HomeMy WebLinkAboutCMR- 463-01TO:
City of Palo Alto
City Manager's Report
HONORABLE CITY COUNCIL 17
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
DECEMBER 17, 2001 CMR: 463:01
APPROVAL OF FINANCING DOCUMENTS FOR CONSTRUCTION
OF THE NON-PARKING PORTION OF THE LOT S/L PARKING
STRUCTURE, AND FOR THE REFUNDING OF THE 1992 CIVIC
CENTER CERTIFICATES OF PARTICIPATION, AND
AUTHORIZATION FOR STAFF TO EXECUTE THE SALE OF AN
AMOUNT NOT TO EXCEED $9,000,000 IN TAXABLE AND TAX-
EXEMPT CERTIFICATES OF PARTICIPATION
REPORT IN BRIEF
On December 10, 2001, Council approved the second phase of financing for construction of
the non-parking area on the Lot SiL site and directed staffto return with the necessary bond
documents to finance the project. Tonight, staff also is recommending that Council approve
the refunding and refinancing of the City's 1992 Civic Center Certificates of Participation
(COPs) based on current low interest rates and expected savings (discussed in CMR:444:01).
Staff advised Council that, with its approval, bonds would be issued in January 2002.
Approval for this financing must be given both by the City Council and by the Council acting
as the Board of Directors of the Palo Alto Public Improvement Corporation.
CMR:463:01 Page 1 of 7
RECOMMENDATION
1. Staff recommends that the City Council:
Approve a Resolution Approving, Authorizing, and Directing Execution of
Certain Lease Financing Documents, Approving Official Notice of Sale,
Approving a Preliminary Official Statement, and Authorizing and Directing
Certain Actions with Respect Thereto.
O Authorize staff to execute the sale of an amount not to exceed $9,000,000 in
Certificates of Participation to: (1) finance on a taxable basis the non-parking
area on Lot S/L; and (2) refund on a tax-exempt basis the 1992 Civic Center
COPs.
Staff recommends that the Council, acting as the Board of Directors of the Palo Alto
Public Improvement Corporation:
O Approve a Resolution Approving, Authorizing, and Directing Execution of
Certain Lease Financing Documents and Authorizing and Directing Certain
Actions with Respect Thereto.
This second action will be taken during a separate meeting of the Corporation
that will be held during the Council meeting on this item.
BACKGROUND
Non-Parking Area on S/L Site.
On December 10, 2001, the Council approved construction of a non-parking area that will
be an extension of the parking garage, in addition to building a parking structure on the Lot
S/L site. As stated in CMR:444:01, the estimated $3.6 million necessary to finance and build
this extension are the General Fund's responsibility. Debt service will be paid using rental
revenues from commercial use of the non-parking area. Remaining net revenues will be used
for teen activity programs, an assessment district subsidy commitment, and for other General
Fund purposes. To fmance this project, staff proposed issuing and selling taxable
Certificates of Participation. These COPs will be issued separately from the assessment
improvement bonds, and separately but simultaneously with the refinanced 1992 COPs. The
taxable COPs and tax-exempt refunding COPs will be issued as separate series, but will be
marketed with the same Official Statement.
CMR:463:01 Page 2 of 7
Refunding and Refinancing of 1992 Certificates of Participation.
Tonight, staff is recommending that Council approve the refinancing of the 1992 Certificates
of Participation issued for improvements to the Civic Center. Current outstanding principal
on these COPs is $3,670,000. Analysis shows estimated net present value savings of
$139,000 or 3.8 percent of outstanding bonds (net of all costs of issuing the refunding). A
refinancing also provides the City with an opportunity to push out and amortize a $699,000
payment (due in March 2002) over the remaining life of the bonds (the refunding COPs will
mature in 2012). By not making this payment in 2001-02, the City can re-budget these funds
for other purposes or simply reduce expenditures in !ight of current revenue constraints. The
City is still required to make this payment, albeit in a different timeframe.
DISCUSSION
Council approval is required in order to sell an amount not to exceed $9,000,000 in
Certificates of Participation (COPs) through a competitive sale process on January 16, 2002.
The City will receive proceeds approximately two weeks later. In a competitive sale, the
City is assisted by its financial advisor (Stone & Youngberg) in receiving and evaluating bids
-and in awarding the sale to an underwriter based on the lowest interest cost to the City.
Underwriters are investment banking firms who resell the COPs, typically to institutional
investors like mutual funds. In general, tax-exempt COPs are well-known and commonly
used investment vehicles in the financial community. The taxable COPs for the non-parking
area, however, are less often used and will be sold in the corporate market.
COPs are technically a share of a stream of future lease payments purchased by investors.
To utilize COPs as a financing vehicle, the City established a separate legal entity in 1983,
in this case a nonprofit corporation, the Palo Alto Public Improvement Corporation (PIC).
Documents presented to the Council in this package include those necessary for the PIC to
enter into a long-term lease of the Civic Center from the City. Most of the documents below
require approval of both bodies, since they are agreements between the two parties. A
separate agenda has been prepared in order for the Council, acting as the PIC Board, to take
the actions it needs to take as that Board. Procedurally, during discussion of this Council
agenda item, the PIC Board meeting will be opened. Both meetings will be underway
concurrently, until the necessary resolutions have been approved by both the Council and the
Board. After that, the Board will adjourn and the Council will continue on with its regular
agenda.
Staff from the Administrative Services and Public Works Departments and the City
Attorney's Office has worked with the City's fmancial adviser and bond and disclosure
council to assemble the fmancing structure and draft the legal documents attached to this
staff report. A ratings presentation to Standard and Poor's is scheduled for December 2001.
Once the rating results are released, staff will report the results to Council.
CMR:463:01 Page 3 of 7
The following documents need Council's approval before the COP's can be sold by a
competitive sale on January 16. The documents below are grouped according to actions that
the City Council must approve, and those that the City Council acting as the Board of
Directors of the Public Improvement Corporation (PIC) must approve.
City Council Approval: Resolution Approving, Authorizing, and Directing Execution of Certain
Lease Financing Documents, Approving Official Notice of Sale, Approving a Preliminary Official
Statement, and Authorizing and Directing Certain Actions with Respect Thereto (Exhibit A)
The resolution authorizes the Mayor, City Manager, the Administrative
Services Director or their designee to sign and .execute various documents, and
to make any changes to those documents that are minor in nature. Council is
also approving as to form the Preliminary Official Statement containing
information material to the offering and sale of the COPs. The documents
staffwill sign with Council's approval are:
A termination of the existing lease between the City and the
Corporation dating from 1992. Canceling this lease will allow the
1992 COPs to be redeemed on March 1, 2002, and will allow the City
to enter into a new lease agreement for the Civic Center with the PIC;
Property lease of the Civic Center between the City and the Public
Improvement Corporation (PIC). In this document, the City is granting
a 20 year lease to the PIC;
A lease agreement between the PIC, now acting as lessor, and the City.
In this document, the City agrees to lease back the Civic Center from
the PIC for 20 years. The City agrees in this document to make the
lease payments that will be sold to investors through the Certificates of
Participation;
A trust agreement between the City, the PIC, and U.S. Bank Trust
National Association, the financial institution that will act as Trustee
over the life of the COPs. In this agreement, the Trustee is instructed
to set up the proceeds from the financing into separate funds for
construction, for lease payments, and for a reserve fund. This
agreement further specifies that the City shall make its lease payments
directly to the Trustee, and not through the PIC;
CMR:463:01 Page 4 of 7
An official Notice of Sale to the investment community seeking bids to
be received at the law offices of Jones Hall at 9:00 a.m. on January 16,
2002;
Continuing Disclosure Certificate
certificate holders that the City is
obligations.
which provides information to
fulfilling its trust and financial
Approval by the City Council Acting as Board of Directors of the Public Improvement
Corporation: Resolution Approving, Authorizing, and Directing Execution of Certain Lease
Financing Documents, and Authorizing and Directing Certain Actions with Respect Thereto
(Exhibit B)
Assignment Agreement Dated August 1, 1998 by and between the Palo Alto Public
Improvement Corporation and U.S. Bank Trust National Association, as trustee. (This
document is the only one that the City Council, acting as the Council, does not also
approve.) This document transfers all rights and responsibilities to the City's lease
payments from the PIC to the Trustee for the benefit of the owners of the COPs. These
rights and responsibilities include the right to collect lease payments from the City, to
enforce payment of the lease, and take action to protect the rights of the COP holders.
>Property Lease;
>Lease Agreement;
>Trust Agreement.
RESOURCE IMPACT
Assuming a 20 year amortization period, an interest cost of 6.8 percent, and $3.6 million in
bond proceeds, the estimated annual lease payment for this facility will be around $331,000.
Rental revenues, based on renting available space on the first floor for retail purposes are
projected at $462,000, with net revenues of $131,000 annually (see CMR:444:01 for details).
Projected rental rates are based on information provided by a local developer and somewhat
reflect the current weakness in commercial rates.
Issuance costs (underwriters fees, bond counsel fees, financial advisory fees, rating agency
fees, municipal bond insurance premium, etc.) will be paid through the sale of the COPs, in
much the same way that closing costs are paid in a home sale escrow process. A detailed
cost breakdown is shown as Exhibit C.
CMR:463:01 Page 5 of 7
POLICY IMPLICATIONS
Approval of the attached financing documents is consistent with prior Council policy
direction (provided on December 10, 2001) and follows the City's policy of refinancing debt
when there are significant net present value savings.
TIMELINE
2001
December TBD
December 27
Ratings presentation
Publish notice of COPs sale
2002
January 8
January 16
January 29
April
Bid documents on COPs distributed to underwriters
Bids on COPs received and awarded
Receive COPs proceeds
Construction of non-parking area begins
ENVIRONMENTAL REVIEW
An Environmental Impact Report for the parking structures was prepared as part of the PC
zoning application and was certified by Council on December 20, 1999, by adoption of
Resolution No. 7917.
EXHIBITS AND ATTACHMENTS:
Exhibit A: A resolution approving, authorizing and directing execution of certain
lease financing documents, approving official notice of sale, approving
a preliminary official statement, and authorizing and directing certain
actions with respect thereto.
Exhibit B:For Palo Alto Public Improvement Corporation. A resolution approving,
authorizing and directing execution of certain lease refmancing
documents and authorizing and directing certain actions with respect
thereto.
CMR:463:01 Page 6 of 7
Attachment A:
Attachment B:
Attachment C:
Attachment D:
Attachment E:
Attachment F:
Attachment G:
Attachment H:
Attachment I:
Exhibit C:
Termination Agreement (1992 Civic Center refmancing and
improvement project leases and assignment)
Property Lease (Between the City of Palo Alto and the Palo Alto Public
Improvement Corporation)
Lease Agreement (Between the Palo Alto Public Improvement
Corporation and the City of Palo Alto)
Trust Agreement (Among U.S. Bank Trust National Association, Palo
Alto Public Improvement Corporation, and City of Palo Alto)
OflScial Notice of Sale (Certificates of Participation Series 2002A-Tax
Exempt) and official bid form
Official Notice of Sale (Certificates of Participation Series 2002B -
Taxable) and official bid form
Continuing Disclosure Certificate
Assignment Agreement (Between the Palo Alto Public Improvement
Corporation and U.S. Bank Trust National Association)
Preliminary Official Statement
Non parking area improvements and Civic Center Refinancing costs
PREPARED BY:
TARUN NARAY4kN
Senior Financial Analyst, Administrative Services
JOE SA~I~¢
Deputy Director, Administrative Services
DEPARTMENT HEAD APPROVAL: ~~-~---~~
CARL YEAff{_ _
Director, Administrative Services
CITY MANAGER APPROVAL:
EMIL5~ HARRISON
Assistant City Manager
CMR:463:01 Page 7 of 7
EXHIBIT A
CITY OF PALO ALTO
RESOLUTION NO. ~
A RESOLUTION APPROVING, AUTHORIZING AND DIRECTING
EXECUTION OF CERTAIN LEASE FINANCING DOCUMENTS,
APPROVING OFFICIAL NONCE OF SALE, APPROVING A PRELIMINARY
OFFICIAL STATEMENT, AND AUTHORIZING AND DIRECTING CERTAIN
ACTIONS WITH RESPECT THERETO
The Council of the City of Palo Alto does hereby resolve as follows:
WHEREAS, the City has heretofore leased certain real property, consisting of the Palo
Alto Civic Center (the "Civic Center") to the Palo Alto Public Improvement Corporation(the
"Corporation") pursuant to that certain lease agreement, dated as of March 1, 1992, by and
between the Corporation, as lessor, and the City, as lessee (the "1992 Lease");
WHEREAS, the City has determined that it is in the interests of the City at this time to
provide for the refinancing of the 1992 Lease and the Certificates of Participation executed and
delivered in connection therewith (the "1992 Certificates"), and in addition, wishes to finance
the costs of constructing the non-parking area on the Lot S/L site, located on Bryant Street,
between Lytton Avenue and University Avenue (the "Parking Structure Improvements"), by re-
leasing the Civic Center pursuant to a Lease Agreement, dated as of January 1, 2002, between
the City and the Corporation (the "Lease Agreement"); and
WHEREAS, for the purpose of obtaining the moneys required to be deposited by it with
U.S. Bank Trust National Association (the "Trustee") to pay for financing the Parking Structure
Improvements and refunding the 1992 Lease and the 1992 Cer.tfficates, the Corporation
proposes to assign and transfer certain of its fights under the Lease Agreement to the Trustee,
and in consideration of such assignment and the execution of a Trust Agreement, dated as of
January 1, 2002, among the Trustee, the City and the Corporation (the "Trust Agreement"), the
Trustee has agreed to execute and deliver certificates of participation, each evidencing a
fractional interest in the lease payments made by the City under the Lease Agreement;
WHEREAS, in connection therewith, it is in the public interest and for the public benefit
that the City authorize and direct execution of the Lease Agreement and certain other financing
documents in connection therewith; and
WHEREAS, pursuant to the City's authorization, Jones Hall, A Professional Law
Corporation, as disclosure counsel to the City, has prepared and presented to the City a form
of preliminary official statement containing information material to the offering and sale of the
certificates of participation described below (the "Preliminary Official Statement"); and
WHEREAS, the documents below specified have been filed with the City, and the
members of the City Council, with the aid of its staff, have reviewed said documents;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
Section 1. The below-enumerated documents be and are hereby approved, and the
Mayor, the City Manager, the Administrative Services Director or a designee appointed by any
such officer (in each case, an "Authorized Officer") are hereby separately authorized and
directed to execute said documents, with such changes, insertions and omissions as may be
approved by such official, and the City Clerk is hereby authorized and directed to attest to
such Authorized Officer's signature:
(a) a Property Lease, relating to the lease of the Civic Center by the City to the
Corporation, between the Corporation and the City (the "Property Lease");
(b) a Lease Agreement, relating to the lease of the Civic Center by the
Corporation back to the City, between the Corporation, as lessor, and the City, as lessee
(the "Lease Agreement"), so long as the stated term of the Lease Agreement does not
extend beyond 25 years (except in the case of default), so long as the principal amount
of the Lease Agreement does not exceed $9,000,000 and so long as the lease payments
payable by the City under the Lease Agreement in any fiscal year do not exceed
$900,000;
(c) a Trust Agreement, by and among the Corporation, the City and the Trustee,
relating to the execution and de!ivery of two series of certificates of participation (Tax-
Exempt Series A and Taxable Series B) evidendng the fractional interests of the owners
thereof in lease payments to be made by the City under the Lease Agreement (the
"Certificates of Participation"); and
(d) A Termination of Lease Agreement, relating to the termination of the 1992
Lease, between the Corporation and the City.
Section 2. The City Council hereby authorizes and directs the competitive sale of the
Certificates in accordance with the Notice of Sale, in substantially the form on ~e with the City
Clerk, together with any changes therein or additions thereto deemed advisable by the Director
of Administrative Services. The Authorized Officer is authorized and directed for and in the
name and on behalf of the City to accept the best bid for the sale of the Certificates, as
determined in accordance with the Notice of Sale.
Section 3. Pursuant to Section 53692 of the Government Code, Jones Hall, as bond
counsel to the City, is hereby authorized and directed to cause the Notice of Intention to Sell
Certificates, in substantially the form on file with the City Clerk, together with any changes
therein or additions thereto deemed advisable by the Director of Administrative Services, to be
published once in The Bond Buyer. Such publication shall be made not later than fifteen (15)
days prior to the date set for receipt of bids on the Certificates.
Section 4. The Authorized Officer, the City Clerk and other officials of the City are
hereby authorized and directed to execute such other agreements, documents and certificates as
may be necessary to effect the purposes of this resolution and the lease financing and
refinancing herein authorized.
Section 5. To the best of the City's knowledge, information and belief, the Preliminary
Official Statement contains no untrue statement of a material fact with respect to the City or
omits to state a material fact with respect to the City required to be stated where necessary to
make any statement made therein not misleading in the light of the circumstances under which it
was made.
Section 6. The City hereby approves, and hereby deems nearly final within themeaning
of Rule 15c2-12 of the Securities Exchange Act. of 1934, the preliminary Official Statement
describing the Certificates of Participation, in the form on file with the Director of
Administrative Services. The Financial Advisor is hereby authorized to distribute the Official
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Statement in connection with the sale of the Certificates of Participation. The Authorized
Officer is hereby authorized and directed to (a) execute and deliver to the purchaser of the
Certificates of Participation a certificate deeming the preliminary Official Statement to be nearly
final as of its date, (b) approve any changes in or additions to cause such Official Statement to
be put in final form, and (c) execute said final Official Statement for and in the name and on
behalf of the City.
Section 7. The Authorized Officers are separately authorized to approve corrections
and additions to the Pre "bminary Official Statement by supplement or amendment thereto, or
otherwise as appropriate, provided that any such corrections or additions shall be necessary to
cause the information contained therein to conform with facts material to the Certificates of
Participation, or to the proceedings of the City or such corrections or additions are in form
rather than in substance.
Section 8. The Mayor, the City Manager and the Administrative Services Director are
separately authorized and directed to cause the Preliminary Official Statement to be brought
into the form of a final official statement (the "Final Official Statement") and to execute said
Final Official Statement, dated as of the date of the sale of the Certificates of Participation,
and the City Manager and Administrative Services Director are separately authorized and
directed to execute a statement that the facts contained in the Final Official Statement, and any
supplement or amendment thereto (which shall be deemed an original part thereof for the
purpose of such s;-:.~.te~ent) were, at the time of sale of the Certificates of Participation, true
and correct in all aterial respects and that the Final Official Statement did not, on the date of
sale of the Cerfi cares of Participation, and does not, as of the date of delivery of the
Certificates of Pa~: cipafion, contain any untrue statement of a material fact with respect to the
City or omit to ~ate material facts with respect to the City required to be stated where
necessary to mak~ any statement made therein not misleading in the light of the circumstances
under which it w~ made. The Mayor, the City Manager or the Administrative Services Director
shall take such fu aer actions prior to the signing of the Final Official Statement as are deemed
necessary or app.r priate to verify the accuracy thereof.
Section 9. ~e Final Official Statement, when prepared, is approved for distribution in
connection with ~: a offering and sale of the Certificates of Participation.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
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APPROVED AS TO FORM:
Senior Assistant City~ Attorney
William H. Madison,
Jones Hall, A Professional Law Corporation
Bond Counsel
City Manager
Director of Administrative Services
Director of Community Service~
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EXHIBIT B
PALO ALTO PUBLIC IMPROVEMENT CORPORA~ON
RESOLUTION NO. ~
A RESOLUTION APPROVING, AUTHORIZING AND
DIRECTING EXECUTION OF CERTAIN LEASE REFINANCING
DOCUMENTS AND AUTHORIZING AND DIRECTING
CERTAIN ACTIONS WITH RESPECT THERETO
RESOLVED, by the Palo Alto Public Improvement Corporation (the "Corporation"):
WHEREAS, the City of Palo Alto (the "City") has heretofore leased certain real
property, consisting of the Palo Alto Civic Center (the "Civic Center") to the Corporation
pursuant to that certain lease agreement, dated as of March 1, 1992, by and between, the
Corporation, as lessor, and the City, as lessee (the "1992 Lease");
WHEREAS, the City has determined that it is in the interests of the City at this time to
provide for the refinancing of the 1992 Lease and the Certificates of Participation executed and
delivered in connection therewith (the "1992 Certificates"), and in addition,, wishes to finance
the costs of constructing the non-parking area on the Lot S/L site, located .on Bryant Street,
between Lytton Avenue and University Avenue (the "Parking Structure Improvements"), by re-
leasing the Civic Center pursuant to a Property Lease and .Lease Agreement, both dated as of
January 1, 2002, between the City and the Corporation (the "Lease Agreement"); and
WHEREAS, for the purpose of obtaining the moneys required to be deposited by it with
U.S. Bank Trust National Association (the "Trustee") to pay for financing .the Parking Structure
Improvements and rebinding the i992 Lease and the 1992 Certificates, the Corporation
proposes to assign and transfer certain of its fights under the Lease Agreement to the Trustee,
and in consideration of such assignment and the execution of a Trust Agreement, dated as of
January 1, 2002, among the Trustee, the City and the Corporation (the "Trust Agreement"), the
Trustee has agreed to execute and deliver certificates of participation, each evidencing a
fractional interest in the lease payments made by the City under the Lease Agreement;
WHEREAS, in connection therewith, it is in the public interest and for the public benefit
that the Corporation authorize and direct execution of the Property Lease, the Lease
Agreement, the Trust Agreement and certain other fi_nandng documents in connection therewith;
and
WHEREAS, the documents below specified have b~en filed with the Corporation, and
the members of the Corporation have reviewed said documents; and
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
Section 1. The below-enumerated documents be and are hereby approved, and the
President and the Vice President are hereby separately authorized and directed to execute said
documents, with such changes, insertions and omissions as may be approved by such official,
and the Secretary of the Corporation is hereby authorized and directed to attest to such
offidal's signature:
(a) a Property Lease, relating to the lease of the Civic Center from the City to the
Corporation, between the City, as lessor, and the Corporation, as lessee;
¯ (b) a Lease Agreement, relating to the lease of the Civic Center by the
Corporation back to the City, between the Corporation, as lessor, and the City, as
lessee;
(c) a Trust Agreement, by and among the Corporation, the City and the Trustee,~
relating to the financing and the execution and delivery of two series of certificates o~
participation (Series A Tax-Exempt and Series B Taxable), evidendng the proportionate
interests of the owners thereof in lease payments to be made by the City under the Lease
Agreement (the "Certificates of Participation");
(d) an Assignment Agreement, by and between the Corporation and the Trustee,
pursuant to which the Corporation will assign certain of its fights under the Lease
Agreement, including its right to receive lease payments thereunder, to the Trustee; and
(e) A Termination of Lease Agreement, relating to the termination of the 1992
Lease, between the Corporation and the City.
