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HomeMy WebLinkAboutOTHER BUSINESS 1 08-04-86 ~ '~' OTH~k' _ J$INESS DATE: AUGUST 4, Inter Corn TO: FROM: $ U Bd EOT: HONORABLE MAYOR & MEMBERS OF THE CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER ASSESSMENT OISTRICT 85-1 STATUS REPORT Attached is a memorandum from Ron Nault regarding various documents pertaining to the Assessment District bond issue. Representatives of the bond counsel, financial consultant and underwriters will be at the City Council's August 4, 1986 meeting to provide a statu~ report on the bond issue. Action by the City Council on the attached documents is not required on August 4; however, there is a possibility that the City Council will be requested to adjourn to August 11, 1986 for the purpose of giving final approval of the bond sale. As the City Council will recall, the bond sale needs to be completed before September 1, 1986 in order to avoid the implications of new tax laws that would otherwise complicate the sale of the bonds. William A. Huston City Manager WAH:jh Attachments DATE: JULY 31, 1986 TO: WILLIAM A. HUSTON, CITY I~AGER FROM: FINANCE DEPARTMENT SUBJECT: ASSESSMENT DISTRICT 85-1, 1915 ACT IMPROVEMENT BONDS The rather large packet attached contains copies of all the documents required for the referenced bond financing. You should find: 1. Indenture of Trust 2. Reimbursement agreement and letter of credit 3. Purchase contract 4. Remarketing agreement 5. Official statement These documents should all be considered as drafts. No action will be taken by Council at this time. Lora Stovall of Barge Wells has prepared a summary of the bond process from the first days of discussion to the present. Her summary and the attached documents pull all the pieces of this puzzle together. It is my understanding that there will be representatives of the key members of the financing team available Monday evening to respond to ~tions. Finance Director RAN: s kr Attachments Battle IYells Associates Municipal Hnancing Consultants 1636 Bush Street San Francisco 94109 415 775-3113 L16-G MEMO TO: William Huston, City Manager City of Tustin FROM: SUBJECT: DATE: William A. Sinsky Lora I. Stovall Bartle Wells Associates Tustin Assessment District No. 85-1 1915 Act Improvement Bonds July 28, 1986 RECEIVED a U g Z 9 1986 FINANCE DEPT. This memo reviews the current status of the Tustin Assessment District No. 85-1 bond issue and the actions to date by the participants in the process. The assessment district includes approximately 522 gross acres bounded by Interstate 5, Browning Avenue, Irvine Boulevard, and Myford Road. All property in the assessment district is owned by The Irvine Company. The bonds will finance the acquisition and construction of street, freeway, and drainage improvements and traffic signals within the assessment district. The cost of the improvements is estimated at about $42.2 million including engineering and utilities. The total bond issue size is $50,650,000. In an assessment district financing, the city basically allows private property owners access to the tax-exempt bond market for the con- struction of public improvements which benefit private properW. The city bears no financial responsibility for the bonds. All debt service and other expenses are billed to the property owners. If a property owner becomes delinquent in his assessment installment payments, his property is subject to superior court foreclosure within 150 days. At the request of the sole property owner, The Irvine Company, the Tustin Assessment District bonds have been structured as a variable- rate transaction. In a variable-rate issue, the interest rate on the bonds changes at specified, short-term intervals. Each time the interest rate is adjusted, the holder of the bonds has the right to resell the bonds at par back to the underwriter. Thus, to the holder, variable-rate bonds are short-term instruments and thus bear interest at short-term rates, which are lower than long-term rates. Portions of the bonds will be converted to fixed-rate as residential property is sold, so that property owners other than The Irvine Company will have fixed liens on their properties. Beginning in early 1985, a team of city staff, Willdan Associates (consulting engineers), bond counsel, the city attorney, Battle Wells Associates, and representatives of The Irvine Company have been working on this financing. We have helped draft legislation amending the 1915 Assessment Bond Act to allow a general law city to issue variable-rate 1915 Act bonds. With the property owner and other participants, we reviewed the pros and cons of fixed- and variable-rate financing. The property owner asked that we proceed toward a variable-rate issue. Variable-rate bonds require an underwriter, a paying-agent bank, and a letter-of- credit bank, and are best sold by a negotiated sale. William Huston July 28, 1986 Page 2 In May 1986 we went through a proposal process to select an under- writer for the bonds. We received proposals from six underwriting groups; three were interviewed by a panel including the city finance director and representatives of bond counsel, The Irvine Company, and Battle Wells Associates. As a result of this process, the team of Merrill Lynch and Stone & Youngberg was chosen as underwriter for the bonds. Since the underwriter was chosen, proposals have also been received from paying agents and letter-of-credit banks, and Citibank and Mitsubishi Trust, respectively, were selected. Legal documents and the official statement are in nearly final form. All of the parties have been meeting frequently to finalize the docu- ments necessary to effect the sale of the bonds. The council approved the engineer's report and confirmed the assessments on July 21. Closing is expected about August 20. As the property is developed for for-sale residential uses, an amount of bonds equivalent to the assessment liens on those properties will be converted to fixed-rate bonds at the interest rates in effect at the time of conversion. Thus, the individual homeowners will have fixed payment schedules for their assessments. Interest rates on the fixed- rate bonds at conversion should be favorable within the market at the time of conversion, because they will reflect the additional investment in the property made by the developer between now and the approval to sell residential property. WAS/LJS: mt L16-G Draft of 7/28/86 1518 $19 INDENTURE OF TI~$T ~22 _BY AND BETW~m~ 124 CITY OF TUSTIN S28 as Tzustee 1%30 Dated as of August 1, 1986 $33 $35 ~4691.3.2771.02:36 $16 TABLE OF CONTENTS TITLE PAGE #2989 %(2989) ~ection 1.01. ~ection 1.02. ~ection 1.03. ~RTICLE I Definitions; Equal Security Definitions ...... 2 Authority for ih; ln~e~t&r; ..... 16 Indenture to Constitute Contract . . .16 S2991 %(2991) %2991 %2991 %2991 ~ection 2.01. ~ection 2.02. ~ection 2.03. ~ection 2.04. ~ection 2.05. ~ection 2.06. ~ection 2.07. ~ection 2.08. ~ection 2.09. ~ection 2.10. ~ection 2.11. ~ection 2.12. ~ection 2.13. ~ection 2.14. ~ection 2.15. ~ection 2.16. _/_%RTICLE II Conditions and TeLls of Bonds Authorization of Bonds . . .16 Denominations, Medium, M;t~O~ ~n~ Place of Payment and Dating of Bonds ................ 17 Payment of Bonds ........... 17 Calculation and Payment of Interest ...... 18 Determinatio~ of'A~j&s&eA }n&erest Rates and Unit Pricing Interest Periods ....... 19 Oeterminatio Af'vlriaAiA Interest Rate .......... 2i DeterminAtioA Af Fix&d Interest Rate ................. 21 Alternate Rate for Interest Calculation ..... 22 Interest on Ba kiO n;d'B;nAs Additional Interest on Bank-Owned Bonds .............. 22 Changes in M~de ........... 23 Form of Bonds .... 2~ Zxecution and Au[h;n[i~a[i;n'o~ Bonds .24 Transfer'a;d'E~c~a;g; &f'B;n3s' [ [ [ .24 Registration Books .......... 25 Temporary Bonds ........... 25 Bonds Mutilated, Destroyed, Lost or Stolen .............. 26 #2991 %(2991) %2991 %2991 %(2991) %(2991) %2991 %2991 %(2991) #2991 %(2991) %(2991) %2991 %(2991) %2991 %(2991) %2991 %(2991) %2991 %(2991) %(2991) %2991 %2991 %2991 9(2991) %2991 %2991 %2991 %2991 %(2991) i 92988 TABLE OF CONTENTS, Continued TITLE PAGE #2990 %(2990) ~ection 3.01. ~ection 3.02. ~ection 3.03. ~ection 3.04. ~ection 3.05. ~ection 3.06. ~ection 3.07. ~ection 3.08. [tRTICLE III Redemption of Bunds Mandatory Redemption ...... 26 Optional Redemption of'U~i~ Pricing Bonds .... 30 optional Redemptio of'B;n s'i the Demand Mode ........... 30 Optional Redemption of Bonds in the Fixed Rate Mode. . _ . . . . .31 Selection of Bonds for'RedemPtion . .31 Notice of Redemption ......... 31 Partial Redemption of Bonds ..... 32 Effect of Redemption ......... 32 #2991 %(2991) %2991 %2991 %(2991) %2991 %(2991) %2991 %(2991) %2991 92991 %2991 %2991 ~ection 4.01. ~ection 4.02. ~ection 4.03. ~ection 4.04. ~ection 4.05. ~ection 4.06. ~ection 4.07. ~ection 4.08. ~TICLE IV puzchase of Bonds Optional Tender of Unit Pricing Bonds .... 33 tional'T;n e; 6f'B;n s'i ih; Demand Mode ......... 33 Mandatory Purc~,i,'o} Bonds ..... 34 Tender and Purchase of Bonds . .35 Mandatory Purchase Upon Expira[i;n' or Termination of Letter of Credit . .36 Letter of Credit; Alternate Letter of Credit . . No Sales After'C;r[ain'D;f ult : : .37 .39 Purchase Fund ............ 39 #2991 %(2991) %2991 %(2991) %2991 %(2991) 92991 92991 %2991 %(2991) %2991 %(2991) %2991 %2991 ARTICLE V Pledge of the Xndentuze; Funds and Accounts ~ection 5.01. ~ection 5.02. ~ection 5.03. Pledge Effected By Indenture ..... 41 Pledge of Assessment Installments; Assessment Fund ........... 41 Collection of Assessment Installments ............. 41 #2991 $(2991) $2991 92991 %(2991) %2991 %(2991) =ii- $2988 SECTIO~ TABLE OF CONTENTS, Continued TITLE PAGE #2990 $(2990) ~ection 5.04. ~ection 5.05. ~ection 5.06. ~ection 5.07. ~ection 5.08. ~ection 5.09. Deposit of Moneys .......... 43 Fixed Rate Reserve Fund ....... 46 Reserve Earnings Fund ........ 47 Use of Money in the Construction Fund .......... 47 IntereSt R~s~r~e F~n~ ........ 48 Investments ............. 49 %2991 S2991 $2991 $2991 $(2991) $2991 #2991 ~ection 6.01. ~ection 6.02. ~ection 6.03. ~ection 6.04. ~ection 6.05. ~ection 6.06. ~ection 6.07. ~ection 6.08. ~RTICLE VI Covenants Compliance with this Indenture . .50 Observance of Laws and Regulations' . .50 Other Liens ......... 50 Prosecution of'S~i~s' . · . .51 Accounting Records and'Statement; . .51 Recordation and Filing ........ 51 Further Assurances .......... 51 Arbitrage Covenant ......... 51 #2991 $(2991) $2991 $2991 S2991 $2991 $2991 $2991 $2991 $2991 ~ection 7.01. ~ection 7.02. ~ection 7.03. ~ection 7.04. ~ection 7.05. ~ection 7.06. ~ection 7.07. ~ection 7.08. ~RTXCLE VIX Default and Limitations of Liability Events of Default .......... 52 Action on Default ........ 52 Remedies of the Trus~e~ ....... 53 Non-Waiver ......... 54 Remedies Not E c u;i;e' . ....... 54 No Liability by the City to the Owners ..... 54 No Liabih[y'b [h; r s[e; &o the Owners ................ 55 Action by Owners ........... 55 $2991 $(2991) $2991 $2991 $2991 $2991 $2991 $2991 $(2991) $2991 $(2991) S2991 :iii- $2988 SECTIC~ TABLE OF CONTENTS, Continued TITLE PAGE %2990 %(2990) ~RTICLE VIII The Trustee and the Remarketing Agent and the Paying Agent ~ection 8.01. ~ection 8.02. ~ection 8.03. ~ection 8.04. ~ection 8.05. ~ection 8.06. Employment and Duties of the Trustee ..... 55 Removal an~ ~e~i~nltio~ ;f't~e Trustee .... 55 Compensati;n'a~d'I;d;m~i~i~a[i;n of the Trustee . . Protection of the ~r~s[e; ] ] ] ~ ] .56.57 Appointment of Remarketing Agent . . .58 Appointment of Paying Agent ..... 58 S2991 $(2991) $(2991) $2991 #(2991) $2991 %(2991) S2991 %(2991) $2991 92991 $2991 ~RTICLE IX A~end~ent of oz Supplement to the Indent=e ~ection 9.01. ~ection 9.02. ~ection 9.03. ~ection 9.04. Amendment of Supplement by Consent of Owners ............ 59 Disqualified B;n~s ...... 60 Endorsement or Repla~e~ent'o~ Bonds After Amendment of Supplement 'S~p~l~m~n~ ~y'M~t~ai ' ' .60 Amendment or Consent ............... 61 #2991 $(2991) $2991 $(2991) $2991 $2991 $(2991) $(2991) %2991 $(2991) ~ection 10.01. ~ection 10.02. ~RTI~LE X Defeasance Discharge of Bonds and Indenture . . .61 Unclaimed Money ........... 62 #2991 S(2991: $2991 $2991 :iv- $2988 SECTION TABLE OF CONTENTS, Continued TITLE PAGE %2990 %(2990) ~ection 11.01. ~ection 11.02. ~ection 11.03. ~ection 11.04. ~ection 11.05. ~ection 11.06. ~ection 11.07. ~ection 11.08. ~ection 11.09. ~ection 11.10. ~ection 11.11. ~ection 11.12. ~ection 11.13. ~xhibit A ~xhibit B Schedule I ~RTICLE XI Miscellaneous Benefits of this Indenture Limited to Parties ...... 63 successor Deemed I ciu e in'ail' References to Predecessor ...... 63 Execution of Documents by Owners . . .63 Waiver of Personal Liability . . .64 Acquisition of the Bonds by City' . . .64 Notice by Mail ............ 64 Funds ..... 64 Gender and References ........ 65 Partial Invalidity .......... 65 California Law ............ 65 New York Time ............ 65 Notices ............... 66 Effective Date ............ 67 Form of Improvement Bond ........ A-1 Form of Landowner Election Notice . . .B-1 Initial Adjusted Interest Rates .... S-1 %2991 %(2991) %2991 %(2991) %2991 %(2991) %2991 92991 %2991 %2991 %2991 %2991 %(2991] %2991 %2991 %2991 %2991 %2991 %2991 %2991 %2991 iv- %2988 ~NDENTURE OF TRUST #40 THIS INDENTURE OF TRUST dated as of August 1, 1986 by _and %43,44 between the City of Tustin and Citibank, N.A., a national banking %(44) ~ssociation organized under the laws of the United States of America; %45 W_ I TN ES S E TH : %48 ~HEREAS, the City intends to finance the costs of certain %52 works ~nd improvements through the issuance of bonds under the Act; %53 and %(53) _WHEREAS, the City desires to provide for the securing of %55 the Bonds as provided in this Indenture; %56 _WHEREAS, the Trustee has accepted ~he trust created and %58,59 established ~y this Indenture and in evidence thereof has joined in %60,61, the execution hereof; %(62) SOW, THEREFORE, ~n consideration of the premises, 9f the %64,65, acceptance by the Trustee of the trust hereby created, and of the %(66) ~urchase and acceptance of the Bonds by the owners thereof, _and for %67,68 other valuable consideration, _the receipt of which is hereby acknowl- %69 edged, ~nd to fix and declare the terms and conditions ~pon which _the %70,71, Bonds are to be issued, authenticated, ~elivered, secured and %73,74 accepted ~y all persons wh~ shall from time to time ~e or become %75,76 owners thereof, ~nd to secure the payment of all the Bonds at any Z~77,78 time issued and Outstandinq hereunder and ~he interest thereon ~ccording to their tenor, purport and effect, ~nd to secure the per- %80,81 formance and observance of all of the covenants, ~greements and con- %82 ditions therein and herein contained, _the City by these presents does %83 grant, ~argain, sell, release, convey, assign, ~ransfer and pledge %84,85 ~nto the Trustee all right, ~itle and interest in and to ~he 986,87, Assessments and other funds as more fully described in Section 5.0] 9f this Indenture, and any additional property _that may fro~ time to %90,91 time, ~y delivery or by writing of any kind, _be subjected to the lien %92,93 hereof by the City 9r by anyone in its behalf and the Trustee is %94,95 hereby authorized to receive the same at any time as additional ~ecu- %96 rity hereunder, ~ubject to such permitted encumbrances under this %97 ~ndenture as may be superior /by operation of law or otherwise) ~o %98,99, the lien hereof. %(100) To have and hold ~11 of the above _unto the Trustee ~nd its %101,1( successors ~nd assigns forever ~or the equal and ratable benefit of %105,1£ the owners ~rom time to time 9f all the Bonds, if any, authenticated %108,1£ ~4691.3.2771.02:36 %16 hereunder and issued by the City and Outstanding ~ithout any priority ~%111,] of any one Bond over any other except as expressly provided herein #112.1 ~pon the trusts and subject to t~e covenants and conditions hereinaf- %113 ter set ~orth. %114 ~OW, THEREFORE, KNOW ALL PEOPLE ~Y THESE PRESENTS, THIS %116,1] INDENTURE OF TRUST ~ITNESSETH: %118 _ARTICLE I %120 DEFINITIONS; EQUAL SECURITY %(120) ~ECTION 1.01. ~. Unless the context otherwise requires, the terms defined in this ~ection 1.01 shall for all pur- %123 poses hereof and of any amendment hereof or ~upplement hereto and of 9124 the Bonds and of any certificate, 9pinion, request or other document %125 mentioned herein or therein have the meanings defined herein, the #126 following definitions ~o be equally applicable to both the singular #127 and plural forms 9f any of the terms defined herein: %128 Act %130 "Act" means the Municipal Improvement Act of 1913 %(130) (Division 12 of Streets ~nd Highways Code), as amended, and the %131 Improvement Bond Act of 1915 (Division 10 of the Streets and Highways %132 Code), as amended. - %(132) Adjuste.d Interest Rate %134 "Adjusted Interest Rate" means, for any Unit Pricing %(134) Bond, that annual rate of interest, expressed as a percentage ~nd %135 rounded to the nearest one thousandth of one percent determined by %(135) the Remarketing Agent 9n a Rate Adjustment Date, which would, in the %136 judgment of the Remarketing Agent lhaving due regard to the prevail- %137 ing market conditions), enable such Bond to be sold at par in the %138 secondary market on such Rate Adjustment Date for the Unit Pricing %(138) ~nterest Period commencing on such Rate Adjustment Date. %139 Alternate Letter of Credit %141 "Alternate Letter of Credit" means a letter of credit or %(141) other security device issued in accordance with Section 4.06 hereof %142 which shall have a term of not Less than one year and shall have the %143 same material terms as ~he Letter of Credit. %144 94691.3.2771.02:36 -_2- %37.1 % (37.1) Alternate Rate %146 "Alternate Rate" means ~s of the first day of an Alternate !%147,] Rate Calculation Period[ during a Demand Mode, the annual interest 1#(148~ rate, not[ in excess of the Maximum Rate, equal to 75% of the inter- est rate applicable to 90-day United States Treasury bills or during i#(150j a Unit Pricing Mode, the annual interest rate, not in e~cg~s of the Maximum Rate, equal tQ 68% of the interest rate applicable to 90-day 1%150.~ United States Treasury bills, determined 9n the basis of the yield at I%151 which such 90-day Treasury bills shall have ~een sold at the most %152 recent Treasury auction conducted during the preceding ~hirty (30) %153 days, or if there shall have been no such auction within the preced- %(153) ing thirty !30) days, the rate of interest borne by the Bonds for the %154 immediately preceding Unit ~ricing Interest Period or Variable Rate %155 Interest Period, as appropriate, ~hall remain in effect for such Unit t156 Pricing Interest Period or Variable ~ate Interest Period. #157 Alternate Rate Calculation Period #161 "Alternate Rate Calculation Period" means I (i) for a ~162 ~ond[ in the Unit Pricing Mode, each Purchase Date, and (ii) fora ~163 Bond[ in the Demand Mode, each Tu.esda~ I 1~(163: Assessment %171 "Assessment" means the assessment levied by the City con- #(171) stituting a first lien ~nd charge upon the real property within the %172 District. %(172) Assessment FgRd #174 "Assessment Fund" means the fund by that name established #(174) in Section 5.02 hereof. %(174) Assessmen~ Installments 1%176 "AsSessment Installments" means the Assessment install- 1#(1761 ments of ~ interest ~nd ~ncidental expenses to be paid b_y 1%177 the owners of property within the District. %(177) Authorize~ Denominations ~179 "Authorized Denominations" means (i) with respect to Unit %(179) Pricing Bonds with Unit Pricing Interest Periods of less than one %(179) year, $100,000 and any integral multiple of $1,000 in excess of %180 $100,000; (ii) with respect to Unit Pricing Bonds with Unit Pricing %(180) Interest Periods 9qual to or greater than one year, $5,000 and any %181 integral multiple thereof; liii) with respect to Bonds in the Demand %182 Mode, $100,000 and any integral multiple of $1,000 in excess of #(182) 94691.3.2771.02:36 -3- ~37.1 ~ (37.1: $100,000; and (iv) with respect to Bonds in the Fixed Rate Mode, $(182) $5,000 and any integral multiple thereof. Prior to any Mandatory [$183 Tender Date, an Owner of a Bond may 91ect to retain ownership of a 15184 Bond notwithstanding the denomination ~hereof and such principal $185 amount shall thereafter be an 'Authorized ~enomination" until such $186 Bond is tendered pursuant hereto. $(186) Automatic Conversion Date $186.2 'Automatic Conversion Date' means the date so selected by %(186.2 the Remarketing Agent in accordance with a Landowner's Election #186.3 Notice. $(186.2 Bank 15188 'Bank' means The Mitsubishi T~ust and Bankinq Corporation, ~%(188] LoB Anqeles Aqencv, ~nd its successors and assigns or any issuer of ~#188.] an Alternate Letter of Credit. $(189) Bank Interest Rate $191 "Bank Interest Rate' means the interest rate payable to %(191) the Bank and determined pursuant to ~he Reimbursement Agreement. %192 Bank-Owned BQnds $194 'Bank-Owned Bonds' means any Bonds held by the Bank pursu- %(194) ant to the ~eimbursement Agreement. $195 Bond Counsel $197 'Bond Counsel' means any firm of nationally recognized $(197) municipal bond attorneys selected by the City and experienced in the $(197) issuance of municipal bonds and the exemption of the interest ~hereon %198 from federal income taxation. $(198) Bonds 15202 'Bonds' means the $50,650.000 principal amount of Bonds !%(2021 ~uthorized hereby ~nd at any time Outstanding hereunder that are %203,2( authenticated _and delivered by the Paying Agent under and pursuant to $205 Article II. %(205) Business Day $207 'Business Day" means a day of the year on which the $(207) Trustee, ~aying Agent, Tender Agent, ~emarketing Agent or banks or $208,2( trust companies in New York, New York, or in California are not %210 authorized or required to remain closed. $(210) 94691.3.2771.02:36 $37.1 % (37.1'. #212 "City" means the City of Tustin, California, a municipal %(212) corporation duly organized and existing under and by virtue of the %213 Constitution ~nd laws of the State of California. %214 Construction Fund %216 "Construction Fund" means the fund by that name estab- %(216) lished in Section 5.07 hereof. #(216) Conversion D~te #218 "Conversion Date" means any date on which a Bond begins to ~219,; bear interest at the Fixed Interest Rate. %(220) Demand Bond %222 "Demand Bond" means a Bond in the Demand Mode. %(222) Demand Date %224 "Demand Date" means the Business Day on which a ~ond %225 begins to bear interest at the Variable ~nterest Rate. %226 Demand MQde %228 "Demand Mode" means that period of time during which a %(228) Bond bears interest at the Variable ~nterest Rate in accordance with %229 Section 2.06 hereof. %(229) District ~%231 "District" means the City of Tustin Assessment District {%(231] NO. 85-1, 1~(2313 Election Notice %233 "Election Notice" means a [telephonic notice to th9 ~%234 Remarketinq Aqe~t and the Tender AGent confirmed by a written notice~ ~%(234~ to th9 Tender~ AGent, stating (i) the principal amount of Unit 1%(234] Pricing Bonds ~o be purchased, iii) the certificate number of each Z%235,; such Bond, liii) the name of the Owners of such Bonds, and liv) the %237,21 Purchase Date on which such Bonds are to be purchased. %(238) Event ~f Default %241 "Event of Default" means any occurrence or event specified %(241) in and defined by ~ection 7.01 hereof. %242 94691.3.2771.02:36 %37.1 % (37.1'. Expiration Date #244 "Expiration Date" means the stated expiration date of the %(244) Letter of Credit, or such stated expiration date as may be 9xtended %244.1 from time to time as provided in the Letter of Credit. %(244.2 Favorable Opinion of Bond Counsel %246 "Favorable Opinion of Bond Counsel' means, with respect %(246) to any action the occurrence of which [equires such an opinion, an #247 unqualified opinion of Bond Counsel to the 9ffect that such action is %248 permitted under the Act and this Indenture ~nd will not impair the #249 exemption of interest on the Bonds ~rom Federal income taxation or %250 taxation under the laws of the State lsubject to the inclusion of any %251 exceptions contained in the opinion delivered upon original issuance %252 of the Bonds). %(252) Final Pricinq Date %254 'Final Pricing Date' means the fourth (4th) Business Day %(254) following the Preliminary Pricing Date. %(254) Final Scale 1%256 "Final Scale' means the Final[ Scale posted by the Remarketing Agent at or before ~1=30 a.m. on each Rate Adjustment [%257 Date occurring during each Unit Pricing Interest Period for any Unit %(257) Pricing Bond. %(257) Fixed Interest Rat~ %259 'Fixed Interest Rate' means the rate to be borne by a ~ond %260 after a Conversion Date with respect thereto, ~hich shall be deter- %261 mined in accordance with Section 2.07 hereof. %(261) Fixed Rate Bonds %261.2 'Fixed Rate Bonds' means any Bond Outstanding bearing %(261.1 interest at Fixed Interest Rate ~ursuant to Section 2.07 hereof. %261.3 Fi.x.ed.Ra~e M0.~e %263 "Fixed Rate Mode' means that period of time during which a %(263) Bond bears interest at ~he Fixed Interest Rate. %264 Fixed Rate Rg~e~ve Fund %264.2 · Fixed Rate Reserve Fund' means the fund by that name %(264. established in Section 5.05 hereof. %(264.1 94691.3.2771.02=36 %37.1 % (37.1 Fixed ~at9 Reserve Requirement !#264.~ "Fixed Rate Reserve Requirement" means an amount equal t9 ~%(264 six months' debt service on the Bonds being converted to a Fixed ~#264.~ Interest Rate, !#(264 Indenture 9266 "Indenture" means this Indenture of Trust dated as of %(266) August 1, 1986 by ~nd between the City and tb~ Trustee, ~s it may !%267,1 from time to time be ~upplemented or amended pursuant to the provi- %270 sions hereof. %(270) Interest Fund %272 "Interest Fund" means the fund by that name established in %(272) Section 5.04 hereof. %(272) Interest Fund Reserve Amount ~%274 "Interest Fund Reserve Amount" means an amount equal to ~%(274 the interest payable on the aqqreqate p~incipal amount of Unit Priced |~(274. or Demand Bonds then OGtstaadinq ~or a period of thirty-five (3~) 1%275 days atl the Maximum Rate. ~%276 Interest Payment Date %278 "Interest Payment Date" means (i) with respect to Unit %(278) Pricing Bonds with Unit Pricing Interest Periods of less than %(278) 180 days: the Purchase Date thereof; iii) with respect to Unit %279 Pricing Bonds with Unit Pricing Interest Periods equal to or greater %(279) than 180 days: 9ach March 2 and September 2 prior to the Purchase %280 Date and the Purchase Date; (iii) with respect to Demand Bonds: ~he %281 first Wednesday of each calendar month (whether or not a Business %(281) Day); and (iv) with respect to Bonds in the Fixed Bate Mode; each %282 March 2 and September 2. "Interest Payment Date" shall also mean any %(282) Mandatory Tender Date. %283 Interes~ Period 9285 "Interest Period" during a Demand Mode means the period %(285) from and including ~he first day of a Demand Mode with respect to a %285.1 Bond ~nd continuing to, but not including, ~he next succeeding ~%286, Wednesday, [ 1%(287 Interest R~serve Fund %295 "~nterest Reserv~.F.un~" means the fund by that name %(295) established in Section 5.08 hereof. %(295) 94691.3.2771.02:36 %37.1 % (37.1 Landowner Election Notice 9297 "Landowner Election Notice" means an executed notice in %(297) substantially the form set forth in Exhibit B attached hereto[= !%298 Letter of cr~.~ %300 "Letter of Credit" means the irrevocable letter of credit %(300) issued by the Bank ~ontemporaneously with the original delivery of %301 the Bonds, 9xcept that upon the issuance of an Alternate Letter of %302 Credit in accordance with Section 4.06 hereof it shall mean such %303 61ternate Letter of Credit. %304 Mandatorily Tendered BQnds !%306 "Mandatorily Tendered Bonds" means{ Bonds required to be !%(306] tendered for purchase @n a ~roposed Conversion Datea any Aut~natic !%307 Conversio~ Dater ~ny Substitution Date, ~ny Demand Date, ~ny Unit !%308,2 Pricing Date, the Termination Date or the Expiration Date{. !%(3093 IMandatory Tende~ Date Z%311 "Mandatory Tender Date" ~ny Proposed Conversion Date, any Z%(311] Automati~ Conversio~ Date,.anv Demand Date, any Unit Pricina Date, !#(311] lany SubstitutioR Date, th~ date of ~9~ination of the Letter of ~%312 Credit or five (5) days prior to th9 ExpiratioB Date. 1%(312] Maturity Date %314 "Maturity Date" means September 2, 2011. %(314) Maximum Rate %316 "Maximum Rate" means the maximum rate of interest the %(316) Bonds may bear under the laws of the ~tate at such time of calcula- !%317 tionL..Drovided however that if such maximum rate of interest i~ !%(3171 qreater than 12% per annum, the{ Maximum Rate{ ~all e~ual the rate $%317.~ of interest per annum covered by the L~tter of Credit then in !%317.2 effect. ~#(317. Minimum Fixed I~terest R~e %319 "Minimum Fixed Interest Rate" m e a n s ~ 5 % o f t h e %320 Preliminary Interest Index and in no 9vent will the Minimum Fixed %321 Interest Rate exceed the ~aximum Rate. %322 94691.3.2771.02:36 %37.1 % (37 MOOdy's #324 "Moody's" means Moody's Investors Service, a corporation #(324) duly organized and 9xisting under and by virtue of the laws of the #325 State of Delaware, ~nd its successors and assigns, except that if ~326 such corporation §hall be dissolved or liquidated or shall no longer ~327 perform ~he functions of a securities rating agency, then the term #328 ~Moody's" shall be deemed to refer to any other nationally recognized #329,33 securities rating agency selected by the City and ~pproved by the ~331 Bank (who shall not be under any Liability by reason of such #332 approval). #(332) Opinion of Counsel 9334 "Opinion of Counsel" means a written opinion of counsel of ~(334) recognized national §tanding in the field of law relating to munici- #335 pal bonds and the exemption from taxation of the interest thereon, ~(335) ~ppointed and paid by the City and satisfactory to and approved by #336 ~he Bank (who shall not be under any Liability by reason of such #337,33 approval). 9(338) {Optional Tender Da~ 1#340 "Optional Tender Date" means the day stated in the Optional Tender Notice delivered by any Owner of a Bond to the Tenderl Aqent and to th~ Remar~e~g Aq~nt with respo..ct to a Bond, which day shall be the seventh calendar day after the date of the delivery of th~ Qptional Tende~ Notice (or the first ~usiness Day thereafter, if such seventh calendar day is not a Business Day). ~#(340~ l{ (340) I~341 1~(341) !#342 {(342) Optional Tender Notice ~#344 "Optional Tender Notice" means the notice from any Owner of a Bond{ to the Tender{ Agent and the R~arketinq Agent of an Optional Tender Date in accordance with the provisions hereof consti- tuting the Tender Notice in the Demand Mode or an Election Notice{ in the Unit Pricing Mode. ${(344~ ~#(344) ~#(344) 1{345 #(345) Outstandi~q #348 "Outstanding," when used as of an particular time with #(348) reference to Bonds, ~eans (subject to the provisions of Section 9.02 #349 hereof) all Bonds ~elivered hereunder except -- #350 il) Bonds cancelled by the Paying Agent or sur- ~352 rendered to the ~aying Agent for cancellation; #353 94691.3.2771.02:36 #37.1 # (37.1) (2) Bonds paid or deemed to have been paid #355 within the meaning of Section 10.01 hereof; and #356 !3) Bonds in lieu of or in substitution for #358 which replacement ~onds shall have been executed by #359 the Trustee and delivered ~y the Paying Agent 9360 hereunder. #(360) ~otwithstanding the foregoing, Bonds purchased or redeemed #362 and held b_y the Bank pursuant to the Reimbursement Agreement shall %363 remain Qutstanding in the hands of the Bank until the Bank is paid %364 ~11 amounts due under such Bonds an~ the Reimbursement Agreement. %365 Qwner %368 "Owner" means the registered owner of a Bond. #(368) Paying Agent 1#370 "Paying Agent" means Citibank, N.A., a corporation duly ~#(370) 9rganized and existing under and by virtue of the laws of the United 1%371,] States of America and havina its principal office in New York, Kew ~#373 York, or any other bank or trust company having an office in New %374 York, New York, which may be substituted in its place ~s provided in %375 Section 8.06 hereof. %(375) Permitted Investments #377 "Permitted Investments" means any of the following to the #(377) extent then permitted by law: #(377) il) United States of America Treasury notes, #379 bonds, bills or ~ertificates of indebtedness, for %380 which the faith and ~redit of the United States of #381 America are pledged for the ~ayment of interest and ~382 principal; ~(382) !2) Obligations issued by banks for coopera- %384 tires, federal land banks, ~ederal intermediate credit #385 banks, federal home loan banks, _the Federal Home Loan #386 Bank Board or the Tennessee Valley Authority 9r obli- %387 gations, participations or other instruments of or #(387) issued by, 9r fully guaranteed as to interest and #388 principal by, the ~ederal National Mortgage #389 Association, or guaranteed portions of ~mall Business %390 Administration notes, or obligations, participations %(390) 9r other instruments of or issued by a federal agency ~391 or a ~nited States of America government-sponsored #392 enterprise; #(392) 94691.3.2771.02:36 :10- #37.1 #(37.1) !3) Bills of exchange or time drafts drawn on #394 and accepted by a ~ommercial bank (including the Bank, %395 the Paying Agent and the Trustee), 9therwise known as #396 bankers acceptances, which are eligible for purchase %397 by members of the Federal Reserve System; %(397) !4) Commercial paper 9f the highest letter and %399,4( numerical rating as provided by _Moody's or S&P, which %401 commercial paper is limited to issuing ~orporations %402 that are organized and operating within the ~nited %403 States of America and that have total assets in excess %(403) of ~ive hundred million dollars ($500,000,000) and %404 that have an ~A" or higher rating for the issuer's %405 debentures, other than ~ommercial paper, as provided %406 by Moody's or S&P; provided that purchases of eligible %407 commercial paper may not exceed two hundred seventy ~%408 (270) days' maturity nor ~epresent more than ten per- 1%409 cent (10%) of the outstanding ~ommercial paper of an %410 issuing corporation; and ~(410) 15) Certificates of deposit issued by a state or #412 national bank !including the Paying Agent and the ~413 Trustee) or savings and loan ~ssociation whose depos- #414 its are insured by either the Federal Deposit #(414) ~nsurance Corporation or the Federal Savings and Loan #415 Insurance ~orporation, as the case may be, and the 1%416 short-term debt pbli~ations of which have the hichest short-term ratinq IQ~I the debentures of which have an "A" or hiqhg~ ratin~l or the Bank or a Qtate-licensed branch of a foreign bank in which the ~ity is autho- rized by law to deposit its funds; and ~%(416] ~%4~6.] ~%416.; #418 %(418) 16) The Local Agency Investment Fund 9stablished pursuant to Section 16429.1 of the ~overr~ent Code of the State of California. %418.2~ ~418.4 %(418.~ Preliminary Interest Index ~420 "Preliminary Interest Index" means ~he annual interest #421 rate or rates which in the judgment of the Remarketinq Aqent and ~%422 Stone ~ YouDqbe~q will ~nable th~ Bonds to be rema~keted in accor- ~%(422] dance with Section 2,07 hereof oD a Conversion Date, but no greater ~423 than the Maximum Rate. %(423) Preliminary ~ricing Date %425 "Preliminary Pricing Date" means ~ date ~etermined by the #426,4: Remarketing Agent which will be at least five (5) but no ~ore than #428 94691.3.2771.02:36 -11- %37.1 %(37.13 fifteen (15) Business Days prior to a Proposed Conversion Date or an %428.1 Automatic Conversion Date. %(428.] Preliminary Scale #430 "Preliminary Scale" means the Preliminary Scale posted by %(430) the Remark,ting Agent at or about 9:30 a.m. on the Rate Adjustment %(430) Date occurring during each ~nit Pricing Interest Period for a Unit %431 Pricing Bond. ~ 1#(431] Principal Fund %440 "Principal Fund" means the fund by that name established #(440) in Section 5.04 hereof. %(440) Principal Payment Date %442 "Principal Payment Date" means (beginning in __) the %(442) September 2 9f each year, and, as to any Bank Owned Bondsz any date 1%443,~ for the payment of principal prescribed by the Eeimbursement #445 Agreement. %(445) Proposed Conversion D~e 1~445.~ "Propq~ed Conversion Date" means the Business Day indi- 1#(445. cared in the written notice of the City qiven pursuant to the ~#(445~ Indenture. o~ which the City intends to effect a conversion of all or ~%445.~ a Portion of the~ Bonds to the Fixed Rate Mode. 1%(445. Purchasg. Date %447 "Purchase Date" means, ~ith respect to Unit Pricing Bonds, %448 ~ Business Day determined by the Remark,ting Agent on a Rate %449 ~djustment Date as the date on which such Bonds may be tendered for %450 purchase to the Tender ~gent, which may include the maturity date %451 thereof. ~(451) Rate Adjustment Date %453 "Rate Adjustment Date" means a Business Day on which an %(453) Adjusted Interest Rate and a Unit Pricing Interest Period for Bonds %(453) in the Unit Pricing Mode are determined by the ~emarketing Agent. %454 Record Date I%456 "Record Date" means (i) with respect to Uoit Pricinq 1%(4561 Bond~ if the Interest Payment Date is a Purchase Date: clQse of ~%(456] busines~...gn one Business Day prior to such Interest Payment ~ate; 1%457 (ii) with respect to Unit Pricing Bonds if the Interest Payment _Date 1#458 94691.3.2771.02:36 :12- #37.1 #(37.1'. is a September 2 or March 2: close of business the fifteenth day of I#(458) the calendar month preceding such Interest Payment Date; provided Z%459 that if a Rate Adjustment Date is between the ~5th day of the calen- %460 dar month and an Interest Payment Date, the Record Date ~hall be the #461 Business Day immediately preceding such next ~nterest Payment Date; %462 !iii) with respect to Bonds in the ~emand Mode: the Business Day %463,4( immediately preceding the Interest Payment Date; ~nd (iv) with %465 respect to Bonds in the Fixed Rate Mode: the fifteenth day of the %(465) ~alendar month preceding each Interest Payment Date. %466 Redemption. Fund %468 "Redemption Fund" means the fund by that name established %(468) in Section 5.04 hereof. %(468) Reimbursement Agreement %470 "Reimbursement Agreement" m e a n s t h a t c e r t a i n %(470) Reimbursement Agreement dated as of August 1. 1986, by and between 1%471 the Bank and the City ort if an A%~ernate Letter of Credit has beeD ~%(471] issued, the reimbursement agreement in connection with such ~lternate ~%472 Letter of Credit. %(472) Remarketinq Agent %474 "Remarketing Agent" means Merrill Lynch, Pierce, Fenner & %(474) Smith Incorporated, or any other investment banking firm which may at %475 any time be substituted in its place as provided in Section 8.05 %476 hereof. %(476) Remarketinq Agreement %478 "Remarketing Agreement" means that certain Remarketing %(478) Agreement dated as of August 1, 1986, b_y and between the City and the %479 Remarketing Agent. %(479) Remarketin~ Cost Account %481 "Remarketing Cost Account" means the account by that name %(481) created in Section 4.08 hereof. %(481) Remarketinq Cgst A~ount Requirement 1%481.: "~emarketin~ Cost Account Requirement" means $ , ~(481. less any transfers from the Remarketing Cost Account r~quired Dursu- ~%481.] ~nt tQ Section 4.08 hereof~ other than transfers to the Reserve ~%481.~ Earnings Fund. 1%(481 94691.3.2771.02:36 -13- %37.1 %(37.11 Reserv~ Earninqs Fund %483 "Reserve Earnings Fund" means the fund by that name estab- %(483) lished in Section 5.06 hereof. ~ I%(483) S&P %489 "S&P" means Standard & Poor's Corporation, a corporation %(489) duly organized and existing under and by virtue of the laws of the %490 State of New York, ~nd its successors and assigns, except that if %491 such corporation ~hall be dissolved or liquidated or shall no longer %492 perform ~he functions of a securities rating agency, then the term %493 ~S&P" shall be deemed to refer to any other nationally ~ecognized %494,49 securities rating agency selected by the City and ~pproved by the %496 Bank (who shall not be under any liability ~y reason of such %497 approval). %(497) Stone..& Younqberq 1%497.2 "Stone & Youngberg" means Stone & Younqberq, a California 1~(497~ limited partnership, and its successors and assiqns including its 1%497.3 successors in interest under th9 Remarketinq Aqreement. 1%(497. Substitutio~ Date %499 "Substitution Date" means the date following five Business %(499) Days prior to the date upon which an ~lte~nate Letter of Credit is to %500 be substituted for the Letter of Credit then in effect. %(500) Tende~ Aqent %502 "Tender Agent" means the Paying Agent. %(502) Tende~ Notice %504 "Tender Notice" means a notice ~tating (i) the principal %505 amount of Demand Bonds to be purchased, (ii) the certificate number %(505) of each such Bond, liii) the name of the Owners of such Bonds, and %506 (iv) the Optional Tender Date 9n which such Bonds are to be %507 purchased. %(507) Tende~ Price %509 "Tender Price" on any Optional Tender Date means 100% of %(509) the principal amount of a Bond 91us accrued and unpaid interest %510 thereon; provided however that on any Purchase Date or Mandatory %(510) Tende~ Date, "Tender ~r$ce" means.~00% 9~ the principal amount 1~511 thereof plus premium if any. !#(511) 94691.3.2771.02:36 %37.1 (37.1) Termination Date %511.2 "Termination Date" means the date specified in a notice %(511.1 from the Bank of termination of ~he Letter of Credit pursuant to %511.3 Section __ ~f the Letter of Credit. %511.4 Trustee ~%513 "Trustee" means Citibank, N, A., a corporation association ~%514 duly organized and existing under ~nd by virtue of the laws of the ~%515 United States of America, land having its principal[ !office in New Y0rk~..NeW Ygsk, pr any other bank or trust company bavinq an office ~518.~ in NeW York, NeW York, ~hich may[ be substituted in its place as pro- !#519 vided in ~ection 8.02 hereof. ~%520 Uni~ Pricinq Bond %522 "Unit Pricing Bond" means any Bond Outstanding while in a %(522) Unit Pricing Mode. %(522) unit Pricinq %524 "unit Pricing Date" means a Business Day on which Bonds %(524) begin to bear interest at the Adjusted Interest Rate. %(524) Uni~ Pricing Interest Period %526 "Unit Pricing Interest Period" means, with respect to a %(526) Unit Pricing Bond, that period of time beginning on a Rate Adjustment %(526) Date and ending on ~he day preceding the Purchase Date, determined by %527 the Remarketing Agent and selected by the purchaser of such Bonds by ~#5.28 reference to the P~e~iminaryl Scale and ~Bal SGale, ~o Unit Pricing ~%529 Interest ~eriod shall exceed one year ~n length; provided that _the %530,51 Unit Pricing Interest Periods may exceed one year. in ~ength upon %532 receipt by the City of a Favorable Opinion 9f Bond Counsel. %533 Unit Pricina Mode %535 "Unit Pricing Mode" means that period of time during which %(535) a Bond bears interest at an Adjusted Interest Rate in accordance with %(535) the provisions of this Indenture. %(535) Variable ID~gr.est Rate %537 "Variable Interest Rate" means that annual rate of inter- %(537) est, expressed as a percentage and rounded to the nearest 9ne thou- %538 sandth of one percent, determined by the Remarketing Agent on the %(538) Business Day preceding the Variable Rate ~justment Date, ~hich, in %539 the judgment of the Remarketing Agent would be the interest rate %(539) 94691.3.2771.02:36 %37.1 % (37.1 necessary to produce as nearly as practicable a par bid (disregarding #540 any accrued interest) on a Demand Bond, on the Variable Rate $(540) Adjustment Date. $(540) Variable Rate Adjustment Date $542 "Variable Rate Adjustment Date" means the first day of $(542) each Variable Rate Interest Period. $(542) Variable Rate Reserve Fund 1#544 "Variable Rate R~serve Fund" means the fund by that name 15(544] established in Section 5.04 hereof. 1#(544] Variable Rate R~0erve Reauirement 1#545.: "Variab~9 Rat~ Reserve Requirement" means $ . !5(545 I 15(545 ~ECTION 1.02. Authority for the Indenture. This Indenture is authorized pursuant to the Act. $547 $(547) ~BCTION 1.03. Indentuze to Constitute Contzact. In con- $549 sideration of the acceptance of the Bonds by the Owners, ~his $550 Indenture shall be deemed to be and shall constitute a ~ontract 15551 between the City, the Bank and the Owners to secure the full and 15552 final payment of the principal of and premium, if any, and interest $553 on the Bonds, subject to the pledge made in this Indenture and the $(553) ~onditions, covenants and ~erms contained herein required to be $554,5! observed or performed by or 9n behalf of the City and the Trustee $556 shall be for the equal _benefit, protection and security of all Owners $557 ~ithout distinction, preference or priority 9f any Bonds over any $558,5~ other Bonds by reason 9f the number or date thereof or the time of $560 authentication or ~elivery thereof or otherwise for any cause whatso- %561 ever, 9xcept as expressly provided herein. S562 N~I~E II S563 CONDITIONS AND TER~ OF B(H~ $(563) ~ECTION 2.01. luthozization of Bon4s. The issuance is 9565 hereby authorized of Bonds in the aggregate principal amount of ~ifty 15566 million, six. ~undre. d..a~d, iifty thousand~ dollars ($50,650,000) to be |~(566~ desiqnated a~ "CitY..Of Tustin Assessment District No. 85-1 15566.[ Improvement Bonds". There is hereby created, in the manner and to $567 the extent provided herein, a continuous pledge and lien to secure $568 the full and final payment of the principal of, premium, if any, and $569 interest on the Bonds. _The Bonds shall be limited obligations of the S570 94691.3.2771.02:36 -16- $37.1 $(37.1: City payable from the items pledged for the payment therefor Rursuant %571,5[ to Section 5.01 hereof. The Paying Agent is hereby authorized to %573 authenticate and to deliver ~he Bonds ~pon written direction of the #574,5, City, and upon the Trustee's receipt of the ~etter of Credit, duly %576 executed by the Bank and upon the City's receipt of _the proceeds of %577 sale thereof. %(577) ~ECTION 2.02. Denominations, Medium, ~ethod and Place of $579 Payment and Dating of Bo~ds. The Bonds shall be prepared in the %(579) form of fully registered Bonds in Authorized Denominations. The %580 interest and principal and redemption premiums, if any, on the Bonds %581 shall be payable in Lawful money of the United States of America. %582 The interest on the Bonds ~hall be payable on the Interest Payment %583 Dates by check mailed bY the Paying Agent to the respective Owners %584 thereof at their addresses as they appear on the Record Date in the %585 books required to be kept by the Paying Agent pursuant to the provi- %586 sions of Section 2.14 hereof, 9xcept that in the case of an Owner of %587 Bonds evidencing ~500,000 or more in aggregate principal amount, upon %588 the written request 9f such Owner to the Trustee, specifying the %589 account or accounts ~o which such payment shall be made, payment %590 shall be made by wire transfer 9f in~ediately available funds on such %591 Interest Payment Date. ~he principal and redemption premiums, if %592 any, on the Bonds shall be payable 9n the Principal Payment Dates or %593 on redemption prior thereto Rpon surrender of the Bonds called for %594 redemption at the office of _the Paying Agent. _The Paying Agent, the %595,5! Tender Agent and the ~rustee may treat the Owner of a Bond as the %597 absolute owner 9f a Bond for all purposes, whether or not such Bond %598 shall be overdue, ~nd the Paying Agent, the Tender Agent and the %599 Trustee ~hall not be affected by any knowledge or notice ~o the con- %600,61 trary; and payment of the Rrincipal of, premium, if any, and interest %602 on such ~ond ~hall be made only to such Owner, which payments shall %603,61 be valid and effectual to satisfy and discharge the liability of such %605 Bond ~o t~e extent of the sum or sums so paid. ~11 Bonds paid pursu- %606,61 ant to the provisions of this Section 2.02 shall be ~ancelled by the %608 Paying Agent and shall not be redelivered. %(608) The Bonds shall be dated the date of authentication thereof %609 ~nd shall bear interest from the Interest Payment Date to which 9610 interest has been paid 9r provided for 9r if such date of authentica- %611,61 tion is prior to ~th9 initia% R~cord Date for a B~nd, ~rom the date ~%614,~ of original authentication and delivery of the Bonds. %(615) ~ECTION 2.03. Payment of B~~lS. The interest on the Bonds %617 shall become due and payable on ~he Interest Payment Dates in each %618 year, beginning on the Interest Payment Date following their date and %619,61 continuing to and including _the Maturity Date, 9r on redemption prior %621,61 thereto. %(622) 94691.3.2771.02:36 -17- %37.1 % (37.1 The principal of the Bonds shall become due and payable on %623 ~he Maturity Date, 9r on redemption prior thereto. ~otwithstanding #624,6: the foregoing, Bonds held by the Bank shall be due and payable as %627 provided in the Eeimbursement Agreement, the terms of which are %628 hereby incorporated ~y reference herein as if fully set forth. %629 ~ECTION 2.04. Calculation and Payment of Intezest. %630 iA) Interest on each Unit Pricing Bond _shall be calculat- 9633,61 ed, in the case of a Unit Pricing ~nterest Period less than or equal 9635 to one year in length, on the ~asis of a 365/366 day year for the %636 actual number of days 9lapsed, and, in the case of a Unit Pricing %637 Interest Period lreater than one year in length, on the basis of a 9638 360 day year ~omposed of 12 30-day months. ~nterest on each Demand 9639,6. Bond ~hall be calculated on the basis of a 365/366 day year for the 9641,6. actual number of days elapsed. From and after a ~onversion Date with %643 respect to a Bond, interest 9n such Bond _shall be calculated on the #644,6. basis of a 360-day year ~omposed of twelve 30 day months. At no time %646 may the rate of interest on the Bonds exceed the Maximum Rate. %(646) !B) The Bonds, as initially issued, will be in the Unit 9648 Pricing Mode at the adjusted Interest Rate set forth in Schedule 1 9649 attached hereto. Each ~ond will bear interest at its applicable 9650,6! Adjusted Interest Rate, Variable ~nterest Rate or a Fixed Interest 9652 Rate, according to the mode then in 9ffect with respect to such 19653 Bond. All Bonds in the Unit Pricing Mode may be converted to the 19(653 Demand MQde and all or a portion of the Bonds in the Unit P~icinq ~9653.1 MOde may be converted to the ~ixed Interest Model If Unit Pricing ~9654 Bonds are converted to the Demand Mode all such BQnds may be con- 19(654 verted Lo the Unit Pricing Mode add a~l ..or a pQ~ti~n of such Bonds 19655 may be converted to a Fixed Interest Mode. A Fixed Interest Rate 19655.1 §hall be in effect until the ~aturity Date, and no Bond may be con- 9656,6 vetted to lany other model after__a Conversion Date with respect t9 1#65~ such Bond. IPrior to any conversion to ~ Demand Mode. a Unit Pricing 19659 Mode or ~ny Proposed Conversion Date, the City must deliver to the 1#660 Tender agent a Favorable Opinion of Bond Counsel~ 19661, NQ~withstanding the foregoing, Bank-Owned B~nds will bear 1%662.. interest at the rate ldescribed in Section 2.09 hereof. 19664 ~he determination by the RemarketingAgent of each Adjusted 9665 Interest ~ate, Variable Interest Rate and Fixed Interest Rate for any 9666 Bond, if in accordance with the provisions hereof, shall _be conclu- 9667,6 sire and binding upon the City, the Paying Agent, the Tender Agent, 9669 ~he Trustee, the Bank and the Owners. 9670 94691.3.2771.02:36 -18- 937.1 9 (37.1 SECTION 2.05. DeteminatiOn of ~ljusted Interest Rates ,and ~673 Unit Pzicinq Tntezest Pe~iocts. Bach Bond will initially bear inter- #674 est in the Unit _Pricing Interest Period at the rates set forth in #675 Section 2.04(B) hereof. Thereafter each Unit Pricing Bond _shall bear %676,6~ interest at the Adjusted Interest Rate for such Unit Pricing Interest %679,6~ Period, established as follows: %(680) ia) At or about 9:30 A.M. New York City time, on the Rate I%682 Adjustment Date occurring during iach Unit ~icinq Interest Period 1%683 for any Unit Pricinq Bopd,I ~he Eemarketing Agent will post the 1%684,( Preliminary[ Scale ~or such Rate Adjustment Date. _The information in 1%686,( such Preliminary Scale shall be made available ~o any prospective %688 purchaser requesting such information. The Adjusted Interest Rate %(688) for each Unit Pricing Interest Period indicated on ~he Preliminary %689 Scale shall be the minimum rate of interest ~er annum which, in the %690 sole opinion of the Remarketing Agent, without consultation with the %(690) City, would be Becessary on and as of the Rate Adjustment Date to %691 remarker each Unit Pricing Bond having such Unit Pricing ~nterest %692,6! Period in a secondary market transaction at a price equal to the %(693) principal !mount thereof; ~rovided, however, that the Adjusted %694,6! Interest Rate indicated ~or any Unit Pricin~ Interest Period shall in 1%696 no event exceed ~he Maximum Rate. !