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HomeMy WebLinkAbout1988-06-07; Public Improvement Corporation; 001; Formation Of Public Improvement Corporation. CITY OF--ARLSBAD - PUBLIC IMPROVE&F-T CORPORATION AB# m! TITLE: FORMATION OF THE CITY OF CARLSBAD MTG 617188 DE&. F1N PUBLIC IMPROVEMENT CORPORATION AND APPROVAL OF DEBT ISSUE DOCUMENTS RECOMMENDED ACTION: I By minute motion, the City Council should assume its role as the Board of Directors of the Carlsbad Public Improvement Corporation. Adopt Resolution No. 88-l adopting bylaws. Adopt Resolution No. 88-2 electing officers. Adopt Resolution No. 88-3 appointing the time and place of regular meetings. Adopt Resolution No. 88-4 authorizing execution and filing of exemption application to State Franchise Tax Board. Adopt Resolution No. 88-5 authorizing the execution and filing of various federal forms. Adopt Resolution No. 88-6 authorizing and directing execution of certain lease financing documents and authorizing and directing certain actions with respect thereto. ITEM EXPLANATION This is the first meeting of the City of Carlsbad Public Improvement Corporation, a non-profit corporation established to assist the City in the construction improvements and acquisition of property and other matters that benefit the residents of the City of Carlsbad. The first action of this corporation will be to assist in the acquisition of Hosp Grove through the issuance of certificates of participation (COP's) for the refunding of a short term note, the proceeds from which were used to purchase Hosp Grove. The first three actions (Resolutions 88-l to 88-3) establish the basic operating guidelines for the corporation including the adopting of bylaws, electing of officers and setting a time and place for regular meetings. Resolutions 88-4 and 88-5 allow the filing of certain forms with the state and federal governments related to the formation of the corporation. Resolution 88-6 asks the board of directors to approve the lease agreement with the'city for the Hosp Grove property, the trust agreement with Bank of California for various services over the life of the COP issue, the agency agreement with the City allowing the City to construct the street and storm drain improvements in the Grove, and the assignment agreement with the trustee assigning the lease payments from the City to the trustee to be used to pay the certificate holders. - Page Two of AB# 001 FISCAL IMPACT The action of forming the corporation has no direct fiscal impact. An important by-product of having the CPI Corporation formed as a part of the Hosp Grove financing is that it is then available to assist with other financings in the future where a certificate of participation may be considered or a lease Page 2 agreement is required. Without the corporation, the City would be required to pay another entity for the privilege of entering into a lease agreement and selling COP's. EXHIBITS 1. Resolution No. 88-l 2. Resolution No. 88-2 3. Resolution No. 88-3 4. Resolution No. 88-4 5. Resolution No. 88-5 6. Resolution No. 88-6 7. Articles of Incorporation RESOLUTION NO. 88-l EXHIBIT 1 GFB3925 I3 A RESOLUTION ADOPTING BYLAWS CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLVED, by the Board of Directors of the City of Carlsbad Public improvement Corporation, that the Bylaws of the City of Carlsbad Public Improvement Corporation, in the form hereto attached and incorporated herein by reference, are hereby adopted and approved and shall stand as the Bylaws of this Corporation until valid amendment thereof. l l l l l I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the City of Carlsbad Public Improvement Corporation, at a meeting thereof duly held on the 7th day of June, 1988, by the following vote of the Directors thereof: AYES,and in favorthereof, Directors: Lewis, Kulchin, Pettine, Mamaux and Larson NOES, Directors: None ABSENT, Directors: None Secretary - ’ 13061-01 JHHWGFB dfs 04/22/66 06/20/66 BYLAWS OF CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION ARTICLE I Offices and Seal Section 1. Offices. The principal office of the Corporation for the transaction of business shall be 1200 Elm Avenue, Carlsbad, California 92008. The Board of Directors may, however, fix and change from time to time the principal office from one location to another by noting the change of address in the minutes of the meeting of the Board of Directors at which the address was fixed or changed. The fixing or changing of such address shall not be deemed an amendment to these Bylaws. Section 2. Seal. The Corporation shall have a seal, consisting of two (2) concentric circles with the words “City of Carlsbad Public Improvement Corporation”, with the date of incorporation of the Corporation. ARTICLE II Directors Section 1. Powers. Subject to the limitations of the Articles of Incorporation of the Corporation, the terms of these Bylaws, and the laws of the State of California, the powers of the Corporation shall be vested in and exercised by and its property controlled and its affairs conducted by the Board of Directors. Section 2. Number. The Corporation shall have five (5) Directors. Directors are collectively to be known as the Board of Directors. The number of Directors may be changed by a Bylaw or amendment thereof duly adopted by the Board of Directors. Section 3. Selection, Tenure of Office and Vacancies. The individuals who act as the members of the City Council of the City of Carlsbad (the “City”) shall constitute the Board of Directors of the Corporation, and each member of the City Council shall be and remain a member of the Board of Directors of the Corporation for so long as such member remains a member of the City Council. Section 4. Compensation. Directors shall serve without compensation but each Director may be reimbursed his or her necessary and actual expenses, including travel incident to his services as Director, pursuant to resolution of the Board of Directors. Any Director may elect, however, to decline said reimbursement. Section 5. Organization Meetings. immediately following the annual meeting of the Board of Directors or any special meeting of the Board of Directors at which Directors shall have been elected, the Directors shall meet for the purpose of organizing the Board, the election of officers and the transaction of such business as may come before the meeting. Pending such organization meeting, all officers of the Corporation shall hold over, except any officer required by law or these Bylaws to be a Director and who does not qualify as a Director. A Director elected at such meeting of the Board of Directors shall forthwith become a member of the Board of Directors for purposes of such organization. In the event such an organizational meeting shall not be held immediately following such meeting of the Board of Directors, it shall thereafter be held at the next regular meeting or at a special meeting and notice thereof shall’ be given in the manner provided in Section 7 of this Article for notice of special meetings. Section 6. Regular and Organizational Meetings. Regular meetings of the Board of Directors shall be held at such time as the Board may fix by resolution from time to time: provided, however, that at least one regular meeting shall be held each year and such meetings shall, in all respects, conform to provisions of the Ralph M. Brown Act, being Sections 54950 through 54961 of the Government Code of the State of California (the “Brown Act”). No notice of any organizational meeting of the Board of Directors, held immediately following the annual meeting of the Board of Directors or on or after any special meeting of the Board of Directors shall have been elected, need be given; provided, that if such an organizational meeting is not held immediately following such meeting of the Board of Directors, then notice thereof shall be given in a manner provided in Section 7 of this Article, in the same manner as notice of special meetings. Section 7. Special Meetings. Special meetings of the Board of Directors shall be called, noticed and held in accordance with the provisions of Section 54956 of the Brown Act. Section 8. Quorum. A quorum shall consist of a majority of the members of the Board of Directors unless a greater ‘number is expressly required by statute, by the Articles of Incorporation of the Corporation, or by these Bylaws. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present, shall be the act of the Board of Directors. Section 9. Order of Business. The order of business at the regular meeting of the Board of Directors and, so far as possible, at all other meetings of the Board of Directors, shall be essentially as follows, except as otherwise determined by the Directors at such meeting: (a) Report on the number of Directors present in person in order to determine the existence of a quorum. -2- (b) Reading of the notice of the meeting and proof of the delivery or mailing thereof, or the waiver or waivers of notice of the meeting then filed, as the case may be. (c) Reading of unapproved minutes of previous meetings of the Board of Directors and the taking of action with respect to approval thereof. (d) Presentation and consideration of reports of officers, and committees. (e) Unfinished business. (9 New business. (g) Adjournment. Section 10. Resignation of Directors. Any Director of the Corporation may resign at any time by giving written notice to the President or to the Board of Directors; provided, however, in the event of such resignation, such Director’s position shall remain vacant until a new member of the City Council is elected to fill such Director’s position. