Constitution and laws of the State of California with the
full power and authority to execute and deliver the
Official Statement, and to enter into the Legal Documents
to be executed by it and this Purchase Contract;
(c) by official action of the City prior to or
concurrently with the acceptance hereof, the City has duly
approved, ratified and confirmed the distribution of the
Preliminary Official Statement and the execution, delivery
and distribution of the Official Statement, and has duly
authorized and approved the execution and delivery of, and
the performance by the City of the obligations on its part
contained in, the Legal Documents and the consummation by
it of all other transactions contemplated by the Official
Statement and this Purchase Contract;
(d) the execution and delivery of the Legal Documents
to be executed by the City, this Purchase Contract and the
Official Statement, and compliance with the provisions on
the City's part contained herein and therein, will not in
any material respect 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, which the City
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 City under the
terms of any such law, administrative regulation, judgment,
decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument, except as provided in the
Legal Documents;
(e) the City is not in any material respect in breach
of or default under any applicable law or administrative
regulation of the State of California or the United States
or any applicable judgment or decree or any loan agreement,
indenture, bond, note, resolution, agreement or other
instrument to which the City is a party or is otherwise
1739043/2
subject, and no event has occurred and is continuing which,
with the passage of time or the giving of notice or both,
would constitute a default or an event of default under any
such instrument;
(f) there is no known action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by
any court, governmental agency, public board or body,
pending or threatened against the City in any material
respect affecting the existence of the City or the titles
of its officers to their respective offices or seeking to
prohibit, restrain or enjoin the sale, execution or
delivery of the Certificates or the payment of Lease
Payments or in any way contesting or affecting the validity
or enforceability of the Certificates, the Legal Documents
or this Purchase Contract or contesting the powers of the
City or its authority to enter into, adopt or perform its
obligations under any of the foregoing, or contesting in
any way the completeness or accuracy of the Preliminary
Official Statement or the Official Statement, or any
amendment or supplement thereto, wherein an unfavorable
decision, ruling or finding would materially adversely
affect the validity or enforceability of the Legal
Documents or this Purchase Contract;
(g) the City 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 (i) to qualify the Certificates for offer
and sale under the Blue Sky or other securities laws and
regulations of such states and other jurisdictions of the
United States as the Underwriter may designate and (ii) 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 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;
(h) if between the date hereof and the date of the
Closing an event occurs, of which the City has knowledge,
which might or would cause the information contained in the
Official Statement, as then supplemented or -amended, to
contain an untrue statement of a material fact or to omit
to state a material fact required to be stated therein or
necessary to make such information therein, in the light of
the circumstances under which it was presented, not
1739043/2
misleading, the City will notify the Trustee, the
Underwriter and the Corporation, and, if in the opinion of
the City, the Trustee, Underwriter or the Corporation, or
their respective counsel, such event requires the
preparation and publication of a supplement or amendment to
the Official Statement, the City will cooperate in the
preparation of an amendment or supplement to the Official
Statement in a form and manner approved by the Underwriter,
and shall pay all expenses thereby incurred;
(i) if the information contained in the Official
Statement is amended or supplemented pursuant to
paragraph (h) hereof, at the time of each supplement or
amendment thereto and (unless subsequently again
supplemented or amended pursuant to such subparagraph) at
all times subsequent thereto up to and including the
Closing Date, the portions of the Official Statement so
supplemented or amended (including any financial and
statistical data contained therein) will not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make such information therein, in the light of the
circumstances under which it was presented, not misleading;
and
(j) the City shall indemnify and hold harmless the
Underwriter and employees and each person who controls the
Underwriter within the meaning of Section 15 of the
Securities Act of 1933, as amended (such Act being herein
called the "Act" and any such person being herein sometimes
called an "Indemnified Party"), against any and all losses,
claims, damages or liabilities, joint or several, to which
such Indemnified Party may become subject under any statute
or at law or in equity or otherwise arising out of this
transaction, and shall reimburse any such Indemnified Party
for any legal or other expenses incurred by it in
connection with investigating any claims against it and
defending any actions, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based
upon (i) an allegation or determination that the
Certificates should have been registered under the Act or
the Trust Agreement should have been qualified under the
Trust Indenture Act of 1939, as amended, or (ii) any untrue
statement or alleged untrue statement of a material fact
contained in the Official Statement (including the
Appendices thereto), or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements
therein not misleading; provided, however, that the City
shall not be liable in any such case to the extent that any
1739043/2
such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged
untrue statement of a material fact contained in that
particular part of the Official Statement, or any amendment
thereof or supplement thereto, under the caption
"underwriting" (in the case of the Underwriter), or the
omission or alleged omission to state under any of such
captions a material fact necessary to make the respective
statements therein not misleading. This indemnity
agreement shall not be construed as a limitation on any
other liability which the City may otherwise have to any
Indemnified Party;
An Indemnified Party shall, promptly after the receipt
of notice of the commencement of any action against such
Indemnified Party in respect of which indemnification may
be sought against the City, notify the City in writing of
the commencement thereof, but the omission to notify the
City of any such action shall not relieve the City from any
liability which it may have to such Indemnified Party
otherwise than under the indemnity agreement contained
herein. In case any such action shall be brought against
an Indemnified Party and such Indemnified Party shall
notify the City of the commencement thereof, the City may,
or if so requested by such Indemnified Party shall,
participate therein or assume the defense thereof, with
counsel satisfactory to such Indemnified Party, and after
notice from the City to such Indemnified Party of an
election so to assume the defense thereof, the City will
not be liable to such Indemnified Party under this
paragraph for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of
investigation. If the City shall not have employed counsel
to have charge of the defense of any such action or if an
Indemnified Party shall have reasonably concluded that
there may be defenses available to it or them which are
different from or additional to those available to the City
(in which case the City shall not have the right to direct
the defense of such action on behalf of such Indemnified
Party), such Indemnified Party shall have the right to
retain legal counsel of its own choosing and legal and
other expenses incurred by such Indemnified Party shall be
borne by the City;
The City shall not be liable for any settlement of any
such action effected without its consent by any Indemnified
Party, but if settled with the consent of the City or if
there be a final judgment or award for the plaintiff in any
such action against the City or any Indemnified Party, with
1739043/2
or without the consent of the City, the City agrees to
indemnify and hold harmless such Indemnified Party for the
amount of any such settlement, final judgment or award;
In order to provide for just and equitable
contribution in circumstances in which indemnification
hereunder is for any reason held to be unavailable from the
City, the City and the Underwriter shall contribute to the
aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses
incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims
asserted, to which the City and the Underwriter may be
subject) in such proportion so that the Underwriter is
responsible for that portion represented by the percentage
that the underwriting discount set forth in the Official
Statement bears to the public offering price appearing
thereon and the City is responsible for the balance;
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of
the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this paragraph, each person, if any, who
controls the Underwriter within the meaning of the Act
shall have the same rights to contribution as the
Underwriter. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another
party or parties under this paragraph, notify such party or
parties from whom contribution may be sought, but the
omission to so notify such party from whom contribution may
be sought shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under this
paragraph. No party shall be liable for contribution with
respect to any action or claim settled without its consent.
3. Conditions to the Obligations of the Underwriter.
The Underwriter hereby enters into this Purchase Contract
in reliance upon the representations and warranties of the City
contained herein and the representations and warranties to be
contained in the documents and instruments to be delivered at
the Closing and upon the performance by the City, the
Corporation and the Trustee of their obligations- both on and as
of the date hereof and as of the Closing Date. Accordingly,
the Underwriter's obligations under this Purchase Contract to
purchase, to accept delivery of and to pay for the Certificates
shall be subject, at the option of the Underwriter, to the
1739043/2
accuracy in all material respects of the representations and
warranties of the City contained herein as of the date hereof
and as of the Closing Date, to the accuracy in all material
respects of the statements of the officers and other officials
of the Trustee and the City made in any certificate or other
document furnished pursuant to the provisions hereof, to the
performance by the City, the Corporation and the Trustee of
their respective obligations to be performed hereunder and
under the Legal Documents as herein defined at or prior to the
Closing Date, and also shall be subject to the following
additional conditions:
(a) The representations and warranties of the City
contained herein shall be true, complete and correct on the
date hereof and on the Closing Date, as if made on and at
the Closing;
(b) At the Closing, the Legal Documents shall have
been duly authorized, executed and delivered by the
respective parties thereto, and the Official Statement
shall have been duly authorized, executed and delivered by
the City, all in substantially the forms heretofore
submitted to the Underwriter, with only such changes as
shall have been agreed to in writing by the Underwriter,
and shall be in full force and effect; and there shall be
in full force and effect such resolution or resolutions of
the City as, in the opinion of Jones Hall Hill & White, A
Professional Law Corporation ("Special Counsel"), shall be
necessary or appropriate in connection with the
transactions contemplated hereby;
(c) Between the date hereof and the Closing Date, the
market price or marketability, at the initial offering
price set forth in the Official Statement, of the
Certificates or the market price generally of obligations
of the general character of the Certificates shall not have
been materially adversely affected, in the reasonable
judgment of the Underwriter (evidenced by a written notice
to the City, the Corporation and the Trustee terminating
the obligation of the Underwriter to accept delivery of and
make any payment for the Certificates), by reason of any of
the following statements of fact, regardless of whether the
statements of fact were in existence or known on the date
of this Purchase Contract:
(1) legislation shall have been introduced in or
enacted by the Congress of the United States or
enacted by the Stare, or legislation pending in the
Congress of the United States shall have been amended,
or legislation shall have been recommended to the
1739043/2
Congress of the United States or otherwise endorsed
for passage (by press release, other form of notice or
otherwise) by the President of the United States, the
Treasury Department of the United States, the Internal
Revenue Service or the Chairman or ranking minority
member of the Committee on Finance of the United
States Senate or the Committee on Ways and Means of
the United States House of Representatives, or
legislation shall have been proposed for consideration
by either such Committee by any member thereof or
presented as an option for consideration by either
such Committee by the staff of such Committee or by
the staff of the Joint Committee on Taxation of the
Congress of the United States, or legislation shall
have been favorably reported for passage to either
House of the Congress of the United States by a
Committee of such House to which such legislation has
been referred for consideration, or a decision shall
have been rendered by a court of the United States or
the State, including the Tax Court of the United
States, or a ruling shall have been made or a
regulation shall have been proposed or made or a press
release or other form of notice shall have been issued
by the Treasury Department of the United States, or
the Internal Revenue Service or other authority of the
United States or the State, with respect to Federal
taxation or taxation by the State upon revenues or
other income of the general character to be derived by
the City or by any similar body, or upon interest on
obligations of the general character of the
Certificates, which may have the purpose or effect,
directly or indirectly, of affecting the tax status of
the City, its property or income, its securities
(including the Certificates) or the interest thereon,
or any tax exemption granted or authorized by
legislation of the State;
(2) the declaration of war or engagement in
major military hostilities by the United States or the
occurrences of any other national emergency or
calamity relating to the effective operation of the
government of or the financial community in the United
States;
(3) the declaration of a general banking
moratorium by federal, New York or California
authorities, or the general suspension of trading on
any national securities exchange;
10
1739043/2
(4) the imposition by the New York Stock
Exchange or other national securities exchange, or any
governmental authority, of any material restrictions
not now in force with respect to the Certificates or
obligations of the general character of the
Certificates or securities generally, or the material
increase of any such restrictions now in force,
including those relating to the extension of credit
by, or the charge to the net capital requirements of,
the Underwriter;
(5) legislation enacted (or resolution passed)
by or introduced or pending legislation amended in the
Congress or recommended for passage by the President
of the United States, or an order, decree or
injunction issued by any court of competent
jurisdiction, or an order, ruling, regulation (final,
temporary or proposed) or press release issued or made
by or on behalf of the Securities and Exchange
Commission, or any other governmental agency having
jurisdiction of the subject matter, to the effect that
obligations of the general character of the
Certificates, or the Certificates, including any or
all underlying arrangements, are not exempt from
registration under the Securities Act of 1933, as
amended, or that the Trust Agreement is not exempt
from qualification under the Trust Indenture Act of
1939, as amended, or that the issuance, offering or
sale of obligations of the general character of the
Certificates, or of the Certificates, including any or
all underlying arrangements, as contemplated hereby or
by the Official Statement, otherwise is or would be in
violation of the federal securities laws as amended
and then in effect;
(6) the withdrawal or downgrading of any rating
of the Certificates by a national rating agency; or
(7) any event occurring, or information becoming
known which, in the judgment of the Underwriter, makes
untrue in any material respect any statement or
information contained in the Official Statement, or
has the effect that the Official Statement contains
any untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading; and
11
1739043/2
(d) At or prior to the Closing Date, the Underwriter
shall have received the following documents, in each case
satisfactory in form and substance to the Underwriter:
(1) The Legal Documents, each duly executed and
delivered by the respective parties;
(2) The approving opinion, dated the Closing
Date and addressed to the City, of Special Counsel in
substantially the form attached hereto as Exhibit A,
and a letter of such counsel, dated the Closing Date
and addressed to the Underwriter and to the Trustee,
to the effect that such opinion may be relied upon by
the Underwriter and the Trustee to the same extent as
if such opinion were addressed to them;
(3) The supplemental opinion, dated the 'Closing
Date and addressed to the Underwriter, of Special
Counsel, substantially to the effect that (i) the
Official Statement has been duly approved by the City
and the Purchase Contract has been duly authorized,
executed and delivered by the City; (ii) the
statements contained in the Official Statement on the
cover and under the captions "Introduction", "The
Certificates", "Security for the Certificates",
"Certificate Owners' Risk", and "Approval of Legal
Proceedings", and in Appendix B "Summary of Principal
Legal Documents", insofar as such statements purport
to summarize certain provisions of the Certificates,
the Lease Agreement, the Trust Agreement, the
Assignment Agreement and State of California law, and
under the caption "Tax Exemption", insofar as such
statements purport to summarize the opinion of Special
Counsel and Federal tax law, present an accurate
summary of such provisions; (iii) nothing came to such
counsel's attention that would lead them to believe
that the Official Statement, as of the date thereof or
the Closing, 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 (except
such counsel need express no view as to financial
statements and the statistical data contained in the
Official Statement); and (iv) except as described in
the Official Statement, no authorization, approval,
consent, or other order of the State of California or
any other governmental authority or agency within the
State of California having jurisdiction over the City
is required for the valid authorization, execution,
12
1739043/2
delivery and performance by the City of the Legal
Documents to which the City is a party, the Official
Statement or the Purchase Contract or for the adoption
of the Resolutions which has not been obtained.