%697 lb) The registered owner of any such Unit Pricing Bond who %699 does not elect to ~ender any portion of such Unit Pricing Bond for %700 purchase in accordance with Section 4.01 hereof shall have the right ~(700) to _select a new Unit Pricing Interest Period by telephonic notice to %701 the Eemarketing Agent no later than 10:00 A.M., New York City time, %702 on the Rate Adjustment Date. ~n that event, !rc~ and after such Rate %703,7( Adjustment Date such Unit Pricing Bond shall have the Unit Pricing %(704) Interest Period _selected by the owner of such Unit Pricing Bond and %705 bear interest at the Adjusted Interest Rate indicated for such [nit %706,7( Pricing Interest Period on the Preliminary Scale, subject to adjust- %(707) ment is provided in paragraph (d) below. ~f the registered owner of %708,7( a Unit Pricing Bond [etains such Bond as described above, the new %710 Purchase Date, ~djusted Interest Rate and Unit Pricing Interest %711 Period shall be inserted by the Trustee in the ~rid provided therefor 1%712 on the reverse side 9f each Bond. 1%713 lc) In the event that on the Rate Adjustment Date the reg- %715 istered owner of any such ~nit Pricing Bond neither tenders such Unit %716 Pricing Bond for purchase in accordance with Section 4.01 hereof nor %717 _selects a new Unit Pricing Interest Period in accordance with para- %718 graph (b) ~bove, then, commencing with such Rate Adjustment Date, %719 _such Unit Pricing Bond shall have a Unit Pricing Interest Period %720 which shall extend to but not include the next succeeding ~usiness %721 Day and shall ~ear interest at the Adjusted Interest Rate indicated %722 for such Unit Pricing Interest Period 9n the Preliminary Scale, %723 subject to ~djustment as provided in paragraph (d) below. #724 94691.3.2771.02~36 -19- %37.1 % (37 id) In the case of any Unit Pricing Bond which has been %726 tendered for purchase on a Rate Adjustment Date pursuant to ~727 Section 4.01 hereof and remarketed b_y the Remarketing Agent pursuant %728 to Section 4.04 hereof, such Unit Pricing Bond ~hall, commencing with %729 such Rate Adjustment Date, have the ~nit Pricing Interest Period %730 selected by the purchaser to whom ~he Unit Pricing Bond has been %731 remarketed and bear interest at the Adjusted Interest Rate indicated %732 for such Unit Pricing Interest Period 9n the Preliminary Scale, %733 subject to ~djustment as herein provided. The first prospective ~ur- %734,72 chasers willing to buy all or any of the Unit Pricing Bonds being %736 remarketed at any of the rates indicated on the Preliminary ~cale #737 will be awarded such remarketed Unit Pricing Bonds. ~n the event %738 that a prospective purchaser selects a Unit Pricing Interest Period %739 for any ~nit Pricing Bond but indicates that it will purchase ~uch %740,7~ Unit Pricing Bond only if such Unit Pricing Bond bears an interest %(741) rate for ~uch Unit Pricing Interest Period which is higher than the %742 rate indicated ~herefor in the Preliminary Scale, such information %743 will be Boted by the Remarketing Agent. ~t the end of the remarker- %744,7~ ing period, if all the Unit Pricing Bonds have not been sold in %746 accordance with the foregoing, and information of the nature %747 described in the preceding sentence has been Roted by the Remarketing #748 Agent, ~hen, in order to effect a complete remarketing of the Unit %749,7! Pricing Bonds, the unremarketed Unit Pricing Bonds shall be sold to #(750) those prospective purchasers who have indicated a willingness to put- %751 chase such Unit Pricing Bonds bearing interest for Unit Pricing %752 Interest Periods closest, in terms of basis points, to the Adjusted %(752) Interest Rates indicated therefor in the Preliminary Scale. ~n that %753 event, the Remarketing Agent shall post at or before ~1:30 A.M., New %754 York City time, on the Rate Adjustment Date, a Final ~cale Hhich ~ill %755,7! be the same as the Preliminary Scale 9xcept that the Adjusted #758 Interest Rate indicated for any Unit Pricing Interest Period ~ill be %759 the highest Adjusted Interest Rate for such Unit Pricing Interest %(759) ~eriod at which any Unit Pricing Bond was remarketed in accordance %760 ~ith this paragraph; ~rovided, however, that the Adjusted Interest %761,7~ Rate shall in Ro event exceed the Maximum Rate. The information on %763 the Final Scale shall be made available to any ~rospective purchaser %764 requesting such information. All Unit Pricing Bonds for which an %(764) Adjusted Interest Rate is determined on the Rate Adjustment Date %765 shall ~ear interest at the Adjusted Interest Rate indicated for the %766 applicable ~nit Pricing Interest Period on the Final Scale even if %767 the ~urchaser ~hereof had stated a willingness to purchase Unit %768 Pricing Bonds at a lower [%djusted Interest Rate for such Unit Pricing %769 Interest Period. %(769) !e) Upon selection of a D~mand Date~ a Proposed Conversion ~#771 Date or an Aut~__atic Conversion Date, or uDon notice of a Termination ~%771.] Date~ Bo Unit Pricing ~nterest Period will extend beyond the ~%772,' effective date established for such changex ~In no event shall a ~%775 94691.3.2771..02:36 -20- %37.1 % (37 Unit Pricing Interest Period extend beyond the[ fifth Business Day ~%776 prior to the Expiration Date[ of the L~tter of Credit. 1#(776] ~ECTION 2.06. Determination of Variable Interest Rate. %778 Bonds in the Demand Mode shall bear interest at the Variable Interest %(778) Rate. ~he Variable Interest Rate shall be determined by the %779 Remarketing Agent prior ~o 3:00 p.m., New York City time, on the %780 Business Day next preceding the Variable _Rate Adjustment Date (which %781 shall be a Wednesday) for such Variable Rate ~nterest Period. _The %782,7~ Variable Interest Rate shall become effective on such Variable _Rate %784 Adjustment Date and shall be applicable through the following %(784) Tuesday. On or before the Business Day next succeeding the date on %785 which the Variable Interest Rate for any Variable Interest Rate %(785) ~eriod is determined by the Remarketing Agent, the Remarketing Agent %786 shall ~ive notice to the Tender Agent of the Variable Interest Rate %787 ~pplicable to such Variable Rate Interest Period. %788 ~he Variable Interest Rate for each Variable Rate Interest %789 Period will be equal ~o that interest rate which, if borne by the %790 Bonds, would in the judgment 9f the Remarketing Agent be the interest %791 rate necessary to produce as nearly ~s practicable a par bid %792 (disregarding any accrued interest) on the Bonds 9n the Variable Rate %793 Adjustment Date, provided that in no event shall the [ariable %794 Interest Rate be in excess of the Maximum Rate. ~nterest on Bonds in %795 the Demand Mode is payable on the first Wednesday of each calendar %796 month. %(796) ~EC~ION 2.07. Det~K~inatig~ of Fix~d,,inte~est Rate. The %799 City shall mail a written notice ~o all owners of Bonds to be con- #800 vetted to ~he Fixed Rate Mode not later than the thirtieth calendar %801 day Bext preceding a Proposed Conversion Date or ~ut~natic Conversion #802,8( Date, as the case may be. Such notice shall specify the ~reliminary %803 Pricing Date, the Proposed Conversion Date or ~utomatic Conversion %803.1 Date, as the case may be, indicate that ~uch Bonds are required to be %804 tendered for purchase to the Tender ~gent on the Proposed Conversion %805 Date or Automatic Conversion Date, as the case may be, at the Tender X%805.~ Price and set forth %he date by which notice of election to retain ~%806 must be submitted to the Tender Agent, which date shall be two %807 Business Days after the ~relimiDmry Pricing Date. ~f such conversion %808,8( is pursuant to Section 2.10(C) hereof, ~uch notice shall be accom- %808.2 panied by a copy of the Favorable Opinion 9f Bond Counsel required by %808.3 Section 2.10(C). ~ny.~pc~ Bond which is not tendered on the Proposed X%809 Conversion Date or the Automatic Conversion Date, as the case may be~ shall be ~eemed purchased and may be cancelled by the Tender Agent. ~%810 In the event that less than all Dg~and BQnds or UBit Pricing BQnds are to be converted to a Fixed Interest Rate on such Proposed Conversiop Da%9 or A~omatic Convgrsion Date, the Trustee sball~ cause to be selected (i) in the event of Demand Bonds,~ the Demand ~%810.~ Bonds to be so converted by lot or (ii) in the case of Unit Pricin~ 94691.3.2771.02:36 -_21- %37.1 # (37.1', Bonds, Unit Pri.cing Bonds to be so converted in order of their ~810.! Purchase Date~, and by lot amonq Bonds with the same Purchase Date. 15810.~ Qn the Preliminary Pricing Date, the Remarketing Agent will $811 make available ~ Preliminary Interest Index and Minimum Fixed $812 Interest Rate. ~ot more than two ~usiness Days following the $813,8] Preliminary Pricing Date, an owner of a Bond to be converted to the $815 Fixed Rate Mode may notify ~he Remarketing Agent by telephone $816 (promptly confirmed by written notice to such Tender Agent) if such $817 Owner wishes to retain such Bond in the F~xed Rate Mode. $(817) Qnl the FiBal Pricing Dater ~he Remarketing Agent will 1S818,~ establish the ~ixed Interest Rate which will be borne by such Bonds $820 after the Conversion mate. A Fixed Interest Rate will be an annual ~$821 rate of interest which in _the sole judgment of the Remarket~g Agent 15822 under then prevailing market ~onditions will allow such Bonds to be 15823 sold at par: provided however, such Bonds may bear a Fixed Interest 1}(823! Rate which results in a sale at less than par so lonq as there is on 1#823.] deposit in the Rem&rk~t~g Cost Account Qn such d~e an amp~t equal ~S823.~ to such discount, ~$(823. ~ECTION 2.08. Alternate Rate for Interest ~alculatio-. $825 In the event (i) the Remarketing Agent fails to determine the $(825) Adjusted ~nterest Rate or the Variable Interest Rate or (ii) the $826 method of determining the Adjusted Interest Rate or the Variable $827 Interest Rate shall be held to be unenforceable b_y a court of law of $828 competent jurisdiction, such Unit Pricing Bonds or Demand Bonds shall #(828) thereupon, ~ntil such time as the Remarketing Agent again makes such 9829 determination or ~ntil there is delivered an opinion of Bond Counsel $830 to the effect that the method 9f determining such rate is enforce- $831 able, bear interest from the last date on which interest was legally $832 paid, at the Alternate Rate for the Al[ernate _Rate Period from time $833 to time in effect. $(833) ~BCTION 2.09. Interest on Bank-O~ned Bonds; Additional 15835 Interest on Bank-0~ne4 B~~!~. Notwithstandinq anythinq to the,con- ~$(835~ trar¥ contained in Section 2.04 hereof, each Bank-Owned B~d shall 15835.1 bear interest on the outstanding ~rincipal amount thereof for each 15836 day from and including the date such Bond is purchased to but not $837 including ~he date such Bond is paid in full at maturity or upon $838 redemption or is remarketed ~t a rate per annum 9qual to the Bank ~#839,~ Interest Rate. 15(840) I~nterest on Bank-Owned Bonds shall be payablel on the 15844,~ first Business Day of each week, and upon payment or redemption of 15846 all or part of a Bank-Owned Bond and on the date of r~marketing 9f $847 such Bank-Owned Bonds. ~nterest shall be calculated based upon a 360 $848 day year and actual days elapsed. ~(848) 94691.3.2771.02:36 -_22- $37.1 $(37.1) ~ECTIOI~I 2.10. C, hanqes in gode. #849 iA) During any Unit Pricing Interest Period, the City may 9852 ~ive written notice at any time to ~he Bank, the ~emarketing Agent 9853,8! and the Tender Agent that it intends to effect ~ conversion of the !#856 interest rate on all of~ the Bonds to a Variable Interest Rate on the 19857,1 Demand ~ate or Dates specified in such written notice, the earliest ~859 of which ~emand Dates shall be Rot less than 30 days fr~n the date of ~859.1 such notice. !Together with such notice, the City shall also ~ile 1~865,1 with the Tender Agent ~ Favorable Opinion of Bond Counsel lwhich #867,8~ opinion nay be based on a ruling or rulings of the Internal ~evenue ~869,8' Service) to the effect that the conversion of ~uch Bonds to ghe #871,8' Variable Interest Rate on such Demand Date or Dates will not #(872) adversely affect ghe validity of the Bonds or the 9xemption of the #873,8° interest on the Bonds ~rom Federal income taxation. ~o change in the ~875,8' Variable Interest Rate shall become effective Rnless the City shall #877 file, ~ith the Tender Agent, such an opinion ~ated the first such ~878,8' Demand Date. ~he Tender Agent shall give notice of such ~onversion 1#880,~ to each Owner of Unit P~icinq Bonds not later than the fifteenth 1#(8811 ~usiness Day preceding the relevant Demand Date ~hich notice shall #882,8~ specify the Demand Date selected by the City and indicate that such ~884 Bonds are required to be tendered to the _Tender Agent on the Demand ~885 Date for mandatory purchase at the ~ender Price. The owner of any ~886 such Bond may retain ownership by giving written notice go the ~887 Remarketing Agent and the Tender Agent by 10:00 a.m. New ~ork time on 9888 or before the date falling seven calendar days prior lot if such day ~889 is not a Business Day, the next preceding ~usiness Day) to the rele- 1#890 vant Demand Date (which notice will be irrevocable) _that it wishes to ~891 retain ownership of all or a portion of such Bonds in denominations #892 which will be Authorized Denominations ~or Demand Bonds. ~ ~#893 ~B) During any Demand Mode. the City may give ~ritten ~898,~ notice at any time to ghe Bank, the R~narketing ~gent and the Tender Agent that it intends to effect a ~onversion of the interest rate on #902 all~ of such Demand Bonds to a Unit Pricing Mode on the Unit ~ricing 1~903,! Date specified in such written notice, which shall be not ~ess than ~905 30 days from the date of such notice. ~ogether with such notice, the 9906 City shall file ~ith the Tender Agent a Favorable Opinion of Bond ~907 Counsel lwhich opinion may be based on a ruling or [ulings of the Internal Revenue Service) to the effect ghat the conversion of the ~910 Bonds go the Adgusted Interest Rate will not adversely ~ffect the ~911,! validity of the Bonds or the 9xemption of interest on the Bonds ~rom ~913,91 Federal income taxation. ~o change to the Unit Pricing Mode shall 19915 become effective ~nless the City shall file, with the ~ender Agent, ~916,! such an opinion dated the Adgusted Interest Date. _The Tender Agent 1~918,! shall give notice 9f such conversion to the owner of such Bonds Rot ~920,91 later ~han the tenth Business Day next preceding the ~nit Pricing ~922,91 Date. _The City may not so convert the interest rate ~nless a Letter #924,91 of Credit will be in effect on ghe date of such conversion. #926 94691.3.2771.02:36 :23- %37.1 #(37.1 lC) The City may give written notice at any time ~o the %928,9] Bank, ~he Remarketing Agent and the Tender Agent ~hat it intends to %930,9~ effect a conversion of the interest fate on all of the Bonds or a %932 portion of the Bonds designated in such notice ~o a Fixed Interest %933 Rate on the Proposed Conversion Date ~pecified in such written %934 notice, which Proposed Conversion Date §hall be not less than 30 days %935 from the date of such notice. IT be Fixed Interes~ Rat~ shall be ~%940 determined as set forth in Section 2.07. The City shall also file ~%941,! with the Tender Agent a Favorable Opinion of Bond Counsel lwhich %947,9, opinion may be based on a ruling or rulings of the ~nternal Revenue %949 Service) to the effect that the conversion of ~uch Bonds to the Fixed %950 Interest Rate ~ill not adversely affect the validity of the Bonds 9r $951,9! the exemption of the interest on the Bonds from ~ederal income $953 taxation. No such conversion to the Fixed ~nterest Rate shall become %954 effective unless the City shall ~ile, with the Tender Agent, such an $955 opinion dated the Proposed Conversion Date. %956 iD) Upon receipt by the Trustee of Landowner Election $958 Notices [the interest rate on the principal amount of BQnds equal to [%961 the amount Q£ Assessments set forth as item (2) in such Landowner ~%962,] Election Notice shall automatically ~onvert to a Fixed Interest Rate ~%963 on the Automatic Conversion Date ~pecified in such notice, which $963.1 Automatic Conversion Date shall Bot be less than 30 days from the $963.2 date of such notice. The Fixed Interest Rate shall be determined and ~t963.~ such conversion shall Occur as set forth in Section 2.07. Z$963., ~ECTION 2.11. F~rm of .~O~]S. The Bonds and the assignment $968 to appear thereon shall each be in substantially the forms respec- $969 tively set forth in Exhibit A ~ttached hereto and incorporated $970 herein, with appropriate or necessary insertions, omissions and vari- %971 ations as permitted or required hereby; ~rovided, however, if use of $972 a book entry form of Bonds becomes feasible in the opinion of the $973 City, Trustee, Paying Agent, Bank and the Eemarketing Agent, then the %974 appropriate Sections herein shall be deemed to permit the use of a $975 book entry form of Bond without ~urther amendment of this Indenture. %976 ~ECTION 2.12. Execution and Authentication of Bonds. The $978 Bonds shall be signed by facsimile signature by the Treasurer of the 15979,] City ~nd the City Clerk, and the City Clerk shall also affix by fac- ~$980 simile ~he corporate seal of the City to the Bonds. _The Bonds shall $981,91 be authenticated by the Paying Agent by the manual signature 9f an $983 authorized officer of the Paying Agent. $(983) ~ECTION 2.13. Tzansfez and Exchange of Boris. All Bonds %985 are transferable or exchangeable by the Owner thereof, in person or $986 by the Owner's attorney duly authorized in writing, at the office 9f $987 the Paying Agent in the books required to be kept by the Paying Agent $(987) ~ursuant to the provisions of Section 2.14 hereof, upon surrender of $988 such Bonds ~ccompanied by delivery of a duly executed written $989 94691.3.2771.02=36 =24- $37.1 $(37.1 instrument of transfer 9r exchange in a form approved by the Paying #990 Agent. Whenever any Bond or ~onds shall be surrendered for transfer %991 or exchange, the Paying Agent ~hall execute and deliver a new Bond or #992 Bonds 9f Authorized Denominations of the same aggregate principal %993 amount, 9xcept that the Paying Agent may require the payment by any #994 Owner requesting such transfer or exchange of any tax or other gov- #995 ernmental _charge required to be paid with respect to such transfer or ~996 exchange. All Bonds surrendered pursuant to the provisions of this %997 Section 2.14 ~hall be cancelled by the Paying Agent and shall not be %998 redelivered. All Bonds issued in exchange for Bonds shall be in the %999 game mode as the Bonds in exchange for which such Bonds were issued. %1000 The Paying Agent shall not be required to transfer or %1001 exchange §ny Bond selected for redemption in whole or in part from %1002 and after ~he date of mailing the notice of redemption of such Bond %1003 or ~ortion thereof. %1004 ~EC~ION 2.14. Reqistzation BOoks. The Paying Agent will #1006 keep at its office sufficient books for ~he registration of the %1007 ownership, transfer or exchange of the Bonds, ~hich books shall be %1008 available for inspection by ~he City and ~he Trustee ~t reasonable #1009,~ hours and under reasonable conditions; ~nd upon presentation for such %1012 purpose the Paying Agent shall, ~nder such reasonable regulations as %1013 it may prescribe, ~egister the ownership, transfer or exchange of the %1014 Bonds in such books as hereinabove provided. ~he ownership of any %1015,~ Bonds may be proved by the books required Lo be kept by the Paying %1017 Agent pursuant to the provisions of Section 2.14 hereof. ~(1017] ~ECTION 2.15. Tomporarv BOnC~. The Bonds may be initially ~1019 delivered in temporary form exchangeable ~or definitive Bonds when #1020 ready for delivery, which temporary Bonds shall be printed, litho- %1021 graphed or typewritten, shall be of such denominations ~s may be %1022 determined by the Trustee, shall be in fully registered form ~nd #1023 shall contain such reference to any of the provisions hereof as may ~(10231 be appropriate. ~very temporary Bond shall be authenticated and #1024,[ delivered by the Paying Agent ~pon the same conditions and terms and #1026 in substantially the same manner ~s definitive Bonds. ~f the Paying %1027,[ Agent authenticates and delivers temporary Bonds, %he Paying Agent %1029 will prepare and authenticate definitive Bonds without delay, ~nd in %1030 that case upon demand of the Owner of any temporary Bonds ~uch de_fin- %1031 itive Bonds shall be exchanged without cost to such Owner ~or tempo- %1032 rary Bonds at the office of the Paying Agent upon surrender 9f such %1033 temporary Bonds, and until so exchanged such temporary Bonds ~hall be %1034 entitled to the same benefit, protection and security hereunder ~s %1035 the definitive Bonds executed and delivered hereunder. Ail temporary %(10351 Bonds ~urrendered pursuant to the provisions of this Section 2.15 %1036 shall be cancelled bY the Paying Agent and shall not be redelivered. %1037 94691.3.2771.02:36 -25- ~37.1 9 (37.1'. SECTION 2.16. Bonds Mutilated, Destzoved, Lost or Stolen. $1039 If any Bond shall become mutilated, the Paying Agent shall authenti- $ (1039'. cate and deliver a new Bond of like tenor and number in lieu of the $1040 mutilated Bond, but only upon surrender to the Paying Agent of the $1041 mutilated Bond, and every mutilated Bond surrendered to the Paying $1042 Agent shall be cancelled ~y it and shall not be redelivered. _If any $1043,1 Bond shall be destroyed, lost or stolen, evidence of such destruc- $(1044 tion, loss or theft may be submitted to the Paying Agent, and if such $1045 evidence is _satisfactory to the Paying Agent, the Paying Agent shall $1046 authenticate and deliver a new Bond of like tenor and number in sub- #1047 stitution for the destroyed, lost or stolen Bond. The Paying Agent $1048 may require payment of a sum not exceeding the actual cost of prepar- $1049 lng each new Bond authenticated and delivered by it under this $1050 Section 2.16 and of the expenses w_hich may be incurred by it under $1051 this Section 2.16. Any replacement Bond authenticated and delivered $1052 under the provisions of this Section 2.16 hereof in lieu of or in $1053 substitution for any mutilated, destroyed, lost or stolen Bond ~hall $1054 be equally and proportionately entitled to the benefit, protection $(1054 and security hereof with all other Bonds executed and delivered here- $1055 under; and the Paying Agent shall not be required to treat both the $1056 original Bond and any replacement Bond as being Outstanding for the $1057 purpose of determining the principal amount of Bonds which may be $1058 authenticated and delivered hereunder or for the purpose of determin- $1059 ing any Percentage of Bonds Outstanding hereunder, but both the orig- $1060 inal and the replacement Bond shall be treated as one and the same. $1061 Notwithstanding any other provision of this Section 2.16, rather than $1062, authenticating and delivering a new Bond for a mutilated, destroyed, $1064 lost or stolen Bond which has been called for redemption, the Paying $1065 Agent may make payment of the principal of such mutilated, destroyed, $1066- lost or stolen Bond directly to the Owner thereof under such regula- $1067 tions as the Paying Agent m_ay prescribe. $1068 ~RTI(~E III REDEMPTI(21 OF B(l~S SECTION 3.01. ~andatogy Redemptior~. ia) Prior to conversion to a Fixed Interest Rate, ~ Bond is subject to redemption on any Interest Payment Date ~pon notice as hereinafter provided, as a whole, or in part in ~uthorized Denominations from moneys ,transferred from the Construction Fund ~o the Redemption Fund pursuant to Section 5.07 hereof, ~rom ~oneys derived from foreclosures under Section 7.02 hereof'or from prepaid Assessment Installments, ~nder the circumstances and upon the condi- tions and terms prescribed herein at a redemption price equal to the sum of the principal amount ~ the Bonds redeemed plus accrugd #1069 (1069 91070 15107~ 151076 $1077 151078 151079 $(1080 $1081 lt108~ 94691.3.2771.02:36 -26- $37.1 S (37.1 interest thereon to the date fixed for redemption p%us the redemption !%(108 premium, if any, set forth below: I#1082 1~1082 Period (Both Dates Inclusive. l) Premium (Expressed as a Percentaqe of Principal A~unt) 1{1082 1#1082 !{1082 1{1082 94691.3.2771.02:36 "-27- #37.1 %(37.1 lb) After conversion to a Fixed Interest Rate, a Bond is subject to redemption in whole or in part on any Interest Payment Date, upon notice as hereinafter provided, in an integral multiple of $5,000, from moneys transferred from the Construction Fund to the Redemption Fund pursuant to Section 5.Q/ hereof, from moneys derived from foreclosures under Section 7.02 hereof or from prepaid Assessment Installments, under the circumstances and upon the condi- tions and terms prescribed herein at a redemption price _equal to the sum of the principal amount of the Bonds redeemed,., plus accr. ued iDter- est thereon to the date fixed for redemption plus the redemption p~e- mium. if any, set forth below: 1#1085. 1#1087 %1088 1#1089 !#1091 % (1092 %1093 1%1094 1#1095 191096 1#(1091 Period (Both Dates Inclus.i~9~ Premium (Expressed as a Pgrcentaqe of Principal Amount) 191097 1%1100 1%1101 1#1102 ~%1103 94691.3.2771.02:36 -28- %37.1 % (37.1 !c) The Bonds are subject to mandatory redemption on %1108 and each Principal Payment ~ate thereafter, upon notice as %1109 hereinafter provided, in part in an integral multiple of the then %1110 minimum Authorized Denomination 9f the Bonds, from Assessment 1%1111 Installments[ Land upon the conditions and terms prescribed herein, !%1112 ~t a redemption price equal to the sum of the principal amount of the %1113 Bonds ~alled plus accrued interest thereon to the date fixed for %1114 redemption, ~nd in the years and principal amounts as follows: %1115 principal %1119 ~ear Amount #1120,~ ~n the event of conversions of all or a portion of the %1125 Bonds to a Fixed Interest ~ate pursuant to Section 2.10 hereof, the %1126 Finance Director of the ~ity is hereby directed to establish a sepa- %1127 rate schedule 9f redemptions for the Bonds bearing a Fixed Interest #1128 Rate commencing 9n the I followin~ such ConversiQp Datel 1%1129 which, as nearly as practicable, will result in 6ssessment 1%1130 Installments with respect to such ~onds bpinq equal in amount for 1%1131 each 9f the years following such Conversion Date(s), after crediting 1%1132 a pro rata portion of moneys Qn deposit in the Intere~ Reserv~ Fund 1%1133 pursuant to Section 5.08 and the moneys withdrawn from the Variable 1%1134 Rate Reserve Fund, as ~rovided in Section 5.04(ii). 1%1134 ~n the event of redemption of ~onds pursuant to subsections 1%1135 (a) or (b) hereof or purchase 9f Bonds from moneys derived from pre- %1137 paid Assessments lother than prepayments and redemptions associated %1138 with a ~onversion of less than all Outstanding Bonds to a Fixed %1139 ~nterest Rate), the Construction Fund or the proceeds of ~oreclosure, %1140,~ as the case may be, in the twelve months ~receding each of the above %1142 Principal Payment Dates (not including the immediately preceding %1143 Principal Payment Date), ~he Finance Director of the City is hereby %1144 directed to annually ~djust the amounts set forth above by deducting %1145 from that year's ~rincipal _amount the amount of Bonds which would 1%1146 have otherwise been redeemed had such redemptions or ~urchases not %1147,~ taken place, as adjusted: (i) to deduct any ~ortion of such prepaid %1149 Assessment which is credited ~oward the principal due on the next %1150 Principal Payment ~ate as provided in Section 5.04(C); and (ii) to 1%1151 round ~he amount due in any year to the nearest lowest integral 1%1152 ~ultiple of the minimum Authorized Denomination of the Bonds then ~ permitted. 1%(115. 94691.3.2771.02~36 :29- %37.1 %(37.1: id) In the event of redemption of Bonds pursuant to $1156 paragraphs (a) or (b) of this Section 3.01 or purchase of BQnds pur- ~#1157 suant to Section 5.07 hereof f~om moneys..~erived from prepaid ~$1158 Assessments, the Construction Fund or the proceeds of foreclosure $(1158] ~nder Section 7.02 hereof, as the case may be, ~he Finance Director $1159,~ of the City is hereby directed to annually adjust ~he amounts set $1161 forth above by deducting therefrom the amount of Bonds ~hich would $1162 have otherwise been redeemed had such redemptions or purchases not $1163 taken place, go as to maintain the same proportional relationship $1164 between ~he amount of Outstanding Bonds redeemed pursuant hereto ~nd #1165,~ the amount of unpaid Assessments, as adjusted: ii) to deduct any $1167 portion of such prepaid Assessment which is credited ~oward the prin- $1168 cipal due on the next Principal Payment Date as provided in $1169 Section 5.04(c) hereof; and iii) to round the amount due in any year $1170 to an integral multiple 9f the then minimum Authorized Denomination $1171 of the Bonds. _The Finance Director of the City shall promptly notify $1172 the ~aying Agent and Trustee of all such adjustments. In ~aking the $1173,Z foregoing adjustments for such redemptions, ~he Finance Director of $1175 the City shall adjust the amounts of ~onds to be redeemed in accor- #1176 dance with the ~bove provisions only with respect to amounts attrib- $1177 utable to [edemptions of such Bonds, if less than ~11 of the #1178,~ Outstanding Bonds have been converted to the Fixed ~nterest Mode. $1180 ~ECTION 3.02. Optional Redemption of Unit Pricinq Bo~ds. $1183 The Bonds in the Unit Pricing Mode ~re subject to optional redemption $1184 bY the City, in whole or in part, on any Business Day, at a redemp- $1185 tion price equal to 100% 9f the principal amount thereof being ~#1186 redeemed plus accrued interest to the redemption datek[ provided how- [$1186. ever, that such redemption ma¥.Qnl¥ be effected in connection with [#1187 the payment of such Bonds pursuant to S~tion 10.01(c). hereof. ~$1188 ~f such redemption is in part, Bank-Owned Bonds shall be redeemed $1199 first, and thereafter Bonds shall be redeemed in the order of their ~$1200 Purchase Dates&[ ~nd by lot among those Bonds with the same[ ~urchase ~#1204~ Date~ ~The amount of Bonds to be ~edeemed shall, if required, be ~$1206 adjusted downward to the extent necessary ~o result in Bonds being $1207 redeemed only in Authorized Denominations. $(1207] ~ECTION 3.03. O~tional Redemption of Bonds,~ th~ Demand #1209 ~__~. Demand Bonds are subject to optional redemption by the City, $(1209] in whole or in part from ~ime to time, on any Variable Rate $1210 Adjustment Date, at a redemption price equal to 100% 9f the principal $1211 amount thereof being redeemed plus accrued interest to such redemp- $(1211] tion date, ~ithout premium; provided however that such redemption may ~$1212 only ~e effected in connection with the Payment of such Bonds pursu- ~ ant to Section 10.01(c) hereof. If such redemption is in part, ~$(121: Bank-Owned Bonds shall be redeemed first, and all Qther Bonds shall ~$1213 be redeemed by lot in such manner as shall be determined by the $(1213) City. ~ny such redemption shall be in Authorized Denominations. $1214 94691.3.2771.02:36 "30- $37.1 $(37.1] ~BCTION 3.04. Qptional Redemption of Bonds in the Fixed S1216 Rate Mode. The Bonds in the Fixed Rate Mode are subject to redemp- $(1216 tion ~y the City in the minimum principal amount of $5,000, in whole $1217,1 on any date or in part on any ~nterest Payment Date, commencing on $1219 the date as set forth below at the following redemption prices $1220 (expressed as percentages of the-principal amount of Bonds called for $1221 redemption), plus accrued interest to the ~ate fixed ~or redemption: $1222 Conversion Date ~nitial RedemptiQB Date $1225 RedemptiQ~ Date Notwithstanding any of the foreqoinq, Bank-Owned BQnds shall be 151231 selected for redemption by the Trustee prior to selectinq any other 15~23] Bonds. 15(123[ ~ECTION 3.05. Selection of Bonds foz Red~.~q~ion, Except 151234 as otherwise p~ovided i~ Sections 3,02 and 3.04, whenever less than 151234 all the Outstanding Bonds are to be redeemed 9n any one date, the 151235 Trustee shall select the Bonds to be redeemed in whole or in part $1236 from the Outstanding Bonds by lot in any manner ~hat the Trustee #1237 deems fair; provided however, that if Bonds are to be redeemed from $(1237] ~repaid Assessments, the Trustee shall select for redemption Bonds $1237.2 bearing interest in the same mode ~s such Assessment. The Trustee $1237.~ shall promptly notify ~he Bank, ~he City and the Paying Agent in $1238,] writing of the numbers of the Bonds so selected for redemption ~n $1241 whole or in part on such date; provided, however, ~hat if on the $1242 Record Date for the redemption, the Bank is ~he Owner of any of the $1243 Bonds, such Bonds shall be selected for redemption ~y the Trustee #1244 ~rior to selecting any other Bonds. $1245 ~E~TION 3.06. Notice of Redemption. Notice of redemption $1247 shall be given by mail by the Trustee ~o the Remarketing Agent, the $1248 Paying Agent and to the Owners 9f any Bonds designated for redemption $1249 in whole or in part prior to ~he redemption date. ~ach notice of $1250,] redemption shall state the redemption date, the redemption Dlace and ~1252 the redemption price, shall designate the numbers 9f the Bonds to be $1253 redeemed if less than all the Bonds Outstanding are to be [edeemed, $1254 ~hall (in the case of any Bond called ~or redemption in part only) $1255,] state the portion of the principal amount ~hereof which is to be $1257 redeemed, and shall state that the interest thereon 9r portions $1258 thereof designated for redemption shall cease to accrue from and $1259 after such redemption date and that on such redemption da~e ~here $1260 will become due and payable on each of the Bonds or portions thereof $(1260) 94691.3.2771.02:36 :31- $37.1 $ (37.1) designated for redemption the redemption price thereon. The failure of any Owner to receive such notice will not affect the ~alidity of $1263 the redemption of any Bonds. %(12631 The Trustee shall give notice of redemption of any Bonds to %1264 be redeemed immediately upon receipt of notice fr~n the City (which %1265,~ notice shall be given to the Trustee ~t l~ast thirty (30) days prior %1267 to the date fixed for redemption; provided however that notice of %1268 redemption from moneys derived from ~repai~ Assessments shall be %1269 given at least sixty (60) days prior ~o the date fixed for %1270 redemption). %(12701 ~ECTION 3.07. Partial Redemption of B~_.-~-. Upon surren- $1272 der of any Bond redeemed in part only, the Paying Agent shall authen- %1273 ticate and deliver to the Owner thereof a new Bond or-Bonds [epre- %1274 senting the unredeemed principal amount of the Bond so surrendered. %(1274] ~ECTION 3.08. Effect of Red~m. ption. If notice of redemp- %1276 tion has been duly given as aforesaid and money ~or the payment of %1277 the redemption price of the Bonds or portions thereof ~o be redeemed #1278 is held by the Paying Agent, then on the redemption date designated %1279 in such notice the Bonds or portions thereof so called for [edemption %1280 shall become payable at the redemption price as specified in such %1281 notice; and from and after the date so designated interest thereon or %1282 portions thereof so called for redemption shall cease to accrue, ~uch %1283 Bonds or portions thereof shall cease to be entitled to any benefit, %(1283] ~rotection or security hereunder and the Owners of such Bonds or ~or- %1284,] tions thereof shall have no rights in respect thereof except to %(1285] [eceive payment of the redemption price. ~otwithstanding the forego- %1286,] ing, any Bonds held by the Bank ~ursuant to the Reimbursement %1288 Agreement by reason of unreimbursed drawings ~nder the Letter of %1289 Credit shall remain Outstanding ~ntil the Bank is paid all amounts 91290 due under such Bonds 9r the Reimbursement Agreement. The Paying %1291 Agent shall, upon surrender for redemption of any of the Bonds or %1292 portions thereof t~ be [edeemed on their redemption dates, pay such %1293 Bonds or portions thereof ~t the redemption price. #1294 ~11 Bonds redeemed pursuant to the provisions of this %1295 Article III 9r purchased pursuant to Section 5.05 hereof shall be %1296 cancelled bY the Paying Agent and shall not be redelivered, ~nless %1297,] such Bonds are paid by unreimbursed drawings under the Letter of %(1298) Credit, in which case the Paying Agent shall register and deliver %1299 such Bonds ~s shall be directed by the Bank. ~fter payment to the %1300,] Bank of all amounts due by reason of such ~nreimbursed drawings, the %1302 Bank shall surrender such bonds ~o the Paying Agent for %1303 cancellation. %(1303) 94691.3.2771.02:36 -32- %37.1 (37.1) ~%RTX CLK IV %1304 PURCHASE OF B(3~3~ $(1304) ~ECTION 4.01. Optional Tender of unit Pricinq Bonds. (A) %1306 The registered owner of any Unit Pricing Bond ~ay demand that such %1307 Bond, or any portion thereof in a principal amount equal to an %(1307) Authorized Denomination (so long as the principal amount not pur- %1308 ~hased is an Authorized Denomination), be ~urchased in accordance $1309,1 with th~ terms of Section 4.04 hereof on any Purchase Date ~t a price %1311 equal to the principal amount thereof bY (a) giving 2n Election %1312,] Notice and (b) delivering such Bond duly endorsed in blank for trans- %1314,] fer at [he ~rincipal corporate trust office of the Tender Agent at or $(1316) ~rior to 12:30 P.M., New York City Time, on such Purchase Date. Such %1317 notice may be ~iven by delivering to the Tender Agent 2n Election %1318,] Notice on any Business Day but no later than ~0:00 A.M. on the $1320 Purchase Date or such notice may be given by ~elephone to the 1%1321 Remarketing Agent and the Tender Aqent on any Business Day but no 1%(132] later than 10:00 A.M. on the Purchase Date. Any such notice given by 1%1322 telephone shall be confirmed with _an Election Notice delivered to the %1323 Tender Agent with the ~ond on the Purchase Date. Any Unit Pricing %1324,] Bond, or portion thereof, for which a ~emand for purchase has been %1326 made in accordance with this Section 4.01 _shall be purchased with the %1327 funds described in Section 4.04. %(13271 ~ECTION 4.02. OD%lo"al Tender Qf Bon4s in the De~an~ ~ode. %1329 The registered owner of a Demand Bond shall, upon proper ~elivery of %1330 a Tender Notice and upon delivery of the Bond to the Tender Agent by 91331 12:30 P.M. on the Optional Tender Date, have the right ~o have such %1332 Bond purchased on such Optional Tender Date, at a purchase ~rice of S1333 100% of the principal amount thereof ~lus accrued interest, if any, %1334 to the date of purchase. ~uch Bonds will be subject to purchase only %1335 if delivered to the Tender Agent in conformance in all respects with %1336 the description thereof in the Tender Notice, ~nd if delivery %1337 (together with necessary endorsements) is made to the Tender Agent ~t %1338 or prior to 3:00 p.m., New York City time, on the Optional Tender %(13381 Date ~pecified in such Tender Notice. The right of any owner to have %1339 Bonds ~urchased pursuant to Section 4.02 shall terminate on the con- %1340 version of the ~onds to the Unit Pricing Node or on the Conversion %1341 Date. %(1341 The delivery of a Tender Notice to the Tender Agent and the %1342 Remarketing Agent is irrevocable and binding on the Owner and cannot %1343 be withdrawn. AnY Bond with respect to which a Tender Notice is %1344 given but which is not tendered on the Optional Tender Date stated in %(1344 such Tender Notice ~hall be deemed purchased and interest thereon %1345 shall cease to accrue. A n~w Bond shall be issued to the purchaser 1%1346 thereof~ The owner of such a Bond shall be entitled solely to ~%1347 ~ayment of the Tender Price for such Bond. An owner of a Bond who %1348, :33- $37.1 94691.3.2771.02:36 % (37.1 gives a Tender Notice with respect to ~uch Bond may repurchase such %1350 Bond if the Remarketing Agent agrees to sell any such Bond so %(1350) tendered back to such owner. ~n such event, the delivery requirement %1351 described above shall be waived. %(1351) ~ECTION 4.03. Mandatory Purchase of Bonds. Unit Pricing %1353 Bonds and Demand Bonds are subject to mandatory tender and purchase %(1353) 9n any Mandatory Tender Date ~t the Tender Price. %1354,1 The Tender Agent shall provide written notice ~o all Owners %1357,1 that Unit Pricing Bonds and Demand Bonds will be subject to mandatory %1359 Tender for purchase on the applicable Mandatory Tender Date, (i) in ~%1360, the event of al conversion to the Fixed Rate Mode not later than the ~%(1361 thirtieth calendar day next preceding the Proposed Conversion Date or ~%1362 the AutomaTic Conversion Date, as the case may be;iii) in the event %1363 of a change from the Unit Pricing Mode to the Demand ~ode, not later %1364,1 tha~ the thirtieth calendar day next preceding the Demand Date; %1366 (iii) in the event of a change from the Demand Mode ~o the Unit %1367,1 ~ricing Mode, not later than the seventh Business Day Bext preceding %1369 the Unit Pricing Date; (iv) in the event of the Expiration Date or ~%1370 the Termination Date, not.later than the 30th day next preceding the ~%1371 Expiration D~te or the Termination Date as the case may be; ~nd ~%1372 (v) in the event of a Substitution Date, not later than the fifth %(1372) Business Day next preceding the Substitution ~ate. %1373,] ~n the case of a cban~e from a[ ~emand Mode to a Unit ~#1375, Pricing M~de or from a Upit Pricing MOde to a Demand Mode such notice ~%(137( must state that the Owner may elect to retain ~uch Bond ~y giving %1377,] ~ritten Botice of such election to the Remarketing Agent Bo later %1380,] than the fifth Business Day preceding such Mandatory Tender Date. %1382 ~pon the filing of such notice such Bond ~hall not be subject to %1383,] optional tender pursuant to ~ection 4.01 or 4.02 hereof on or prior %1385 to the ~emand Date or the Unit Pricing Date, as the case may be. In ~%1386.~ the case of a conv~.rsion to a Fixed Interest Rate~ ~uch notice shall ~%1386~ conform, to the requirements Qf Section 2.07 hereQf. ~%(138( [Qn any Mandatory Tender Date, unless the Owner thereof has ~%1387 elected to retain ownership of a Unit Pricing Bond or Demand Bond, %(1388] such Bond will be ~eemed to have been purchased, whether or Rot actu- %1389,2 ally delivered for purchase. ~nterest on such Bond will cease to %1391 accrue and ~uch ~ond shall no longer be entitled to the security pro- %1392,~ vided by this Indenture. The Owner of such BQnd shall be entitled ~%1395 only to receive the Tender Price, together with interest ~ccrued to ~%1396 such Mandatory Tender Date and ~olely from the funds deposited pursu- %1398 ant to ~his Indenture for such purpose. #1399 94691.3.2771.02:36 -34- %37.1 %(37.1 ~ECTION 4.04. Tender and Purchase of Bonds. (A) Promptly #1401 upon its receipt of any Optional Tender Notice, the Tender Agent %(1401) shall give telephonic notice to the Remarketing Agent of its ~eceipt #1402,1 ~f such Optional Tender Notice, confirmed in writing, which written #(1403) Gonfirmation shall contain a copy of such Tender Notice. %1404 ~onds subject to purchase pursuant to Section 4.01, %1405 Section 4.02 or Section 4.03 shall be purchased ~rom the owners %1406,1 Thereof on any Optional Tender Date or any Mandatory Tender Date, as %1408 the case may be, at the Tender Price which shall be payable solely %1409 from the following sources in the order listed: %(1409) il) Proceeds of the remarketing of Bonds pursu- %1411 ant to the Eemarketing Agreement; #1412 12) Amounts received from the Bank pursuant to the Letter of Credit; and %1414,1 %(1415) 13) Other funds provided by the City lawfully available therefor. %1417 %(1417) lB) At or prior to 12:30 ~.M. New York time, on each %1419,] Optional Tender Date and each Mandatory ~ender Date, the Remarketing [%1421 Agent (1) will cause to be delivered to the ~ in immedi- ~%1422 ately available funds the proceeds of the remarketing, 12) will %1423 deliver to the Tender Agent instructions for delivery and registra- %1424 tion of the Bonds remarketed ~hereof in accordance with paragraph %1425,] (C) b~low, and (3) will give Rotice to the ~1~9~_~, specifying[ ~%1427 ~he aggregate principal amount 9f[ ~onds ~ot remarketed and which ~%1431~ must be purchased by the Bank on such date. if any. lIf such notice ~%1433, from the Remarketing Agent indicates ~hat Bonds are required to be ~%1437 purchased by the Bank, ~he Tender Agent shall give immediate Rotice %1438,] to the Bank and the City at or prior to 1:00 P.M. New York time on #(1439] such Optional Tender Date or Mandatory Tender Date ~pecifying the %1440,~ information set forth in !the preceding sentence. The aggregate ~%1442 ~mount of Bonds specified in such direction to be Rurchased by the %1443,2 Bank shall not be reduced. %(14441 lC) On each Optional Tender Date and Mandatory Tender %1446 Date, all ~onds which (i) have been remarketed shall be delivered ~nd %1447,1 registered as directed by ~he Remarketing Agent or iii) are required %1449,1 to be purchased by the Bank ~hall i~ediately register in the Bame of %1451,1 the Bank. ~he Tender Agent shall ~eliver all such Bank-Owned Bonds %1453,1 in accordance with the instructions 9f the Bank. %1455 iD) The Tender Agent shall take any action reasonably %1457 ~equested by the Remarketing Agent to facilitate the remarketing of %1458 Bonds lincluding without limitation Bank-Owned Bonds) on Optional %1459 Tender Dates and on Mandatory Tender Dates. %1460 94691.3.2771.02:36 -35- %37.1 % (37.1 IE) The Tender Agent shall pay the Tender Price for each #1462 ~ond at or prior to 4:00 P.M. New York time on the Optional ~ender #1463,1 Date or Mandatory Tender Date, as the case may be, only after receipt #(1464) of §uch Bond, properly endorsed either in blank 9r to the Tender #1465,1 Agent. Payment of the Tender Price 9f any Bond tendered for purchase #1467 shall be made in immediately ~vailable funds or in such manner as #1468 such Owner and the Tender Agent ~hall agree. #1469 IF) Notwithstandinq any prgvision contained in this 1#1471 Article IV, all Bank-Owned Bonds shall be deemed tendered to the 1#(1471 Remarketinq Aqent on each Busine~ Day without the need for any 1#1472 notice of tender or delivery of .~uch Bonds. The Remarketing Aaent ~%1473~ shall remarker such Bank-Qwned Bonds in accordance with .the Indenture [#1475 and the RemarketingAq~eement provided however that the Bank shall be |#1475, deemed to repurchase such Bonds without any further payment therefor 1#(1475 i__f such Bonds are not remarketed, all in accordance wit~ ~ ~#1475, her_~ 1#(1475 ~ECTION 4.05. Ma,2datorv Purchase Upon Expiration or #1477 Termination of ~etter of Credit. #(1477) iA) On the 180th day prior to the Expiration ~ate, the #1479,] Trustee shall give written notice to the City, the Eemarketing Agent #1479.~ and the Bank that the Letter of Credit 9xpires on the Expiration #1479.2 Date. Unless the term of the Letter of Credit shall have been #(1479. extended or there shall have been delivered an Alternate Letter of #1480 Credit in-substitution therefor as provided in Section 4.06 hereof 9r 1#1481, unless ~n or before five days prior to t~ae ExDiration_P_~J ~11 Bonds 1#1483 shall have been converted to the Fixed Interest Rate ~s provided in #1484 Section 2.10 hereof, ~ll_~L~L~ Bonds or Demand Bonds shall be 1#1485 purchased by the ~ender Agent on ~he fifth Business Day prior to the 1#1486, Expiration Date, ~t a purchase price equal to one hundred Ret cent #1488,] (100%) of the principal amount of the Bonds. J(1489] lB) Unless there shall have been delivered an Alternate #1491 Letter of C~edit as provided in Section 4,06 hereof or unless on or 1#149~. before five days prior to a Term#Dm#ion Date ~11 Bonds have been con- ~#1493 vetted to the ~ixed Interest Rate as provided in Section 2.10 hereof, ~1494 all Unit Pricinq Bonds or Demand B~nds shall be purchased by the ~#1495 ~ender Agent on such Termination Date at a purchase price 9qual to J1496,~ one hundred percent (100%) of the principal _amount of the Bonds. #1498 lC) Notice of purchase of such Bonds pursuant to this ~1500 Section 4.05 shall be ~iven by the Trustee by mail to all Owners of 1#150%. Demand Bonds or Unit Pricina Bonds at least thirty (30) days prior to ~J(150 the Expiration Date or Termination Date. ~uch notice shall 1~1502 ii) specify the Expiration Date or Termination Date, iii) specify, if #1504,1 applicable, the last times and dates prior to ~uch expiration on #1507 which such Bonds must be delivered, or on which notice ~ust be given, #1508 94691.3.2771.02:36 -_36- #37.1 # (37.1 for the purchase of such Bonds pursuant to the Owner's 9ption under $1509 Sections 4.01 and 4.02 hereof, !iii) state that after the fifth $1510 Business Day prior to the Expiration Date or after the Termination $(1510) Date such Bonds will Bo longer be purchased at the option of the $1511 Owner, and /iv) state that such Bonds shall be subject to purchase by $1512 the Tender Agent ~t the principal amount thereof on the date speci- $1513 fled in such notice land where the Bonds shall be tendered). 611 $1514,1 such Bonds purchased with a drawing on the Letter of Credit ~hall be $1517 deemed purchased by the Trustee on behalf of the Bank 9n such date, 151518 and from and after[ ~uch date the interest on such Bonds so purchased ~$1519 ~hall accrue solely for the benefit of the Bank and its assigns ~s $1520,1 owner of such Bonds. Qn the fifth Business Day prior to the $1522 ExpiratioB D~te or on th~ Termination Date, as the case may.be, the 151522. Trustee shall draw on the Letter of Credit, in accordance with the ~$1523 terms thereof, ~n amount equal to the unpaid principal of all $1524 Outstanding Bonds lother than Bonds held by the Bank). [ 151525 ~f subsequent to the commencement of the giving of such $1530 notice, ~he term of the Letter of Credit shall have been extended or $1531 there ~hall have been delivered an Alternate Letter of Credit in ~ub- $1532,1 stitution therefor as provided in Section 4.06 hereof, then the $(1533) Trustee ~hall discontinue giving the aforementioned notice and shall $1534 give Botice by mail to all Owners of such extension of the term of $1535 ~he Letter of Credit or the delivery of an Alternate Letter of $1536 Credit, ~hich notice shall specify ii) that the giving of notice of $1537,1 the expiration of the term of or termination of the ~etter of Credit $1539 has been commenced, iii) that subsequent to the commencement of the $1540 giving of such notice ~he term of the Letter of Credit has been $1541 extended or that an ~lternate Letter of Credit has been delivered to $1542 the Trustee in accordance ~ith this Indenture, liii) the rating of $1543,1 the Bonds by Moody's or S&P by reason of such 9xtension or delivery, $1545 !iv) the date that the term of the Letter of Credit or Alternate $1546 ~etter of Credit will expire; and iv) that the prior notice of put- $1547,1 chase and any proposed conversion to a ~ixed Interest Rate are %1549 cancelled. ~uch notice of the term of the Letter of Credit has been $1550 extended or ~hat an Alternate Letter of Credit has been delivered $1551 shall be liven not more than five (5) days following such extension $1552 or delivery. $(1552) SECTION 4.06. ~etter. ~ Credit: Alternate Letter ~f Credit. $1553 iA) On the first Business Day of each calendar month _the $1555,1 Trustee shall by draw on the Letter of Credit in $1557 accordance with the terms thereof so as to receive thereunder by $(1557) 9n such date an amount _equal to ii) the amount of money $1558,1 withdrawn from the Interest Reserve Fund to pay interest on Unit ~$1561 pricin~ Bonds a~ Demand Bonds 0u~nq such calendar month and 15(156] iii) the amount of interest accrued on the Unit Pricing Bonds and the $1562 ~emand Bonds during such calendar month but not due ~nd payable on $1562.1 94691.3.2771.02:36 -37- $37.1 $(37.1) the Unit Pricing Bonds and Demand Bonds. ~uch money shall be #1564 deposited in the Interest Reserve Fund. %(1564) !B) (i) Qn each Principal Payment Date and each date Unit |%1566 Pricinq BQnds or Dejnand Bonds are redeemed pursuant to Sections 3.01, ~%1566. 7.02 and 3.03..hereof the Trustee shall by draw on the ~ Letter of Credit in accordance ~ith the terms thereof so as to %1568 receive thereunder by on such date an amount sufficient to %1569 enable the Trustee to pay principal then payable on the Unit Pricing %1570 Bonds and Demand Bonds, whether at maturity or [edemption thereof %1571 (except any payment of principal on Bonds from the 9riginal proceeds %1572 of the Bonds as provided herein). %(1572] lC) On any Business Day, the Trustee shall by draw ~%1574 on the Letter of Credit in accordance with the terms thereof so as to ~%1575 ~eceive thereunder by __ on such date an amount equal to the _amount %1576,1 certified by the Remarketing Agent pursuant to Section 4.04(B)(3) ~%1578 hereof to pay the Tender P~ice of UNit Price Bonds or Demand Bonds.