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Nonliability for Debts. The private property of the Directors shall be exempt from execution or other liability for any debts, liabilities or obligations of the Corporation and no Director shall be liable or responsible for any debts, liabilities or obligations of the Corporation. Section 12. Indemnity by Corporation for Litigation Expenses of Officer, Director or Employee. Should any Director, officer or employee of the Corporation be sued, either alone or with others, because he is or was a director, officer or employee of the Corporation, in any proceeding arising out of his alleged misfeasance or nonfeasance in the performance of his duties or out of any alleged wrongful act against the Corporation or by the Corporation, indemnity for his reasonable expenses, including attorneys’ fees incurred in the defense of the proceedings, may be assessed against the Corporation, its receiver, or its director by the court in the same or a separate proceeding if the person sued acted in good faith and in a manner such person reasonably believed to be in the best interests of the Corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The amount of such indemnity shall be so much of the expenses, including attorneys’ fees, incurred in the defense of the proceeding, as the court determines and finds to be reasonable. -3- ARTICLE Ill Officers Section 1. Officers. The officers of the Corporation shall be a President, a Vice President, a Secretary and such other officers as the Board of Directors may appoint. When duties do not conflict, one person, other than the President, may hold more than one of these offices. The Corporation may also have, at the discretion of the Board of Directors, one or more additional Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. In addition to such officers, the City Manager of the City shall act ex officio as the Executive Director of the Corporation; the chief financial officer of the City shall act ex officio as the Treasurer of the Corporation; the City Clerk of the City shall act ex officio as the Secretary of the Corporation; and the City Attorney of the City shall act ex officio as legal counsel to the Corporation. Section 2. Election of Officers. The officers of the Corporation (other than the Executive Director, Treasurer, Secretary and legal counsel to the Corporation) shall be chosen by and shall serve at the pleasure of the Board of Directors and each shall hold office until any such officer shall resign or shall be removed or otherwise disqualified to serve or any successor shall be elected and qualified to serve. Section 3. Subordinate Officers. The Board of Directors may elect or authorize the appointment of such other officers than those hereinabove mentioned as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws, or as the Board of Directors from time to time may authorize or determine. Section 4. Removal of Officers. Any officer may be removed, either with or without cause, by a majority of the Directors then in office at any regular or special meeting of the Board, or, except in the case of an officer chosen by the Board of Directors, by any officers upon whom such power of removal may be conferred by the Board of Directors. Should a vacancy occur in any office as a result of death, resignation, removal, disqualification or any other cause, the Board of Directors may delegate the powers and duties of such office to any officers or to any Directors until such time as a successor for said office has been elected and appointed. Section 5. President. The President shall preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or be prescribed by the Bylaws. The President shall also be the chief corporate officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the Board of Directors. He shall be ex officio member of all standing committees, and shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws. -4- Section 6. Vice President. In the absence or disability of the President, the Vice President, or the Vice Presidents in order of their ranks as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as may from time to time be prescribed for them, respectively, by the Board of Directors or by these Bylaws. Section 7. Secretary. The Secretary shall keep or cause to be kept a book of minutes at the principal office or at such other place as the Board of Directors may order, of all meetings of the Directors, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors’ meetings and the proceedings thereof. The Secretary shall give or cause to be given notice of all meetings of the Board of Directors of the Corporation, shall keep the corporate records in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws. Section 8. Treasurer. The Treasurer shall keep and maintain or cause to be kept and maintained adequate and correct amounts of its assets, liabilities, receipts, disbursements, gains and losses. The books of account shall at all times be open to inspection by any Director. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Directors. He shall disburse the funds of the Corporation as shall be ordered by the Board of Directors, shall render to the President and the Directors whenever they shall request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, shall take proper vouchers for all disbursements of the funds of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws. Section 9. Executive Director. The Executive Director of the Corporation shall have such powers and perform such duties as may from time to time be prescribed by the Board of Directors or by these Bylaws. Section 10. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and the Assistant Treasurers in the order of their seniority as specified by the Directors shall, in the absence or disability of the Secretary or the Treasurer, respectively, perform the duties and exercise the powers of the Secretary or Treasurer and shall perform such duties as the Board of Directors shall prescribe. ARTICLE IV Objects and Purposbs Section 1. Nature of Objects and Purposes. The business of the Corporation is to be operated and conducted in the promotion of its objects and purposes as set forth in Article II of its Articles of Incorporation. . -5 Section 2. Dissolution. The Corporation may be dissolved by vote of the Directors, or by the action of the Board of Directors in accordance with the provisions of California law. Upon the dissolution of the Corporation, and after payment or provision for payment, all debts and liabilities, the assets of the Corporation shall be distributed to the City. If for any reason the City is unable or unwilling to accept the assets of the Corporation, said assets will be distributed to the Federal Government; to a state or local government for public purposes; or to a nonprofit fund, foundation, or corporation which is organized and operated for charitable purposes and which. has established its tax- exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended. Section 3. Merger. The Corporation may merge with other corporations organized solely for nonprofit purposes, qualified and exempt from Federal taxation pursuant to Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and from State taxation, upon compliance with the provisions of California law relating to merger and consolidation. ARTICLE V General Provisions Section 1. Payment of Money, Slgnatures. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the Corporation and any and all securities owned by or held by the Corporation requiring signature for transfer shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by the Board of Directors. Section 2. Execution of Contracts. The Board of Directors, except as in the Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any contract or execute any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances and unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. Section 3. Fiscal Year. The fiscal year of the Corporation shall commence on the 1st day of July of each year and shall end on the 30th day of June of the next succeeding year. Section 4. Annual Audit. The affairs and financial condition of the Corporation shall be audited annually at the end of each fiscal year (as provided in Section 3 above) commencing with fiscal year 1988-1989 by an independent certified public accountant selected by the Board of Directors and a written report of such audit and appropriate financial statements shall be submitted to the Board of Directors prior to the next regular meeting of the Board of Directors of the Corporation following the completion of such -6- audit. Additional audits may be authorized as considered necessary or desirable by the Board of Directors. ARTICLE VI Exempt Activities Notwithstanding any other provisions of these Bylaws, no Director, officer, employee or representative of the Corporation shall take any action or carry on any activity by or on behalf of the Corporation not permitted to be taken or carried on by an organization exempt under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and the Regulations promulgated thereunder as they now exist or as they may hereafter be amended. ARTICLE VII Amendment to Bylaws These Bylaws may be amended by majority vote of the Board of Directors. ADOPTED by the Board of Directors of the City of Carlsbad Public Improvement Corporation on June 7, 1988. BY h& k &Lb&d-F Secretary -7- SECRETARY’S CERTIFICATE I, the undersigned, do hereby certify: 1. That I am the duly elected and acting Secretary of the City of Carlsbad Public Improvement Corporation, a California nonprofit public benefit corporation; and 2. That the foregoing Bylaws constitute a full, true and correct copy of the Bylaws of said Corporation in full force and effect as of the date hereof. 7-4 IN WITNESS WHEREOF, I have hereunto subscribed my name this L day of JUdE ,19z -8- -_ GFE3925/4 RESOLUTION NO. 88-2 A RESOLUTION ELECTING OFFICERS CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLVED, by the Directors of the City of Carlsbad Public Improvement Corporation, that the following persons are elected to the offices set forth opposite their names below, as officers of the Corporation, to serve until the election and qualification of their successors, as provided in Article III, Section 2 of the Bylaws of the Corporation. Name Claude A. Lewis President Ann J. Kulchin Vice President Aletha L. Rautenkranz Secretary RESOLVED, by the Directors of the City of Carlsbad Public Improvement Corporation, that, pursuant to Article Ill, Section 1 of the Bylaws of the City of Carlsbad Public Improvement Corporation, Ray Patchett, City Manager of the City of Carlsbad shall be the Executive Director of this Corporation, James Elliott, Finance Director of the City of Carlsbad shall be the Treasurer of this Corporation, Aletha L. Rautenkranz, City Clerk of the City of Carlsbad shall be the Secretary of this Corporation, and Vincent F. Biondo, City Attorney pf the City of Carlsbad shall act as legal counsel to this Corporation. * * * * * I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the City of Carlsbad Public Improvement Corporation, at a meeting thereof duly held on the 7th day of June, 1988, by the following vote of the Directors thereof: AYES, and in favor thereof, Directors: Lewis, Kulchin, Pettine, Mamaux and Larson NOES, Directors: None ABSENT, Directors: None R. Ra -- Secretary EXHIBIT 3 GFE3925 / 5 RESOLUTION NO. 88-3 A RESOLUTION APPOINTING TIME AND PLACE OF REGULAR MEETINGS CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLVED, by the Board of Directors of the City of Carlsbad Public Improvement Corporation that the first Tuesday in April of each year at the hour of six o’clock p.m., at the offices of the City of Carlsbad, 1200 Elm Avenue, Carlsbad, California, is hereby appointed as the time and place for the regular meeting of this Board pursuant to Article II, Section 6 of the Bylaws of this Corporation. l l l l * I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the City of Carlsbad Public Improvement Corporation, at a meeting thereof duly held on the 7th day of June, 1988, by the following vote of the Directors thereof: AYES, and in favor thereof, Directors: Lewis, Kulchin, Pettine, Mamaux and Larson NOES, Directors: None ABSENT, Directors: None EXHIBIT 4 OF83925 ! 