Section 2. The President, Vice President, Executive Director, Treasurer, Secretary and
other officials of the Corporation are hereby authorized and directed to execute such other
agreements, documents and certificates as may be necessary to effect the purposes of this
resolution and the lease financing herein authorized.
I hereby certify that the foregoing resolution was duly adopted, at a meeting of the Palo
Alto Public Improvement Corporation held on the 17th day of December, 2001, by the following
vot~e-c- .......................................................................
AYES, and in favor of:
NOES:
ABSENT:
Secretary
APPROVED AS TO FORM:
William H. Madison,
Iones Hall, A Professional Law Corporation
Bond Counsel
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ATTACHMENT A
26005-57 JH:WHM 11/19/01
12/10/01
PLEASE RECORD, AND
WHEN RECORDED, RETURN TO:
JONES HALL,
A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
Attention: William H. Madison, Esq.
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY
TRANSFER TAX PURSUANT TO SECTION 11922 OF THE CALIFORNIA
REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM
RECORDING FEES PURSUANT TO SECTION 6103 OF THE CALIFORNIA
GOVERNMENT CODE.
TERMINATION AGREEMENT
(1992 Civic Center Refinancing and Improvement Project Leases
and Assignment)
THIS TERMINATION AGREEMENT is made and entered into as of
January 1, 2002, by and between the PALO ALTO PUBLIC IMPROVEMENT
CORPORATION, a nonprofit corporation duly organized and existing under the
laws of the State of California (the "Corporation") and the CITY OF PALO
ALTO, a chartered municipal corporation organized and existing under the laws
of the State of California (the "City").
RECITALS
WHEREAS, the Corporation has heretofore leased certain real property,
consisting of the Palo Alto Civic Center (the "Leased Property"), including
certain improvements financed by lease transactions between the City and the
Corporation in 1983 and 1992, more particularly described in Exhibit A hereto,
pursuant to that certain Site and Facility Lease, dated as of March 1, 1992,
between the City and the Corporation (the "1992 Site and Facility Lease") and a
Lease Agreement, dated as of March 1, 1992, by and between the Corporation,
as lessor, and the City, as lessee (the "1992 Lease"); and
WHEREAS, the 1992 Site and Facility Lease and the 1992 Lease are
sometimes referred to herein collectively as the "1992 Leases"; and
WHEREAS, the Corporation assigned its right to receive Lease Payments
due from the City under the 1992 Lease to the Trustee, for the benefit of the
Owners of the 1992 Certificates (as herein defined), pursuant to an Assignment
Agreement, dated as of March 1, 1992, between the Trustee and the Corporation
(the "1992 Assignment ");and
WHEREAS, the City has determined that it is in the interests of the City
at this time to provide for the refinancing of the 1992 Lease and the City's
existing obligations under the 1992 Lease, including Certificates of Participation
executed and delivered in the amount of $7,670,000 (the "1992 Certificates")
and for the financing of the costs of. constructing the non-parking area on the Lot
S/L site, located on Bryant Street, between Lytton Avenue and University
Avenue (the "Parking Structure Improvements"), by re-leasing the Leased
Property pursuant to a Lease Agreement, dated as of January 1, 2002, between
the City and the Corporation (the "Lease Agreement"); and
WHEREAS, the Corporation will cause to be deposited with the Trustee
(as hereinafter defined) funds for the refinancing of the 1992 Lease and the 1992
Certificates, and the financing of the Parking Structure Improvements; and
WHEREAS, the City and the Corporation propose to make a deposit of
moneys from the proceeds of the Certificates of Participation which represent
the right to receive the Lease Payments payable by the City under the Lease
Agreement, and to appoint the Trustee as their agent for the purpose of applying
said deposit to the payment of the redemption price of the 1992 Certificates in
accordance with the instructions provided by that certain Trust Agreement,
dated as of January 1, 20029 among the City, the Corporation and the Trustee,
and to the payment and redemption of the 1992 Certificates in accordance with
the 1992 Trust Agreement, and the Trustee desires to accept said appointment:
and
WHEREAS, in connection with the delivery of the Lease Agreement, it is
necessary to terminate the 1992 Leases and the 1992 Assignment.
NOW, THEREFORE, for and in consideration of the premises and the
material covenants hereinafter contained, the parties hereto hereby formally
¯ covenant, agree and bind themselves as follows:
Section 1. Termination of 1992 Leases and 1992 Assignment. The
1992 Leases and 1992 Assignment are hereby terminated with respect to the
land and related real property described more fully in Exhibit A attached hereto
and by this reference incorporated herein. The Trustee hereby consents to the
termination of its rights under the 1992 Leases and 1992 Assignment as assignee
of the Corporation pursuant to the 1992 Assignment.
Section 2. Recordation Hereof. The City shall, at its expense, cause a
copy of this Termination Agreement to be recorded in the Santa Clara County
Recorder's Office. The City and the Corporation shall execute any and all
documents, and take any and all actions, as may be required to accomplish the
termination of the 1992 Leases and 1992 Assignment with respect to the land
and real property described in Exhibit A attached hereto, and the discharge of
the 1992 Leases of record with respect to such land and real property.
Section 3. Execution in Counterparts. This Termination Agreement
may be executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
Section 4. Applicable Law. This Termination Agreement shall be
governed by and construed in accordance with the laws of the State of
California.
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IN WITNESS WHEREOF, the Corporation and the City have caused this
Termination Agreement to be executed in their respective names by their duly
authorized officers, all as of the date first above written.
PALO ALTO PUBLIC
IMPROVEMENT
CORPORATION, as lessee and
sublessor
Attest:
By
Vice President
By
Secretary
CITY OF PALO ALTO, as lessor
and sublessee
[S E AL]
Attest:
By
Carl L. Yeats
Director of Administrative Services
By
City Clerk
APPROVED:
U.S. BANK NATIONAL
ASSOCIATION, as Successor Trustee to
Bank of America National Trust and
Savings Association
By
Authorized Officer
-4-
EXHIBIT A
Legal Description
[to come]
A-1
ATTACHMENT B
26005-57 JH:WHM
12/10/01
ll/19/01
PLEASE RECORD, AND
WHEN RECORDED, RETURN TO:
William H. Madison, Esq.
Jones Hall, A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
PROPERTY LEASE
Dated as of January 1, 2002
by and between the
CITY OF PALO ALTO,
as Lessor
and the
¯ PALO ALTO PUBLIC IMPROVEMENT CORPORATION,
as Lessee
TABLE OF CONTENTS
PROPERTY LEASE
Section 1.01.
Section 1.02.
Section 1.03.
Section 1.04.
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Definitions ..........................................................................................................2
Article and Section Headings ...............................................................................2
References to Agreement .......................................................................................2
Number and Gender ..............................................................................................2
Section 2.01.
Section 2.02.
Section 3.01.
Section 3.02.
Section 3.03.
Section 3.04.
Section 3.05.
Section 4.01.
Section 4.02.
Section 5.01.
Section 5.02.
Section 5.03.
Section 5.04.
Section 5.05.
Section 5.06.
Section 5.07.
Section 5.08.
Section 5.09.
Section 5.10.
Section 5.! 1.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Representations, Covenants and Warranties of the City ........................................3
Representations, Covenants and Warranties of Corporation ...................................3
ARTICLE III
AGREEMENT TO LEASE; TERM OF
PROPERTY LEASE; PROPERTY LEASE PAYMENT
Lease ...................................................................................................................4
Term ....................................................................................................................4
Property Lease Payment .......................................................................................4
Title ....................................................................................................................4
No Merger ............................................................................................................4
ARTICLE IV
EMINENT DOMAIN; NET PROCEEDS
Eminent Domain ...................................................................................................5
Application of Net Proceeds .................................................................................5
ARTICLE V
MISCELLANEOUS
Liens ....................................................................................................................6
Assignment and Subleasing by the Corporation ......................................................6
Amendment ..........................................................................................................6
Notices ................................................................................................................6
Binding Effect ......................................................................................................6
Severability ........................................................................................................6
Further Assurances and Corrective Instruments ......................................................6
Execution in Counterparts .....................................................................................7
Applicable Law ...................................................................................................7
Corporation and City Representatives ..................................................................7
Captions ..............................................................................................................7
EXHIBIT A DESCRIPTION OF LEASED PROPERTY ..........................................................A-1
PROPERTY LEASE
THIS PROPERTY LEASE, dated for convenience as of January 1, 2002, by and between
the CITY OF PALO ALTO, a chartered municipal corporation duly organized and existing
under the Constitution and laws of the State of California, as lessor (the "City"), and the PALO
ALTO PUBLIC IMPROVEMENT CORPORATION, a nonprofit public benefit corporation duly
formed, organized and acting pursuant to the laws of the State of California (the
"Corporation"), as lessee; and
WITNE S S E TH:
WHEREAS, the Corporation has heretofore leased certain real property, consisting of
the Palo Alto Civic Center (the "Leased Property"), including certain improvements financed by
lease transactions between the City and the Corporation in 1983 and 1992 (the "Prior Project"),
more particularly described in Exhibit B hereto, pursuant to that certain lease agreement, dated
as of March 1, 1992, by and between the Corporation, as lessor, and the City, as lessee (the
"1992 Lease");
WHEREAS, the 1992 Lease has been duty terminated pursuant to a Termination
Agreement, dated as of January 1, 2002, between the City and the Corporation;
WHEREAS, the City has determined .that it is in the interests of the City at this time to
provide for the refinancing of the 1992 Lease and the Certificates of Participation executed and
delivered in connection therewith (the "1992 Certificates"), and for the financing of the costs of
constructing the non-parking area on the Lot S/L site, located on Bryant Street, between Lytton
Avenue and University Avenue (the "Parking Structure Improvements"), by re-leasing the
Leased Property pursuant to this Property Lease and a Lease Agreement, dated as of January
1, 2002, between the City and the Corporation (the "Lease Agreement"); and
WHEREAS, the Corporation will cause to be deposited with the Trustee (as hereinafter
defined) funds for the refinancing of the 1992 Lease and the 1992 Certificates, and the financing
of the proposed Parking Structure Improvements;
WHEREAS, the Corporation will establish a trust pursuant to the Trust Agreement and
direct the Trustee to execute and deliver the two series of certificates of participation (the
"Certificates") representing undivided fractional interests in the Lease Payments to and
including the earlier of the maturity or redemption of the Certificates; and
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants hereinafter contained and for other good and valuable consideration, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. Definitions. All terms specifically defined in the Trust Agreement dated
as of January 1, 2002 by and among U.S. Bank Trust National Association, as trustee, the
Corporation and the City (the "Trust Agreement")shall have the same respective meanings
when used herein. In addition, the following terms defined in this Section 1.01 shall have the
respective meanings herein set forth when used herein.
"Lease Agreement" means the Lease Agreement, dated as of January 1, 2002, by and
between the Corporation as lessor and the City as lessee, together with any duly authorized
and executed amendments thereto.
"Leased Property" means the Palo Alto Civic Center, more particularly described in
Exhibit A hereto, together with all improvements located thereon as of the Closing Date.
"Permitted Encumbrances" means, as of any particular time: (i) liens for general ad
valorem taxes and assessments, if any, not then delinquent; (ii) the Assignment Agreement; (iii)
this Property Lease and the Lease Agreement; (iv) the Trust Agreement; (v) any right or claim of
any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner
prescribed by law; (vi) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions or restrictions which exist of record as of the date on which
the Certificates are delivered to the purchasers thereof and which the City certifies in writing
will not materially impair the use of the Leased Property; and (vii) easements, rights of way,
mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions
established following the date of recordation of this Property Lease and to which the
Corporation and the City consent in writing.
"Property Lease" means this Property Lease, together with any duly authorized and
executed amendments hereto.
"Property Lease Payment" means the payment required to be paid by the Corporation
on the Closing Date pursuant to Section 3.03.
Section 1.02. Article and Section Headings. Unless otherwise specified, references to
Articles, Sections, and other subdivisions of this Property Lease are to be designated Articles,
Sections, and other subdivisions of this Property Lease as originally executed. The headings or
titles of the several articles and sections, and the table of contents appended to copies hereof,
shall be solely for convenience of reference and shall not affect the meaning, construction or
effect of the provisions hereof.
Section 1.03. References to Agreement. The words "hereof', "herein", "hereunder",
and words of similar import refer to this Property Lease as a whole.
Section 1.04. Number and Gender. The singular form of any word used herein,
including terms defined as provided in Section 1.01, shall include the plural, and vice versa.
The use of a word of any gender shall include all genders.
-2-
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.01. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Corporation as follows:
(a) Due Organization and Existence. The City is a chartered municipal
corporation duly organized and existing under the Constitution and laws of the State.
(b) Authorization. The laws of the State authorize the City to enter into this
Property Lease and to enter into the transactions contemplated by and to carry out its
obligations under this Property Lease, and the City has duly authorized and executed
this Property Lease.
(c) No Violations. Neither the execution and delivery of this Property Lease nor
the fulfillment of or compliance with the terms and conditions hereof nor the
consummation of the transactions contemplated hereby, conflicts with or results in a
breach of the terms, conditions or provisions of any restriction or any agreement or
instrument to which the City is now a party or by which the City is bound, or constitutes
a default under any of the foregoing, or results in the creation or imposition of any lien,
charge or encumbrances whatsoever upon any of the property or assets of the City, or
upon the Leased Property, except Permitted Encumbrances.
Section 2.02. Representations. Covenants and Warranties of Corporation. The
Corporation represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence. The Corporation is a nonprofit public
benefit corporation duly formed, operating and existing under the laws of the State; has
power to enter into the Property Lease; is possessed of full power to sublease real and
personal property; and has duly authorized the execution and delivery of this Property
Lease.
(b) Authorization. The laws of the State authorize the Corporation to enter into
this Property Lease and to enter into the transactions contemplated by and to carry out
its obligations under this Property Lease, and the Corporation has duly authorized- and
executed this Property Lease.
(c) No Violations. Neither the execution and delivery of this Property Lease nor
the fulfillment of or compliance with the terms and conditions hereof, nor the
consummation of the transactions contemplated hereby, conflicts with or results in a
breach of the terms, conditions or provisions of any restriction or any agreement or
instrument to which the Corporation is now a party or by which the Corporation is
bound, or constitutes a default under any of the foregoing, or results in the creation or
imposition of any lien, charge or encumbrance whatsoever upon any of the property or
assets of the Corporation, or upon the Leased Property, except Permitted
Encumbrances.
-3-
ARTICLE III
AGREEMENT TO LEASE; TERM OFPROPERTY LEASE; PROPERTY LEASE PAYMENT
Section 3.01. Lease. The City hereby leases the Leased Property to the Corporation,
and the Corporation hereby leases the Leased Property from the City, upon the terms and
conditions set forth in this Property Lease.
Section 3.02. Term. The term of this Property Lease shall commence on the Closing
Date and shall end on September 1, 2022, unless such term is extended as hereinafter provided.
If on September 1, 2022, the Trust Agreement shall not be discharged by its terms, then the Term
of this Property Lease shall be extended until the Trust Agreement shall be discharged by its
terms (but in no event beyond September 1, 2032). If prior to September 1, 2022, the Trust
Agreement shall be discharged by its terms, the Term of this Property Lease shall thereupon
end.
Section 3.03. Property Lease Payment. The Corporation hereby agrees to pay to the
City, as rental for the use and occupancy of the Leased Property during the term of this
Property Lease, the amount of Dollars
($ ) which shall be due and payable on the Closing Date, and which shall be deemed
to have been paid when the proceeds of the Certificates are deposited with the Trustee. No
further amounts shall be due and payable by the Corporation to the City under this Property
Lease.
Section 3.04. Title. Title to the Leased Property shall reside in the City, and during the
term of this Property Lease, the City shall hold title to the Leased Property and any and all
additions which comprise fixtures, repairs, replacements or modifications to the Leased
Property, including those fixtures, repairs, replacements or modifications which are added to
the Leased Property by the City at its own expense and which may be removed without
damaging the Project and including any items added to the Leased Property by the City
pursuant to Section 5.8 of the Lease Agreement.
Section 3.05. No Merger. It is the express intention of the parties hereto that this
Property Lease and the obligations of the parties hereunder shall be and remain separate and
distinct from the Lease and the obligations of the parties thereunder, and that during the term
of the Lease no merger of title or interest occur or be deemed to occur as a result of the position
of the City as lessee under the Lease and as lessor under this Property Lease, or the position of
the Corporation as lessee under this Property Lease.
-4-
ARTICLE IV
EMINENT DOMAIN; NET PROCEEDS
Section 4.01. Eminent Domair~ If all of the Leased Property shall be taken
permanently under the power of eminent domain or sold to a government threatening to exercise
the power of eminent domain, the term of this Property Lease shall cease as of the day
possession shall be so taken. If less than all of the Leased Property shall be taken permanently,
or if all of the Leased Property or any part thereof shall be takeh temporarily, under the power
of eminent domain, this Property Lease shall continue in full force and effect and shall not be
terminated by virtue of such taking and the parties waive the benefit of any law to the contrary.
Section 4.02. Application of Net Proceeds. The Net Proceeds of any insurance award
.resulting from any damage to or destruction of the Leased Property or any improvements
thereon by fire or other casualty, and the Net Proceeds of any eminent domain award resulting
from any event described in Section 4.01 hereof, shall be applied as set forth in Section 6.2(a) of
the Lease Agreement. All such Net Proceeds shall be paid to the City or the Trustee as their
interests may appear under the Lease Agreement, and the Corporation hereby waives any and
all right, title and interest which it may have in and to any such Net Proceeds by virtue of its
estate in the Leased Property under this Property Lease.
-5-
ARTICLE V
MISCELLANEOUS
Section 5.01. Liens. The Corporation shall not, directly or indirectly, create, assume or
suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the
Leased Property, other than the respective rights of the Corporation and the City as herein
provided and Permitted Encumbrances.
Section 5.02. Assignment and Subleasing by the Corporation. For the purpose of
providing funds to enable the Corporation to pay the Property Lease Payment on the Closing
Date, the Corporation has leased the Leased Property to the City pursuant to the Lease
Agreement. The Corporation shall not have the right to further sublease or to assign any of its
interests under this Property Lease in and to the Leased Property or any portion thereof.
Section 5.03. Amendment. Without the prior written consent of the Trustee, the
Corporation and the City will not alter, modify or cancel, or agree or consent to alter, modify or
cancel this Property Lease, excepting only such alteration or modification as may be permitted
by Article X of the Trust Agreement.
Section 5.04. Notices. All notices, certificates or other communications hereunder shall
be sufficiently given and shall be deemed to have been received 48 hours after deposit in the
United States mail in registered or certified form with postage fully prepaid:
If to the City:City Clerk
City of Palo Alto
P. O. Box 10250
Palo Alto, CA 94303
If to the Corporation:Palo Alto Public Improvement Corporation
c/o City Clerk
P. O. Box 10250
Palo Alto, CA 94303
If to the Trustee:U.S. Bank Trust National Association
Corporate Trust Services
One California Street, Suite 400
San Francisco, CA 94111
Fax: 415/273-4590
The Corporation, the Trustee and the City, by notice given hereunder, may designate
different addresses to which subsequent notices, certificates or other communications will be
sent.
Section 5.05. Binding Effect. This Property Lease shall inure to the benefit of and shall
be binding upon the Corporation and the City and their respective successors and assigns.
Section 5.06. SeverabiliW. In the event any provision of this Property Lease shall be
held invalid or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
-6-
Section 5.07. Further Assurances and Corrective Instruments. The Corporation and
the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such further instruments
as may reasonably be required for correcting any inadequate or incorrect description of the
Leased Property hereby leased or intended so to be or for carrying out the expressed intention-
of this Property Lease.
Section 5.08. Execution in Cou.nterparts. This Property Lease may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.
Section 5.09. Applicable Law. This Property Lease shall be governed by and
construed in accordance with the laws of the State.
Section 5.10. Corporation and City Representatives. Whenever under the provisions
of this Property Lease the approval of the Corporation or the City is required, or the
Corporation or the City is required to take some action at the request of the other, such
approval or such request shall be given for the Corporation by an Corporation Representative
and for the City by an Corporation Representative, and any party hereto shall be authorized to
rely upon any such approval or request.
Section 5.11. Captions. The captions or headings in this Property Lease are for
convenience only and in no way define, limit or describe the scope or intent of any provisions or
Section of this Property Lease.
IN WITNESS WHEREOF, the Corporation has caused this Property Lease to be
executed in its name by its duly authorized officers; and the City has caused this Property
Lease to be executed in its name by its duly authorized officers and sealed with its corporate
seal, as of the date first above written.
CITY OF PALO ALTO, as Lessor
By
Carl L. Yeats
Director of Administrative Services
(S E A L)
Attest:
By
City Clerk
PALO ALTO PUBLIC IMPROVEMENT
CORPORATION, as Lessee
By
President
Attest:
By
Secretary
-8-
STATE OF CALIFORNIA
COUNTY OF
)
) ss
)
On before me,., Notary
Public, personally appeared .., personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
EXHIBIT A
DESCRIPTION OF LEASED PROPERTY
ATTACHMENT C
26005-57 JH:WHM
12/10/01
11/19/01
PLEASE RECORD, AND
WHEN RECORDED, RETURN TO:
William H. Madison, Esq.
Jones Hall, A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
LEASE AGREEMENT
Dated as of January 1, 2002
by and between the
PALO ALTO PUBLIC IMPROVEMENT CORPORATION,
as Lessor
and the
CITY OF PALO ALTO,
as Lessee
TABLE OF CONTENTS
LEASE AGREEMENT
Section 1.1.
Section 1.2.
Section 1.3.
Section 1.4.
Section 1.5.
Section 2.1.
Section 2.2.
Section 3.1.
Section 3.2.
Section 3.3.
Section 3.4.
Section 3.5.
Section 3.6.
Section 4.1.
Section 4.2.
Section 4.3.
Section 4.4.
Section 4.5.
Section 4.6.
Section 4.7.
Section 5.1.
Section 5.2.
Section 5.3.
Section 5.4.
Section 5.5.
Section 5.6.