(4) The opinion of the City Attorney of the
City, dated the Closing Date and addressed to the
Underwriter, to the effect that (i) the City is a
municipal corporation and general law city of the
State of California; (ii) the resolution or
resolutions of the City approving and authorizing the
execution and delivery by the City of the Legal
Documents to which the City is a party, the Purchase
Contract and the Official Statement (the
"Resolutions") were duly adopted at 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; (iii) there is no action, suit,
proceeding, inquiry or investigation at law or in
equity before or by any court, governmental agency,
public board or body, pending or threatened against
the City, to restrain or enjoin the Lease Payments
under the Lease Agreement, or in any way contesting
the validity of the Certificates, the Legal Documents
or the Purchase Contract; (iv) the execution and
delivery of the Legal Documents to which the City is a
party, the Purchase Contract and the Official
Statement, the adoption of the Resolutions, and
compliance by the City with the provisions of the
foregoing, under the circumstances contemplated
thereby, do not and will not in any material respect
conflict with or constitute on the part of the City a
breach or default under any agreement or other
instrument to which the City is a party or by which it
is bound; (v) the Official Statement has been duly
authorized, executed and delivered; (vi) the Legal
Documents to which the City is a party and the
Purchase Contract have been duly authorized, executed
and delivered by the City and, assuming due
authorization, execution and delivery by the other
parties thereto, constitute legal, valid and binding
agreements of the City enforceable in accordance with
their respective terms, subject to laws relating to
bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights genera-lly and the
application of equitable principles if equitable
remedies are sought; and (vii) the statements
contained in the Official Statement under the captions
"The Project", "City Financial Information", "General
13
1739043/2
City Information", "Economic Profile of the City" and
"Absence of Litigation" are true and correct in all
material respects;
(5) The opinion, dated the Closing Date and
addressed to the Underwriter, of Counsel to the
Trustee, in substantially the form of Exhibit B
hereto, together with an unqualified opinion of such
counsel, dated the Closing Date and addressed to the
City, to the effect that such opinion may be relied
upon by the City to the same extent as if such opinion
were addressed to the City;
(6) The opinion of counsel to the Corporation,
dated the Closing Date and addressed to the City and
the Underwriter, to the effect that (i) the
Corporation is a nonprofit public benefit Corporation
organized and validly existing pursuant to the laws of
the State of California; (ii) the resolution or
resolutions of the Corporation (the "Corporation
Resolution") approving and authorizing the execution
and delivery by the Corporation of the Legal Documents
to which it is a party were duly adopted at meetings
of the Corporation 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;
(iii) the Legal Documents to which the Corporation is
a party have been duly authorized, executed and
delivered by the Corporation; (iv) there is no action,
suit, proceeding, inquiry or investigation at law or
in equity before or by any court, governmental agency,
public board or body, pending or threatened against
the Corporation in any way contesting the validity of
the Legal Documents; and (v) the execution and
delivery of the Legal Documents to which the
Corporation is a party, the adoption of the
Corporation Resolution and compliance by the
Corporation with the provisions of the foregoing,
under the circumstances contemplated thereby, do not
and will not in any material respect conflict with or
constitute on the part of the Corporation a breach or
default under any agreement or other instrument to
which the Corporation is a party or by which it is
bound.
(7) The opinion, dated the Closing Date and
addressed to the Underwriter on behalf of the
Underwriter, of Brown & Wood, San Francisco,
California, counsel for the Underwriter
("Underwriter's Counsel") to the effect that (a) the
14
1739043/2
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) based upon
the information made available to them in the course
of their participation in the preparation of the
Official Statement as counsel for the Underwriter and
without having undertaken to determine independently,
and acknowledging that the limitations inherent in
their examination and in the knowledge available to
them renders them unable to assume, and therefore
without assuming, any responsibility for, the
accuracy, completeness or fairness of the statements
contained in the Official Statement, nothing has come
to their attention which would lead them to believe
that the Official Statement (excluding therefrom
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;
(8) A certificate or certificates, dated the
Closing Date, signed by a duly authorized official of
the City satisfactory to the Underwriter, in form and
substance satisfactory to the Underwriter, to the
effect that (a) the representations and warranties of
the City contained in the Purchase Contract are true
and correct in all material respects on and as of the
Closing Date with the same effect as if made on the
Closing Date; (b) no litigation is pending or
threatened (i) to restrain or enjoin the execution,
sale or delivery of any of the Certificates or the
Lease Payments under the Lease Agreement, (ii) in any
way contesting or affecting the validity of the
Certificates, the Purchase Contract, or the Legal
Documents to which the City is a party, or (iii) in
any way contesting the existence or powers of the
City; and (c) 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 Closing Date any statement or information
contained in the Official Statement relating to the
City or is not reflected in the Official Statement but
should be reflected therein in order to make the
statements and information therein relating to the
City not misleading in any material respect;
15
1739043/2
(9) A certificate or certificates, dated the
Closing Date, signed by a duly authorized official of
the Corporation satisfactory to the Underwriter, in
form and substance satisfactory to the Underwriter, to
the effect that (a) no litigation is pending or
threatened in any way contesting or affecting the
validity of the Purchase Contract or the Legal
Documents to which the Corporation is a party, (b) no
event affecting the Corporation has occurred since the
date of the Official Statement which either makes
untrue or incorrect in any material respect as of the
Closing Date any statement or information contained in
the Official Statement relating to the Corporation or
is not reflected in the Official Statement but should
be reflected therein in order to make the statements
and information therein relating to the Corporation
not misleading in any material respect; and (c) the
execution and delivery of the Assignment Agreement by
the Corporation is effective and sufficient to
transfer, for the benefit of the Owners, its right
(i) to receive and collect Lease Payments, (ii) to
receive and collect proceeds of condemnation of, and
insurance on the Project, and (iii) to enforce payment
of amounts due under the Lease Agreement upon default
by the City, and such transfer is perfected against
and is not subject to the claims of any person
claiming by or through the Corporation or of present
or future creditors of the Corporation;
(10) A certificate, dated the date of Closing,
signed by a duly authorized official of the Trustee,
satisfactory in form and substance to the Underwriter,
to the effect that:
(a) the Trustee is a national banking
association duly organized and existing under and by
virtue of the laws of the United States of America;
(b) the Trustee is duly authorized to enter into
and perform its duties under the Trust Agreement and
the Assignment Agreement and to acknowledge the
Purchase Contract and to execute and deliver the
Certificates to the Underwriter pursuant to the Trust
Agreement;
(c) when delivered to and paid fo-r by the
Underwriter at the Closing, the Certificates will have
been duly executed and delivered by the Trustee;
16
1739043/2
(d) the execution and delivery of the Financing
Documents to which the Trustee is a party, 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 (except that no
representation, warranty or agreement is made with
respect to any federal or state securities or blue sky
laws or regulations), 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 held
by the Trustee pursuant to the lien created by the
Trust Agreement 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;
(e) the Trustee has no knowledge of any action,
suit, proceeding, inguiry or investigation, at law or
in equity, before or by any court, governmental
agency, public board or body, pending or threatened
against the Trustee, as such but not in its individual
capacity, affecting the existence of the Trustee, or
the titles of its officers to their respective offices
or seeking to prohibit, restrain or enjoin the
execution and delivery of the Certificates or the
collection of revenues pledged or to be pledged to pay
the principal, premium, if any, and interest with
respect to the Certificates, or the pledge thereof, or
in any way contesting or affecting the validity or
enforceability of the Financing Documents, or
contesting the powers of the Trustee or its authority
to 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 Financing
Documents; and
(f) subject to the provisions of the Trust
Agreement and applicable law, the Trustee will apply
the proceeds from the Certificates to the purposes
specified in the Trust Agreement;
17
1739043/2
(11) Two copies of the Legal Documents duly
executed and delivered by the parties thereto;
(12) Two copies of the Official Statement,
executed on behalf of the City by an authorized
representative of the City;
(13) Two certified copies of the general
resolution of the Trustee authorizing the execution
and delivery of the Legal Documents to which the
Trustee is a party;
(14) Two certified copies of the resolutions of
the City authorizing the execution and delivery of the
Legal Documents to which the City is a party, the
Official Statement and the Purchase Contract;
(15) Two certified copies of the resolutions of
the Corporation authorizing the execution and delivery
of the Legal Documents to which the Corporation is a
party;
(16) Evidence that any ratings described in the
Official Statement are in full force and effect as of
the Closing Date;
(17) Two copies of the Blue Sky Memorandum with
respect to the Certificates, prepared by Underwriter's
Counsel;
(18) A certificate, dated the date of Closing,
signed by a duly authorized official of the City
concerning "No-arbitrage" in form satisfactory to
Special Counsel;
(19) Such additional legal opinions,
certificates, proceedings, instruments, title
insurance, other insurance policies or evidences
thereof and other documents as the Underwriter,
Underwriter's Counsel or Special Counsel may
reasonably reguest to evidence the truth and accuracy,
as of the date hereof and as of the Closing Date, of
the representations of the City and the Corporation
herein and of the statements and information contained
in the Official Statement, and the due performance or
satisfaction by the Trustee, the City and the
Corporation at or prior to the Closing of all
agreements then to be performed and all conditions
then to be satisfied by any of them in connection with
the transactions contemplated hereby and by the Legal
Documents.