[ ~%1578 iD) If at any time there shall have been delivered to the %1581 Trustee ii) an Alternate Letter of Credit in substitution for the %1582 Letter 9f Credit then in effect, iii) an Opinion of Counsel stating %1583,1 that the delivery of such Alternate Letter of Credit to the Trustee %1585 is authorized under this ~ndenture, will not adversely affect the %1586 exemption from Federal income taxation of interest on the Bonds, and %1587 complies with the ~erms of this Indenture, liii) written evidence %1588,1 from Moody's, if the Bonds are rated by ~oody's, and S&P, if the %1590 Bonds are rated by S&P, in each case to the 9ffect that such rating %1591 agency has reviewed the proposed ~lternate Letter of Credit and that %1592 the substitution of the proposed ~lternate Letter of Credit for the %1593 Letter of Credit then in effect ~ill not, by itself, result in a %1594 reduction, suspension or withdrawal of the fating(s) of the Bonds %1595 from those which then prevail, and (iv) written evidence satisfactory %(1595 to the Bank of the provision for purchase from the Bank of all Bonds %1596 held by it a~d payment of all amounts due it under ~he Reimbursement %1597, Agreement o~ or before the effective date 9f such Alternate Letter of ~1599 Credit, then the ~rustee shall accept such Alternate Letter of Credit %1600 and promptly ~urrender the Letter of Credit then in effect to the %1601 Bank in accordance with its terms for cancellation. ~ritten notice %1602, of the s~bstitution of such Alternate Letter of Credit _shall be given %1604 by the Trustee to the Remarketing Agent and the Owners. ~f at any %1605 time there shall cease to be any Unit Pricing Bonds or Demand Bonds %(1605 Outstanding hereunder, the Trustee shall thereafter surrender the %1606 Letter of Credit ~hen in effect to the Bank in accordance with the %1607 terms thereof ~or cancellation. %1608 94691.3.2771.02:36 -38- %37.1 %(37.1 (E) The Trustee shall not sell, assign or otherwise %1610 transfer the Letter of Credit, _except to a successor Trustee hereun- %1611,1 der and in accordance with _the terms of the Letter of Credit and this %1613 Indenture. $ (1613) iF) Whenever payments of principal are made on a Bond from $1615,1 proceeds of a draw on the Letter of Credit, such Bond shall be deemed %1617 to remain Outstanding until the Bank shall be paid all amounts due on $1618,1 suc~ Bond and under the Reimbursement Agreement by reason of such %(1619) drawing. % (1619) [SECTION 4.07. NO Sales After Certain Defaults. There 151623 shall be no remarketing of Bonds pursuant to Sections 4.01, 4.02 or ~#1624 4.03 hereof if there shall have occurred and _be continuing an Event %1625 of Default; provided, that if any such Event of Default shall there- %1626 after be cured, as evidenced by a certificate of the City _satisfac- $1627,1 tory tm and approved by the Bank (who shall not be under any liabil- ~%1629, ity by reason of such approval or disaDDroval), then such remarketing ~%(1630 of Bonds pursuant to Sections 4.01, 4.02 or 4.03 hereof shall be %1631 reinstated. % (1631) ~ECTION 4.08. ~[~,_~- There is hereby established $1633 and there shall be maintained with the Tender Agent _a separate fund %1634 to be known as the "Purchase Fund." The Tender Agent shall further %1635,1 establish a separate account within the Purchase Fund to be known as %1637 the 'Letter of Credit Account,' a_ separate account within the ~%1638, Purchase Fund to be known as the "Remarketing Purchase Accountz" {a ~S164! separate account within the Purchase Fund to be known as the ~91642 "Remarketing Cost Account," and a separate account within the Purchase Fund to be known as the "Discount Account.' ~%1642. UPOn receipt of the proceeds of a remarketing of Optionally ~%1643, Tendered Bonds on an Optional Tender Date or Mandatorily Tendered %1645 Bonds on a Mandatory Tender Dat~, the Tender Agent shall deposit such %1646 proceeds in the Remarketing Purchase Account for application to the Tender Price of the Bonds. Notwithstanding the foregoinG, uDon the [%1647.. receip~ of the proceeds of a remarketinG[ of Bank-Owned Bonds. the ~ ~hall ~mmediatelv DaY such proceeds to the. Bank to the ~%1647. extent of any .amount owing to the Bank. ~%(164~ [Upon receipt of moneys from the Bank for payment of all or ~S1647. a portion of the Tender Price for the Bonds, the Tender Agent shall %1649,] deposit such money in the Letter of Credit Account for application to %1651 the Tender Price of the Bonds to the extent that the moneys on %1652 deposit in the Remarketing Purchase Account shall not be sufficient. %1653 Any amounts deposited in the Letter of Credit Account and not applied %1654,] on any Optional Tender Date or Mandatory Tender Date to the payment %1656 for any Bonds shall be paid to the Bank on such date in immediately ~%1657. ~vailable funds. ! %(165~ 94691.3.2771.02:36 :39- %37.1 % (37.1~. [Upon receipt of moneys d~ignated to be used to pay dis- Z%1661~ count in accordance with section 2.07 hereof, the Trustee shall ~#(1661 deposit such amgunts in the Discount Account. On the 1~ Conversion Date the Trustee sha~l apply such amounts to the payment ~%1661~ of the Tender Price of the.~andatorily Tendered Bonds. ~#(1661 Amounts held in the Letter of Credit Account, the I#1668 Remarketi~g Purchase Account or the Discount A~count by the Tender[ Z%1668. Agent[ shall be held uninvested or shall be invested in direct obli- ~%1669, gations-of the United States 9f America with a maturity date not #1670.] later than 30 days subsequent ~o the date of purchase. Investment %1670.~ earnings in each respective account shall be retained therein. %1671 ~oneys on deposit in the Remarketing Cost Account _shall be %1675,] used solely for the purpose of paying, from time ~o time, remarketing #1677 costs consisting of discounts 9n the resale of Bonds to the Bank, #1678 which discounts are certified by the ~emarketing Agent as necessary %1679 or advisable in connection ~ith such remarketing. ~ayment of such %1680,~ costs, upon such certification, shall be made by feimbursing 'draws %1682 therefor under the Letter of Credit or by ~irect payment to the owner %1683 of the Bonds so remarketed, as directed by the Remarketing Agent. [#1684 Upon conversion of all or a portion of the Bonds to a ~ixed 1~1688 Interest Rate, the amount on deposit in the ~emarketing Cost Account #1688.] equal to the ratio of the principal ~mount of the Bonds so converted %1688.~ to the original principal amount of Bonds issued hereunder shall be %1688.~ withdrawn from the Eemarke~ing Cost Account for application as pro- vided in the ~econd paragraph of Section 3.01(c) hereof, n~ 1_~ ment of all of the Bonds, the City may apply amounts on deposit in 1%168~ the Remarketinq COSt Account for any Purpose permitted under the /_~ ~ ~(168, [Investment-~o come from Bank] If on the first Business Day ~168~ of any month the amount on deposit in the Remarketin~ Cost Account exceeds the Re~arketing Cost Account Re~uirementl, such,excess shall ~168~ be transferred to the Reserve Earnings Fund, ~1688 IOn any Optional Tender Date or Mandatory Tender D~te, the ~1688 Tender A~ent shall transfer on the books ~equired to be kept b~ the ~#1688 Pa¥in~ Agent purs,,-nt to the provisions of Section 2.14, ownership o~ ~%1688 all of the Bonds tendered or regui~ed to .be tendered to the n~m~ of ~168~ the purchaser thereof, includin~ without ]~mftation, registration of ~168~ Bank-Owned Bonds in the name of the Bank Qn any Optional Tender Date ~%1688 or the Mandatory Tender Date. I ~(168 94691.3.2771.02:36 -40- %37.1 (37.1 _ARTICLE V %1689 PLEDGE OF THE INDENT~RE~ FUNDS AND ACCOUNTS %(1689) ~ECTION 5.01. Pledqe Effected By Indenture. Pursuant to %1691 this Indenture there is pledged ~or the payment of the principal of %1692 and redemption premium, if any, and interest on the Bonds, and .0~1~ ~ ~ations under the R~imbursement Aureement in accordance with their [%1694 terms and the provisions of this Indenture, ~ubject only to the pro- %1695,1 vision~ of this Indenture ~ermitting the application thereof for the %1697 purposes and on the terms and conditions set forth in this Indenture %1698 ii) all right, title and ~nterest of the City ~n the Assessment %1699,] Installments, iii) the proceeds of the sale of the Bonds, liii) to %1701,] the Fixed Rate Bonds, the Fixed Rate Reserve Fund, (iv) to the Unit Pricioq Bonds and the Demand B~nds, the Variable Rate Reserve Fund, ~nd iv) all other funds, accounts and sub-accounts, if any, createo %1701.] hereunder (except the Purchase Fund). %(1702) ~ECTION 5.02. Ple~ue Of A--e_~nt Tngtsllm~,r~gt Assessment %1704 Fund. The Assessment Installments pledged pursuant to ~ection 5.01%1705 hereof ~hall be used for the punctual payment of the interest and %1706 principal and redemption premiums, if any, on the Bonds, and the %1707 ~ssessment-Installments shall not be used for any other purpose ~hile %1708,] any of the Bonds remain Outstanding. %(17091 All Assessment Installments shall be ~ollected by the City %1710,[ from the ~wners of real ~roperty within the District ~ither through %1712,] the real property tax bills administered by the Orange ~ounty Tax %1714 Collector-Treasurer or by ~irect collection by the City or its agent~ %1715 provided, however, that following conversion to a Fixed ~nterest Rate %1716,[ the City shall only collect Assessment ~nstallments on such tax %1718 bills. Ail Assessment Installments received by the Trustee shall be [%1719 held ~n ~rust by the Trustee and shall be deposited by the City as and when received in the Assessment Fund, which fund the City hereby ~%1721 ~grees to establish and maintain so long as any Bonds are %1722 Outstanding. ~rior to conversion to~ Fixed Interest Rate~u_pf~l~2~ Bonds, not later than the ~irst Business Day of each month, the Trustee shall advise the ~ity of the amount of Assessment %1725 Installments due ~nd payable for the preceding month with respect to ~%1726. Assessments bearing interest at a rate egual to the ~djusted Interest 1%1728 Rate or the Variable Interest Rate and ~hall collect the same from %1730 the owners of ~uch real property within the District. %1731 ~ECTION 5.03. Collection of Asses-~ent Installments. %1734 iA) Collection of unpaid Asses~ents shall commence i~e- %1736 diately following ~he first Interest Payment Date in which interest %1737 on the ~onds is paid from the Interest Reserve Fund. ~ ~%173~ Pricing Mode or a Demand Mode, ~ssessment Installments[ on real 1%174~ 94691.3.2771.02=36 =41- %37.1 %(37.1 property with Assessments bearin~ interest equal to the Variable ~%1748~ Interest R~te or Demand Rate. shall be directly collected in the ~#(1748 amount of interest ~ccrued on the Bonds whether or not paid, or due ~%1749 under the ~eimbursement Agreement during the ~receding month, less ~#1750, any applicable credits provided herein, includinq but nQt limited to, ~1752 Section 5.04(C) hereof. Additionally, on each direct collection due ~%1753 (and, in the ca~e of principal due under the Reimbursement %1754 ~greement, on each on and before and on any %1755,1 other similar billing date after which _the principal shall become due #1757 by reason of purchase or redemption of Bonds) commencing on and after %1758 , ~he Assessment Installment shall also include the amount %1759 of ~rincipal, if any, to be paid on such Principal Payment Date ~%1760 l(excluding any prepaid Assessments) Rursuant to this Indenture or ~%1762, the Reimbursement Agreement, less any applicable credits provided %1764 herein. ~n addition, the City shall also cause to be collected ~1765 through the tax bills or direct collections the continuing ~osts of %1766,] ~he Bonds including but not limited to the fees, losts and indemnifi- %1768,] cations du~ the Trustee, Paying Agent, ~ity, and Tender Agent, ~hich %1770,] costs shall be allocated in proportion to ~he Assessment levied %1772 against each parcel and collected with _Asses~nent Installments until %1773 the Assessment against such ~arcel is paid in full. _The fees, costs %1774,] and indemnifications of the Bank and the Remarketing Agent in excess %1776 of the costs and indemnifications paid from the Reserve Earnings %(1776] Account ~hall also be collected through the tax bill or direct col- %1777 lections from owners of property with Assessments bearing interest at %(1777] other than the Fixed Interest Rate. ~11 moneys collected with %1777.[ respect to such fees, costs and indemnifications shall be deposited %1777.1 in the Construction Fund and disbursed in accordance with the provi- %1777.1 sions relating thereto. ~11 amounts collected hereunder shall be %1778 secured by the lien of th~ Assessment and, if not ~aid, collection %1779,1 shall be enforceable in ~he manner set forth in the Act and herein. %1781 (B) Any Assessment may be prepaid at any time by paying %1783 the unpaid ~mount thereof less the amounts transferred to the #1784 Redemption ~und (i} from the V~iable Rate Reserve F~nd pursuant to [%1785 Section 5.04(D)(ii) hereof if ~he Assessment bears interest at a rate ~%1785 other than the Fixed Interest Rate or iii) from the Fixed Rate %1785. Reserve Fund pursuant to Section 5.05(ii) hereof, if the Assessment %1785. bears interest at a Fixed Interest Rate, ~ogether with the redemption %1786 premium set forth in Section 3.01/~(b) hereof if a_RR~ ~nd the estimated amount of interest' to be paid to the ~ate of redemption %1789, ~f the Bonds representing the ~ortion of such Assessment which ~annot %1791, be applied for redemption on the next available redemption date~_but [%1793 not to exceed one year's interes~ on such portion of the prepaid [~1794 Assessment at[ the Maximum-Rate, which amounts shall be deposited in ~%1795 ~he Redemption Fund. #1796 94691.3.2771.02:36 -_42- %37.1 ~(37.3 !C) Ail unpaid Assessments shall bear interest at ~hese #1797,1 respective interest rates hereunder or ~nder the Reimbursement #1799 Agreement. The amount of delinquent Assessment Installments ~dvanced ~#1801, by the City ~rom the Variable R~te Reserve Fund shall be ~ayable as ~#1803 to principal and shall bear interest as provided in ~he Bonds, #1804 together with penalties as provided in the ~ct and, to the extent #1805 applicable, if such delinquencies ~nd the Bonds representing such #1806 delinquent ~ssessmept Installments are paid by the Bank by draws on ~#1807 the Letter 9f Credit, such Assessments shall be payable as to ~rinci- ~%1808, pal and shall bear interest as provided in the Reimbursement #(1809) ~greement which is hereby incorporated by [eference as if fully set %1810,] forth. %(1811) ~EC~ION 5.04. Deposit ..of MoneYs. The proceeds received #1813 from the sale of the Bonds !except for an amount equal to the Reserve ~1814 Requirement ~hich shall be deposited in the V~riable Rate Reserve ~#1815 Fund created hereunder, except for the sLnn of repre- ~91816 senti~g ~he interest on the Bonds estimated to become payable Rrior #1817,] to August 1, 1987, ~hich shall be deposited in the Interest Fund, #1819 except for the sum of which shall be deposited in the ~1820 Interest Reserve Fund and except for the sum of $ which #(1820] shall ~e deposited in the Remarketing Cost Account) ~hall be depos- #1821,~ ired by the City in the Construction Fund. #(1822] The City shall deposit the money contained in the ~1823 Assessmen~ Fund and in the Construction Fund, as appropriate, at the #1824 following respective ~imes in the following respective funds in the #1825 manner hereinafter provided, 9ach of which funds the Trustee hereby ~#1826 agrees to establish and maintain §o long as any Bonds are Outstanding ~#1827 and each such fund shall constitute ~ trust fund for the benefit of #1827.1 the Owners of the Bonds ~nd the Bank, and the money in each of such ~1827.1 ~unds shall be disbursed only for the purposes and uses ~ereinafter ~#1828 authorized~ Thgse funds collectively shall constitute the ~#1829. "redemption fund" as described in the Act. ~#1829 iA) ~k~9~L~. ~he City, on the first Business Day of ~1831, each calendar month lbeginning on the c~nmencement of collection of ~1833 Assessment Installments Rursuant ~o Section 5.03 hereof), shall 91834, deposit in the Interest Fund ~rom money in the Assessment Fund ~he #1836, amount of interest collected in the preceding ~ssessment Installment, ~1838 which deposit, together with the amount of any required transfer from #1839 ~he Variable Rate Reserve Fu~d or the Fixed Rate Reserve Fund, shall ~1840 be at least sufficient ~to pav (1) interest on F~xed Rate BQnds, ~184~ ~2~ all a~ounts paid from the Interest Reserve Fund durin~ ~uch cal- [~1842 endar month, and (2) all ~mou~ts accru{n~ but not vet pavable bv the ]_~ B_~ on Unit Pricin~ Bonds and D~mand Bonds during such calendar ~184{ month in fulfillment of its obligations pursuant to Section o~ ~ ~he Reimbursement A~reement. ~o long as a Letter of Credit is in ~%1845 effect, money in the Interest Fund shall be used and withdrawn by the #(1845 94691.3.2771.02~36 -43- #37.1 #(37.1 ~ity on such Interest Payment Date solely for the purpose 9f (i) #1846,1 paying interest on Fixed Rate Bonds and (ii) reimbursing the Bank for %(1847) draws on the Letter 9f Credit. Following expiration of the Letter of %1848 Credit or any Alternate Letter of Credit and the ~ayment in full of %1849,1 ~11 amounts due to the Bank hereunder, money in the Interest Fund #1851 shall be issued and withdrawn by the ~ity on such Interest Payment %1852 Date solely ~or the payment to the Paying Agent of interest on the %1853 Qutstanding Bonds. %1854 lB) ~t~~- _The City, on the Business Day preced- %1856,1 ing each Principal Payment Date, ~hall deposit in the Principal Fund %1858 from money in the Assessment Fund 9r, if moneys in the Assessment %1859 Fund are insufficient therefor, ~he Variable Rate Reserve Fund an ~%1860 amount equal to the principal bec~ning due on each ~rincipal Payment ~#1861 Date. Ko long as a Letter of Credit is in effect money in the %1862 Principal Fund shall be used and withdrawn bY the City on each %1863 Principal Payment Date solely ~or the purpose of (1) paying the prin- %1864 cipal of Fixed Rate Bonds and (2) reimbursing the Bank for draws on %1865 the Letter of Credit. Following expiration of the Letter of Credit %1866 or any Alternate Letter of Credit ~nd the payment in full of all %1867 amounts due to the ~ank hereunder, money in the Principal Fund shall %1868 be issued and withdrawn by the ~ity on such Interest Payment Date %1869 solely for the payment to the Paying Agent of the ~rincipal of %1870,1 Outstanding Bonds. _The amount of any prepaid Assessments transferred %1872 to the Principal ~und pursuant to Section 5.04(C) hereof ~hall be ~#1873, used fo~ the reimbursement of the Bank or _the payment of principal, %1875 as the case may be, on the next succeeding Principal ~ayment Date and %1876 the amount of any such transfers shall also be applied as a credit %1877 against the amount of ~rincipal otherwise due on the Assessment %1878 Installment immediately preceding such Principal Payment Date. %1879 lC) R~demption Fund. The City, on the redemption date %1881,] specified in a notice from the City filed with the Trustee at the %1883 time ghat any p~epaid Assessment is paid to the City shall deposit in %1884 ~he Redemption Fund that amount of money constituting prepaid %1885 Assessments. Money in the Redemption Fund shall be ~sed and with- %1886,] drawn by the C~ty on such redemption _date solely for the purpose of %1888 (1) the redemption of Fixed Rate Bonds if the Assessment bore inter- %1888.] est at a Fixed Interest Rate and (2) reimbursing the Bank for draws %1889 on the Letter of Credit if the Assessment bears interest at other %(1889] than a ~ixed Interest Rate. Following the 9xpiration of the Letter #1889.2 of Credit or Alternate ~etter of Credit and the payment in full of %1891 all amounts due to the Bank hereunder, money in the Redemption Fund %1892 shall be used and withdrawn ~y the City solely for payment to the %(18921 Paying Agent for redemption of Qutstanding Bonds. _The portion of any %1893,] prepaid Assessment which is less ~han an integral multiple of the %1895 then minimum Authorized ~enc~ination of the Bonds and which cannot be %1896 applied 9n the next available redemption date for the ~edemption of %1897,1 94691.3.2771.02:36 -44- %37.1 % (37.1 Bonds shall be ~,uuediately transferred to the Principal Fund and used %1899 as provided in Section 5.04 hereof. %1900 iD) variabl~ Rate Reserve Fund. IThe Variable Rate ~ Reserve Fund shall[ ~e maintained, Rsed, transferred, reimbursed and 1%1912, liquidated as follows: %(1913) (i) Whenever there are insufficient funds in the Interest Fund or Principal Fund as a result of a failure of an owner of property to pay an Assessment bearing interest at other than a _Fixed Interest Rate or the interest thereon to reimburse the Bank for draws on the Letter of Credit, an smount necessary to pay such deficiency shall be advanced from the variab__~Reserve Fund to such funds. _The amounts so advanced shall be reimbursed to the Variable R~te Reserve Fund from the proceeds of redemption or sale of the parcels for which payment of delinquent Assessment Installments has been made from the Variable Rate Reserve Fund. (ii) In the event Assessments not bearing inter- est at a Fixed Interest Bate are prepaid, in whole or in part, the Assessments thus paid shall be[ reduced by an amount equal to the ratio of the balance on deposit in[ the Variable Rate Reserve Fund to the total amount originally assessed in the proceedings for the issuance of the Bonds~ l~SS any previous credit with respect to such Assessment~ _and the amount thus determined shall be transferred from the a__~ Rate Reserve Fund to _the Redemption Fund. (iii) If on the first Business Day of each month, commencing the amount of any income rea- lized from the investment of the money in _the_~ Rate Reserve Fund PlUS the remaining principal amount thereof exceeds the Variable Rate Reserve Requirement, such excess shall be transferred to (i) first,., to th9 ~emarketina Cost Account to the extent the ~ount on deposit therein is less than the Remarketinq Cost Account Requirement and (ii) second, to ~ (iv) If at any time -the balance in the Variable Rate Reserve Fund is sufficient to retire all of ~he Unit Pricing Bonds and Demand Bonds, whether by redemption or at maturity, _collection of -the Assessment Installments not bearing interest at a Fixed Interest Rate ~hall be discontinued or reduced, %1915 %1916 %1916.1 %1916.2 %(1916. %1917,] ~%1919 1%1920 ~%(192~ ~%1921 %1922 ~%1923 ~%(1922 %1925 %1925.] ~%1926 ~%1927. ~%1929 %1929.: ~%1930 ~%1931 1}1932. 1%1933 %1935 ~%1938 ~%1939 ~%1940 ~%(194 ~%(194 ~%194{ 1%1949 ~%1951 %1952, %1953. %1954 94691.3.2771.02:36 =45- %37.1 % (37.1 as appropriate and ~he Variable Rate Reserve Fund shall be transferred to ~he Principal Fund and ~nterest Fund ~t the times and in the amounts required ~or the payment of the principal of and interest on ~uch Bonds. ~%1955 %1956,1 %1958 91959 %1960 SECTION 5.05. Fixed Rate Reserve Fund. The Trustee hereby 1%1960: agrees to establish and maintain, $o long as any Bonds. are [%1960: Outstand[nq the Fixed Rate Reserve Fund which fund shall constitute a 1%1960. trust fund for the benefit of the Owners of the Bonds and the Bank. ~%1960. [Upon conversion of all or a part of the Bonds to a _Fixed Interest 1%1960. Rate, there shall be transferred from the V~riable Rate Reserve Fund Z%1960, ~o the Fixed Rate Reserve Fund a pro rata share of the amount on 1%1960. deposit in the Variable Rate Reserve Fund, such amount not to exceed |}(.1960. the FixeO Rat.~ Reser¥~ Requirement with respect ~o said Bonds. 1%1960. ii) Whenever there are insufficient funds in the Interest Fund or ~rincipal Fund ~s a result of a failure by an owner of property to pay an ASSessment bearing a ~ate of interest eoual to a Fixed Interest Rate 9r the interest thereon ~o pay the next maturing installment of the principal 9f or interest on the Fixed Rate Bonds, an amount necessary to pay such deficiency ~hall be advanced from the Fixed Rate Reserve Fund to such funds. _The amounts so advanced shall be reimbursed to the Fixed Rate Reserve Fund ~rom the proceeds of red~ption or sale of the parcels for which ~ayment of delinquent Assessment Installments has been made from _the Fixed Rate Reserve Fund. iii) In the event Assessments bearing interest at a Fixed Interest Rate are prepaid, in whole or in part, ~he Assessments thus paid shall be proportion- ately reduced by an amount equal to that portion of the balance on deposit in the Fixed Rate Reserve Fun~ ~qual to the ratio of the prepaid principal ~eceived by such prepa~nt to the total amount of principal of all Fixed Rate Bonds then Outstandin~,[ I~nd the amount thus determined shall be transferred from _the Fixed Rate Reserve Fund to ~he Redemption Fund. !iii) If on the first Business Day of each month, commencing ~he amount of any income rea- iized from the investment of the money in ~he Fixed Rate Reserve Fund ~lus the remaining principal amount thereof exceeds ~he Fixed Rate Reserve Requirement, such excess shall be transferred ~first. to the Remarketing Cost Account ~f the amount on deposit %1960.7 %1960.8 ~%1960~ ~%(196~ ~%1960. %1960.] %(1960. %1960.] %1960.] %(1960. 91960.] %1960.] %1960.] %(1960~ %1960.~ 9(1960. %1960.2 ~%1960. %1960.~ Z%1960. ~%(196! ~%1960. ~%1960 %1960.: %1960.1 %1960.1 %1960.1 %1960.1 %1960.~ ~%196~ 94691.3.2771.02:36 -46- %37.1 %(37.1 therein is less than the Remarketina Cost Account Requirement and ~second, to the [In~eres~ Fund as a credit aqainst interest on Assessments bearinq inter- est at Fixed Interest Rate~ !iv) If at any time ~he balance in ~he Fixed Rate Reserve Fund is sufficient to retire all of _the Fixed Rate Bonds, ~hether by redemption or at maturi- ty, ~ollection of ~he Assessment Installments _bearing interest at a Fixed Interest Rate ~hall be discontin- ued or reduced, as appropriate and ~he Fixed Rate Reserve Fund §hall be transferred to ~he Principal Fund and Interest Fund ~t the times and in the amounts required ~or the payment of the principal of and interest on the ~ixed Rate Bonds. 1%(196C ~#~9~0, 1%(196~ 1%1960. %1960.2 %1960.2 %1960.~ %1960.~ %1960.~ %1960.~ %1960.~ %1960.~ %1960.~ %1960.] ~ECTION 5.06. Resezve Eazninos Fund. Tb ~ ~.e i s h er eby 1%1962 established and there shall be maintained by the Trustee ~ separate 1%1963 fund to be known ~s the "Reserve Earnings Fund." ~uch fund shall %1964,: constitute a trust fund for the ~enefit of the Owners of the Bonds %1964.: and the Bank. Money ~2 deposit in. the Reserve Earnings Fund ~hall be 1%1965 withdrawn solely for ~he payment of fees, expenses and indemnifica- tions of the Remarketing Agent and the Bank in ~ccordance with the %1968.1 terms of the Reimbursement Agreement ~nd the Remarketing Agreement. %1968.1 Upon conversion of all Bonds to a Fixed Interest P~te or on the date ]_~ on which nQ Bonds are Outstandin~ and ~Q lon~ as all fees, expenses ~%1968. and indemnifications of the Ba~k and the R~marketinq A~ent are Daid, ~%1968 amounts on deposit in the Reserve Earnina Fund shall be transferreo ~%196~ to the Inte~es~ Fund and applied in accordance therewith. 1%1968 ~ECTION 5.07. Use of #oney in the Construction Fun~. The %1970 City hereby agrees to establish and maintain a Construction Fund %(1970 until ~he completion of the construction of the works of improvements %1971 within ~he District. %1972 ~11 moneys on deposit in the Construction Fund shall be %1973 held by the City in trust and shall be applied by the Trustee ~or the 1%1974 ~ayment of costs of the construction of the works of improvements %1976 within the District and expenses incidental thereto, including the %1977 payment of the costs of the issuance ~nd delivery of the Bonds and %1978 the fees and expenses of the Bank, _the Paying A~ent, ~he Remarketing %1979, Agent, %he Trustee, Hoody's and S&P incurred prior to the completion %1981, of such works of improvement. %(1982 ~hen the construction of the works of improvement have been %1983 completed, 9r upon the decision of the City to terminate such con- %1984 struction the City shall deliver to the Trustee and the Bank ~ %1985, certificate-of the City stating the fact and date of such completion %(1986 9r termination 9f such construction and stating that all the costs of %1987, 94691.3.2771.02:36 -_47- %37.1 %(37.1 such construction and equipment and expenses incidental thereto ~ave 91989 been determined and paid (or that all such costs and expenses have 91990 been'paid less specified claims which are subject to dispute ~nd for 91991 which a retention in the Construction Fund is to be maintained in the 91992 full amount of such claims until such dispute is resolved or that %(1992) such ~osts are fees, costs or indemnifications of the Bank, ~aying 91992.1 Agent or Remarketing Agent). ~pon the delivery of such certificate, 91993 the City shall transfer ~ny remaining balance of money in the 91994 Construction Fund lbut less the amount of any such retention or such 91995 fees, costs or indemnifications) first to the Variable Rate.Reserve [%1995. Fund if the amount contained therein is less than the amount required 1#1996 to be-maintained on deposit therein, and thereafter to ~he Redemption 91997,] ~und to be applied by the City for the redemption of ~onds or put- 91999 chase of Bonds for cancellation pursuant to Section 3.08 hereof. %(1999) ~ending use of such moneys in the Redemption Fund for _the %2000,2 redemption or purchase of Bonds, such moneys shall not be invested ~t %2002 a yield, within the meaning of Treasury Regulations Section %2003 1.103-13(c), ~hat exceeds the yield on the Bonds. ~nvestment income #2004,2 from such moneys may be used to pay interest on the Bonds 9r to pay %2006 the redemption or purchase price of such Bonds. ~otwithstanding any- 192007 thing in this Section ~.07 to the contrary, §uch moneys may be used ~92008 and invested in any manner permitted b_y an Opinion of Counsel which 92009 provides that such use of investment sill not affect the exemption 92010 from Federal income taxes of interest on the Bonds. 9(2010] ~ECTION 5.08. Interest Reserve Fund. The Trustee hereby |92014 agrees to establish and maintain, so long as any BQnds are ~#2014= Outstanding, the Interest Reserve Fund which fund shall constitute a trust ~und for the benefit of the Owners of th9 Bonds and the Bank. ~%2014 IThe Trustee is hereby instructed to apply amoup~s Qn deposit in _the ~#2015 Interest Reserve Fund on each Interest ~ayment Date (beginning o,~ the 92017 Interest ~ayment Date on which capitalized interest ~eposited pursu- 92018,: ant to Section 5.04 hereof is exhausted) tO advance to owners of Unit Pricing Bonds and Demand Bonds amounts owed to such Owners by the ~92020. Bank ~ to Section of the Reimbursement A~reament 9n suc~[ ~92020 Interest P~yment Dates. ~uring the period prior to the conversion of ~92020 all Bonds to a Fixed Interest Rate, ~he Interest Fund Reserve Amount 92022 shall be reduced following the [edemption of Unit Pricing Bonds and %2023 Demand Bonds, so ~hat ~he Interest Fund Reserve Amount shall always 92024,1 be equal to the interest payable on the Qutstanding Unit Pricing 92026 Bonds and Demand Bonds as set forth above. The amount of any such %2027 reduction shall be applied as a credit against the interest due in %2028 the immediately succeeding ~ss~ssment Installments relating to Unit %2029 Pricing Bonds and Demand Bonds. %(2029 Upon conversion of all or a portion of the Bonds ~o a Fixed 192029 Interest Rate, there shall be transferred ~rom the Interest Reserve ~%202~ Fund to the Interest Fund to be applied as a credit rovided in 19202~ 94691.3.2771.02:36 -48- 937.1 # (37.1 Section 3,01(c) a pro ra~a §hare of all amounts in the Interest ~92029. Reserve Fund. ~ollowing conversion of all Bonds to the Fixed #2030 Interest Rate, the Interest ~und Reserve Amount shall be reduced to #2031 zero and the entire ~mount of the reduction applied as a credit ~2032 against the interest due on the immediately succeeding Assessment #2033 ~nstallment. ~n addition to such credit~ %he amount of any interest ~#2034, earnings or profits from investment of the Interest Fund Reserve #2037 Amount and amounts require~ herein to be transferred to the Interest ~2038 Eund~ shall-be applied as credit against the amount of interest due ~92039, on the next Assessment Installment. ~(2040) ~ECTION 5.09. ~nvest~ents. Any money held by the City in ~2042 the Construction Fund, or by the T~ustee in the Assessment Fund, ~he I#2042. Interest Fund, ~he Principal Fund, ~he Redemption Fund, ~he Reserve #2045,2 Earnings Fund, the Interest R~serve Fund. the Variable Rate Reserve 1#2046. Fund. the Remarketinq Cost Account 9r the Fixed Rate Reserve Fund 1#2047. ~hall be held in demand or time deposits lincluding certificates of ~2048,2 deposit) of any bank (including the Trustee) ~uthorized to accept #2050,2 deposits ~f public funds~ ~nd shall be secured at all times by such ~2052 obligations as are required by law _and to the fullest extent required #2053 by law, except that such money may be invested _by the City or th9 ~2054~ Trustee, as the case may be, in Permitted Investments which will, ~s 1t2056 nearly as practicable, mature on or before the dates on which such t(2056) money is anticipated to be needed for disbursement hereunder. _Ail t2057,2 such money deposited or invested shall be deposited 9r invested so as t2059 to obtain the highest yield which the City deems ~racticable, having 1%2060, due regard for the safety of such money, and the City or Trustee may 1#2062 commingle any of the money held by it hereunder, except money derived ~2063,2 ~rom draws under the Letter of Credit and on deposit in the Purchase ~(2065) Fund or the Interest Reserve Fund, ~hich shall not be commingled ~2066 under any circumstances. _The City or Trustee may present for redemp- 1#2079 tion or sell any such deposit or investment whenever it shall be nec- 1%2080 essary in order to provide ~o~ey to meet any payment of the money so #2081 deposited or invested, ~nd the Trustee shall not be liable or respon- ~2082 sible for any losses ~esulting from any such deposit or investment #2083 presented for redemption or sold. ~(2083) ~ny interest or profits on[ deposits and investments 1~2084 received by ~he City (other than interest or profits on the Pc_P~ l~ Fund, the variable Rate Reserve Fund or the Fixed Rate Reserve Fund 1~(208~ which shall b9 r~tained therein ~xcept as provided in Section 4.08, L~. Section 5,04 and Section 5.05 hereof, respectively) shall be depos- 1~(208~ ired in the Interest Fund, except that prior to completion of the 1~2086 works 9f improvement and the filing of the certificate of the ~ity as %2087,~ required by Section 5.05 hereof, all interest or profits on invest- ~2089 ments of moneys held in the Construction Fund shall remain in said ~2090 Fund. %(2090] 94691.3.2771.02:36 -49- %37.1 %(37.1 The Trustee shall establish an escrow account 9r fund in %2090.1 which it ~hall deposit and hold any ~oneys derived from drawings on %2090.3 the ~etter of Credit which are Rot immediately applied ~o payment of %2090.4 principal, interest or premiums on the ~onds other than moneys on %2090.7 deposit in the Interest Reserve ~und representing interest accrued %2090.8 but not yet due and payable. ~ending the use of the moneys for such %2090.9 payment, the City shall invest moneys in direct obligation~ ~f the ~2090.1 United States of America which will mature on or before the ~ates on %2090.1 which the moneys are anticipated to be required. %(2090. ~ny moneys held by the City in the Interest Reserve Fund %2091 shall be held uninvested, invested in direct obligation of the United ]_~ States Q~ America or invested in repurchase agreements with any bank 1%2093~ or trust company organized under the laws of any state of the United 1%2093. States of America or any national banking association (including the [%2093~ Trustee) or government bond dealer repo~tinq to, trading with, and |#2093~ recognized as ~ primary dealer by the ~ederal Reserve Bank of New 1%2093: York, which agreement is secured by any one or more of the securities ~%2093. described above[ ~which will mature on or before the dates in which ~%2093. the moneys are anticipated to be required. !REPURCHASE AGREEMENTS - %2095.] NOT OTHERWISE PERMITTED] %(2095. ~d~TICLE VI %2096 % (2096', ~ECTION 6.01. ¢~pliance with this Indentuze. Th e City %2098 will faithfully observe and perform all the agreements, ~onditions, %2099,: covenants and terms contained herein required ~o be observed and per- %2101 formed by it. #(21011 SECTION 6.02. ~bservance of Laws and Requlations. The %2103 City and ~he Trustee will faithfully observe and perform all lawful %(21031 ~nd valid obligations or regulations now or hereafter imposed on them %2104 b_y contract, or prescribed by any state or national law, 9r by any %2105,1 officer, board or commission having jurisdiction or control, ~s a %2107 condition of the continued enjoyment of each and every franchise, %(2107 ~ight or privilege now owned or hereafter acquired by them, including %2108,1 their right to exist and carry out their respective businesses, %o %2110 the end that such franchises, rights and privileges ~hall be main- %2111 tained and preserved and shall not be abandoned, forfeited 9r in any %2112 manner impaired. %(2112 ~ECTION 6.03. O_~Le=~9~. So long a s any Bonds are %2114 Outstanding, ~he City will not create or suffer to be created ~ny %2115, pledge of or lien on the items set forth in Section 5.01 hereof 9ther %2117 than the pledge and lien hereof. 9(2117 94691.3.2771.02~36 :50- %37.1 %(37.1 ~ECTION 6.04. Prosecution of Suits. The City will within %2119 sixty (60) days of the request of the Bank, the Trustee 9r any Owner, %2120 take such action from time to time as may be necessary or proper ~o %2121,2 ~emedy or cure any default in the payment of ~ssessment Installments %2123 ~nd will prosecute all actions, suits or other proceedings ~s may be %2124,2 appropriate for such purposes, including a judicial foreclosure %2126 action as set forth in ~he Act and Section 7.02 hereof. %2127 SECTION 6.05. Accountinq Records and Statements. The %2129 City will-keep proper accounting records in which c~plete and cor- %2130 rect entries shall be made 9f all transactions relating to the %2131 receipt, deposit and disbursement of ~he Assessment Installments, _and %2132,2 such accounting records shall be available for inspection by _the Bank %2134 or any Owner or such Owner's agent duly authorized in writing at rea- %2135 sonable hours and under reasonable conditions. ~ot later than the %2136 twenty-fifth (25th) day of each month, ~ommencing on ~ 192137 1987 ~nd continuing so long as any Bonds are Outstanding, _the City 1%2138, will, upon request, furnish to the Bank, the TNustee and any Owner 1%2140 !but at the expense of such ~wner) ~ complete statement covering the %2141,2 receipts, deposits and disbursements 9f the Assessment installments %2143 ~or the preceding monthly period. %2144 ~ECTION 6.06. Recordation al~d Filinq. The City will file, 1%2146 record, register, renew, refile and record ~11 such documents, including financing statements lot continuation statements in connec- %2148 tion therewith), ~s may be required by law in order to maintain at %2149 all times a security interest in ~he Assessment Installments under %2150,: and pursuant to this Indenture, ~11 in such manner, at such times and %2152 in such places ~s may be required in order to fully perfect, preserve %2153 and protect ~he benefit, protection and security of the Owners ~nd %2154,~ the rights of the Trustee hereunder, and the City ~ill do whatever 92156 else may be necessary or be reasonably required in order to perfect %2157 and continue the pledge and lien on ~he Assessment Installments ~s %2158,: provided herein. %(21591 ~ECTION 6.07. Further Assuzanoes. Whenever and so often %2161 as requested to do so by the Trustee, ~he Bank or any Owner, the City 92162 will promptly execute and deliver or cause to be executed and deliv- %2163 ~red ~11 such other and further assurances, documents or instruments %2164 and promptly do or cause to be done all such other and further things %2165 ~s may be necessary or reasonably required in order to further _and %2166, more fully vest in the Trustee and the Owners ~he benefit, protection %2168 and security conferred or intended to be conferred. %(2168 ~ECTION 6.08. Azbitza~e Covenant. The City shall not %2170 make, or give its consent to, any use of the proceeds 9f the Bonds or %2171 of any moneys on deposit to the credit of any ~und or account %2172 established under the Indenture ~hich may be deemed to be ~he %2173, proceeds of the Bonds pursuant to Section 103(c) 9f the Internal %2175 94691.3.2771.02:36 -51- %37.1 %(37.1 Revenue Code of 1954, as amended, ~nd the applicable regulations %2176 thereunder which would cause any of ~he Bonds to become ~arbitrage %2177,2 bonds" ~ithin the meaning of said Section 103(c) ~nd the applicable %2179,2 regulations thereunder. $(2180) [~RTICLE VII $2181 DEFAULT AND LIMITATIONS OF LIABILITY $(2181) ~ECTION 7.01. Events of Default. If any of the following $2183 events occur, it is hereby declared ~o constitute an "Event of $2184 Default"~ $(2184) ia) Default in the due and punctual payment of $2186 interest on any Bond, ~hether at the stated Interest $2187 Payment Date thereof, 9r upon proceedings to redemp- $2188 tion thereof or upon purchase ~hereof pursuant to %2189 Article IV hereof; $(2189] lb) Default in the due and punctual payment of the principal of 9r premium, if any, on any Bond, ~hether at the stated maturity thereof, 9r upon pro- ceedings for redemption thereof, 9r upon purchase pur- suant to Article IV hereof; lc) Receipt by the Trustee of notice from the Bank that ~n Event of Default under ~he Reimbursement Agreement shall have occurred and be continuing; or $2191 %2192 $2193,~ $2195 $(2195] $2197 #2198,: $(21991 id) Default in the due and punctual payment of $2201 any ~ssessment Installment due hereunder. $2202 ~ECTION 7.02. Action on Defa"lt. So long as the Letter of $2204 Credit is in effect, ~ithin sixty (60), and if the Letter of Credit $2206 is not in effect, within one hundred fifty (150) days, of the occur- 152207 fence of an Event of ~efault under Section 7.01(d) and upon the 152208 direction of ~he Trustee and the Bank, the City shall forthwith $2209 undertake foreclosure ~roceedings in the manner prescribed in ~ection $2210,: 8830 et sga. of ~he Streets and Highways Code to collect the amount $2212 of ~ny delinquent Assessment Installment. ]pon the redemption or %2213, sale of the real property responsible ~or such delinquent Assessment S2215 Installment, ~he City shall: ia) deposit to the Fixed Rate Reserve %2216, Fund if the ASSeSsment bears interest at a Fixed Interest Rate or to the Variable Rate Reserve Fund if the ~ssessment bears interest at ~#2217 other than a Fixed Interest Rate, [espectively, the amount of any $2217. ~elinquency advanced therefrom to the Interest Fund or Principal ~und S2218, for payment of interest on or principal of Bonds; and lb) in the S2220 event of the exhaustion of the amounts held in the V iabl Rte 94691.3.2771.02:36 =52- $37.1 $(37.1 Reserve Fund and the consequent inability to reimburse _the Bank for ~#2222 draws on the Letter of Credit, forthwith remit to the Bank any moneys %2223 received on account thereof, up to the amount due to the Bank as an %2224 Owner of Bonds or pursuant to the Reimbursement Agreement. In the %2225,2 ~vent that such real property is neither redeemed by the owner #(2226) thereof or sold to a third party purchaser at such foreclosure sale, #2227 the City-shall cause a credit bid on behalf of and in the name of _the #2228,2 ~ity and the Bank to be entered in the amount due the City and/or the %(2229) Bank pursuant to the Reimbursement Agreement and shall cause a #2230,2 sheriff's deed for said real property to be executed in the name of ~%2232, the City and/or the Bank, as appropriate. The proceeds from any #(2233) resale of such real property on which there is an Assessment bearing #2234 interest aT other than a Fixed Interest Rate _shall be applied first #2234.0 to any amounts due to the Bank hereunder or under the Reimbursement %2235 Agreement, and Thereafter any excess shall be applied by the City in ~%2236, the following order: (i) to restore the V riable Rte Reserve Fund ~#(2237 to the Variable Rate Reserve Requirement, iii) to the payment of any ~#2238 continuing costs of the Bonds, ~nd (iii) as a pro rata credit against %2239 the unpaid principal of the Assessments and for redemption of Bonds %2240 pursuant to Section 3.01(a), (b) or (c) hereof. The excess proceeds_ ~#2241~ remaining after deposits to ~he Fixed Rate Reserve Fund or Variable ]_~ Rate Reserve FuDd required in clause (a) above from any resale of ~%2241: .~uch real property on which there is an Assessment bearing interest ~#2241. at a Fixed Interest RaTe shall be applied in the following order: #2241..' (i) to restore the Fixed Rate Reserve Fund to the Fixed Rate Reserve #2241.~ Requirement, (ii) to the payment of any continuing costs of the #2241.~ Bonds, and (iii) as a pro rata credit against the unpaid principal of #2241.( the Assessments and for redemption of Bonds Pursuant to #2241.~ Section 3.01(a), (b) or (c) hereof. %(2241. SECTION 7.03. Remedies of the TruStee. The Trustee shall %2243 have the right-- %(2243'~ ia) by mandamus or other action or proceeding or #2245 suit at law or in equity ~o enforce its rights against %2246 the City 9r any supervisor, officer or employee there- #2247 of, ~nd to compel the City or any such supervisor, %2248 officer or employee thereof ~o observe or perform #2249 their duties Rnder applicable law and the conditions, #2250 covenants and terms contained herein [equired to be #2251 observed or performed; #(2251 ~b) by suit in equity to enjoin any acts or #2253 things which are unlawful 9r violate the rights of the #2254 Trustee; or #(2254 94691.3.2771.02:36 -53- #37.1 # (37.1 lc) by suit in equity upon the happening of any $2256 default hereunder to require ~he City and its supervi- $2257 sots, officers and employees ~o account as the trustee #2258 of an express trust. $(2258) anything to the contrary contained herein notwithstanding, $2260 so long as the Letter of Credit is in effect and the Bank is not in ~$2261 ~efault under ~he Letter of Credit, ~he Trustee shall not exercise ~$2262, any of the foregoing rights ~ithout the prior written consent of the $2264 Bank and shall, upon the Bank's offer to the Trustee of [easonable $2265,2 security and indemnity against costs, expenses ~nd liabilities to be $2267 incurred by it, exercise such lights at the direction of the Bank. $2268 SECTION 7.04. Non-Waiver. A waiver of any default hereun- $2270 der or breach of any obligation by ~he City or Trustee hereunder $2271 shall not affect any subsequent default hereunder 9r of any subse- $2272,2 ~uent breach of an obligation by ~he City or Trustee hereunder or $2274 impair any rights or remedies 9n any such subsequent default hereun- $2275 der or breach of an obligation b_y the City or Trustee hereunder. ~o $2276,2 delay or omission by the City or Trustee ~o exercise any right or $2278 remedy accruing upon any default hereunder ~hall impair any such $2279 right or remedy or shall be construed to be ~ waiver of any such $2280 default hereunder or an acquiescence therein, ~nd every right or $2281 remedy conferred upon the City or Trustee ~y applicable law or by $2282 this article may be enforced and exercised ~rom time to time and as $2283 often as shall be deemed expedient b_y the City and Trustee. $2284 If any action, proceeding or suit to enforce any right or $2285 to exercise ~ny remedy is abandoned or determined adversely to the $2286 City or Trustee, ~he City and the Trustee shall be restored to their $2287 former positions, ~ights and remedies as if such action, proceeding $2288 or suit had not ~een brought or taken. $2289 SECTION 7.~5. ~emedies Not Exclusive. No remedy conferred $2291 herein upon or reserved herein to the City or Trustee is intended to $2292 be exclusive of any other remedy, ~nd every such remedy shall be $2293 cumulative and shall be in addition ~o every other remedy given here- $2294 under or now or hereafter existing Rnder applicable law or equity or $2295 by statute or otherwise and may be 9xercised without exhausting and $2296 without regard to any other remedy ~onferred by any other applicable $2297 law. $ (2297[ ~E~ION 7.06. NO Liability by the City to the Owners. $2299 Except for the collection of ~he Assessment Installments an~ the $2300 observance and performance 9f the other conditions, covenants and $2301 terms contained herein or in the Act [equired to be observed or per- $2302 formed by it, ~he City shall not have any obligation or liability to $2303 the Owners ~ith respect to this Indenture or ~he preparation, $2304, authentication, delivery, transfer, exchange or cancellation 9f the $2306 94691.3.2771.02~36 -54- $37.1 $(37.1 Bonds or with respect to the performance by the Trustee of any %2307 obligation contained herein required to be performed by it. Pursuant 1%2308, tQ ResolutiOn No. 86-81, the City has determined that no funds of the ~#2308. City will be available ~o pay principal of, premium, if any, or %2308.3 interest on the Bonds. %(2308. SECTION 7.07. No Liability by the Trustee to the O~ners. %2310 Except as-expressly ?rovided herein, the Trustee shall not have ~ny %2311 obligation or liabllzty to the Owners with respect to the collection %(2311) ~nd payment, when due, of the Assessment Installments b_y the City, or %2312,2 with respect to the observance or performance by the City of the %2314 other conditions, covenants and terms contained herein required-~o be %2315 observed and performed by it. %(2315) ~ECTION 7.08. Action by Owners. In the event the Trustee %2317 fails to take any action to eliminate an Event of Default under %2318 Section 7.01 hereof, the Qwners of a majority in aggregate principal %2319 amount of Outstanding ~onds may, with the consent of the Bank if a $2320 Letter of Credit is outstanding and the Bank is not in default there- %2320.1 under, institute any suit, action, mandamus or other proceeding in %2321 equity or at law for the protection or 9nforcsment of any right under %2322 this Indenture, but only if such Owners have first made written $2323 request of the TrUstee after the right to exercise such powers, of %2324 fight of action shall have occurred, and shall have afforded the %2325 Trustee a reasonable opportunity either to proceed ~o exercise the %2326,~ ~owers granted therein or granted under law or to institute such %2328 action, suit or proceeding in its name and ~n~ess also, the Trustee %2329 shall have been offered reasonable ~ecurity and indemnity against the %2330 costs, expenses and liabilities ~o be incurred therein or thereby, %2331 and the Trustee ~hall have refused or neglected to comply with such %2332 request within ~ reasonable time. %2333 ARTICLE VIII THE TRUSTEE AHD THE P~h%RKETXNG AGENT PAYING 12334 #(2334: %(23341 ~BCTION 8.01..