ARTICLE I
DEFINITIONS AND EXHIBITS
Definitions ..........................................................................................................2
Article and Section Headings ...............................................................................3
References to Agreement .......................................................................................3
Number and Gender ..............................................................................................3
Exhibits ...............................................................................................................3
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Representations, Covenants and Warranties of the City ........................................4
Representations, Covenants and Warranties of Corporation ...................................4
ARTICLE III
DEPOSIT OF MONEYS; ACQUISITION AND
CONSTRUCTION OF THE PROJECT;
SUBSTITUTION AND REMOVAL OF LEASED PROPERTY
Deposit of Moneys ................................................................................................6
Acquisition and Construction of Project ..................................................................6
Payment of Construction Costs ...............................................................................6
Payment of Costs of Issuance .................................................................................6
Substitution of Leased Property ............................................................................6
Removal of Property from Leased Property ...........................................................7
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE AGREEMENT;
LEASE PAYMENTS
Agreement to Lease .........: ....................................................................................9
Term of Lease Agreement ......................................................................................9
Lease Payments ....................................................................................................9
Quiet Enjoyment .................................................................................................10
Title ..................................................................................................................10
Additional Payments .........................................................................................11
No Merger ..........................................................................................................11
ARTICLE V
MAINTENANCE; TAXES; INSURANCE; AND OTHER
MATTERS
Maintenance, Utilities, Taxes and Assessments ...................................................12
Modification of Leased Property .........................................................................12
Public Liability and Property Damage Insurance .................................................13
Fire and Extended Coverage Insurance .................................................................13
Insurance Net Proceeds .......................................................................................13
Self-Insurance ....................................................................................................14
-i-
Section 5.7.
Section 5.8.
Section 5.9.
Section 5.10.
Section 6.1.
Section 6.2.
Section 6.3.
Section 7.1.
Section 7.2.
Section 7.3.
Section 8.1.
Section 8.2.
Section 8.3.
Section 9.1.
Section 9.2.
Section 9.3.
Section 9.4.
Section 9.5.
Section 9.6.
Section 9.7.
Section 10.1.
Section 10.2.
Section 10.3.
Section 10.4.
Section 11.1.
Section 11.2.
Section 11.3.
Section 11.4.
Section 11.5.
Advances ...........................................................................................................14
Installation of City's Equipment .........................................................................14
Liens ..................................................................................................................14
Compliance With Property Lease .......................................................................15
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN;
USE OF NET PROCEEDS
Eminent Domain .................................................................................................16
Application of Net Proceeds ...............................................................................16
Abatement of Rental in the Event of Damage or Destruction .................................16
ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Disclaimer of Warranties ...................................................................................18
Access to the Leased Property .............................................................................18
Release and Indemnification Covenants ..............................................................18
ARTICLE VIII
ASSIGNMENT, LEASING AND AMENDMENT
Assignment by the Corporation ...........................................................................19
Assignment and leasing by the City ....................................................................19
Amendment of Lease Agreement ..........................................................................19
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Events of Default Defined ..................................................................................20
Remedies on Default ..........................................................................................20
No Remedy Exclusive .........................................................................................22
Agreement to Pay Attorneys' Fees and Expenses ...................................................22
No Additional Waiver Implied by One Waiver ..................................................22
Application of Proceeds ......................................................................................22
Trustee and Certificate Owners to Exercise Rights ...............................................22
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Security Deposit ................................................................................................23
Prepayment ........~ ..............................................................................................23
Mandatory Prepayment ......................................................................................23
Credit for Amounts on Deposit ............................................................................23
ARTICLE XI
MISCELLANEOUS
Notices ..............................................................................................................24
Binding Effect ....................................................................................................24
Severability ......................................................................................................24
Net-net-net Lease ..............................................................................................24
Further Assurances and Corrective Instruments ....................................................24
-ii-
Section 11.6.
Section 11.7.
Section 11.8.
Section 11.9.
EXHIBIT A-1
EXHIBIT A-2
EXHIBIT B
Execution in Counterparts ...................................................................................24
Applicable Law .................................................................................................24
Corporation and City Representatives ................................................................24
Captions ............................................................................................................25
SCHEDULE OF TAX-EXEMPT LEASE PAYMENTS ..........................................A-1
SCHEDULE OF TAXABLE LEASE PAYMENTS ................................................A-2
DESCRIPTION OF LEASED PROPERTY ..........................................................B-1
-iii-
LEASE AGREEMENT
THIS LEASE AGREEMENT; dated for convenience as of January 1, 2002, is by and
between the PALO ALTO PUBLIC IMPROVEMENT CORPORATION, a nonprofit public
benefit corporation formed, operating and acting pursuant to the laws of the State of California
(the "Corporation") as lessor, and the CIr.:OF PALO ALTO, a chartered municipal
corporation duly organized and existing under the Constitution and laws of the State of
California, as lessee (the "City").
RECITALS
WHEREAS, the Corporation has heretofore leased certain real property, consisting of
the Palo Alto Civic Center (the "Leased Property"), including certain improvements financed by
lease transactions between the City and the Corporation in 1983 and 1992, more particularly
described in Exhibit B hereto, pursuant to that certain lease agreement, dated as of March 1,
1992, by and between the Corporation, as lessor, and the City, as lessee (the "1992 Lease") ;. and
WHEREAS, the 1992 Lease has been duly terminated pursuant to a Termination
Agreement, dated as of January 1, 2002, between the City and the Corporation;
WHEREAS, the City has determined that it is in the interests of the City at this time to
provide for the refinancing of the 1992 Lease and the Certificates of Participation executed and
delivered in connection therewith (the "1992 Certificates") and for the financing the costs of
constructing the non-parking area on the Lot S/L site, located on Bryant Street, between Lytton
Avenue and University Avenue (the "Parking Structure Improvements"), by re-leasing the
Leased Property pursuant to this Lease Agreement; and
¯ WHEREAS, the Corporation will cause to be deposited with the Trustee (as hereinafter
defined) funds for the refinancing of the 1992 Lease and the 1992 Certificates, and the financing
of the Parking Structure Improvements;
WHEREAS, the Corporation will establish a trust pursuant to the Trust Agreement and
direct the Trustee to execute and deliver the two series of certificates of participation (the
"Certificates") representing undivided fractional interests in the Lease Payments to and
including the earlier of the maturity or redemption of the Certificates; and
WHEREAS, the City is authorized under its charter and the Constitution and the laws
of the State of California to enter into this Lease Agreement for the purposes and subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants hereinafter contained and for other good and valuable consideration, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.1. Definitions. All terms specifically defined in the Trust Agreement shall
have the same respective meanings when used herein. In addition, the following terms defined
in this Section 1.1 shall have the respective meanings herein set forth when used herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Escrow Fund" means the escrow fund created under the Section 3.05 of the Trust
Agreement.
"Lease Agreement" means this Lease Agreement, together with any duly authorized
and executed amendments hereto.
"Lease Payment Date" means February 15 and August 15 of each year during the Term
of this Lease Agreement, commencing August 15, 2002.
"Leased Property" means the City of Palo Alto Civic Center, as more particularly
described in Exhibit B.
"Original Purchaser" means the first purchaser of the Certificates upon their delivery by
the Trustee.
"Permitted Encumbrances" means, as of any particular time: (i) liens for general ad
valorem taxes and assessments, if any, not then delinquent; (ii) the Assignment Agreement; (iii)
the Property Lease and this Lease Agreement; (iv) any right or claim of any mechanic, laborer,
materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (v)
easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants,
conditions or restrictions which exist of record as of the Closing Date and which the City
certifies in writing will not materially impair the use of the Leased Property; and (vi) easements,
rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions
or restrictions established following the date of recordation of this Lease Agreement and to
which the Corporation and the City consent in writing.
"Project" means thenon-parking area on the Lot S/L site, located on Bryant Street,
between Lytton Avenue and University Avenue.
"Property Lease" means the Property Lease, dated as of January 1, 2002, recorded
concurrently herewith, by and between the City, as lessor, and the Corporation, as lessee,
together with any duly authorized and executed amendments thereto.
"Property Lease Payment,' means the payment required to be paid by the Corporation
on the Closing Date pursuant to Section 3.03 of the Property Lease.
"Regulations" means temporary and permanent regulations promulgated under the
Code.
"Rental Period" means each twelve-month period during the Term of this Lease
Agreement commencing on September 2 in any year and ending on the: next succeeding
September 1, except that the first rental period shall commence on January 1, 2002.
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~Taxable Lease Payments" means the Lease Payments shown on Exhibit A-2,
attributable to the portion of the proceeds of the Certificates applied to the acquisition and.
const~n.~ction of the Parking Su'ucture Improvements.
"Tax-Exempt Lease Payments" means the Lease Payments shown on Exhibit A-l,
attributable to the portion of the proceeds of the Certificates applied to the refunding of the
1992 Lease in full on March 1, 2002.
"Trust Agreement" means the Trust Agreement dated as of January 1, 2002 by and
among Trustee, the Corporation and the City, relating to the Certificates.
Section 1.2. Article and Section Headings. Unless otherwise specified, references to
Articles, Sections, and other subdivisions of this Lease Agreement are to be designated Articles,
Sections, and other subdivisions of this Lease Agreement as originally executed. The headings
or titles of the several articles and sections, and the table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not affect the meaning, construction
or effect of the provisions hereof.
Section 1.3. References to Agreement. The words "hereof', "herein", "hereunder", and
words of similar import refer to this Lease Agreement as a whole.
Section 1.4. Number and Gender. The singular form of any word used herein,
including terms defined as provided in Section 1.1, shall include the plural, and vice versa. The
use of a word of any gender shall include all genders.
Section 1.5. Exhibits. The following Exhibits are attached to, and by reference made a
part of, this Lease Agreement:
Exhibit A-l: The schedule of Tax-Exempt Lease Payments to be paid by the City
hereunder with respect to the Leased Property, showing the date and amount of each such Tax-
Exempt Lease Payment.
Exhibit A-2: The schedule of Taxable Lease Payments to be paid by the City hereunder
with respect to the Leased Property, showing the date and amount of each such Taxable Lease
Payment.
Exhibit B: The description of the Leased Property.
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ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section ~..1. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Corporation as follows:
(a) Due Organization and Existence. The City is a chartered municipal
corporation duly organized and existing under the Constitution and laws of the State.
(b) Authorization. The laws of the State authorize the City to enter into the
Property Lease, this Lease Agreement and the Trust Agreement and to enter into the
transactions contemplated by and to carry out its obligations under all of the aforesaid
Agreements, and the City has duly authorized and executed all of the aforesaid
Agreements.
(c) No Violations. Neither the execution and delivery of the Property Lease, this
Lease Agreement or the Trust Agreement, nor the fulfillment of or compliance with the
terms and conditions hereof or thereof, nor the consummation of the transactions
contemplated hereby or thereby, conflicts with or results in a breach of the terms,
conditions or provisions of any restriction or any agreement or instrument to which the
City is now a party or by which the City is bound, or constitutes a default under any of
the foregoing, or results in the creation or imposition of any lien, charge or encumbrances
whatsoever upon any of the property or assets of the City, or upon the Leased Property
, except Permitted Encumbrances.
(d) Possession of Leased Property. The City is in possession of the Leased
Property.
(e) Private Activity Bond Limitation. The City shall assure that the proceeds of
the Bonds are not so used as to cause the Bonds to satisfy the private business tests of
section 141(b) of the Code or the private loan financing test of section 141(b) of the
Code or the private loan financing test of section 141 (c) of the Code.
(f) Federal Guarantee Prohibition. The City shall not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the Lease
Payments to be "federally guaranteed" within the meaning of section 149(b) of the Code
and Regulations promulgated thereunder.
Section 2.2. Representations, Covenants and Warranties of Corporation. The
Corporation represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence. The Corporation is a nonprofit public
benefit corporation duly organized, operating and existing under the laws of the State of
California; has power to enter into the Property Lease, this Lease Agreement, the
Assignment Agreement and the Trust Agreement; is possessed of full power to lease real
and personal property; and has duly authorized the execution and delivery of all of the
aforesaid Agreements.
(b) No Encumbrances. The Corporation will not pledge the Lease Payments or
any other amounts derived from the Leased Property and from its other rights under this
Lease Agreement, and will not mortgage or encumber the Leased Property, except as
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provided under the terms of the Property Lease, this Lease Agreement, the Assignment
Agreement or the Trust Agreement.
~ric; (c) No Violations. iXIeither the execution and delivery of the Property Lease, this
Lease Agreement, the Assignment Agreement or the Trust Agreement, nor the fulfillment
of or compliance with the terms and conditions hereof or thereof, nor the consummation
of the transactions contemplated hereby or thereby, conflicts with or results in a breach
of the terms, conditions or provisions of any restriction or any agreement or instrument
to which the Corporation is now a party or by which the Corporation is bound, or
constitutes a default under any of the foregoing, or results in the creation or imposition
of any lien, charge or encumbrance whatsoever upon any of the property or assets of the
Corporation, or upon the Leased Property, except Permitted Encumbrances.
(d) No Assignments. Except as provided herein, the Corporation will not assign
this Lease Agreement, its right to receive Lease Payments from the City, or its duties and
obligations hereunder to any other person, firm or corporation so as to impair or violate
the representations, covenants and warranties contained in this Section 2.2.
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DEPOSH OF MONEYS; ACQUIS: ON AND UCTION OF THE
PROJECT;SUBSTITUTION AND REMOVAL ..... :~ED PROPERTY
Section 3.1. Deposit of ?~Aoneys. On the Closing Date, the Corporation shall cause to
be deposited with the Trustee the proceeds of the sale of the Certificates. Pursua: :~ Section
3.01 of the Trust Agreement, the accrued interest with respect to the Certifica~:: ~hall be
deposited in the Lease Payment Fund, the amount of $shall be deposited in ~bq
Reserve Fund, $shall be deposited in the C ssuance Fund, $
shall be deposited in the Escrow Fund, and the remainde -~ proceeds ($,) st ~1
be deposited into :he Construction Fund.
S, on 3.2. ~: ~uisition and Construction of the Proiect., The Corporation hereby
a nts City as its. :ent for the purposes of construe" ~m, installation and equipping of the
P ::t. ~i:e City, as ag~znt of the Corporation, shall cau~ the construction, installation and
equipping of the Project, to be performed diligently to the end that the Project will be
substantially completed in accordance with the aforesaid plans and specifications on or prior
to . Upon comoletion, ~:-~ City shall file a Certificate of Completion with the
Trustee. addition, in the ::~at that me costs of acquiring, delivering and installing the Project
or any pc:don thereof are greater than the amount of mo-* ::~" deposited in or transferred to the
Construction Fund, together with investment earnings t :on, the City agrees if, under such
circumstances, it nonetheless desires to construct, deliver ~ install such portion of the Project,
to deposit into the Constructic~ Vund an amount of money necessary to pay such increased
Construction Costs, but only fr ~gally available funds, if any.
S~.ction 3.3. Payment of Construction Costs. Payment for the acquisition, construction,
installation and equipping of the Project shall be made from the moneys deposited in the
Construction Fund, which moneys shall be disbursed for such purpose in accordance and upon
compliance with Section 3.02 of the Trust Agreement.
Section 3.4. Payment of Costs of Issuance. F nent of Costs of Issuance shall be
macae from the moneys deposited in the Costs of Is:...nce Fund, which moneys shall be
disbursed for such purpose in accordance and upon compiiance with the Trust Agreement.
Section 3.5. Substitution of Leased Property. The City shall have, and is hereby
granted, the option at any time and from time to time during the Term of this Lease, to
substitute other land, facilities, imr:,rovements or other F ~rty (a "Substitute Property") for the
Leased Property or any p~rtion :~ ~reof (a "Former Pr,_ ;~y"), provided that the City shall
satisfy all of the following requirements which are hereby eclared to be conditions precedent to
such substitution:
(a) The City shall notify S&P and Moody's in writing of such substitution, which
notice shall contain the certification that all conditions set forth in this Section 3.5 are
met with respect to such substitution;
(b) The City shall take all actions and shall execute all documents required to
subject such Substitute Property to the terms and provisions of this Lease, including the
filing with the Corporation and the Trustee an amended Exhibit B which adds thereto a
description of such Substitute Property and deletes therefrom the description of such
Former Property, and including the recordation of this Lease or a memorandum hereof
with respect to such Substitute Property in the office of the Santa Clara County
Recorder;
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(c) The City shall certify in writing to the Corporation and the Trustee, such
certification to be accompanied by an appraisal prepared by an appraiser who is
independent of the City, that the estimated fair market value of such Substitute
Property is at least equal to estimated fair market value of such Former Property, except
that the estimated fair market value of such Substitute Property, together with the
portion of the Leased Property remaining after the removal of the Former Property, shall
not be required to exceed the aggregate principal components of the unpaid Lease
Payments;
(d) The City shall certify in writing to the Corporation and the Trustee that such
Substitute Property serves the public purposes of the City and constitutes property
which the City is permitted to lease under the laws of the State of California;
(e) The City shall certify in writing to the Corporation and the Trustee that the
estimated useful life of such Substitute Property at least extends to the date on which
the final Lease Payment becomes due and payable hereunder;
(f) The City shall obtain a CLTA policy of title insurance meeting the
requirements of Section 5.4 with respect to such Substitute Property; and
(g) The Substitute Property shall not cause the City to violate any of its
covenants, representations and warranties made herein or in the Trust Agreement.
From and after the date on which all of the foregoing conditions precedent to such
substitution are satisfied, the Term of this Lease .shall cease with respect to the Former Property
and shall be continued with respect to the Substitute Property, and all references herein to the
Former Property shall apply with full force and effect to the Substitute Project. The City shall
not be entitled to any reduction, diminution, extension or other modification of the Lease
Payments whatsoever as a result of such substitution.
Section 3.6. Removal of Property from Leased Property. The City shall have, and is
hereby granted, the option at any time and from time to time during the Term of this Lease, to
remove any property from the description of the Leased Property, provided that the City shall
satisfy all of the following requirements which are hereby declared to be conditions precedent to
such removal:
(a) The City shall receive written evidence from S&P and Moody's that such
removal will not cause the withdrawal or reduction of the rating then assigned to the
Certificates by S&P and Moody's:
(b) The City shall file with the Corporation and the Trustee an amended Exhibit
B. which deletes therefrom the description of the property to be removed;
(c) The City shall obtain a report of an independent appraiser Certifying that the
appraised value of the Leased Property which will remain following such removal is not
less than the aggregate principal amount of the Outstanding Certificates;
(d) The City shall obtain and cause to be filed with the Trustee and the
Corporation an opinion of Bond Counsel stating that such removal is permitted
hereunder and does not cause interest with respect to the Certificates to become
includable in the gross income of the Certificate Owners for federal income tax purposes.
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From and after the date on which all of the foregoing conditions precedent to such
removal are satisfied, the Term of this Lease shall cease with respect to the property which is so
removed. The City shall not be entitled to any reduction, diminution, extension or other
modification of the Lease Payrae~..wl~iatsoever as a ffff~u-lt of suc~i"~emovh÷:TTE~-
2. \
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ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE AGREEMENT;LEASE PAYMENTS
Section 4.1. Agreement to Lease. The Corporation hereby subleases the Leased
Property to the City, and the City hereby subleases the Leased Property from the Corporation,
upon the terms and conditions set forth in this Lease Agreement.
Section 4.2. Term of Lease Agreement. ~T, he Term of this Lease Agreement shall
commence on January 1, 2002 and shall end on September 1, 2022 unless such term is extended
as hereinafter provided. If on September 1, 2022, the Trust Agreement shall not be discharged
by its terms, then the Term of this Lease Agreement shall be extended until the Trust Agreement
shall be discharged by its terms (but in no event beyond September 1, 2032). If prior to
September 1, 2022, the Trust Agreement shall be discharged by its terms, the Term of this Lease
Agreement shall thereupon end.
Section 4.3. Lease Payments~ (a) Obligation to Pay. Subject to the provisions of
Articles VI and X, the City agrees to pay to the Corporation, its successors and assigns, as
rental for the use and occupancy of the Leased Property hereunder during each Rental Period,
the Lease Payments (denominated into components of principal and interest) for the Leased
Property in the respective amounts specified in Exhibits A-1 and A-2, to be due and payable on
the respective Lease Payment Dates specified in Exhibits A-1 and A-2.
Any amount held in the Lease Payment Fund on any Lease Payment Date (other than
amounts resulting from the prepayment of the Lease Payments in part but not in whole
pursuant to Article X and other than amounts required for payment of past due principal or
interest represented by any Certificates not presented for payment) shall be credited towards
the Lease Payment then due and payable; and no Lease Payment need be made on any Lease
Payment Date if the amounts then held in the Lease Payment Fund and available for such
purpose are at least equal to the Lease Payment then required to be paid. The Lease Payments
for the Leased Property payable in any Rental Period shall be for the use of the Leased
Property during such Rental Period.
(b) Effect of Prepayment. In the event that the City prepays all remaining Lease
Payments, including any premium, if any, in full pursuant to Article X, the City's obligations
under this Lease Agreement shall thereupon cease and terminate, including but not limited to
the City's obligation to pay Lease Payments under this Section 4.3; subject however, to the
provisions of Section 10.1 in the case of prepayment by application of a security deposit. In the
event that the City purchases the Leased Property pursuant to Section 10.2, the amount paid
pursuant to Section 10.2 shall be credited entirely towards the prepayment in full or in part of
the Lease Payments. In the event that the City prepays the Lease Payments in part but not in
whole pursuant to Section 10.3 as a result of any insurance award or condemnation award with
respect to the Leased Property, such prepayment shall be credited entirely towards the
prepayment of the Lease Payments as follows: (i) the principal components of the remaining
Lease Payments shall be reduced on a pro rata basis in integral multiples of $5,000; and (ii) the
interest component of the remaining Lease Payments shall be reduced by the aggregate
corresponding amount of interest which would otherwise be payable with respect to the
Certificates thereby redeemed pursuant to Section 4.01 (c) of the Trust Agreement.
(c) Fair Rental Value. The Lease Payments for the Leased Property for each Rental
Period shall constitute the total rental for the Leased Property during each Rental Period, and
shall be paid by the City in each Rental Period for and in consideration of the right of the use
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and occupancy of, and the continued quiet use and enjoyment of the Leased Property during
each Rental Period. The parties hereto have agreed and determined that the total Lease
Payments for the Leased Property do not exceed the fair rental value of the Leased Property.