18
1739043/2
If the conditions to the Underwriter's obligations
contained in this Purchase Contract are not satisfied or if the
Underwriter's obligations shall be terminated for any reason
permitted herein, all obligations of the Underwriter hereunder
may be terminated at, or at any time prior to, the Closing Date
by written notice to the City, the Corporation and the Trustee.
4. Expenses.
All expenses and costs incident to the authorization,
execution, delivery and sale of the Certificates to the
Underwriter, including the costs of printing and preparation of
the Certificates, the Preliminary Official Statement, the
Official Statement and the Blue Sky Memorandum and Legal
Investment Survey, the word processing fees and distribution
expenses of Underwriter's Counsel with respect to the
preparation of the Preliminary Official Statement and the
Official Statement, the cost of duplicating the Legal
Documents, the fees of accountants, consultants and rating
agencies, the Underwriter's computer fees, federal funds
interest expense and out-of-state travel expense incurred in
conjunction with presentations to rating agencies, the initial
fee of the Trustee and its counsel in connection with the sale
of the Certificates and the fees and expenses of Special
Counsel and Counsel for the Trustee, the City and the
Corporation and insurance premiums associated with the
procurement of title insurance and any other insurance required
in the financing shall be paid from the proceeds of the
Certificates. In the event that the Certificates for any
reason are not executed and delivered, or to the extent
proceeds of the Certificates are insufficient or unavailable
therefor, any fees, costs and expenses owed by the City or the
Trustee, which otherwise would have been paid from the proceeds
of the Certificates, shall be paid by the City. All
out-of-pocket expenses of the Underwriter, including in-state
travel and other expenses, and the fees and expenses of
Underwriter's Counsel and California Debt Advisory Commission
reporting fees, shall be paid by the Underwriter.
5. Notices.
Any notice or other communication to be given to the
Trustee, the Corporation, the City or the Underwriter under
this Purchase Contract may be given by delivering the same in
writing to the respective party at the following address:
Underwriter: Rauscher Pierce Refsnes, Inc.
One California Street, #2630
San Francisco, CA 94111
19
1739043/2
Trustee:
Corporation:
City: City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Manager
The Bank of California, N.A.
400 California Street
San Francisco, California 94107
City of Carlsbad Public
Improvements Corporation
c/o City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Manager
6. Survival of Representations and Warranties.
The representations and warranties of the City set forth in
or made pursuant to this Purchase Contract shall not be deemed
to have been discharged, satisfied or otherwise rendered void
by reason of the Closing or termination of this Purchase
Contract and regardless of any investigations or statements as
to the results thereof made by or on behalf of the Underwriter
and regardless of delivery of and payment for the Certificates.
8. Effectiveness.
1739043/2
20
This Purchase Contract shall become effective and binding
upon the respective parties hereto upon the execution of the
acceptance hereof by duly authorized officers of the City and
the acknowledgement hereof by the duly authorized officer of
the Trustee and shall be valid and enforceable as of the time
of such acceptance.
Very truly yours,
RAUSCHER PIERCE REFSNES, INC.
By:
Virginia L. Horler, Vice President
ACCEPTED:
CITY OF CARLSBAD, CALIFORNIA
By:
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1739043/2
ACKNOWLEDGEMENT
The undersigned hereby acknowledges receipt of an executed
copy of the Purchase Contract, dated , and
agrees that, upon the execution and delivery of the Trust
Agreement and its acceptance of the appointment of Trustee
thereunder, it shall execute and deliver the Certificates in
accordance with the terms of such Purchase Contract to the
extent such terms are consistent with the terms of the Trust
Agreement.
THE BANK OF CALIFORNIA, N.A., as Trustee
By:Authorized Officer
22
1739043/2
EXHIBIT A
[FORM OF FINAL OPINION OF SPECIAL COUNSEL]
[Closing Date]
City Council
City of Carlsbad
1200 Elm Avenue
Carlsbad, CA 92008
OPINION: Certificates of Participation (Hosp Grove
Project) Representing Fractional Interests
of the Owners thereof in Lease Payments to
be made by the City of Carlsbad as the
Rental of Certain Property Pursuant to a
Lease Agreement with the City of Carlsbad
Public Improvements Corporation
Members of the City Council:
We have acted as special counsel in connection with the
delivery by the City of Carlsbad (the "City") of the $
Lease Agreement, dated June 1, 1988, between the City of
Carlsbad Public Improvements Corporation (the "Lessor") and the
City (the "Lease Agreement") pursuant to Section 37350 of the
California Government -Code. The Lessor has, pursuant to the
Assignment Agreement, dated June l, 1988 (the "Assignment
Agreement"), between the Lessor and The Bank of California,
N.A., as trustee (the "Trustee"), assigned certain of its
rights under the Lease Agreement, including the right to
receive lease payments made by the City thereunder (the "Lease
Payments"), to the Trustee. Pursuant to the Trust Agreement,
dated June 1, 1988, among the Trustee, the Lessor and the City
(the "Trust Agreement"), the Trustee has executed and delivered
certificates of participation (the "Certificates") evidencing
fractional interests of the owners thereof in Lease Payments.
We have examined the law and such certified proceedings and
other papers as we deem necessary to render this opinion.
As to questions of fact material to our opinion, we have
relied upon representations of the City contained in the Lease
Agreement, the Trust Agreement and the certified proceedings
and certifications of public officials and others furnished to
us, without undertaking to verify the same by independent
investigation.
A-l
1739043/2
Based upon the foregoing, we are of the opinion, under
existing law, as follows:
1. The City is duly created and validly existing as
a municipal corporation and general law city with the power to
enter into the Lease Agreement and the Trust Agreement and to
perform the agreements on its part contained therein.
2. The Lease Agreement has been duly authorized,
executed and delivered by the City and is an obligation of the
City valid, binding and enforceable against the City in
accordance with its terms.
3. The Trust Agreement and the Assignment Agreement
are valid, binding and enforceable in accordance with their
terms.
4. Subject to the terms and provisions of the Lease
Agreement, the Lease Payments are payable from general funds of
the City lawfully available therefor. By virtue of the
Assignment Agreement, the owners of the Certificates are
entitled to receive their fractional share of the Lease
Payments in accordance with the terms and provisions of the
Trust Agreement.
5. The portion of the Lease Payments designated as
and comprising interest and received by the owners of the
Certificates is excluded from gross income for federal income
tax purposes and is not an item of tax preference for purposes
of the federal alternative minimum tax imposed on individuals
and corporations; it should be noted, however, that, for the
purpose of computing the alternative minimum tax imposed on
such corporations (as defined for federal income tax purposes),
such interest is taken into account in determining adjusted net
book income (adjusted current earnings for taxable years
beginning after December 31, 1989). The opinions set forth in
the preceding sentence are subject to the condition that the
City comply with all requirements of the Internal Revenue Code
of 1986 that must be satisfied subsequent to the delivery of
the Lease Agreement in order that such interest be, or continue
to be, excluded from gross income for federal income tax
purposes. The City has covenanted to comply with each such
requirement. Failure to comply with certain of such
requirements may cause the inclusion of such interest in gross
income for federal income tax purposes to be retroactive to the
date of delivery of the Lease Agreement. We express no opinion
regarding other federal tax consequences arising with respect
to the Lease Agreement and the Certificates.
A-2
1739043/2
6. The portion of the Lease Payments designated as
and comprising interest and received by the owners of the
Certificates is exempt from personal income taxation imposed by
the State of California.
The rights of the owners of the Certificates and the
enforceability of the Lease Agreement, the Trust Agreement and
the Assignment Agreement may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter enacted and
may also be subject to the exercise of judicial discretion in
appropriate cases.
Respectfully submitted,
A Professional Law Corporation
A-3
1739043/2
EXHIBIT B
FORM OF TRUSTEE COUNSEL'S OPINION
Re: City of Carlsbad, California
Certificates of Participation
(Hosp Grove Project)
Ladies and Gentlemen:
We have acted as special counsel to The Bank of California,
N.A. (the "Bank"), in connection with the Trust Agreement,
dated as of June 1, 1988, between the City of Carlsbad,
California (the "City"), the City of Carlsbad Public
Improvements Corporation (the "Corporation") and the Bank, as
Trustee (the "Trust Agreement"), and the Assignment Agreement
dated as of June l, 1988, between the Corporation and the Bank
(the "Assignment Agreement"), and the execution and delivery of
Certificates of Participation (Hosp Grove Project) (the
"Certificates"). This opinion is rendered pursuant to the
Purchase Contract, dated , 1988, by and between the
City and Rauscher Pierce Refsnes, Inc. (the "Underwriter") (the
"Purchase Contract").
In connection therewith, we have examined and reviewed such
documents, and certificates of public officials, officers of
the Bank and others as we have deemed necessary for the
purposes of this opinion. In all such examinations, we have
assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to
original and certified documents of all copies submitted to us
as conformed or photostatic copies, and the authenticity of the
originals of all such latter documents. As to various
questions of fact material to this opinion, we have relied, to
the extent that we deemed such reliance proper, upon such
certificates of officers of the Bank. We have examined an
executed counterpart of each of the Trust Agreement, the
Assignment Agreement and the Purchase Contract and have assumed
the power, municipal or corporate, as the case may be, and the
legal authority to execute and deliver the same of the other
parties thereto and the due authorization, execution and
delivery thereof by the other parties thereto.
Based upon the foregoing, we are of the opinion that:
1. The Bank is a national banking association organized
and existing under and by virtue of the laws of United States
of America, having duly authorized, executed and delivered the
Trust Agreement and the Assignment Agreement;
B-l
1739043/2
2. The Trust Agreement and the Assignment Agreement
constitute legally valid and binding agreements of the Bank,
enforceable against the Bank in accordance with their terms;
3. The Certificates have been validly authorized,
executed and delivered by the Bank and are legally valid and
binding obligations, enforceable in accordance with their terms;
4. The execution and delivery of the Financing Documents,
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 (except that no
representation, warranty or agreement is made with respect to
any federal or state securities or Blue Sky laws or
regulations), 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 held by the
Trustee pursuant to the lien created by the Trust Agreement
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; and
5. There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court,
governmental agency, public board or body, pending or
threatened against the Trustee, as such but not in its
individual capacity, affecting the existence of the Trustee, or
the titles of its officers to their respective offices or
seeking to prohibit, restrain or enjoin the execution and
delivery of the Certificates or the collection of revenues
pledged or to be pledged to pay the principal, premium, if any,
and interest with respect to the Certificates, or the pledge
thereof, or in any way contesting or affecting the validity or
enforceability of the Financing Documents, or contesting the
powers of the Trustee or its authority to 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
Financing Documents;
Our opinion with respect to the foregoing documents is
qualified by (i) the application of bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar laws of
general application affecting creditors' rights; or (ii) the
discretion of any court to refuse to order equitable relief,
B-2
1739043/2
including specific performance of any clause of any such
documents, whether such enforceability is considered in a
proceeding in equity or at law. We express no opinion as to
the applicability or effect of federal or state securities or
tax laws on the Certificates or the interest payments made with
respect thereto.
This opinion is furnished by us to you solely for your
benefit and we are not assuming any professional responsibility
to any other person whomsoever. This opinion is not to be
used, circulated, quoted or otherwise referred to for any other
purpose.