6 RESOLUTION NO. 88-4 A RESOLUTION APPROVING AND AUTHORIZING EXECUTION AND FILING OF EXEMPTION APPLICATION TO STATE FRANCHISE TAX BOARD CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLVED, by the Board of Directors of the City of Carlsbad Public Improvement Corporation, that that certain Exemption Application to the State Franchise Tax Board (Form FTB3500), is hereby approved and Jones Hall Hill & White, A Professional Law Corporation, is hereby authorized to complete said Application and the Secretary is hereby authorized to execute said completed Application and directed to cause the filing of said Application with the State of California Franchise Tax Board. BE IT FURTHER RESOLVED, that the Secretary of the Corporation be and is hereby designated the “person to contact” of this Corporation for purposes of the filing of Form No. FTB3500. I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the City of Carlsbad Public Improvement Corporation, at a meeting thereof duly held on the 7th day of June, 1988, by the following vote of the Directors thereof: AYES, and in favor thereof, Directors: Lewis, Kulchin, Pettine, Mamaux and Larson NOES, Directors: None ABSENT, Directors: None RESOLUTION NO. 88-5 EXHIBIT 5 GFE3925 I7 A RESOLUTION APPROVING AND AUTHORIZING EXECUTION AND FILING OF VARIOUS FEDERAL FORMS CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLVED, by the Board of Directors of the City of Carlsbad Public Improvement Corporation, that Federal Forms Nos. 1024 (Application for Recognition of Exemption under Section 501(c)(4)), 2848 (Power of Attorney), SS-4 (Application for Employee Identification Number) and Form 8718 (User Fee for Exempt Organization Determination Letter Request), are hereby approved and that Jones Hall Hill & White, A Professional Law Corporation, special counsel to the Corporation, is hereby authorized to complete said Forms and the Secretary is authorized to execute said Forms and is authorized to cause the appropriate filing of said Forms. BE IT FURTHER RESOLVED, that the Secretary of the Corporation be and is hereby designated the “person to contact” of this Corporation for purposes of the filing of Federal Form No. 1024. I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the City of Carlsbad Public Improvement Corporation, at a meeting thereof duly held on the 7th day of June, 1988, by the following vote of the Directors thereof: AYES, and in favor thereof, Directors: Lewis, Kulchin, Pettine, Mamaux and Larson NOES, Directors: None ABSENT, Directors: None -. EXHIBIT 6 - _ 13061-03 JIiHWWIiM:peh pch peh 05113 M6701 05/20!33 05125/&? CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION RESOLUTION NO. 88-6 A RESOLUTION APPROVING, AUTHORIZING AND DIRECTING EXECUTION OF CERTAIN LEASE FINANCING DOCUMENTS AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS WITH RESPECT THERETO RESOLVED, by the City of Carlsbad Public Improvement Corporation (the “Corporation”): WHEREAS, the City of Carlsbad (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 proposes 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 will 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 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; and WHEREAS, in connection therewith, it is in the public interest and for the public benefit that the Corporation 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 will purchase the certificates of participation described below; and WHEREAS, the documents below specified have been tiled with the Corporation, and the members of the Corporation, with the aid of its staff, have reviewed said documents; and NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows: SECTION 1. The below-enumerated documents be and are hereby approved, and the President, or the Vice-President, are hereby authorized and directed to execute said documents, with such changes, insertions and omissions as may be approved by such official, and the Secretary of the Corporation 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”); (b) a trust agreement, by and among the Corporation, the City and The Bank of California, National Association, California, as trustee (the “Trustee”), relating to the financing and the execution and delivery of certificates of participation evidencing the proportionate interests of the owners thereof in lease payments to be made by the City under the Lease Agreement (the “Certificates of Participation”); (cl 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; and (d) an assignment agreement, by and between the Corporation and the Trustee, pursuant to which the Corporation will assign certain of its rights under the Lease Agreement, including its right to receive lease payments thereunder, to the Trustee. SECTION 2. The President, Vice-President, , Secretary and other officials of the Corporation are hereby authorized and directed to execute such other agreements, documents and certificates as may be necessary to effect the purposes of this resolution and the lease financing herein authorized. ************ -2- I hereby certify that the foregoing resolution was duly adopted at a meeting of the City of Carlsbad Public Improvement Corporation held on the 7th day of June, 1988, by the following vote: AYES, and in favor of: Lewis, Kulchin, Pettine, Mamaux and Larson NOES: None ABSENT: None dQ& Secretary -3- 13061-03 . _* h JHHWWHM:pch pch pch 06/l?-- Obl2 Obl26. 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 Page Section 1.1. * Section 1.2. REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.2. Representations, Covenants and Warranties of Corporation. . . . . . . . . . . . . , . . . . . . . . . . . 3 Section 3.1. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.2. Acquisition and Construction of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.3. Payment of Acquisition and Construction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE I DEFINITIONS AND EXHIBITS Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Ekhiiits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II ARTICLE III DEPOSIT OF MONEYS; ACQUISITION AND CONSTRUCTION OF THE PROJECT Section 3.4. Payment of Delivery Costs ......................................................................... 6 Section 3.5. Unexpended Moneys .................................................................................... 6 ARTICLE IV AGREEMENT TO LEASE; TERM OF THIS LEASE AGREEMENT; LEASE PAYMENTS Section 4.1. Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.2. Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.3. Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.4. Lease Payment6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.5. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 4.6. Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 4.7. Additional Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 I ARTICLE v MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS AND OTHER MATTERS Section 5.1. Section Maintenance, Utilities, Taxes and Assessments.. ........................................ 10 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; USEOFNETPROCEEDS 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 VIII 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 IX 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 ....... ..i ............................ 20 ARTICLE X PREPAYMENT OF LEASE PAYMENTS Section 10.1. Section 10.2. Section 10.3. Section 10.4. Section 11.1. Section 11.2. Section 11.3. Section 11.4. Section 11.5. Section 11.6. Section 11.7. Section 11.8. Section 11.9. Security Deposit ........................................................................................ 21 Purchase Option ....................................................................................... 21 Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain ......................................................................... 22 Credit for Amount6 on Deposit .................................................................. 23 ARTICLE XI MISCELLANEOUS Notices.. ................................................................................................... 24 Binding Effect .......................................................................................... 24 Severability .............................................................................................. 24 Net-net-net Lease.. ................................................................................. 24 Further Assurances and Corrective Instruments ....................................... 24 Execution in Counterparts ........................................................................ 25 Applicable Law.. .... . .................................................................................. 25 Corporation and City Representatives ....................................................... 25 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- -__L---.---m 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 36, 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 DEFmIONS AND EXHIBITS Section 1.1. Definitions. The terms defined in Ezhibit- A attached hereto and by this reference incorpor@ed 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. -2- 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 -3- 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 hen, 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. -4- ARTICLE III DEPOSIT OF MOM!WS; 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 agent for the purposes of acquisition and construction of the Project and in furtherance .thereof 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 not 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 ‘m such event the remaining Lease Payments pertaining to the Project shall be abated, in the proportion that the Acquisition and Construction Cost of -5- 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, shsll 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. -6- 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 lz 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 Apreement. 