~nnlovment an4 Duties of the ustee. The %2336 City hereby appoints and employs the Trustee to perform the _obliga- $2337 tions contained herein; _all in the manner provided herein and subject %2338 to the conditions and terms hereof. %(2338 ~ECTION 8.02. R--~-~val and Resianation of the Xustee. #2340 The City may at any time direct the removal of the Trustee initially I(2340 appointed hereby ~nd any successor thereto b_y giving written notice %2341, of such removal to the Trustee ~nd by giving notice by mail of such 92343 removal to the Owners, _and the Trustee initially appointed hereby and %2344 any successor thereto ~ay at any time resign by giving written notice %2345 94691.3.2771.02:36 .55- %37.1 % (37.1 of such resignation ~o the City and by giving notice by mail of such %2346 resignation ~o the Owners. ~pon giving any such notice of red, oval or %2347,2 upon receiving any such notice 9f resignation, the City, with the #2349 consent of the bank (which consent ~hall not be unreasonably %2350 withheld), shall promptly appoint a successor Trustee b_y an instru- #2351 ment in writing; provided that in the event the City does not appoint %2352 a successor Trustee within sixty (60) days ~ollowing the giving of %2353 any such notice of removal or the receipt of any such notice of res- %2354 ignation, the removed or resigning Trustee may petition any appropri- %2355 ate court having jurisdiction to appoint a successor Trustee. _Any %2356,~ successor Trustee shall be a bank or trust company doing business and $2358 having a principal corporate trust office in either ~ew York, New #2359,~ York or Los Angeles, 9r San Francisco, ~alifornia, having a combined $2361,~ capital (exclusive of borrowed capital) and surplus of at least two %2365,~ hundred fifty million dollars ($250,000,000) and subject to supervi- $2367 sion or examination by state or national authorities. ~f such bank $2368 or trust company publishes a report of condition at least annually, %(2368) ~ursuant to law or to the requirements of any supervising or examin- $2369 ing authority above referred to, then for the purposes of this $2370 Section 8.02 ~he combined capital and surplus of such bank or trust %2371 company ~hall be deemed to be its combined capital and surplus as set $2372,~ forth in its most recent report of condition so published. %(2373) ~ny removal or resignation of a Trustee and appointment of %2374 a successor Trustee ~hall become effective only upon the acceptance %2375 of the appointment by the successor Trustee. $2376 ~BCTION 8.03. Compensation and Indemnification of the S2378 Tzustee. The City shall from time to time, subject to any agreement S(2378) then in effect ~ith the Trustee, pay the Trustee compensation for its $2379,~ services and reimburse ~he Trustee for all its advances and expendi- $2381 tures hereunder, including but not limited to advances to and fees $2382 and expenses of accountants, agents, appraisers, consultants, counsel #2383 or other experts ~mployed by it in the o~servance and performance of %2384 its rights and 9bligations hereunder; provided that the Trustee shall $2385,~ not have any lien ~or such compensation or reimbursement against any %2387 money held by it in any of the funds established hereunder, although $2388,1 the Trustee may take whatever legal actions are available to it #(23891 ~irectly against the City to recover such compensation or %2390 reimbursement. %(2390] To the extent permitted by law, the City does hereby assume #2391 liability for, and agrees to indemnify and hold harmless the Trustee $2392,~ from and against any and all claims, damages and losses (including %2394 legal fees and expenses) arising out of ii) the condition, manage- $2395,] ment, maintenance or use of _or frum any work done in connection with %2397 the works of improvement within the District, iii) any act of $2398,~ negligence of the City or of any of its agents, ~ontractors, %2401 employees, invitees, licensees, officers or supervisors in connection S2402 94691.3.2771.02:36 -56- S37.1 $(37.1] with the works of improvement within ~he District, 9r liii) the $2403,2 payment of any costs or expenses of ~he acquisition and construction $2406 of the works of improvement within ~he District; provided, that no $2407,2 indemnification will be made for ~illful misconduct or negligence $2409 hereunder by the Trustee. $(2409) ~he City also agrees to indemnify the Trustee for, _and to $2410,2 hold it harmless against, ~ny loss, liability or expense incurred $2412 without negligence 9r bad faith on the part of the Trustee, ~rising $2413,2 out of or in connection with the acceptance 9r administration of the $2415 trust or trusts hereunder, ~s well as the costs and expenses of $2416 defending itself ~gainst any claim or liability in accordance with $2417 the exercise 9r performance of any of its powers or duties $2418 hereunder. $(2418) ~ECTION 8.04. Protection of the Trustee. Th e T r u s tee $2420 shall be protected and shall incur no liability in acting or proceed- $2421 lng in good faith upon any affidavit, bond, ~ertificate, consent, $2422 notice, request, requisition, resolution, ~tatement, telegram, vouch- $2423 er, waiver or other paper or document ~hich it shall in good faith $2424 believe to be genuine ~nd to have been adopted, executed or delivered $2425 by the proper party or Dursuant to any of the provisions hereof, _and $2426,2 the Trustee shall be under no duty to make any investigation 9r $2428 inquiry as to any statements contained or matters referred to in any $2429 such instrument, but may accept and rely upon the same ~s conclusive $2430 evidence of the truth and accuracy of such statements. The Trustee $2431 may consult with counsel, who may be counsel to the City, ~ith regard $2432 to legal questions arising hereunder, ~nd the opinion of such counsel $2433 shall be full and complete authorization ~nd protection in respect to $2434 any action taken or suffered by it hereunder in good faith in accor- $2435 dance therewith. $(2435) ~henever in the observance or performance of its rights and $2436 obligations hereunder the Trustee shall deem it necessary or desir- $2437 able ~hat a matter be proved or established prior to taking or suf- $2438 feting ~ny action hereunder, ~uch matter lunless other evidence in $2439,2 respect thereof be herein specifically prescribed) ~ay be deemed to $2442 be conclusively proved and established by ~ certificate of the City, $2443 and such certificate shall be ~ull warrant to the Trustee for any $2444 action taken or suffered under ~he provisions hereof upon the faith $2445 thereof, ~ut in its discretion'the Trustee may, in lieu thereof, $2446 accept other ~vidence of such matter or may require such additional $2447 evidence ~s to it may seem reasonable. $2448 ~he Trustee may buy, sell, own, hold and deal in any of the $2449 Bonds ~nd may join in any action which any Owner may be entitled to $2450 take ~ith like effect as if it were not a party hereto. The Trustee, $2451,2 either as principal or agent, ~ay also engage in or be interested in $2453 any financial or other transaction ~ith ~he City ~nd may act as $2454,2 94691.3.2771.02:36 :57- $37.1 $ (37.1) agent, depositary or trustee for any c~ittee or body 9f Owners or %2457 of owners of obligations of the City ~s freely as if it were not the %2458 Trustee hereunder. #(2458) _The Trustee shall not be answerable for the exercise of any #2459 of its rights hereunder or for the performance of any of its obliga- %2460 tions hereunder 9r for anything whatsoever in connection with the %2461 funds established hereunder, 9xcept only for its own willful miscon- %2462 duct or gross negligence. #(2462) ~ECTION 8.05. ApPointment of R~arketinq Aqent. The City #2464 hereby appoints the Remarketing Agent ~o remarker Bonds pursuant to #2465 this Indenture hereof, ~nd to keep such books and records as shall be %2466 consistent with prudent industry practice and to make such books and #2467 records available for inspection by the Bank, the City, the Paying %2468 Agent and the Trustee ~t all reasonable times, and~ Rromptly con- [#2469, firmed by a written notice to the Trustee, who shall then DromDtlv J#(247~ notify the Bank and~ perform all other duties required hereunder and 1%2471L in th~ Remarketing Aqreement. [The Remarketing Agent may at any time resign and be dis- [#2476 charged 9f the duties and obligations created by this Indenture ~y [%2477, giving at least ~ days' notice to the Bank. the Trustee, the ~#(247~ City, ~he Paying Agent and the Trustee. _The Remarketing Agent may be [%2479, removed at any time, at the direction of ~he Bank and the City, by an %2481 instrument filed with ~he Remarketing Agent and the Paying Agent. %2482 ~ny successor Remarketing Agent shall be selected by the City ~ith %2483,~ the consent of the Bank (who shall be under no ~iability by reason of %2485 such consent) ~nd shall be a member of the National Association of #2486 Securities Dealers, Inc., ~hall have a capitalization of at least %2487 fifteen million dollars 1515,000,000) or have a line of credit with a #2488 commercial bank in the amount of at least fifteen million dollars #2489 !515,000,000), and shall be authorized by law to perform all the #2490 duties ~et forth in this Indenture. #2491 ~ECTION 8.06. Appointment of Pavfnq A~ent. T h e C i t y %2493 hereby appoints the Paying ~gent to authenticate and deliver the %2494 Bonds as provided ~erein and to hold ~11 Bonds delivered to it ~ursu- #2495,: ant to this Indenture in trust for the benefit of ~he respective #2498 Owners who shall have so delivered such Bonds until money represent- 92499 ing the purchase price of such Bonds ~hall hav~ been delivered to or %2500 for the account of or to the order of ~uch Owners, ~o hold ~11 money %2501,1 delivered to it for the purchase of Bonds in trust for the benefit of %2504 the person or entity which shall have so-delivered such money until %2505 the Bonds purchased with such money ~h~ll have been delivered to or %2506 for the account of such person or entity, ~o ~eliver to the Bank, the %2507, City, the Remarketing Agent and the Trustee ~ copy of each notice %2509 delivered to it in accordance with Section 4.01 ~ereof ~nd, %2510, immediately upon the delivery to it of Bonds in accordance with 9(2511 94691.3.2771.02:36 -_58- #37.1 # (37.1 ~ection 4.01 hereof, to give telephonic or telegraphic notice to the $2512 City, ~he Remarketing Agent and the Trustee specifying the principal $2513 amount 9f the Bonds so delivered to it. $2514 ~he Paying Agent may at any time resign and be discharged $2515 of the duties ~nd obligations set forth in this Indenture by giving $2516 at least ~ixty (60) days' notice to the Bank, the City, ~he $2517,2 Remarketing Agent and the Trustee. The Paying Agent may be removed $2519 at any time, ~t the direction of the Bank and the City, b_y an instru- $2520,2 ment filed with the Paying Agent and the Trustee. any successor $2522 Paying Agent shall be a bank 9r trust company doing business and $2523 having an office in New York, New York and shall be appointed by the $2524 City, ~ith the consent of the Bank (who shall not ~e under any $2525,2 liability by reason of such consent), in the same manner provided in $2527 Section 8.02 hereof for ~ppointment of a successor Trustee. $2528 ~RTX CLE IX S2529 AItlENDPlENT OF OR SUPPLEItlENT TO THE XI~ENTUR~ $(2529) ~ECTION 9.01. Amendment of Supplement by Consent of Owners. S2531 This Indenture and the rights and obligations of the City, the $(2531) Trustee, ~he Remarketing Agent and the Owners hereunder may be $2532 amended 9r supplemented at any time kY an amendment hereof or supple- $2533,2 ment hereto ~hich shall become binding when the written consents of $2535 ~he Owners of a majority in aggregate principal amount of ~he Bonds $2536,2 then Outstanding, 9xclusive of Bonds disqualified as provided in $2538 Section 9.02 hereof, ~nd the written consent of the Bank, I~0 lonq aS 152539, th~ Bank is not in default on its Letter of CreditlL are filed with !#(2539 the Trustee. ~o such amendment or supplement shall il) reduce the 152540, rate of interest on any Bond or extend the time of payment thereof 9r $2542 reduce the amount of principal or redemption premiums, if any, 9n any $2543 Bond or extend the Principal Payment Date thereof ~ithout the prior $2544 written consent of the Owner of the Bond so affected, or 12) reduce $2545 the percentage of Owners whose consent is required for _the execution $2546 of any amendment hereof or supplement hereto, or !3) modify any of $2547 the rights or obligations of the Trustee without its prior written $2548 consent thereto. #(2548) This Indenture and the rights and obligations of the City, $2549 ~he Trustee, the Remarketing Agent and the Owners hereunder may also $2550 be amended 9r supplemented at any time by an amendment hereof or sup- $2551 plement hereto ~hich shall become binding upon execution without the $2552 written consents of ~ny Owners, but with the written consent of the $2553 Bank, ~ut only to the extent permitted by law ~nd after receipt of an $2554,2 approving Opinion of Counsel ~nd only for any one or more of the %2556 following purposes - $(2556) 94691.3.2771.02:36 -59- $37.1 S (37.1) ia) to add to the conditions, covenants and terms contained herein [equired to be observed or per- formed by the City 9ther conditions, covenants and terms thereafter ~o be observed or performed by the City, 9r to surrender any right reserved herein to or conferred herein on the City, _and which in either case shall not adversely affect the interests of ~he Owners; or $2558 #2559 $2560 $2561 $2562 $2563 $2564 $(2564) lb) to make such provisions for the purpose of curing any ambiguity or of ~orrecting, curing or sup- ~lementing any defective provision ~ontained herein or in regard to questions arising hereunder which ~he City may deem desirable or necessary and not inconsis- tent herewith, and which shall not adversely affect the interests of the Owners. $2566 $2567 $2568 $2569 $(2569) $2570 $(2570) ~ECTION 9.02. Disqualified Bgnds. Bonds held for the $2572 account of the City lbut excluding Bonds held in any pension or $2573 retirement fund of the City) ~hall not be deemed Outstanding for the $2574 purpose of any consent 9r other action or any calculation of $2575 Outstanding Bonds provided herein, and shall not be entitled to con- $2576 sent to or take any other action provided herein, ~nd the Trustee may $2577,2 adopt appropriate regulations to require each Owner, before such $2579 Owner's consent provided for herein shall be deemed effective, ~o $2580 reveal if the Bonds as to which such consent is given ~re disquali- $2581 fied as provided in this Section 9.02. $(2581) ~BCTION 9.03. ~ndozsement or Replacement of Bonds After $2583 Amendment of Supplement. After the effective date of any action $(2583) taken as hereinabove provided, ~he Trustee may determine that the $2584 Bonds may bear a notation kY endorsement in form approved by the $2585 Trustee ~s to such action and in that case upon demand of the Owner $2586 9f any Outstanding Bond and presentation of such Owner's Bond for $2587 such purpose ~t the office of the Trustee ~ suitable notation as to $2588,2 such action shall be made on such Bond. ~f the Trustee shall so $2590 determine, Dew Bonds so modified as in the opinion of the Trustee $2591 shall be necessary ~o conform to such action shall be prepared, ~nd #2592,~ in that case upon demand of the Owner of any Outstanding Bonds ~uch $2594 new Bonds shall be exchanged without cost to each Owner ~or Bonds $2595 then Outstanding at the office of the Paying Agent u_pon surrender of $2596 such Outstanding Bond. All Bonds surrendered to the Paying Agent $2597 pursuant to the provisions of ~his Section 9.03 shall be cancelled by $2598 the Trustee and shall not be redelivered. $(2598) 94691.3.2771.02:36 =60- $37.1 $(37.1) ~ECTIOM 9.04. Amendment or Supplement by Mutual Consent. $2600 The provisions of this Article IX shall not prevent any Owner from $(2600) accepting ~ny amendment or supplement as to the particular Bonds $2601 owned by such Owner, provided that due notation thereof is made on $2602 such Bonds. $(2602) _ARTICLE X #2603 DEFE~Atq(~I~ ~ECTION 10.01. Discharqe of Bonds and Inderrkur-. ia) If the Trustee shall pay or cause to be paid or there shall otherwise be paid ~o the Owners of all Outstanding Bonds the interest, principal and Kedemp- tion premiums, if any, ~t the times and in the manner provided herein and therein, ~hen such Owners shall cease to be entitled to the pledge and lien ~escribed in Section 5.01 hereof ~s provided herein, ~nd all agreements and covenants of the City and the Trustee ~o such Owners hereunder shall thereupon cease, ~ermi- hate and become void and shall be discharged and satisfied. _(b) Any Outstanding Bonds shall on their Principal Payment Dates _or their dates of redemption prior thereto be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this Section 10.01 if there shall ~e on deposit with the Trustee m_oney which is sufficient to pay the interest and principal on such Bonds Rayable on and prior to their Principal Payment Date or their dates of redemption. lc) Any Outstanding Bonds shall prior to their Principal Payment Dates ~r their dates of redemption prior thereto be deemed to have been paid within the meaning of and with the effect 9xpressed in subsection (a) of this Section 10.01 if 11) in case any of such Bonds are to be redeemed on any date prior to ~heir Principal Payment Dates, the City shall have given to the Trustee in form satisfactory to it irrevocable instructions to give notice by mail ~o the Owners of such Bonds of the redemption of such Bonds on such redemption dates, 12) there shall have been deposited with the Trustee either money in an amount ~hich shall be sufficient or United States of America Treasury bills, Rotes, bonds or certificates of indebtedness, S(2603) $2604 $2606 $2607 $2608 $2609 $2610 $2611 $2612,2 $(2613) S2614,2 $(2615) $(2615) $2617 $2618 %2619 $2620 $(2620) $2621 $2622 %2623 S(2623) $2625 S2626 $2627 $2628 $2629 $2630 $(2630) $2631 $2632 S(2632) %2633 %2634 %(2634) 92635 94691.3.2771.02:36 -_61- $37.1 S (37.1) or obligations for which ~he full faith and credit of the United States of America are pledged ~or the pay- ment of interest and principal, ~hich are not subject to redemption except by the Owner thereof ~rior to 9aturity lincluding any such securities issued or held in book-entry form 9n the books of the Department of the Treasury of the United States of America) ~he interest on and principal of which when paid will pro- vide money which, ~ogether with money, if any, depos- ited with the Trustee ~t the same time, shall be suf- ficient to pay when due the interest 9videnced and represented by such Bonds on and prior to their ~rincipal Payment Dates or their dates of redemption prior thereto, ~s the case may be, and the principal and redemption premiums, if any, on such Bonds, and 13) in the event such Bonds are not by their terms subject to redemption ~ithin the next succeeding sixty (60) days, ~he City shall have given the Trustee in form satisfactory to it irrevocable instructions to give notice by mail to the Owners of such Bonds ~hat the deposit required by clause (2) above has been made with the Trustee ~nd that such Bonds are deemed to have been paid in accordance with ~his Section 10.01 and stating their Principal Payment Dates or redemp- tion dates ~hDon which money is to be available for the payment of ~he interest and principal of such Bonds. %2636 %2637 %2638 %2639 %2640 %2641 %2642 %(2642) %2643 %2644 %2645 %(2645) %2646 %2647 %2648 %2649 %2650 %2651 %2652 %2653 %(2653 %2654 %2655 %(2655) %2656 %2657 id) After the payment of the interest, redemp- tion premium, if any, and principal on all Outstanding Bonds ~s provided in this Section 10.01, ~he Trustee shall execute and deliver to the City all such instru- ments ~s may be necessary or desirable to evidence the discharge ~nd satisfaction of this Indenture, _and the Trustee shall pay over or deliver to the City all money or ~eposits or investments held by it pursuant hereto which are not required ~or the payment of the interest and principal on such Bonds. 92659 %(2659) %2660,~ %(2661) %2662 %2663,2 9(2664) %2665 %2666 %(2666) le) Bonds purchased or redeemed by the Bank put- %2668 suant ~o any provision of this Indenture or the %2669 Reimbursement ~greement shall not be deemed paid here- %2670 under until ~he Bank is paid all amounts due under %2671 such Bonds or the Eeimbursement Agreement. ] ~%2672 ~ECTION 10.02. Un¢laime~ Konev. Anything contained herein %2691 to the contrary notwithstanding, ~ny money held by the Trustee in %2692 trust for the payment and discharge 9f the interest or principal or %2693 redemption premiums, if any, 9f any Bonds which remains unclaimed for %2694 six (6) years after the date when ~he payments on such Bonds have %2695 94691.3.2771.02:36 -62- %37.1 %(37.1) become payable, if such money was held by the Trustee on such date, $2696 or for six (6) years after the date of deposit of such money if $2697 deposited with the Trustee _after the date when the interest and prin- #2698 cipal on such Bonds have become payable, ~hall upon written notice #2699,2 from the City be repaid by the Trustee to the City as its absolute $2701 property free from trust, and the Trustee shall thereupon be released $2702 and discharged with respect thereto and the Owners shall look only to $2703 the City for the payment of the interest and principal and redemption #2704 premiums, if any, on such BUnds; provided that before being required $2705 to make any such payment to the City, the Trustee shall, at the $2706 expense of the City, give notice by mail to the Owners that such $2707 money remains unclaimed and that after a date named in such notice, #2708 ~hich date sha~l not be less than sixty (60) days after the date of $2709 giving -such notice, the balance of such money then unclaimed will be #2710 returned to the City. #2711 ~TICLE XI $2712 MISC~.T. ANEO~S $(2712) SECTION 11.01. Benefits of this Xndentuze Limited tO t2714 ~. Nothing contained herein, expressed or implied, is intended $2715 to give to any person other than the Bank, the City, _the Paying #2716,2 Agent, the Remarketing Agent, the Trustee and the Owners any claim, $2718,~ remedy or right under or pursuant hereto, ~nd any agreement, condi- $2722 tion, covenant or term contained herein required to be observed or $2723 performed by or on behalf of the City _shall be for the sole and $2724 exclusive benefit of the Bank, the Paying Agent, the Remarketinq #2725,] Agent and the Trustee and the Owners. $2727,2 SECTION 11.02. Successor Deemed Included in All References t2730 to Pr~4ecessor. Whenever either the Bank, the City, the Paying $2731,2 Agent, the Remarketing Agent, the Trustee or any officer thereof is 92734,~ named or referred to herein, -such reference shall be deemed to $2737 include the successor to -the powers, duties and functions that are $2738 presently vested in the Bank, the City, the Paying Agent, the #2739,~' Remarketing Agent or the Trustee or such officer, and all agreements, $2743,~ conditions, covenants and terms contained herein required to be #2745 observed or performed by or on behalf of the Bank, the City, the 92746,~ Paying Agent, the Remarketing Agent or the Trustee or any officer $2749,2 thereof shall bind and inure to the benefit of ~he respective succes- 92752 sors thereof whether so expressed or not. #(2752) ~ECTXON 11.03. Execution of Documents by Owners. Any $2754 declaration, request or other instrument which is permitted 9r 92755 required herein to be executed by Owners kay be in one or more 92756 instruments of similar tenor ~nd may be executed by Owners in person #2757 9r by their attorneys appointed in writing. The fact and date of $2758,: 94691.3.2771.02:36 _63 #37.1 $ (37.1] their execution by any Owner 9r such Owner's attorney of any %2760 declaration, request or other instrument 9r of any writing appointing %2761 such attorney may be proved bY the certificate of any notary public #2762 or other officer authorized ~o take acknowledgments of deeds to be %2763 recorded in the state or territory in which such notary public or %2764 other officer purports to act that the person signing such declara- %(2764) tion, [equest or other instrument or writing acknowledged to such %2765 notary public or other officer the execution thereof, 9r by an affi- %2766 davit of a witness of such execution duly sworn to before such notary %(2766) public 9r other officer, or by such other proof as the Trustee may %2767 accept ~hich it may deem sufficient. %2768 6ny declaration, request or other instrument in writing of %2769 the Owner 9f any Bond shall bind all future Owners of such Bond ~ith %2770,2 respect to anything done or suffered to be done bY the City or the %2772 Trustee in good faith and in accordance therewith. %(2772) ~ECTION 11.04. Waivez of Personal Liabili~7. No supervi- %2774 sot, officer or employee .of the City shall be individually or person- %2775 ally liable for the payment of the interest 9r principal or redemp- %2776 tion premiums, if any, on the Bonds, but nothing contained herein %2777 shall relieve any supervisor, 9fficer or employee of the City from %2778 the performance of any 9fficial duty provided by any applicable pro- %2779 vision of law or hereby. %(2779) IECTION 11.05. Acquisition of the Bonds by City. All %2781 Bonds acquired by the City, ~hether by purchase or gift or otherwise, %2782 shall be surrendered ~o the Trustee for cancellation. %2783 ~ECTION 11.06. Notice by ~a/1. Any notice required to be %2785 given hereunder by mail to the Owners thall be given by mailing a %2786 copy of such notice, first class postage prepaid, ~o the Owners of %2787 all the Bonds at their addresses appearing in the books ~equired to %2788 be kept by the Paying Agent pursuant to the provisions of !ection %2789 2.14 hereof not less than fifteen (15) days nor more than thirty (30) %(2789) days ~ollowing the action or prior to the event concerning which %2790 notice thereof is required to be given unless a different notice #2791 period is specified 9lsewhere herein; provided that receipt of any %2792,1 such notice shall not be a condition ~recedent to the effect of such %2794 notice and failure to receive any such Botice shall not affect the #2795 validity of the proceedings taken in connection ~ith the action or %2796 the event concerning which such notice was given. 9(2796) ~E~TION 11.~7~ Fun4s. Any fund required to be established %2798 and maintained herein ~y the Trustee may be established and main- %2799 tained in the accounting records 9f the Trustee either as an account %2800 or a fund, and may, for the purpose of !uch accounting records, any %2801 audits thereof and any reports or statements ~ith respect thereto, be %2802 treated either as an account or a fund; but all such records with %2803 94691.3.2771.02~36 -64- %37.1 %(37.1) respect to all such funds shall at all times ~e maintained in %2804 accordance with sound accounting practice and with ~ue regard for the %2805 protection of the security of the Bonds ~nd the rights of the %2806 Owners. %(2806) ~ECTION 11.08. Article and Section Readinqs, Gender and #2808 References. The headings or titles of the several articles and sec- %(2808) tions hereof ~nd the table of contents appended hereto ~hall be %2809,2 solely for convenience of reference ~nd shall not affect the meaning, %2811 construction or effect hereof, ~nd words of any gender shall be %2812 deemed and construed to include all genders. _All references herein %2813 to "Articles," "Sections" and other subdivisions 9r clauses are to %2814 the corresponding articles, sections, subdivisions or ~lauses hereof; %2815 ~nd the words "hereby," "herein," "hereof," "hereto," "herewith," %2816 ~hereunder" and other words of similar import refer to this Indenture %2817 ~s a whole and not to any particular article, section, subdivision 9r %2818,2 clause thereof. $(2819) ~ECTION 11.09. Partial Invalidity. If any one or more of #2821 the conditions, covenants or terms contained herein iequired herein $2822 to be observed or performed by or on the part of the City, ~he Payinq. %2823 Agent or the Trustee !hall be contrary to law, then such condition or %2824 conditions, !uch covenant or covenants, or such term or terms shall $2825,2 be null and void and shall be deemed separable from the remaining $(2826) ~onditions, covenants and terms hereof and shall in no way affect ~he $2827,2. validity hereof or of the Bonds, _and the Owners shall retain all the %2829 benefit, protection and security _afforded to them hereunder and under %2830 all provisions of applicable law. ~he parties hereto declare that $2831 they would have executed and delivered this Indenture 9ach and every %2832 other article, section, paragraph, subdivision, ientence, clause and $2833 phrase hereof and would have authorized ~he issuance and delivery of %2834 the Bonds pursuant hereto irrespective of the fact that any one or $2835 more of the articles, sections, paragraphs, fubdivisi~ns, sentences, $2836 clauses or phrases hereof 9r the application thereof to any person or %2837 circumstance ~ay be held to be unconstitutional, unenforceable or %2838 invalid. %(2838) ~ECTION 11.10. California Law. This Indenture shall be $2840 construed and governed in accordance with the laws 9f the State of %2841 California. $(2841) ~ECTION 11.11. New York Ti~e. Unless otherwise expressly %2843 stated, all times referred to in this Indenture ~hall be New York $2844 City time. $(2844) 94691.3.2771.02:36 -65- %37.1 $(37.1) ~ECTION 11.19-. Notic~~. All written notices to be given $2846 hereunder shall be given by mail to the party entitled thereto at its $2847 address set forth below, or at such other address as such party may $2848 provide to the other parties hereinafter listed in writing from time $2849 to time, namely: $(2849) ~f to the Trustee: $2852 ~itibank, N. A. 120 Wall Street Sort 850 New York, New York Attention: 10043 ~S2855 ~#2856 ~S2857 ~#2858 ~S2858. ~$2860 ~f to the Paying Agent: S2863 Citibank, N, A, 120 Wall Street Sort 850 New York, N~w..¥0rk Attention: 10043 ~#2866 ~S2867 ~$2868 ~S2869 ~92869. If to the Tender AGent: ~#2871. Citibank~ N. A. 120 Wall Street Sort 850 New York, N~W Yo~k Attention: 10043 1S2871. 1S2871. ~%2871. 1#2871. 1S2871. 94691.3.2771.02:36 -66- $37.1 $(37.1) ~f to the City: ~ity of Tustin ~00 Centennial Way Tustin, California 92680 6ttention: Finance Director ~f to the Remarketing Agent: ~errill Lynch, Pierce, Fenner & Smith Incorporated ~errill Lynch World Headquarters ~orth Tower ~orld Financial Center ~ew York, New York 10281 ~ttention: Tax Exempt Money Markets Department %2872 %2875 %2876 %2877 1#2878 %2881 %2884 %(2884) %2885 #2886 %2886.1 %2887 %2888 %(2888) ~f to the Bank: %2891 The Mitsubishi T~ust and Banking Corporation Los AnGeles AagOcy 911 Wilshire Blvd., Suite ~650 Los AnGeles, ~alifornia 90017 Attention: 1%2892. 1#2892. 1%2892. ~%2892.~ 1%2892 ~, ~ECTION 11.13. ~ffective Date. This Indenture shall %2894 become effective upon its execution and delivery by the parties %(2894) hereof. % (2894) 94691.3.2771.02:36 -67- %37.1 %(37.1) ~N WITNESS W~ERBOF, the City has caused these presents to %2896,2 be signed in its name and on its behalf by its Mayorr and its corpo- 1%2898 rate seal to be hereunto affixed amd ~ttested by its City Clerk, I%2899 thereunto duly authorized, and ~o evidence its acceptance of the %2900 trusts hereby created, the ~rustee has caused these presents to be %2901 signed in its name ~nd on its behalf by its duly authorized officers, %2902 and its 9fficial seal to be hereunto affixed. %2903 %2906 ~ayor of the City of Tustin %2907 ~TTEST: %2909 ~ity Clerk of the City of Tustin %2911 %2912 %(2912) %2914 !Trustee] %2915 ~TTEST: %2917 %2919 iTrustee] %2920 94691.3.2771.02:36 -68- %37.1 %(37.1) EXHIBIT A EXB IBIT A iFORM OF IMPROVEMENT BOND] %2925 1%2926. %2927 94691.3.2771.02:36 %2923 %(2923) E_XH IBIT B %2970 [LANDOWNER ELECTION NOTICE] %2971 The undersigned hereby certifies that: (1) He is the owner of the following real prop- erty which is located in the City of Tustin Asse..ssment District NQ, 85-~: 192971. %2971.6 ~}2971~ 1%(2971 IDescription of real property] %2971.9 (2) The assessment on such real property is %2971.1 - %(2971. pursuant to this notice the undersigned hereby elects to %2971.1 convert ~he assessment on such real property to a Fixed Interest Rate %2971.1 ~as such term is defined in the Indenture of Trust dated as of %2971.1 August 1, 1986 by and between the City of Tustin ~n~ Citibank, %2971.1 N. A. (the "Indenture") on , 19__; provided, however, %2971.2 that such ~onversion shall not occur unless the requirements 9f %2971.2 Section 2.10(D) (i) or (ii) are met. ]pon the requirements of %2971.2 Section 2.10(D) (i) or (ii) having been ~et, ~his notice shall be %2971.2 irrevocable. %(2971. iName of Owner] %2971.2 mY: %2971.2 ITitle] %2971.2 94691.3.2771.02:36 %2929.1 %(2929. ~CHEDULE I ~nitial Adjusted Interest Rates iTo come] #2975 %2977 %2979 94691.3.2771.02:36 %2973 % (2973)' I'~.?,?,,,~D TO SHOW CHANGES CITY OF TUSTIN as Account Party and THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY as Issuing Bank REIMBURSEMENT AGREEMENT Dated as of August 1, 1986 u.s.$ Relating to the $ Improvement Bonds of the City of Tustin, Assessment District No. 85-1 Draft No. 2 7/28/86 Graham & James MTRS 2.101 TABLE OF CONTENTS Page No. ARTICLE I. Section 1.1. Section 1.2. ARTICLE II. Section 2.1. Section 2.2. Section 2.3. DEFINITIONS AND ACCOUNTING TERMS ..... Definitions ......... ISSUANCE OF LETTER OF CREDIT AND OTW~ PAYMENTS ....................... Issuance of Letter of Credit ......... Reimbursements and Other Payments .... (a) Reimbursements .................. (b) The Letter of Credit Fees ....... (c) Manner of Payments .............. (d) Late Payments ................... (e) Obligations Unconditional ....... (f) Waivers, Etc .................... (g) Increased Costs ................. Certain Provisions with Respect to Bank Bonds · . (b) Interest. (d) Prepayments. . (e) Sael of Bank'~]]]]]]]]][]][. (f) Bank as Owner of Bonds .......... (g) Custodial Arrangement ........... (h) Rate and Price Notification ..... (i) Subrogation as to Interest Payments ........................ 6 7 7 7 8 9 9 10 10 11 11 12 12 12 12 13 13 13 13 ARTICLE III. Section 3.1 Section 3.2. Section 3.3. Section 3.4 LETTER OF CREDIT OPERATIONS .......... Changes in Stated Amount of Letter of Credit ............................ Remarketing of Bonds Owned by the Bank ............................. Separate Purchase Arrangement; UsuryPayment ..... ~ 6~i.~ ~. ~~'~'~ ........ of Credit ............................ 13 13 13 14 14 -i- ARTICLE IV. Section 4.1 REPRESENTATIONS AND WARRANTIES ....... Representations and Warranties of the City ............................. (a) Existence ....................... (b) Power and Authorization ......... (c) No Legal Bar .................... (d) Consents ........................ (e) Litigation ...................... (f) Enforceability .................. (g) Changes in Law .................. (h) Financial Statements ............ (i) Disclosure of Information ....... (j) The Assessment District, Liens and Installments .......... Page No. 14 14 14 15 15 15 16 16 16 16 17 17 ARTICLE V. Section 5.1 Section 5.2. ARTICLE VI. Section 6.1 COVENANTS ............................ Affirmative Covenants of the City .... (a) Compliance with this Agreement and Other Financing Documents... (b) Laws, Permits and Obligations... (c) Use of Proceeds ................. (d) Maintenance of Existence ........ (e) Annual Statements ............... (f) Visitation and Examination ...... (g) Maintenance of Tax-Exempt Status of the Bonds ............. (h) Enforcement of the Irvine Company Agreement ............... Negative Covenants of the City ....... (a) No Change in Indenture or the Irvine Company Agreement .... (b) Conversion to Fixed Interest Rate ................... (c) Amendment of the Irvine Company Agreement.. · CONDITIONS TO ISSUANCE OF LETTER OF CREDIT ............................ Conditions To Issuance and Delivery of Letter of Credit .................. (a) The Financing Documents ......... (b) The Indenture ................... (c) City Proceedings, etc ........... 17 17 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20 20 20 20 -ii- Page No. ARTICLE Section Section VII. 7.1. 7.2. (d) Certificate ..................... (e) City's Attorney's Legal Opinion ......................... (f) Bond Counsel's Legal Opinion .... (g) Representation and Warranties True; No Default ................ (h) Other Requirements .............. EVENTS OF DEFAULT .................... Definition of Events ................. Notice of Events ..................... 2O 21 21 21 22 22 22 22 ARTICLE Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section VIII. 8.1 8.2. 8.3. 8.4. 8.5, 8.6. 8.7. 8.8. 8.9. 8.10. 8.11. 8.12. 8.13. 8.14. 8.15. 8.16. 8.17. 8.18. 8.19 MI SCELLANEOUS ........................ 23 No Waiver; Modifications in Writing.. 23 Payment on Non-Business Days ......... 24 Further Assurances ................... 24 Survival of Representations and Warranties ........................... 24 Notices, etc ......................... 25 Costs, Expenses and Taxes ............ 26 Execution in Counterparts ............ 26 Binding Effect; Assignment ........... 26 Governing Law ........................ 26 Severability of Provisions ........... 26 Headings ............................. 27 Right of Setoff ...................... 27 Actions Relating to the Financing Documents; Indemnity ................. 27 Limited Liability of City ............ 30 Security ............................. 30 Successor Trustee .................... 31 Extension of Term .................... 31 Advances .......... 31 Right of First ~i~.~.~i~ 31 Exhibit "A" Form of Irrevocable Letter of Credit -iii- I~E f ~BURSF-~4ENT AGREEMENT THIS REIMBURSEMENT AGREEMENT, dated as of August 1, 1986, is ~ade by the City of Tustin, California (the "City"), in favor of The Mitsubishi Trust and Banking Corporation, Los Angeles Agency (the "Bank"). RECITALS: WHEREAS, to obtain funds for the construction and acquisition of certain public improvements in the City of Tustin Assessment District No. 85-1 (which improvements and assessment district are described in Resolution of Intention No. adopted by the City Council of the City on (the "Resolution")), to meet debt service during construction of those improvements, the City proposes to issue and sell not to exceed U.S.$ aggregate principal amount of its Improvement Bonds, Assessment District No. 85-1; and WHEREAS, in order to provide funds for redemptions prior to maturity of the Bonds (as hereinafter defined), to provide funds for the purchase of Bonds tendered and not remarketed pursuant to the Indenture (as hereinafter defined) and to insure the timely payment of the principal of and interest on the Bonds, the City is requesting the Bank to issue to the Trustee under the Indenture for the account of the City a letter of credit (the "Letter of Credit"); and WHEREAS, the parties hereto, by all necessary action, have duly authorized the execution and delivery of this Agreement; NOW, THEREFORE, in order to provide for and to evidence the obligation of the City to reimburse any drawings under the Letter of Credit, and in consideration of the premises and of the commitments made hereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS Section 1.1. Definitions. Unless otherwise defined herein or the context otherwise requires, certain capitalized terms used herein shall have the meaning set forth in -1- Section 1.01 of the Indenture. In addition, the following terms as used in this Agreement shall have the following meanings, unless the context otherwise requires. These definitions shall be equally applicable to both the singular and the plural forms of the terms so defined. "Agreement" shall mean this Reimbursement Agreement, as the same may be amended or supplemented from time to time. "Bank Bond Principal Payment Date" shall mean as to each Bank Bond the earliest of (i) a Principal Payment Date [or date of a redemption under Indenture], (ii) the maturity date, (iii) the fifth anniversary of the Termination Date, (iv) in the event that the funds in the Remarketinq Cost Account are insufficient to permit the Bank to purchase Bonds at the Bank Purchase Price and the Bank is nQ~ reimbursed for the amount in excess of the Bank Purchase Pricer the date of payment under the Letter of Credit with respect to such Bonds, or (v) the date Of any event which adversely ~imDacts ~he ~ax exempt status o~ the Bonds. "Bank Bonds" shall mean all Bonds owned by the Bank acquired pursuant to the terms of Articles III or IV of the Indenture and held by the Bank or by Trustee as custodian for the Bank. "Bank Interest Rate" shall mean, at any date of c=%ermination, the lesser of (i) the Base Rate then in effect and (ii) the Maximum Rate in effect from such date of determination to the next succeeding Business Day. "Bank Purchase Date" shall mean any Business Day on - which Bonds are purchased pursuant to Section 2.03(a) hereof. "Bank Purchase Price" shall mean, with respect to Bonds to be purchased on any Bank Purchase Date under Section 2.3(a) hereof: (1) if, on such Bank Purchase Date, the Base Rate is less than or equal to the Maximum Rate, (i) accrued interest (without regard to the Bank Rate) on the Bonds to be purchased to the Bank Purchase Date, plus (ii) the principal amount of the Bonds to be purchased; or (2) if, on such Bank Purchase Date, the Base Rate is greater than the Maximum Rate, the amount calculated with respect to such purchase in accordance with Appendix A hereto (using the Bank Rate and the Base -2- Rate in effect on such Bank Purchase Date, the amount of accrued interest (without regard to the Bank Rate) on the Bonds to the Bank Purchase Date and the number of days until the next succeeding Business Day); A "Base Rate" means the following (provided that in no event shall the rate of interest payable with respect to any Bank Bond exceed the Maximum Rate): (1) with respect to Put Bonds, except as otherwise provided in clauses (3) and (4) below, for each of the first sixty (60) days that a Bond is a Bank Bond the Bond shall bear interest at a rate per annum equal to the Federal Funds Rate for such day plus three- eighths of one percent (3/8%), (2) with respect to Put Bonds, except as otherwise provided in clauses (3) and (4) below, for each day thereafter that a Bond is a Bank Bond the Bond shall bear interest at a rate per annum equal to the Prime Rate for such day, (3) except as otherwise provided in clause (4) below, for each day that any sum due to the Bank on any Bank Bond remains unpaid, such Bond shall bear interest at a rate per annum equal to the Prime Rate for such day plus two percent (2%), and (4) in no event shall any Bank Bond bear interest at a rate less than the average rate applicable to thirty (30) day tax-exempt commercial paper as reported by the Munifacts Wire System Inc., or, if such index is no longer reported, a substitute approximating as closely as possible such rate, as selected in good faith by the Bank and approved by the City, or, if the City shall fail to act, by the Trustee. "Bankruptcy Law" shall mean Title 11, U.S. Code, as amended or supplemented, any successor statute thereto, or any similar federal, state, or foreign law for the relief of debtors. "Bond Counsel" shall mean a firm of recognized bond counsel familiar with the transactions contemplated under the Indenture and acceptable to the City and, for the purpose of Section 6.01(f) hereof, the Bank. -3- "Bonds" shall mean the City of Tustin Improvement Bonds, Assessment District No. 85-1 in the aggregate principal amount of $ issued by the City pursuant to the Indenture, other than Fixed Interest Rate Bonds. "Bonds Payment Date" means any Purchase Date, Conversion Date, Demand Date, Optional Tender Date, Unit Pricing Date, or Principal Payment Date, as those terms are defined in the Indenture, the first Business Day of each week as to Bank Bonds and any other date on which the principal of, or interest on, the Bonds is to be paid to the Owners thereof, whether upon redemption or at maturity of the Bonds. "Business Day" shall mean a day which is not a Saturday or a Sunday or a bank holiday under the laws of the United States or the States of California or New York. "City Attorney" shall mean Rourke & Woodruff. "Effective Date" shall mean the date on which the Letter of Credit is issued by the Bank. "Event of Default" shall have the meaning set forth in Section 7.1 hereof. "Federal Funds Rate" shall mean, for any day, the average rate charged to the Bank for such day on overnight federal funds transactions with member banks of the Federal Reserve System arranged by federal funds brokers, as determined by the Bank. "Financing Documents" shall mean this Agreement, the Letter of Credit, the Bonds, the Indenture, the Remarketing Agreement and any other document or instrument required or stated to be delivered hereunder or thereunder. "Indenture" shall mean that certain Trust Indenture relating to the Bonds, dated as of August 1, 1986, by and between Citibank N.A. and the City, as the same may be amended or supplemented from time to time. "Interest Draw" shall mean a payment with respect to interest made by the Bank pursuant to a demand under the Letter of Credit in the form of Annex 1. -4- ["Irvine Company Agreements" shall mean that certain Cash Advance Agreement for Improvements in Proposed Assessment District No. 85-1 dated and entered into by the City and The Irvine Company, as the same may be amended or supplemented or extended from time to time and the Protocol Agreement entered into by the City and The Irvine Company, as the same may be amended or supplemented or extended from time to time.] "Issuer" shall mean the City. "Letter of Credit" shall mean the letter of credit issued pursuant to Section 2.1 hereof, as the same may be amended from time to time. "Letter of Credit Fee" shall mean all fees set forth in Section 2.2 hereof. "Participant" shall mean a person that acquires a participation in the Bank's rights and/or obligations under this Agreement and the Letter of Credit. "Prime Rate" shall mean, for any day, the fluctuating rate announced publicly by the Bank from time to time at its Los Angeles Agency office as its "prime rate", said rate to change on and as of the date of any change in the announced "prime rate". "Principal Draw" shall mean any payment by the Bank with respect to a drawing by the Trustee under the Letter of Credit other than an Interest Draw or an Unpaid Drawing. "Put Bonds" shall mean any Bonds purchased pursuant to / Sections 4.01, 4.02, 4.03, 4.05(A) or 4.05(B) of the Indenture. "Reimbursement Account" shall mean the Bank's account with Security Pacific National Bank in Los Angeles, C~liforniar Account No. 0000-8422 or such other account as may be designated by the Agent in writing to the City and the Trustee. "Stated Amount" shall mean the amount available to be drawn under the Letter of Credit, which initially shall be $ , as from time to time decreased and/or increased in accordance herewith. -5- "Termination Date" shall mean the tenth (10th) anniversary date of the issuance of the Letter of Credit, as such date may be extended pursuant to an amendment of the Letter of Credit, or any earlier date on which the Letter of Credit shall terminate, expire or be cancelled. "Unpaid Drawings" shall mean, at any time, the aggregate amount of payments made by the Bank pursuant to demands under the Letter of Credit~for the purchase of Put Bonds to the extent theretofore not reimbursed by the City pursuant to the terms of this Agreement. Section 1.2. Accounting Terms. Ail accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, except as may be otherwise stated herein. ARTICLE II. ISSUANCE OF LETTER OF CREDIT AND OT~RR PAYMENTS Section 2.1. Issuance of Letter of Credit. On at least two (2) Business Days' prior notice from the City and at the request and for the account of the City, the Bank hereby agrees, on the terms and subject to the conditions hereinafter set forth, to issue to the Trustee a Letter of Credit (in the form of Exhibit A hereto) dated the date of issuance thereof in the initial amount of $ , which shall create the obligation of the Bank to honor drawings in accordance with the terms of the Letter of Credit in amounts equal to: (1) the principal amount of the Bonds, (2) an amount (up to $ ) available for interest accrued on the Bonds at or before the Termination Date, and (3) an amount (up to $ ), available for premium upon redemption [or purchase] of the Bonds. The Letter of Credit shall be issued for a term expiring on the tenth (10th) anniversary date of the Effective Date, subject to extension or earlier termination as provided in this Agreement, the Indenture and/or in the Letter of Credit or cancellation. The Banks' obligation to issue the Letter of Credit shall expire at 4:00 p.m., Los Angeles time, on , 1986. -6- Section 2.2. Reimbursements and Other Payments. (a) Reimbursements. Except as otherwise provided in Section 8.14 hereof, the City agrees to reimburse the Bank, at the times, in the manner and otherwise as provided in this Agreement and the Indenture, for each payment made under the Letter of Credit honoring any drawing made by the Trustee thereon. The City shall reimburse the Bank for each Interest Draw, Principal Draw and for each other payment (other than an Unpaid Drawing) under the Letter of Credit, no later than the close of business of the banking office where the Reimbursement Account is then maintained, on the day such Interest Draw, Principal Draw or other payment is honored. The obligation of the City to reimburse any Unpaid Drawings shall be evidenced by and subject to the terms and conditions set forth in Section 2.3 of this Agreement. Whenever the Bank pays interest on a Bond pursuant to an Interest Draw, the Bank shall be subrogated to the rights of the Owner of the Bond to payment of such interest. The Bank shall be the Owner of each Bond purchased or paid with moneys drawn under the Letter of Credit, and shall be entitled to all of the rights, benefits and protections of the Indenture with respect to each such Bond and the obligations of the City under this Agreement (for the purpose of this provision the Indenture shall be deemed to continue in full force and effect notwithstanding any earlier termination thereof so long as any obligation of the City under this Agreement shall remain unpaid). (b) Advance Deposits for Certain Draws. Prior to --/ any draw under the Letter of Credit with respect to (i) any optional redemption pursuant to Section 3.02 or 3.03 of the Indenture, or (ii) any premium whatsoever, the City shall pay or cause to be paid, and the Trustee shall have in its possession, immediately available funds in the amount equal to such draw. (c) The Letter of Credit Fees. Except as otherwise provided in Section 8.14 hereof, the City shall pay to the Bank in advance (i) on the Effective Date and on each January 1, April 1, July 1 and October 1 thereafter a Letter of Credit Fee at the rate of three-tenths of one percent (.3%) per annum during the first five years after the Effective Date, (ii) at the rate of four-tenths of one percent (.4%) per annum during the second five-year period following the Effective Date to , 1996, and (iii) -7- thereafter on each January 1, April 1, July 1, and October 1 to the Termination Date at the rate agreed by the parties upon any extension of the Letter of Credit pursuant to Section 8.17 hereof (computed on the basis of a 360-day year and actual days elapsed) (each such date, a "fee payment date") on the average daily Stated Amount during the period beginning on such fee payment date and ending on the date next preceding the next fee payment date thereafter (each such period, a "payment period"). The Letter of Credit Fee payable on the Effective Date for the payment period ending October 1, 1986 shall be based on the assumption that the average daily Stated Amount for that payment period will be the Stated Amount on the Effective Date, and the Letter of Credit Fee for each payment period thereafter shall be calculated based on the assumption that the average daily Stated Amount for such payment period will be the Stated Amount on the date which is thirty (30) days prior to such fee payment date. On the last Business Day of each payment period (in the case of the last payment period, the Termination Date), the actual Letter of Credit Fee for the payment period ending on such date shall be calculated and (i) if the amount paid for such payment period exceeded the actual Letter of Credit Fee payable, the excess shall (at the direction of the Bank) be repaid to the City by the Bank or credited against the Letter of Credit Fee payable for the next payment period and (ii) if the amount paid for such payment period was less than the actual Letter of Credit Fee payable, the deficiency shall (at the direction of the Bank) be paid by the City to the Bank or added to the Letter of Credit Fee payable for the next payment period. Except as otherwise provided in Section 8.14 hereof, the City shall, in 'addition to the Letter of Credit Fee, pay to the Bank for its own account within two (2) Business Days following each drawing on the Letter of Credit a fee of $250 for each such drawing. In addition, the City shall pay to the Bank (i) a fee of $10,000 upon the substitution of a letter of credit for the Letter of Credit pursuant to Section 4.06 of the Indenture or upon early termination of the Letter of Credit accompanied by cancellation of all Outstanding Bonds other than Fixed Interest Rate Bonds; and (ii) a transfer fee of $1,500 with respect to each transfer of the Letter of Credit pursuant to the terms of Section 4.06 of the Indenture. (d) Manner of Payments. Ail payments to be made by or on behalf of the City or the Trustee to the Bank on account of amounts at any time owing hereunder or in -8- connection herewith shall be made, and shall not be considered made until received, in U.S. dollars in the Reimbursement Account in immediately available funds. All such payments shall be made to the Bank not later than the close of business of the banking office where the Reimburse- ment Account is then maintained, on the date due. (e) Late Payments. For each day that any sum due to the Bank hereunder or under the Indenture remains unpaid such sum shall bear interest at a rate per annum equal to the Prime Rate for such day plus two percent (2%) (computed on the basis of a 360-day year and actual days elapsed). (f) Obligations Unconditional. Except as otherwise provided in Section 8.14 hereof, the City's obligation to reimburse the Bank for each payment made under the Letter of Credit honoring any drawing made by the Trustee thereon and all of its other obligations under this Agreement, except as provided in this paragraph below, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the City may have against the Bank or against any beneficiary of the Letter of Credit (or any other person for whom such beneficiary may be acting), or any other person, including, without limitation, any defense based on the failure of any drawing on the Letter of Credit by the Trustee to conform to the terms of the Letter of Credit or based on invalidity, inaccuracy, falsity, or lack of genuineness, whether by forgery, fraud or otherwise, of any document, demand, or statement presented under the Letter of Credit or any failure of the City to receive all or any part of the proceeds of the sale of any Bonds with respect to which such drawing on the Letter of Credit was made by the Trustee or any non-application or misapplication by the Trustee of the proceeds of such drawing, and irrespective of the legality, validity, regularity or enforceability of all or any of the Financing Documents, and notwithstanding any amendment or waiver of (other than an amendment or waiver explicitly reciting the release or discharge of any such obligation), or any consent to departure from, all or any of the Financing Documents or any exchange, release, or non- perfection of any collateral securing the Bonds or the obligations of the City hereunder or any expiration of the Letter of Credit pursuant hereto; provided, however, that the City shall not be obligated to reimburse the Bank for any wrongful payment or disbursement made under the Letter of -9- Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Bank or any of its officers, employees, or agents. (g) Waivers, Etc. To the full extent permitted by law: (i) the City hereby waives (a) presentment, demand, notice of demand, protest, notice of protest, notice of dishonor and notice of non-payment; (b) except as provided in and subject to the Indenture, the right, if any, to the benefit of, or to direct application of, any security hypothecated to the Bank until all obligations of the City to the Bank hereunder, howsoever arising, shall have been paid; (c) the right to require the Bank to proceed against the City hereunder, or against any person under any guaranty or similar arrangement, or to pursue any other remedy in its power; (d) all statutes of limitation; and (e) any defense arising out of the election by the Bank to foreclose on any security by one or more non-judicial or judicial sales; (ii) the Bank may exercise any other right or remedy, even though any such election operates to impair or extinguish the City's right to reimbursement from, or any other right or remedy it may have against, any person, or any security (it being understood that this clause (ii) does not confer upon the Bank any right or remedy it would not have otherwise); and' (iii) the City agrees that the Bank may proceed against the City or any person directly and independently of any other, and that any forbearance, change of rate of interest, or acceptance, release or substitution of any security, guaranty, or loan or change of any term or condition hereunder or under the Letter of Credit or any Financing Document shall not in any way affect the liability of the City hereunder. (h) Increased Costs. If any change in any law or regulation, domestic or foreign, in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof, or in any generally accepted regulatory or accounting principles on or after the date hereof shall (i) impose, modify or deem applicable any reserve, special deposit or similar require- ment against letters of credit issued or participated in by, or assets held by, or deposits in or for the account of the Bank or any Participant, (ii) impose on the Bank or any Participant any other condition or requirement regarding this Agreement or the Letter of Credit or any participation therein or any collateral therefor or (iii) subject the Bank -10- or any Participant to any tax, charge, fee, deduction or any withholding of any kind