Very truly yours,
B-3
1739043/2
EXHIBIT C
CERTIFICATE PAYMENT SCHEDULE
Payment Dates
(August 1) Principal Amount Interest Rate Price
$ % %
C-l
1739043/2
EXHIBIT 6
PRELIMINARY OFFICIAL STATEMENT DATED
MAY , 1988
NEW ISSUE
In the opinion of Jones Hall Hill & White, A Professional
Law Corporation, San Francisco, California, Special Counsel,
subject, however to certain qualifications described herein,
under existing law, the portion of Lease Payments designated as
and comprising interest and received by the owners of the
Certificates is excluded from gross income for federal income
tax purposes, such interest is not an item of tax preference
for purposes of the federal individual and corporate
alternative minimum taxes, although it is included in adjusted
net book income and current earnings in computing the
alternative minimum tax imposed on certain corporations. In
the further opinion of Special Counsel, such interest is exempt
from California personal income taxes. See "TAX EXEMPTION"
herein.
$
Certificates of Participation
(Hosp Grove Project)
Evidencing the Undivided Fractional Interests of the
Owners Thereof in Lease Payments to be Made by the
CITY OF CARLSBAD, CALIFORNIA
As Rental For Certain Property Pursuant to
a Lease Agreement with the
CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION
Dated: June 1, 1988 Due: August 1, as shown below
The Certificates are being executed and delivered to
finance the payment of the principal and interest due and
payable on June 30, 1988 with respect to the $6,555,000 City of
Carlsbad 1987 Notes, issued in connection with the financing of
the purchase by the City of Carlsbad (the "City") of Hosp
Grove, and the construction of street improvements to
thoroughfares adjacent to Hosp Grove and corresponding storm
drains (Hosp Grove and the aforementioned street improvements
and storm drains are herein collectively referred to as the
"Project"). The City of Carlsbad (the "City") will lease the
Project from the City of Carlsbad Public Improvement
Corporation (the "Corporation") pursuant to a Lease Agreement,
dated as of June 1, 1988, by and between the City and the
Corporation (the "Lease Agreement").
1739043/1
The Certificates are deliverable in fully registered form
in the denomination of $5,000 or any integral multiple
thereof. Principal and premium, if any, represented by the
Certificates will be payable at the principal corporate trust
office of The Bank of California, N.A., the trustee and
registrar of the Certificates, in San Francisco, California.
Interest represented by the Certificates is payable
semiannually on each February 1 and August I, commencing
February 1, 1989. Payment of interest represented by the
Certificates shall be made by check or draft mailed to the
registered owners at their addresses appearing on the
Certificate registration books as of the 15th day of the month
preceding each Interest Payment Date, except that in the case
of an owner of $1,000,000 or greater in principal amount of
outstanding Certificates, such payment may, at such owner's
option, be made by wire transfer of immediately available funds
in accordance with instructions provided by such owner. The
Certificates are subject prior to maturity to optional
redemption, mandatory redemption and special redemption, as
described herein.
The City has covenanted in the Lease Agreement that as long
as the Project is available for the City's possession, it will
take such action as may be necessary to include and maintain
all Lease Payments for the Project in its annual budgets, and
to make the necessary annual appropriations therefor. The
obligation of the City to make Lease Payments under the Lease
Agreement does not constitute an obligation of the City for
which the City is obligated to levy or pledge any form of
taxation. Neither the Certificates nor the obligation of the
City to make Lease Payments constitute an indebtedness of the
State of California, the City or any other political
subdivision of the State of California, within the meaning of
the Constitution of the State of California or otherwise.
MATURITY SCHEDULE*
$ Certificates
Maturity Principal Interest Maturity Principal Interest
(August 1) Amount Rate Price (August 1) Amount Rate Pric
1989 $ ?. % 1994 % %
1990 1995
1991 1996
1992 1997
1993 1998
$ % Certificates Due August 1, 2008 - Price %
(Plus Accrued Interest)
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The Certificates are offered when, as and if sold, executed
and delivered, subject to the approval as to their legality by
Jones Hall Hill & White, A Professional Law Corporation, San
Francisco, California, Special Counsel. Certain legal matters
will be passed upon for the Underwriter by Brown & Wood, San
Francisco, California. It is anticipated that the Certificates
in definitive form, will be available for delivery in New York,
New York, on or about June 28, 1988.
RAUSCHER PIERCE REFSNES, INC.
Dated: June , 1988
Preliminary, subject to change.
1739043/1
CITY OF CARLSBAD, CALIFORNIA
City Council
Claude A. Lewis, Mayor
Ann J. Kulchin, Mayor Pro Tempore
Eric Larson
John J. Mamaux
Mark V. Pettine
City of Carlsbad Public Improvement Corporation
Board of Directors
Claude A. Lewis, Chairman
Ann J. Kulchin
Eric Larson
John J. Mamaux
Mark V. Pettine
City Officials
Raymond R. Patchett, City Manager
Frank N. Mannen, Assistant City Manager
James F. Elliott, Finance Director
Martin Orenyak, Community Development Director
Vincent F. Biondo, Jr., City Attorney
Aletha L. Rautenkranz, City Clerk
Special Counsel
Jones Hall Hill & White,
A Professional Law Corporation
San Francisco, California
Trustee
The Bank of California, N.A.
San Francisco, California
1739043/1
No dealer, broker, salesperson or other person has been
authorized by the City or the Corporation, to give any
information or to make any representations other than those
contained herein and, if given or made, such other information
or representation must not be relied upon as having been
authorized by the City, the Corporation, or the Underwriter.
This Official Statement does not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale
of the Certificates by a person in any jurisdiction in which it
is unlawful for such person to make such an offer, solicitation
or sale.
This Official Statement is not to be construed as a
contract with the purchasers of the Certificates. Statements
contained in this Official Statement which involve estimates,
forecasts or matters of opinion, whether or not expressly so
described herein, are intended solely as such and are hot to be
construed as a representation of facts.
The information set forth herein has been obtained from
official sources which are believed to be reliable but it is
not guaranteed as to accuracy or completeness. The information
and expression of opinions herein are subject to change without
notice and neither delivery of this Official Statement nor any
sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the
Corporation or the City since the date hereof. All summaries
of the Lease Agreement, Trust Agreement, or other documents,
are made subject to the provisions of such documents
respectively and do not purport to be complete statements of
any or all of such provisions. Reference is hereby made to
such documents on file with the City for further information in
connection therewith.
IN CONNECTION WITH THE OFFERING OF THE CERTIFICATES, THE
UNDERWRITER MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ll
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TABLE OF CONTENTS
Introduction 1
The Project 3
Estimated Sources and Uses of Proceeds 3
The Certificates 4
Security for the Certificates 7
Certificate Owners' Risks 10
The Corporation 11
City Financial Information 12
General City Information 23
Economic Profile of the City 25
Tax Exemption 31
Approval of Legal Proceedings 32
Absence of Litigation 32
Rating 33
Underwriting 33
Miscellaneous 34
Appendix A - Excerpts of the 1986/87 Audited
Financial Statements of the City A-l
Appendix B - Summary of Principal Documents B-l
Appendix C - Proposed Form of Legal Opinion C-l
111
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(map of Carlsbad to be inserted here)
IV
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$ *
CERTIFIGATES OF PARTICIPATION
(Hosp Grove Project)
Evidencing the Undivided Fractional Interests of the
Owners Thereof in Lease Payments to be Made by the
CITY OF CARLSBAD, CALIFORNIA
As Rental For Certain Property Pursuant to a
Lease Agreement with the
CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION
INTRODUCTION
This Official Statement provides certain information
concerning the sale and delivery of Certificates of
Participation (Hosp Grove Project) (the "Certificates"), in the
aggregate principal amount of $ *, which are to be
executed and delivered for the purpose of financing the payment
of the principal and interest due and payable on June 30, 1988
with respect to the $6,555,000 City of Carlsbad 1987 Notes
issued in connection with the financing of the purchase by the
City of Carlsbad, California (the "City") of Hosp Grove,
approximately 52 acres of land located within the City to be
held by the City for general municipal purposes and which is
currently zoned open space ("Hosp Grove"), and the construction
of street improvements to the thoroughfares adjacent to Hosp
Grove and corresponding storm drains (Hosp Grove and the street
improvements and storm drains are herein collectively referred
to as the "Project"). The Certificates represent undivided
fractional interests of the owners thereof in certain Lease
Payments to be made by the City of Carlsbad, California (the
"City"), for the possession of the Project pursuant to a Lease
Agreement, dated as of June 1, 1988 (the "Lease Agreement"),
between the City and City of Carlsbad Public Improvement
Corporation (the "Corporation"), a nonprofit public benefit
corporation duly organized and existing under the laws of the
State of California.
The Certificates are being executed and delivered pursuant
to a Trust Agreement, dated as of June 1, 1988 (the "Trust
Agreement"), by and among the City, the Corporation and The
Bank of California, N.A., San Francisco, California (the
* Preliminary, subject to change,
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"Trustee"). The Certificates evidence the undivided fractional
interests of the owners thereof in Lease Payments payable by
the City, as lessee, to the Corporation, as lessor, for the
possession of the Project. Pursuant to an Agency Agreement,
dated as of June 1, 1988, by and between the Corporation and
the City (the "Agency Agreement"), the City, as agent for the
Corporation, has agreed to construct those portions of the
Project to be constructed. Pursuant to an Assignment
Agreement, dated as of June 1, 1988 (the "Assignment
Agreement"), the Corporation will assign to the Trustee for the
benefit of the owners of the Certificates all its rights to
receive amounts payable by the City under the Lease Agreement
("Lease Payments") and its rights to enforce payment of all
amounts due in the event of a default by the City.
The City is required under the Lease Agreement to make
Lease Payments from any source of legally available' funds in
each year the City has possession of the Project. The Lease
Payments are designed to be sufficient in both time and amount
to pay, when due, the principal and interest represented by the
Certificates. The City has covenanted in the Lease Agreement
to take such action as may be necessary to include the Lease
Payments in its annual budgets and has further covenanted to
make the necessary annual appropriations for all such Lease
Payments. The amount of Lease Payments which the City is
obligated to pay under the Lease Agreement will be adjusted or
abated during any period in which by reason of damage or
destruction or eminent domain proceedings, there is
interference with the City's possession of the Project. Such
adjustment or abatement will end with the substantial
completion of repair, replacement or reconstruction of the
Project. The obligation of the City to make Lease Payments
does not constitute an obligation of the City for which the
City is obligated to levy or pledge any form of taxation or for
which the City has levied or pledged any form of taxation. The
obligation of the City to make Lease Payments does not
constitute a debt of the City, the Corporation, the State of
California, or any of its political subdivisions, and does not
constitute an indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction.
For certain financial information with respect to the City, see
"CITY FINANCIAL INFORMATION" herein and "APPENDIX A - Excerpts
of the 1986/87 Audited Financial Statements of the City"
attached hereto. For a discussion of certain amendments to the
Constitution of the State of California and their impact on the
City, see heading "CITY FINANCIAL INFORMATION-Constitutional
Amendments Affecting City Revenues" herein.
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Brief descriptions of the security for the Certificates,
the Corporation, the City and the Project are included in this
Official Statement together with summaries of the Lease
Agreement, the Assignment Agreement, the Agency Agreement and
the Trust Agreement. Such descriptions do not purport to be
comprehensive or definitive. All references herein to the
Lease Agreement, the Assignment Agreement, the Agency Agreement
and the Trust Agreement are qualified in their entirety by
reference to such documents and references herein to the
Certificates are qualified in their entirety by reference to
the form thereof included in the Trust Agreement, copies of all
of which are available for inspection at the principal
corporate trust office of the Trustee.
THE PROJECT
On June 1, 1987 the City acquired with the proceeds of a
Note in the amount of $6,459,384 to the order of San Diego
Trust and Savings Bank (the "Temporary Note") approximately 52
acres of land located within the City, known as Hosp Grove,
which land is to be held by the City for general municipal
purposes which is currently zoned open space. On July 16, 1987
the City issued its 1987 Notes in the principal amount of
$6,555,000 (the "Notes") the proceeds of which were used to
retire the Temporary Note and pay interest due thereon and to
pay costs of issuance incurred in connection with the issuance
of the Notes. The principal of the Notes and the interest
accrued thereon is due and payable on June 30, 1988.