In making such determination, consideration has been given to the estimated value of the Leased
Property, the obligations of the parties under the Property Lease and this Lease Agreement, the
uses and purposes which may be served by the Leased Property and the benefits therefrom
which will accrue to the City and the general public.
(d) Budget and Appropriation. The City covenants to take such action as may be
necessary to include all Lease Payments due hereunder in each of its budgets during the Term of
this Lease Agreement and to make the necessary annual appropriations for all such Lease
Payments, except to the extent such Lease Payments are payable from amounts on deposit in
the Lease Payment Fund. During the Term of this Lease Agreement, the City will fumish to the
Trustee a certificate that the Lease Payments due in the applicable fiscal year have been
included in the City's budget for such fiscal year within thirty (30) days after the adoption of
each budget. The covenants on the part of the City herein contained shall be deemed to be and
shall be construed to be duties imposed by law and it shall be the duty of each and every public
official of the City to take such action and do such things as are required by law in the
performance of the official duty of such officials to enable the City to carry out and perform the
covenants and agreements in this Lease Agreement agreed to be carried out and performed by
the City.
(e) Assignment. The City understands and agrees that all Lease Payments have been
assigned by the Corporation to the Trustee in trust, pursuant to the Assignment Agreement, for
the benefit of the Owners of the Certificates, and the City hereby assents to such assignment.
The Corporation hereby directs the City, and the City hereby agrees to pay to the Trustee at its
Principal Corporate Trust Office, all payments payable by the City pursuant to this Section 4.4
and all amounts payable by the City pursuant to Article X.
Section 4.4. Quiet Enjoyment. The Corporation shall provide the City with quiet use
and enjoyment of the Leased Property, and the City shall, for the remainder of the Term of this
Lease Agreement, peaceably and quietly have and hold and enjoy the Leased Property, without
suit, trouble or hindrance from the Corporation, except as expressly set forth in this Lease
Agreement. The Corporation will, at the request of the City and at the City's cost, join in any
legal action in which the City asserts its right to such possession and enjoyment to the extent
the Corporation may lawfully do so. Notwithstanding the foregoing, the Corporation shall have
the right to inspect the Leased Property as provided in Section 7.2.
Section 4.5. Title. Title to the Leased Property shall be in the City and during the term
of this Lease Agreement, the City shall hold title to the Leased Property and any and all
additions which comprfse fLxtures, repairs, replacements or modifications to the Leased
Property, including those fixtures, repairs, replacements or modifications which are added to
the Leased Property by the City at its own expense and which may be removed without
damaging the Leased Property and including any items added to the Leased Property by the
City pursuant to Section 5.8 hereof. Such title shall be governed by the provisions of Section 3.4
of the Property Lease during the term of the Property Lease.
If the City prepays the Lease Payments in full pursuant to Article X or makes the
security deposit permitted by Section 10.1, or pays all Lease Payments during the Term of this
Lease Agreement as the same become due and payable, all right, title and interest of the
Corporation under the Property Lease in and to the Leased Property (determined in accordance
with Sections 3.1 or 3.4 thereof) shall be terminated. The Corporation agrees to take any and
all steps and execute and record any and all documents reasonably required by the City to
consummate any such termination of leasehold estate.
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Section 4.6. Additional Payments. In addition to the Lease Payments, the City shall
pay when due, during the term of the Lease Agreement, all costs and expenses incurred by the
Corporation to comply with the provisions of the Trust Agreement, including without limitation
all Costs of Issuance (to the extent not paid from.amounts on deposit in the Costs of Issuance
Fund), compensation due to the Trustee and all reasonable costs and expenses of auditors,
engineers and accountants.
Section 4.7. No Merger~ It is the express intention of the parties hereto that this Lease
Agreement and the obligations of the parties hereunder shall be and remain separate and
distinct from the Property Lease and the obligations of the parties thereunder, and that during
the term of the Property Lease no merger of title or interest Shall occur or be deemed to occur as
a result of the position of the City as lessor under the Property Lease and as lessee hereunder,
or as a result of the position of the Corporation as lessee under the Property Lease and as
lessor under this Lease Agreement.
ARTICLE V
MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of
this Lease Agreement, as part of the consideration for the rental of the Leased Property, all
improvement, repair and maintenance of the Leased Property shall be the responsibility of the
City, and the City shall pay for or otherwise arrange for the payment of all utility services
supplied to the Leased Property, which may include, without limitation, janitor service,
security, power, gas, telephone, light, heating, water and all other utility services, and shall pay
for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased
Property resulting from ordinary wear and tear or want of care on the part of the City or any
assignee or lessee thereof. In exchange for the Lease Payments herein provided, the Corporation
agrees to provide only the Leased Property, as hereinbefore more specifically set forth. The
City waives the benefits of subsections 1 and 2 of Section 1942 of the California Civil Code,
and waives the right to make repairs at the expense of the Corporation or in lieu thereof, vacate
under Section 1942 of the California Civil Code, and all similar rights under the statues of
similar effect, but such waiver shall not limit any of the rights of the City under the terms of this
Lease Agreement.
The City shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Corporation or the City affecting the Leased Property or the
interests or estates therein; provided that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
shall be obligated to pay only such installments as are required to be paid during the Term of
this Lease Agreement as and when the same become due.
The City may, at the City's expense and in its name, in good faith contest any such
taxes, assessments, utility and other charges and, in the event of any such contest, may permit
the taxes, assessments or other charges so contested to remain unpaid during the period of such
contest and any appeal therefrom unless the Corporation shall notify the City that, in the
opinion of Independent Counsel, by nonpayment of any such items, the interest of the
Corporation in the Leased Property will be materially endangered or any part thereof will be
subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments
or charges or provide the Corporation with full security against any loss which may result from
nonpayment, in form satisfactory to the Corporation and the Trustee.
Section 5.2. Modification of Leased Property. The City shall, at its own expense,
have the right to remodel the Leased Property or to make additions, modifications and
improvements to the Leased Property. All additions, modifications and improvements shall
thereafter comprise part of the Leased Property and be subject to the provisions of this Lease
Agreement. Such additions, modifications and improvements shall not in any way damage the
Leased Property or cause it to be used for purposes other than those authorized under the
provisions of state and federal law; and the Leased Property, upon completion of any
additions, modifications and improvements made thereto pursuant to this Section, shall be of a
value which is not substantially less than the value of the Leased Property immediately prior to
the making of such additions, modifications and improvements. The City will not permit any
mechanic's or other lien to be established or remain against the Leased Property for labor or
materials furnished in connection with any remodeling, additions, modifications, improvements,
repairs, renewals or replacements made by the City pursuant to this Section; provided that if
any such lien is established and the City shall first notify or cause to be notified the
Corporation of the City's intention to do so, the City may in good faith contest any lien filed or
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established against the Leased Property, and in such event may permit the items so contested
to remain undischarged and unsatisfied during the period of such contest and any appeal
therefrom and shall provide the Corporation With full security against any loss or forfeiture
which might arise from the nonpayment of any such item, in form satisfactory to the
Corporation. The Corporation will cooperate fully in any such contest, upon the request and at
the expense of the City.
Section 5.3. Public Liability and Property Damage Insurance. The City shall
maintain or cause to be maintained, throughout the Term of this Lease Agreement, a standard
comprehensive general insurance policy or policies in protection of the Corporation, City, and
their respective members, officers, agents and employees. Said policy or policies shall provide
for indemnification of said parties against direct or contingent loss or liability for damages for
bodily and personal injury, death or property damage occasioned by reason of the operation of
the Leased Property. Said policy or policies shall provide coverage in the minimum liability
limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal
injury or deaths of two or more persons in each accident or event, and in a minimum amount of
$150,000 (subject to a deductible clause of not to exceed $250,000, or such higher amount as
the City shall determine, provided that such higher deductible shall be considered a self insured
retention) for damage to property resulting from each accident or event. Such public liability
and property damage insurance may, however, be in the form of a single limit policy in the
amount of $3,000,000 per occurrence covering all such risks. Such liability insurance may be
maintained as part of or in conjunction with any other liability insurance coverage carried by the
City. The proceeds of such liability insurance shall be applied toward extinguishment or
satisfaction of the liability with respect to which the proceeds of such insurance shall have been
paid.
Section 5.4. Fire and Extended Coverage Insurance; Title Insurance. (i) The City
shall procure and maintain, or cause to be procured and maintained, throughout the Term of
this Lease Agreement, insurance against loss or damage to any structures constituting any part
of the Leased Property by fire and lightning, with extended coverage and vandalism and
malicious mischief insurance. Said extended coverage insurance shall, as nearly as practicable,
cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such
other hazards as are normally covered by such insurance. Such insurance shall be in an amount
equal to one hundred percent (100%) of the replacement cost of the Leased Property. Such
insurance may be subject to deductible clauses of not to exceed $100,000 for any one loss. Such
insurance may be maintained as part of or in conjunction with any other fire and extended
coverage carried by the City. The City hereby assigns to the Corporation all right of the City to
collect and receive Net Proceeds under any of said policies, which right has been assigned by
the Corporation to the Trustee pursuant to the Assignment Agreement. The Net Proceeds of
such insurance shall be applied as provided in Section 6.2(a)
(ii) The City shall procure, and deliver to the Trustee on the Closing Date, a title
insurance policy which insures the leasehold estate created under this Agreement, in an amount
equal to the principal amount of the Certificates of Participation.
SECTION 5.5. Rental Interruption Insurance. The City shall procure and maintain, or
cause to be procured and maintained, throughout the Term of this Lease, rental interruption or
use and occupancy insurance to cover loss, total or partial, of the useof the buildings, facilities
and other improvements constituting any part of the Project, as a result of any of the hazards
covered in the insurance required by Section 5.04, in an amount at least equal to the maximum
Lease Payments coming due and payable during any two consecutive Fiscal Years during the
remaining Term of this Lease. Such insurance may be maintained as part of or in conjunction
with any other insurance coverage carried by the City, and may be maintained in whole or in
part in the form of the participation by the City in a joint powers authority or other program
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providing pooled insurance; provided that such insurance may not be maintained by the City in
the form of self-insurance. The Net Proceeds of such insurance, if any, shall be paid to the
Trustee and deposited in the Lease Payment Fund, and shall be credited towards the payment
of the Lease Payments allocable to the insured improvements as the same become :~.~e and
payable, or to the extent there has been a draw on the Reserve Fund Sure Bond, to r~ ~.lburse
the Insurer for amounts due under the Guaranty Agreement as a res,.:-lt of ~ .aw on the Reserve
Fund Surety Bond.
Section 5.6. Insurance Net Proceeds; Form of Policies. Each policy of insurance
requirec~ y Sections 5.4 and 5.5 hereof shall provide that all proceeds uhereunder shall be
payable-the Trustee as and to the extent requU-ed hereunder. All policies of insurance
required ~y this Lease Agreement shall be in form satisfactory to the Trustee. The City shall
pay or cause to be paid when due the premiums for all insurance policies required by this Lease
Agreement. All such policies shall provide that the Trustee shall be given thirty (30) days notice
of each expiration, any intended cancellation thereof or reduction of the coverage provided
thereby. The Trustee shall not be responsible for the sufficiency of any insurance herein required
and shall be fully protected in accepting payment on account of such insurance or any
adjustment, compromise or settlement of any loss agreed to by the Try -~. The C~; shall
cause to be delivered to the Trustee annuaiiy evidence that the insurance Aicies required by
this Lease Agreement are in full force and effect.
Section 5.7. Advances. If the City shall fail to perform any of its obligations under this
Article the Corporation may, but shall not be obligated to, take such action as may be necessary
to cure such failure, including the advancement of money, and the City shall be obligated to
repay all such advances as soon as possible, with interest at the rate of ten percent (10%) per
annum from the date of the advance to the date of repayment.
Section 5.8. Installation of City's Equipment. The City may at any time and from
time to time, in its sole discretion and at its own expense, install or permit to be installed other
items of equipment or other personal property in or upon the Leased Property. All such items
shall remain the sole property of the City, in which neither .the Corporation nor the Trustee shall
have any interest, and may be modified or removed by the City at any time provided that the
City shall repair and restore any and all damage to the Leased Property resulting from the
installation, modification or removal of any such items. Nothing in this Lease Agreement shall
prevent the City from purchasing or leasing items to be installed pursuant to this Section under
a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as
security for the unpaid portion of :~e purchase price thereof, provided that no such lien or
security interest shall attach to any part of the Leased Property.
Section 5.9. Liens. The City shall not, directly or indirectly, create, incur, assume or
suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the
Leased Property, other than the respective rights of the Corporation and the City as herein
provided and Permitted Encumbrances. Except as expressly provided in this Article, the City
shall promptly, at its own expense, take such action as may be necessary to duly discharge or
remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is
responsible, if the same shall arise at any time. The City shall reimburse the Corporation for
any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien,
charge, encumbrance or claim.
Section 5.10. Compliance With Property Lease. During the term of the Property
Lease, the City will observe and perform all agreements and obligations on its behalf required to
be observed and performed thereunder. The City will not take any action or permit any action
within its control to be taken which constitutes or which, if not corrected, with the passage of
-14-
time or with notice, or both, would constitute or cause to occur any default under the Property
Lease.
-15-
ARTICLE VI
DAMAGE~I)ESTRUCTION AND EMINENT DOMAIN;USE OF NET PROCEEDS
Section 6.1. Eminent Domain. If the Leased Property shall be taken permanently
under the power of eminent domain or sold to a government threatening to exercise the power of
eminent domain, the Term of this Lease Agreement shall cease as of the day possession shall be
so taken. If less than all of the ~.ased Property shall be taken permanently, or if the Leased
Property or any part thereof shz~ ~~e taken temporarily, under the power of eminent domain, (1)
this Lease Agreement shall con~inue~n full force and effect and shall not be terminated by virtue
of such taking and ~h~ parties waixre~he-benefi~of~any law~m the contrary, and (2) there shall
be a partial abateme~at.'of Lease Payments as a ~esult~of the fii~plication of the Net Proceeds of
any eminent domain award to the prepayment ~,~he Lease4~as~ments hereunder, in an amount
to be agreed upon by the City and the Corporatiari~such ~ha~ the resulting Lease Payments
represent fair consideration for the use and occupancy of the remaining usable portion of the
Leased Property. The City covenants to contest any eminent domain award which is
insufficient to either : (i) redeem the Certificates in whole, if all of the Leased Property is
condemned; or (ii) redeem a pro rata share of Certificates, in the event that less than all of the
Leased Property is condemned.
Section 6.2. Application of Net Proceeds. (a) From Insurance Award. The Net
Proceeds of any insurance award resulting from any damage to or destruction of the Leased
Property by fire or other casualty shall be paid to the Trustee, as assignee of the Corporation
under the Assignment Agreement, and deposited in the Insurance and Condemnation Fund for
application as set forth in Section 6.01 of the Trust Agreement.
(b) From Eminent Domain Award. The Net Proceeds of any eminent domain award
resulting from any event described in Section 6.1 hereof shall be paid to the Trustee, as assignee
of the Corporation under the Assignment Agreement, and deposited in the Insurance and
Condemnation Fund for application as set forth in Section 6.02 of the Trust Agreement.
Section 6.3. Abatement of Rental in the Event of Damage or Destruction. The
amount of Lease Payments shall be abated, during any period in which by reason of damage or
destruction (other than by eminent domain which is hereinbefore provided for) there is
substantial interference with the use and occupancy by the City of the Leased Property (other
than any portions of the Leased Property described in Section 5.2) or the Leased Property or
any portion thereof. The amount of such abatement shall be agreed upon by the City and the
Corporation such that the resulting Lease Payments represent fair consideration for the use and
occupancy of the portions of the Leased Property not damaged or destroyed. Such abatement
shall continue for the period commencing with such damage or destruction and ending with the
substantial completion of the work of repair or reconstruction. In the event of any such damage
or destruction, this Lease Agreement shall continue in full force and effect and the City waives
any right to terminate this Lease Agreement by virtue of any such damage and destruction.
However, notwithstanding any other provisions of this Section 6.3, there shall be no abatement
of Lease Payments under this Section 6.3 to the extent that the proceeds of an eminent domain
or insurance award are available to pay Lease Payments, or to the extent that moneys are
available in the Lease Payment Fund or the Reserve Fund, it being hereby declared that such
proceeds and amounts constitute special funds for the payment of the Lease Payments.
ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.1. Disclaimer of Warranties. The Corporation makes no warranty or
representation, either express or implied, as to the value, design, condition, merchantability or
fitness for any particular purpose or fitness for the use contemplated by the City of the Leased
Property, or any other representation or warranty with respect to the Leased Property. In no
event shall the Corporation be liable for incidental, indirect, special or consequential damages,
in connection with or arising out of this Lease Agreement, the Property Lease or the Trust
Agreement for the existence, furnishing, functioning or City's use of the Leased Property.
Section 7.2. Access to the Leased Prot~ertv. The City agrees that the Corporation and
any Corporation Representative, and the Corporation's successors or assigns, shall have the
right at all reasonable times to enter upon and to examine and inspect the Leased Property.
The City further agrees that the Corporation, any Corporation Representative, and the
Corporation's successors or assigns shall have such rights of access to the Leased Property as
may be reasonably necessary to cause the proper maintenance of the Leased Property in the
event of failure by the City to perform its obligations hereunder.
Section 7.3. Release and Indemnification Covenants. The City shall and hereby
agrees to indemnify and save the Corporation and its officers, agents, successors and assigns
harmless from and against all claims, losses and damages, including legal fees and expenses,
arising out of (i) the use, maintenance, condition or management of, or from any work or thing
done on the Leased Property by the City, (ii) any breach or default on the part of the City in the
performance of any of its obligations under this Lease Agreement, (iii) any act or negligence of
the City or of any of its agents, contractors, servants, employees or licensees with respect to the
Leased Property, or (iv) any act or negligence of any lessee of the City with respect to the
Leased Property. No indemnification is made under this Section or elsewhere in this Lease
Agreement for willful misconduct, negligence, or breach of duty under this Lease Agreement by
the Corporation, its officers, agents, employees, successors or assigns.
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RTICLE VIII
ASSIGNMENT, LEASING AND AMENDMENT
Section 8.1. Assignment by the Corporation~ The Corporation's rights under this
Lease Agreemem zluding the right to receive and em payment of the Lease Payments to
be made by the under this Lease Agreement have b~- :~: assigned to the Trustee pursuant to
the Assignment :eement, to which assignment the City hereby consents.
Section 8.2. Assignment and ~ -~:ing by the City. This Lease Agreement may not be
assigned by the City. The City may further lease any of the Leased Property or any portion
thereof, but only with the written consent of the Corporation and subject to all of the following
conditions:
(i) This Lease Agreement'. and the obliga~ ~-~ of the City to make Lease Payments
hereunder shall remain obligations of the City; an~
(ii) The City shall, within thirty (30) days after the delivery thereof, furnish or
cause to be furnished to the Corporation and the Trustee a true and complete copy of
such lease; and
(iii) No such lease by the City shall cause the Leased Property to be used for a
purpose other than as may be authorized under the provisions of the Constitution and
laws of the State: and
(iv) The City shall furnish the Corporation and the Trustee with a written
opinion of Bond Counsel, stating that such lease does not cause the interest components
of the Lease Payments to become subject to federal or State personal income taxes.
(v) The Trustee shall receive a favorable opinion from counsel to the City on
items (i), (iii) and (iv) above.
Section 8.3. Amendment of Lease Agreement.(1) Except as provided in paragraph
(2) below, without the prior written consent of the Trustee the City will not alter, modify or
cancel, or agree or consent to alter, modify or cancel this Lease Agreement, excepting only such
alteration or modification as may be permitted b), ~ rticle IX of the Trust Agreement.
(2) In addition, this Lease may be ame~: :d to obligate the City to pay additional
amounts of rental hereunder for the use and occ~i3ancy of the Leased Property or any portion
thereof, but only if the City has filed with the Trustee written certifica ~n of the City that the
amendments made hereunder will not of themselves cause a reductio: or withdrawal of any
rating then assigned to the Certificates.
-18-
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Events of Default Defined. The following shall be "events of default"
under this Lease Agreement and the terms "events of default" and "default" shall mean,
whenever they are used in this Lease Agreement, with respect to the Leased Property, any one
or more of the following events:
(i) Failure by the City to pay any Lease Payment when due and payable
hereunder, or failure to pay any other payment when due and payable hereunder.
(ii) Failure by the City to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in clause (i)
or clause (ii) of this Section, for a period of thirty (30) days after wi:itten notice
specifying such failure and requesting that it be remedied has been given to the City by
the Corporation, the Trustee or the Owners of not less than five percent (5%) in
aggregate principal amount of Certificates then outstanding; provided, however, if the
failure stated in the notice can be corrected, but not within the applicable period, the
Corporation, the Trustee and such Owners shall not unreasonably withhold their
consent to an extension of such time if corrective action is instituted by the City within
the applicable period and diligently pursued until the default is corrected.
(iii) The filing by the City of a voluntary petition in bankruptcy under Title 11 of
the United States Code or any substitute or successor statute.