whatsoever, and the result of any event referred to in clause (i), (ii) or (iii) above shall be to increase the cost to the Bank or any Participant of issuing, participating in or maintaining the Letter of Credit or of holding any collateral therefor or reduce the amount of any fee or any other amount receivable by the Bank or any Participant with respect to the Letter of Credit or any participation therein or this Agreement (which increase in cost or reduction in fee or other receipt, as the case may be, shall be determined by the Bank's or Participant's reasonable allocation of the aggregate of such cost increases or fee reductions resulting from such events), then, upon demand by the Bank, the Letter of Credit Fee set forth in Section 2.2(b) hereof shall immediately be increased by the additional amounts that are reasonably necessary to compensate the Bank or such Participant for such increased costs incurred or reduced receipts suffered thereby, provided that the participation of one or more Participants shall not cause the Letter of Credit Fee to exceed the amount it would have been without the participation of such Participant or Participants. A certificate of the Bank or any Participant as to such increased costs incurred or reduced receipts suffered by any of them as a result of any event mentioned in clause (i), (ii) or ~iii) above submitted to the City specifying the event causing such increased cost or reduced receipt and setting forth in reasonable detail the calculation made to determine the amount of such increased cost or reduced receipt shall be presumptively correct as to the amount thereof, absent demonstrable error. The Bank and each Participant shall exercise reasonable efforts to minimize such increased costs or reduced receipts. The participation of one or more Participants shall not reduce or alter the Bank's obligations under this Agreement or affect in any way the rights or obligations of the City hereunder or under the Bonds and the City shall have the right to continue to deal solely with the Bank, and no such participation shall cause any national rating agency to lower its rating on the Bonds. Section 2.3. Certain Provisions with Respect to Bank Bonds. Bank Bonds shall be subject to all applicable provisions of this Agreement and to these provisions: (a) Purchase of Bonds. The Bank will purchase with funds drawn under the Letter of Credit, on the terms and -11- conditions contained in this Agreement and the Indenture and at the applicable Bank Purchase Price, all Bonds other than Fixed Rate Bonds (i) that are Put Bonds purchased and not resold by the Remarketing Agent by [time] on the same dayAor (ii) that become due, whether by acceleration, redemptiod'or otherwise. Bonds purchased by the Bank for any reason other than Put Bonds will be due and payable immediately, and the City will immediately pay, or cause to be paid, to the Bank, as owner of such Bonds, the principal amount of such Bonds and interest accrued to the date of payment. (b) Interest. Interest on Bank Bonds shall be paid in arrears to the Bank on the first Business Day of each week and on each Bonds Payment Date. Each Bank Bond shall bear interest on the outstanding principal amount thereof for each day from and including the date such Bond is purchased to but not including the date such Bond is paid in full at maturity or upon redemption or is remarketed at a rate per annum equal to the Bank Interest Rate. The Bank Interest Rate shall be computed on the basis of a 360-day year and actual days elapsed. Accrued interest received by the Bank on any Bank Bond shall be credited against the City's obligations under this Section 2.3(a). (c) Principal. Ail Bank Bonds shall be subject to payment, redemption and purchase pursuant to the Indenture. In addition, the City on each Bank Bond Principal Payment Date shall pay to the Bank the full principal amount of the Bonds to be redeemed or, in the case of Bank Bonds which have reached maturity, pay the principal owing with respect to all such matured Bonds, as applicable, plus accrued and unpaid interest thereon to the date of such payment. All other Bank Bonds shall be paid or redeemed by the City by payments in accordance with Section 2.2(a) hereof. (d) Prepayments. The City may prepay without premium or penalty any Bank Bond at any time. Principal prepayments shall be accompanied by interest accrued thereon to the date of prepayment. (e) Sale of Bank Bonds. Any sums received by the Bank on account of any sale or other transfer of Bank Bonds to a third party (whether by reason of termination of the Letter of Credit and substitution of an Alternate Letter of Credit, remarketing of the Bank Bonds, or otherwise) shall -12- reduce, in an equal sum, the reimbursement obligation of the City hereunder. (f) Bank as Owner of Bonds. Upon its purchase of any Bond pursuant hereto, and for so long as it shall continue to hold such Bond, the Bank shall be the owner of such Bond for all purposes of such Bond, the Indenture and the Resolution. (g) Custodial Arrangement. The Bank shall be entitled to participate in any custodial arrangement in effect at any time with respect to the Bonds. (h) Rate and Price Notification. By [time] on any day on which the Bank holds Bonds or is requested to purchase Bonds pursuant to Section 2.03(a) hereof, the Bank shall notify the Remarketing Agent of the Prime Rate, Base Rate and Bank Purchase Price then in effect; except that no such notice shall be required with respect to any Bond due and payable immediately as provided in Section 2.03(a) hereof. The Bank will inform the City of the Prime Rate, Base Rate and Bank Purchase Price from time to time as requested by the City. (i) Subrogation as to Interest Payments. Whenever, pursuant to an Interest Drawing, the Bank pays regularly scheduled interst on Bonds not owned by it, the Bank shall be subrogated to the rights of the owners of Bonds to payment of such interest. ARTICLE III. LETTER OF CREDIT OPERATIONS Section 3.1. Changes in Stated Amount of Letter of Credit. The Stated Amount of the Letter of Credit shall be decreased and increased as provided in the Letter of Credit. In no event shall any such increase cause the sum of (i) Unpaid Drawings and (ii) the Stated Amount to exceed $ · Section 3.2. Remarketing of Bank Bonds. ASo long as the Bank is the Owner of Put Bonds, they shall be subject to remarketing pursuant to t~'Remarketing Agreement and the City shall cause the the Bank to be named in the Remarketing Agreement as a beneficiary of that agreement. The Bank shall deliver any such Bonds, and a due-bill check if required, at -13- the direction of the Trustee against receipt in the Reimbursement Account, as provided in Section 2.2(~) hereof, of the principal amount of, and any accrued interest on, such Bonds. Section 3.3. Separate Purchase Arrangement; Usury. The Bank shall have the option, in lieu of purchasing any Bonds hereunder, to arrange to loan the purchase price of such Bonds to a third party which shall purchase, hold and tender such Bonds as Bank Bonds on the terms and conditions provided herein and in the Indenture; provided that no such arrangement shall in and of itself reduce in any respect the Bank's obligations under this Agreement or the Letter of Credit or affect in any way the rights or obligations of the City hereunder or under the Bonds or the Trustee's rights under the Letter of Credit, that the City and the Trustee shall have the right to continue to deal solely with the Bank and that no such arrangement shall cause any national rating agency to lower the rating on the Bonds.. No such arrangement shall result in a reduction of the Stated Amount. In no event shall any purchaser of Bonds hereunder be entitled to receive payments hereunder in excess of those permitted by any usury or similar law applicable to it. If any third party purchases any Bonds pursuant to an arrangement contemplated-in this Section, the Bank shall promptly notify the Trustee and the Paying Agent of (a) such purchase, (b) the identity of the Bonds so purchased, and (c) the identity of the third party purchasing the Bonds. Section 3.4. Payment of Drawings on Letter of Credit. The Bank agrees that (a) drawings on the Letter of ~ will be paid from funds of the Bank and not directly or indirectly from funds or collateral on deposit with or for the account of, or pledged with or for the account of the Bank by the City and (b) the Bank will seek reimbursement for each payment under the Letter of Credit only after such payment has been made. ARTICLE IV. REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties of the City. The City represents and warrants to the Bank as follows: -14- (a) Existence. The City is a municipal corporation duly organized, existing and in good standing under and by virtue of the Constitution and laws of the State of California. (b) Power and Authorization. The City has all requisite power and authority (i) to execute, deliver and perform its obligations under the Financing Documents to which the City is a party and (ii) to issue and sell the Bonds in the manner and for the purposes contemplated by the Indenture and this Agreement. The City has taken all necessary action to authorize the issuance and sale of the Bonds and to authorize the execution, delivery and performance of the Financing Documents to which the City is a party. (c) No Legal Bar. The City is not in default under any of the provisions of the laws of the State of California which would affect its existence or its powers referred to in the preceding paragraph (b). The execution, delivery and performance by the City of this Agreement, the adoption and performance by the City of the Indenture, the issuance and the sale of the Bonds in the manner and for the purposes contemplated by this Agreement and the Indenture, and the execution, delivery and performance by the City of all other Financing Documents to which the City is a party (i) will not violate any provision of any applicable law or regulation or of any order, writ, judgment or decree of any court, arbitrator or governmental authority, (ii) will not violate any provisions of the Charter or the Code of Ordinances of the City or any other document constituting, regulating or otherwise affecting the operations or activities of the City, and (iii) will not violate any provision of, constitute a default under, or result in the creation or imposition of any lien, mortgage, pledge, charge, security interest or encumbrance of any kind on any of the assets of the City pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which the City is a party or which, to the best knowledge of the City, purports to be binding upon the City or upon any of its assets. (d) Consents. The City has obtained all consents, permits, licenses and approvals of, and has made all registrations and declarations with, governmental authorities required under law to authorize the sale and issuance of the -15- Bonds and the execution, delivery and performance by the City of this Agreement and the Indenture. (e) Litigation. Except as disclosed in the Official Statement of the City delivered in connection with the offering of the Bonds, there is no action, suit, investigation or proceeding to which the City is a party and which is pending or, to the best knowledge of the City, threatened in connection with any of the transactions contemplated by this Agreement, against or affecting the assets of the City, the result of which could, if decided adversely to the City, have a materially adverse effect on the operations of the City or its ability to perform its obligations under the Financing Documents. (f) Enforceability. This Agreement and the Indenture have each been duly executed and delivered by the City and constitute, and, when executed by the City and authenticated (where required) and delivered by the Trustee, the Bonds, and each other Financing Document to which the City is or is to be a party will each constitute, the legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms (except as such enforceability may be limited by bankruptcy, moratorium or other similar laws affecting creditors' rights generally and provided that the application of equitable remedies is subject to the application of equitable principles). (g) Changes in Law. There is not pending any change of law which, if enacted or adopted, could have an adverse effect on the City's power to issue or its ability to pay in full in a timely fashion the principal of and interest on the Bonds or the obligations'of the City under Section 2.3 of this Agreement. (h) Financial Statements. The balance sheets of the City as of , and the related statements of income, changes in equity and changes in financial position for the year then ended (copies of which have been furnished to the Bank) present fairly the City's financial position at , and the results of its operations and the changes in its financial position for the year then ended, in conformity with generally accepted accounting principles applied on a consistent basis, and there has been no material adverse change in such condition or operation, the business -16- properties, or conditions (financial or otherwise) of the City since that date. (i) Disclosure of Information. The information relating to the City contained in any Official Statement issued by the City in relation to the issuance of the Bonds, including any exhibits, appendices or attachments thereto, as such statements may be amended or supplemented from time to time, is true and correct and does not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There are no facts that the City has failed to disclose to the Bank that, individually or in the aggregate, could have a materially adverse effect on the assets, financial condition, business or operations of the City or its ability to perform its obligations under the Financing Documents. (j) The Assessment District, Liens and Installments. Assessment District No. 85-1 is duly formed and validly existing. The Bonds are secured by valid and enforceable liens upon the lots and parcels of land within Assessment District No. 85-1, which constitute a first lien and charge against such properties (including all present and future improvements thereon comprising part of such properties) coequal with the lien securing real property taxes. The Indenture validly and enforceably pledges, in Section 5.01 thereof, the Assessment Installments (as defined in the Indenture) to the payment of all amounts due under the Bonds and this Agreement and such pledge constitutes a first lien and charge against such Assessment Installments. Each representation and warranty on the part of the City contained in any Financing Document shall be deemed to be reaffirmed by the City on each drawing on the Letter of Credit. ARTICLE V. COVENANTS Section 5.1. Affirmative Covenants of the City. The City covenants and agrees that so long as any Bond or any obligation of the City under this Agreement shall remain unpaid or the Bank shall have any liability under or in respect of the Letter of Credit: -17- (a) Compliance with this Agreement and the Other Financing Documents. The City will observe and perform each term, covenant, condition and agreement on its part to be performed or observed under this Agreement and/or the other Financing Documents. (b) Laws, Permits and Obligations. The City will comply with all valid acts, rules, regulations, orders and directions of any legislative, executive, administrative or judicial body applicable to the Financing Documents, violations of which would have a material adverse effect on the City, its financial condition, its assets, or its ability- to perform its obligations under the Financing Documents. (c) Use of Proceeds. The City will use or cause to be used the proceeds of the sale of the Bonds in accordance with the provisions of the Indenture and this Agreement and in accordance with the statements pertaining thereto in the Official Statement of the City delivered in connection with the offering of the Bonds. (d) Maintenance of Existence. The City will at all times maintain its existence and good standing under the laws of the State of California. (e) Annual Statements. The City shall furnish to the Bank (i) as soon as possible but in any event within one hundred eighty (180) days following the end of each Fiscal Year, its balance sheet as of the end of such fiscal year and the related statements of income, changes in equity and changes in financial position for the year then ended certified by independent auditors of recognized standing, (ii) within sixty (60) days after the end of each of the first three (3) quarters of each fiscal year, its unaudited income statement for the last month of such quarter presenting the results of its operations in such month and for the year to date, (iii) as soon as available a copy of any report to the City of any auditors of the City, (iv) to the extent permitted by law, as soon as available a copy of any other periodic report of its activities or condition submitted to any governmental agency and any other audit report prepared with respect to its activities or condition for delivery to a third party and (v) as soon as available but in no event later than thirty-one (31) days after the end of each fiscal quarter, a financial statement with respect to each of the Assessment Fund, Reserve Fund, Construction Fund, Principal Fund, Interest Fund, Fixed Rate Reserve Fund, Interest Reserve Fund, Reserve Earnings Fund, Purchase Fund and Redemption Fund [other funds]. (f) Visitation and Examination. Unless otherwise prohibited by law, the City will permit any person designated by the Bank to visit any of the offices of the City to examine the books and financial records, including minutes of meetings of the City Council, and make copies thereof or extracts therefrom, and to discuss the affairs, finances and accounts of the City with its principal officials, all at such reasonable times and as often as the Bank may reasonably request, to the extent such information and material relate~ to the transactions contemplated by the Financing Documents. (g) Maintenance of Tax-Exempt Status of the Bonds. The City will not take any action or omit to take any a-~-~n which, if taken or omitted, would adversely affect the exemption of interest on the Bonds from federal income taxation or from State of California personal income taxes. [ (h) Enforcement of Irvine Company Agreements. City shall take such action to enforce the Irvine Company Agreements as the Bank may reasonably direct.] The Section 5.2. Negative Covenants of the City. The City covenants and agrees that so long as any Bonds or any obligation of the City under this Agreement shall remain unpaid or the Bank shall have any liability under or in respect of the Letter of Credit: (a) No Change in Indenture or the Irvine Company Agreements. The City will not cancel, terminate, amend, supplement, modify or waive any of the provisions of the Indenture or the Irvine Company Agreements, and will not consent to any such cancellation, termination, amendment, supplement, modification or waiver, without the prior written consent of the Bank. (b) Conversion to Fixed Interest Rate. The City will not cause the Bonds to bear interest at the Fixed Interest Rate unless the City (1) will be able to reimburse the Bank for any related or res--'~ting payment under the Letter of Credit on the day of such payment, as provided in Section 2.2 hereof, and (2) has entered into an aqreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated and -19- Stone & Youngberg or other national firm or firms reasonably~ acceptable to the Bank for the sale of Fixed Rate Bonds on a~ "firm commitment" basis upon such terms and conditions ~ reasonably acceptable to the Bank. [(c) Amendment of the Irvine ComDany Agreements. City shall not amend the Irvine Company Agreements without the prior written consent of the Bank, which consent may not be unreasonably withheld.] The (d) Residential Property. The City will not permit residential property,,within Assessment District No.' 85-1 to be conveyed to a residential user, including a lessor, thereof while an Assessment on such property secures payment of any Bond covered by the Letter of Credit, and the City shall record a notice to such effectr in form an~ substance reasonably satisfactory to the Bank~ with the Orange County Recorder. IRestrictions on sale to developers) A~TICLE VI. CONDITIONS TO ISSUANCE OF LETTER OF CREDIT Section 6.1. Conditions To Issuance and Delivery of Letter of Credit. The obligation of the Bank to issue an~ deliver the Letter of Credit to the Trustee shall be subject to the fulfillment, at or before the issuance of the Letter of Credit, of each of the following conditions: (a) The Financing Documents. The Financing Documents shall have been duly executed and delivered by each of the respective parties thereto and shall not have been modified, amended or rescinded, shall be in full force and effect on and as of the Effective Date and executed original or certified copies of each thereof shall have been delivered to the Bank. (b) The Indenture. The Indenture shall have been duly adopted and shall be in full force and effect on and as of the Effective Date. (c) City Proceedings, etc. The Bank shall have received a certified copy of all proceedings taken by the City authorizing the transactions hereunder and the execution, delivery and performance of this Agreement, the Indenture, and the Bonds, together with such other certifications as to matters of fact as shall be reasonably -20- requested by the Bank, all in form and substance satisfactory to the Bank. (d) Certificate. The Bank shall have received a certificate signed by an authorized representative of the City, dated the Effective Date, to the same effect as paragraphs (a) through (c) of this Section 6.1, and to the further effect that (i) the City has obtained all consents, permits, licenses and approvals of, and has made all registrations and declarations with, governmental authorities required under law to authorize the issuance and sale of the Bonds and the execution, delivery and performance bY fhe City of this Agreement; (ii) to the best knowledge of the City, no Event of Default or event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default, has occurred or is continuing; and (iii) to the best knowledge of the City, there is no action, suit, investigation or proceeding to which the City is a party and which is pending or threatened (A) in connection with any of the transactions contemplated by the Indenture or this Agreement or (B) against or affecting the City or its assets, the result of which could have a materially adverse effect on the financial condition, assets, business or operations of the City or its ability to perform its obligations under the Financing Documents. Such certificate shall cover such other matters incident to the transactions contemplated by the Indenture and by this Agreement as the Bank may reasonably request, and shall be in form and substance satisfactory to the Bank. (e) City Attorney's Legal Opinion. The Bank shall have received an opinion of the City Attorney dated the Effective Date in form and substance satisfactory to the Bank. (f) Bond Counsel's Legal O~inion. The Bank shall have received an opinion of Bond Counsel dated the Effective Date in form and substance satisfactory to the Bank. (g) Representations and Warranties True; No Default. The Bank shall be satisfied that on the Effective Date each representation and warranty on the part of the City contained in any Financing Document is true and correct in all material respects and no Event of Default, or event which, with the giving of notice, passage of time, or both, would constitute an Event of Default, has occurred and is -21- continuing; provided, however, that issuance of the Letter of Credit shall not be deemed to constitute a determination by the Bank that this condition has been satisfied or to constitute waiver of, or estoppel, to the Bank's right to enforce remedies as provided herein should such conditions later be determined not to have been satisfied on the Effective Date. (h) Other Requirements. The Bank shall have received such other certificates, approvals, opinions and documents as shall be reasonably requested by the Bank, all in form and substance satisfactory to the Bank. ARTICLE VII. EVENTS OF DEFAULT Section 7.1. Definition of Events. If any of the following events, acts or occurrences (herein called "Events of Default") shall occur: (a) the issuance of any Bonds shall result in a violation by the City of any law, rule or regulation, or any order of any court, governmental agency or regulatory body, or any indenture or loan or'credit agreement (including the Financing Documents), or any other agreement or instrument, applicable to the City or to such issuance by the City which impairs the ability of the City to perform its obligations hereunder or any of the Financing Documents; or (b) default in the payment when due of principal or premium owing or interest on any Bond which continues for a period of five (5) Business Days (except to the extent that such default is solely attributable to the wrongful failure by the Bank to honor a conforming drawing made by the the Letter of Credit) or default in the payment when due of any amount owing by the City under this Agreement or under the Indenture; or (c) any representation or warranty on the part of the City contained in any Financing Document shall at any time prove to have been incorrect in any material respect when made or when effective or when reaffirmed, as the case may be; or (d) the City shall default in the performance or observance of any term, covenant, condition or agreement on -22- its part to be performed or observed hereunder or under the Indenture (and not constituting an Event of Default under any other clause of this Section 7.1), and such default shall continue unremedied for thirty (30) days after written notice thereof shall have been given to the City by the Bank; or (e) an "Event of Default" under Section 7.01(a) or (b) of the Indenture (as such term is defined in the Indenture) shall have occurred and be continuing, except to the extent that such "Event of Default" is solely attributable to the wrongful failure by the Bank to honor a conforming drawing made by the Trustee under the'Letter of Credit (for the purpose of this provision the Indenture shall be deemed to continue in full force and effect notwithstanding any earlier termination thereof so long as any obligation of the City under this Agreement shall remain unpaid); then, in any such event, the Bank may, at the same or different times, so long as such Event of Default is continuing (i) notify the Trustee that an Event of Default has occurred and is continuing, (ii) accelerate all amounts owing pursuant to the terms of this Agreement, whereupon the same shall be and become immediately due and payable, and/or (iii) exercise any one or more of the rights and remedies available to the Bank under the Financing Documents or otherwise, or to exercise any other right or power provided to the Trustee in the Indentur~ Section 7.2. Notice of Events. The City shall give notice to the Bank of the occurrence of any Event of Default, or event which with the giving of notice, the passage of time, or both would constitute an Event of Default, in each case within two (2) days after becoming aware thereof. ARTICLE VIII. MISCELLANEOUS Section 8.1. No Waiver; Modifications in Writing. No failure or delay on the part of the Bank in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to -23- the Bank at law or in equity or otherwise. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by the City therefrom, shall be effective unless the same shall be in writing and signed by or on behalf of the Bank. Any amendment, modification or supplement of or to any provision of this Agreement, and any consent to any departure by the City from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. No notice to or demand on the City in any case shall entitle the City to any other or further notice or demand in similar or other circumstances. The Bank shall notify the Trustee of each amendment to this Agreement. Section 8.2. Payment on Non-Business Days. Unless otherwise provided herein, whenever any payment shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation and payment of the amount due. Section 8.3. Further Assurances. The City agrees to do such further acts and things and to execute and deliver to the Bank such additional assignments, agreements, powers and instruments as the Bank may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to better assure and confirm unto the Bank its rights, powers, and remedies hereunder. Section 8.4. Survival of Representations and Warranties. Ail representations and warranties made in this Agreement and in any certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement and the issuance and delivery of the Letter of Credit. Section 8.5. Notices, Etc. Ail notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto or any other person shall be in writing and shall be personally delivered or sent by registered or certified mail, postage prepaid, or by prepaid telecopier, telex, TWX or telegram (with messenger delivery specified in the case of a telegram) and shall be deemed to be given for purposes of this Agreement on the day that such writing is delivered to the intended recipient thereof in accordance with the provisions of this -24- Section 8.5. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 8.5, notices, demands, instructions and other communications in writing shall be given to or made upon the respective parties hereto at their respective addresses (or to their respective telecopier, telex or TWX numbers) indicated below: If to the City: City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance Director Tel. No. If to the Bank: The Mitsubishi Trust and Banking Corporation Los Angeles Agency 911 Wilshire Boulevard Los Angeles, California 90017 Attention: Manager Tel. No. (213) 488-9003 Telex No. 677187 With a copy to: Graham & James 725 South Figueroa St. 34th Floor Los Angeles, California 90017 Attention: William W. Wells/MTRS 2.101 Tel. No. (213) 624-2500 Telecopier No. (213) 622-8221 (Rapicom 6100) Telex No. 69-1383 -25- If to the Trustee: Citibank N.A. 120 Wall Street New York, New York 10043 Attention: Tel. No. ( ) Telex No. ( ) Section 8.6. Costs, Expenses and Taxes~ The City agrees to pay all reasonable costs and expenses of the Bank in connection with the negotiation, preparation, execution, delivery, administration and enforcement of this Agreement and any amendments or modifications hereof (or supplements hereto), including the reasonable fees and out-of-pocket expenses of Graham & James, counsel to the Bank, or such other counsel as may be appointed by the Bank, and independent public accountants and other outside experts retained by the Bank in connection with any of the foregoing. In addition, the City shall pay any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Letter of Credit or any other instrument delivered hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Letter of Credit or any other instrument delivered hereunder. Section 8.7. Execution in Counterparts. This Agreement may be executed in counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 8.8. Binding Effect; Assignment. This Agreement shall be binding upon, and inure to the benefit of, the City and the Bank and their respective successors and assigns; provided, however, that the City may not assign its rights or obligations hereunder (except to the Trustee, provided that such assignment will not affect the City's primary liability therefor) without the prior written consent of the Bank and the Trustee. This Agreement shall not be construed so as to confer any right or benefit upon any person other than the parties to this Agreement, and their respective successors and assigns. -26- Section 8.9. Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be construed in accordance with the laws of said State, without regard to principles of conflicts of law. Section 8.10. Severability of Provisions. Any provi- sion of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 8.11. Headings. Article and Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Section 8.12. Right of Setoff. In addition .to any other right or remedy that the Bank may have by operation of law or otherwise, the Bank shall be entitled to exercise its right of setoff or banker's lien to the fullest extent permitted by law; provided, however, that the Bank hereby irrevocably waives such right of setoff or banker's lien in order to appropriate and apply to the payment of Unpaid Drawings, Principal Draws, Interest Draws and interest thereon any balances, credits, deposits, accounts or moneys of the City at any time with the Bank when and if there shall be a drawing under the Letter of Credit during the pendency of any proceedings by or against the City, seeking relief in respect of the City under the Bankruptcy Law; provided further, however, that the Bank may exercise such right of setoff or banker's lien if (a) it is determined by a court of competent jurisdiction that such exercise would not lead to the Bank being released, prevented or restrained from or delayed in fulfilling its obligations under the Letter of Credit, and (b) the exercise or existence of such right of setoff or banker's lien would not constitute any payment (including pursuant to the Letter of Credit) to holders of the Bonds in respect of amounts payable thereunder a voidable preference payment under the Bankruptcy Law. -27- Section 8.13. Actions Relating to the Financing Documents; Indemnity. (a) Any action taken or omitted by the Bank under or in connection with the Financing Documents, if taken or omitted in good faith, shall be binding upon the City and shall not put the Bank under any resulting liability to the City. Without limiting the generality of the foregoing, the Bank shall be protected in relying upon a duly executed instrument of transfer in the form attached as Annex 5 to the Letter of Credit. (b) The Bank may, under the Letter of Credit, receive, accept and pay any demands or other documents and instruments signed by, or issued to, the receiver, trustee in bankruptcy, custodian, executor, administrator, guardian or conservator of anyone named in the Letter of Credit as the person by whom demands and other documents and instruments are to be made or issued. (c) The Bank shall not have any liability to the City, and the City assumes all risk and responsibility for (i) the form, sufficiency, correctness, validity, genuineness, falsification and legal effect of any demands and other documents, instruments and other papers relating to the Letter of Credit, (ii) the general and particular conditions stipulated therein, (iii) the good faith acts of any person whosoever in connection therewith, (iv) failure of any person (other than the Bank, subject to the terms and conditions hereof) to comply with the terms of the Letter of Credit; (v) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telex, telegraph, wireless or otherwise, whether or not they be in code, (vi) errors in translation or errors in interpretation of technical terms, (vii) any failure or inability by the Bank or anyone else to perform in accordance with the foreign laws, customs or regulations or by reason of any control or restriction rightfully or wrongfully exercised by any government or group asserting or exercising governmental or paramount powers, and (viii) for any other consequences arising from causes beyond the Bank's control. (d) The City waives any right to object to any payment made under the Letter of Credit against a demand and accompanying documents as provided in the Letter of Credit varying in punctuation, capitalization, spelling, or similar -28- matters of form. The Bank may accept any demands and other doc-ments that appear on their face to be in order in accordance with the procedures for presentation set forth in the Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary. (e) Subject to Section 8.14 hereof, the City agrees at all times to protect, indemnify and save harmless the Bank to the full extent lawful from and against any and all claims, actions, suits and other legal proceedings, and from and against any and all losses, claims, demands, liabilities, damages, costs, charges, counsel fees and other expenses which it may, at any time, sustain or incur by reason of or in consequence of or arising out of the issuance of the Letter of Credit or the purchase and sale of Bonds as contemplated in this Agreement, all of which risks are hereby assumed by the City, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future d__e jure or de facto government or governmental authority; provided that the City shall not be required to indemnify the Bank for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the wilful misconduct or gross negligence of the Bank in determining whether a demand or statement presented under the Letter of Credit complied with the terms of the Letter of Credit or (ii) the Bank's wilful or grossly negligent failure to pay under the Letter of Credit after the presentation to it by the Trustee of a demand strictly complying with the terms and conditions of the Letter of Credit. Nothing in this Section is intended to limit the obligations of the City contained in Sections 2.2 and 2.3 hereof. The Bank shall not be liable to the City for any failure by the Bank of them or anyone else to pay any draft under the Letter of Credit as a result of any governmental acts or any other cause beyond the control of the Bank. The obligations of the City hereunder shall survive cancellation or expiration of the Letter of Credit and payment of the Bonds. (f) Recognizing that transactions such as the issuance and sale of the Bonds sometimes result in threatened or actual litigation and that the Bank's role under the Financing Documents is limited to acting solely as the issuer of the Letter of Credit to enhance the credit quality of the Bonds and to provide for an efficient mechanism for the -29- payment of principal and interest thereon and the purchase price thereof, subject to Section 8.14 hereof, the City agrees to indemnify the Bank (and its agents, employees and controlling persons) (the Bank and its agents, employees and controlling persons being hereinafter collectively referred to in this paragraph (f) as the "Indemnitees") to the full extent lawful against any and all claims, losses and expenses incurred (including all reasonable fees and disbursements of the !ndemnitees' legal counsel and all of the Indemnitees' reasonable travel and other out-of-pocket expenses incurred in connection with investigation of and preparation for any such pending or threatened claims and any litigation and other proceedings arising therefrom) arising out of or based upon the issuance, sale and distribution of the Bonds, including without limitation, the inclusion of any untrue statement or alleged untrue statement of a material fact contained in any offering statement made available to purchasers of the Bonds, or any amendments or supplements thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of circumstances under which they were made, not misleading, except insofar as any such claims, losses and expenses arise out of or are based on an untrue statement or alleged untrue statement in, or omission or alleged omission from, such offering statement (or any amendments or supplements thereto) made in reliance upon and in conformity with information furnished in writing to the City by the Banks. The obligations of the City under this Section 8.13(f) shall be in addition to any rights that any Indemnitee may have at common law or otherwise and shall survive the Termination Date. If indemnification pursuant to this Section 8.13(f) shall be found to be unlawful or invalid for any reason, then the City and each Indemnitee shall make contributions in payment of any liabilities incurred pursuant to the above-referenced issuance, sale and distributions and statements or omissions in accordance with the respective fault of the City and each Indemnitee. Section 8.14. Limited Liability of City. Except for the collection of and payment to the Bank, when due, of the Assessment Installments and the observance and performance of the other conditions, covenants and terms contained herein, in the Indenture and in any Bank Bonds required to be observed or performed by it, the City shall not have any obligation or liability to the Bank (as Owner or otherwise) with respect to this Agreement, the Indenture or any Bank -30- Bond, and all amounts payable under this Agreement shall be payable only from the proceeds from the sale of the Bonds, the Assessment Installments collected by or for the City pursuant to the Indenture, either as due or by collection by foreclosure of the delinquency, and all interest earnings on the foregoing amounts. Section 8.15. Security. The security interest granted to the Bank pursuant to the terms of the Indenture is hereby incorporated herein by this reference, and shall extend to and secure all obligations of the City to the Bank hereunder, notwithsfanding any termination or discharge of the Indenture and shall, survive until all sums owing hereunder are paid in full. The City shall not grant to the Bank, and it shall not accept, any additional security interest in or lien on any collateral for the City's obligations under this Agreement unless such lien and/or security interest is for the pari passu benefit of the holders of the Bonds. Section 8.16. Successor Trustee. Promptly following the appointment and qualification of any successor Trustee pursuant to the Indenture, the Bank shall effect a transfer of the Letter of Credit to such successor Trustee upon presentation to the Agent of a duly executed instrument of transfer in the form of Annex 5 attached to and otherwise as set forth in the Letter of Credit and upon receipt of the transfer fee set forth in Section 2.2 above. The Bank may conclusively rely upon an executed instrument of transfer in the form of said Annex 5 in connection with any such transfer of the Letter of Credit. Section 8.17. Extension of Term. At the request of the City at any time within 90 days before the eighth anniversary of the Effective Date and within 90 days before the end of each subsequent one year period, while the Letter of Credit is outstanding, the parties hereto may in their discretion agree to extend the term of this Agreement and the Termination Date of the Letter of Credit for an additional one year, provided that the Termination Date shall not occur later than the anniversary date of the Effective Date. This provision is not intended to limit the ability of the parties hereto to agree at any other time or any other terms to extend the term of this Agreement and the Termination Date of the Letter of Credit. -31- Section 8.18. of its obligations under this Agreement or the Indenture the Bank may in its discretion at any time and from time to time make advances to effect performance of any such obligation on behalf of the City. The City shall reimburse the Bank for each advance upon demand. Each advance shall bear interest from the date of the advance until paid at the Bank Interest Rate. Section 8.14 shall not apply to this Section. Advances. If the City fails to perform any Section 8.19. Right of First Refusal. In the event of an optional redemption pursuant to Section 4.01 or 4.02 as a] result' of a refunding, in whole or in part, of the Outstanding Bonds, the Bank shall have the right of first refusal to issue a letter of credit with respect to such refunding on equal or more favorable terms as those offered in writing by any other bank. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CITY OF TUSTIN By · Mayor ATTEST: City Clerk of the City of Tustin THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY By 64/JAC/586 -32- APPENDIX A Calculation Pursuant to Clause Cb) 6, D~Finition of =Rank Purchase Pric~" Aaount under Clause (b) of definition of · Bank Purchase Price" - C - ((p + a) x (A/B)) vhere: A- (P + a) + CCP + a) x n/360 z 1) B - (P + a) + ((p + a) x n/360 x Z) P - principal amount of Bonds being purchased a = accrued interest to the Bank Purchase Date n · number of dams f:oB Bank Purchase Date to next succeeding Business Day t · Bank Rate in effect on Bank Purchase Date i · Base Rate in effect on Bank PuEchase Date Let P- ;1,000,000; a - ;1,000; n - 1; i - 12%; then: A - (;1,001,000) + (;1,001,000 x 1/360 x .12) B - (;1,001,000) + ($1,001,000 x 1/360 x .14) C- (;3,,001,000) x (Sl,003.,333.66667/;1,00!,389.27778) I ' 14%. ;1,001,333.66667 ;~1,001,389.27778 ' $J,000~944.41 EXHIBIT "A" FORM OF IRREVOCABLE LETTER OF CREDIT IRREVOCABLE LETTER OF CREDIT The Mitsubishi Trust and Banking Corporation Los Angeles Agency 911Wilshire Boulevard Suite 1650 Los Angeles, California 90017 Irrevocable Letter of Credit No. Citibank N.A. as Trustee under the Trust Indenture dated as of August 1, 1986 by the City of Tustin, California · 1986 Ladies and Gentlemen: At the request and for the account of the City of Tustin, California (the "City"), we hereby jointly and severally establish in your favor as Trustee under that certain Trust Indenture By and Between Citibank N.A. and the City of Tustin, California dated as of August 1, 1986 relating to $ City of Tustin, California Assessment District No. 85-1 UPDATESTM Improvement Bonds (the "Indenture") this irrevocable letter of credit in the aggregate amount of United States Dollars (U.S.$ ), of which $ (the "Principal Portion") is available with respect to principal of, $ (the "Interest Portion") is available with respect to interest on, and {the '~Premium Portion"~ is availab~ w~h respect to premium on, the Improvement Bonds· Assessment District No. 85-1 in the aggregate principal amount of $ issued by the City. This Letter of Credit is established pursuant to a Reimbursement Agreement (the "Agreement") dated as of August 1, 1986 by and between the City and us. Unless otherwise provided or defined herein or the context otherwise requires, capitalized terms used in this Letter Draft No. 2 Graham & James MTRS 2.101 Citibank N.A. , 1986 Page 2 of Credit shall have the meaning set forth in the Agreement or the Indenture. Funds shall be available hereunder to make any payment to the owners of outstanding Bonds with respect to (i) interest on Bonds, other than Bank Bonds and Fixed Rate Bonds, to a maximum amount calculated as (__) days interest at twelve percent (12%) per annum on the then-outstanding Bonds other than Bank Bonds, and Fixed Rate Bonds, upon one or more telegraphic or telex demands by you in the form of Annex 1 hereto on the fifth calendar day of each month or the next preceding Business Day if such calendar day is not a Business Day; (ii) the ~rincipal Aamount of the purchase price of Bonds on any date on which Bonds are to be purchased from the Owners thereof pursuant to Sections 4.01, 4.02, 4.03, 4.05(A) or 4.05(B) (to the extent a drawing hereunder is required by Section 4.06(_) of the Indenture upon presentation of one or more telex or telegraphic demands by you in the form of Annex 2 hereto; (iii) the principal~ of Bonds on any date on which Bonds at,to be red--or paid at maturity or the_~rincipal~amount of the purchase or acquisition price of ~he Bond~ ~-~rchased or acquired pursuant to Sections 2.03, 3.01(a), 3.01(c), 3.02 or 3.03~of the Indenture upon presentation o~one or more telegraphic or telex demands by you in the form of Annex 3 hereto; or (iv) the amount of~premium on any date on which Bonds are to be redeemed from the owners thereof pursuant to Sections 4.01 o__r 4.02a(to the extent a drawing hereunder is required by Section 4.06( )) of the Indenture upon presentation of one or more t~-legraphic or telex demands by you in the form of Annex 4 hereto, all of the foregoing Annexes to be 'completed and in compliance with the instructions in brackets in each respective Annex. Each presentation shall be made at the office of The Mitsubishi Trust and Banking Corporation, Los Angeles Agency, presently located at 911 Wilshire Boulevard, Suite 1650, Los Angeles, California, 90017. Each such presentation must be made on or before the close of business on a Business Day prior to the expiration of this Letter of Credit. This Letter of Credit shall expire at the close of business of the Bank on the earliest of (a) the tenth anniversary date following the date of issuance of this Letter of Credit, Draft No. 2 7/2__8/86 Graham & James MTRS 2.101 Citibank N.A. , 1986 Page 3 (b) the dale on which the Trustee certifies to us that all Outstanding Bonds (other than Bonds owned by the Bank and Fixed Rate Bonds) have been paid or will be paid with funds deposited with the Trustee, or (c) the date on which the Trustee certifies to us that it has received an Alternate Letter of Credit meeting the requirements of the Indenture. The amount of each telex or telegraphic demand presented hereunder will be the amount inserted in numbered paragraph (3) of said telex or telegraphic demand. We hereby agree with you that each telex or telegraphic demand presented hereunder in the form of Annex 1 hereto in full compliance with the terms hereof will be duly honored by payment to you in immediately available funds (a) no later than 10:00 a.m. Los Angeles time on the Business Day next succeeding the day such demand is presented as aforesaid if such presentation is made at or before 3:00 p.m. Los Angeles time or (b) no later than 12:00 noon Los Angeles time on the Business Day next succeeding the day such demand is presented as aforesaid, if such presentation is made after 3:00 p.m. Los Angeles time. We hereby agree with you that each telex or telegraphic demand presented hereunder in the form of Annex 1, Annex 2, Annex 3 or Annex 4 hereto in full compliance with the terms hereof will be duly honored by payment to you in immediately available funds (a) no later than 12:00 noon Los Angeles time on the day such demand is presented as aforesaid if such presentation is made at or before 10:00 a.m. Los Angeles time or (b) no later than 12:00 noon Los Angeles time on the Business Day next succeeding the day such demand is presented as aforesaid, if such presentation is made after 10:00 a.m. Los Angeles time. You shall endeavor to give telephonic notice to us no later than one-half hour prior to the deadlines set forth above for presenting telex or telegraphic demands, but your failure to do so shall not relieve us of the duty to honor a d~mand otherwise conforming to the terms and conditions of this Letter of Credit. £..~ft No. 2 7/28/86 Graham & James MTRS 2.101 Citibank N.A. ' , 1986 Page 4 The Stated Amount is comprised of the Principal Portion,~the Interest Portion and the Premium Portion, as they may vary from time to time. Upon each payment hereunder with respect to principal of the Bonds, the Principal Portion shall be decreased by the amount of the payment and the Interest Portion and the Premium Portion shall be decreased proportionally. Upon each conversion of a Bond to a Fixed Rate Bond, the Principal Portion shall be decreased by the principal amount of each such Fixed Rate Bond and the Interest Portion and the Premium Portioq shall be decreased proportionally. Upon any sale or transfer by us of Bonds purchased by us upon payment hereunder pursuant to a demand in the form of Annex 3 hereto, the Principal Portion, the Interest Portion and the Premium Portion shall be automatically reinstate~ Dy the amounts by which they were decreased upon such payment. The Interest Portion shall be decreased upon, and to the extent of, each payment hereunder with respect to interest pursuant to a demand in the form of Annex 1 or 2 hereto and shall be increased upon, and to the extent of, our being reimbursed for that payment; in any event, the Interest Portion shall be reinstated automatically and irrevocably by the amount of that payment on the close of business on the date of such payment. [Reduction of Premium Porton to correspond with / reduction of obligations as per Indenture. Reinstatement~ of Premium Portion if necessary.] Any change in the Principal Portion,^the Interest Portion or the Premium Portion may be confirmed in an amendment to this Letter of Credit issued by us and delivered to the Trustee in person or by telex or telecopier, but no failure to confirm an increase or decrease will affect the validity of the change. Except as otherwise provided herein, this Letter of Credit shall be governed by and construed in accordance with the Uniform Customs and Practice for Documentary Credits (1983 Revision), International Chamber of Commerce Publication No. 400 (the "UCP") and, to the extent not inconsistent therewith, the laws of the State rf California. Anything to the contrary in Article 45 of Draft No. 2 7/2_~8/86 Graham & James MTRS 2.101 Citibank N.A. , 1986 Page 5 expires or terminates in accordance with its terms. Any failure by the Trustee or any successor trustee to draw upon this Letter of Credit with respect to an interest payment on, or purchase price of, the Bonds in accordance with the terms and conditions of the Indenture shall not cause this Letter of Credit to be unavailable for any future drawing in accordance with the terms and conditions of the Indenture. This letter of credit may be transferred more than once but only in the amount of the full unutilized balance hereof to any single transferee who has succeeded you as trustee under the Indenture and in compliance with the terms and conditions of the Indenture governing such transfer. Transfers may be effected only through the Agent and only upon presentation to it of a duly executed instrument of transfer in the form attached hereto as Annex 5 and payment of our transfer fee in the sum of U.S.