The City has determined that certain improvements to the
thoroughfares adjacent to Hosp Grove are needed to improve the
flow of traffic in that area and storm drains will be
constructed to enclose a currently open drainage channel.
ESTIMATED SOURCES AND USES OF PROCEEDS
The proceeds of the sale of the Certificates are expected
to be comprised of and to be applied as follows:
Estimated Sources:
Principal Amount of Certificates $
Accrued Interest
Total Sources $
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Estimated Uses:
Escrow Fund
Acquisition and Construction Fund
Lease Payment Fund(l)
Reserve Fund (2)
Delivery Costs Fund
Underwriter's Discount
Original Issue Discount
Total Uses
(1) Interest due with respect to the Certificates from June 1,
1988 through , including $ of
accrued interest and $ of capitalized interest
from Certificate proceeds.
(2) Equal to maximum annual principal and interest payments
with respect to the Certificates.
THE CERTIFICATES
The Certificates will be sold, executed and delivered in
the aggregate principal amount of $ .* Each
Certificate shall be dated as of June 1, 1988 and interest
represented thereby shall be payable at the rates set forth on
the cover page hereof from the Interest Payment Date (defined
below) next preceding the date of execution thereof, unless:
(i) it is executed as of an Interest Payment Date, in which
event interest represented thereby shall be payable from the
date thereof; or (ii) it is executed after the close of
business on the fifteenth day of the month preceding each
Interest Payment Date (the "Record Date"), in which event
interest represented thereby shall be payable from such
Interest Payment Date; or (iii) it is executed on or before
January 15, 1989, in which event interest represented thereby
shall be paid from June 1, 1988. The Interest Payment Dates
are February 1, 1989 and the first day of each August and
February thereafter as long as any Certificates are
outstanding. The Record Date is the 15th day of the month
preceding each Interest Payment Date.
The Certificates will mature on August 1 in each year of
the designated years and in the principal amounts set forth on
the cover page hereof.
* Preliminary, subject to change.
1739043/1
The Certificates will be executed and delivered in fully
registered form without coupons, in the denomination of $5,000
or any integral multiple thereof. Principal and premium, if
any, represented by the Certificates will be payable at the
principal corporate trust office of the Trustee in San
Francisco, California. Payment of interest represented by the
Certificates shall be made by check or draft mailed to the
registered owner as of the Record Date, except that in the case
of an registered owner of $1,000,000 or greater in principal
amount of outstanding Certificates, such payment may, at such
owner's option, be made by wire transfer of immediately
available funds in accordance with instructions provided by
such owner.
Optional Redemption
The Certificates maturing on or after August 1, 1999 are
subject to optional redemption prior to maturity on or after
August 1, 1998 at the option of the City, as a whole or in part
(but not in a total redemption amount of less than $20,000 at
any one time), in inverse order of maturity and by lot within a
maturity, on any Interest Payment Date from amounts deposited
by the City in accordance with its option to prepay Lease
Payments, from any available source of funds therefor in
inverse order of maturity in multiples of $5,000 at the
following redemption prices expressed as percentages of the
principal amount to be redeemed plus accrued interest to the
redemption date:
Date of Redemption Redemption Price
August 1, 1998 through July 31, 1999 102 %
August 1, 1999 through July 31, 2000 101%
August 1, 2000 through July 31, 2001 101
August 1, 2001 through July 31, 2002 100%
August 1, 2002 and thereafter 100
Special Redemption
The Certificates are subject to special redemption in whole
on any date, or in part on any Interest Payment Date, among
maturities, and by lot within a maturity, such that equal
annual Lease Payments prevail following such redemption, and by
lot within a maturity at a redemption price equal to the
principal amount thereof plus accrued interest, without
premium, upon a prepayment of Lease Payments made by the City
if any of the Project is damaged, destroyed or taken in eminent
domain proceedings, from all net insurance or condemnation
proceeds if the City elects not to repair or replace such
Project or portion thereof.
1739043/1
Mandatory Redemption
The Certificates maturing on August 1, 2008, are subject to
mandatory redemption on August 1 in each year on or after
August 1, 1999, by lot, from the principal components of the
Lease Payments required to be paid by the City pursuant to the
Lease Agreement with respect to each such redemption date, at a
redemption price equal to the principal amount thereof to be
redeemed, together with accrued interest thereon to the date
fixed for redemption, without premium, as follows:
Redemption Redemption
Date Principal Date Principal
(August 1) Amount (August 1) Amount
1999 $ 2004 $
2000 2005
2001 2006
2002 2007
2003 2008*
* Maturity
Other Redemption Provisions
In the event that less than all of the remaining Lease
Payments are prepaid, the Trustee shall select Certificates for
redemption among maturities on a pro rata basis in multiples of
$5,000 and from within each maturity by lot, in any manner
which the Trustee deems fair and appropriate.
When redemption is authorized or required, the Trustee
shall give to the owners of the Certificates notice, at the
expense of the City, of the redemption of the Certificates.
Such notice shall specify: (a) that the whole or a designated
portion thereof (in the case of redemption of a Certificate in
part but not in whole) are to be redeemed and the
identification thereof, (b) the date of redemption and
redemption price, (c) the place or places where the redemption
will be made, (d) that on the redemption date, the redemption
price will become due and payable upon each such Certificate or
portion thereof called for redemption, and interest with
respect thereto shall cease to accrue from and after said date,
and (e) the place where such Certificates are to be surrendered
for payment of the redemption price.
Notice of redemption shall be given by certified or
registered mail to the respective owners of any Certificates
designated for redemption at their addresses appearing on the
1739043/1
Certificate registration books, at least thirty (30) days but
not more than sixty (60) days prior to the redemption date and
to all securities depositories and to one or more information
service by telecopy, registered, certified or overnight mail at
least thirty-five (35) days prior to the redemption date;
provided that neither the failure to receive such notices nor
any immaterial defect in any notice so mailed shall affect the
sufficiency of the proceedings for the redemption of
Certificates.
SECURITY FOR THE CERTIFICATES
Each Certificate represents an undivided fractional
interest in Lease Payments made by the City under the Lease
Agreement. The Corporation, pursuant to the Assignment
Agreement, will assign certain of its rights, under the Lease
Agreement to the Trustee for the benefit of the owners of the
Certificates, including its right to receive Lease Payments and
insurance and condemnation proceeds thereunder and its rights
to exercise all the rights and remedies conferred on the
Corporation under the Lease Agreement. The obligation of the
City to make Lease Payments is payable from annual
appropriations of the City from funds lawfully available
therefor. Neither the full faith and credit nor the taxing
power of the City, the State of California or any of its
political subdivisions is pledged to make Lease Payments under
the Lease Agreement. The Lease Payments are calculated to be
sufficient to pay, when due, the principal and interest
represented by the Certificates.
The Lease Agreement provides that the City shall take
action each year as may be necessary to include all Lease
Payments in its annual budgets and to make annual
appropriations therefor. As provided in the Lease Agreement,
the covenants of the City thereunder shall be deemed by the
City to be and shall be ministerial duties imposed by law. It
shall be the duty of each and every public official of the City
to take such action and to do such things as are required by
law in the performance of the official duty of such officials
to enable the City to carry out and perform the covenants and
agreements in the Lease. Under California law, even though the
Lease Agreement becomes effective as of the date thereof, the
obligation of the City to make Lease Payments with regard to
the portion of the Project to be constructed (other than to the
extent that funds to make Lease Payments are available in the
Lease Payment Fund or the Reserve Fund) may be abated in whole
or in part if the City does not have full possession of such
portion of the Project due construction delay. In the case of
partial abatement, the City's obligation to make Lease Payments
for other portions of the Project for which it does have
possession shall continue unabated.
7
1739043/1
A Reserve Fund is established by the Trust Agreement in an
amount equal to the Reserve Requirement, as defined in the
Trust Agreement. Except to the extent amounts in the Reserve
Fund exceed the Reserve Requirement, such funds are to be used
only for the payment of Lease Payments to the extent amounts in
the Lease Payment Fund are insufficient therefor. Any amounts
remaining in the Reserve Fund upon payment in full of all
outstanding Certificates, or upon providing for such payment
pursuant to the terms of the Trust Agreement, will be withdrawn
by the Trustee and paid to the City.
Lease Payments
The Lease Agreement requires the City to deposit with the
Trustee as assignee of the Corporation, on each January 15 and
July 15, commencing on January 15, 1989 ("Lease Payment Dates")
an amount equal to the aggregate Lease Payment coming due and
payable on the next Interest Payment Date.
The Lease Payments payable for the possession of the
Project for the annual rental period commencing on August 2 of
each year and terminating on the following August I are payable
in two installments, such that the payment made on or before
July 15 of each year represents the principal and interest
payable with respect to the Certificates on the succeeding
August 1, and the payment made on or before each January 15
represents the interest payable with respect to the
Certificates on the succeeding February 1. The City shall
receive a credit towards payment of Lease Payments for amounts
on deposit in the Lease Payment Fund on each Lease Payment Date.
The Lease Agreement provides that Lease Payments shall be
abated for any period during which there is substantial
interference with the possession of the Project by the City due
to damage, destruction or taking in eminent domain
proceedings. During such a period, however, the Trustee may
pay amounts relating to principal and interest represented by
the Certificates from other sources, such as the Reserve Fund,
the proceeds of rental interruption insurance or, if
self-insured for rental interruption, amounts reserved by the
City for such purpose, or amounts on deposit in the Insurance
and Condemnation Fund. Lease Payments with respect to the
portions of the Project not damaged, destroyed or condemned
shall continue unabated. The City will obtain rental
interruption insurance, or will self-insure for rental
interruption and reserve, in an amount equal to to
insure against an interruption in Lease Payments because of
damage to the Project. See "APPENDIX B - Summary of Principal
Documents - Lease Agreement" attached hereto.
8
1739043/1
The Lease Agreement requires that Lease Payments be
deposited in the Lease Payment Fund maintained by the Trustee.
On each Interest Payment Date, the Trustee will withdraw from
the Lease Payment Fund the aggregate amount of such Lease
Payments and will apply such amounts to make principal and
interest payments represented by the Certificates, sufficient
to meet the following annual amortization schedule. Such
amounts shall be modified by the Trustee to reflect a partial
redemption of Lease Payments under the Lease Agreement.
Annual Lease Payments
For the
Year Ending Portion of Lease Payment Representing Total Lease
Augus t 1 Principal Interest Payments
1989 .
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008*
* Final Maturity
Sources of Lease Payments
Lease Payments made by the City to the Corporation are
payable from any revenues generally available to the City
except certain special fund revenues which are legally
restricted as to use. However, the City is obligated to make
Lease Payments from any lawfully available funds-.
1739043/1
CERTIFICATE OWNERS' RISKS
Lease Payments
The Lease Payments are not secured by any pledge of or lien
on taxes or other revenues of the City, but are payable from
all funds lawfully available to the City. The City has the
capacity to enter into other obligations which may constitute
additional charges against its revenues. In the event the
City's revenue sources are less than its total obligations, the
City could choose to fund other municipal services before
making Lease Payments. The same result could occur if, because
of state constitutional limits on expenditures, the City is not
permitted to appropriate and spend all of its available
revenues. However, the City has covenanted in the Lease
Agreement to budget for, appropriate and make the Lease
Payments in each year it has possession of the Project.'
The obligation of the City to pay the Lease Payments does
not constitute an obligation of the City for which the City is
obligated to levy or pledge any form of taxation or for which
the City has levied or pledged any form of taxation. The
obligation of the City to pay Lease Payments does not
constitute a debt of the City, the Corporation, the State of
California or any of its political subdivisions, and does not
constitute an indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction.