Section 9.2. Remedies on Default. Whenever any event of default referred to in
Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the Corporation
to exercise any and all remedies available pursuant to law or granted pursuant to this Lease
Agreement: provided, however, that notwithstanding anything herein or in the Trust Agreement
to the contrary, there shall be no right under any circumstances to accelerate the Lease
Payments or otherwise declare any Lease Payments not then in default to be immediately due
and payable. Each and every covenant hereof to be kept and performed by the City is
expressly made a condition and upon the breach thereof the Corporation may exercise any and
all rights of entry and re-entry upon the Leased Property, and also, at its option, with or
without such entry, may terminate this Leas~ Agreement; provided, that no such termination
shall be effected either by operation of law or acts of the parties hereto, except only in the
manner herein expressly provided. In the event of such default and notwithstanding any re-
entry by the Corporation, the City shall, as herein expressly provided, continue to remain liable
for the payment of the Lease Payments and/or damages for breach of this Lease Agreement
and the performance of all conditions herein contained and, in any event such rent and/or
damages shall be payable to the Corporation at the time and in the manner as herein provided,
to wit:
(a) In the event the Corporation does not elect to terminate this Lease Agreement
in the manner hereinafter provided for in subparagraph (b) hereof, the City agrees to and
shall remain liable for the payment of all Lease Payments and the performance of all
conditions herein contained and shall reimburse the Corporation for any deficiency
arising out of the re-leasing of the Leased Property, or, in the event the Corporation does
not re-lease the Leased Property, then for the full amount of all Lease Payments to the
end of the Term of this Lease Agreement, but said Lease Payments and/or deficiency
shall be payable only at the same time and in the same manner as hereinabove provided
-19-
for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by
the Corporation or any suit in unlawful detainer, or otherwise, brought by the
Corporation for the purpose of effecting such re-entry or obtaining possession of the
Leased Property or the exercise of any other remedy by the Corporation. The City
hereby irrevocably appoints the Corporation as the agent and attorney-in-fact of the
City to enter upon and re-lease the Leased Property in the event of default by the City in
the performance of any covenants~herein contained to be performed by the City and to
remove all personal property w, Iiatsoever situated upon the Leased Property to place
such property in storage or other suitable place in the City of Palo Alto, for the account
of and at the expense of the City, and the City hereby exempts and agrees to save
harmless the Corporation from any :cos~s~.~loss or damage whatsoev~r.,~c.~-ri.'sing or
occasioned by any such entry upon and~,~-leasing of the Leased Property and the
remowa]~and storage of such property by the Corporation or its duly authorized agents
in accordance with the provisions herein contained. The City hereby waives any and all
claims for damages caused or which may be caused by the Corporation in re-entering
and taking possession of the Leasev Property as herein provided and all claims for
damages that may result from the destruction of or injury to the Leased Property and
all claims for damages to or loss of any property belonging to the City that may be in or
upon the Leased Property. The City agrees that the terms of this Lease Agreement
constitute full and sufficient notice of the right of the Corporation to re-lease the Leased
Property in the event of such re-entry without effecting a surrender of this Lease
Agreement, and further agrees that no acts of the Corporation in effecting such re-leasing
shall constitute a surrender or termination of this Lease Agreement irrespective of the
term for which such re-leasing is made or the terms and conditions of such re-leasing, or
otherwise, but that, on the contrary, in the event of such default by the City the right to
terminate this Lease Agreement shall vest in the Corporation to be effected in the sole
and exclusive manner hereinafter provided for in subparagraph (b) hereof. The City
further waives the right to any rental obtained by the Corporation in excess of the Lease
Payments and hereby conveys and releases such excess to the Corporation as
compensation to the Corporation for its services in re-leasing the Leased Property.
(b) In an event of default hereunder, the Corporation may terminate this Lease
Agreement and re-lease all or any portion of the Leased Property. In the event of the
termination of this Lease Agreement by the Corporation in the manner hereinafter
provided on account of default by the City (and notwithstanding any re-entry upon the
Leased Property by the Corporation in any manner whatsoever or the re-leasing of the
Leased Property), the City nevertheless agrees to pay to the Corporation all costs, loss
or damages howsoever arising or occurring payable at the same time and in the same
manner as is herein provided in the case of payment of Lease Payments. Any surplus
received by the Corporation from such re-leasing shall be the absolute property of the
Corporation and the City shall have no right thereto, nor shall the City be entitled to any
credit in the event of a deficiency in the rentals received by the Corporation from the
Leased Property. Neither notice to pay rent or to deliver up possession of the premises
given pursuant to law nor any proceeding in unlawful detainer taken by the Corporation
shall of itself operate to terminate this Lease Agreement, and no termination of this
Lease Agreement on account of default by the City shall be or become effective by
operation of law, or otherwise, unless and until the Corporation shall have given written
notice to the City of the election on the part of the Corporation to terminate this Lease
Agreement. The City covenants and agrees that no surrender of the Leased Property or
of the remainder of the Term hereof or any termination of this Lease Agreement shall be
valid in any manner or for any purpose whatsoever unless stated or accepted by the
Corporation by such written notice.
Section 9.3. No Remedy Exclusive., No remedy herein conferred upon or reserved to
the Corporation is intended to be exclusive and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Lease Agreement or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or power accruing upon
any default shall impair any such right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Corporation to exercise any remedy reserved to it in
this Article it shall not be necessary to give any notice, other than such notice as may be
required in this Article or by law.
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either
party to this Lease Agreement should default under any of the provisions hereof and the
nondefaulting party should employ attorneys or incur other expenses for the collection of
moneys or the enforcement or performance or observance of any obligation or agreement on the
part of the defaulting party herein contained, the defaulting party agrees that it will on demand
therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other
expenses so incurred by the nondefaulting party.
Section 9.5. No Additional Waiver Implied by One Waiver~ In the event any
agreement contained in this Lease Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
Section 9.6. Application of Proceeds. All net proceeds received from the re-lease or
other disposition of the Leased Property under this Article IX, and all other amounts derived by
the Corporation or the Trustee as a result of an event of default hereunder, shall be transferred
to the Trustee promptly upon receipt thereof and shall be deposited by the Trustee in the Lease
Payment Fund to be applied to the Lease Payments in order of payment date.
Section 9.7. Trustee and Certificate Owners to Exercise Rights. Such rights and
remedies as are given to the Corporation under this Article IX have been assigned by the
Corporation to the Trustee under the Trust Agreement, to which assignment the City hereby
consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the
Certificates as provided in the Trust Agreement.
-21-
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit. Notwithstanding any other provision of this Lease
Agreement, the City may on any date secure the payment of Lease Payments by a deposit with
the Trustee of: (i) an amount of cash which, together with amounts on deposit in the Lease
Payment Fund, the Insurance and Condemnation Fund and the Reserve Fund, is sufficient to
pay all unpaid Lease Payments, including the principal and interest components thereof, in
accordance with the Lease Payment Schedule set forth in Exhibit A, or (ii) Federal Securities
together with cash, if required, in such amount as will, in the opinion of an independent certified
public accountant, together with interest to accrue thereon and, if required, all or a portion of
moneys or Federal Securities then on deposit in the Lease Payment Fund, the Insurance and
Condemnation Fund and the Reserve Fund, be fully sufficient to pay all unpaid Lease Payments
on their respective Lease Payment dates or on any purchase option date as set forth in Section
10.2, as the City shall instruct at the time of said deposit. In the event of a security deposit
pursuant tO this Section, all obligations of the City under this Lease Agreement, and all security
provided by this Lease Agreement for said obligations, shall cease and terminate, excepting
only the obligation of the City to make, or cause to be made, Lease Payments from such security
deposit, and title to the Leased Property shall be affected thereby as described in Section 4.6.
Said security deposit shall be deemed to be and shall constitute a special fund for the payment
of Lease Payments in accordance with the provisions of this Lease Agreement.
Section 10.2. Prepayment; Purchase Option. The City may exercise its option to
prepay the principal component of the [Taxable] Lease Payments, in whole or in part, on any
date on or after September 1, __, by paying a prepayment price equal to the aggregate or a
portion of the unpaid principal components of the remaining [Taxable] Lease Payments,
together with the interest component of the [Taxable] Lease Payment required to be paid on
such date, and premium due, if any. Such prepayment price shall be deposited by the Trustee
in the Lease Payment Fund to be applied to the redemption of Series 2002B Certificates
pursuant to Section 4.01(a) of the Trust Agreement. The City shall give the Trustee notice of its
intention to exercise its option not less than forty-five (45) days in advance of the date of
exercise. In the event the City prepays the entire unpaid principal component of the [Taxable]
Lease Payments in whole, the City will be deemed to have purchased the Leased Property and
title to the Leased Property shall thereupon vest in the City, free and clear of any encumbrance
created by this Agreement.
Section 10.3. Mandatory PrepaymenL The City shall be obligated to prepay the Lease
Payments for the Leased Property, in whole or in part on any date, from and to the extent of
any Net Proceeds of insurance award or condemnation award with respect to the Leased
Property have theretofore been deposited with the Trustee in the Lease Payment Fund for such
purpose pursuant to Article VI hereof. Such proceeds shall be applied to the prepayment of the
principal component of the Lease Payments and the Prepayment of the Certificates in
accordance with Article VI of the Trust Agreement.
Section 10.4. Credit for Amounts on Deposit. In the event of prepayment of the
principal components of the Lease Payments in full under this Article X, such that the Trust
Agreement shall be discharged by its terms as a result of such prepayment, all amounts then on
deposit in the Lease Payment Fund or the Reserve Fund shall be credited towards the amounts
then required to be so prepaid.
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ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, certificates or other communications hereunder shall
be suffi.ciently given and shall be deemed to have been received 48 hours after deposit in the
United States mail in registered or certified form with postage fully prepaid:
If to the City:City Clerk
City of Palo Alto
P. O. Box 10250
Palo Alto, CA 94303
If to the Corporation:Palo Alto Public Improvement Corporation
c/o City Clerk
P. O. Box 10250
Palo Alto, CA 94303
If to the Trustee:U.S. Bank Trust National Association
Corporate Trust Services
One California Street, Suite 400
San Francisco, CA 94111
¯Fax-: 415/273=4590
The Corporation and the City, by notice given hereunder, may designate different
addresses to which subsequent notices, certificates or other communications will be sent.
Section 11.2. Binding Effect. This Lease Agreement shall inure to the benefit of and
shall be binding upon the Corporation and the City and their respective successors and assigns.
Section 11.3. Severability. In the event any provision of this Lease Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
Section 11.4. Net-net-net Lease. This Lease Agreement shall be deemed and
construed to be a "net-net-net lease" and the City hereby agrees that the Lease Payments shall
be an absolute net return to the Corporation, free and clear of any expenses, charges or set-offs
whatsoever.
Section 11.5. Further Assurances and Corrective Instruments. The Corporation and
the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such further instruments
as may reasonably be required for correcting any inadequate or incorrect description of the
Leased Property hereby leased or intended so to be or for carrying out the expressed intention
of this Lease Agreement.
Section 11.6. Execution in Counterparts. This Lease Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.
-23-
Section 11.7. Applicable Law. This Lease Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 11.8. Corporation and City Representatives. Whenever under the provisions
of this Lease Agreemem the approval of the Corporation or the City is required, or the
Corporation or the City is required to take some action at the request of the other, such
approval or such request shall be given for the Corporation by a Corporate Representative and
for the City by a City Representative, and any party hereto shall be authorized to rely upon any
such approval or request.
Section 11.9. Captions. The captions or headings in this Lease Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any provisions or
Section of this Lease Agreement.
-24-
IN WITNESS WHEREOF, the Corporation has caused this Lease Agreement to be
executed in its corporate name by its duly authorized officers; and the City has caused this
Lease Agreement to be executed in its name by its duly authorized officers and sealed with its
corporate seal, as of the date first above written.
PALO ALTO PUBLIC IMPROVEMENT
CORPORATION,
as Lessor
Attest:
President
Secretary
CITY OF PALO ALTO,
as Lessee
(S E A L)
Attest:
Carl L. Yeats
Director of Administrative Services
City Clerk
-25-
EXHIBIT A-1
SCHEDULE OF TAX-EXEMPT LEASE PAYMENTS
DATE PRINCIPAL INTEREST
TOTAL LEASE
PAYMENT
A-1
EXHIBIT A-2
SCHEDULE OF TAXABLE LEASE PAYMENTS
DATE PRINCIPAL INTEREST
TOTAL LEASE
PAYMENT
B-1
EXHIBIT B
DESCRIPTION OF CIVIC CENTER
11/19~1
TRUST AGREEMENT
Dated as of January I, 2002
by and among
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee,
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
and the
CITY OF PALO ALTO
Relating to
$[Principal Amount]
City of Palo Alto
Certificates of Participation
Series 2002.6. (Tax-Exempt) and Series 2002B (Taxable)
(Civic Center Refinancing and Downtown Parking Improvements Project)
TABLE OF CONTENTS
TRUST AGREEMENT
Section 1.01.
Section 1.02.
¯ Section 2.01.
Section 2.02.
Section 2.03.
Section 2.04.
Section 2.05.
Section 2.06.
Section 2.07.
Section 2.08.
Section 2.09.
Section. 2.10.
Section 2.11.
Section 2.12.
Section 3.01.
Section 3.02.
Section 3.03.
Section 3.04.
Section 4.01.
Section 4.02.
Section 4.03.
Section 4.04.
Section 4.05.
Section 5.01.
~ ;~ion 5.02.
~ ~n 5.03.
Section 5.04.
Section 5.05.
ARTICLE !
DEFIH~TIO~
Definitions. __3
Authorization. m _9
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
~thorization ......................................................I0
:;titles ...... .........iO
t~m of Certificates .............................................................................II
Form..........................................................II
Execution ..................................................................................II
Transfer and Exchange ..........................................................................................II
Certificates Mutilated, Lost, Destroyed or Stolen .......................................................................................II
Payment...............................................................................................................12
Execution of Documents and Proof of Ownership .............................................................................12
Registration Books ....................................................................................................13
Use of Depository ...........................................................................................................................~ ..............................13
ARTICLE III
DISPOSITION OF PROCEEDS; RESERVE FUND;
COSTS OF ISSUANCE FUND AND CONSTRUCTION FUND
Application of Proceeds ...........................................................................................................................................................16
Reserve Fund ...................................................................................................................................................................................16
Costs of Issuance Fund ................................................................................................................................................................16
Construction Fund ...........................................................................................................................................................................17
ARTICLE IV
PREPAYMENT OF CERTIFICATES
Prepayment..............................................................................................................................................................................18
Selection of Certificates for Prepayment ...................................................................................................................................18
Notice of Prepayment. .....................................................................................................................................................................18
Partial Prepayment of Certificate ..................................................................................................................................19
Effect of Notice of Prepayment ..........................................................................................................................................19
ARTICLE V
LEASE PA~ ,~!iTS; LEASE PAYMENT FUND
Assignment of Rights in Lease Agreement. ..................................................................................................................................20
Establishment of Lease Payment Fund ...............................................................................................................................20
Deposits...........................................................................................................................................................................................20
Application of Moneys .....................................................................................................................................................................20
Surplus.......................................................................................................................................................................................20
-i-
Section 6.01.
Section 6.02.
Section 6.03.
Section 7.01.
Section 7.02.
Section 7.03.
Section 7.04.
Section 7.05.
Section 7.06.
Section 7.07.
Section 8.01.
Section 8.02.
Section 8.03.
Section 8.04.
Section 8.05.
Section 9.01.
Section 9.02.
Section 9.03.
Section 9.04.
Section 9.05.
Section 9.06.
Section 10.01.
Section 10.02.
Section 10.03.
Section 10.04.
Section 10.05.
Section 10.06.
Section I1.01.
Section 11.02.
Section 11.03.
Section 11.04.
Section
Section 12.01.
ARTICLE VI
INSURANCE AND CONDEMNATION FUND
INSURANCE; EMINENT DOMAIN
Establishment of Insurance and Condemnation Fund~
Application of Net Proceeds of Eminent Domain Award.
Cooperation
21
~.~21
_22
ARTICLE VII
MONEYS IN FUNDS
Held in Trust.___23
Investments Authorized ....23
Accounting....23
Allocation of Earnings ...............23
Valuation of Investments .........................................................~. .............23
Commingling of Investment Securities and Disposition of Investments ...........23
No Arbitrage.,..24
ARTICLE VIII
THE TRUSTEE
Compensation of the Trustee ........................................................................................25
Removal of Trustee ..............................................................................................25
Appointment of Agent ..............................................................................._25
Merger or Consolidation ....................................................................~. ...........................................25
Protection and Rights of the Trustee ....................................................................................................25
ARTICLE IX
MODIFICATION OR AMENDMENT OF AGREEMENT
Amendments Permitted ..............................................................................................................................................................28
Procedure for Amendment with Written Consent of Certificate Owners .............................................................~ ..............................28
Disqualified Certificates .................................................................................................................................................................29
Effect of Supplemental Agreement. ..................................................................................................................................29
Endorsement or Replacement of Certificates Delivered After Amendments ........................................................................................29
Amendatory Endorsement of Certificates ........................................................................................................................................30
ARTICLE X
COVENANTS; NOTICES
Compliance With and Enforcement of Lease Agreement .................................................................................................................31
Prosecution and Defense of Suits ........................................................................................................................................................31
Recordation and Filing ...................................................................................................................................................................31
No Federal Guarantee ....................................................................................................................................................................31
Continuing Disclosure ..............................................................................................................................................................31
Further Assurances .............................................................................................................................................................................32
ARTICLE XI
LIMITATION OF LIABILITY
Limited Liability of City .......................................................................................................................................................................33
No Liability for Trustee Performance ...................................................................................................................................................33
Indemnification ................................................................................................................................................................................33
Opinion of Counse[ ...........................................................................................................................................................................33
Limitation of Rights to Parties and Certificate Owners ......................................................................................................................33
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Assignment of Rights ........................................................................................................................................................................34
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Section 12.02.
Section 12.03.
Section 12.04.
Section 12.05.
Section 12.06.
Section 12.07.
Section 12.08.
Section 13.01.
Section 13.02.
Section 13.03.
Section 13.04.
Section 14.01.
Section 14.02.
Section 14.03.
Section 14.04.
Section 14.05.
Section 14.06.
Section 14.07.
Section 14.08.
Section 14.09.
EXHIBITA
EXHIBIT B
Remedies.__
Appl~tion of Funds..~,
Institution of Legal Proceed~!8~-~,
Non-~iver. ....... ~;~ ~
Remedies Not Exclusive .......................................
Power of Trustee to Control Proceedings..
Limitation on Certificate Owners' Right to Sue
34
34
__..34
_.....34
35
35
.__35
ARTICLE XIII
DEFEASANCE
Discharge of Trust Agreement..m ~ ~:_..37
Discharge of Liability on Certificates ....37
Deposit of Money or Securities with Trustee ..............~ ~ .....~......38
Payment of Certificates After Discharge of Trust Agreement ................................................_..38
~-
Re~ ~s...__~ .....~B.; .....~.~ ........~ ...........39
Not~c~ ..........................................................................~9
Gove~ing ~w ..........................................................................~9
Binding Effe~ ....................................................................................
Ex~ution in Counterpa~ ...............................................................................~.~.~....39
Des~ion of ~ncelled Cenifi~tes .........................................................................:..:.: ........~9
Headings......................................................................................................:...:.' ..........40
Wai~r of Notice ...........................................................................................................................................40
Sepa~bili~ of In.lid Provisions ..........................................................................................................................................40
FORM OF SERIES 2002A TAX-EXEMPT CERTIFICATE OF PARTICIPATION
FORM OF SERIES 2002B TAXABLE CERTIFICATE OF PARTICIPATION
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into as of January I, 2002, by and among U.S. BANK TRUST NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United States of America (the "Trustee"), the PALO ALTO PUBLIC
IMPROVEMENT CORPORATION, a nonprofit public benefit corporation duly formed, organized operating and acting pursuant to the laws of the State
of California (the "Corporation"), and the CITY OF PALO ALTO, a chartered municipal corporation duly organized andexisting under the Constitution
and laws of the State of California (the "City").
RECITALS
WHEREAS, the Corporation has heretofore leased certain real property, consisting of the Palo Alto Civic Center (the "Leased
Property"), including certain improvements financed by lease transactions between the City and the Corporation in 1983 and 1992, pursuant to that
ce~in lease agreement, dated as of March I, 1992, by and between the Corporation, as lessor, and the City, as lessee (the "1992 Lease");
WHEREAS, the 1992 Lease has been duly terminated pursuant to a Termination Agreement, dated as of January I, 2002, between the
City and the Corporation, and approved by the Trustee;
WHEREAS, the City has determined that it is in the interests of the City at this time to provide for the refinancing of the 1992 Lease
and the 1992 Certificates, and for the financing of certain improvements to the University Avenue Parking Structure (the "Parking Structure
Improvements"), by re-leasing the Leased Property pursuant to a Lease Agreement, dated as of January I, 2002, between the City and the
Corporation (the "Lease Agreement"); and
WHEREAS, the Corporation will cause to be deposited with the Trustee funds for the refinancing of the 1992 Lease and the 1992
Certificates, and the financing of the Parking Structure Improvements;
WHEREAS, the Corporation will establish a trust pursuant to this Trust Agreement and direct the Trustee to execute and deliver two
series of Certificates (Series 2002A (Tax-Exempt) and Series 2002B (Taxable)) representing undivided fractional interests in the Lease Payments; and
WHEREAS, for the purpose of obtaining the moneys required to be deposited into the funds and accounts established hereunder and under
the Escrow Deposit and Trust Agreement (as defined herein), the Corporation proposes to assign and transfer certain of its rights under said Lease
Agreement to the Trustee, and in consideration of such assignment and the execution of this Trust Agreement, the Trustee has agreed to execute and
deliver City of Palo Alto Certificates of Participation (Civic Center Refinancing and Downtown Parking Improvements Project), Series 2002A (Tax-
Exempt) and Series 2002B (Taxable), each evidencing an undivided fractional interest in the Lease Payments made by the City under the Lease
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section I.OI. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of
this Trust Agreement, have the meanings herein specified. In addition, any terms defined in the Lease Agreement and not otherwise defined herein
shall have the respective meanings given such terms in the Lease Agreement.
"Assignment Agreement" means the Assignment Agreement, dated as of January I, 2002, by and between the Corporation and
the Trustee, together with any duly authorized and executed amendments thereto.
"Bond Counsel" means any attorney or firm of nationally recognized expertise with respect to legal matters relating to obligations
the interest on which is exempt from federal income taxation pursuant to Section 103 of the Tax Code.
"Business Day" means a day of the week on which the Trustee is not required or authorized to remain closed and on which the New
York Stock Exchange is open.
"Certificates" means the Series 2002A Certificates and the Series 2002B Certificates, to be executed and delivered pursuant hereto.
"City" means the City of Palo Alto, a chartered municipal corporation duly organized and existing under the Constitution and the laws of
the State.
"City Representat!ve" means the City Manager, the Assistant City Manager or the Director of Administrative Services of the City or
any other person authorized by resolution of the City Council to act on behalf of the City under or with respect to this Trust Agreement and the Lease
Agreement.
"Closing Date" means the date upon which there is an exchange of the Certificates for the proceeds representing the purchase of the
Certificates by the Original Purchasers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Costs" means all costs of payment of, or reimbursement for, acquisition, design, construction, installation and
equipping of the Project, including but not limited to, architect and engineering fees, construction contractor payments, costs of feasibility and other
reports, inspection costs, performance bond premiums and permit fees, and includes Costs of Issuance not paid out of the Costs of Issuance Fund.
"Construction Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.04 hereof.
"Corporation Representative" means the President or Vice President of the Corporation, or any other person authorized by
resolution of the Corporation to act on behalf of the Corporation under or with respect to this Trust Agreement and the Lease Agreement.
"Corporation" means the Palo Alto Public Improvement Corporation, a nonprofit public benefit corporation duly formed, organized,
operating and existing under the laws of the State, and its successors and assigns.