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 -7- 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 payme_nt 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 V a ue. 1 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. (0 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. -8- 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 Payments during the Term of the Lease Agreement as the same become due and payable, all right, title 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. Section 4.7. Additional Payments. In addition to the Lease Payments, the City shall pay when due all costs and expenses incurred by the Corporation to comply with the provisions of the Trust Agreement, including without limitation all Delivery Costs (to the 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. -9- ARTICLE V M-NMCE; TAXES; INSVRANCE; USE LIlMITATIONS AND OTBtERMATTERS 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 -lO- 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 hen to be established or remain against the Project or the Site for labor or materials fiunished 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 hen 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 ag&st the Project or the Site, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shah 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 general 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 in the minimum liability limits of $l,OOO,OOO for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City, and may be maintained in the form of self- insurance by the City. The Net Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. Section 5.4. Rental Interruption Insurance. The City shall procure, and maintain through the Term of the Lease Agreement during the time the Project is under construction or is completed, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any structures constituting any part of the Project during the Term of the Lease Agreement as a result of any earthquake or earth movement, in an amount at least equal to Lease Payments attributable to the Project for a period of eighteen months. The Net Proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund, and shall be credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. The City shall be permitted to self-insure for rental interruption or use and occupancy insurance required above, so long as: -ll- (1) the City segregates within its funds an amount designated as a reserve for such loss; and (2) the City’s liability under such self-insurance is limited to amounts on hand in such segregated reserve;, and (3) the co b m ined coverage under such self-insurance program and any other rental interruption or use and occupancy insurance are equal to the miniumum insurance coverage indicated above. Section 5.5. Title Insurance. The City shall provide, at its own expense, on or before the Closing Date, a CLTA title insurance policy in the amount of not less than dollars ($ A 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 fYom 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 -12- agreement, or subject to a vendor’s hen or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such hen 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, hen, 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 in 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 in 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. -13- ARTICLE VI DAMAGE, DESTRUCTION AND EMMNT 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 dam.age 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. -14- ARTICLE VII DISC-R OF WARRANT IES; 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 or 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 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. -15- ARTICLE VIII ASSZGIWWEh’T, SURLEAS~GANDAMENDMENT Section 8.1. Assignment by’the Corporation. The Corporation’s rights under this Lease Agreement, inc@ing 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. -16- ARTICLE IX EVENTS OF DEFAULT Ah’D 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 notice can be corrected, but not within the applicable period, the Corporation, the Trustee and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (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 -17- 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 shah 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 Sit. 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 in 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. 0.1) 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 -18- 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 CorporaQon shah 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 IX 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 moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. Section 9.5. No Additional Waiver Implied by One Waiver. In the event any .agreement contained in this Lease 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 IX, 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 tare given to the Corporation under this Article M 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 mgy 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 sticient 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 sticient 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 in part, but not in an amount of less than $20,000, together, -2o- 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 July 15,1998 through July l4,1999 2.0% July 15,1999 through July 14,200O 1.5 July 15,200O through July 14,200l 1.0 July 15,200l 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 in 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 aRer 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 shah 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 shah be credited towards the amounts then required to be so prepaid. -21- ARTICLE XI MXSCELAANEOUS Section 11.1. Notices. All notices, certificates or other communications hereunder shall be sticiently 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: If to the Trustee: City of Carlsbad Public Improvement Corporation 1200 Elm Avenue Carlsbad, California 92008 Attention: President 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 shah 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 BY President (S E A L) Attest: Secretary CITY OF CARLSBAD, as Lessee BY Mayor (S E A L) 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, 19&3, 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 sf 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. “CZosing 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) f%om 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 acquiiition 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 Servide” 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 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 DefiuZt” 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 time 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 (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; a@ (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 ticeecZ.s” means the sum of the following amounts: (a) original proceeds, namely, net amounts (after payment of ail 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; (cl 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; (D 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 detition. “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 pnge3 “Infirm&ion 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 Proper@” means any security (as said term is defined in section 165@(2)(A) or (B) of the Code), obligation, annuity or investment-type property, exc&li.ng, 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. “Nonpuqwse 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 (0 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 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; (D 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 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 Ofice” 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 & 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 fif%eenth (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-(3121 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. “Tncstee” mea& The Bank of California, N.A., or any successor thereto, acting as Trustee pursuant to this Trust Agreement. EXHIBITB DESCRIPTION OF THE SITE Situated in the City of Carlsbad, County of San Diego, State of California, and described as follows: _ L-TO COME] Ekhiblt B EXHIBITC DESCRIPTION OF THE PROJJXT i-Z'OCOMEl Exhibit C EXHIBITD SCHEDULE OF LEASE PAYMENT!3 SEMI-ANNUAL ANNUAL S TIPUJaATED DATE PRJNCIPAL INTEREST TOTAL TOTAL VALUE 01/16/89 07/16/89 01/16/90 07/16/90 01/16/91 07/16/91 01/16/92 07/16/92 OlJJ6/93 07/16/93 01/16/94 07/16/94 01/16/96 07/16/96 01/16/96 07/16/96 01/16/97 07/16/97 OlLl6/98 07/16/98 01/16/99 07/16/99 01/16/00 07/16/00 01/16/01 07/16/01 01/16/02 07/16/02 01/16/03 07/16/03 01/16/04 07/16/04 01/16/06 07/16/06 01/16/06 07/16/06 01/16/07 07/16/07 01/16/08 07/16/08 Miblt D 1306143 JIiEiWcWHM:pch peh peh 06/12/t Id6666 65J20~66 05ml63 TRUST AGREJ3ME3T 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 Page ARTICLE I DEFINITIONS Section 1.01. Definitions ................................................................................................ 2 Section 1.02. Authorization ........................................................................................... 2 Section 1.03. Exhibits ................................................................................................... 2 ARTICLE II THE CERTIFICATES OF PARTICIPATION Section 2.61. 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 III ACQUIWMON 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 i Page ARTICLE Iv REDEMPTION OF CERTIFICATES Section 4.01. Redemption .............................................................................................. 10 Section 4.02. Selection of Certificates for Redemption ..................................................... 11 Section 4.03. Notice of R%demption .......................................................................... .: .... 