Construction
If the City for any reason cannot take possession of such
portions of the Project to be constructed as scheduled, a
portion of the Lease Payments payable under the Lease Agreement
will be abated during the period between the expected delivery
date and the time when the Corporation delivers possession in
an amount equal to the proportion which the construction costs
of the part or parts of the Project not yet delivered to the
City bears to the construction cost of all such portions of the
Project expected to be constructed. In the event that the
costs of constructing those portions of the Project to be
constructed are greater that the amount made available from the
proceeds of the Certificates for such purpose, the City has
agreed in the Lease Agreement to provide amounts necessary to
complete such portions of the Project to be constructed, but
only from funds available to the City in the fiscal year in
which the City has entered into the Lease Agreement.
10
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Limited Recourse on Default
If the City defaults on its obligations to make Lease
Payments and the Trustee elects to terminate the Lease
Agreement, the Trustee may re-let the Project provided, the
Trustee shall re-let to a political subdivision of the State so
as to preserve the tax-exempt nature of the interest component
of the Lease Payments represented by the Certificates to the
extent possible. In the event of a default, there is no remedy
of acceleration of any Lease Payments which have not come due
and payable in accordance with the Lease Agreement. The City
will continue to be liable for Lease Payments as they become
due and payable in accordance with the Lease Agreement, and the
Trustee is required to seek a separate judgment each year for
that year' s defaulted Lease Payments. Any such suit for money
damages would be subject to limitations on legal remedies
against cities in California, including a limitation on
enforcement of judgments against funds needed to serve the
public welfare and interest.
Interruption of Possession for Extended Period
The amount of Lease Payments due under the Lease Agreement
will be adjusted or abated during any period in which by reason
of damage, destruction, eminent domain or otherwise there is
substantial interference with the possession of the Project
such that the resulting Lease Payments for the remaining
portions of the Project represent fair consideration therefor.
Such adjustment or abatement will end with the substantial
completion or replacement, repair or reconstruction of the
Project. If proceeds of the City's rental interruption
insurance, or amounts reserved under a self-insurance plan, and
moneys in the Reserve Fund are insufficient to pay all
principal and interest represented by the Certificates during
the period of repair or reconstruction or during eminent domain
proceedings, the City will have no obligation to make Lease
Payments to cover such deficiency and no remedy for nonpayment
will be available to the Trustee or the Certificate Owners
against the City under the Lease Agreement or Trust Agreement
(see "APPENDIX B - Summary of Principal Documents - Lease
Agreement - Insurance" attached hereto).
THE CORPORATION
Organization
The City of Carlsbad Public Improvement Corporation is a
non-profit public benefit corporation organized and existing
under the laws of the State of California for the purpose of
assisting the City in financing public projects.
11
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CITY FINANCIAL INFORMATION
Ad Valorem Property Taxation
City property taxes are assessed and collected by the
County of San Diego (the "County"), at the same time and on the
same rolls as the County and special district property taxes.
The valuation of secured property is established as of
March 1 and is subsequently equalized in August, and is payable
in two installments of taxes due November 1 and February 1,
respectively. Taxes become delinquent on December 10 and
April 10 for each respective installment. Taxes on unsecured
property (personal property and leasehold) are due on August 31
of each year based on the preceding fiscal year's secured tax
rate.
State law exempts $7,000 of the full cash value of an
owner-occupied dwelling, but this exemption does not result in
any loss of revenue to local agencies, since the State
reimburses local agencies for the value of the exemptions.
Assessed Valuations
The State Board of Equalization assesses all property using
100% of value as defined by Article XIIIA of the State
Constitution. State law provides exemptions from ad valorem
property taxation for certain classes of property such as
churches, colleges, non-profit hospitals, and charitable
institutions.
The following table sets forth the five-year history of
assessed valuations for the City:
CITY OF CARLSBAD
ASSESSED VALUATIONS
Fiscal Before Redevelopment After Redevelopment
Year Adjustment Adjustment
1983/84 2,252,921,234 2,242,525,629
1984/85 2,548,132,552 2,534,352,353
1985/86 2,951,163,070 2,917,119,901
1986/87 3,517,751,761 3,458,390,377
1987/88 4,096,874,876 4,014,899,876
Source: County of San Diego Property Tax Services.
12
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Tax Levies, Collections and Delinquencies
Taxes are levied for each fiscal year on taxable real and
personal property which is situated in the City as of the
preceding March 1. A supplemental roll is developed when
property changes hands which produces additional revenue. For
assessment and collection purposes, property is classified as
either "secured" or "unsecured" and is listed accordingly on
separate parts of the assessment roll. The "secured roll" is
that part of the assessment roll containing State-assessed
property and real property having a tax lien which is
sufficient, in the opinion of the assessor, to secure payment
of the taxes. Unsecured property comprises all property not
attached to land such as personal property or business
property. Boats and airplanes are examples of unsecured
property. Unsecured property is assessed on the "unsecured
roll."
There is a ten percent penalty on any delinquent payment of
secured roll taxes. In addition, property on the secured roll
with respect to which taxes are delinquent becomes
tax-defaulted. Such property may thereafter be redeemed by
payment of the delinquent taxes and the delinquency penalty,
plus a redemption penalty to the time of redemption. If taxes
are unpaid for a period of five years or more, the property is
subject to auction sale by the County Tax Collector.
In the case of unsecured property taxes, a 10% penalty
attaches to delinquent taxes on property on the unsecured roll,
and an additional penalty of 1.5% per month begins to accrue
beginning November 1st of the fiscal year and a lien is
recorded against the assessee. The taxing authority has four
ways of collecting unsecured personal property taxes: (1) a
civil action against the taxpayer; (2) filing a certificate in
the office of the County Clerk specifying certain facts in
order to obtain a judgment lien on specific property of the
taxpayer; (3) filing a certificate of delinquency for record in
the County Recorder's Office in order to obtain a lien on
specified property of the taxpayer; and (4) seizure and sale of
personal property, improvements or possessory interests
belonging or assessed to the assessee.
Each county levies (except for levies to support prior
voter-approved indebtedness) and collects all property taxes
for property falling within that county's taxing boundaries.
The secured tax levy and year-end delinquencies for 1983/84
through 1986/87 are shown on the following table:
13
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CITY OF CARLSBAD
SECURED TAX CHARGES AND DELINQUENCIES
Secured Tax Amount Delinquent % Delinquent
Charge June 30 June 30
1983/84 $ 4,129,204 $158,975 3.9
1984/85 4,720,080 183,873 3.9
1985/86 5,570,339 220,109 4.0
1986/87 8,989,953 324,829 3.6
1987/88(1) 10,243,777 409,751 4.0
(1) Estimate.
Source: County of San Diego Property Tax Services.
Budget Process
Development of an annual budget typically begins six months
prior to the fiscal year under consideration. Budgeting is a
continuing process involving the presentation of budget
estimates by all departments, review of requests by the City
Manager and referral of a preliminary budget to the City
Council for consideration. After the City Council review and
public hearing on the proposed budget, approval of the budget
for the forthcoming year is enacted by resolution of the City
Counc i1.
14
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The following table reflects the City's General Fund
revenues and expenditures by major category for fiscal years
ended June 30, 1986 through June 30, 1989.
CITY OF CARLSBAD
GENERAL FUND REVENUES AND EXPENDITURES
by Major Category
FISCAL YEARS ENDED JUNE 30, 1986 THROUGH JUNE 30, 1989
REVENUES
Source
Taxes
Licenses & Permits
Charges for Services
Fines
Interest
Other
Total Revenue
Gas Tax funds available to
support a portion of
Street Maintenance costs
Total Available Revenue
1985-86
$14,851,803
,996,864
,870,965
288,055066,441
1.234.824
$24,308,952
1986-87
Actual
$17,025,712
4,348,903
2,606,776
366,597
,149,488
943.282
1.
$26,440,758
44P.
1987-88
Estimate (1>
$18,889,000
3,602,000
1,846,000
393,000
800,000
185.000
$25,715,000
700.500
1988-89
Budget (2)
$20,859,000
3,418,000
2,278,900
393,000
600,000
414.000
$27,962,900
760.000
t?ft 7?? qnn
EXPENDITURES (3)
_ Type _
General Goverment
Public Safety
Public Works
Culture & Recreation
Total Expenditures
$4,120,270
7,851,268
5,734,750
3.539.015
(1)
(2)
$5,639,077
9,452,556
4,067,420
4.190.635
$5,210,434
9,773,838
6,342,079
4.841.872
$76 ififl ??"*
Estimated revenues and expenditures
Data from preliminary budget presented to the City Council 5/24/88.
Subject to change before adoption on 6/12/88.
$5,897,308
11,505,764
6,927,265
5.414.334
$?Q 744.671
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Comparative Financial Statements
The following tables reflect the City's general fund
revenues, expenditures and fund balance for the fiscal years
ended June 30, 1985, 1986 and 1987 and general fund balance
sheet at June 30, 1985, 1986 and 1987. This information has
been derived from the audited financial statements of the City
for such fiscal years and should be read in conjunction with
"APPENDIX A - Excerpts of the 1986/87 Audited Financial
Statements of the City" attached hereto.
CITY OF CARLSBAD
GENERAL FUND
REVENUES, EXPENDITURES AND FUND BALANCE,
FISCAL YEARS ENDED JUNE 30, 1985 THROUGH JUNE 30, 1987
June 30, 1985 June 30, 1986 June 30, 1987
REVENUES:
Taxes
License and Permits
Fines and Forfeitures
Use of Money and Property
Revenue from Current Svcs.
Transfers In
Miscellaneous
TOTAL REVENUES
EXPENDITURES:
General Government
Public Safety
Public Works
Cultural and Recreation
Transfers Out
TOTAL EXPENDITURES
REVENUES OVER (UNDER)
EXPENDITURES
FUND EQUITY JUNE 30
$12,828,834
3,470,656
345,750
1,088,532
2,415,554
578,000
120,051
$20,847,377
$3,004,590
7,020,105
2,516,105
3,072,810
210,000
$15,824,011
$14,851,803
3,996,864
288,055
1,066,441
2,870,965
707,754
1,234,824
$25,016,706
$4,120,270
7,851,268
5,734,750
3,539,015
3,272.322
$24,972,625
$17,025,712
4,348,903
366,591
1,149,488
2,606,776
270,275
943,282
$26,711,033
$5,639,077
9,452,556
4,067,556
4,190,635
853,034
$24,202,742
$ 5,023,366 $ 44,081 $ 2,508,291
$ 2.250.175 $ 2.294.256 $ 4.802.547
Source: City of Carlsbad.
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16
CITY OF CARLSBAD
GENERAL FUND
BALANCE SHEETS
JUNE 30, 1985, 1986 and 1987
ASSETS:
Cash and Investments
Receivables:
Taxes
Accounts
Accrued interest
Due from other funds
Due from other governments
Advances to other funds
Inventory, at cost
Prepaid costs
TOTAL ASSETS
June 30. 1985
$1,641,161
473,694
150,383
358,679
912,542
12,288
43,500
$3.592.247
June 30, 1986
$1,494,284
657,010
31,021
110,364
23,615
1,369,618
14,069
79,500
$3.779.481
June 30, 1987
$2,096,962
1,005,471
77,936
150,759
416,194
3,915
2,827,702
24,216
79,500
$6.682.655
LIABILITIES
Accounts payable $328,519 $397,925 $ 510,553
Accrued wages payable 907,652 1,076,001 1,304,586
Due to Other Funds 105,901 11,299
Payable from restricted assets:
Accrued interest payable - - 64,969
TOTAL LIABILITIES $1.342.072 $1.485.225 $1.880.108
FUND EQUITY
Fund balances - reserved $2,250,175 $2,294,256 $4,792,585
Fund balances - unreserved - - 9,962
TOTAL FUND EQUITY $2,250,175 $2,294,256 $4,802,547
TOTAL LIABILITIES AND
FUND EQUITY $3.592.247 $3.779.481 $6.682.655
Source: City of Carlsbad
Financial and Accounting Information
The accounts of the City are organized on the basis of
funds and account groups, each of which is considered a
separate accounting entity. The operations of each fund are
accounted for with a separate set of self-balancing accounts
that comprise its assets, liabilities, fund equity, revenues,
and expenditures, or expenses, as appropriate. Government
resources are allocated to and accounted for in individual
1739043/1
17
funds based upon the purposes for which they are to be spent
and the means by which spending activities are controlled. The
various funds are grouped into eight generic fund types and
three broad fund categories as follows:
Government Funds:
General Fund - The general fund is the general
operating fund of the City. It is used to account for
all financial resources except those required to be
accounted for in another fund.