"Corporate Trust Office" means the corporate trust office of the Trustee at , Attention: ,
provided for transfer, exchange, registration, surrender and payment of Certificates means the corporate trust office of U.S. Bank Trust National
Association in , or at such other address designated by the Trustee in written notice flied with the City, the Corporation and the
Owners.
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"Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation
relating to the execution, sale and delivery of the Certificates, including but not limited to settlement costs, printing costs, reproduction and binding
costs, initial fees and charges of the Trustee, financing discounts, legal fees and charges, bond insurance or title, insurance fees and charges, financial
and other professional consultant fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates
and charges and fees in connection with the foregoing.
"Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.03 he, reof.
"Counsel" means any attorney at law or law firm (who or which may be counsel for the City, the Trustee or the Corporation and which
counsel is satisfactory to the City.
"Escrow Fund" means the Escrow Fund created under Section 3.05.
"Event of Default" means an event of default under the Lease Agreement, as defined in Section 9.1 thereof.
"Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide,
arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on
an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition
price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with
applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a
specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that
is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security--State and Local
Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled
investment fund in which the City and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the
fund is without regard to the source of the investment.
"Fiscal Year" means each twelve-month period beginning on July I of any year and ending on June 30 of the succeeding year, or any
other twelve-month period hereafter adopted by the City as its official fiscal year period.
"Independent Counsel" means an attorney duly admitted to the practice of law before the highest court of the state in which such
attorney maintains an office and who is not an employee of the Corporation, the Trustee or the City.
"Insurance and Condemnation Fund" means the fund by that name established and held by the Trustee pursuant to Section
"Investment Securities" means any of the following which at the time of investment are legal investments under the laws of the
State of California for trust funds held by the Trustee (the Trustee is entitled to rely upon any investment direction of the City as a certification that
such investment constitutes an Investment Security):
I. Direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to
payments of principal and interest by the United States of America, including (in the case of direct and general obligations of the United
States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations.
Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and
holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed
directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations
are held in safekeeping in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of
he custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated. The obligations
described in this paragraph are hereinafter called "United States Obligations".
2. Obligations issued or guaranteed by the following instrumentalities or agencies:
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(a)Federal Home Loan Banks;
(b)Government National Mortgage Association;
(c)Farmers Home Administration;
(d)Federal Home Loan Mortgage corporation;
(e)Federal Housing Administration; and
(t)Federal National Mortgage Association.
3. Direct and general long-term obligations of any state or commonwealth of the United States, to the payment of which the
full faith and credit of the state or commonwealth is pledged and that are rated "Aaa" by Moody's and "AAA" by S&P.
4. Direct and general short-term obligations of any state or commonwealth, to the payment of which the full faith and credit
of the state or commonwealth is pledged and that are rated in the highest rating category by Moody's and S&P.
5. Interest-bearing demand or time deposits issued by state banks or trust companies or national banking associations that
are members of the Federal Deposit Insurance Corporation (FDIC) or by savings and loan associations that are members of the Federal
Savings and Loan Insurance Corporation (FSLIC). These deposits must be continuously and fully insured by FDIC and be with banks whose
debt is rated at least P-I or Aa by Mood)es and at least A-I ÷ or AA by S&P.
6. Repurchase agreements, the maturities of which are 30 days or less, or are due on demand, entered into with financial
institutions such as banks or trust companies organized under state law or national banking associations, insurance companies, or
government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a
member of the Security Investors Protection Corporation or with a dealer or parent holding company, in each such case the debt of which
is rated at least "A" or "P-I" by Moody's and S&P. Such repurchase agreements shall be in respect of United States Obligations and
(except repurchase agreements with institutions whose debt or commercial paper is rated "Aaa" or "P-I" by Moody's and S&P) shall be
collateralized by United States Obligations, and the provisions of the repurchase agreement shall meet the following additional criteria:
(i) the Trustee (who shall not be the provider of the collateral) or a third party acting solely as agent for the
Trustee has possession of the United States Obligations;
(ii) failure to maintain the requisite collateral levels will require the Trustee to liquidate the United States
Obligations immediately;
(iii) the Trustee has a perfected, first priority security interest in the United States Obligations; and
(iv) the United States Obligations are free and clear of third-party liens, and in the case of an SIPC broker, were
not acquired pursuant to a repurchase or reverse repurchase agreement.
7. Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's and meeting the following conditions:
(a) the municipal obligations are (i) not to be redeemed prior to maturity or the Trustee has been given
irrevocable instructions concerning their calling and redemption and (ii) the issuer has covenanted not to redeem such
municipal obligations other than as set forth in such instructions;
(b) the municipal obligations are secured by cash or United States Obligations that may be applied only to
interest, principal, and premium payments of such municipal obligationi;
(c) the principal of and interest on the United States Obligations (plus any cash in the escrow fund) are sufficient
to meet the liabilities on the municipal obligations;
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(d) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or
trustee; and
(e) the United States Obligation~us any cash in the escrow fund) are not available to satisfy any other claims,
including those against the trustee or escrow agent.
8. Prime commercial paper of a United States corporation,~.fi_nance company or banking institution if such commercial paper
is rated at least "PI" by Moody's ~nd~ .at least "A-I +"by S&P and if such commercial paper is stated to mature in not more than 270
days.
9. Shares of a diversified open-end management investment company (as defined in the Investment Company Act of 1940) or
shares in a regulated investment company (as defined in Section 851 (a) of the Internal Revenue Code of 1986, as amended) that is a
money market fund that has been rated in the highest rating category by S&P.
10. The Local Agency Investment Fund maintained by the Treasurer of the State ("LAIF").
II. Banker's acceptances drawn on and accepted by commercial banks (including the Trustee and any affiliate of the Trustee)
having a combined unencumbered capital, surplus and retained earnings of not less than $30,000,000 and whose notes or commercial
paper are rated in the highest rating category by Moody's (if the Certificates are then rated by Moody's) and S&P (if the Certificates are
then rated by S&P).
12. Money market funds restricted to obligations issued or guaranteed as to payment of principal and interest by the full faith
and credit of the United States of America, including such funds for which the Trustee or an affiliate acts as investment advisor or provides
other services, which are rated in the highest rating category by S&P.
13. Investment Agreements which are approved in writing by Moody~s and S&P.
14. Shares in a California common law trust established pursuant to Title I, Division 7, Chapter 5 of the California
Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the California
Government Code, as it may be amended; i.e., the California Arbitrage Management Program (CAMP).
"Lease Agreement" means the Lease Agreement dated as of January I, 2002, by and between the Corporation as lessor and the City
as lessee, together with any further duly authorized and executed amendments thereto.
"Lease Default Event" means any of the events specified in Section 9.1 of the Lease Agreement.
"Lease Payments" means all payments required to be paid by the City pursuant to Section 4.3 of the Lease Agreement, including any
prepayment thereof pursuant to Article X of the Lease Agreement.
"Lease Payment Fund" means the fund by that name established and held by the Trustee pursuant to Section 5.02.
"Lease Term" means the period during which the Lease is in effect as specified in the Lease Agreement.
"Moody's" means Moody's Investors Service, of New York, New York, or its successors.
"Net Proceeds" means any insurance proceeds or condemnation award in excess of $50,000, paid with respect to the Leased
Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof.
"Original Purchaser" means , as original purchaser of the Certificates.
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"Outstanding", when used as of any particular time with reference to Certificates, means (subject to the provisions of Section 9.03)
all Certificates theretofore, or thereupon being, executed and delivered by the Trustee under this Trust Agreement except (I) Certificates theretofore
cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Certificates with respect to which all liability of the City shall have been
dis~l'~rged in accordance with Section 13.02, including Certificates (or portions of Certificates) referred to in Section 13.04; and (3) Certificates for
t~ ~lsfer or exchange of or in lieu of or in substitution for which other Certificates shall have been executed and delivered by the Trustee or the
Te~er Agent pursuant to this Trust Agreement.
"Owner" or "Certificate Owner", when used with respect to a Certificate means the person in whose name the ownership of such
Certificate shall be registered.
"Payment Date" means (i) with respect to the interest on the Certificates, September I, 2002, and the first day of each September
and March thereafter so long :~ any Certificates are Outstanding hereunder, (ii) with respect to the principal of the Certificates, September I,
20 and each September t~,~~.after so long as the Certificates are OutstandinE, terminating September I, 20__.
"Principal Amount" means the total unpaid principal component of the Lease Payments due under Section 4.3 of the Lease
Agreement.
"Project" means non-parking area on the Lot S/1. site, located on Bryant Street, between Lytton Avenue and University Avenue.
"Rating Category" means any generic rating category of Moody's or S&P, without regard to any refinement of such category by plus
or minus sign or by numerical or other qualifying designation.
"Record Date" means the close of business on the fifteenth day of the month preceding each Payment Date, whether or not such
fifteenth day is a Business Day.
"Registration Books" means the records maintained by the Trustee pursuant to Section 2.11 for registration and transfer of
ownership of the Certificates.
"Regulations" means temporary and permanent regulations promulgated under the Code.
"Reserve Fund" means the fund established and held by the Trustee pursuant to Section 3.02 of this Trust Agreement.
"Series 2OO2A Reserve Requirement" means, as of the date of calculation, an amount equal to the lesser of (i): ten percent
(10%) of the original Principal Amount of the Tax-Exempt Lease Payments; (ii) 125% of average annual Tax-Exempt Lease Payments; or (iii)
maximum annual Tax-Exempt Lease Payments. On the Closing Date, the Series 2002A Reserve Requirement is equal to $
"Series 2OO2B Reserve Requirement" means, as of the date of calculation, an amount equal to the lesser of (i): ten percent
(10%) of the original Principal Amount of the Taxable Lease Payments; (ii) 125% of average annual Taxable Lease Payments; or (iii) maximum
annual Taxable Lease Payments. On the Closing Date, the Series 200213 Reserve Requirement is equal to $
"Series 2OO2A Certificates" means the $ aggregate principal amount of City of Palo Alto Certificates of
Participation (Civic Center Refinancing and Downtown Parking Improvements Project), Series 2002A (Tax-Exempt).
"Series 2OO2B Certificates" means the $ aggregate principal amount of City of Palo Alto Certificates of
Participation (Civic Center Refinancing and Downtown Parking Improvements Project), Series 2002B (Taxable).
"S&P" means Standard & Poor's Corporation, of New York, New York, or its successors.
"State" means the State of California.
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"Tax Code" means the Internal Revenue Code of 1986, as amended, or any federal statutes enacted in lieu of the Internal Revenue Code
of 1986. Any reference herein to a provision of the Tax Code shall include all applicable regulations of the United States Department of the Treasury
promulgated be deemed to be and shall refer to any statute of similar import enacted in lieu or in amendment of such section or contained in any
federal statutes enacted in lieu of the Internal Revenue Code of 1986.
"Term of the Lease Agreement" means the time during which the Lease Agreement is in effect, as provided in Section 4.2 of the
Lease Agreement.
"Trust Agreement" or "Agreement" means this Trust Agreement, together with any amendments or supplements hereto
permitted to be made hereunder.
"Trustee" means U.S. Bank Trust National Association, a national banking association organized under the laws of the United States of
America or any successor thereto ac~ing as Trustee pursuant to this Trust Agreement.
"Written Request of the Corporation" means an instrument in writing signed by the Corporation Representative.
'%qritten Request of the City" means an instrument in writing signed by the City Representative.
Section I.O2. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly
empowered to enter into this Agreement, and has taken all actions necessary to authorize the execution of this Agreement by the officers and persons
signing it.
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ARTICLE II
THE CERTIFICATES OF PARTICIPATION
Section 2.01. Authorization. The Trustee is hereby authorized and directed to register, execute and deliver to the Original
Purchasers: (i) City of Palo Alto Certificates of Participation (Civic Center Refinancing and Downtown Parking Improvements Project), Series 2002A
(Tax-Exempt), in an aggregate principal amount of Dollars ($[Principal Amount]) evidencing undivided fractional
interests in the Tax-Exempt Lease Payments; and (ii). and City of Palo Alto Certificates of Participation (Civic Center Refinancing and Downtown
Parking Improvements Project), Series 2002B (Taxable) in an aggregate principal amount of Dollars ($[Principal
Amount]) evidencing undivided fractional interests in the Taxable Lease Payments.
Section 2.02. Date. E~h ~ificate shall be dated as of the date of its execution (except that each Certificate delivered to the
Original Purchaser shall be dated the Closing Date), and interest with respect thereto shall be payable from the Payment Date next preceding the date
of execution thereof, unless: (i) it is executed as of a Payment Date, in which event interest represented thereby shall be payable from such Payment
Date; or (ii) it is executed after a Record Date and before the following Payment Date, in which event interest represented thereby shall be payable -
from such Payment Date; or (iii) it is executed on or before August 15, 2002, in which event interest represented thereby shall be payable from the
Closing Date; provided, however, that if, as of the date of any Certificate, interest represented by such Certificate is in default, interest represented by
such Certificate shall be payable from the Payment Date to which interest represented thereby has previously been paid or made available for
payment.
Section 2.03. Maturities; Interest Rates. (i) The Series 2002A Certificates shall mature on September I, as follows:
Yea.__~r Amount Interest Rate
(ii) The Series 2002B Certificates shall mature on September I, as follows:
Yea__..~r Amount Interest Rate
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Section 2.04. Form of Certificates; Interest. The Certificates shall be delivered in the form of fully registered Certificates
without coupons in the denomination of $5,000 or any integral multiple thereof, except that no Certificate may have principal maturing in more than
one year. The Certificates shall be assigned such alphabetical and numerical designation as shall be designated by the Trustee.
Interest represented by the Certificates shall be payable on each Payment Date to and including the date of maturity or prepayment,
whichever is earlier, as provided in Section 2.09. Said interest shall represent the portion of Lease Payments designated as interest and coming due
during the Rental Period preceding each Payment Date. The proportionate share of the portion of Lease Payments designated as interest represented
by any Certificate shall be computed by multiplying the portion of Lease Payments designated as principal represented by such Certificate by the rate
of interest applicable to such Certificate (on the basis of a 360-day year of twelve 30-day months).
Section 2.05. Form. The Certificates shall be substantially in the form set forth in Exhibit A-I and A-2 attached hereto and by
this reference incorporated herein.
Section 2.06. Execution. The Certificates shall be executed by and in the name of the Trustee by the manual signature of an
authorized officer of the Trustee. If any officer whose signature appears on any Certificate ceases to be such officer before the date of delivery of such
Certificate, such signature shall nevertheless be as effective as if the officer had remained in office until such date. Any Certificate may be executed on
behalf of thee Trustee by such person as at the actual date of the execution of such Certificate shall be the proper officer of the Trustee.
Section 2.07. Transfer and Exchange. (a) Transfer of Certificates. The registration of any Certificate may, in accordance
with its terms, be transferred upon the Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney,
upon surrender of such Certificate for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of
transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for registration of transfer,
the Trustee shall execute and deliver a new Certificate or Certificates of the same maturity and aggregate principal amount, in any authorized
denominations.
(b)- Exchange of Certificates. Certificates may be exchanged at the Corporate Trust Office of the Trustee, for a like aggregate principal
amount of Certificates of other authorized denominations of the same maturity and the same Series. The City shall pay any costs of the Trustee
incurred in connection with such exchange, except that the Trustee may require the payment by the Certificate Owner requesting such exchange of any
tax or other governmental charge required to be paid with respect to such exchange.
Section 2.08. Certificates Mutilated~ Lost~ Destroyed or Stolen. If any Certificate shall become mutilated, the
Trustee, at the expense of the Owner of said Certificate, shall execute and deliver a new Certificate of like tenor and maturity in exchange and
substitution for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated. Every mutilated Certificate so
surrendered to the Trustee shall be cancelled by it and redelivered to, or upon the order of, the City. If any Certificate shall be lost, destroyed or
stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and, if an
indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of
like tenor and maturity and numbered as the Trustee shall determine in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The
Trustee may require payment of an appropriate fee for each new Certificate delivered under this Section 2.08 and of the expenses which may be
incurred by the Trustee in carrying out the duties under this Section 2.08. Any Certificate executed and delivered under the provisions of this Section
2.08 in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Agreement
with all other Certificates secured by this Agreement. The Trustee shall not be required to treat both the original Certificate and any replacement
Ce~ificate as being Outstanding for the purpose of determining the principal amount of Certificates which may be executed and delivered hereunder
or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be
treated as one and the same. Notwithstanding any other provision of this Section 2.08, in lieu of delivering a new Certificate in exchange for a
Certificate which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such
Certificate upon receipt of indemnity satisfactory to the Trustee.
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Section 2.09. Payment. Payment of interest due with respect to any Certificate on any Payment Date shall be made to the
person appearing on the Registration Books as the Owner thereof as of the Record Date immediately preceding such Payment Date, such interest to be
paid by check mailed to such Owner at his address as it appears on the Registration Books ~r i~ ~ddress as he may have filed with the
Trustee for that purpose. The principal, interest and prepayment price represented by the Certif~or upon prior prepayment shall be
payable in la~ful money of the United States of America upon surrender at the Corporate Trust 0~~ee.
Section 2.10. Execution of Documents and Proof of Ownership. Any request, direction, co~: ~, revocation of
consent, or other instrument in writing required or permitted by this Agreement to be signed or executed by Certificate Owners may ~ in any number
of concurrent instruments of similar tenor, and may be signed or executed by such Owners in person or by their attorneys or agents a~Dointed by an
instrument in w~ting for that purpose. Proof of the execution of any such instrument, or of any instrument appointing a.~y such ~.~y or agent,
and of the ownership of Certificates shall be sufficient for any purpose of this Agreement (excep uthe~'~.~ : i~erein provide~ nade in the
following manner:.
(a) The fact and date of the execution by any Owner or his attorney or agent of any such instrument and of any instrumem
appointing any such attorney or agent, may be proved by a certificate, which shall be acknowledged or verified, of an officer of any bank
or trust company located within the United States of America, or of any notary ~ublic, or other officer authorized to take
acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such instruments acknowledged before him the
execution thereof. Where any such instrument is execut~ by a~ officer of a corporation or association or a member of a partnership on
behalf of such corporation, association or partnership, s~ certificate shall also constitute sufficient proof of his authority.
(b) The fact of the ownership of Certificates by any person and the amount, the maturity and the numbers of such Certificates
and the date of his holding the same shall be proved by the Registration Books.
Nothing contained in this Article II shall ~,~ construed as limiting the Trustee to such proof, it being intended that the Trustee may accept
any other evidence of the matters herein stated whi~ ~he Trustee may deem sufficient. Any request or consent of the Owner of any Certificate shall
bind every future Owner of the same Certificate in respect of anything done or suffered to be done by the Trustee in pursuance of such request or
consent.
Section 2.11. Registration Books. The Trustee shall keep or cause to be kept, at its Corporate Trust Office, sufficient records
for the registration and registration of transfer of the Certificates, which shall at all times be open to inspection by the City and the Corporation; and,
upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be
registered or transferred, on the Registration Books, Certificates as hereinbefore provided.
Section 2.12. Use of Depository. Notwithstanding any provision of this Trust Agreement to the contrary:
(a) Pursuant to the Certificate Purchase Agreement, at the request of the Original Purchasers named therein, the Certificates
shall be initially executed and registered in the name of "Cede & Co.," as nominee of The Depository Trust Company, the depository
designated by the Original Purchasers, and shall be evidenced by one Certificate maturing on each of the maturity dates set forth in
Section 2.03 of this Trust Agreement to be in a denomination corresponding to the total principal therein designated to mature on such
date. Registered ownership of such Certificates, or any portions thereof, may not thereafter be transferred except:
/I) to any successor of The Depository Trust Company or its nominee, or of any substitute depository designated
pursuant to clause (2) of this subsection (a) ('substitute depository"); provided that any successor of The Depository Trust
Company or substitute depository shall be qualified un~ ~y applicable laws to provide the service proposed to be provided
by it;
(2) to any substitute depository not objected to by the City or the Trustee, upon (i) ~he resignation of The
Dep~ ~ry Trust Company or its successor (or any substitute depository or its successor) from its functions as depository or
(if) ~ ~ rmination by the City that The Depository Trust Company or its successor is no longer able to carry out its functions
-I0-
as depository; provided that any such substitute depository shall be qualified under any applicable laws to provide the services
proposed to be provided by it; or
(3) to any person as provided below, upon (i) the resignation of The Depository Trust Company or its successor (or
any substitute depository or its successor) from its functions as depository or (ii) a determination by the City that The
Depository Trust Company or its successor is no longer able to carry out its functions as depository; provided that no
substitute depository which is not objected to by the City and the Trustee can be obtained.
(b) In the case of any transfer pursuant to clause (I) or clause (2) of Section 2.12(a) hereof, upon receipt of all outstanding
Certificates by the Trustee, together ~th a Written Request of the City to the Trustee, a single new Certificate shall be executed and
delivered for each maturity of such Certificate then outstanding, registered in the name of such successor or such substitute depository, or
their nominees, as the case may be, all as specified in such Written Request of the City. In the case of any transfer pursuant to clause (3)
of Section 2.12(a) hereof, upon receipt of all outstanding Certificates by the Trustee together with a Written Request of the City, new
Certificates shall be executed and delivered in such denominations and registered in the names of such persons as are requested in a
Written Request of the City provided the Trustee shall not be required to deliver such new Certificates within a period less than 60 days
from the date of receipt of such a Written Request of the City.
(c) In the case of partial prepayment or an advance refunding of any Certificates evidencing all of the principal maturing in a
particular year, The Depository Trust Company shall deliver the Certificates to the Trustee for cancellation and re-registration to reflect
the amounts of such reduction in principal.
(d) The City and the Trustee shall be entitled to treat the person in whose name any Certificate is registered as the absolute
Owner thereof for all purposes of this Trust Agreement and any applicable laws, notwithstanding any notice to the contrary received by
the Trustee or the City; and the City and the Trustee shall have no responsibility for transmitting payments to, communication with,
notifying or otherwise dealing with any beneficial owners of the Certificates. Neither the City nor the Trustee will have any responsibility
or obligations, legal or otherwise, to the beneficial owners or to any other party including The Depository Trust Company or its successor
(or substitute depository or its successor), except for the registered owner of any Certificate.
(e) So long as all outstanding Certificates are registered in the name of Cede & Co. or its registered assign, the City and the
Trustee shall reasonably cooperate with Cede & Co., as sole registered Owner, or its registered assign in effecting payment of the principal
of and prepayment premium, if any, and interest on the Certificates by arranging for payment in such manner that funds for such
payments are properly identified and are made immediately available on the date they are due.