$1,500. Any transfer of this letter of credit as aforesaid must be endorsed by Mitsubishi Trust and Banking Corporation, Los Angeles Agency on the reverse hereof and may not change the time or place of expiration specified above. Faithfully yours, THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY By ~64~JAC~586LTR ANNEX 1 to THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE MITSUBISHI TRUST AND BANKING CORPORATION LOS ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS ANGELES, CALIFORNIA 90017 FOR THE URGENT ATTENTION OF MANAGER, LOAN DEPARTMENT [INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES WITH RESPECT TO IRREVOCABLE LETTER OF CREDIT NO. ISSUED BY THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY (THE "LETTER OF CREDIT") THAT: (1) THE TRUSTEE IS THE TRUSTEE UNDER THE INDENTURE FOR THE OWNERS OF THE BONDS. (2) THE TRUSTEE IS MAKING DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO MAKE A DEPOSIT TO THE INTEREST RESERVE FUND PURSUANT TO AND TO THE EXTENT REQUIRED BY SECTION 4.06(A) OF THE INDENTURE. (3) THE AGGREGATE AMOUNT REQUIRED TO BRING THE BALANCE ON DEPOSIT IN SUCH INTEREST RESERVE FUND TO THE BALANCE [TO DRAW INTEREST PURSUANT TO SECTION 4.06(A) OF THE INDENTURE] -1- REQUIRED TO BE MAINTAINED PURSUANT TO SECTION 4.06(A) OF THE INDENTURE IS $[INSERT AMOUNT], WHICH IS THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT. THE TRUSTEE HAS NOT HERETOFORE MADE DEMAND UNDER THE LETTER OF CREDIT POR SUCH AMOUNT OR ANY PORTION THEREOF. (4) UPON OUR RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT WE WILL HOLD THE SAME IN TRUST FOR THE BENEFIT OF THE OWNERS, AND WE WILL APPLY THE SAME EXCLUSIVELY TO THE PAYMENT OF THE AMOUNT OWING IN RESPECT OF INTEREST ACCRUING WITH RESPECT TO THE BONDS AS PROVIDED IN THE INDENTURE, AND NO PORTION OF SAID AMOUNT SHALL BE DEPOSITED BY US IN ANY ACCOUNT MAINTAINED BY OR FOR THE ACCOUNT OF THE C~T¥ OR APPLIED BY US FOR ANY PURPOSE OTHER THAN TO PAY THE AMOUNT OF INTEREST OWING ON ACCOUNT OF SUCH BONDS. (5) THE AMOUNT DEMANDED HEREBY DOES NOT EXCEED THE AMOUNT WHICH THE TRUSTEE IS REQUIRED TO DRAW HEREUNDER PURSUANT TO SECTION 4.06(A) OF THE INDENTURE. [INSERT THE FOLLOWING FOR OPTOINAL REDEMPTIONS PURSUANT TO SECTION 3.01 OR 3.02 OF THE INDENTURE: (6) AN AMOUNT EQUAL TO THE AMOUNT HEREBY DEMANDED HAS BEEN DEPOSITED WITH THE TRUSTEE AND IS BEING HELD BY THE TRUSTEE IN IMMEDIATELY AVAILABLE FUNDS IN THE FUND.] -2- TERMS DEFINED IN THE LETTER OF CREDIT ARE USED IN THIS ANNEX AS THEREIN DEFINED, UNLESS OTHERWISE DEFINED IN THIS ANNEX. IINSERT NAME OF BENEFICIARY], AS TRUSTEE -3- ANNEX 2 to THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE MITSUBISHI TRUST AND BANKING CORPORATION ~9S ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS ANGELES, CALIFORNIA 90017 FOR THE URGENT ATTENTION OF MANAGER, LOAN DEPARTMENT [INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES WITH RESPECT TO IRREVOCABLE LETTER OF CREDIT NO. ISSUED BY THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY (THE "LETTER OF CREDIT") THAT: (1) THE TRUSTEE IS THE TRUSTEE UNDER THE INDENTURE FOR THE OWNERS OF THE BONDS. (2) THE TRUSTEE IS MAKING DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO PAY THE PRINCIPAL PORTION OF THE PURCHASE PRICE DUE AND PAYABLE ON THE PURCHASE FROM THE OWNERS OF THE [TO DRAW THE PRINCIPAL PORTION OF THE PURCHASE PRICE WITH RESPECT TO BONDS PURCHASED PURSUANT TO SECTIONS 4.01, 4.02, 4.03, 4.05(A) OR 4.05(B) OF THE INDENTURE AND DRAWN PURSUANT TO S 4.06(_) THEREOF.] -1- BONDS, FOLLOWING TENDER THEREOF PURSUANT TO [INSERT SECTION 4.01. 4.02, 4.03, 4.05(A) OR 4.05(B)] OF THE INDENTURE, OF ONE OR MORE OF THE BONDS ON [INSERT RELEVANT PURCHASE DATE]. (3) THE AGGREGATE AMOUNT OF THE PRINCIPAL PORTION OF THE PURCHASE PRICE TO BE PAID ON ACCOUNT OF SAID BONDS ON SAID DATE IS $[INSERT AMOUNT], WHICH IS THE AMOUNT HEREBY DEM-~NDED UNDER THE LETTER OF CREDIT. THE TRUSTEE HAS NOT HERETOFORE MADE DEMAND UNDER THE LETTER OF CREDIT FOR SUCH AMOUNT OR ANY PORTION THEREOF. (4) UPON OUR RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT WE WILL HOLD THE SAME IN TRUST FOR THE BENEFIT OF THE OWNERS AND WE WILL APPLY THE SAME EXCLUSIVELY TO THE PAYMENT OF THE PRINCIPAL PORTION OF THE PURCHASE PRICE TO BE PAID IN RESPECT OF THE BONDS REFERRED TO IN NUMBERED PARAGRAPH (2) ABOVE AS PROVIDED IN THE INDENTURE, AND NO PORTION OF SAID AMOUNT SHALL BE DEPOSITED BY US IN ANY ACCOUNT MAINTAINED BY OR FOR THE ACCOUNT OF THE CITY OR APPLIED BY US FOR ANY PURPOSE OTHER THAN TO PAY THE AMOUNT OF THE PORTION OF THE PURCHASE PRICE TO BE PAID ON ACCOUNT OF SUCH BONDS. (5) THE AMOUNT HEREBY DEMANDED DOES NOT EXCEED THE AMOUNT THE TRUSTEE IS REQUIRED TO DRAW UNDER THE LETTER OF CREDIT PURSUANT TO SECTION 4.06(_) OF THE INDENTURE. -2- TERMS DEFINED IN THE LETTER OF CREDIT ARE USED IN THIS ANNEX AS THEREIN DEFINED, UNLESS OTHERWISE DEFINED IN THIS ANNEX. [INSERT NAME OF BENEFICIARY], AS TRUSTEE -3- ANNEX 3 to THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE MITSUBISHI TRUST AND BANKING CORPORATION LOS ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS ANGELES, CALIFORNIA 90017 FOR THE URGENT ATTENTION OF MANAGER, LOAN DEPARTMENT [INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES WITH RESPECT TO IRREVOCABLE LETTER OF CREDIT NO. ISSUED BY THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY (THE "LETTER OF CREDIT") THAT: [TO DRAW THE PRINCIPAL PORTION PURSUANT TO SECTIONS 2.03, 3.01(A), 3.01(C), 3.02, OR 3.0L ONAMAT~m~'-~TORY ~ REDEMPTION OR OPTIONAL REDEMPTION AND DRAWN PURSUANT TO SECTION 4.06( I OF THE INDENTURE] -4- (1) THE TRUSTEE IS THE TRUSTEE UNDER THE INDENTURE FOR THE OWNERS OF THE BONDS. (2) THE TRUSTEE IS MAKING DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO PAY PRINCIPAL DUE AND PAYABLE UPON [INSERT ONE OF THE FOLLOWING: REDEMPTION AT MATURITY PURSUANT TO SECTION 2.03 OF THE INDENTURE, MANDATORY REDEMPTION PURSUANT TO SECTION 3.01(A)kOF THE INDENTURE, OR MANDATORY REDEMPTION OF BONDS OTHER THAN FIXED RATE BONDS PURSUANT TO SECTION 3.01(C) OF THE INDENTURE, OPTIONAL REDEMPTION PURSUANT TO SECTION 3.02 OF THE INDENTURE, OR OPTIONAL REDEMPTION PURSUANT TO SECTION 3.03 OF THE INDENTURE] OF ONE OR MORE OF THE BONDS ON [INSERT THE RELEVANT BONDS PAYMENT DATE]. (3) THE AGGREGATE AMOUNT OF PRINCIPAL OWING OR THE PRINCIPAL PORTION OF THE PURCHASE PRICE TO BE PAID ON ACCOUNT OF SAID BONDS ON SAID DATE IS $[INSERT AMOUNT], WHICH IS THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT. THE TRUSTEE HAS NOT HERETOFORE MADE DEMAND UNDER THE LETTER OF CREDIT FOR SUCH AMOUNT OR ANY PORTION THEREOF. (4) UPON OUR RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT WE WILL HOLD THE SAME IN TRUST FOR THE BENEFIT OF THE OWNERS AND WE WILL APPLY THE SAME EXCLUSIVELY TO THE PAYMENT OF THE PRINCIPAL AMOUNT OWING OR PURCHASE PRICE TO BE PAID IN RESPECT OF THE BONDS REFERRED TO IN NUMBERED PARAGRAPH (2) ABOVE AS PROVIDED IN THE INDENTURE AND -5- NO PORTION OF SAID AMOUNT SHALL BE DEPOSITED BY US IN ANY ACCOUNT MAINTAINED BY OR FOR THE ACCOUNT OF THE CITY OR APPLIED BY US FOR ANY PURPOSE OTHER THAN TO PAY THE AMOUNT OF PRINCIPAL OWING ON ACCOUNT OF SUCH BONDS. (5) THE AMOUNT DEMANDED HEREBY DOES NOT EXCEED THE AMOUNT THE TRUSTEE IS REQUIRED TO DRAW HEREUNDER PURSUANT TO SECTION 4.06(B) AS APPLICABLE OF THE INDENTURE FOR THE PURPOSE STATED ABOVE. [INSERT THE FOLLOWING FOR OPTIONAL REDEMPTIONS PURSUANT TO SECTION 3.02 OR 3.03 OF THE INDENTURE: (6) AN AMOUNT EQUAL TO THE AMOUNT HEREBY DEMANDED HAS BEEN DEPOSITED WITH THE TRUSTEE AND IS BEING HELD BY THE TRUSTEE IN IMMEDIATELY AVAILABLE FUNDS IN THE FUND.] TERMS DEFINED IN THE LETTER OF CREDIT ARE USED IN THIS ANNEX AS THEREIN DEFINED, UNLESS OTHERWISE DEFINED IN THIS ANNEX. [INSERT NAME OF BENEFICIARY], AS TRUSTEE -6- ANNEX 4 to THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE MITSUBISHI TRUST AND BANKING CORPORATION LOS ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS ANGELES, CALIFORNIA 90017 FOR THE URGENT ATTENTION OF MANAGER, LOAN DEPARTMENT [INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES WITH RESPECT TO IRREVOCABLE LETTER OF CREDIT NO. ISSUED BY THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY (THE "LETTER OF CREDIT") THAT: (1) THE TRUSTEE IS THE TRUSTEE UNDER THE INDENTURE FOR THE OWNERS OF THE BONDS. (2) THE TRUSTEE IS MAKING DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO PAY~PREMIUM RELATING TO THE PRINCIPAL PORTION OF THE PURCHASE PRICE DUE AND PAYABLE ON THE PURCHASE FROM THE OWNERS OF THE [TO DRAW~WITH RESPECT TO BONDS ~D PURSUANT TO SECTIONS~ , OF THE INDENTURE AND DRAWN PURSUANT TO ~ 4.06(_) THEREOF.] -1- BONDS, FOLLOWING TENDER THEREOF PURSUANT TO [INSERT SECTIONA, ] OF THE INDENTURE, OF ONE OR MORE OF THE BONDS ON [INSERT RELEVANT PURCHASE DATE]. (3) THE AGGREGATE AMOUNT OF THE PREMIUM TO BE PAID ON ACCOUNT OF SAID BONDS ON SAID DATE IS $[INSERT AMOUNT], WHICH IS THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT. THE TRUSTEE HAS NOT HERETOFORE MADE DEMAND UNDER THE LETTER OF CREDIT FOR SUCH AMOUNT OR ANY PORTION THEREOF. (4) UPON OUR RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT WE WILL HOLD THE SAME IN TRUST FOR THE BENEFIT OF THE OWNERS AND WE WILL APPLY THE SAME EXCLUSIVELY TO THE PAYMENT OF THEAPREMIUM TO BE PAID IN RESPECT OF THE BONDS REFERRED TO IN NUMBERED PARAGRAPH (2) ABOVE AS PROVIDED IN THE INDENTURE, AND NO PORTION OF SAID AMOUNT SHALL BE DEPOSITED BY US IN ANY ACCOUNT MAINTAINED BY OR FOR THE ACCOUNT OF THE CITY OR APPLIED BY US FOR ANY PURPOSE OTHER THAN TO PAY THE AMOUNT OF THE PORTION OF THE PURCHASE PRICE TO BE PAID ON ACCOUNT OF SUCH BONDS. (5) THE AMOUNT HEREBY DEMANDED DOES NOT EXCEED THE AMOUNT THE TRUSTEE IS REQUIRED TO DRAW UNDER THE LETTER OF CREDIT PURSUANT TO SECTION 4.06( ) OF THE INDENTURE. A- (6) AN AMOUNT EQUAL TO THE AMOUNT HEREBY DEMANDED HAS--/ / BEEN DEPOSITED WITH THE TRUSTEE AND IS BEING HELD BY THE ! J -2- TRUSTEE IN IMMEDIATELY AVAILABLE FUNDS IN THE FUND. TERMS DEFINED IN THE LETTER OF CREDIT ARE USED IN THIS ANNEX AS THEREIN DEFINED, UNLESS OTHERWISE DEFINED IN THIS ANNEX. [INSERT NAME OF BENEFICIARY], AS TRUSTEE -3- ANNEX 5 to THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE MITSUBISHI TRUST AND BANKING CORPORATION LOS ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS A~]GELES, CALIFORNIA 90017 Subject: Letter of Credit No. issued by The Mitsubishi Trust and Banking Corporation, Los Angeles Agency Ladies and Gentlemen: For value received, we hereby irrevocably assign and Transfer all of our rights under the above-captioned Letter of Credit, as heretofore and hereafter amended, extended or increased, to: [name of Transferee] [Address of Transferee] By this transfer, all of our rights in the Letter of Credit are transferred to the transferee, and the transferee shall have sole rights as beneficiary under the Letter of Credit, including sole rights relating to any amendments, and whether now existing or hereafter made. The Letter of Credit may hereafter be amended, extended or increased without our consent or notice to us and you will give notice thereof directly to the transferee. By its signature below the undersigned transferee (i) acknowledges that it has duly succeeded to , as trustee under that certain Trust Indenture relating to those certain Improvement Bonds, Assessment District No. 85-1 in the aggregate principal amount of $ issued by the City of Tustin, California, which Trust Indenture is dated as of August 1, 1986 and entered into by and between Citibank N.A. and the City of Tustin, California as amended or supplemented from time to time (the "Indenture") and (ii) consents and agrees to perform and comply with all the terms, covenants and conditions on its part to be performed or complied with under the Indenture. The original Letter of Credit is returned with all amendments to this date accompanied by payment to you of your transfer fee in the sum of US$1,500. Please notify the transferee in such form as you deem advisable of this transfer and of the terms and conditions of the Letter of Credit, including amendments, as transferred. A copy of this instrument of transfer has been furnished to the City of Irvine for its information. Very truly yours, [Insert Name of Transferor] By [Insert name and title] Acknowledged: [Insert Name of Transferee] By [Insert name and title] -2- ANNEX 2 to THE DAI-ICHI KANGYO BANK, LIMITED LOS ANGELES AGENCY, AND THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY IRREVOCABLE LETTER OF CREDIT NO. THE DAI-ICHI KANGYO BANK, LIMITED LOS ANGELES AGENCY 770 WILSHIRE BOULEVARD LOS ANGELES, CALIFORNIA 90017 AND THE MITSUBISHI TRUST AND BANKING CORPORATION LOS ANGELES AGENCY 911 WILSHIRE BOULEVARD SUITE 1650 LOS ANGELES, CALIFORNIA 90017 FOR THE URGENT ATTENTION OF MANAGER, LOAN DEPARTMENT [INSERT NAME OF BENEFICIARY] (THE "TRUSTEE") HEREBY CERTIFIES WITH RESPECT TO IRREVOCABLE LETTER OF CREDIT NO. ISSUED JOINTLY AND SEVERALLY BY THE DAI- ICHI KANGYO BANK, LIMITED, LOS ANGELES AGENCY AND THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY (THE "LETTER OF CREDIT") THAT: (1) THE TRUSTEE IS THE TRUSTEE UNDER THE INDENTURE FOR THE OWNERS OF THE BONDS. [TO DRAW INTEREST PURSUANT TO SECTION 5.18(a)(iv) OF THE INDENTURE] -1- (2) THE TRUSTEE IS MAKING DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT TO REPLENISH THE INTEREST DISBURSEMENT FUND PURSUANT TO SECTION 5.18(a)(iv) OF THE INDENTURE. THE BALANCE OF SUCH INTEREST DISBURSEMENT FUND PRESENTLY IS ZERO. (3) THE AGGREGATE AMOUNT REQUIRED TO BRING THE BALANCE ON DEPOSIT IN SUCH INTEREST DISBURSEMENT FUND TO THE INTEREST DISBURSEMENT FUND REQUIREMENT AS DEFINED IN SECTION 6.04 OF THE INDENTURE IS $[INSERT AMOUNT], WHICH IS THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT. THE TRUSTEE HERETOFORE HAS NOT MADE DEMAND UNDER THE LETTER OF CREDIT FOR SUCH AMOUNT OR ANY PORTION THEREOF. (4) UPON OUR RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT WE WILL HOLD THE SAME IN TRUST FOR THE BENEFIT OF THE OWNERS, AND WE WILL APPLY THE SAME EXCLUSIVELY TO THE PAYMENT OF THE AMOUNT OWING IN RESPECT OF INTEREST ACCRUING WITH RESPECT TO THE BONDS AS PROVIDED IN THE INDENTURE, AND NO PORTION OF SAID AMOUNT SHALL BE DEPOSITED BY US IN ANY ACCOUNT MAINTAINED BY OR FOR THE ACCOUNT OF THE CITY OR APPLIED BY US FOR ANY PURPOSE OTHER THAN TO PAY THE AMOUNT OF INTEREST OWING ON ACCOUNT OF SUCH BONDS. (5) THE AMOUNT DEMANDED HEREBY DOES NOT EXCEED THE AMOUNT WHICH THE TRUSTEE IS REQUIRED TO DRAW HEREUNDER PURSUANT TO SECTION 5.18(a)(iv) OF THE INDENTURE. -2- TERMS DEFINED IN THE LETTER OF CREDIT ARE USED IN THIS ANNEX AS THEREIN DEFINED, UNLESS OTHERWISE DEFINED IN ~THIS ANNEX. [INSERT NAME OF BENEFICIARY], AS TRUSTEE -2- 64/JAC ~586Annexes CITY OF TUSTIN IMPROVEMENT BONDS SPECIAL ASSESSMENT DISTRICT NO. 85-1 PURCHASE CONTRACT Auqus% __, 1986 City Council City of Tustin 300 Centennial Way Tustin, California 92680 Dear Members of the City Council: The undersigned, Merrill Lynch Capital Markets, Group, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Stone & Youngberg (collectively, the "Underwriters"), offer to enter into the following agreement with the City of Tustin (the "City"), which, upon the City's acceptance of this of- fer, will be binding upon the City and upon the Underwriters. This offer is made subject to the City's acceptance of this Purchase Contract on or before 7:30 p.m. Los Angeles time on Au~s~ , 1986, and, if not so accepted, will be subject to withdrawal by the Underwriters upon written notice delivered to the City at any time prior to the acceptance hereof by the City. 1. Upon the terms and conditions, and upon the basis of representations set forth herein, the Underwriters, jointly and severally, hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriters, $54,000,000 aggregate principal amount of the City of Tustin Improvement Bonds, Assessment District No. 85-1 (the "Bonds"). The Bonds shall be dated and shall ma- ture as set forth in Schedule 1 hereto. The Bonds shall initially bear interest at the Adjusted Interest Rate'deter- mined as set forth in the hereinafter defined Indenture. The Adjusted Interest Rate for each Bond as of the date of sale of the Bonds for the initial interest period, is also set forth in Schedule 1 hereto. The purchase price for the Bonds shall be 99.5% of the aggregate principal amount of the Bonds. Payment for and delivery of the Bonds, and the other actions contemplated hereby to take place at the time of such payment and delivery, are herein sometimes called the "Closing."' 2. The Preliminary Official Statement, including the cover page and appendices thereto, dated Auqust __, 1986, relating to the Bonds (the "Preliminary Official State- ment''), as amended to conform to the terms of this Purchase Contract, and with such other changes and amendments as are mutually agreed to by the City and the Underwriters, is here- in~fter called the "Official Statement." 3. The Bonds shall be as described in the Offi- cial Statement and shall be issued and secured under the provisions of an Indenture (the ".Indenture"), dated as of August 1, 1986, between the City, and Citibank, N.A., as trustee (the "Trustee"), authorizing the issuance of the Bonds. The Bonds and interest thereon will be payable in accordance with the Indenture, from unpaid assessments (the "Assessments") levied and collected with interest, and from other monies as provided for in the Indenture. Proceeds of the sale of the Bonds will be used by the City in accordance with the terms of the Indenture. The Indenture, the Resolu- tion of Intention (the "Resolution of Intention") relating to the establishment of the East Tustin Assessment District No. 85-1 (the "District") and the levying of the Assessments, and all actions, agreements and proceedings related thereto (collectively, the "Proceedings") were or will be taken pur- suant to the Municipal Improvement Act of 1913, as amended (the "1913 Act"), the Improvement Bond Act of 1915, as amend- ed (the "Bond Law"), and all other applicable laws. 4. Any action under this Purchase Contract taken by the Underwriters, or either of them, including payment for and acceptance of the Bonds, and delivery and execution of any receipt for the Bonds and any other instruments in con- nection with the Closing, shall be valid and sufficient for all purposes and binding upon each of the Underwriters, pro- vided that any such action shall not impose any obligation or liability upon the Underwriters other than as may arise as expressly set forth in this Purchase Contract. 5. It shall be a condition to the City's obliga- tion to sell and deliver the Bonds to the Underwriters, and to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Bonds, that the entire $50,650,00~ aggregate principal amount of the Bonds author- ized by the Indenture shall be sold and delivered by the City, and purchased, accepted and paid for by the Underwrit- ers, at the Closing. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price of par. 6. The City hereby authorizes the Official State- ment and the information and documents therein contained or described to be used by the Underwriters in connection with the public offering and sale of the Bonds. The City ratifies and confirms the use by the Underwriters prior to the date 575560-024MS1/CONTRTUSTIN/5 07/28/86 2 hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. 7. The City represents and warrants to each of the Underwriters that: (a) The City is a general law city duly or- ganized and existing under the Constitution and laws of the State of California, and has, and at the date of the Closing will have, full legal right, power and authority (i) to execute, deliver and enter into this Purchase Contract, (ii) to execute, deliver and enter into the Indenture (iii) to issue, sell and deliver the Bonds to the Underwriters as provided herein, (iv) to undertake the Proceedings, and (v) to carry out and consummate the transactions contemplated by this Purchase Contract, the Resolution of Intention, the Indenture and the Official Statement; (b) The City has complied, and will at the Closing be in compliance in all respects, with the In- denture, the 1913 Act, the Bond Law and all other appli- cable law; (c) By official action of the City prior to or concurrently with the acceptance hereof, the Cit~ has duly adopted the Resolution of Intention, has duly au- thorized and approved the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of, ~and the perfor- mance by the City of the obligations contained in the Bonds, the Indenture and this Purchase Contract, and has duly authorized and approved the performance of its obligations contained in the Proceedings and the consum- mation by it of all other transactions contemplated by the Official Statement, including, without limitation, the levy and collection of the Assessments and the As- sessments constitute valid and binding liens on the properties on which they have been levied; (d) The execution and delivery of this Pur- chase Contract, the Indenture, the Remarketing Agent Agreement (as hereinafter defined) the Reimbursement Agreement (as hereinafter defined) and the Bonds, the adoption of the Proceedings relating to the issuance of the Bonds, the levy and collection of the Assessment, and the establishment of the District, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or a default under any applicable law or administrative regulation of the State of California or the United States, or any applicable 575560-024MS1/CONTRTUSTIN/5 07/28/86 3 judgment, decree, agreement or other instrument to which the City is a party or is otherwise subject; (e) Promptly after the Official Statement is available in final form, the City shall deliver or cause to be delivered to the Underwriters two copies of the Official Statement manually signed by the Mayor of the City. The Underwriters shall furnish or cause to be furnished to the City, as soon as available, copies of the Official Statement, and all amendments and supple- ments thereto, in such quantities as the City may rea- sonably request; (f) ~ the time of the City's acceptance hereof and at all times subsequent thereto up to and including the time of the Closing, the Official State- ment ~ith respect to the information therein~other than the information therein under the caotions ~he Bank add "The Remarketina Aaent". does not and will not con- tain any untrue statement df a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (g) There is no action, suit, proceeding or investigation before or by any court, public board or body pending or, to the best knowledge of the City,~ threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the City or the District, or the titles of its Council members and officers, (ii) enjoin or restrain the issuance, sale and delivery of the Bonds, the levy and collection of the Assessments or any other monies or properties pledged or to be pledged under the Indenture for the payment of the Bonds, (iii) in any way question or affect any of the rights, powers, duties or obligations of the City with respect to the monies pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds, (iv) in any way question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the Bonds or the Indenture, or (v) in any way question or affect this Purchase Contract or the transactions con- templated by this Purchase Contract, the Official State- ment, the documents referred to in the Official Statement, or any other agreement or instrument to which the City is a party relating to the Bonds; (h) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriters, as the Underwriters 575560-024MSl/CONTRTUSTIN/5 07/28/86 may reasonably request, to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriters may designate, and will assist, if necessary therefor, in the continuation of such qualifications in effect as long as required for the distribution of the Bonds; provided, however, that the City shall not be required to qualify as a foreign corporation or to file any general consents to service of process under the laws of any state; (i) The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the City is a bond issuer whose arbitrage certifications may not be relied upon; (j) Any certificate signed by any official of the City authorized to do so shall be deemed a represen- tation and warranty by the City to the Underwriters as to the statements made therein; and (k) The City shall apply the proceeds of the Bonds, including the investment earnings thereon, in accordance with the Indenture and the Resolution of Intention and as described in the Official Statement. 8. The City covenants and agrees with each of the Underwriters that it will advise the Underwriters promptly of any proposal to amend or supplement the Official Statement or any part thereof. If between the date of this Purchase Con- tract and the date ninety (90) days after the Closing an event occurs which is materially adverse to the purpose for which the Official Statement is to be used which is not dis- closed in the Official Statement, the City shall notify the Underwriters; and if in the opinion of the Underwriters such event requires a supplement or amendment to the Official Statement, the City shall supplement or amend the Official Statement in a form and in a manner approved by the Under- writers and counsel to the Underwriters. 9. At 9:00 a.m., Los Angeles time, on Auqus% 1986, or at such other time or on such other date as is # mutually agreed by the City and the Underwriters, the City shall deliver the Bonds to the Underwriters in definitive form, duly executed and authenticated, together with the other documents hereinafter mentioned, and, subject to the terms and conditions hereof, the Underwriters shall accept such delivery and pay the purchase price of the Bonds as set forth in paragraph 1 hereof by certified or bank cashier's check or checks payable in immediately available federal funds to the order of "City of Tustin, California." Delivery and payment, as aforesaid, shall be made at the office~ of 575560-024MS1/CONTRTUSTIN/5 07/28/86 5 Mudge Rose Guthrie Alexander & Ferdon, Los Angeles, Califor- nia, or such other place as shall have been mutually agreed upon by the City and the Underwriters. The Bonds shall be printed or lithographed on steel engraved borders, shall bear CUSIP numbers and shall be prepared and delivered as fully registered Bonds without coupons in authorized denominations specified by the Underwriters at least two (2) business days before the Closing for purposes of inspection and packaging; provided, however, that the Underwriters shall not reject delivery of the Bonds solely because the Bonds do not bear CUSIP numbers. 10. The Underwriters have entered into this Pur- chase Contract in reliance upon the representations, warran- ties and agreements of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obli- gations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the fol- lowing conditions: (a) The representations and warranties of the City contained herein shall be true, complete and cor- rect on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing the proceed- ings relating to the authorization and issuance of the Bonds and the establishment of the District (including but not limited to the Proceedings) shall be in full · force and effect, and shall not have been amended, modi- fied or supplemented, and the Official Statement shall not have been amended, modified or supplemented, except in either case as may have been agreed to in writing by the Underwriters; (c) At the time of the Closing, there shall have been taken all such actions as, in the opinion of Mudge Rose Guthrie Alexander & Ferdon, and Rourke & Woodruff (collectively "Bond Counsel"), shall be neces- sary or appropriate in connection with the levying of the Assessment, the formation of the District, or of the issuance of the Bonds, and the transactions contemplated hereby; (d) The Underwriters shall have the right to terminate the Underwriters' obligations under this 575560-024MS1/CONTRTUSTIN/5 07/28/86 Purchase Contract to purchase, to accept delivery of and to pay for the Bonds by notifying the City of their election to do so if, after the execution hereof and prior to the Closing: (i) the marketability of the Bonds or the market price thereof, in the opinion of the Un- derwriters, has been materially and adversely affected by any decision issued by a court of the United States (including the United States Tax Court) or of the State of California, by any ruling or requlation (final, tem- porary or proposed) issued by or on behalf of the De- partment of the Treasury of the United States, the Internal Revenue Service, or other governmental agency of the United States, or any governmental agency of the State of California, or by a tentative decision or an- nouncement with respect to legislation contemplated by a committee of the House of Representatives, the Senate of the United States or a Joint Committee of the Senate of the United States and the House of Representatives, or by legislation enacted by, pending in, or favorably reported to either the House of Representatives (other than H.R. 3838 in the form adopted by the House of Rep- resentatives on December 17, 1985) or the Senate of the United States (other than H. R. 3838 in the form adopted by the Senate on June 24, 1986), or either House of the Legislature of the State of California, or formally proposed to th~ Congress of the United States by the President of the United States or to the Legislature of the State of California by the Governor of the State of California in an executive communication, affecting the tax status of the City, its property or income, its bonds (including the Bonds) or the interest thereon, or any tax exemption granted or authorized by the Bond Law; (ii) the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency, or there shall have occurred any other outbreak of hostilities, or a local, national or international calamity or crisis, financial or other- wise, the effect of such outbreak, calamity or crisis being such as, in the reasonable opinion of the Under- writers, would affect materially and adversely the abil- ity of the Underwriters to market the Bonds (it being agreed by the Underwriters that there is no outbreak, calamity or crisis of such a character as of the date hereof); (iii) there shall have occurred a general sus- pension of trading on the New York Stock Exchange or the declaration of a general banking moratorium by the Unit- ed States, New York State or California State authori- ties; (iv) there shall have occurred a withdrawal or downgrading of any rating assigned to (a) any securities of the City or (b) any debt instruments of the Bank, by a national municipal bond rating agency; (v) any of the proposed developments described in the Official 575560-024MS1/CONTRTUSTIN/5 07/28/86 7 Statement shall have been repudiated by the applicable developer, or any litigation or proceedings shall be pending or threatened questioning proposed developments or seeking to enjoin the development thereof, or the City shall have received notice from the applicable developer that it will be unable to proceed with the development as described in the Official Statement; (vi) any Federal or California court, authority or regulatory body shall take action materially and adversely affect- ing the ability of a developer to proceed with the de- velopment as contemplated by the Official Statement; or (vii) an event occurs which in the opinion of the Under- writers requires a supplement or amendment to the Offi- cial Statement, and such supplement or amendment is not prepared by the City; and (e) At or prior to the Closing, the Under- writers shall have received each of the following documents: (1) The Official Statement, executed on behalf of the City by its Mayor; (2) An opinion, in form and substance satisfactory to the City and the Underwriters, dated as of the date of the Closing, of Bond Coun- sel, approving, without qualification, the validity of the Bonds and the exemption of the interest thereon ~rom federal and state personal income taxation, as described in the Official Statement; (3) A supplemental opinion, dated the date of the Closing and addressed to the Under- writers, of Bond Counsel to the effect that (i) this Purchase Contract, the Reimbursement Agree- ment, the Remarketing Agent Agreement and the In- denture have been duly authorized, executed and delivered by the City, and, assuming due author- ization, execution and delivery by the other par- ties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as such en- forceability may be limited by the application of equitable principles if equitable remedies are sought; (ii) the Bonds are not subject to the reg- istration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; (iii) the Bonds conform as to form and tenor to the description thereof contained under the caption "The Bonds" in the Official Statement, and the statements contained therein 575560-024MS1/CONTRTUSTIN/5 07/28/86 8 under the captions "The Bonds"; "Summary of Inden- ture''; "Introduction":~"Pending Federal Tax Legis- lation''; and "Tax Exemption" insofar as such statements purport to summarize certain provisions of the 1913 Act, the Bond Law, the Bonds, the In- denture, the Resolution of Intention, the Proceed- ings present a fair and accurate summary of such provisions; and, in connection with Bond Counsel's participation in the Proceedings relating to the establishment of the District and the issuance and authorization of the Bonds, and the preparation of the Official Statement, but without undertaking independently to verify the accuracy or complete- ness of the statements in the Official Statement, Bond Counsel has no reason to believe that the Official Statement, as of the date of Closing, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (4) A certificate dated the date of the Closing, addressed to the Underwriters and signed by the Mayor of the City and by the Finance Direc- tor of the City to the effect that: (i) The representations and warran- ties of the City contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing;~ (ii) The City has complied with all agreements, covenants and arrangements, and satisfied all conditions, on its part to be complied with or satisfied at or prior to the Closing; and ~(iii) To the best of their knowledge, no event affecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement in order to make the statements therein not misleading in any respect; (5) An opinion, dated the date of Closing and addressed to the Underwriters, of Rourke & Woodruff, as City Attorney, that there is no ac- tion, suit, proceeding or investigation before or by any court, public board or body pending or, to the best of their knowledge, threatened, wherein an 575560-024MS1/CONTRTUSTIN/5 07/29/86 9 unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence of powers of the District or the City, or the titles of its Council members and officers; (ii) enjoin or restrain the issuance, sale and delivery of the Bonds, the collection of any other monies or prop- erty pledged or to be pledged under the Indenture for the Bonds; (iii) in any way question or affect any of the rights, powers, duties or obligations of the City with respect to the Assessments or the monies and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds; (iv) in any way question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the Bonds; or (v) in any way question or affect this Purchase Contract or Contract, the Official Statement or the docu- ments referred to in the Official Statement; (6) A Certificate dated the date of Closing, addressed to the Underwriters and signed by an authorized principal of the appraisal firm named in the Official Statement, to the effect that the~Appraisal Report~fairly and accurately de- scribes the minimum or "not less than" market val- ues of the properties subject to the Assessment._~. (7) A Certificate dated the date of Closing, addressed to the Underwriters and signed by the "Engineer" named in the Resolution of Inten- tion to the effect that the statements and informa- tion in the Official Statement as set forth under the caption~'The District" and in Appendix ~ there- to - "Assessment Diagram" and Appendix_~ thereto - ~"Description of Work and Method of Assessment," fairly and accurately describe the matters intended to be described therein and that, in connection with his participation in the preparation of the Official Statement, he has no'reason to believe that the Official Statement, as of the date of Closing, contained any untrue statement of a mate- rial fact or omitted to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; (8) A Certificate dated the date of closing, addressed to the Underwriters and signed by an authorized officer of The Mitsubishi Trust, and Banking Corporation, Los Angeles Agency (the "Bank"), to the effect that the information con- tained in the Official Statement under the headings 575560-024MS1/CONTRTUSTIN/5 07/28/86 10 "The Bank", "The Letter of Credit", and "The Reim- bursement Agreement'~fairly and accurately summa- rize the information purported to be presented or summarized therein and that such information is included in the Official Statement with the consent of the Bank and that, in connection with his par- ticipation in the preparation of the Official Statement, he has no reason to believe that the Official Statement, as of the date of Closing, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; (9) An opinion, dated the date of Clos- ing and addressed to the Underwriters, of Graham & James, counsel for the Bank, to the effect that (A) the Bank is a banking corporation duly organized and validly existing under the (B) the Bank has the power to execute and deliver the Reimbursement Agreement (the "Reimbursement Agreement") and the Letter of Credit (the "Letter of Credit") referred to in the Official Statement, (C) the execution and delivery of the Reimbursement Agreement and the issuance of the Letter of Credit have been duly authorized by, and the Reimbursement Agreement and Letter of Credit have been duly exe- cuted and delivered by the Bank, (D) the Reim- bursement Agreement and the Letter of Credit constitute the legal, valid and binding obligations of the Bank enforceable against the Bank in accor- dance with their respective terms, except as such enforceability may be limited by applicable insol- vency, reorganization, liquidation, moratorium, readjustment of debt or other similar proceedings of or affecting the Bank, and (D) the Letter of Credit is not subject to the registration require- ments of the Securities Act of 1933, as amended; [(10) An opinion, dated the date of Clos- ing and addressed to the Underwriters, of ~ & Ohno, counsel for the Bank, to the effect that (A) the Bank has the power to execute and deliver the Reimbursement Agreement and the Letter of Cred- it, (B) the execution and delivery of the Reim- bursement Agreement and the issuance of the Letter of Credit have been duly authorized by the Bank, (C) when executed and delivered for the Bank, the Reimbursement Agreement and the Letter of Credit will have been duly executed and delivered by the Bank, (D) were the Reimbursement Agreement and the 575560-024MS1/CONTRTUSTIN/5 07/29/86 11 Letter of Credit governed by the laws of Japan, the Reimbursement Agreement and the Letter of Credit, when duly executed and delivered by the Bank, would constitute the legal, valid and binding obligations of the Bank enforceable against it in accordance with their respective terms except as such enforce- ability may be limited by applicable insolvency, reorganization, liquidation, moratorium, readjust- ment of debt Or .other similar laws affecting the enforcement of creditor's rights generally, as such laws may be applied in the event of an insolvency, reorganization, liquidation, moratorium, readjust- ment of debt or other similar proceedings of or affecting the Bank, (E) when duly executed and delivered by the Bank, the Reimbursement Agreement and the Letter of Credit (assuming that such in- struments are legal, valid and binding under the laws of the State of California to which they are expressed to be subject and, to the extent they may be applicable, under the laws of the United States) shall constitute the legal, valid and binding obli- gations of the Bank enforceable against it in ac- cordance with their respective terms except as such enforceability may be limited by applicable insol- vency, reorganization, liquidation, moratorium, readjustment of debt or other similar laws affect- ing the enforcement of creditor's rights generally, as such laws may be applied in the event of any insolvency, reorganization, liquidation, moratori- um, readjustment of debt or other similar proceed- ings of or affecting the Bank; and (F) under Japanese law, the obligations of the Bank under the Reimbursement Agreement and the Letter of Credit rank pari passu in priority of payment and in all other respects with all other unsecured obligations of said Bank subject only to mandatorily preferred obligations under applicable law of which the only material preferred obligations are its liability for national and local taxes and said Bank's em- ployees' rights for wages and other claims arising from employment relations;] (11) Evidence satisfactory to the Under- writers that the Bonds have been given the "Aaa/VM1G 1" rating by Moody's Investors Service, or the "NR/A-I+" rating by Standard & Poor's Corpo- ration and that no such rating has been withdrawn or lowered; (12) An opinion of O'Melveny & Myers, dated the date of Closing and addressed to the 575560-024MSl/CONTRTUSTIN/5 07/28/86 12 Underwriters, as to such matters as the Underwriters shall reasonably request; and (13) Such additional legal opinions, certificates, instruments and documents as the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the City's representa- tions and warranties contained herein and of the statements and information contained in the Offi- cial Statement and the due performance or satisfac- tion by the City on or prior to the date of the Closing of all agreements then to be performed and all conditions then to be satisfied by the City. In addition to the foregoing, the City shall pro- vide the Proceedings relating to the authorization and issu- ance of the Bonds and the establishment of the District and the levying of the Assessment certified by authorized offi- cers of the City under its seal as true copies and as having been adopted or executed (as applicable), with only such amendments, modifications or supplements as may have been agreed to by the Underwriters. All of the opinions, letters, certificates, instru- ments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisioqs hereof if, but only if, they are in form and substance satisfactory to the Underwriters. Receipt of, and payment for, the Bonds shall constitute evidence of the satisfactory nature of such as to the Underwriters. The performance of any and all obligations of the City hereunder and the performance of any and all conditions contained here- in for the benefit of the Underwriters may be waived by the Underwriters in their sole discretion. If the City shall be unable to satisfy the condi- tions to the obligations of the Underwriters to purchase, accept delivery of and pay for the Bonds contained in this Purchase Contract, or if the obligations of the Underwriters to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Con- tract, this Purchase Contract shall terminate, and neither the Underwriters nor the City shall be under further obliga- tion hereunder, except that the respective obligations of the City and the Underwriters set forth in paragraphs 11 and 13 hereof shall continue in full force and effect. 11. (a) The Underwriters shall be under no obliga- tion to pay, and the City shall pay the following expenses incident to the performance of the City's obligations hereun- der: (i) the cost of the preparation and printing of the 575560-024MSl/CONTRTUSTIN/5 07/28/86 13 Bonds Preliminary Official Statement and the Official State- ment; (ii) the fees and disbursements of accountants, advis- ers and of any other experts or consultants retained by the City, including the fees and expenses of the Engineer respon- sible for the preparation of the Report relating to the Dis- trict, the Financial Consultants to the City and the Appraiser. (b) The Underwriters shall pay all expenses (in- cluding'out-of-pocket expenses and regulatory expenses) in- curred by them in connection with the public offering and distribution of the Bonds, including the fees and disburse- ments of counsel retained by them. 12. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the City's address set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to Merrill Lynch Capital Markets, Municipal Securities Division, 400 South Hope Street, Suite 2020, Los Angeles, California 90071-2821, Attention: Samuel B. Corliss and to Stone & Youngberg, One California Street, Suite 2800, San Francisco, California, Attention: David Hartley. 13. This Purchase Contract is made solely for the benefit of the City and the Underwriters (including their successors and assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. All of the City's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect regardless of: (i) any investigations made by or on behalf of the Underwriters or (ii) delivery of and payment for the Bonds pursuant to this Purchase Contract. The agreements contained in this paragraph and in paragraph 11 shall survive any termination of this Purchase Contract. 14. (a) To the extent permitted by law, the City shall indemnify and hold harmless each of the Underwriters, each of their respective officials, officers, directors, employees and agents and each person who controls the Under- writers within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (collectively, the "Securities Act"), against any and all losses, claims, damages, liabilities, costs and expenses (including without limitation fees and disbursements of coun- sel and other expenses) incurred by them or any of them in connection with investigating or defending any loss, claim, damage, liability or any suit, action or proceeding, joint or several, to which they or any of them may become subject under the Securities Acts, or any other federal or state law 575560-024MS1/CONTRTUSTIN/5 07/28/86 14 or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities, costs and expenses (or any suit, action or proceeding in respect thereof) arise out of or are based upon, (i) any untrue statement or alleged untrue statement of fact contained in the Official Statement or in any amendment or supplement thereto approved by the City (which approval shall not be unreasonably withheld), or arise out of or are based upon the omission or alleged omis- sion to state therein a fact required to be stated therein or necessary to make the statements therein, in'light of the circumstances under which they were made, not misleading, (ii) the breach by the City of any representation or Warranty of the City contained in this Purchase Contract or contained in any document or certificate delivered, provided or re- quested at the Closing pursuant to this Purchase Contract (the "Closing Documents"), or (iii) the breach by the City of any of its covenants, agreements or undertakings contained herein or in the Closing Documents; provided, however, that the City shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon, any untrue statement or omission or alleged untrue statement as omission made in the Official Statement with respect to the Bank. This indemnity agreement shall be in addition to any liability which the City may otherwise have. (b) The Underwriters shall indemnify and hold harmless the City, its officials, employees and agents, to the same extent as the foregoing indemnity from the City to the Underwriter but only with reference to written informa- tion furnished to the City by or on behalf of the Underwrit- ers specifically for use in the preparation of the documents referred to in the foregoing indemnity. This indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. The City acknowledges, and the Underwriters represent, that the statements set forth in and under the heading~"Underwritinq"Ain the Official State- ment constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in the Offi- cial Statement. (c) Promptly after receipt by any party entitled to indemnification under this Section 14 of notice of the commencement of any suit, action or proceeding, such indemni- fied party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 14, notify the indemnifying party in writing of the commencement there- of; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 14 or from any liability under this Section 14 unless the failure to provide notice prejudices the defense of such suit, action 575560-024MS1/CONTRTUSTIN/5 07/28/86 15 or proceeding. In case any such action is brought against any indemnified party, and it notifies the indemnifying par- ty, the indemnifying party shall be entitled to participate in, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indem- nified party; provided, however, if the defendants in any such action include both the indemnified party and the indem- nifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to other- wise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party shall not be liable to such indemnified party under this Section 14 for any legal or other expenses subsequently in- curred by such indemnified party in connection with separate defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the fees and ex- penses of more than one separate firm of attorneys at any point in time representing the indemnified parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, or (iii) the indemnifying party has authorized the employment of separate counsel for the indemnified party at the expenses of the indemnifying party. 15. This Purchase Contract shall become effective upon the execution of the acceptance hereof by an authorized 575560-024MSl/CONTRTUSTIN/5 07/28/86 16 officer of the City, and shall be valid and enforceable as of the time of such acceptance. Very truly yours, MERRILL LYNCH CAPITAL MARKETS MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED STONE & YOUNGBERG MERRILL LYNCH CAPITAL MARKETS MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By Vice President STONE & YOUNGBERG By Accepted: This 1986 day of CITY OF TUSTIN By Authorized Officer 575560-024MS1/CONTRTUSTIN/5 07/28/86 17 $54,000,000 CITY OF TUSTIN IMPROVEMENT BONDS, EAST TUSTIN ASSESSMENT DISTRICT NO. 85-1 REMARKETING AGREEMENT BETWEEN THE CITY OF TUSTIN MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Dated as of August 1, 1986 TABLE OF CONTENTS SECTION PAGE Parties .................................................... 1 Recitals ................................................... 1 ARTICLE I GENERAL Section i.1. Remarketing Agent ........................... 1 Section 2.1. Section 2.2. Section 2.3. Section 2.4. Section 2.5. Section 2.6. ARTICLE II REMARKETING AGENT Representations, Warranties and Covenants ... 2 Duties and Obligations of Remarketing Agent 2 Disclosure to Purchaser of Tendered Bonds and Qualification of Bonds ................ 3 Conditions to Remarketing Agents' Obligation ................................ 4 Remarketing Agent Books and Records ......... 4 Events of Default ........................... 4 Section 3.1. Section 3 2. Section 3 3. Section 3 4 Section 3 5 Section 3 6 Section 3 7 Section 3.8 Section 3.9 Section 3.10. Section 3.11. ARTICLE III MISCELLANEOUS Remarketing Agent Not Acting as Underwriter . 5 Removal of Remarketing Agent ................ 5 Resignation of a Remarketing Agent .......... 5 Appointment of Successor Remarketing Agent .. 5 Remarketing Agent Compensation .............. 5 Remarketing by the Issuer ................... 6 Amendments .................................. 6 Governing Law ............................... 6 Notices ..................................... 6 Indemnification ............................. 6 Miscellaneous ............................... 8 Exhibit A Addresses for the Giving of Notice REMARKET ING AGREEMENT THIS REMARKETING AGREEMENT, dated as of August 1, 1986, is made and entered into between Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Remarketing Agent"), and the City of Tustin, California (the "Issuer"), in connection with the city of Tustin Improvement Bonds Assessment District No. 85-1 (the "Bonds") authorized pursuant to an Indenture (the "Indenture") dated as of August 1, 1986 between the Issuer and Citibank, N.A., as trustee (the "Trustee"). RECITALS: WHEREAS, the Issuer has issued and sold the Bonds in order to better provide financing for certain improve- ments; and WHEREAS, the Remarketing Agent has agreed to accept the duties and responsibilities as the Remarketing Agent under the Indenture and this Remarketing Agreement; NOW, THEREFORE, in consideration of the premises, the Issuer and the Remarketing Agent do hereby covenant and agree as follows: Ail terms not otherwise defined herein shall have their respective meanings as provided in the Indenture. ARTICLE I GENERAL SECTION 1.1. Remarketing Agent. Merrill Lynch, Pierce, Fenner & Smith Incorporated is hereby appointed by the Issuer as the initial Remarketing Agent as provided for in the Indenture for the remarketing of Repurchased Bonds and Tendered Bonds (as such terms are hereafter defined). Suc- cessor Remarketing Agents, if any, are to be appointed as provided for in the Indenture. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Stone & Youngberg shall be appointed as co-remarketing agents with respect to the remarketing of Bonds, from time to time, upon conversion of all or a portion of the Bonds to a fixed interest rate in accordance with the terms of the Indenture. The terms and conditions, and the representations of the remarketing agents in connection with such remarketing will be set forth and established at or prior to the time of the initial conversion of all or a portion of the Bonds to a fixed interest rate. ARTICLE II REMARKETING AGENT SECTION 2.1. Representations, Warranties and Covenants. The Remarketing Agent hereunder represents, war- rants and covenants as follows: (a) Such firm is a member of the National Associa- tion of Securities Dealers, Inc. (the "NASD"); (b) Such firm is authorized by law to perform all of the duties imposed upon it by the Indenture and this Remarketing Agreement; (c) Such firm will comply with the Federal securi- ties laws, state Blue Sky laws (to the extent applica- ble) and the rules and regulations of the NASD in performing its duties hereunder; provided, however, that the Remarketing Agent may rely solely upon the advice of its counsel as to the application of such laws, rules and regulations; and (d) The Remarketing Agent has been duly incorpo- rated and is validly existing and in good standing under the laws of the State of Delaware; has full power and authority to enter into and perform its obligations under this Agreement; and this Agreement constitutes the legal, valid and binding obligation of the Remarketing Agent enforceable against the Remarketing Agent in ac- cordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insol- vency, reorganization, moratorium or other laws relating to or affecting the enforcement of creditors' rights generally and by general principles of equity. SECTION 2.2. Duties and Obligations of Remarket- ing Agent. The Remarketing Agent has received and reviewed a copy of the Indenture and hereby accepts, subject to Section 2.4 of this Agreement and only so long as this Agreement shall remain in full force and effect, all the duties and obligations specified in the Indenture to be undertaken by the Remarketing Agent with respect to Bonds in the Unit Pricing Mode and with respect to the Bonds in the Demand Mode. Notwithstanding anything herein or in the Indenture to the contrary, with respect to its duties hereunder and under the Indenture the Remarketing Agent shall not be liable for any action, failure to act or error of judgment made in good faith by any of its officers or employees unless it is established that the Remarketing Agent was grossly negligent with respect to such action, failure to act or judgment. SECTION 2.3. Disclosure to Purchaser of Tendered Bo~ds and Repurchased Bonds and Qualification of the Bonds. (a) The Remarketing Agent, upon advice of its counsel and in view of the circumstances and laws in effect at the time of remarketing, may in its sole discretion deter- mine what disclosure documents, if any, are to be prepared in connection with the remarketing of Bonds in the Demand Mode tendered for purchase to the Trustee ("Tendered Bonds") and Bonds in the Unit Pricing Mode tendered for repurchase to the Trustee ("Repurchased Bonds"), and whether and to what extent the remarketing of such Bonds in the manner contemplated hereunder and under the Indenture requires registration under the Securities Act of 1933 or other federal or state securi- ties laws. If for whatever reason the Remarketing Agent shall determine that it is unable to obtain the information concerning the Owner, the Issuer, the Bank or other parties or circumstances necessary to prepare appropriate disclo- sures, if any, or if the Remarketing Agent shall be unable to procure the necessary cooperation of the Issuer, the Owner or the Bank in order to comply with applicable law, including federal or state securities laws in connection with the mar- keting of Tendered Bonds and Repurchased Bonds, then this Agreement shall terminate and the Remarketing Agent shall be under no obligation to perform any of its duties under this Agreement other than to return any Tendered Bonds, Repur- chased Bonds or funds for the purchase thereof to the appro- priate parties. The Remarketing Agent shall have no obligation to bear the cost of obtaining such information but shall be only required to notify the parties which it be- lieves have such information that such information is re- quired. In addition, if, at any time during the term of this Agreement, any event known to the Issuer relating to or af- fecting the Issuer, the Indenture, the Reimbursement Agree- ment, the Letter of Credit, the Bank, this Agreement or the Bonds shall occur which might affect the correctness or com- pleteness when made of any statement of a material fact con- tained in the Official Statement, the Issuer shall promptly notify the Remarketing Agent in writing of the circumstances and details of such event. (b) The Issuer shall cooperate with the Remar- keting Agent in, and the Issuer shall pay all out of pocket (as opposed to overhead) costs associated with, the qualifi- cation of the Bonds for offering and sale and the determina- tion of the eligibility of the Bonds for investment under the laws of such jurisdictions as the Remarketing Agent shall designate and shall use their best efforts to continue any such qualification in effect so long as required for the distribution of the bonds by the Remarketing Agent, provided that the Issuer shall not be required to qualify to do busi- ness in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so sub- ject; and provided further that if the Remarketing Agent anticipates costs in an aggregate amount in excess of $5,000 during any calendar year, the Remarketing Agent may notify the Issuer and the Issuer may elect not to pay any such costs in an aggregate amount during any calendar year in excess of $5,000. If such election shall be made by the Issuer, the Remarketing Agent may immediately resign and be relieved of all duties and obligations under this Agreement. SECTION 2.4. Conditions to Remarketing Agents' Obligations. Notwithstanding any provision of this Agreement or the Indenture to the contrary, there shall be no duty of the Remarketing Agent to remarket Tendered Bonds or Repur- chased Bonds pursuant to this Agreement unless (i) there shall not have occurred and be continuing an Event of Default under and as defined in the Indenture, and (ii) the In- denture, the Reimbursement Agreement, the Letter of Credit and all other instruments and documents to be entered into in connection with the delivery of the Bonds shall be in full force and effect and shall not have been amended, modified or supplemented in any way which would materially and adversely affect the Bonds, except as may have been agreed to in writing by the Remarketing Agent, and there shall be in full force and effect such additional resolutions, agreements, certificates (including such certificates as may be required by regulations of the Internal Revenue Service in order to establish the tax-exempt character of interest on the Bonds) and opinions, which resolutions, agreements, certificates and opinions shall be reasonably satisfactory in form and substance to counsel for the Remarketing Agent. In the event that the Remarketing Agent determines, after consultation with such persons as it deems advisable, that it has no obligation to remarket Tendered Bonds or Repurchased Bonds pursuant to this Section 2.4 the Remarketing Agent will immediately provide written notice to that effect to the Bank, the Issuer, and the Trustee. SECTION 2.5. Remarketinq Agent Books and Records. The Remarketing Agent agrees to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available for inspection by the Issuer, the Owner, the Paying Agent and the Trustee at all reasonable times. SECTION 2.6. Events of Default. The failure by the Issuer to make any payment required by this Remarketing Agreement when due Shall constitute an "event of default" hereunder and shall entitle the parties hereto to take what- ever action at law or in equity, including specific perfor- mance, that is necessary or desirable to collect the amounts then due and thereafter to become due to them or to enforce observance or performance of any covenant, condition or agreement of the Issuer hereunder. ARTICLE III MISCELLANEOUS SECTION 3.1. Remarketing Agent Not Acting as Underwriter. It is understood and agreed upon by all the parties hereto that the Remarketing Agent is only obligated hereunder to act as agent for the Issuer. The Issuer agrees that, while this Agreement is in effect, the Remarketing Agent shall be the exclusive remarketing agent for the Ten- dered Bonds and the Repurchased Bonds. The Remarketing Agent is in no way obligated to advance its own funds to purchase any Bonds. SECTION 3.2. Removal of Remarketing Agent. The Remarketing Agent may be removed at any time by an instru- ment, signed by the Issuer and filed with the Remarketing Agent, the Paying Agent, the Bank and the Trustee. Such removal shall be effective immediately upon receipt of such instrument by the Remarketing Agent. In the event of the removal of the Remarketing Agent, the Trustee shall give notice thereof by mail to all Bondholders and the Remarketing Agent shall pay over, assign and deliver this Agreement to its successor. SECTION 3.3. Resignation of a Remarketing Agent. The Remarketing Agent may at any time resign and be dis- charged of all duties and obligations hereunder and under the Indenture by giving notice, in writing, 60 days prior to the date set for resignation, to the Bank, the Issuer, the Trus- tee and the Paying Agent. SECTION 3.4. Appointment of Successor Remarket- lng Agent. If the Remarketing Agent shall resign pursuant to Section 3.3, or be removed pursuant to Section 3.2, the Issuer shall appoint a successor Remarketing Agent in accordance with the Indenture. SECTION 3.5. Remarketing Agent Compensation. For Bonds in the Unit Pricing Mode with Unit Pricing Interest Periods of one year or less and for Bonds in the Demand Mode, the Issuer will pay to the Remarketing Agent a quarterly fee payable in arrears on the 1st day of January, April, July, and and October commencing on January 1, 1987 of each year equal to 1/24 of 1 percent of the principal amount of such Bonds outstanding as of 5:00 P.M., New York City Time, on the day preceding each such date. For Bonds in the Unit Pricing Mode wi%h Unit Pricing Interest Periods over one year such fee shall be negotiated between the Remarketing Agent and the Issuer. SECTION 3.6. Remarketin9 by the Issuer. The Issu- er shall have no right to remarker any Bonds except pursuant to the terms and conditions imposed on the Remarketing Agent under this Agreement and the Indenture. SECTION 3.7. Amendments. This Agreement may be amended from time to time by an instrument in writing execut- ed by the parties hereto, so long as such amendment is not inconsistent with the Indenture, without the consent of the Bondholders, unless such consent is required under the Indenture. SECTION 3.8. Governing Law. This Agreement shall be governed by the laws of the State of California. SECTION 3.9. Notices. Any notices, requests, directions, instruments or other communications given or made hereunder or pursuant thereto shall be in writing and shall be deemed to have been validly given or made when delivered personally or by courier or mailed by registered or certified mail, return receipt requested, postage prepaid, to the re- spective addresses set forth on Exhibit A hereto, or if ad- dressed to any other party at such other address as such party shall hereafter furnish to the parties hereto in writ- ing. All such notices, requests or other communications may be made by telephone promptly confirmed by writing. SECTION 3.10. Indemnification. (a) To the extent permitted by law, the Issuer agrees to indemnify and hold harmless the Remarketing Agent and its officers, directors, shareholders, agents and employees (collectively, the "Indem- nified Persons" and individually an "Indemnified Person") from and against any losses, claims, damages or liabilities, and any actions in respect thereof, to which any Indemnified Person may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, (i) any untrue statement or al- leged untrue statement made in the Official Statement or the omission or alleged omission to state therein any fact neces- sary to make the statements made therein, in light of the circumstances under which they were made, not misleading; (ii) the breach by the Issuer of any representation or war- ranty of the Issuer contained in any of the documents deliv- ered, provided or requested at the closing (the "Closing Documents") pursuant to the Purchase Contract relating to the Bonds; or (iii) the breach by the Issuer of any of its cove- nants, agreements or undertakings contained herein or in the Closing Documents, and will reimburse each Indemnified Person fo~ any legal or other expenses reasonably incurred by such Indemnified Person in investigating, defending or preparing to defend any such action or claim; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of, or is based upon, any untrue statement or omission or alleged untrue statement or omission made in the Official Statement with respect to the Owner, any Underwriter or any Indemnified Person. The indemnity agreement in this paragraph shall be in addition to any liability which the Issuer may otherwise have to any Indemnified Person and shall extend upon the same terms and conditions to each person, if any, who controls any Indemnified Person within the meaning of the Securities Ex- change Act of 1934, as amended. (b) In case any such action shall be brought against any Indemnified Person, the Issuer shall be entitled to participate therein and, to the extent that it wishes, to assume the defense thereof, with counsel satisfactory to such Indemnified Person, and after notice from the Issuer to such Indemnified Person of their election to assume the defense thereof and the acceptance by such Indemnified Person of the counsel chosen for such defense, the Issuer shall not be liable to such Indemnified Person under this Section 3.10 for any legal or other expenses subsequently incurred by such Indemnified Person in connection with the defense thereof other than reasonable costs of any investigation; provided, however, that if the named parties to any such action (in- cluding any impleaded parties) include both the Indemnified Persons and the Issuer, the Indemnified Persons shall have the right to select separate counsel to assume such legal defense and to otherwise participate in the defense of such action on behalf of the Indemnified Persons; provided, fur- ther, however, that the Issuer shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys at any point in time for the Indemnified Persons. (c) The indemnity agreements contained in this Section 3.10 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Remarketing Agent, or the delivery of and any payment for any Bonds hereunder, and shall survive the termination or cancellation of this Agreement. (d) Notwithstanding the foregoing, no Indemnified Person shall be indemnified hereunder for any losses, claims, damages or liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. (e) To the extent permitted by applicable laws if the indemnification provided for in Section 3.10(a) is un- available to an Indemnified Person other than on account of paragraph (d) above or similarly is insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Issuer in lieu of indemnifying such Indem- nified Person, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is ap- propriate to reflect the relative fault of each of the par- ties in causing such losses, claims, damages or liabilities, as well as any other relevant equitable consideration. SECTION 3.11. Miscellaneous. Nothing herein shall be construed to make any party an employee of the other or to establish any fiduciary relationship between the parties except as expressly provided herein. IN WITNESS WHEREOF, the Issuer and the Remarketing Agent have caused this Agreement to be executed in their respective names all as of the date first above written. CITY OF TUSTIN, CALIFORNIA By: Title: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Acknowledged and Agreed to: By: Title: STONE & YOUNGBERG By: Title: EXHIBIT A If to the Issuer: City of Tustin, California 300 Centennial Way Tustin, California Attn: City Treasurer with a copy to: James Rourke City Attorney Rourke & Woodruff 701 S. Parker St., Suite 700 Orange, California 92668 If to the Owner: The Irvine Company 550 Newport Center Drive Newport Beach, California 92660 Attn: Richard E. Moran, Jr. Treasurer with a copy to: If to the Remarketing Agent: Merrill Lynch, Pierce, Fenner & Smith Incorporated Inc. Merrill Lynch World Headquarter North Tower World Financial Center New York, New York 10281 Attn: Tax-Exempt Money Markets Department (TICACTIVE)92248A, O02,002 St. 9224RA Fret. 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-B800 Comic. 30o~-86 1~40 Sc-q: 1. TUST]N /OS T.R./CHEA N Chic 154211 177047 Output (CO) 30-~ui-86 10:.41 PHA Proof of Ju[y 30, 1986 0O2 PRELIMINARY OFFICIAL STATEMENT DATED ................ .. 1986 Ratings: Moody's: Standard & Poor's: NEW ISSUE (See "Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds is exempt from all present Federal income taxes and from State of California personal income taxes under existing statutes, regulations and court decisions, and the Bonds are exempt from all UPDATESTMCalifOrnia taxes, except franchise taxes. See, however, the section entitled "Pending Federal Tax Legislation" herein. $50,650,000 CITY OF TUSTIN [UNIT PRICED] IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 85-1 ORANGE COUNTY, CALIFORNIA Dated: As descrll~l herein Price: 100% Du~ S~ptember 2, 2011 The Bonds are issued pursuant to provisions of the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code), as amended, and an Indenture of Trust dated as of August 1, 1986, between the City of Tnstin and Citibank, N.A., as Tmst~ (the "Tr~t~"). Thc Bonds will initially be issued in the Unit Pricing Mode. Each Bond in the Unit Pricing Mode will bear interest at the Adjusted Interest Rate determined fey such Bond, as of the time of its most recent Rate Adjustment Date. The Rcmarketing Agent is to determine each such Adjusted Interest Rate, on the basis of market conditions, as described bercin. Bonds in thc Unit Pricing Mode may be tendered for purchase to Citibank, N.A., New York, New York, in its capacity as tender agent (the "Tender Agent"), by 12:30 p.m., New York City time, on the Purchase Date established with respect to each Bond at the time of the most recent Rate Adjustment Date for each such Bond. Bonds in thc Unit Pricing Mode so tendered for purchase will be purchased at a price equal to the principal amount thereof. The Purchase Date for a Bond in the Unit Pricing Mode is also an Interest Payment Date for such Bond. The determination of the Adjusted Interest Rate, Unit Pricing Interest Period and Purchase Date for each Bond in thc Unit Pricing Mode may be made independently of such determination for any other Bond in the Unit Pricing Mode. All of the Bonds in thc Unit Pricing Mode may be converted to the Demand Mode or all or a portion of the Bonds in the Unit Pricing Mode may be converted to thc Fixed Rate Mode, all as described herein. Bonds in the Demand Mode will bear interest at thc Variable Interest Rate determined weekly by thc Rcmarkcting Agent. Wben in tbe Demand Mode, BOnds may be tendered for purchase on the Optional Tender Date which is the seventh calendar day next succec~ding thc delivery of a Tender Notice to thc Tender Agent and to the Rcmarketing Agent, as marc fully described herein. Each Bond in the Demand Mode tendered for purchase will be purchased at a price of par plus accrued interest to (but not including) the Optional Tender Date. AIl of thc Bonds in thc Demand Mode may be converted to thc Unit Pricing Mode or all or a portion of thc Bonds in the Demand Mode may be converted to the Fixed Rate Mode, all as described herein. The Bonds are subject to redemption prior to maturity as described herein. Bonds in the Unit Pricing Mode and Bonds in the Demand Mode (collectively, the "Adjustable Rate Bonds"), are secured by an irrevocable direct-pay letter of credit (the "Letter of Credit") and certain other moneys pledged therefor. The Letter of Credit will permit the Truste~ to draw certain amounts equal to the principal of and up to 40 days of interest on the Adjustable Rate Bonds determined at the maximum annual interest rate of 12% per annum, as described herein. The Letter of Credit will expire on August 21, 1996, unless terminated or renewed and will be issued by The Mitsubishi Trust and Banking Corporation, Los Angeles Agency. Assessment installments (thc "Assessment Installments") suiTicicnt to make debt service payments on the Bonds and to pay other related expenses will be billed to thc owners of thc property within the District. Assessment Installments corresponding to Adjustable Rate Bonds (thc "Adjustable Rate Assessments") will be billed directly to the owners of thc property subject to thc Adjustable Rate Assessments. Assessment Installments corresponding to BOnds bearing a Fixed Interest Rate (the "Fixed Rate Assessments") will be included on the regalar county tax bills to all owners of property subject to the Fixed Rate Assessments. The Ass~sment Installments will be used to pay debt service on the Bonds as it becomes due; provided, however, that to the extent draws have be~n made on thc Letter of Credit to pay debt service on thc Adjustable Rate Bonds, thc Assessment Installments shall be used pro rata to reimburse the Bank for such drawings under the Letter of Credit and to pay debt service on the Fixed Rate Bonds. To provide funds for payment of the Bonds and thc interest thereon as a result of any delinquent Assessment Installments, the City will establish a reserve fund with respect to the Bonds, as described herein. Additionally, the City has covenanted to initiate judicial foreclosure within 60 days of the nonpayment of an Adjustable Rate Ass~sment (I 50 days as to a Fixed Rate Assessment). Under certain circumstances, the City may have the duty to transfer tbe ammmt of any delinquency in the Imyment of Assessment Installments out of any available funds of the City. It is not expected, however, that any such funds will be available. Funds available under the Letter of Credit will be available to Imy principal of and interest mt the Adjustable Rate Bauds to the extent described above to theNeither the faith and credit nor the taxing power of theCity, tbe State of Calif~r~tia or any political subdivision thereofis pledgedpayme~t of the Bomis. The Bonds are offered when, as and if issued and delivered to the Underwriters, subject to the approval of legality by Mudge Rose Outhrie Alexander & Ferdon. Los Angeles, California, and Rourke & Woodruff, Co. Bond Counsel. and certain other conditions. Certain legal matters will be passed upon for the Underwriters by O'Melveny & Myers. It is expected that the Bonds in definitive form will be available for delivery in New York, New York on or about August 21. 1986. Merrill L h Capital Markets ync * UPDATESTM is a service mark of Merrill Lynch & Co., Inc. Stone & Youngberg ', (TICACTIVID92248A, O03,003 St: 92248A Fret: 92248A JEFFRIES C.P.Y. COMPANY (213)742-8800 Com~ 29-Jui-86 1~.54 Seq: 1 TUSTIN /05 T.R./CHEA N Chic 024037 132:117 Output (CO) 29-Jul-86 19:.55 PHA oo3 SUMMARY OF UNTE~ RATE MODES UMt Prle~ Mode Demasd Mede lq,xed Rate Mode Interest Rate Adjusted Interest Rate Variable Interest Rate Fixed Interest Rate Interest For Unit Pricing Interest Pcrieds of le~s First Wednesday of each cai- Each March 2 and Payment Date than 180 days: interest paid on the Put- endar month (whether or not September 2 chase Date; for Unit Pricing Interest a Business Day); to accrue Periods equal to or greater than 180 from thc first Wednesday of days; interest paid on each March 2 each month through the and September 2 prior to thc Purchase Tue~lay preceding the first Date and on thc Purchase Date Wednesday of thc following month Record Date If Interest Payment Date is a Purchase One Business Day preceding The fifteenth day of Date: one Business Day prior to such each Interest Payment Date thc calendar month Interest Payment Date; if Interest Pay- preceding each Inter- ment Date is a March 2 or September est Payment Date 2, thc fifteenth day of the calendar month preceding each Interest Payment Date; provided that if a Rate Adjust- ment Period falls between the 1Sth day of the calendar month and an Interest Payment Date, the Record Date shall be thc Business Day immediately pre- ceding thc next Interest Payment Date Authorized For Unit Pricing Interest Periods of less $100,000 and any integral $$,000 and any in* Denominations than 1 year; $100,000 and any integral multiple of $1,000 in excess tcgral multiple thereof multiple of $1,000 in excess thereof; for thereof Unit Pricing Interest Periods equal to or greater than I year; $$,000 and in- tegral multiples thereof Tender Option Optional tender on each Purchase Date Optional tender on any Busi- Not Available if the Bondholder notifies the Remar- ness Day upon 7 days' notice kcting Agent and thc Tender Agent by to the Rcmarkcting Agent 10:00 A.M. on Purchase Date of intent and thc Tender Agent and to tender delivery of the Bonds by 12:30 P.M. on the Optional Tender Date Preliminary By 9:30 A.M. on each Rate Adjustment Not Applicable Not Applicable Interest Rate Date, the Remarketing Agent will Scale make available to Bondholders and pro- spective Bondholders a scale of interest rates applicable to periods from 1 day to 1 year (or longer upon receipt of Favorable Opinion of Bond Counsel) Final Interest Determined by 11:30 A.M. on each Determined each Tuesday, cf- Determined prior to Rate/Period Rate Adjustment Date for a period fective Wednesday (whether Conversion Date and Determination from I day to 1 year (or longer upon or not a Business Day) effective until matu- receipt of Favorable Opinion of Bond through the following Tues- rity Counsel) day Interest For Unit Pricing Interest Periods less 365/366 day year for actual 360 day year eom- Calculation than or equal to I year: 365/366 day number of days elapsed posed of twelve 30-day year for actual number of days elapsed; months for Unit Pricing Interest Periods greater than I year: 360 day year com- posed of twelve 30-day months (TICACTIVE)q2248A,004,008 St: 92248A Fret: 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-8800 Comp; 28-Jul-86 22:45 Seq: 1 TU~'IN /05 T.P./CHEA N Chic 152701 104460 Output (CO) 28-Jui-86 22:47 PHA No dealer, broker, salesnum or other person has been aut.harized' by .the ~Ci?y, the .B.ank..or ~t..he Underwriters to ~ive any informatioo or to mke .a~.y rep.r?enmtions ot~lte?, titan m?~e_c, onm.t~e? in mis OfficiM Statement, and, if ~iven or made, such other m!o...rn?u_an ?r repro?man,ns mu~.~ ~no~ oe re_u~, upon. o~rr having been authorized by any of the foregoing. This ~nciai Stacm_ent.o .ucs not tonsure, re an on.er .~.o ..sell .0 the solicitation of an offer to buy, nor shall there be any sale o.f t..he Bonds?y~a.uy ~e.rsan m.. any j~ .m. ls~..g.tlOll !n which it is nnlnwful for such person to make such o.ff.er, soli?~.tian_or .sate..t.n.e.m? .t~,..non ~et mnn.e~e~m hes been obtained from the ¢it~ and other sources which ale Deneved to ne r. en..ame: DUP..It ts..no.~ gua..mnteea~as to accuracy or completeness and is not t.o be co?,trued .os a rep. r..ese~.um?.n Dy t. ne .~nuc.,rwn?,rs. the, infonnation and expressions of opinion berem are s?o]ect to ¢~n~e. Mmo.ut nonc~, a.n. ll netmer me. aes!.ve~, o, this Ofliciai Statement nor any sale md.e hereunoer, under any csrcumsmq_ces,.sn~q., cr~te any smpflcau..on that there has been no change m the affairs of t.he Bank or any other part~ descrtbed t~erem sunsequent to me date as of which such information is presented. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT TABLE OF CONTENTS Pap Pqe Summary Stetemcnt ....................................................... ii Location Map .................................................................. v Introduction ..................................................................... 1 The Bonds ........................................................................ 2 Authority for Issuance ................................................ 2 Gtneral Provisions ....................................................... 2 Unit Pricing Mode ...................................................... 2 Demand Mode ............................................................. 4 Alternate Rate ............................................................. 5 Fixed Rate Mode ........................................................ 6 Mandatory Purchas~ of thc Bonds ............................ 7 Interchangcabllity ........................................................ 7 Rod~nption .................................................................. 7 Purpo~ of the Bonds .................................................. 9 Security for the Bonds ................................................ 9 Payment of Property Taxes ........................................9 Obligation of the City Upon Delinquency ................ 10 Covenant to Commenen Superior Court Foreclosure ............................................................... 10 The Bank ......................................................................... 10 The Remarkctin$ Agent ................................................. ! 1 The Letter of Credit ....................................................... 12 Summary of thc Reimbursement Agreement ............... 11 Summary of the Indenture ............................................ 12 Provisions Applicable Prior to Elfeetivene~ of Fixed Interest Rate ................................................... 00 Denominations ......................................................... 00 Interest Rates .......................................................... 00 Redemption .............................................................. 00 Owner Option To Require lhtrchnse of' Bonds ..... O0 Ma.nd~_to.~ Purchase Upon Expiration of Letter of cremt ............................................................... 00 Mandatory Purchase Upon Conversion to Fixed Interest Rate ........................................................ 00 Mandatory Purchase Upon Event of Default under the R~imbureement Agreement ............... 00 Limit on Renmrketing ............................................ 00 Conversion to Fixed Interest Rate ......................... 00 Provisions Applicable From and_After Effeetivene~ of Fixed Interest Kate ........................ 00 Denominations ......................................................... 00 Interest Payments .................................................... 00 Redemption .............................................................. 00 Prav~ion~ No Longer Effective ............................. 00 Provisions Applicable Generally ................................00 Registration. Transfer and Exchange of Bonds .... 00 Proc~_____, of the Bonds ............................................ 00 Assessment Installments ......................................... 00 Flow of Funds ......................................................... 00 Interest Fund ....................................................... 00 Principal Fund ..................................................... 00 Redemption Fund ................................................00 Reserve Fund ....................................................... 00 Effects of Partial Conversion ................................ 00 Investments .............................................................. 00 Letter of Credit ....................................................... 00 Covenants ................................................................. O0 Events of Default .................................................... O0 Foreclosure ~___~_ ings ..........................................O0 Action by Owners ................................................... O0 Tmstee's Remedies .................................................. O0 Limitations on Liability .......................................... O0 The Trustee ............................................................. 00 The Paying Agent ................................................... 00 The Remnrketing Agent ......................................... 00 Amendments and Supplements .............................. 00 Summary of the R~narketing Agreement ................... t2 The Improvement Project ............................................... 12 The District ..................................................................... 18 Dns~ption ................................................................... 00 Factors Which May Affect Land Development ....... 00 Propony Ownership .................................................... 12 Legal Opinion .................................................................. 14 The Financial Advisor .................................................... 14 Tax Exemption ................................................................ 14 Pending Federal Tax Legislation ................................... 14 No Litigation ................................................................... 15 Ratings ............................................................................. 1 Undorwriting ................................................................... 15 Additional Information ................................................... 16 Appendix A: .a~se~ment Diagram (index Map) ......... A-I Appendix B: Description of Work and Method Asse~ment ................................................................... B- 1 (T]CACTIVED92248A,O04,008 St: 92248A Fmc 92248A JEFFR[ES C.P.Y. COMPANY (213)742-8800 Comp: 30-Julo86 11:15 Seq: 2 TUST[N /OS T.R./CHEA N Chic 0S1].6~ 066512 Output (CO) 30-Jul-86 ].1:16 PHA SUMMARY STATEMENT THIS SUMMARY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COM- PLETE INFORMATION IN THIS OFFICIAL STATEMENT AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. Pm'i~me ............................. Proceeds from the $50,650,000 principal amount of City of Tustin [Unit Priced] Improvement Bonds, Assessment District No. 85-1 ("the Bonds"), will be used to finance the construction and acquisition of certain public improve- ments as more fully described herein. Security for the Bonds .... The Bonds are issued upon and secured by the unpaid Assessment Installment together with interest thereon, and said unpaid Assessment Iustallmcnts together with interest thereon constitute a trust fund for the redemption and payment of thc principal of thc BOnds and thc interest thereon and certain costs and expanses related tbercto. Thc unpaid Assessment Installments rcprescnt liens on the lots and parcels assessed. They do not, however, comtitute a personal indebtedness of the respective owners of said lots and parcels. If the lots and parcels are transferred to another owner, the ability of the new owner to meet assessment obligations therefor will become relevant. The information under the Section herein entitled "Property Ownership" should be considered in light of this fact. Assessment Installments sufficient to meet debt service payments on thc Bonds and to pay other rclated expenses will be billed to the owners of the property within thc District. The Adjustable Rate Assessments billed against each property represent a pro rata share of thc debt service coming duc with respect to the Adjustable Rate BOnds and certain expenses related thereto, based on the percentage which the unpaid Adjustable Rate Assessments against that property bears to thc total of unpaid Adjustable Rate Assessments levied to repay the Adjustable Rate Bonds. Thc Fixed Rate Assessments billed against each property owner represent a pro rata share of debt service coming due with respect to the Fixed Rate Bonds and certain expenses rclated thereto. In thc event insufficient monies are deposited in the Principal and Interest Funds from the Assessment Fund, the owners of the Bonds shall be entitled to a pro rata portion of such monies; provided, however, that to the extent draws on thc Letter of Credit are used to pay debt service on the Adjustable Rate Bonds, thc Bank shall be entitled to a pro rata portion of such monies. A Rcscrvc Fund in an amount equal to $ .................. will be established from Bond proceeds. The Reserve Fund will be a source of moneys to advance to thc Principal and Interest Funds in the event of delinqucnt Adjustable Rate Assessments. As Bonds in the Unit Pricing Mode or Demand Mode arc converted to a Fixed Interest Rate, a pro rata portion of moneys in the Reserve Fund will be transferred to thc Fixed Rate Reserve Fund. Additionally, thc City has covenanted to institute judicial foreclosure proceedings within 60 days of the non payment of any Adjustable Rate Assessment (150 days of thc nonpayment of any Fixed Rate Assessment and to prosecute such proceedings diligently to completion. Under certain circumstnnees, the City may have the duty to transfer into the Principal and Interest Funds the amount of any delinquency in the payment of Assessment Installments out of any available funds of the City. It is not expected, however, that any such funds will be available. Funds available under the Letter of Credit described below will be available to pay principal and interest on the Adjustable Rate Bonds (See "The Letter of Credit"). From the date of issuance of the Adjustable Rate Bonds until all the Bonds are redeemed or converted to a Fixed Interest Rate, thc Adjustable Rate Bonds will be payable from an irrevocable direct-pay Letter of Credit issued by Thc (T[CACTIVID92248A, 004,008 St: 92248A Fmt: 92248A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: ;0-J~-86 11:15 ~'q: ; TUSTIN /05 T. RdCHEA N ChE 055745 032501 Output (CO) 30-J~-86 11:16 PHA Redempti(m ....................... The District ...................... Mitsubishi Trust and Banking Corporation, Los Angeles Agency. The Letter of Credit will expire on August 21, 1996 unless otherwise terminated or extended as described herein. Fully registered form in minimum denominations of $100,000 or any integral multiple of $I,000 in excess thereof for Bonds in the Unit Pricing Mode with Unit Pricing Interest Periods of less than 1 year and for Bonds in the Demand Mode; Bonds in thc Unit Pricing Mode with Unit Pricing Interest Periods equal to or greater than 1 year and Bonds in the Fixed Rate Mode may be in denominations of $5,000 or integral multiples thereof. The Bonds arc subject to redemption and mandatory purchase as described herein. Assessment District No. 85-1 ("the District") is comprised of 19 assessed parcels totalling approximately 522 net acres located in thc southeastern portion of thc City. Thc District is adjacent to thc Santa Aha Freeway (I-5). All of thc assessable land in thc District is currently owned by Thc Irvine Company, a privately owned land development corporation. The City of Tustin is located in the central part of Orange County, about 40 miles southeast of thc City of Los Angeles and about 80 miles north of the City of San Diego. Tustin includes over 11 square miles adjacent to the Cities of Orange, Santa Ana and Irvine. Thc State Department of Finance estimates the city's January 1, 1986 population at 42,750, a 33% increase since 1980. iii ('I/CACT[ViD92248A, 004,008 St: 92248A Fmt: 92248A JEFFR[E$ C.P.Y. COMPANY (213)742-8800 Comp: 28-Jui-86 20:04 Seq: 4 TUSTIN /05 T.P~CHEA N Chic 1751~.1 026561 Output (CO) 28-Jul-86 2~05 PHA CITY OF TUSTIN MAYOR AND CITY COUNCIL Donald J. Saltarclli ........................... Mayor Ronald B. Hoe~tcrcy ........................... Mayor Pro Tern Richard B. Edgar ........................... Councilmember Ursula E. Kennedy ........................... Councilmember John Kelly ........................... Councilmember CITY STAFF William A. Hutton ........................... City Manager Jamos G. Rourk¢ ........................... City Attorney Mary E. Wynn ........................... City Clerk Robert S. Ledendecker ........................... Director of Public Works and Superintendent of Streets Ronald A. Nault ........................... Director of Finance/City Treasurer CO-BOND COUNSEL ........................................................... CO-BOND COUNSEL ........................................................... PROFF_..qSIONAL SERVICES Mudge Rose Guthrie Alexander & Ferdon Los Angel~, California Rourk¢ & Woodruff Orange, California CITY ATTORNEY ................................................................. Rourke & Woodruff TRUSTEE/PAYING AGENT/TENDER AGENT .............. FINANCIAL ADVISOR ......................................................... Orange, California Willdan Associates Anaheim, California Citibank, N.A. New York, New York Battle Wells Associates San Francisco, California iv (TICACT]VID92248A,004,008 St: 92248A Fmf: 92248A JEFFRIES C.P.Y. COMPANY (213)742-8~00 Comic. 08-Jui-86 22:16 Seq: 5 TUSTIN /05 T.R./CHEA N Chic 037247 013056 Output (CO) 08-Jul-86 22:18 PHA LOCATION MAP 13 AN( .MING?ON EDRO LONG BEACH Se~ AVALON Surf$~de HUNTINGTO~ BEACH NEWPORT EALIIOA TUSTIN 7 LAGUNA BEACI SAN / i ? iUAN ~4 (TTCACT/VIED92248A, O09,029 St: 92248A Fmt: 92248A JEFFR[ES C.P.Y. COMPANY (213)742-8800 Com~ 30-Jul-86 1(~4~. ~ecl: 1 TUb'FIN /OS T.P~/CHEA N Chic 123476 067760 Output (CO) 30-Jd-86 10:.47 PHA OFFICIAL STATEMENT $so,6 o, ooo CITY OF TUSTIN [UNIT PRICED] IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 85-1 OlO INTRODUCTION The City of Tustin (the "City") is located in the central part of Orange County, about 40 miles southeast of Los Angeles and about 80 miles north of San Diego. Tustin covers, over 11 square miles and adjoins the Cities of Orange, Santa Aha, and Irvine. The State Department of Finance estimates the City's January 1, 1986 population at 42,750, a 33 percent increase since 1980. A~ment District No. 85-1 (the "District") comprises 19 assessed parcels covering a total of about 522 net acres. The District is located in the southeastern portion of the city, bounded by the Santa Aha Freeway (Interstate 5), Browning Avenue, Irvine Boulevard, and Myford Ro~d. About ......... acres of the District will be developed with low- to medium-high-density residential uses. The Tustin Autocenter covers about ......... acres, and about ......... acres include commercial and retail development. Proceeds of the issue will used to fund the design, construction, inspection, and administration of public improvements within the District. The improvements consist of the backbone facilities to provide for traffic aoce~ and control, drainage and utility service for the properties. Appendix A, entitled "Assessment Diagram," shows the configuration of the District and the various assessed parcels, and indicates the location of the public improvements to be constructed. For a more detailed description of the improvement project, including a description of the methodology used by the Engineer of Work to spread the assessment, refer to Appendix B hereof, entitled "Description of Work and Method of Assessment." All of the asse~able land in the District is currently owned and being developed by The Irvine Company. The Irvine Company is the largest landowner in Orange County, and is responsible for significant residential, commercial, and office development in Orange County. The Irvine Company's land holdings extend along the coast from Newport Beach to Lagnna Beach, and inland approximately 22 miles to the Riverside County line. Assessment Installments sufficient to make debt service payments on the Bonds and to pay other related expenses will be billed to the owners of the property in the District. Adjustable Rate Assessments will be billed directly to the owners of the property subject to the Adjustable Rate Assessments. Fixed Rate Assessments will be included on the regular county tax bills sent to owners of property subject to the Fixed Rate Assessments. The Assessment Installments are to be pa!d into an Assessment Fund ("the Assessment Fund"), which will be held by the City and transferred to the Principal and Interest Funds for the payment of principal and interest, respectively, on the Bonds, provided, however, that to the extent that draws on the Letter of Credit are used to pay debt service on the Adjustable Rate Bonds, moneys in the Principal and Interest Funds will be used pro rata to reimburse the Bank for drawings under the Letter of Credit and to pay principal and interezt with respect to the Fixed Rate Bonds. A R~rve Fund, initially in an amount equal to $ .................. will be established from Bond proceeds. The R~rve Fund will be used to advance moneys to the Principal and Interest Funds in the event of delinquent Adjustable Rate Assessments. Upon conversion of all or a part of the Adjustable Rate Bonds to the Fixed Rate Mode, a pro rata portion of moneys in the Reserve Fund will be transferred to the Fixed Rate Reserve Fund. Monies in the Fixed Rate Reserve Fund will be used to advance moneys to the Principal and Interest Funds in the event of delinquent Fixed Rate Asse~ments. Additionally, the City has covenanted to commence court foreciozure proceedings within 60 days of the non-payment of an Adjustable (T~CACTIVE)92248A,009,029 St: 92248A Fmt: 92248A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 29-Jul-86 23:0~ ~eq: 2 TUSHN /OS T.R./CHEA N Chic 075630 147220 Output (CO) 29-Jui-86 23:11 PHA 011 Rate Assessment (150 days with respect to a Fixed Rate Assessmcnt) and to prosecute such proceedings diligently to completion. If there are additional delinquencies with respect to Assessment Installments, after depletion of the Reserve Fund with respect to the Adjustable Rate Bonds and the Fixed Rate Reserve Fund with respect to Fixed Rate Bonds, the City under certain circumstances may have the duty to transfer into the Principal and Interest Funds the amount of any such delinquency out of any available funds of the City. It is not expected, however, that any such funds will he available. Funds available to he drawn under the Letter of Credit will he used to pay principal and interest, however, on the Adjustable Rate Bonds ns further described under the section herein entitled "The Letter of Credit." Pursuant to thc Remarketing Agreement, dated as of August 1, 1986, by and between the City and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") (the "Remarketing Agreement"), Merrill Lynch will serve initially as Remarkcting Agent (the "Remarketing Agent") for the remarketing of Adjustable Rate Bonds. THE BONI~ Authority for Issuance The improvement proceedings for the City of Tustin Assessment District No. 85-1, have been conducted pursuant to the Municipal Improvement Act of 1913, as amended ("the 1913 Act"). The Bonds, which represent the unpaid Assessment Installments levied against property in the District, are issued pursuant to the provisions of the Improvement Bond Act of 1915, as amended (the "Bond Law") and an Indenture of Trust (the "Indenture") dated as of August 1, 1986 between the City and Citibank, N.A., as trustee (the "Trustee"). Unless otherwise defined herein, all capitalized terms used herein shall have the 'meaning set forth in the "Summary of the Indenture -- Definitions". General Provisions The Bonds, as initially issued, will be in the Unit Pricing Mode and will initially hear interest at the applicable Adjusted Interest Rate. All of thc Bonds in the Unit Pricing Mode may be converted to thc Demand Mode or all or a portion of thc BOnds in thc Unit Pricing Mode may be converted to thc Fixed Interest Mode, and if converted to the Demand Mode, may be thereafter converted to the Unit Pricing Mode or thc Fixed Interest Mode. No conversion to any mode may be made for Bonds in the Fixed Interest Mode. Prior to any Demand Date, any Unit Pricing Date or any Proposed Conversion Date (except as indicated herein), thc City must deliver to the Trustee a Favorable Opinion of Bond Counsel. Notwithstand- ing thc foregoing, Bank-Owned Bonds will hear interest in addition to that berne by other Bonds. The BOnds are dated the date of their authentication, shall bear interest from the Interest Payment Date to which interest has been paid or provided for, or if such date of authentication is prior to thc initial Record Date for such Bond, from thc date of original authentication and delivery of the Bonds, at the rates as described herein, and will mature on September 2, 2011 or prior redemption thereof. The principal and redemption price of thc Bonds shall be payable at thc principal oi~ce of Citibank, N.A., New York, New York, as thc paying agent (the "Paying Agent'). Unit Pricing Mode The Adjusted Interest Rate for each Bond in the Unit Pricing Mode (other than Bank Bonds) will be det~'mined on the Rate Adjustment Date for such Bond in accordance with the following procedures. (a) At or about 9:30 A.M., New York City time, on each Rate Adjustment Date, the Remarkct- lng Agent will post the Preliminary Scale for such Rate Adjustment Date. The information in such Preliminary Scale will be made available to any prospective purchaser requesting such information. The Adjusted Interest Rate for each Unit Pricing Interest Period indicated on the Preliminary Scale will be the minimum rate of interest per annum which, in the sole opinion of the Remarketing Agent, without consultation with the City, would be necessary on and as of the Rate Adjustment Date to remarket each Unit Pricing Bond having such Unit Pricing Interest Period in a secondary market (T]CACTIVE)92248A,009,029 St: 92248A Fmc 92248A JEFFR]ES C.P.Y. COMPANY (213)742-8800 Comp; 29-Jul-86 21:5'1 Seq: 3 TUSTIN /05 T.R./CHEA N Chic 0~2654 04~204 Output (CO) 29-Jui-86 21:.54 PHA 013 transaction at a price equal to the principal amount thereof; provided, however, that the Adjusted Interest Rate indicated for any Unit Pricing Interest Period will in no event exceed the Maximum Rate. (b) The registered owner of any such Bond in the Unit Pricing Mode who does not elect to tender all or any portion of such Bond for purchase will have the right to select a new Unit Pricing Interest Period by telephonic notice to the Remarketing Agent no later than 10:00 A.M., New York City time, on the Rate Adjustment Date. In that event, from and after such Rate Adjustment Date, such Bond will have the Unit Pricing Interest Period selected by the owner of such Bond and bear interest at the Adjusted Interest Rate indicated for such Unit Pricing Interest Period on the Preliminary Scale, subject to adjustment as provided in paragraph (d) below. If the registered owner of a Bond in the Unit Pricing Mode retains such Bond as described above, thc new Purchase Date, Adjusted Interest Rate and Unit Pricing Interest Period shall be inserted in the grid provided on the reverse side of each Bond. (c) In the event that on the Rate Adjustment Date the registered owner of any such Bond in the Unit Pricing Mode neither tenders such Bond for purchase nor selects a new Unit Pricing Interest Period in accordance with paragraph (b) above, then, commencing with such Rate Adjustment Date, such Bond will have a Unit Pricing Interest Period which will extend to but not include the next succeeding Business Day and will bear interest at the Adjusted Interest Rate indicated for such Unit Pricing Interest Period on the Preliminary Scale, subject to adjustment as provided in paragraph (d) below. (d) In the case of any Bond in the Unit Pricing Mode which has been tendered for purchase on a Rate Adjustment Date upon election of the holder thereof and remarketed by the Remarketing Agent, such Bond will, commencing with such Rate Adjustment Date, have the Interest Period selected by the purchaser to whom such Bond has been remurketed and bear interest at the Adjusted Interest Rate indicated for such Unit Pricing Interest Period on the Preliminary Scale, subject to adjustment as herein provided. The first prospective purchasers willing to buy such Bonds being remarketed at any of the rates indicated on the Preliminary Scale will be awarded such remarketed Bonds. In the event that a prospective purchaser selects a Unit Pricing Interest Period for any Unit Pricing Bo, nd but indicates that it will purchase such Bond only if such Bond bears an interest rate for such Unit Pricing Interest Period which is higher than the rate indicated therefor in the Preliminary Scale, such information will be noted by the Remarketing Agent. At the end of the remarketing period, if all Bonds to be remarketed on such Rate Adjustment Date have not been sold in accordance with the foregoing, and information of the nature described in the preceding sentence has been noted by the Remarketing Agent, then, in order to effect a complete remarketing, the unremarketed Bonds will be sold to those prospective purchasers who have indicated a willingness to purchase such Bonds bearing interest for Unit Pricing Interest Periods closest, in terms of basis points, to the Adjusted Interest Rates indicated therefor in thc Preliminary Scale. In that event, thc Remarkcting Agent will post at or before 11:30 A.M., New York City time, on the Rate Adjustment Date, a Final Scale which will be the same as thc Preliminary Scale except that the Adjusted Interest Rate indicated for any Unit Pricing Interest Period will be thc highest Adjusted Interest Rate for such Unit Pricing Interest Period at which any Bond was remarketed in accordance with this paragraph; provided, however, that thc Adjusted Interest Rate will in no event exceed thc Maximum Rate. The information on thc Final Scale will be made available to any prospective purchaser requesting such information. All Bonds for which an Adjusted Interest Rate is determined on the Rate Adjustment Date will bear interest at thc Adjusted Interest Rate indicated for the applicable Unit Pricing Interest Period on the Final Scale even if thc purchaser thereof had stated a willingness to purchase such Bonds at a lower Adjusted Interest Rate for such Unit Pricing Interest Period. (c) For those Bonds selected to be converted to thc Demand Mode or the Fixed Rate Mode, no Unit Pricing Interest Period would be thereafter available which would extend beyond thc effective date established for such conversion to the Demand Mode or thc Fixed Rate Mode. The determination of each Adjusted Interest Rate and Unit Pricing Interest Period in accordance with the foregoing will be conclusive and binding upon the holders of the Bonds. (TZCACT[VE)92248A, OOC),029 St: 92248A Fret: 92248A JEFFRIES C.P.Y. COMPANY (213)742-8800 Com~ 29-Jul-86 21:51 Sc, q: TUSTIN /OS T.R./CHEA N Chk: 033320 075425 O~tput (CO) 29-Jui-86 21:54 PHA 014 Upon certain conditions as described below, thc Bonds in the Unit Pricing Mode will bear interest at the Alternate Rate. Bonds in the Unit Pricing Mode shall initially include Unit Pricing Interest Periods of no greatcr than 1 year. Unit Pricing Interest Periods may exceed periods of 1 year upon receipt of a Favorable Opinion of Bond Counsel. For any Unit Pricing Interest Period of less than 180 days, interest will be paid on thc Purchase Date even if not purchased on such date. For any Unit Pricing Interest Period equal to or longer than 1 $0 days, interest will be paid on the Purchase Date and on each March 2 and September 2 prior to thc Purehasc Date. For any Bond having a Unit Pricing Intcrest Period of leas than or equal to 1 year, interest will be computcd on the basis of a 365/366 day year for the actual number of days clapped. For any Bond having a Unit Pricing Interest Period of greater than 1 year, interest will be computed on thc basis of a 360-day year, composed of twelve 30-day months. Thc registered owner of any Bond in thc Unit Pricing Mode may demand that such Bond or any portion thcrcof in a principal amount equal to an Authorized Denomination (so long as thc amount not purchased is an Authorized Denomination) be purchased on any Purchase Date thereof at a price equal to thc principal amount thereof by (A) giving telephonic notice to thc Rcmarkcting Agent and the Tender Agent and written notice to thc Tender Agent which (i) states the principal amount of such Bond to be purchased, (ii) states the Purchase Date on which thc Unit Pricing Bond is to be purchased, (iii) irrevocably demands such purchase and (B) delivery of such Bond duly endorsed in blank for transfer at thc principal corporate trust office of the Tender Agent at or prior to 12:30 P.M., New York City time, on such Purchase Date. Any Bond, or portion thereof, for which a demand for purchase has been made in accordance with this paragraph will be purchased from any funds derived from remarketing such Bond or funds supplied by thc Bank pursuant to the Letter of Credit. At thc option of the City, all of thc Bonds in the Unit Pricing Mode may be changed to thc Demand Mode in accordance with certain provisions of thc Indenture. Upon receipt from the City of written notice requesting a change to the Demand Mode and upon compliance with the various provisions therefor as set forth in the Indenture, including receipt by the Tender Agent of a Favorable Opinion of Bond Counsel, thc Trastcc shall give notice by first class mail to all holders of such proposed change and the Demand Date or Dates selected by thc City. Such notice shall be given not less than 15 Business Days prior to such Demand Date or Dates selected and shall indicate that such Bonds are required to be tendered to the Tender Agent on the relevant Demand Date for mandatory purchase at the Tender Price and shall further indicate that the owners of thc Bonds may elect to retain tbeir Bonds by giving written notice to such effect submitted to thc Tender Agent not less than 7 Business Days prior to the relevant Demand Date. (Any Demand Date shall bc a Wednesday which is also a Business Day). All or a portion of thc Bonds in the Unit Pricing Mode may, and under certain circumstances, will be converted to bear interest at thc Fixed Interest Rate as provided in the Indenture and as further described herein. Denmnd Mode Bonds in the Demand Mode (other than Bank Bonds) shall bear interest at the Variable Interest Rate. The Variable Interest Rate shall be determined by the Remarketing Agent prior to 3.