Special Revenue Funds - Special revenue funds are used
to account for the proceeds of specific revenue
sources (other than special assessments, expendable
trusts, or major capital projects) that are legally
restricted to expenditures for specified purposes.
Debt Service Funds - Debt service funds are used to
account for the accumulation of resources for, and the
payment of, the principal of and interest on general
long-term debt, and related costs.
Capital Projects Fund - Capital projects funds are
used to account for financial resources to be used for
the acquisition or construction of major capital
facilities (other than those financed by proprietary
funds, special assessment funds, and trust funds).
Special Assessment Funds - Special assessment funds
are used to account for the financing of public
improvements or services deemed to benefit the
properties against which special assessments are
levied.
Proprietary Funds:
Enterprise Funds - Enterprise funds are used to
account for operations (a) that are financed and
operated in a manner similar to private enterprises
where the intent of the governing body is that the
costs (expenses, including depreciation) of providing
goods or services to the general public on a
continuing basis be financed or recovered primarily
through user charges; or (b) where the governing body
has decided that periodic determination of revenues
earned, expenses incurred, and/or net income is
appropriate for capital maintenance, public policy,
management control, accountability, or other purposes.
18
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Internal Service Funds - Internal service funds are
used to account for the financing of goods or services
provided by one department or agency to other
departments or agencies of the City, or to other
governments, on a cost-reimbursement basis.
Fiduciary Funds:
Trust and Agency Funds - Trust and agency funds are
used to account for assets held by the City in a
trustee capacity or as an agent for individuals,
private organizations, other governments and/or other
funds. For the year ended June 30, 1985, the City was
holding only agency funds due, for the most part, to
other funds and other agencies. Agency funds are
custodial in nature (assets equal liabilities) and do
not involve measurement of results of operations.
All government funds are accounted for using the modified
accrual basis of accounting. Their revenues are recognized
when they become measurable and available as net current
assets. Taxpayer-assessed income, gross receipts, and other
taxes are considered "measurable" when in the hands of
intermediary collecting governments and are recognized as
revenue at that time. Anticipated refunds of such taxes are
recorded as liabilities and reductions of revenue when they are
measurable and their validity seems certain.
Expenditures are generally recognized under the modified
accrual basis of accounting when the related fund liability is
incurred. Exceptions to this general rule include:
(1) accumulated unpaid vacation, sick pay, and other employee
amounts which are not accrued; and (2) principal and interest
on general long-term debt which is recognized when due.
All proprietary funds are accounted for using the accrual
basis of accounting. Their revenues are recognized when they
are earned, and their expenses are recognized when they are
incurred.
City Debt Structure
Short-Term - Other than the Refunded Note, the City has no
outstanding short-term indebtedness.
Long-Term - The City has never defaulted on the payment of
principal or interest on any of its indebtedness. As of
June 30, 1987, the City had outstanding $3,045,000 principal
amount of bonds serviced by the City's Debt Service Fund, of
which $670,000 principal amount represented general obligation
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bonds of the City and $2,375,000 principal amount represented
revenue bond obligations of the City's Parking Authority and
Building Authority. See "Appendix A - Excerpts of the 1986/87
Audited Financial Statements of the City" attached hereto.
Lease Obligations - In 1981, the City entered into an
agreement with the City of Oceans ide to lease the public
parking area surrounding a regional shopping area. Under the
terms of the Agreement, the City has agreed to pay an aggregate
amount of $700,040 including interest of 10%. The annual
principal and interest payments are to be $70,000 through 1991
and $1 annually for each of the remaining years of the fifty
year lease. In May, 1986, the City entered into a lease for
the building at 2075 Las Palmas Drive. The City uses this
building for the Community Development Center. The lease had a
purchase option that the City exercised on July 31, 1987,
purchasing the building for $1,602,160. Subseguently,' the City
entered into a ten-year sale leaseback agreement, commencing
August 20, 1987, with annual payments of $234,529. The first
payment was made February 20, 1988.
The following is a summary of future annual minimum lease
payments to be paid from the City's General Fund under existing
leases as of December 31, 1987:
Year Ending Annual Minimum
June 30 Lease Payments
1988 $304,529
1989 304,529
1990 304,529
1991 304,529
1992 234,530
Thereafter 1,172,685
Direct and Overlapping Debt
Contained within the City are numerous overlapping local
agencies providing public services. These local agencies have
outstanding bonds issued in the form of general obligation,
lease revenue and special assessment bonds. The direct and
overlapping debt of the City is shown in the following table:
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CITY OF CARLSBAD
STATEMENT OF DIRECT AND OVERLAPPING DEBT
1987-88 Assessed Valuation: $4,014,899,694 (after deducting $81,975,182 redevelopment tax
allocation increment)
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable Debt 6/1/88
San Diego County Building Authorities 4.444% $11,923,474
San Diego County Water Authority 4.601 1,300,013
San Diego County Water Authority Certificate of Participation 4.601 4,601,000
Metropolitan Water District 0.765 4,020,534
Carlsbad Unified School District (Various issues) 96.051-96.056 525,555
Carlsbad Unified School District 96.025 6,049,575
San Marcos Unified School District 22.781 375,285
San Dieguito Union High School District 9.042 298,386
Encintas Union School District 24.212 332,915
Encintas Union School District Authority 24.212 277,227
Other School Districts Various 8,564
Tri-City Hospital District 33.828 696,856
Palomar Pomerado Hospital District & Authority 0.745 116,369
Leucadia County Water District and I.D. #1 49.258 & 3.370 333,462
San Marcos County Water & I.D.'s #1,2,6 6.259-10.847 164,344
Costa Real Municipal Water District Certificates
of Participation 99.060 11,887,200
Costa Real Municipal Water District,
Improvement Districts #1,2,3,4 98.106-99.054 894,429
Olivenbain Municipal Water District I.D. #1 30.829 439,313
City of Carlsbad 100. 550,000(1)
City of Carlsbad Building Authorities 100. 2,215,000
City of Carlsbad 1915 Act Bonds 100. 9,570,000
City of Carlsbad Public Improvement Corporation (2) 100. 8,500,000
TOTAL DIRECT AND OVERLAPPING BONDED DEBT $65,079,501
(1) Excludes tax and revenue anticipation notes and tax allocation bonds.
(2) Represents $8,500,000 certificates of participation to be sold.
Ratios to Assessed Valuation:
Directed Debt ($11.265.000) 0.28%
Total Debt 1.62%
SHARE OF AUTHORIZED AND UNSOLD BONDS:
Metropol i tan Water Di stri ct $2,027,250
Costa Real Municipal Water District, I.A. #1 $ 98,329
Costa Real Municipal Water District, I.A. #3 $ 196,212
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/87: $ 297,938
21
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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 XI HA 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 changes in
the Consumer Price Index—not to exceed 2 percent per year;
(d) permits establishment of 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 1975-1976 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 sales 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. "Appropriations
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
22
1739043/1
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. The State mandated limit for the City
in 1987/88 was $31,936,660 and estimated 1987/88 appropriations
subject to the limit were $23,149,900.
Another initiative was approved by the voters in November,
1986 which (i) requires that any tax for general governmental
purposes imposed by local governmental entities such as the
City be approved by resolution or ordinance adopted by a
two-thirds vote of the governmental entity's legislative body
and by a majority vote of the electorate of the governmental
entity, (ii) requires that any special tax (defined as taxes
levied for other than general governmental purposes) imposed by
a local governmental entity by approved by a two-thirds vote of
the voters within that jurisdiction, (iii) restricts the use of
revenues from a special tax to the purposes or for the service
for which the special tax was imposed, (iv) prohibits the
imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA,
(v) prohibits the imposition of transaction taxes and sales
taxes on the sale of real property by local governmental
entities, and (vi) requires that any tax imposed by a local
government entity on or after August 1, 1985 be ratified by a
majority vote of the electorate within two years of the
adoption of the initiative or be terminated by November 15,
1988. The City does not anticipate any potential adverse
financial impact or a result of the adoption of this initiative.
GENERAL CITY INFORMATION
Introduction
The City was incorporated July 16, 1952. It is a general
law city with a council/manager form of government. The City
encompasses 39 square miles and is located approximately
35 miles north of the City of San Diego.
23
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CITY OF CARLSBAD
COUNTY OF SAN DIEGO
POPULATION ESTIMATES
Year City County
1970 14,944 1,357,854
1975 19,200 1,560,700
1980 35,490 1,861,846
1981 35,600 1,895,200
1982 37,650 1,944,000
1983 39,200 1,988,600
1984 40,650 2,041,400
1985 44,950 2,102,500
1986 48,850 2,165,500
1987 55,300 2,240,700
1988 58,900 2,327,700'
Sources: 1970 and 1980: U.S. Census.
1975, 1981-1988: State of California Department of
Finance.
Labor Relations
The City has 431 full-time permanent employees and five
representation units, as follows:
CITY OF CARLSBAD
LABOR RELATIONS
No. of Contract Expiration
Representation Unit Employees Date
Carlsbad Police Officers'
Assoc. 72 June 15, 1988
Carlsbad Fireman's Assoc. 52
Carlsbad City Employees'
Assoc. 231
Carlsbad Police Management 7 (1)
City Management 69 (1)
(1) Ongoing contracts without expiration dates.
Source: City of Carlsbad.
24
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Retirement Programs
All permanent employees of the City are covered under the
Public Employees' Retirement System (PERS) of the State, a
defined benefit plan. Pension costs are funded by monthly
contributions from the City and covered employees.
Contributions by the City during 1987/88 are estimated to be
$2,781,996 and are expected to be $2,784,112 for 1988/89.
Contribution rates are determined by PERS and are calculated to
include unfunded prior service costs amortized through the year
2000.
The Public Employees Retirement System actuary estimates
the plan's unfunded liability as of June 30, 1987 to be $16,606.
The City contributes to PICA only for Medicare benefits for
employees hired after April 1, 1986. The amount for 1987/88 is
estimated to be $39,105 and $85,000 is expected to be
contributed in 1988/89.
ECONOMIC PROFILE OF THE CITY
Employment
As of May 1, 1987 the civilian labor force for the City was
22,580, of which 21,826 were employed. The unadjusted
unemployment rate as of decreased to
percent from the rate of percent.
25
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Largest Employers
The following table sets forth the largest employers in the
City:
CITY OF CARLSBAD
SCHEDULE OF PRINCIPAL EMPLOYERS
1986-87
Firm
Manufacturing;
Hughes Aircraft Company
Taylor Made Golf
Eaton-Leonard Corporation
Beckman Instruments
Dyna Industries Incorporated
Watkins Manufacturing Corp.
Sierracin-Mangnedyne, Inc.
Sargent Industries
Non-Manufacturing;
Plaza Camino Real
La Costa Hotel and Spa
Car Country Carlsbad
City of Carlsbad
Carlsbad Unified School District
San Diego Gas Sc Electric
Farmers Insurance Group
Pea Soup Andersen's
Daniel's Cablevision
Product/Service
Electronic Components
Golf Equipment
Vending Machines
Microbics Operation
Medical Products
Portable Spas
Electronic Motors
Industrial Seals
Shopping Center
Hotel/Health Spa
Car Dealership
Government
Education
Electricity and Gas
Insurance
Restaurant/Hotel
Cable TV
Number of
Employees
1,500
280
275
240
195
185
162
150
1,000
1,000
500 (est.)