(t~ So long as all outstanding Certificates are registered in the name of Cede & Co. or its registered assign (hereinafter, for
purposes of this subjection (t~, the "Owner"):
(I) All notices and payments addressed to the Owners shall contain the Certificates" CUSIP number.
(2) Notices to the Owner shall be forwarded by hand delivery (with receipt) or overnight courier to:
Muni Reorganization Manager
Reorganization Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530
or certified or registered United States mail to:
Muni Reorganization Manager
Reorganization Department
T~...~l~..sitory Trust Company
P.O. Box 876
Ga.r.de~,City, NewYork 11530 'i~i~. ~.-
(3) ~a~s of interest on the Certificates sball~be made payable to the order of "Cede & Co? and shall be
delivered to th~,e,~.r~r of the Owner, in next day tunds on each applicable March I and September I. Such pa~ents shall be
addressed
Manager, Cash Receipts, Dividends
The Depository Trust Company
7 Hanover Square, 22nd Floor
NewYork, NewYork 10004
(4) Payments of the principal on the Certificates shall be received by the Owner, in next day funds on each
applicable September ~ Payments of the principal shall ~.~ payable to Cede & Co., and shall be addressed as follows:
Muni Vault Supervisor
Vault Department
The Depository Trust Company
55 Water Street- 2nd Sub Level
New York, New York 10041
(5) The Owner may request payments of interest or principal to be made other than as described in Section
2.12(t")(3) and Section 2.12(t)(4) above as requested by such Owner, and the Trustee and the City shall reasonably cooperate
with respect to the provision for such payment to the extent otherwise permitted under this Trust Agreements.
(6) The Owner may direct the Trustee in writing to use any other address or department as the address or
department to which payments of the interest or principal or notices may be sent.
(7) The Owner shall in writing provide the Trustee with examples of signatures of those authorized to act on its
behalf, which shall be subject to change and the Trustee shall accept direction in writing from such persons or their designated
successors on behalf of the registered Certificate.
(g) Reference is hereby made to the Letter of Representations directed to the Depository Trust Company and executed by the
City and the Trustee in form hereto attached and incorporated herein by reference, providing for certain actions by the City and the
Trustee under specified circumstances; in the event of conflict between the provisions of this Trust Agreement and said Letter of
Representations, the latter shall control.
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ARTICLE III
DISPOSITION OF PROCEEDS; RESERVE FUND;
COSTS OF ISSUANCE FUND AND CONSTRUCTION FUND
Section 3.OI. Application of Proceeds. The proceeds received by the Trustee from the sale of the Certificates shall forthwith
be set aside by the Trustee in the following respective funds and in the following order of priority:
(a) The Trustee shall deposit in the Lease Payment Fund an amount equal to the portion of the Lease Payment which
represents accrued interest due and payable on the Closing Date by the City under the Lease Agreement ($.
(b) The Trustee shall deposit an amount equal to $
deposited into the Series 2002A Reserve Account and $
to the Reserve Fund (with $to be
to be deposited into the Series 2002B Reserve Account);
(c) The Trustee shall deposit an amount equal to $in the Costs of Issuance Fund;
(d) The Trustee shall deposit to the Escrow Fund an amount equal to $; and
(e) The Trustee shall deposit the balance ($) to the Construction Fund.
Section 3.02. Reserve Fund. The Trustee shall establish a special fund designated as the "Reserve Fund", and within said Fund
two accounts; the Series 2002A Reserve Account and the Series 2002B Reserve Account, to be held separate and apart from all other funds and
moneys held by the Trustee in trust for the benefit of the Owners of the Certificates, and applied solely as provided herein.
(A) All moneys at any time on deposit in the Series 2002A Reserve Account shall be applied solely as provided in this Section 3.02(A). If
on any Payment Date the moneys available in the Tax-Exempt Lease Payment Account do not equal the amount of the principal and interest and
prepayment premiums (if any) represented by the Series 2002A Certificates then coming due and payable, the Trustee shall apply the moneys
available in the Series 2002A Reserve Account to make delinquent Tax-Exempt Lease Payments on behalf of the City by transferring the amount
necessary for this purpose to the Tax-Exempt Lease Payment Account. Upon receipt of any delinquent Lease Payment or portion thereof with respect
to which moneys have been advanced from the Series 2002A Reserve Account, such Lease Payment or portion thereof shall be deposited in the Series
2002A Reserve Account to the extent of such advance. If on any Payment Date the moneys on deposit in the Series 2002A Reserve Account and the
Tax-Exempt Lease Payment Account (excluding amounts required for payment of principal, interest and prepayment premium, if any, represented by
any Series 2002A Certificates theretofore having come due but not presented for payment) are sufficient to pay all Outstanding Series 2002A
Certificates, including all principal, interest and prepayment premiums (if any), the Trustee shall, upon the Written Request of the City, transfer all
amounts then on deposit in the Series 2002A Reserve Account to the Tax-Exempt Lease Payment Account to be applied to the payment of the Tax-
Exempt Lease Payments on behalf of the City, and such moneys shall be distributed to the Owners of Series 2002A Certificates in accordance with
Article 11. Any amounts remaining in the Series 2002A Reserve Account on the date of payment in full or provision for such payment of all
Outstanding Series 2002A Certificates shall be withdrawn by the Trustee and at the Written Request of the City applied towards such payment or paid
to the City.
(B) All moneys at any time on deposit in the Series 2002B Reserve Account shall be applied solely as provided in this Section 3.02(B). If
on any Payment Date the moneys available in the Taxable Lease Payment Account do not equal the amount of the principal and interest and
prepayment premiums (if any) represented by the Series 2002B Certificates then coming due and payable, the Trustee shall apply the moneys
available in the Series 2002B Reserve Account to make delinquent Taxable Lease Payments on behalf of the City by transferring the amount necessary
for this purpose to the Taxable Lease Payment Account. Upon receipt of any delinquent Lease Payment or portion thereof with respect to which
moneys have been advanced from the Series 2002B Reserve Account, such Lease Payment or portion thereof shall be deposited in the Series 2002B
Reserve Account to the extent of such advance. If on any Payment Date the moneys on deposit in the Series 2002B Reserve Account and the Taxable
Lease Payment Account (excluding amounts required for payment of principal, interest and prepayment premium, if any, represented by any Series
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2002B Certificates theretofore having come due but not presented for payment) are sufficient to pay all Outstanding Series 2002B Certificates,
including all principal, interest and prepayment premiums (if any), the Trustee shall, upon the Written Request of the City, transfer all amounts then
on deposit in the Series 2002B Reserve Account to the Taxable Lease Payment Account to be applied to the payment of the Taxable Lease Payments on
behalf of the City, and such moneys shall be distributed to the Owners of Series 2002B Certificates in accordance with Article II. Any amounts
remaining in the Series 2002B Reserve Account on the date of payment in full or provision for such payment of all Outstanding Series 2002B
Certificates shall be withdrawn by the Trustee and at the Written Request of the City applied towards such payment or paid to the City.
Section 3.03. Costs of Issuance Fund. The Trustee shall establish a special fund designated as the "Costs of Issuance Fund";
shall keep such fund separate and apart from all other funds and moneys held by it; and shall administer such fund as provided herein. There shall
be deposited in the Costs of Issuance Fund the proceeds of the Certificates deposited therein pursuant to Section 3.01(c), and any other funds from
time to time deposited with the Trustee for such purpose. The moneys in the Costs of Issuance Fund shall be disbursed to pay the Costs of Issuance
from time to time upon the receipt of Written Requests of the City setting forth the amounts to be disbursed for payment or reimbursement of Costs of
Issuance and the name and address of the person or persons to whom said amounts are to be disbursed, stating that the amounts to be disbursed are
for Costs of Issuance properly chargeable to the Costs of Issuance Fund. Any amounts remaining in the Costs of Issuance Fund on the date one
hundred and twenty (120) days after the Closing Date shall be withdrawn therefrom by the Trustee and transferred to the Lease Payment Fund.
Section 3.04. Construction Fund. The Trustee shall establish and maintain a separate fund to be known as the
"Construction Fund". The Trustee shall disburse moneys in the Construction Fund from time to time, for the purpose of paying the Construction Costs.
Each such disbursement shall be documented by a requisition which shall: (a) identify the total amount of such costs to be paid pursuant to such
requisition, including all items of cost in such detail as may be available to the City; and (b) state with respect to such disbursement (i) the
requisition number, in sequential order, (if) the amount to be disbursed for payment of such costs, and (iii) that each item of cost identified therein
has been properly incurred, constitutes payment of a Construction Cost and has not been the basis of any previous disbursement. Upon completion of
the Project and following payment of all Construction Costs, the Construction Fund shall be closed and transferred to the Lease Payment Fund.
Section 3.05. Establishment of Escrow Fund. There is hereby created by the Trustee, as security for the payment of the
redemption price of the 1992 Certificates on March I, 2002, an irrevocable escrow to be held in escrow by the Trustee on behalf of the City and for the
benefit of the owners of the 1992 Certificates, said escrow to be designated the "City of Palo Alto 1992 Refunding Escrow Fund" (the "Escrow Fund").
All moneys and Federal Securities in the Escrow Fund are hereby irrevocably transferred to the Trustee, as security for payment of the debt service on
the 1992 Certificates, to be held by the Trustee in escrow for the benefit of the owners of the 1992 Certificates. If at any time the Trustee shall receive
actual knowledge that the moneys and Federal Securities in the Escrow Fund will not be sufficient to make any payment required to redeem the 1992
Certificates in full on March I, 2002, the Trustee shall notify the City of such fact and the City shall immediately cure such deficiency.
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ARTICLE IV
~REPAYMENT OF CERTIFICATES
Section 4.OI. Prepayment~ (A) Optional Prepayment.
(I) The Series 2002A Certificates are not subiect to optional prepayment prior to their stated maturity dates,~
The Series 2002B Certificates maturing on or before September I, 20__ are not subject to optional prepayment prior to their
respective stated maturities. The Series 2002B Certificates maturing on or after September I, 20__, are subject to optional
prepayment on any date on or after September I, 20m, in whole or in part, from prepayments of the Taxable Lease
Payments made at the option of the City pursuant to Section 10.2 of the Lease Agreement, at a prepayment price equal to the
principal amount thereof to be prepaid, together with accrued interest to the prepayment date, at the prepayment price
(expressed as percentages of the principal amount of Series 2002B Certificates or portions thereof to be prepaid) set forth in
the following table, together with accrued interest to the date fixed for prepayment:
Prepayment
Prepayment Dates Pric___~e
On or after September I, 20__ to and including __, 20
On or after September I, 20__ to and including ,20
On or after September I, 20__ and thereafter
10 .0%
10
I .0
(B)Prepayment From Net Proceeds of Insurance and Condemnation. The Certificates are also subject to prepayment on any Payment
Date, in whole or in part, from the Net Proceeds of insurance or condemnation with respect to the Leased Property, which Net
Proceeds are deposited in the Lease Payment Fund and credited towards the prepayment of the Lease Payments made by the
City pursuant to Section 10.3 of the Lease Agreement, at a prepayment price equal to the principal amount of the Certificates
to be prepaid, together with accrued interest to the date fixed for prepayment, without premium.
Section 4.02. Selection of Certificates for Prepayment. Whenever provision is made in this Agreement for the
prepayment of Certificates and less than all Outstanding Certificates are called for prepayment, the Trustee shall select Certificates for prepayment
from the Outstanding Certificates not previously called for~ prepayment, among maturities on a pro rata basis in integral multiples of $5,000 and by
lot within a maturity in any manner deemed appropriate by the Trustee. For the purposes of such selection, Certificates shall be deemed to be
composed of $5,000 portions, and any such portion may be separately prepaid. The Trustee shall promptly notify the City and the Corporation in
writing of the Certificates so selected for prepayment.
Section 4.03. Notice of Prepayment. When prepayment is authorized or required pursuant to Section 4.01, the Trustee shall
give notice of the prepayment of the Certificates. Such notice shall specify: (a) that the Certificates or a designated portion thereof are to be prepaid,
(b) the date of prepayment, and (c) the place or places where the prepayment will be made. Such notice shall further state that on the specified date
there shall become due and payable upon each Certificate, the principal and premium, if any, together with interest accrued to said date, and that
from and after such date interest represented thereby shall cease to accrue and be payable.
Notice of such prepayment shall be mailed by first class mail to the respective Owners of Certificates designated for prepayment at their
addresses appearing on the Registration Books, at least thirty (30) days but not more than forty-five (45) days prior to the prepayment date, which
notice shall, in addition to setting forth the above information, set forth, in the case of each Certificate called only in part, the portion of the principal
thereof which is to be prepaid; provided that neither failure to receive such notice so mailed nor any defect in any notice so mailed shall affect the
sufficiency of the proceedings for the prepayment of such Certificates.
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Section 4.04. Partial Prepayment of Certificate. Upon surrender of any Certificate prepaid in part only, the Trustee
shall execute and deliver to the Owner thereof, at the expense of the City, a new Certificate or Certificates of authorized denominations equal in
aggregate principal amount to the unprepaid portion of the Certificate surrendered and of the same interest rate and the same maturity.
Section 4.05. Effect of Notice of Prepayment. Notice having been given as aforesaid, and moneys for the prepayment
(including the interest to the applicable date of prepayment and including any applicable premium), having been set aside in the Lease Payment
Fund, the Certificates shall become due and payable on said date of prepayment, and, upon presentation and surrender thereof at the Corporate Trust
Office of the Trustee, said Certificates shall be paid at the unpaid principal amount (or applicable portion thereof) with respec~ thereto, plus interest
accrued and unpaid to said date of prepayment.
If, on said date of prepayment, moneys for the prepayment of all the Certificates to be prepaid, together with interest to said date of
prepayment, shall be held by the Trustee so as to be available therefor on such date of prepayment, and, if notice of prepayment thereof shall have
" ~ been given as aforesaid, then, from and after said date of prepayment, interest represented by said Certificates shall cease to accrue and become
payable. All moneys held by or on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the account of the Owners of the
Certificates so to be prepaid.
All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of this Article IV shall be cancelled upon surrender
thereof and destroyed.
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ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.01. Assignment of Rights in Lease Agreement. The Corporation has in the Assignment Agreement
transferred, assigned and set over to the Trustee certain of its rights in the Lease Agreement, including but not limited to all of the Corporation's
rights to receive and collect all of the Lease Payments and all other amounts required to be deposited in the Lease Payment Fund pursuant to the
Lease Agreement or pursuant hereto. All Lease Payments and such other amounts to which the Corporation may at any time be entitled shall be paid
directly to the Trustee, and all of the Lease Payments collected or received by the Corporation shall be deemed to be held and to have been collected
or received by the Corporation as the agent of the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with
¯ the Trustee within one Business Day after the receipt thereof, and all such Lease Payments and such other amounts shall be forthwith deposited by the
Trustee upon the receipt thereof in the Lease Payment Fund (except as provided in Section 3.02).
Section 5.02. Establishment of Lease Payment Fund. The Trustee shall establish a special fund designated as the
"Lease Payment Fund", and within said Fund the =Tax-Exempt Lease Payment Account and the "Taxable Lease Payment Account". All moneys at any
time deposited by the Trustee in the Lease Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the Certificates. So long
as any Certificates are Outstanding~ neither the City nor the Corporation shall have any beneficial right or interest in the Lease Payment Fund or the
moneys deposited therein, except only as provided in this Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set
forth.
Section 5.03. Deposits.
(A) There shall be deposited in the Tax-Exempt Lease Payment Account all Tax-Exempt Lease Payments received by the Trustee (except as
provided in Section 3.02), including any moneys required to be deposited therein pursuant to the Lease Agreement or pursuant to this Agreement,
and including any other moneys required to be credited towards payment of the Tax-Exempt Lease Payments.
(B) There shall be deposited in the Taxable Lease Payment Account all Taxable Lease Payments received by the Trustee (except as provided
in Section 3.02), including any moneys required to be deposited therein pursuant to the Lease Agreement or pursuant to this Agreement, and
including any other moneys required to be credited towards payment of the Taxable Lease Payments. Section 5.04. Application of
Moneys. All amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal,
interest and prepayment premiums (if any) with respect to the Certificates as the same shall become due and payable, in accordance with the
provisions of Article II and Article IV; except that all amounts in the Tax-Exempt Lease Payment Account shall be used and withdrawn by the Trustee
solely for the purpose of paying the principal, interest and prepayment premiums (if any) with respect to the Series 2002A Certificates, and all
amounts in the Taxable Lease Payment Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal, interest
and prepayment premiums (if any) with respect to the Series 2002B Certificates.
Section 5.05. Surplus. Any surplus remaining in the Lease Payment Fund, after prepayment and payment of all Certificates,
including premiums and accrued interest (if any) and payment of any applicable fees to the Trustee or provision for such prepayment or payment
having been made to the satisfaction of the Trustee, shall be withdrawn by the Trustee and remitted to the City.
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ARTICLE VI
INSURANCE AND CONDEMNATION FUND
INSURANCE; EMINENT DOMAIN
Section 6.OI. Establishment of Insurance and Conde~,~ation Fund; Application of Net Proceeds of
Ins~ ~ Award. The provisions of this Section are subject to Section 4.02 of the Property Lease. Any I~et Proceeds of insurance against
accider ~ destruction of any structure constituting any part of the Leased Property collected by the City in the event of any such accident or
destruc~i mall be paid to the Trustee by the City pursuant to Section 6~.(a) of the Lease Agreement and deposited by the Trustee promptly upon
receipt thereof in a special fund designated as ~'lnsurance and Condemnation Fund~'. If the City determines and notifies z~ Trustee in writing of
its determination, within ninety (90) days foi the date of such deposit, that the replacement, repair, restoration, modi~ ~ ion or improvement
of the Leased Property is not economically feasi~, or in the best interest of the City, then such Net Proceeds shall be promptly transferred by the
Trustee to the Lease Payment Fund and applied to the prepayment of Lease Payments pursuant to Section 4.01(b); provided, that such transfer shall
only be made if the amount transferred is sufficient to prepay the principal amount of Certificates attributable to the portion of the Leased Property
damaged or destroyed, determined on the basis ~. ~he ratio resulting from dividing the cost of the portion of the Leased Property so damaged or
destroyed by the total cost of the Leased Property. All Net Proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the
Lease Payment Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed
portions of the Leased Property by the City, upon receipt of Written Requests of the City stating with respect to each payment to be made (i) the
name and address of the person, firm or corporation to whom payment is due, (ii) the amount to be paid and (iii) that each obligation mentioned
therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous
withdrawal, and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation.
Any balance of the Net Proceeds remaining after such work has been completed shall be paid to the City. The preceding sentence notwithstanding,
before the remaining .~let Proceeds are paid to the City by ~~ Trustee, the City shall deliver to the Trustee a certificate stating that the Leased
Property has been replaced, repaired, restored, modified or ,;~°oved with the Net Proceeds to the extent that the City has full use, occupancy and
enjoyment of the Leased Property.
Section 6.02. Application of Net Proceeds of Eminent Domain Award. The provisions of this Section are subject
to Section 4.02 of the Property Lease. If all or any part of the Leased Property shall be taken by eminent domain proceedings (or sold to a
government threatening to exercise the power of eminent domain) the Net P~ceeds therefrom shall be deposited with the Trustee in the Insurance
and Condemnation Fund pursuant to Section 6.2(b) of the Lease Agreement and shall be applied and disbursed by the Trustee as follows:
(a) If all of the Leased Property shall have been taken in such eminent domain proceedings or sold to a government
threatening the use of eminent domain powers, or if the City has given written notice to the Trustee of its determination that such
proceeds are not needed for repair or rehabilitation of the Leased Property, the Trustee shall transfer such proceeds to the Lease Payment
Fund to be credited towards the prepayments of the Lease Payments required to be paid pursuant to Section 6~.(b) of the Lease
Agreement and applied to the prepayment of Certificates in the manner provided in Section 4.01(b).
(b) If less than all of the Leased Property shall have been taken in such eminent domain proceedings or sold to a government
threatening the use of eminent domain powers, and if the City has given written notice to the Trustee of its determination that such
proceeds are needed for repair, rehabilitation or replacement of the Leased Prope~, the Trustee shall pay to the City, or to its order, from
said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing of Written Requests of the City in the
form and containing the provisions set forth in Section 6.01.
Section 6.03. Cooperation. The Corporation and the Trustee shall cooperate fully with the City at the expense of the City in
filing any proof of loss with respect to any insurance policy maintained pursuant to Article V of the Lease Agreement and, to the extent indemnified to
its satisfaction from any liability or expense related thereto, in the prosecution or defense of any prospective or pending condemnation proceeding
with respect to the Leased Property or any portion thereof.
-18-
ARTICLE VII
MONEYS IN FUNDS
Section 7.01. Held in Trust. The moneys and investments held by the Trustee under this Trust Agreement are irrevocably held
in trust for the Certificates, and for the purposes herein specified, and such moneys shall be expended only as provided in this Trust Agreement, and
shall not be subject to levy or attachment or lien by or for the benefit of any creditor of (i) the City, (if) the Trustee, (iii) the Corporation or (iv) the
Owner of Certificates.
Section 7.02. Investments Authorized. All moneys in any of the funds established pursuant to this Trust Agreement shall
be invested by the Trustee, and, upon Written Request of the City, shall be invested as directed by the City, solely in Investment Securities. In the
absence of any Written Request of the City directing investments, the Trustee shall invest in Investment Securities described in (12) of the definition
thereof.
Investment Securities shall be purchased at Fair Market Value, provided the Trustee shall not be responsible to determine Fair Market
Value. Moneys in all funds other than the Reserve Fund shall be invested in Investment Securities maturing not later than five (5) years from the date
said investment is made.
Section 7.03. Accounting. The Trustee shall furnish to the City, not less than monthly, an accounting (which may be in the
form of the Trustee's regular statement) of all investments made by the Trustee. The Trustee shall not be responsible or liable for any loss suffered in
connection with any investment of funds made by it in accordance with Section 7.02.
Section 7.04. Allocation of Earnings. Any income, profit or loss on such investments in any of the funds other than the
Reserve Fund shall be deposited in or charged to the respective funds from which such investments were made. Investment earnings on the Reserve
Fund, to the extent said earnings are not needed to maintain the Reserve Fund at the Reserve Requirement, shall be transferred to the Lease Payment
Fund as set forth in Section 3.02 hereof to pay principal of, interest on and premium, if any, on the Certificates as the same shall become due and
payable.