-00 P.M., New York City time, on the Business Day next preceding the Variable Rate Adjustment Date (which shall be a Wednesday) for such Variable Rate Interest Period. The Variable Interest Rate shall become effective on such Variable Rate Adjustment Date and shall be applicable through the following Tuesday. On or before the Business Day next succeeding the date on which the Variable Interest Rate for any Variable Interest Rate Period is determined by the Remarketing Agent, the Remarketing Agent shall give notice to the Paying Agent of the Variable Interest Rate applicable to such Variable Rate Interest Period. The Variable Interest Rate for each Variable Rate Interest Period will be equal to that interest rate which, if borne by the Bonds, would in the judgment of the Remarketing Agent be the interest rate necessary to produce as nearly as practicable a par bid (disregarding any accrued interest) on the Bonds on (TXCACTIVE)92248A, OOg, 0Z9 St: 9224~A Fret: 9224~A JEFFRIES C.P.Y. COMPANY (2:1~)742-8800 Comp~ 29-Jul-86 01:40 5eCl: 5 TUSTIN /05 T.R./CHEA N Chic 021204 102072 Output (CO) 29-Ju1-86 0~'43 PHA 015 the Variable Rate Adjustment Date, provided that in no event shall thc Variable Interest Rate be in excess of the Maximum Rate. Bonds in thc Demand Mode will accrue interest at thc Variable Interest Rate, calculated on thc basis of a 365/366 day year for thc actual number of days elapsed. Interest on Bonds in the Demand Mode is payable on thc first Wednesday of each month. Thc determination of thc Variable Interest Rate for Bonds in thc Demand Mode, if in accordance with thc Indenture, shall be conclusive and binding. The owner of a Bond in thc Demand Mode shall, upon proper delivery of a Tender Notice, as described below, have thc right to have such Bond purchased on any Optional Tender Date, at the applicable Tender Price. "Optional Tender Date" means thc day stated in the Tender Notice delivered by a holder to the Tender Agent and to thc Rcmarketing Agent with resin'ct to such Bond, which day shall be the seventh calendar day after the date of the delivery of thc Tender Notice (or the first Business Day thereafter, if such seventh calendar day is not a Business Day). The Tender Notice must state (i) thc principal amount of each such Bond to be purchased, (ii) the certificate number of each such Bond, (iii) the name of thc registered holder of each such Bond, and (iv) the Tender Date on which each such Bond is to be purchased. In any event, Bonds will be subject to purchase only if delivered to thc Tender Agent, conforming in all respects to thc description thereof in thc Tender Notice, and if delivery (together with necessary endorsements) is made to the Tender Agent at or prior to 3:00 P.M., New York City time, on the Optional Tender Date specified in such Tender Notice. The right of any owner to have Bonds purchased shall terminate on thc change of such Bonds to thc Unit Pricing Mode or the conversion of such Bonds to thc Fixed Rate Mode. The delivery of a Tender Notice to the Tender Agent and the Remarketing Agent is irrevocable and binding on the owner and cannot be withdrawn. Any with respect to which a Tender Notice is given but which is not tendered on the Optional Tender Date stated in such Tender Notice shall be deemed purchased and interest thereon shall cease to accrue. A new Bond shall be issued to the purchaser thereof. Thc prior owner of such Bond shall be entitled solcy to payment of thc Tender Price for such Bond. An owner of a Bond who gives a Tendar Notice with respect to such Bond may repurchase such Bond if the Remarketing Agent agrees to sell any such Bond so tendered back to such owner. In such event, the delivery requirement in connection with such tender shall be waived. If the City elects, all of the BOnds in the Demand Mode may be changed to the Unit Pricing Mode in accordance with certain provisions of the Indenture, including notice of the change to the owners of the Bonds and delivery to the Tender Agent of a Favorable Opinion of Bond Counsel. Thc Tender Agent shall thereupon give written notice to ali Bondholders not later than the tenth Business Day next preceding the Unit Pricing Date, which notice shall specify thc Unit Pricing Date or Dates selected by thc City and shall indicate that such Bonds are required to be tendered to the Tender Agent on the relevant Unit Pricing Date for purchase at thc Tender Price and shall further indicate the date by which thc owners of thc Bonds may elect to retain their Bonds by written notice to such effect submitted to the Tender Agent. Any Bond which is not tendered on or prior to the proposed Unit Pricing Date shall be deemed purchased and may be cancelled by the Tender Agent. All or a portion of the Bonds in thc Demand Mode may also be converted to bear interest at thc Fixed Interest Rate, as provided berein. All or a portion of the Bonds in the Demand Mode may, and under circumstances, will be converted to thc Fixed Rate Mode as provided in the Indenture and as further described herein. Under certain conditions, as described below, Bonds in the Variable Rate Mode shall bear interest at the Alternate Rate. Alternate Rate In thc event (i) the Remarketing Agent fails to determine the Adjusted Rate or thc Variable Interest Rate or (ii) the method of determining the Adjusted Rate or the Variable Interest Rate shall be beld to be unenforceable by a court of law of competent jurisdiction, thc Bonds shall thereupon, until such time as the Rcmarkcting Agent again makes such determination or until there is delivered an opinion of Bond Counsel to the effect that the method of determining such rate is enforceable, bear interest from the last date on which interest was legally paid, at the Alternate Rate for the Alternate Rate Period from time to time in (T]CACT[VE)92248A,009,029 St: 92248A Fret: 92248A JEFFR]ES C.P.Y. COMPANY (213)742-8800 Comp.' 30-Jul-86 10:.41 Seq: 6 TUSTIN /OS T.P. YCHEA N Chic 1:1105~ 002177 Output (CO} ~O-Jul-86 10.47 PHA 016 effect. "Alternate Rate" means, as of the first day of an Alternate Rate Calculation Perod, the annual interest rate not in excess of the Maximum Rate, equal to 75% of the interest rate applicable to 90-day United States Treasury bills for Bonds in the Unit Pricing Mode and 68% of the interest rate applicable to 90-day United States Treasury Bills for Bonds in the Demand Mode, determined on the basis of the yield at which such 90-day Treasury bills shall have been sold at thc most rcccnt Treasury auction conducted during the preceding thirty (30) days, or if there shall have been no such auction within the preceding thirty (30) days, the rate of interest borne by the Bonds for the immediately preceding Unit Pricing Interest Pcriod or Variable Rate Interest Period, as appropriate shall remain in effect for such Unit Pricing Interest Period or Variable Rate Interest Period. "Alternate Rate Period" means (i) if Bonds are in the Unit Pricing Mode, from the last Purchase Date to but not including the first Business Day of the next succeeding month, which day shall be the Purchase Date or (ii) if Bonds are in the Demand Mode from each Wednesday to thc next Tuesday. "Alternate Rate Calculation Date" means (i) if Bonds are in the Unit Pricing Mode, each Purchase Date, and (ii) if Bonds arc in the Demand Mode, each Tuesday. Fixed Rate Mode Thc Indenture provides that the City may, under certain circumstances, elect to convcrt all or a portion of the Bonds in the Unit Pricing Mode or the Demand Mode to the Fixed Rate Mode. In addition, the Indenture provides that Bonds in the Unit Pricing Mode or the Demand Mode are subject to automatic conversion [describe automatic conversion process -- when finalized]. Bonds in the Fixed Rate Mode will bear a fixed annual rate of interest to maturity determined as provided in the Indenture and no conversion may be made back into the Unit Pricing Mode or Demand Mode. In the event of a Proposed Conversion Date or Automatic Conversion Date of all or a portion of the Bonds to a Fixed Rate Mode, thc Trustee shall mail written notice to all holders of the Bonds subject to conversion not later than thc thirtieth calendar day next preceding thc Proposed Conversion Date or Automatic Conversion Date, as the case may be, which notice shall specify the Preliminary Pricing Date, the Proposed Conversion Date or Automatic Conversion Date as the case may be, indicate that such Bonds are required to be tendered for purchase to the Tender Agent on the Proposed Conversion Date or Automatic Conversion Date as the case may be, at the Tender Price and set forth thc date by which notice of election to retain must be submitted to thc Tender Agent, which date shall be two Business Days after the Preliminary Pricing Date. If such conversion date is not an Automatic Conversion Date, such notice shall be accompanied by a copy of the Favorable Opinion of Bund Counsel. The Preliminary Pricing Date will be a date determined by the Rcmarketing Agent and will be at least five (5) but not more than fifteen (15) Bnsiness Days prior to thc Proposed Conversion Date. Any Bond which is not tendered on the Proposed Conversion Date or Automatic Conversion Date, as the case may be shall be deemed purchased and may be cancelled by the Tender Agent. On the Preliminary Pricing Date, thc Remarketing Agent will make available a Preliminary Interest Index and a Minimum Fixed Interest Rate. The Preliminary Interest Index will be the annual interest rate or rates which in the sole judgment of the Rcmarketing Agent will enable the Bonds to be remarketed at par on the Conversion Date, but such rate shall not be greater than the Maximum Rate. The Minimum Fixed Interest Rate will be 95% of thc Preliminary Interest Index. Not more than two Business Days following the Preliminary Pricing Date, a Bondholder may notify the Remarketing Agent by telephone (promptly confirmed by written notice to the Tender Agent) if the Bondholder wishes to retain such Bond in the Fixed Rate Mode. On the fourth (4th) Business Day following the Preliminary Pricing Date (the "Final Pricing Date"), thc Rcmarkcting Agent will establish the Fixed Intcrest Rate which will be borne by thc Bonds after the Conversion Date. The Fixed Interest Rate will be thc annual rate(s) of interest which in thc sole judgment of the Remarketing Agent under then prevailing market conditions will allow such converted Bonds to be sold at par on the Conversion Date. PROSPECTIVE PURCHASERS OF BONDS IN THE FIXED RATE MODE ARE CAUTIONED NOT TO RELY UPON THIS OFFICIAL STATEMENT AS A STATEMENT OF PROVISIONS RELATING TO SUCH BONDS. AMONG OTHER DIFFERENCES, IT IS ANTICIPATED THAT THE LETTER OF CREDIT WILL NOT SECURE THE BONDS IN THE FIXED RATE MODE. mssmss (TICACTIVE)92248A, O09,029 St: 92248A Fmt: 92248A JEFFR[ES C.P.Y. COMPANY (213)742-8800 Comp 29-~-86 2].:51 ~1:7 TUSTIN /OS T.P~CHEA N Chic 16~725 112577 Output (CO) 29-,Id-86 21:~4 PflA 018 ANY OFFER OR SALE OF BONDS IN THE FIXED RATE MODE WILL BE MADE PURSUANT TO AN OFFICIAL STATEMENT OR OTHER OFFERING MATERIALS TO BE PREPARED FOR SUCH OFFERING AND SALE IN CONNECTION WITH ANY APPLICABLE CONVERSION DATE. Mnmiatory Purclume of the Bonds Bonds in thc Unit Pricing Mode or Demand Mode are subject to mandatory tender and purchase on any Mandatory Tender Date which includes any Proposed Conversion Date, any Automatic Conversion Date, any Demand Date, any Unit Pricing Date, the date of termination of thc Letter of Credit, any Substitution Date and any Expiration Date. The Tender Agent shall provide written notice to all holders of Bonds in the Unit Pricing Mode or Demand Mode, subject to Mandatory Tender that such Bonds will be subject to mandatory tender for purchase on the applicable Mandatory Tender Date, (i) not later than the thirtieth calendar day next preceding any Proposed Conversion Date or Automatic Conversion Date, as the case may be; (ii) not later than the thirtieth calendar day next preceding a Demand Date; (iii) not later than the seventh Business Day next preceding a Unit Pricing Date and (iv) not later than the thirtieth day next preceding the Expiration Date; and (v) not later than the fifth Business Day next preceding the Substitution Date. In the case of a Mandatory Tender Date involving a Demand Date or a Unit Pricing Date, such notice must state that the Bondholder may elect to retain such Bond by giving written notice of such election to the Remarketing Agent and the Tender Agent, no later then the fifth Business Day preceding such Mandatory Tender Date. Upon the filing of such notice, any Bond with respect to which the owner has elected to retain notwithstanding a conversion to the Demand Mode and the Unit Pricing Mode, shall not be subject to optional tender on or prior to the Demand Date or the Unit Pricing Date, as the ease may be. On any Mandatory Tender Date, unless the owner thereof has elected to retain ownership of a Bond in the Unit Pricing Mode or Demand Mode, as applicable, such Bond will be deemed to have been purchased, whether or not actually delivered for purchase, and on that day, interest will cease to accrue and such Bond will no longer be entitled to the security provided by the Indenture. Such owner will be entitled only to receive the Tender Price, together with interest accrued to such Mandatory Tender Date, solely from the funds deposited pursuant to the Indenture for such purpose. lnterclumgeability The Bonds, upon surrender thereof at the principal office of the Paying Agent with a written instrument of transfer satisfactory to the Trustee, duly executed by the registered owner or the registered owner's duly authorized attorney, may be exchanged for an equal aggregate principal amount of Bonds of the same maturity and of any other Authorized Denomination. In all cases in which the privilege of exchanging or transferring the Bonds is exercised, the City shall execute and the Trustee shall authenticate and deliver the Bonds in accordance with the provisions of the Indenture. For every such exchange or transfer of the Bonds, the Paying Agent may require the payment of a reasonable sum for such transfer or exchange plus a sum sufficient to pay any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. The Paying Agent shall not be required to transfer or exchange any Bond selected for redemption in whole or in part after the mailing of the notice of redemption of such Bond. (T[CACTTV~D92248A, O09,029 St: 92248A Fmt: 92248A JEFFR[ES C~P.Y. COMPANY (213)742-8800 Con~ 30-Jul-86 0{~42 ~'q: 8 TUST/N /OS T.P~/CHEA N Chic 052174 042260 Output (CO) 30-Ju1-86 0{~45 PHA 019 Mm~htor~ Redemption Thc Adjustable Rate Bonds arc subject to redemption as a whole or in part, as the case may be, at any time as follows: (1) Bonds in the Unit Pricing Mode are subject to redemption at any time, upon notice as hereinafter described, as a whole or in part such that all BOnds remaining will be in Authorized Dcnomiuations, in order of Purchase Dates, from moneys in the Interest Reserve Fund (as to interest) and the proceeds of a draw upon the Letter of Credit (as to principal and premium, if any) (i) to the extent of prepaid Adjustable Rate Assessments, and (ii) to the extent monies are transferred from the Construction Fund to the Redemption Fund, under the circumstances and upon the conditions and terms described herein, at a redemption price calculated in accordance with the following (each price being stated as a percentage of the principal to be redeemed, to be paid on the redemption date together with interest accrued to the redemption date): (a) If the Interest Period is less than or equal to one year, the redemption price will be calculated as follows: (i) if the number of days between the date selected for redemption and the Purchase Date for such Bond (the "Remaining Interest Period") is less than or equal to 30 days, the redemption price will be 100%; and (ii) if the Remaining Interest Period is more than 30 days on the date the Trustee mails the redemption notice, thc Trustee will request the Remarkcting Agent provide a Unit Pricing Rate for a Unit Pricing Interest Period equal to the Remaining Interest Period (the "Replacement Rate"), and if the Replacement Rate is greater than or equal to thc rate on the Bonds called for redemption (thc "Bond Rate"), the redemption price will be 100%, but if the Replacement Rate is less than the Bond Rate, the redemption price will be calculated by dividing the number of days in the Remaining Interest Period by 365 or 366 days (as applicable) and multiplying the quotient by the difference between the Bond Rate and the Replacement Rate and rounding thc product to thc nearest 1/100th and adding the result to 100, as shown in the following formula: Days Remaining in Redemption Price ,, Unit Pricin~ Interest Period x I + 100, 365 (or 366) where I -, (Bond Rate - Replacement Rate); provided that in no event will the redemption price exceed 101% for a Unit Pricing Interest Period less than or equal to one year. (TZCACTIVID92248A, 009,029 St: 92248A Fret: 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-8800 Comp: 30-Jul-86 11:15 Seq: 9 TUSTIN /OS T.R./CHEA N Chic 062557 176552 Output (CO) 30-Jul-86 11:17 PHA o2o (b) If thc Unit Pricing Interest Period for such Unit Pricing Bond is more than one year, thc redemption price will be determined in accordance with thc following table: Unit ~ Interest Period more than 1 but less than or equal to 3 years .............. more than 3 but less than or equal to 6 years .............. more than 6 but less than or equal to 10 years ............ more than 10 years .......................................................... ~ from tl~ n~at reemat Rnt~ Adjmtmeut Date m R~ rote ~l) 0 to I year 101% 1 to 2 years 100.5 2 to 3 years 100 0 to 2 yca~ I01.5 2 to 3 y~rs 100 3 to 4 yea~ 1~.5 after 4 y~ 1~ 0 to 4 years 102 4 to 5 y~ 101.5 5 to 6 y~ 101 after 6 years 100 0 to ~ y~ 102.5 7 to 8 y~ 102 8 to 9 yea~ 101 after 9 years 100 (1) Notwithstanding thc foregoing sections (a) and (b), Bonds in thc Unit Pricing Mode arc redeemable at par plus accrued interest on their Purchase Date and all Bonds held by the Bank are redeemable at par. (2) Bonds in thc Demand Mode are subject to redemption on any Interest Payment Date as a whole, or in part such that all Bonds remaining shall be in Authorized Denominations, by lot, from moneys in the Interest Reserve Fund (as to interest) and the proceeds of a draw upon the Letter of Credit (as to principal) (i) to thc extent of prepaid Adjustable Rate Assessments, and (ii) to thc extent monies are transferred from the Construction Fund to the Redemption Fund, under the circumstances and upon thc conditions and terms described herein at a redemption price equal to the sum of the principal amount of the Bonds plus accrued interest thereon to the date fixed for redemption. See "Summary of the Indenture -- Redemption Procedures." (3) Subject to the following, thc Adjustable Rate Bonds are subject to mandatory redemption on each September 2, commencing September 2, 1992, from moneys in the Interest Reserve Fund (as to interest) and the proceeds of a draw upon the Letter of Credit (as to principal), to thc extent of Adjustable Assessment Installments and foreclosure proceeds deposited in the Principal Fund and upon the conditions and terms described herein, at a redemption price equal to the sum of the principal amount of the Bonds called plus accrued interest thereon to the date fixed for redemption, and in thc (TICACTIVE)92248A, O09,029 St: 92248A Fmt: 92248A JEFFR[E$ C.P.Y. COMPANY (213)742-8800 Coml~ 30-Jul-86 11:15 St, q: 10 TUSTIN /OS T.I~/CHEA N Chic 073125 042621 Output (CO) 30-Jui-86 11:17 PHA years and principal amounts (subject to reduction as described under "Summary of thc Indenture Redemption Procedures") as follows: Year Pri~ip~i Am~nt 1992 ......................................................................................................................... $ 990,000 1994 ......................................................................................................................... 1995 ......................................................................................................................... 1996 ......................................................................................................................... 1997 ......................................................................................................................... 1998 ......................................................................................................................... 1999 ......................................................................................................................... 2008 ......................................................................................................................... 2010 ......................................................................................................................... 2011 ......................................................................................................................... 1,080,000 1,175,000 1,285,000 1,395,000 1,525,000 1,660,000 1,810,000 1,970,000 2,150,000 2,345,000 2,555,000 2,785,000 3,035,000 3,310,000 3,605,000 3,930,000 4,285,000 4,670,000 5,090,000' * Final Maturity The procedures governing the selection of Bonds to be redeemed and notice of redemption are described below under "Summary of the Indenture -- Redemption Procedures." Opflotmi Redemption The Adjustable Rate Bonds arc subject to redemption as a whole or in part, as thc case may be, at thc option of thc City, at any time as follows:- (1) Bonds in the Demand Mode are subject to redemption on any Business Day, as a whole, or in part such that all Bonds remaining shall be in Authorized Denominations, by lot, from moneys in the Interest Reserve Fund (as to interest) and thc proceeds of a draw upon thc Letter of Credit (as to principal), to the extent monies are legally available therefor under thc circumstances and upon thc conditions and terms described bercin at a redemption price equal to the sum of the principal amount plus accrued interest thereon to thc date fixed for redemption. Sec "Summary of thc Indenture -- Redemption Provisions." (2) Bonds in thc Unit Pricing Mode are subject to redemption on any Business Day, as a whole, or in part such that all Bonds remaining shall be in Authorized Denominations, in order of Purchase Dates, from moneys in thc Interest Reserve Fund (as to interest) and the proceeds of a draw upon the Letter of Credit (as to principal and premium, if any), under thc circumstances and upon thc conditions and terms described herein at a redemption price calculated in the same manner as set forth above with respect to thc Mandatory Redemption of Bonds in thc Unit Pricing Mode. Sec "Summary of thc Indenture -- Redemption Provisions." Thc procedures governing the selection of Bonds to be redeemed and notice of redemption are described below under "Summary of thc Indenture -- Redemption Procedures." Puqm~e of the Bonds Proceeds from thc sale of thc Bonds will be used to finance thc construction and acquisition of certain public improvcments as described in thc scction hcrcin cntitlcd "Thc Improvement Projcct' and Appendix B, "Description of Work and Method of Assessment." 10 I (TICACT~VE)92248A, O09,029 St: 92248A Fret: 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-8800 Comp; 30-Jul-86 01:42 Seq: 11 TUSTZN /OS T.R./CHEA N Chk: 115423 015246 Output (CO) ~o-Jul-S6 01:45 PHA 021 Security for the Bonds Upon issuance of thc Bonds, there will be delivered to the Trustee an irrevocable direct-pay Letter of Credit issued by The Mitsubishi Trust and Banking Corporation, Los Angeles Agency. During the term of the Letter of Credit, the Trustee will draw amounts in accordance with the terms thereof to pay the principal of and up to 40 days interest on the Adjustable Rate Bonds at thc maximum rate of 12 percent per annum. The Bonds are issued upon and secured by the unpaid Assessment Installments together with interest thereon, and the unpaid Assessment Installments together with interest thereon constitute a trust fund for the redemption and payment of thc principal of thc Bonds and the interest thereon. All of thc Bonds are secured by the moneys in thc applicable accounts of the Assessment Fund, the Principal Fund, thc Interest Fund and the Redemption Fund created pursuant to the Indenture. In addition, principal of and interest on the Adjustable Rate Bonds arc payable from draws on the Letter of Credit, from moneys in such funds, from moneys in the Interest Reserve Fund and from moneys in the Reserve Fund. To the extent that draws on the Letter of Credit are used to pay principal and interest on the Adjustable Rate Bonds, however, the Bank shall be entitled to reimbursement for such drawings from monies in the Principal Fund and Interest Fund. The principal of and interest on the Bonds in the Fixed Rate Mode are payable exclusively out of such funds and out of the moneys set aside in the Fixed Rate Reserve Fund. The City will establish a Reserve Fund out of Bond proceeds in an amount of $ ................... The Reserve Fund will be a source of money to advance to the Principal and Interest Funds in the event of delinquent Adjustable Rate Assessments. As Adjustable Rate Bonds are converted to a Fixed Interest Rate, a pro rata portion of moneys in the Reserve Fund will be transferred to the Fixed Rate Reserve Fund. In addition, the Interest Reserve Fund will bc funded from Bond proceeds in an amount equal to 35 days interest on the Adjustable Rate Bonds at 12% per annum. Upon a conversion of a portion of the Bonds to the Fixed Rate Mode, the amount therein shall be reduced pro rata in order to maintain a reserve therein at all times during which Adjustable Rate Bonds are outstanding equal to 35 days interest at 12% per annum on the amount of Adjustable Rate Bonds outstanding. Moneys in the Interest Reserve Fund shall be used to pay interest on the Adjustable Rate Bonds as such amounts become due. On the first Business Day of each month the Trustee shall draw on the Letter of Credit, for deposit in the Interest Reserve Fund, an amount equal to the interest accrued (whether or not paid) during the prior month. See "Summary of the Indenture -- Flow of Funds." Although the unpaid assessments constitute liens on the lots and parcels assessed, they do not constitute a personal indebtedness of the respective owners of said lots and parcels. There is no assurance that thc owners will be financially able to pay the Assessment Installments or that they will pay such installments even though financially able to do so. Failure by owners of the parcels to pay Adjustable Rate Assessments when duc, depiction of the Reserve Fund and thc inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent Adjustable Rate Installments levied against such parcels would, in the absence of sufficient funds under the Letter of Credit, result in the inability to make full or punctual payments of debt service on the Adjustable Rate Bonds. However, the proceeds of draws under the Letter of Credit are expected to be sufficient to pay such debt service on the Adjustable Rate Bonds to the extent described under *'The Letter of Credit." Payment of Property Taxes The Assessor of the County of Orange recently renssessed thc real property of The Irvinc Company duc to a transfer of stock among The Irvine Company shareholders. Thc Irvine Company has paid its tax bill for fiscal year 1984/85 and both installments for fiscal year 1985/86 under protest and is disputing the reassessment. Pending resolution of thc tax protest the disputed portion of the tax collections will be held in an impound account by the County Auditor-Controller. Undisputed property taxes and special assessments will not be impounded and will be disbursed to the City and other public entities. 11 (T~CACT[VE)92248A,O09,029 St: 92248A FmC 92248A JEFFRIES C.P.Y. COMPANY (213)742-8800 Comp: 30-Jul-86 00:42 Seq: 12 TUSTIN /05 T.I~/CHEA N C~tlc 061642 ~.73~67 O~t~Jt (CO) 30-J~1-86 00:45 PHA 022 023 024 Obligttioa of the City Upon Delinquency If a delinquency occurs in thc payment of any Adjustable Rate Assessment, the City has the duty to transfer the amount of such delinquent installment from thc Rcsorvc Fund into thc Principal and Interest Funds. Under certain circumstance~ the City my have duty to transfer into the Principal and Interest Funds the ammmt of any delinquency in the payment of Assessment Installments out of any available funds of the City. It is not expected, however, that any such funds will he available. The enactment of Article XIIIA of the California Constitution and subsequent legislative enactments effectively repealed thc otherwise mandatory duty on thc part of the City, under thc Bond Law, to levy and colloct a special tax (in an amount necessary to mect delinquencies, but not to exceed ten cents on each $100 of assessed value of all taxable property within thc City in any one year) if surplus funds are not available to cover delinquencies. Covenant to Commence Superior Court Foreclosure The Bond Law provides that in the event any assessment or iustallmcnt or any interest thereon is not paid when duc, the City may covenant to order thc institution of an action in thc Superior Court of thc State of California to foreclose the lien of thc unpaid assessment. In such action the real property subject to thc unpaid assessment may be sold at a court foreclosure sale. Such court foreclosure sale procedure is not mandatory. However, thc City will covenant to commence foreclosure proceedings no later than 60 days after an occurrence of delinquency of an Adjustable Rate Assessment (150 days with respect to a Fixed Rate Assessment) and to diligently prosecute thc foreclosure to final judgment and sale. Sec "Summary of thc Indenture -- Provisions Applicable Generally -- Events of Default" and "-- Foreclosure Proceedings." A judgment debtor (property owner) has at least 140 days from the date of service of thc notice of levy to redeem the property to be sold. If a property owner falls to so redeem and thc property is sold, his only remedy is an action to set asida the sale which must be brought within six (6) months of the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on thc revived judgment as if thc sale had not been made. (Section 701.680 of thc Code of Civil Procedure of the State of California.) The constitutionality of the aforementioned legislation (which repeals thc one-year redemption period) has not been tested and there can ba no assurance that, if tested, such legislation will bc upheld. Until further development takes place in the District, and along with it the anticipated further diversification of ownership, payment of thc Assessment Installments is largely dependent upon thc timely payment by The Irvine Company or other future landowners within thc District. If The Irvine Company or any future major landowner files bankruptcy, absent available funds, there could be a delay in payment of Ass~smcnt Installments, as such bankruptcy filing would delay the City's Superior Court foreclosure proceedings. Moreover, amounts received upon foreclosure sales may not be sufficient to fully repay delinquent Assc~smcnt Installments. THE BANK The Mitsubishi Trust and Banking Corporation The Mitsubishi Trust and Banking Corporation was founded in Tokyo, Japan on March 10, 1927. The Bank is the largest of Japan's seven trust banks engaged in general banking and trust operations. In terms of total funds, it hus been Japan's leading trust bank every year since 1958. As of March 31, 1985, its total assets stood at more than US$68 billion (based on a then-current exchange rate of 250.65 Japanese Yen to the U.S. Dollar and determined in confofaiity with accounting principles generally accepted in Japan), an increase of approximately 24 percent over the previous fiscal year end. It is ranked as the 20th largest bank in the world, based on assets, as reported by American Banker as of December 21, 1984. The Bank is one of the core members of the Mitsubishi Group, which is the largest Japanese industrial group, repre~nting a cross section of Japanese industry from manufacturing to trade and finance. 12 (TICAGTIVE}92248A,009,029 St: 92248A Fmt: 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-8800 Con~ 30-Jul-86 0~.42 ~.Cl: 1~ TUSTIN /OS T. RJCHEA g C~lc ].52631 067677 0u~0ut (CO) 30-Ju1-86 0~.45 PHA 02~ The Bank's Los Angeles Agency (the "Agency") has been licensed by the California Superintendent of Banks and conducts business as permitted by the California Financial Code. As of March 31, 1985, the Agency had total assets of approximately US$3,047 million. The Agency is subject to examination periodically by the California Superintendent of Banks and the Federal Reserve Bank of San Francisco. In addition, the agency is required to file financial reports with the Federal Reserve Bank of San Francisco. The Mitsubishi Trust and Banking Corporation will provide to any person to whom this Official Statement is delivered, upon written request of such person, a copy of the most recent Annual Report of the Bank. Written requests should be directed to Mr. Kohzo Sohma, Chief Manager, or Mr. Takao Ishimaru, Manager, The Mitsubishi Trust and Banking Corporation, Los Angeles Agency, 911 Wilshire Boulevard, Suite 1650, Los Angeles, California 90017. THE LETTER OF CREDFr The following is a brief outline of certain provisions of the Letter of Credit issued by the Bank and is not considered a full statement pertaining thereto. Reference is made to the Letter of Credit for the full text thereof. Copies of said document are available from the City. Upon issuance of and receipt of payment for the Bonds, the Bank shall issue and deliver the Letter of Credit to the Trustee for the account of the City. The Letter of Credit will be an irrevocable obligation of the Bank to pay to the Trustee in accordance with the terms and conditions set forth in the Letter of Credit, in an aggregate amount not exceeding $51,316,083, of which an aggregate amount not exceeding $50,650,000 may be drawn upon with respect to principal of the Adjustable Rate Bonds (other than Bank Owned Bonds) and of which an aggregate amount not exceeding $666,083 may be drawn upon with respect to interest on the Adjustable Rate Bonds (other than Bank Owned Bonds). The Letter of Credit will permit the Trustee to draw certain amounts for the payment of the principal and interest on the Adjustable Rate Bonds (other than Bank Owned Bonds), as described in the Indenture. In addition, under the terms of the Letter of Credit the Trnstee is entitled to obtain funds to pay the principal amount of the purchase price of Adjustable Rate Bonds tendered for payment and not remarketed to the extent other moneys are not available therefor. The Letter of Credit will expire as described under "The Reimbursement Agreement." SUMMARY OF THE REIMBURSEMENT AGREEMENT [Copy to come] THE REMARKETING AGENT The initial Remarketing Agent with respect to Adjustable Rate Bonds will be Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). Merrill Lynch's principal o~ce is at Merrill Lynch World Headquarters, North Tower, World Financial Center, New York, New York 10281. Solely for purposes of remarketing any Bonds upon conversion to the Fixed Rate Mode, "Remarketing Agent" shall collectively refer to Stone & Youngberg and Merrill Lynch. sUMMARy OF THE REMARKETING AGREEMENT The following is a brief outline of certain provisions contained in the Remarketing Agreement and is not considered a full statement pertaining thereto. Reference is made to said agreement for the complete text therof. Copies of said agreement are available from the City. Under thc Rcmarketing Agreement, the City will appoint Merrill Lynch, Pierce, Fenner & Smith Incorporated as the initial Remarkcting Agent in connection with the rcmarketing of Adjustable Rate Bonds which are tendered to the Tender Agent in connection with a demand for purchase. The Remarketing 13 (T~CACT/VE~92248A,009,029 St: 92248A Fret: 92248A JEFFR[E$ C.P.Y. COMPANY (213)742-8800 Comp: ~0-Jul-86 00:42 Seq: 14 · TUST~N /OS T.P./CHEA N Chic 14076~ 154221 Output (CO) )0-~1-86 0~.45 PHA Agent must use its best efforts to remarket tendered Bonds. The Remarketing Agent, may upon 60 days written notice to the City, the Bank, thc Trustee and the Paying Agent resign as the Remarketing Agent for the Adjustable Rate Bonds. In addition, the Remarketing Agent shall have no obligation to remarkct Adjustable Rate Bonds tendered for purchase in the event (i) an Event of Default shall occur under thc Indenture, (ii) the Indenture, the Reimbursement Agreement, the Letter of Credit or any other document or instrument entered into in connection with the delivery of the Bonds shall not be in full force and effect or shall have been modified, amended or supplemented in any way which would materially adversely affect the markctability of thc Adjustable Rate Bonds, or (iii) the Rcmarketing Agcnt determines that it is unable to obtain the information necessary to prepare adequate disclosure documents with respect to the Adjustable Rate Bonds. SUMMARY OF THE INDENTURE [TO COME] THE IMPROVEMENT PROJECT Description Proceeds of the issue 'will be used to fund the design, construction, inspection, and administration of public facilities which will provide for traffic access and control, drainage, and utility service for properties in the District. The improvements are located within and adjacent to the District, which is bounded by the Santa Aria Freeway (Interstate 5), Browning Avenue, Irvine Boulevard, and Myford Road. For a more detailed description of the Improvement Project, including a description of the method used by the Engineer of Work to spread the assessment, refer to Appendix B herein entitled "Description of Work and Method of Assessment". Appendix A herein entitled "Assessment Diagram" shows the configuration of the District and various assessment parcels and indicates the location of the public improvements to be constructed under the Improvement Project. Estimated Improvement Project Costs The following are the estimated Improvement Project Costs as set forth in thc Engineer's Report. Estimated Construction Costs ........................................................... $42,200,893.18 Estimated Incidental Costs and Expenses ....................................... 13,939,402.78 Total Estimated Cost ......................................................... 56,140,295.96 Less Contributions and Earned Interest .......................................... 45,490,295.96) Assessment Amount ........................................................... 50,650,000.00 THE DISTRICT Property Ownership The Assessment Installments arc not personal obligations of the property owners within the District; however, the ability and willingness of such owners to pay the Assessment Installments could affect the. payment of debt service on the Bonds. Although The Irvine Company is currently the major owner of land within the District, it will not be restricted in transferring its land to others. The Irvine Company is a privately held corporation founded by James Irvine in 1876, 12 years after he assembled the Irvine Ranch through purchase of Spanish and Mexican land grant ranchos. Thc Irvine Company is engaged in the long. term, economic utilization of its 68,000 acre land resource in central 14 (TTCACl'TVF~92248A, O09,029 St: 92248A Fmt: 92248A JEFFRIE$ C.P.Y. COMPANY (213)742-8800 Comp:. 30-Jul-86 0'1:42 Sc.q: 15 TUSTIN /OS T.R./CHEA N C~lc 136247 101003 Outout (CO) 30-Jul-gb 01:45 PHA o26 027 Orange County. The Irvinc Company is developing its property into a scries of urban communities which ~nciudc centers of employment -- office, research, industrial and retail -- and a diversity of residential opportunities for sale and for rent. Within this urban environment, The Irvine Company is developing high quality income producing properties which it owns and operates. Land not currently planned for develop- ment is being farmed. Battle Wells Associates is thc Financial Advisor to the City of Tustin for thc issuance of thc Bonds. A California Corporation, Battle Wells Associates is an independent municipal consulting firm providing financial advisory services to public agencies since 1964. Thc firm has experience in other financing tools in addition to the issuance of bonds, including short term borrowing and the use of cash reserves. LEGAL OPINION Legal matters incident to the authorization and issuance of the Bonds are subject to the unqualified approving opinion of Mudg¢ Rose Guthrie Alexander & Ferdon, and Rourke & Woodruff, Co-Bond Counsel. The opinion will be dated and given on and speak only as of the date of original delivery of the Bonds. Certain legal matters will be passed upon for the Underwriters by O'Melveny & Myers and for the City by Rourke & Woodruff as City Attorney. TAX EXEMPTION In the opinion of Mudge Rose Guthrie Alexander & Ferdon and Rourke & Woodruff, Co-Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from present Federal income taxes and from present personal income taxes imposed by the State of California. See "Pending Federal Tax Legislation" below. PENDING FEDERAL TAX LEGISLATION [To Come] 028 NO LfrlGATION According to Mudge Rose Guthrie Alexander & Ferdon, and Rourke & Woodruff, Co-Bood Counsel, there is no controversy or litigation of any nature now pending to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or in any way contesting or affecting the validity of the Bonds, the proceedings of the City taken with respect to the issuance or sale thereof, the existence or powers of the City or the title of any officers of the City to their respective positions. A no-litigation certificate executed by the City Attorney will be required to be delivered to the Underwriters simultaneously with the delivery of the Bonds. Moody's Investors Service has assigned its municipal bond rating ". ........ "to thc Bonds. Standard & Poor's Corporation has assigned its municipal bond rating ". ........ "to the Bonds. Such ratings reflects only the views of such organization, and an explanation of the significance of such ratings may be obtained from each rating agency. There is no assurance that such ratings will continue for any given perod of time or that such ratings will not be revised downward or withdrawn entirely by such rating agency, if in the judgment of such rating agencies circumstances so warrant. Neither the City, the Underwriters nor the Bank have 15 (TICACTlVID92248A,009,029 St: 92248A Fmt: 92248A JEFFR[E$ C.P.Y. COMPANY (2:13)742-8800 Comp: .~0-Jul-86 00:42 S~q: ].6 TUSTIN /OS T.~/CHEA N C~lc 060326 ~.76747 Output (CO) 30-Jul-86 0~45 PHA undertaken any responsibility to bring to thc attention of the owners of the Bonds any proposed change in or withdrawal of thc ratings or to oppose any such proposed revision or withdrawal. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of thc Bonds. In addition, upon conversion of thc interest rate on any of the Bonds to a Fixed Rate under thc circumstances described in thc Indenture, such Bonds will not have the benefit of the Letter of Credit and, consequently, the ratings on such Bonds may be reduced or withdrawn. UNDERWRITING Merrill Lynch, Pierce, Fenner & Smith Incorporated and Stone & Youngberg (collectively thc "Underwriters"), have purchased the Bonds from the City at an aggregate discount of $ .................. from the total par value of Bonds as set forth on thc cover page of this Preliminary Official Statement. Thc public offering price may be changed from time to time by the Underwriters. The Underwriters may offer and sell Bonds to certain dealers and others at a price. ADDITIONAL INFORMATION Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and thc purchasers or owners of any of thc Bonds. The execution and delivery of this Official Statement by the Mayor of the City has been duly authorized by the City. Concurrently with the delivery of the Bonds, the City will furnish a certificate executed on behalf of the City by the City Treasurer to the effect that this Official Statement does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. Dated: August ...... 1986 By Donald J. Saltarelli, Mayor 16 APPENDIX A DIAGRAM ASSESSMENT DISTRICT NO. 85-1 CITY OII TUSTIN COUNTY 011 ORANGE STATE OF CALIFORNIA T~,ACT A-I SCALE IN FEET (T[CACTZVE)922488,002,010 St: 922488 Fret: 92248B JEFFR[ES C.P.Y. COMPANY (213)742-8800 Comp:. 24-Jul-86 22:40 Seq: 2 TUST~N /OS TR N Chic 007336 064370 Output (CO) 24-Jul-86 22:42 PHA 003 APPENDIX B DESCRIPTION OF WORK AND METHOD OF ASS~MENT Description of Work: A. The construction of certain grading, paving, base, curbs and gutters, parkway, drainage, intersec- tion work, street lights, signing, striping, landscaping, and utilities, together with appurtenances and appurtenant work for the following roadways: · Irvine Boulevard ~ the improvement of Irvine Boulovard to its ultimate section along the south side, easterly of Ranchwood to Myford Road, including the construction of drainage facilities and utilities · Bryan Avenue ~ the widening of Bryan Avenue to its ultimate street section between Browning Avenue and approximately 450 feet east of Tustin Ranch Road and the full-width improvement of Bryan Avenue between 450 feet east of Tustin Ranch Road to Myford Road including drainage facilities and utilities · El Camino Real -- the full-width improvement of El Camino Real between Browning Avenue and approximately 400 feet east of Auto Center Drive including drainage facilities; the widening from two lane roadway to full-width improvement between approximately 400 feet east of Auto Center Drive and Myford Avenue including drainage facilities and utilities · Browning Avenue -- the widening of Browning Avenue along its east side between the Santa Aha Freeway and approximately 1,400 feet north of Bryan Avenue including drainage facilities and utilities · Tustin Ranch Road ~ the full-width improvement of Tustin Ranch Road between the Santa Aha Freeway and Irvine Boulevard including drainage facilities and utilities · Myford Road -- the widening of Myford Road along the west side to ultimate width section between Santa Aha Freeway and Irvine Boulevard, including the realignment of Myford Road between Bryan Avenue and Irvine Boulevard including drainage facilities and utilities · New Myford Road -- the full-width improvement of New Myford Road between El Camino Real and Irvine Boulevard including drainage facilities and utilities B. The construction of traffic signal improvements at the following intersections: · El Camino Road at Browning Avenue · El Camino Road at Tustin Ranch Road · El Camino Road at Myford Road · Browning Avenue at Bryan Avenue · Bryan Avenue at Myford Road · Myford Road at Irvine Boulevard · Tnstin Ranch Road at Irvine Boulevard · Tustin Ranch Road at Bryan Avenue · Tustin Ranch Road at Auto Center Drive · Tustin Ranch Road at Loop Road · Myford Road at Sector II Access · New Myford Road at h'vine Boulevard · New Myford Road at Bryan Avenue · New Myford Road at Loop Road · New Myford Road at El Camino Real B-1 (TICACTIVE)92248B, O02,010 St: 92248B Fret: 922488 JEFFR[ES C.P.Y. COMPANY (213)742-8800 ComK 30-Jul-06 03:04 Seq: 3 TUSTIN /OS TR N C~lc 055262 107163 Output (CO) 30-Jul-86 03:05 PHA C. Jamboree Road interchange at Santa Ana Freeway -- full improvement of thc Jamboree Road interchange at the Santa Ana Freeway including the bridge overcrossing of the Santa Ana Freeway and traffic signals D. Flood Control Facilities -- the improvement of the following drainage facilities: * El Modena Channel between Browning Avenue and the Santa Ana Freeway e F07-S04 Channel * F07-S02 Channel Method of Assessment: The law requires, and the statutes provide, that special assessments, as levied pursuant to thc 1913 Act, must be based on the benefit properties receive from the work of improvements. Thc statutes do not specify the method or formula that should be used to apportion the assessments in any special assessment district proceedings. The City has retained the firm of Willdan Associates for the purpose of assisting the City in making an analysis of the facts in the Distric{ and recommending to thc City thc apportionment of thc assessment obligation. In making the analysis, it was necessary to identify the benefits that thc public improvements rendered to the properties within the boundaries of thc District and to determine that the properties receive a direct and special b~ncfit distinguished from that of thc general public. It was determined that the improvements are necessary and required for the development of thc properties within the District to full potential, consistent with the City's General Plan, thc adopted East Tustin Specific Plan, the East Tustin Phase I Residential Plan, and the Tustin Auto Center Plan; that such improvements are necessary and required for the orderly development of the properties within the District; that such improvements would be necessary and are required as a condition of approval of approved tentative tract maps and parcel maps for the area; and, therefore, that the improvements are, for the most part, of direct and special benefit to the properties in the District. The public improvements in the District generally consist of the backbone facilities which will provide for traffic access and control, drainage, and utility service for the properties. Certain public improvements proposed for installation will convey public benefit beyond the properties within the District. Therefore, it is not proper to assess said properties for all of thc costs; and such costs will be offset by cash contributions from The Irvinc Company. B-2