11 Section 4.04. Partial Redemption of Certificate .............................................................. 12 Section 4.05. Purchase of Certificate6 ............................................................................ 12 ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.01. Assignment of Rights in Lease Agreement ................................................ 13 Section 5.02. Establishment of Lease Payment Fund.. ................................................... 13 &ctiOn 5.03. Deposits ................................................................................................... 13 &&ion 5.04. Application of Moneys.. ............................................................................. 13 Section 5.05. Surplus .................................................................................................... 13 ARTICLE VI RESERVE FUND; ESCROW FUND Section 6.01. Establishment of Reserve Fund.. ............................................................... 14 Section 6.02. Deposit.. ................................................................................................... 14 SeCtiOn 6.03. Transfer6 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 &?&ion 6.09. Transfer of Excess.. .................................................................................. 15 Section 6.10. Investment of Escrow Fund.. .................................................................... 15 ARTICLE VII 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 Page ARTICLE VIII MONEYS IN FUNDS; INVESTMENT; REBATE Section 8.01. Held in Trust.. .............. . .......................................................................... 18 Section 8.02. Investments Authorised ............................................................................ 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 IX 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 . . . 111 Page ARTICLE XU 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. IndemnifZation of Trustee ...................................................................... 32 Section 12.04. Limitation of Bights to Parties and Certificate Owners ........................... 32 ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CEBTIFICATE OWNERS Section 13.01. Assignment of Bights ............................................................................. 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’ Bight to Sue ....................................... 34 ARTICLE XIV MISCELLANEOUS Section 14.01. Section 14.02. Section 14.03. Section 14.04. Section 14.05. Section 14.06. Section 14.07. Section 14.08. Section 14.09. Section 14.10. Defeasance ............................................................................................. 36 Records .................................................................................................. 36 Notices. .................................................................................................. 36 Governing Law.. ..................................................................................... 37 Binding Effect; Successors ...................................................................... 37 Execution in Counterparts ...................................................................... 37 Delivery of Cancelled Certificates ............................................................ 37 Headings ................................................................................................ 37 Waiver of Notice.. ................................................................................... 37 Separability of Invalid Provisions ............................................................ 37 EXHIBIT A - Definitions EXHIBIT B - Form of the Certificates 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 Ih4PROVEMENT 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 dated as of the date hereof (the “Lease Agreement”), whereby the City has agreed 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 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. Def?nitions. 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 Agreeme& 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: DeGnitions. Exhibit B: Form of the Certificates. -2- ARTICLE II THE CERTIFICATES OF PARTICIPATION Section 2.01. Authorization. The Trustee is hereby authorized and directed upon written request fkom the Corporation to prepare, execute and deliver, to the Original Purchaser, CertGktes . dyllars z aggregate principal amount of > evidencing undivided fractional interests of the Owners thereof in 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 fkom 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 made available for payment with respect to the Outstanding Certificates. Section 2.03. Maturity: Interest Pates. The Certificates shall mature on August 1 in each of the respective years, and in the respective amounts, and interest represented thereby shall be computed at the respective rates, as follows: Maturity Date (August 1) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2008 Principal Interest Amount Rate $ % -3- Section 2.04. Form of Certificates; Interest. The Certikates shall be delivered in the form of fully registered Certificates without coupons in the denomination of $5,000 or any integral multiple thereof, except that no Certificate 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 Certifkate 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 shah deposit in the Lease Payment Fund an amount equal to $ representing accrued interest in the amount of $ from June 1, 1988 io the Closing Date, plus capitalized interest for Lease Payments attributable to the Project in the amount of $ fkom the Closing Date to @I) 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 ai maturity. (4 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. -4- 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 aiiy Certificate or Certificates shall be surrendered for registration of transfer, the Trustee shah 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 the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall 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 Owner, shall execute and deliver a new Certi&ate 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 may 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 Certscate 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 0 r more in principal amount of the Certificates. The principal, interest and -5- 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 conctient 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 Cerl%cates 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 sticient. Any request or consent of the Owner of any Certificate shall bind every future Owner of the same Certificate in respect of anything done or suffered to be done by the Trustee 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. -6- ARTICLE III 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. Pa.yment 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; (ii) state that the amounts to be disbursed constitute Acquisition and 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 were necessarily and reasonably incurred; and that said amounts are not being paid in advance of the time, if any, fmed 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 $. %nstituting a Nonpurpose Obligation or assessment) to other than a state or local ‘. _ ernmental 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. -7- (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 f&r 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 des’lgnated as the “Delivery Costs Fund”; shah keep such fund separate and apart f?om 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 in accordance with this Section 3.04, but the Trustee shah 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. -8- -9- ARTICLE IV RJ?DEM..ION 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 asker 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, fkom 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 31,200O 1.5 August 1, 2000 through July 31,200l 1.0 August 1, 2001 through July 31, 2002 0.5 August 1, 2002 and thereafter 0 (b) 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: Redemption Date (August 1) 1998 1999 2000 2001 2002 2003 Principal Amount of Certificates to be Redeemed -lO- 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 (II) 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 aRer 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 Outstanding Certificates are called for redemption, the Trustee shall select Certificates for redemption from the Outstanding Certificates not previously called for redemption such 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 -ll- 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 sufEcient to pay the redemption price of all the Certificates or portions of Certificates which are to be redeemed on that date. Official notice 07 redemption having been given as aforesaid, the Certificates or portions of Certificates so to be redeemed shah, 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 IV, 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. -12- ARTICLE V LEASE PAYMENTS; LEASE PAYMENTFUND Section 5.01. Assignment of Eights 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 alI 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 for the benefit of the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, except only as provided in this Trust Agreement, and such moneys shall be used and applied by the Trustee as hereinafier set forth. Section 5.03. Deposits. There shall be deposited in the Lease Payment Fund all Lease Payments received by the Trustee (except aa 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. -13- 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 in 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 II of this Trust Agreement. Any amounts remaining in the Reserve Fund upon payment in full of all Outstanding Certitlcates, 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. -14- Section 6.07. Deposit. There shah 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 2.0701). 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 (0 of the definition thereof. -15- ARTICLE VII INSURANCE AND CONDEMNATION FUNLJ; INSURANCE; EMmNT DOMm Section 7.01. Establishment of Insurance and Condemnation Fund; Application of Net Proceeds of InsuraIice 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 -16- 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 tbe 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 repla&ment 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 prepayment 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 4.010~) 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 other independent professional consultant, a copy of which shall be filed with the Trustee. Any such determination by the City shall be final. 