435
425
414
320
200
90
Source: City of Carlsbad Chamber of Commerce.
26
1739043/1
The following table presents the annual average wage and
salary employment figures by industry classification for San
Diego County for the years 1983 through 1987.
SAN DIEGO COUNTY
WAGE AND SALARY BY INDUSTRY
ANNUAL AVERAGES
(In Thousands)
Agriculture
Mining
Construction
Manufacturing
Transportation,
Public Utilities
Wholesale Trade
Retail Trade
Finance, Insurance,
Real Estate
Services
Government
TOTAL (2)
1983
29.8
28.3
131.6
45.8
163.5
139.5
1984 1985
13.6
0.5
31.6
106.9
12.3
0.6
41.4
116.0
11.9
0.8
47.5
121.6
30.5
31.0
142.4
48.5
181.3
141.8
31.6
33.6
153.3
52.0
197.9
145.7
1986 1987 (1)
11.8
0.8
50.9
121.8
32.3
35.2
161.1
56.6
211.1
149.9
691.0 745.8 795.7 831.5
12.0
0.8
55.9
122.4
33.6
38.0
168.2
60.6
227.6
155.8
874.9
(1) Forecast
(2) Totals may not add due to independent rounding.
Source: State Department of Employment Development.
The following table presents annual labor force and
employment data for San Diego County, the State of California
and the United States for the years 1980 through 1987. As
shown in the table, unemployment rates in San Diego County have
been lower than those in California and the nation as a whole.
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COUNTY OF SAN DIEGO
Labor Force, Employment and Unemployment
Yearly Average for Years 1980 through 1987
Year and Area
1980
San Diego County
Cal i fornia
United States
1981
San Diego County
Cal ifornia
United States
1982
San Diego County
Cal i fornia ,
United States ,
1983
San Diego County
Cali fornia
United States
1984
San Diego County ....
Cal i fornia
United States
1985
San Diego County
Cal i fornia
United States
1986
San Diego County ....
Cali fornia
United States
1987
San Diego County ....
California < 1 )
United States
Civil ian
Labor Force
774,500
11,581,000
.... 106,940,000
797,300
11,799,900
... 108,670,000
834,000
12,189,000
110,204,000
877,100
12,281,000
111,551,000
915,300
12,619,000
113,544,000
967,200
12,937,000
.... 115,462,000
1,010,900
13,365,000
.... 117,834,000
1,058,800
13,976,000
, .. 119,865,000
Employment
723,300
10,791,100
99,303,000
740,500
10,907,800
100,397,000
756,800
10,978,000
99,526,000
805,100
11,095,000
100,834,000
860,800
11,638,000
105,005,000
915,900
12,007,000
107,150,000
960,500
12,473,000
109,597,000
1,011,000
13,272,000
112,440,000
Unemployment
52,700
789,900
7,637,000
55,000
872,100
8,273,000
77,200
1,211,000
10,678,000
72,000
1,187,000
10,717,000
54,500
981,000
8,539,000
51,300
931,000
8,312,000
50,400
892,000
8,237,000
47,800
704,000
7,425,000
Rate
6.8%
6.8
7.1
6.9
7.4
7.6
9.3
9.9
9.7
8.2
9.7
9.5
6.0
7.8
7.5
5.3
7.2
7.1
5.0
6.7
7.0
4.5
5.0
6.2
(1) As of March, 1988, seasonally adjusted.
Source: California Employment Development Department.
28
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Commercial Activity
Taxable sales in the City have increased at an annual rate
of 12.3% during the five-year period 1982 through 1986. A
five-year history of taxable sales is shown in the following
table:
CITY OF CARLSBAD
TAXABLE TRANSACTIONS
(in Thousands of Dollars)
Retail Stores
Year
1982
1983
1984
1985
1986
Total All Outlets
No. of Taxable No. of Taxable
Permits Transactions Permits Transactions
422
436
468
470
522
$327,174
369,888
439,885
483,798
503,109
1
1
1
1.
121
169
304
417
1,612
$359,774
407,933
482,963
542,677
571,855
Source: California State Board of Equalization.
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Construction Activity
The following table shows construction activity in the City
for the past five years.
CITY OF CARLSBAD
BUILDING PERMIT VALUATION
(In Thousands of Dollars)
Residential 1983 1984 1985 1986 1987
New single housing $ 63,870 $ 86,482 $122,340 $185,433 $ 74,859
New multi-dwelling 36,767 44,152 77,129 96,803 20,963
Additions, alterations 2,231 2,670 3,261 3,809 5.464
Total Residential $102,868 $133.304 $202,730 $286.045 $101,286
Non-Residential
New commercial $ 5,921 $ 22,243 $ 31,921 $ 33,934 $11,199
New industrial 8,407 1,481 745 2,509 13,726
Other 2,794 6,522 17,072 5,444 1,985
Additions, alterations 7,736 7.140 18.994 12,280 13.540
Total non-residential $ 24,858 $ 37,386 $ 68,732 $ 54,167 $ 40,450
Total Valuation $127,726 $170.690 $271.462 $340T212 $141T736
Number of new
dwelling units
Single dwelling 782 933 1,267 1,779 523
Multi-dwelling 817 907 1.528 1,338 287
Total Units 1,599 1,840 2,795 3,117 810
Source: Security Pacific Bank, California Construction Trends, and
Economic Sciences Corporation for calendar year 1987.
Transportation
Excellent land, sea and air transportation facilities serve
the City. Major road service is provided by Interstate 5
(north/south) and State Highway 78 (east/west).
Mainline service of AMTRAK and the Santa Fe Railway is
available to the City. More than 100 trucking and
moving/storage firms serve North San Diego County, with
overnight delivery service to Arizona, Los Angeles, San Diego,
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San Francisco and intermediate points. Local bus service is
provided by North County Transit District; interurban and
regional bus service is provided by Greyhound and Trailways.
McClellan-Palomar Airport is located in the City and can
accommodate private and light commercial aircraft. Oceanside
Municipal Airport is located 8 miles north in Oceanside,
California. Lindbergh Field (San Diego International Airport)
is 30 miles south, and John Wayne Airport in Irvine, California
is 45 miles to the north.
Deepwater general cargo and bulk service is provided by the
Port of San Diego, located 37 miles to the south.
TAX EXEMPTION
In the opinion of Jones Hall Hill & White, A Professional
Law Corporation, San Francisco, California, Special Counsel,
subject, however, to the qualifications set forth below, under
existing law, the portion of the Lease Payments designated as
and comprising interest and received by the owners of the
Certificates is excluded from gross income for federal income
tax purposes, such interest is not an item of tax preference
for purposes of the federal alternative minimum tax imposed on
individuals and corporations, provided, however, that, for the
purpose of computing the alternative minimum tax imposed on
corporations (as defined for federal income tax purposes), such
interest is taken into account in determining adjusted net book
income (adjusted current earnings for taxable years beginning
after December 31, 1989).
The opinions set forth in the preceding paragraph are
subject to the condition that the City comply with all
requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), that must be satisfied subsequent to the delivery
of the Lease Agreement in order that such interest be, or
continue to be, excluded from gross income for federal income
tax purposes. The City has covenanted to comply with each such
requirement. Failure to comply with certain of such
requirements may cause the inclusion of such interest in gross
income for federal income tax purposes to be retroactive to the
date of delivery of the Lease Agreement. Special Counsel
expresses no opinion regarding other federal tax consequences
arising with respect to the Lease Agreement and the
Certificates.
Prospective purchasers of the Certificates should be aware
that (i) with respect to insurance companies subject to the tax
imposed by section 831 of the Code, section 832(b)(5)(B)(i)
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reduces the deduction for loss reserves by 15 percent of the
sum of certain items, including interest payable with respect
to the Certificates, (ii) for taxable years beginning before
January 1, 1992, interest payable with respect to the
Certificates earned by some corporations could be subject to
the environmental tax imposed by section 59A of the Code,
(iii) interest payable with respect to the Certificates earned
by certain foreign corporations doing business in the United
States could be subject to a branch profits tax imposed by
section 884 of the Code, (iv) passive investment income,
including interest payable with respect to the Certificates,
may be subject to federal income taxation under section 1375 of
the Code for Subchapter S corporations that have Subchapter C
earnings and profits at the close of the taxable year if
greater than 25 percent of the gross receipts of such
Subchapter S corporation is passive investment income and
(v) section 86 of the Code requires recipients of certain
Social Security and certain Railroad Retirement benefits to
take into account, in determining the taxability of such
benefits, receipts or accruals of interest payable with respect
to the Certificates.
In the further opinion of Special Counsel, interest payable
with respect to the Certificates is exempt from California
personal income taxes.
APPROVAL OF LEGAL PROCEEDINGS
The legality of the sale, execution and delivery of the
Certificates is subject to the approval of Jones Hall Hill &
White, A ' Professional Law Corporation, San Francisco,
California, acting as Special Counsel. A copy of such legal
opinion will be printed on each Certificate. Certain matters
will be passed upon for the Underwriter by Brown & Wood, San
Francisco, California.
ABSENCE OF LITIGATION
At the time of delivery of and payment for the
Certificates, the Corporation and the City will certify that
there is no action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court or regulatory
agency, against the Corporation or the City affecting their
existence or the titles of their respective off-ices or seeking
to restrain or to enjoin the sale or delivery of the
Certificates, the application of the proceeds thereof in
accordance with the Trust Agreement, or in any way contesting
or affecting the validity or enforceability of the
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Certificates, the Trust Agreement, the Lease Agreement or the
Assignment Agreement, or any action of the Corporation or City
contemplated by any of said documents, or in any way contesting
the completeness or accuracy of this Official Statement or any
amendment or supplement thereto, or contesting the powers of
the Corporation or City or their authority with respect to the
Certificates or any action of the Corporation or City
contemplated by any of said documents, nor, to the knowledge of
the Corporation or City, is there any basis therefor.
RATING
Moody's Investors Service and Standard & Poor's Corporation
have given the Certificates the rating of " " and
" "., respectively.
These ratings reflect only the view of such organizations
and an explanation of the significance of such ratings may be
obtained from them as follows: Moody's Investors Service,
99 Church Street, New York, New York 10007, (212) 553-0337; and
Standard & Poor's Corporation, 25 Broadway, New York, New York
10004, (212) 248-2525. There is no assurance that the ratings
will continue for any given period of time or that they will
not be revised downward or withdrawn entirely by the rating
agencies that issued them, if, in the judgment of such rating
agencies, circumstances so warrant. Any such downward
revisions or withdrawals of such ratings may have adverse
effects on the market price of the Certificates.
UNDERWRITING
The Certificates will be purchased from the Trustee by
Rauscher Pierce Refsnes, Inc. (the "Underwriter"), under a
Purchase Contract, dated June , 1988 (the "Purchase
Contract"), pursuant to which the Underwriter agrees to
purchase all of the Certificates at an aggregate purchase price
of $ plus accrued interest to the date of delivery
of the Certificates for reoffering by the Underwriter. The
obligation of the Underwriter to accept delivery of the
Certificates is subject to various conditions contained in the
Purchase Contract.
The initial public offering prices stated on the cover of
this Official Statement may be changed from time to time by the
Underwriter. The Underwriter may offer and sell the
Certificates to certain dealers (including dealers depositing
Certificates into investment trusts), dealer banks, banks
acting as agents and others at prices lower than said public
offering prices.
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MISCELLANEOUS
Insofar as any statements made in this Official Statement
involve matters of opinion or of estimates, whether or not
expressly stated, they are set forth as such and not as
representations of fact. No representation is made that any of
such statements made will be realized. Neither this Official
Statement nor any statement which may have been made verbally
or in writing is to be construed as a contract with the owners
of the Certificates.
The execution and delivery of this Official Statement have
been duly authorized by the City.
CITY OF CARLSBAD
By
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