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. -17- ARTICLE VIII MONEY23 INFUNDS; INVESTIMENT; 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 foi! 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 amate, 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 EarninPs. 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 in the Acquisition and Construction Fund until the Acquisition and Construction Fund is closed pursuant to Section 3.05 hereof. Subject -18- 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 selI 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 meaning of section 148(a) of the Code and Regulations promulgated thereunder. Section 8.07. Application of Investment Earnings; Rebate of Excess Investment Earnings to United States. (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 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 than interest earnings on the Lease Payment Fund if such earnings in 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 -19- with subsection CD). 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 CertificatZs are invested (other than amounts attributable to an excess described in this paragraph ($1, 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 (il. (Cl Calculation of Excess. Within 30 days of the last day of the tist 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 -2o- 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. -21- ARTICLE lx TEE 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 UnitedStates 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 accordan& 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 sufIiciency 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 sticient 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 -24- 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. Inrervention 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. 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, the City shall promptly appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the City shall mail notice thereof to the Certificate Owners at their respective addresses set forth on the Registration Books. Section 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, -25- 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 thereupsn 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 kticle IX, shall be filed or recorded by the successor Trustee in each recording office where the Assignment Agreement shah have been filed or recorded. -26- 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 afhrmative 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. 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 parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but only to the extent permitted by law and only (1) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any,right or power herein reserved to the Corporation or the City, (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 -27- 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 Se&on 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 time 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. -28- which Each Certificate Owner shall certify to the Trustee whether the Certificates such consent is given are disqualified as provided in Section 10.03 hereof. as to 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 ofthe 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 the particular Certificates held by him, provided that proper notation thereof is made on such Certificates. -29- 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 u.Gder 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 RePulations. 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 times and in such places as may be required by law in order fully to preserve, protect and perfect the security of the Trustee and the Certificate Owners. Section 11.05. City Budpets. 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. -3o- 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 Gill 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. -31- ARTICLE XII 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 a-peements 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. -32- ARTICLE XIII 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 zihd 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 aggregate principal amount of the Certificates then Outstanding shall, exercise any and all remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that .notwithstanding anything herein or in the Lease Agreement to the contrary, there shall be no right under any circumstances to accelerate the maturities of the Certificates or otherwise to declare any Lease Payment not then in default to be immediately due and payable. In the event the City has defaulted under the Lease Agreement and the Trustee has 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 IX of the Lease Agreement shall be applied by the Trustee in the order following upon presentation of the several Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses of the Trustee and of the Certificate Owners in declaring such Event of Default, 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 insu&ient 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 -33- 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 riihts 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 Otiers 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 -34- 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 notificatio%, 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 in 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. -35- ARTICLE 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 tune 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 -36- 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. GoverninP: 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 WITNFSS 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 CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION (S E A L) Attest: BY President Secretary CITY OF CARLSBAD (S E A L) Mayor Attest: City Clerk -39- EXHIBITA DEFINITIONS “Acquisition arid 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. “Co&” 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 thg 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 Seruice” 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 III of the Trust Agreement. “Escrolo Fund” means the fund by that name established and held by the Trustee pursuant to Section 6.06 of the Trust Agreement “Event of DefiuZt” 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 thi7Farmers 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 (aRer 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; (0 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. “Znfirmation 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. “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 LeasetAgreement. “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 shah 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 Encumbrancesn 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; (II> 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) Anyofth e o f 11 owing obligations of federal agencies not guaranteed by the United States of AmeriZa: (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 Bating 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 Bating 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; (0 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 Bating 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 Bating 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 Oflice” 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-(5161 227-4039 or 4190; Midwest Securities Exhibit A Page 7 Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax-(3121 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 se,curities depositories holding substantial amounts of obligations of types comprising the Certificates. “Site” means aloof 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 Agree&W 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 acting as Trustee pursuant to this Trust Agreement. , or any successor thereto, “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 Page 8 FORM OF THE CERTIFICATES - CERTIFICATE OF PARTICIPATION (Hosp 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 June 1, 1988 REGISTERED OWNER: PRINCIPAL AMOUNT: $- CUSIP 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 f+om 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 oxIthe 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 HFREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATESETFORTHONTHEREVERSEHEREOFWHICHFURTHER 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: Trustee , as BY Authorized Signatory Exhibit B Page 3 (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 t&&ion. 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 tractional 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 31,199s 2.0% August 1, 1999 through July 31,200O 1.5 August 1, 2000 through July 31,200l 1.0 August 1,200l 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 respecx 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 to be Redeemed 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Maturity) Redemption Date (August 1) $ $ Notice of redemption, unless waived, is to be given by the Trustee by mailing an offkial 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 assign and transfer unto the undersigned do(es) hereby sell, , (Name, Address and Tax Identification Number of Assignee) the within registered Certificate and hereby irrevocably attorney, to transfer the same the Trustee with full power of substitution in the premises. Dated: Signature: constitute(s) and appoint(s) on the Certificate register of 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 Page 6 * - . 13061-03 JHHW:WHM:ct ct wh 05/l 3/6L 05/20/66 05/26/66 M6699 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 h 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 7. 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; 1 r 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 70. 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 77. 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- * - _ 13061-05 JHHWWHM:peh pch c pch 05/13/s& o5mJk33 05/26/l36 . - . AFTER RECORDATION RETURN TO: JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION Four Embarcadero Center, Suite 1950 San Francisco, California 94111 Attention: William H. Madison, Esq. ASSIGN-MENT AGREEMENT (HOSP GROVE PROJECT) THIS ASSIGNMENT AGREEMENT, made and entered into 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 (the “Corporation”), and The Bank of California, National Association, a naitonal banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”); WITNESSETH: In the joint and mutual exercise of their powers, in consideration of the mutual covenants herein contained, and for other valuable consideration, the parties hereto recite and agree as follows: Section 1. Recitals. (a) The Corporation and the City of Carlsbad (the “City”) have entered into a lease agreement, dated as of June 1, 1988 (the “Lease Agreement”), and recorded concurrently herewith, whereby the Corporation has agreed to lease to the City, and the City has agreed to lease from the Corporation, the Project and the Site (as said terms are more particularly defined in the Lease Agreement) in the manner and on the terms set forth in the Lease Agreement, which terms include, without limitation, the obligation of the City to pay Lease Payments (as defined in the Lease Agreement) to the Corporation in consideration of the City’s use and enjoyment of the Project and the Site under the Lease Agreement. @) Under the Lease Agreement, the Corporation is required to cause to be deposited with the Trustee certain sums of money to be credited, held and applied in accordance with the Lease Agreement and with a trust agreement, dated as of June 1, 1988 (the “Trust Agreement”), by and among the Corporation, the City and the Trustee. (c) Upon delivery of the Lease Agreement, the Corporation is required to deposit with the Trustee, in addition to other moneys to be deposited with the Trustee, moneys for the acquisition and construction of the Project. For the purpose of obtaining such moneys, the Corporation is willing to convey to certain persons (the “Owners”) fractional interests in the Lease Payments, such fractional interests to be evidenced by certificates _ - of participation therein (the “Certificates”). In order to make such fractional interests marketable on terms acceptable to the Corporation, the Corporation is willing to assign and transfer its rights under the Lease Agreement to the Trustee for the benefit of the Owners. Concurrently with the delivery of this Assignment Agreement, the Trustee is executing, selling and delivering Certificates in an aggregate face amount of dollars ($ ) to Rauscher Pierce Refsnes, Inc. for resale to the Owners. The proceeds of such sale are anticipated to be sufficient to permit the Corporation to make the deposits required under the Lease Agreement and the Trust Agreement and to permit the Corporation to pay therewith the cost of acquisition and construction of the Project. (d) Each of the parties has authority to enter into this Assignment Agreement and has taken all actions necessary to authorize its officers to execute it. Section 2. Assignment. The Corporation hereby transfers, assigns and sets over to the Trustee, for the benefit of the Owners of Certificates executed and delivered under the Trust Agreement, all of the Corporation’s rights under the Lease Agreement (excepting only the Corporation’s rights under Sections 5.3, 7.3 and 9.4 of the Lease Agreement), including without limitation (i) the right to receive and collect all of the Lease Payments from the City under the Lease Agreement, (ii) the right to receive and collect any proceeds of any insurance maintained thereunder and of any condemnation award rendered with respect to the Project or the Site, and (iii) the right to exercise such rights and remedies conferred on the Corporation pursuant to the Lease Agreement as may be necessary or convenient (A) to enforce payment of the Lease Payments and any other amounts required to be deposited in the Lease Payment Fund or the Insurance and Condemnation Fund established under the Trust Agreement, or (B) otherwise to protect the interests of the Owners in the event of a default by the City under the Lease Agreement. All rights assigned by the Corporation shall be administered by the Trustee in accordance with the provisions of the Trust Agreement and for the equal and fractional benefit of the Owners of Certificates. Section 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of securing, equally and fractionally, the payments due pursuant to the Lease Agreement and the Trust Agreement to, and the rights under the Lease Agreement and Trust Agreement of, the Owners of the Certificates delivered pursuant to the Trust Agreement, all subject to the provisions of the Trust Agreement. Section 4. Conditions. This Assignment Agreement shall confer no rights or impose no duties upon the Trustee beyond those expressly provided in the Lease Agreement and the Trust Agreement. -2- -. . . c4 A. L L IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their officers thereunto duly authorized as of the day and year first written above. CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION BY (S E A L) Attest: Secretary THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION, as Trustee BY Authorized Officer -3- STATE OF CALIFORNIA > > ss. COUNTY OF SAN DIEGO > On this _ day of in the year 1988, before me, the undersigned, a Notary Public in and for said State, personally appeared and personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons who executed this instrument as the and Secretary, respectively, of the City of Carlsbad Public Improvement Corporation, and acknowledged to me that the City of Carlsbad Public Improvement Corporation executed it. WITNESS my hand and official seal. Notary Public in and for said State Commission Expires: Typed Name: (S E A L) -4- - , - STATE OF CALIFORNIA ) ) ss. COUNTY OF > On this day of , in the year 1988, before me, the undersigned, a Notary Public in and for said State personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the within instrument as an authorized officer of The Bank of California, N.A., the corporation therein named, and acknowledged to me that The Bank of California, N.A. executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS my hand and official seal. (S E A L) Notary Public in and for said State Typed Name: Commission Expires: -5- 13061-01 / GFB3924 EXHIBIT 7 ARTICLES OF INCORPORATION CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION I. The name of this corporation is City of Carlsbad Public Improvement Corporation. II. A. This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for charitable purposes. B. The purposes for which this corporation is formed are: (1) The specific and primary purposes for which this corporation is formed are: a. To render financial assistance to the City of Carlsbad, State of California (the “City”), by financing, refinancing, acquiring, constructing, improving, leasing and selling of buildings, building improvements, equipment, electrical, water, sewer, road and other public improvements, lands, and any other real or personal property for the benefit of residents of the boundaries of the City and surrounding areas. b. To acquire by lease, purchase or otherwise, real or personal property or any interest therein; to construct, reconstruct, modify, add to, improve or otherwise acquire or equip buildings, structures or improvements and (by sale, lease, sublease, leaseback, gift or otherwise) make any part or all of any such real or personal property available to or for the benefit of the residents of the boundaries of the City. c. To promote the common good and general welfare of the residents of the boundaries of the City, and the governmental enterprises in the boundaries of the City and surrounding areas by the acquisition of the real and personal property as hereinabove described. d. To borrow the necessary funds to pay the cost of financing, refinancing, acquiring, constructing, replacing, establishing, improving, maintaining, equipping and operating such properties and facilities for the herein described purposes, the indebtedness for which borrowed money may, but need not, be evidenced by securities of this corporation of any kind or character issued at any one or more times, which may be either unsecured or secured by any mortgage, trust deed, pledge, encumbrance or other lien upon any part or all of the properties and assets at any time then or thereafter owned or acquired by this corporation. e. To receive limited or conditional gifts or grants in trust, inter wives, or by way of testamentary devises, bequests or grants in trust, or otherwise, funds of all kinds including property, both real, personal and mixed, whether principal or income, tangible or intangible, present or future, vested or contingent, in order to carry on the purposes of this corporation. (2) The general purposes and powers are to have and exercise all rights and powers now or hereafter conferred on nonprofit corporations under the laws of the State of California; provided, however, that this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the specific and primary purposes of this corporation: provided, further, that this corporation shall not have the power to, and shall not, do any act or conduct any activity, plan, scheme, design or course of conduct which in any way conflicts with Sections 501 (c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and regulations promulgated pursuant to such Sections as they now exist or as they may hereafter be amended. Ill. The name and address in the State of California of this corporation’s initial agent /p for service of process is: Mr. James Elliott Finance Director City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 IV. The principal offices for the transaction of the business of this corporation is located in the County of San Diego. The property of this corporation is irrevocably dedicated to charitable purposes and no part of the net income or assets of this corporation shall ever inure to the benefit of any director, officer or member thereof or to the benefit of any private person. V. A. This corporation is organized and operated by a group of public spirited citizens exclusively for charitable purposes within the meaning of Section 501(c)(4) of the /I Internal Revenue Code of 1986, as amended. -2- - B. Notwithstanding any other provision of these Articles, this corporation shall not carry on any other activities not permitted to be carried on by a corporation exempt form federal income tax under Section 501(c)(4) of the Internal Revenue Code of 1986, as amended. C. No substantial part of the activities of this corporation shall consist of carrying on propaganda, or otherwise attempting to influence legislation, and this corporation shall not participate or intervene in any political campaign (including the publishing or distribution of statements) on behalf of any candidate for political office. \ VI. A. During the continuance of this corporation, it may distribute any of its assets to the United States of America, the State of California, or any political subdivision thereof, to a nonprofit fund, foundation or corporation which is organized and operated exclusively for charitable or social welfare purpose and which has established its tax- exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended. B. Upon the dissolution or winding up of this corporation, its assets remaining after payment of, or provision made for the payment of, all debts and liabilities of this corporation, shall be distributed to the United States of America, the State of California, or any political subdivision thereof, or to a nonprofit fund, foundation or corporation /” which is organized and operated exclusively for charitable or social welfare purposes and which has established its tax-exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986. as amended. -3- - IN WITNESS WHEREOF, the undersigned, being the sole incorporator of this corporation, have executed these Articles of Incorporation, as of the day of May, 1988. BY William H. Madison, Incorporator I hereby declare that I am the person who executed the foregoing Articles of Incorporation, which execution is my act and deed. BY William H. Madison, Incorporator -4- GFB3925 I9 ACTION BY WRITTEN CONSENT OF INCORPORATOR CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION The undersigned, as sole incorporator of this public benefit corporation, took the below stated action on , at p.m., at the offices of the Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California pursuant to Section 5134 of the California Corporations Code for the purpose of electing initial directors and setting the time and place for the organizational meeting. The Articles of Incorporation were duly filed with the Secretary of State of California on , and that corporation number was assigned to this Corporation. RESOLVED, that the following persons be selected as the initial directors of the corporation: Claude A. Lewis Ann J. Kulchin John J. Mamaux Mark V. Pettine Eric Larson BE IT FURTHER RESOLVED, that the organizational meeting of the corporation be held on June 7, 1988 at 6:00 p.m., at the offices of the City of Carlsbad, 1200 Elm Avenue, Carlsbad, California, and that the notice of such meeting sent to the initial directors and other interested persons by Aletha L. Rautenkranz, City Clerk of the City of Carlsbad, is hereby approved and ratified. All further organizational matters being left for the new directors to take action upon, the meeting was adjourned. William H. Madison, Incorporator 13061-01 JHHW:GFB GFB3925 AGENDA CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION Organizational Meeting -- June 7, 1988 1. Resolution Adopting Bylaws (Resolution 88-l) 2. Resolution Electing Officers (Resolution 88-2) 3. Resolution Appointing Time and Place of Regular Meetings (Resolution 88-3) 4. Resolution Approving and Authorizing Execution and Filing of Exemption Application to State Franchise Tax Board (Resolution 88-4) 5. Resolution Approving and Authorizing Execution and Filing of Various Federal Forms (Resolution 88-5) 6. A Resolution Approving, Authorizing and Directing Execution of Certain Lease Financing Documents and Authorizing and Directing Certain Actions with Respect Thereto (Resolution 88-6) 7. Other Business 8. Adjournment 13061-03 JHHW:WHM:ct ct wh 05/l 3/L 05/20/88 05/26/88 EXHIBIT 4 AGENCYAGREEMENT 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 7. 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 70. 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 77. 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- CORPORATION DIVIS I ON I, MARCH FONG EU, Secretary of State of the State of California, hereby certify: That the annexed transcript has been compared with the corporate record on file in this office, of which it purports to be a copy, and that same is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this Secretary of State SEC/STATE FORM CE.107 m 86 40888 . . -- . s 13061;Ol / GFB3924 4 ARTICLES OF INCORPORATION 1502956 ENDORSED FILED ““yd~ks~p- wm fm Wu, SeaebtjdSW CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION . - I. The name of this corporation is City of Carlsbad Public Improvement Corporation. II. A. This corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for charitable purposes. B. The purposes for which this corporation is formed are: (1) The specific and primary purposes for which this corporation is formed are: a. To render financial assistance to the City of Carlsbad, State of California (the “City”), by financing, refinancing, acquiring, constructing, improving, leasing and selling of buildings, building improvements, equipment, electrical, water, sewer, road and other public improvements, lands, and any other real or personal property for the benefit of residents of the ’ boundaries of the City and surrounding areas. b. To acquire by lease, purchase or otherwise, real or personal property or any interest therein; to construct, reconstruct, modify, add to, improve or otherwise acquire or equip buildings, structures or improvements and (by sale, lease, sublease, teaseback, gift or otherwise) make any part or all of any such real or personal property available to or for the benefit of the residents of the boundaries of the City. c. To promote the common good and general welfare of the residents of the boundaries of the City, and the governmental enterprises in the boundaries of the City and surrounding areas by the acquisition of the real and personal property as hereinabove described. d. To borrow the necessary funds to pay the cost of financing, refinancing, acquiring, constructing, replacing, establishing, improving, maintaining, equipping and operating such properties and facilities for the herein described purposes, the indebtedness for which borrowed money may, but need not, be evidenced by securities of this corporation of any kind or 4 character issued at any one or more times, which may be either unsecured or secured by any mortgage, trust deed, pledge, encumbrance or other lien upon any part or all of the properties and assets at any time then or thereafter owned or acquired by this corporation. e. To receive limited or conditional gifts or grants in trust, inter vivos, or by way of testamentary devises, bequests or grants in trust, or otherwise, funds of all kinds including property, both real, personal and mixed, whether principal or income, tangible or intangible, present or future, vested or contingent, in order to carry on the purposes of this corporation. (2) The general purposes and powers are to have and exercise all rights and powers now or hereafter conferred on nonprofit corporations under the laws of the State of California; provided, however, that this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the specific and primary purposes of this corporation; provided, further, that this corporation shall not have the power to, and shall not, do any act or conduct any activity, plan, scheme, design or course of conduct which in any way conflicts with Sections 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended, and regulations promulgated pursuant to such Sections as they now exist or as they may hereafter be amended. Ill. The name and address in the State of California of this corporation’s initial agent for service of process is: Mr. Raymond R. Patchett City Manager City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 IV. The principal offices for the transaction of the business of this corporation is located in the County of San Diego. The property of this corporation is irrevocably dedicated to charitable purposes and no part of the net income or assets of this corporation shall ever inure to the benefit of any director, officer or member thereof or to the benefit of any private person. V. A. This corporation is organized and operated by a group of public spirited citizens exclusively for charitable purposes within the meaning of Section 501(c)(4) of the Internal Revenue Code of 1986, as amended. -2- . . B. Notwithstanding any other provision of these Articles, this corporation shall not carry on any other activities not permitted to be carried on by a corporation exempt form federal income tax under Section 501(c)(4) of the Internal Revenue Code of 1986, as amended. C. No substantial part of the activities of this corporation shall consist of carrying on propaganda, or otherwise attempting to influence legislation, and this corporation shall not participate or intervene in any political campaign (including the publishing or distribution of statements) on behalf of any candidate for political office. VI. A. During the continuance of this corporation, it may distribute any of its assets to the United States of America, the State of California, or any political subdivision thereof, to a nonprofit fund, foundation or corporation which is organized and operated exclusively for charitable or social welfare purpose and which has established its tax- exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended. B. Upon the dissolution or winding up of this corporation, its assets remaining after payment of, or provision made for the payment of, all debts and liabilities of this corporation, shall be distributed to the United States of America, the State of California, or any political subdivision thereof, or to a nonprofit fund, foundation or corporation which is organized and operated exclusively for charitable or social welfare purposes and which has established its tax-exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, as amended. -3- ..t- l /- - r -3 * * IN WITNESS WHEREOF, the undersigned, being the sole incorporator of this corporation, have executed these Articles of Incorporation, as of the 31st day of May, 1988. Lcil2L.e . BY _’ . William H. Madison, Incorporator 1 hereby declare that I am the person who executed the foregoing Articles of Incorporation, which execution is my act and deed. -4-