Section 7.05. Valuation of Investments. In computing the amount in any fund or account, Investment Securities shall be
valued at the market price thereof. With respect to all funds and accounts except the Reserve Fund, valuation shall occur annually, prior to the
adoption of the City's budget. Investment Securities in the Reserve Fund shall be valued annually, except in the event of a withdrawal from the
Reserve Fund, whereupon they shall be valued immediately after such withdrawal and monthly thereafter until the Reserve Fund is at its required
level.
Section 7.06. Commingling of Investment Securities and Disposition of Investments. Investments in all
funds may be commingled for purposes of making, holding or disposing of investments, notwithstanding provisions herein for transfer to or holding in
particular funds amounts received or held by the Trustee hereunder, provided that the Trustee shall at all times account for such investments strictly
in accordance with the funds to which they are credited and otherwise as provided in this Trust Agreement. The Trustee may act as principal or agent
in the making or disposing of any investment.
The Trustee may sell, or present for prepayment, any Invest~ment Securities so purchased whenever it shall be necessary to provide moneys
to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Investment Securities is credited, and the Trustee
shall not be liable or responsible for any loss resulting from any investment made pursuant to this Section 7.06.
The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City
the right to receive brokerage confirmations of security transactions as they occur, the City will not receive such confirmations to the extent
permitted by law. The Trustee will furnish the City periodic cash transaction statements which include detail for all investment transactions made by
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the Trustee hereunder. The Trustee may make any investments hereunder through its own bond or investment department or trust investment
department, or those of its parent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any
investments made by the Trustee hereunder.
Section 7.07. No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with
respect to the proceeds of the Series 2002A Certificates which if such action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the Closing Date would have caused the Series 2002A Certificates to be "arbitrage bonds" within the meaning
of section 148(a) of the Code and Regulations promulgated thereunder.
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ARTICLE VIII
THE TRUSTEE
Section 8.01. Compensation of the Trustee. The City shall from time to time, as agreed upon between the City and the
Trustee, pay to the Trustee reasonable compensation for its services, and shall reimburse the Trustee for all its advances and expenditures, including
but not limited to advances to, and fees and expenses of, independent appraisers, accountants, consultants, counsel, agents and attorneys-at-law or
other experts employed by it in the exercise and performance of its powers and duties hereunder.
Section 8.02. Removal of Trustee. The City and the Corporation may by written agreement between themselves, or the
Owners of a majority in aggregate principal amount of all Certificates Outstanding may by written request, at any time and for any reason, remove
the Trustee and any successor thereto, and shall thereupon appoint a successor or successors thereto. Any such successor shall be a bank or trust
company in good standing, duly authorized to exercise trust powers and subject to examination by federal or State authority having a combined
capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000). If such bank or trust company publishes a report
of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the
purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as
set forth in its most recent report of conditions so published.
The Trustee may at any time resign by giving written notice to the City and the Corporation and by giving to the Certificate Owners notice
by mailing such notice to the registered owners of the Certificates. Upon receiving such notice of resignation, the City shall promptly appoint a
successor Trustee by an instrument in writing; provided, however, that in the event that the City does not appoint a successor Trustee within thirty
(30) days following receipt of such notice of resignation, the resigning Trustee may petition the appropriate court having jurisdiction to appoint a
successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee. Upon such acceptance, the City shall mail notice thereof to the Certificate Owners at their respective addresses
set forth on the Certificate registration books maintained pursuant to Section 2.1 I.
Section 8.03. Appointment of Agent. The Trustee may appoint an agent to exercise any of the powers, rights or remedies
granted to the Trustee under this Trust Agreement, and to hold title to property or to take any other action which may be desirable or necessary. ¯
Section 8.04. Merger or Consolidation.. Any company into which the Trustee may be merged or converted, or with which it
may be consolidated, or any company resulting from any merger, conversion or consolidation to which it shall be a paT, or any company to which
the Trustee may sell or transfer all or substantially all of its corporate trust business (provided that such company shall be eligible under Section
8.02) shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary
notwithstanding.
Section 8.05. Protection and Rights of the Trustee. The Trustee shall be protected and shall incur no liability in acting
or proceeding in good faith upon any resolution, notice, telegram, request, consent, waiver, certificate, statement, affidavit, voucher, bond,
requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board or
person or to have been prepared and furnished pursuant to any of the provisions of this Trust Agreement, and the Trustee shall be under no duty to
make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the
same as conclusive evidence of the truth and accuracy of such statements. The Trustee may consult with counsel, who may be counsel to the
Corporation, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any
action taken or suffered by it hereunder in good faith in accordance therewith.
Whenever in the administration of its duties under this Trust Agreement, the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed), shall be deemed to be conclusively proved and established by the certificate of the City Representative or the Corporation Representative
and such certificate shall be full warranty to the Trustee for any action taken or suffered under the provisions of this Trust Agreement upon the faith
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thereof, but in its discretion the Trustee may, in lieu thereof, accept other of such matter or may requir ~h additional evidence as to it
may seem reasonable.
The Tr~ ~y become the Owner of th ~ificates with the ~:~ rights ~uld have if it were ~ne Trustee: may acquire and
of other b~ ~vidences of indebtedness of the City with the same rights iz ~.~ld have if it were nD~ the Tru~:~ :~d may act as a
~ ~ry for and ~ ~y of its officers or directors to act as a member of, or in any other capacity with respect to, ar~? ~~mittee formed to
protect the rights of 0~.~-~ of Certificates, whether or n.ot such committee shall represent the Owners of the majority in principal amount of the
Certificates then Outstanding.
The recitals, statements and representations ~y ~i ~ity and the C~poration contained in this Trust Agreement or in the Certificates shall
be taken and constr~ as made by and on the part of the City and the Corporation, as the case may be, and not by the Trustee, and the Trustee does
not assume, and sh~ ~ot have, any responsibility or obligation for the correctness of any thereof.
The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys,
agents, or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its duty hereunder, and ~ Trustee shall not be
answerable for the default or misconduct of any such attorney, agent, or receiver selected by it with reasonable care. The Trustee shall not be
answerable for the exercise of any discretion or power under this Trust Agreement or for anything whatever in connection with the funds and accounts
established hereunder, except only for its own gross negligence or willful misconduct.
The Trustee shall be responsible to perform only those duties specifically set f~ ~erein and no implied duties or obligations shall be read
into this Trust Agreement against the Trustee.
The Trustee shall have no responsibility with respect to any. information, statement, or recital in any official statement, offering
memorandum or any other disclosure material prepared or distributed with respect to the Certificates.
The Trustee is authorized and directed to execute in its capacity as Trustee the Assignment Agreement.
The Trustee shallnot be deemed to have knowledge of an Event of Default hereunder unless it shall have actual know!~e at its Corporate
Trust Office.
No provision of this Trust Agreement or any other document related hereto shai~, ~ire the Trustee to risk or advance its own funds or
otherwise incur any financial liability in the performance of its duties or the exerci.~ of its rig~ ~ereunder.
Before taking any action under Article XII hereof the Trustee may require indemnity satisfactory to the Trustee be furnished from any
expenses and to protect it against any liability it may incur hereunder.
The immunities extended to the Trustee also extend to its directors, officers, employees and agents.
The Trustee shall not be liable for any action taken or not taken by it i~ ~.~~ordance with the direction of a maj~ ¯ other percentage
provided for herein) in aggregate principal amount of Certificates outstanding rela~i~ to the exercis~ ~ any right, power or remedy available to the
Trustee.
The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty.
Every provision of this Trust Agreement, the Lease Agreement, the Property Lease and the Assignment Agreement reiating to the conduct or
liability of the Trustee shall be subject to the provisions of this Trust Agreement, including without limitation, this Article.
In acting as Trustee hereunder, the Trustee acts solely in its capa~-~ ~s Trustee hereunder and not in its individuai :~sonal capacity,
and all persons, including without limitation the Owners, the City and the C~ ~,.'ation, having ~ claim against the Trustee ~.i look only to the
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funds and accounts held by the Trustee hereunder for payment, except as otherwise provided herein. Under no circumstances shall the Trustee be
liable in its individual or personal capacity for the obligations evidenced by the Certificates.
The Trustee makes no representation or warranty, either express or implied, as to the value, design, condition, merchantability or fitness
for any particular purpose or fitness for the use contemplated by the City or the Corporation of the project or any portion thereof, or any other
representation or warranty with respect to the Property or any portion thereof. In no event shall the Trustee be liable for incidental, indirect, special
or consequential damages in connection with this Trust Agreement, the Lease Agreement or the Property Lease or the existence, furnishing or
functioning of the Prope~ or the City's use of the Leased Propen'y.
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ARTICLE IX
MODIFICATION OR AMENDMENT OF AGREEMENT
Section 9.OI. Amendments?.Permitted. This Agreement and the rights and obligations of the parties hereto and the Lease
Agreement and the rights and obligations of the parties~thereto, may be modified or amended at any time by a supplemental agreement which shall
become effective when the ~tten ~consents of the O~rs of at least sixty percent (60%) in aggregate principal amount of the Certificates then
Outstanding, exclusive of C~ificates disqualified as provided in Section 9.03, shall have been filed ~th the Trustee. No such modification or
amendment shall (I) extend or have the effect of extending the fixed maturity of any Certificate or redt,~ ~g the interest rate with respect thereto or
extending the time of payment of interest, or reducing the amount of principal thereof or reducing ~y premium payable upon the prepayment
thereof, without the express consent of the Owner of such Certificate, or (2) reduce or have the effect of reducing the percentage of Certificates
required for the affirmative vote or written consent to an amendment or modification of the Lease Agreement, or (3) modify any of the rights or
obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 9.02.
This Agreement and the rights and obligations of tl~i~a~'~s hereto and the Lease Agreement and the rights and obligations of the
respective parties thereto, may be modified or amended at any~i~ i~ supplemental agreement, without the consent of any such Owners, but only
to the extent permitted by law and only (I) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any
right or power herein or therein reserved to the City, (2) to cure, correct or supplement any ambiguous or defective provision contained herein or
therein so long as such modification or amendment is not inconsistent with any other provision contained herein, (3) in regard to questions arising
hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which shall not adversely affect the interests of the
Owners of the Certificates, (4) to correct any incorrect property description or (5) to make such additions, deletions or modifications as may be
necessary to assure compliance with section 148(f~ of the Code relating to required rebate of Excess Investment Earnings to the United States or
otherwise as may be necessary to assure exemption from federal income taxation of the interest component of the Lease Payments. Any such
supplemental agreement shall become effective upon execution and delivery by the parties hereto or thereto as the case may be.
Section 9.02. Procedure for Amendment with Written Consent of Certificate Owners. This Agreement
and the Lease Agreement may be amended by supplemental agreement as provided in this Section 9.02 in the event the consent of the Owners of the
Certificates is required pursuant to Section 9.01. A copy of such supplemental agreement, together with a request to the Certificate Owners for their
consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his address as set forth on the Registration Books, but failure to
receive copies of such supplemental agreement and request shall not affect the validity of the supplemental agreement when assented to as in this
Section provided.
Such supplemental agreement shall not become effective unless there shall be filed with the Trustee the written consents of the Owners of
sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section
9.03) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of
ownership of the Certificates for which such consent is given, which proof shall be such as is permitted by Section 2.10. Any such consent shall be
binding upon the Owner of the Certificate giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice
thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee
prior to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Certificates shall have filed their consents to such supplemental agreement, the Trustee
shall mail a notice to the Owners of the Certificates in the manner hereinbefore provided in this Section for the mailing of such supplemental
agreement of the notice of adoption thereof, stating in substance that such supplemental agreement has been consented to by the Owners of the
required percentage of Certificates and will be effective as provided in this Section (hut failure to receive copies of said notice shall not affect the
validity of such supplemental agreement or consents thereto). A record, consisting of the papers required by this Section to be filed with the Trustee,
shall be conclusive proof of the matters therein stated. Such supplemental agreement shall become effective upon the mailing of such last-mentioned
notice, and such supplemental agreement shall be deemed conclusively binding upon the parties hereto and the Owners of all Certificates at the
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ARTICLE X
COVENANTS; NOTICES
Section IO.Oh Compliance With and Enforcement of Lease Agreement. The City covenants and agrees with the
Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. The Corporation covenants and agrees with
the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement.
The City will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or
permitted to be done, or any such omission of or refraining from action, would or might be an event of default under or a ground for cancellation or
termination of the Lease Agreement. The Corporation and the City, immediately upon receiving or giving any notice, communication or other
document in any way relating to or affecting their respective estates, or either of them, in the Leased Property, which may or can in any manner
affect such estate of the City, will deliver the same, or a copy thereof, to the Trustee.
Section 10.02. Prosecution and Defense of Suits. The Corporation and the City shall promptly, upon request of the
Trustee or any Certificate Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the
title to the Leased Property, whether now existing or hereafter developing and shall prosecute all such suits, actions and other proceedings as may be
appropriate for such purpose and shall indemnify and save the Trustee and every Certificate Owner harmless from all loss, cost, damage and expense,
including attorneys" fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceeding.
Section 10.03. Recordation and Filing. The City shall record and file the Lease Agreement, the Assignment Agreement and
all such documents as may be required by law (and shall take all further actions which may be necessary or be reasonably required by the Trustee),
all in such manner, at such times and in such places as may be required by law in order fully to preserve, protect and perfect the security of the
Trustee and the Certificate Owners.
Section 10.04. No Federal Guarantee. The Corporation and the City shall take no action nor permit nor suffer any action
to be taken if the result of the same would cause the Tax-Exempt Lease Payments or the Series 2002A Certificates to be a federally guaranteed
obligation within the meaning of Section 103(h) of the Tax Code.
Section 10.05. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of
the provisions of that certain Continuing Disclosure Certificate executed by the City as of the Closing Date, as originally executed and as it may be
amended from time to time in accordance with its terms. Notwithstanding any other provision of this Lease, failure of the City to comply with such
Continuing Disclosure Certificate shall not constitute an Event of Default; provided, however, that any Participating Underwriter (as such term is
defined in such Continuing Disclosure Certificate ) or any Owner or beneficial owner of the Bonds may take such actions as may be necessary and
appropriate to compel performance by the City of its obligations under this Section, including seeking mandate or specific performance by court
order.
Section 10.06. Further Assurances. The Corporation and the City will make, execute and deliver any and all such further
resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this
Agreement and the Lease Agreement, and for the better assuring and confirming unto the Owners of the Certificates the rights and benefits provided
herein.
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ARTICLE XI
LIMITATION OF LIABILITY
Section I1.01. Limited Liability of City. Except for the payment of Lease Payments when due in accordance with the Lease
Agreement and the performance of the other covenants and agreements of the City contained in the Lease Agreement and herein, the City shall have
no pecuniary obligation or liability to any of the other parties or to the Owners of the Certificates with respect to this Trust Agreement or the terms,
execution, delivery or transfer of the Certificates, or the distribution of Lease Payments to the Owners by the Trustee.
Section 11.02. No Liability for Trustee Performance. Neither the City nor the Corporation shall have any obligation or
liability to any of the other partiesor to the Owners of the Certificates with respect to the performance by the Trustee of any duty imposed upon it
under this Trust Agreement, except where the City or the Corporation, as the case may be, has given specific direction to the Trustee to take certain
actions.
Section 11.03. Indemnification. The Corporation and the City agree to indemnify and save the Trustee harmless from and
against all claims, suits, losses, expenses, liabilities, and actions brought against it, or to which it is made a pa~, and from all losses and damages
suffered by it as a result thereof, including where and to the extent such claim, suit or action arises out of the actions of any other party to this
Agreement including but not limited to the ownership, operation or use of the Leased Property by the City. Such indemnification shall not extend to
claims, suits and actions brought against the Trustee for failure to perform and carry out the duties specifically imposed upon and to be performed by
it pursuant to this Trust Agreement, which failure constitutes negligence or willful misconduct by the Trustee. In the event the Corporation or the City
is required to indemnify the Trustee as herein provided, the Corporation or the City shall be subrogated to the.rights of the Trustee to recover such
losses or damages from any other person or entity.
Section 11.04. Opinion of Counsel. Before being required to take any action, the Trustee may require an opinion of
Independent Counsel acceptable to the Trustee, which opinion shall be made available to the other parties hereto upon request, which counsel may be
counsel to any of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed action. If it does so in good faith,
Trustee shall be protected in relying thereon.
Section 11.05. Limitation of Rights to Parties and Certificate Owners. Nothing in this Agreement or in the
Certificates expressed or implied is intended or shall be construed to give any person other than the City, the Corporation, the Trustee, the Owners of
the Certificates, any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenant, condition or provision hereof;
and all such covenants, conditions and provisions are and shall be for the sole and exclusive benefit of the City, the Corporation, the Trustee and said
Owners.
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ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 12.01. Assignment of Rights. Pursuant to the Assignment Agreement the Corporation has transferred, assigned and
set over to the Trustee all of the Corporation's rights in and to the Lease Agreement (excepting on the Corporation's rights under Sections 5.8, 7_t and
9.4 thereof), including without limitation all of the Corporation's rights to exercise such rights and remedies conferred on the Corporation pursuant to
the Lease Agreement as may be necessary or convenient (i) to enforce payment of the Lease Payments and any other amounts required to be
deposited in the Lease Payment Fund or the Insurance and Condemnation Award Fund, and (ii) otherwise to exercise the Corporation's rights and take
any action to protect the interests of the Trustee or the Certificate Owners in an Event of Default.
Section 12.02. Remedies. If an Event of Default shall happen, then and in each and every such case during the continuance of
such Event of Default, the Trustee may, and upon request of the Owners as provided in Article IX of the Lease Agreement shall, exercise any and all
remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that notwithstanding anything herein or in the
Lease Agreement to the contrary, there shall be no right under any circumstances to accelerate the maturities of the Certificates or otherwise to
declare any Lease Payment not then in default to be immediately due and payable.
Section 12.03. Application of Funds. All moneys received by the Trustee pursuant to any right given or action taken under
the provisions of this Article XII or Article IX of the Lease Agreement shall be applied by the Trustee in the order following upon presentation of the
several Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid -
First, to the payment of the costs and expenses of the Trustee and of the Certificate Owners in declaring such Event of Default,
including reasonable compensation to its or their agents, attorneys and counsel;
Second, to the payment of the whole amount then owing and unpaid with respect to the Certificates for principal and interest,
with interest on the overdue principal and installments of interest, and in case such moneys shall be insufficient to pay in full the whole
amount so owing and unpaid with respect to the Certificates, then to the payment of such principal and interest without preference or
priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest,
ratably to the aggregate of such principal and interest.
Section 12.04. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, the
Trustee in its discretion may, and upon the written request of the Owners of a majority in principal amount of the Certificates then Outstanding, and
upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates by a suit in
equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power
herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall
deem most effectual in support of any of its rights or duties hereunder.
Section 12.05. Non-waiver. Nothing in this Article XII or in any other provision of this Agreement or in the Certificates, shall
affect or impair the obligation of the City to pay or prepay the Lease Payments in accordance with and subject to the terms and provisions of the
Lease Agreement, or affect or impair the right of action, which is also absolute and unconditional, of the Certificate Owners to institute suit to enforce
and collect such payment. No delay or omission of the Trustee or of any Owner of any of the Certificates to exercise any right or power arising upon
the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein, and every power and remedy given by this Article XII to the Trustee or to the Owners of Certificates may be exercised from time
to time and as often as shall be deemed expedient by the Trustee or the Certificate Owners.
Section 12.06. Remedies Not Exclusive. Ho remedy herein conferred upon or reserved to the Trustee or to the Certificate
Owners is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise.
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Section 12.07. Power of Trustee to Control Proceedines. In the event that the Trustee, upon the happening of an
Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion
or upon the request of the Owners of a majority in principal amount of the Certificates then Outstanding, it shall have full power, in the exercise of its
discretion for the best interests of the Owners of the Certificates, with respect to the continuance, discontinuance, withdrawal, compromise, settlement
or other disposal of such action; provided, however, that the Trustee shall not discontinue, withdraw, compromise or settle, or otherwise dispose of
any litigation pending at law or in equity, without the consent of a majority in aggregate principal amount of the Certificates Outstanding; provided,
that the provisions of this Section 12.07 shall only be effective if the Municipal Bond Insurance Policy is not in full force and effect.
Section 12.08. Limitation on Certificate Owners' Right to Sue. !~o Owner of any Certificate executed and delivered
hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Agreement, unless (a)
such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default hereunder;, (b) the Owners of at least
twenty-five percent (25%) in aggregate principal amount o~all the Certificates then Outstanding shall have made written request upon the Trustee to
exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the
Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have
refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender
of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to
the exercise by any Owner of Certificates of any remedy hereunder;, it being understood and intended that no one or more Owners of Certificates shall
have any right in any manner whatever by his or their action to enforce any right under this Agreement, except in the manner herein provided, and
that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and
for the equal benefit of all Owners of the Outstanding Certificates.
The right of any Owner of any Certificate to receive payment of said Owner's proportionate interest in the Lease Payments as the same
become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner,
notwithstanding the foregoing provisions of this Section or any other provision of this Agreement.
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ARTICLE Xlll
DEFEASANCE
Section 13.OI. Discharge of Trust Agreement. The Certificates may be paid by the City in any of the following ways,
provided that the City also pays or causes to be paid any other sums payable hereunder by the City:
(a) by paying or causing to be paid the Principal Amoun~ ~!ating to the C~ ~ ~cates, together with interest thereon, as and
when the same become due and payable ;
(b) by depositing with the Trustee, in trust, at or before ~ ~ ~y, money or securities in the necessary amount (as provided in
Section 13.03) to pay or prepay all Certificates then Outstanding; or
(c) by delivering to the Trustee, for cancellation by it, all of the Certificates then Outstanding.
If the City shall also pay or cause to be paid all other sums payable by ~ City hereunder, then and in that case, at the election of the City
(evidenced by a Written Request of the City, filed with the Trustee, signifying ~.~ ~ntion of the City to discharge all such indebtedness and this
Trust Agreement), and notwithstanding that any Certificates shall not have beer~ ~urrendered for payment, this Trust Agreement and the pledge of
Lease Payments and other assets made under this Trust Agreement and all covenants, agreements and other obligations of the City under this Trust
Agreement shall cease, terr~inate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the City, the
Trustee shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and shall execute
and deliver to the City all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay
over, transfer, assign or deliver all moneys or securities or other prope~ held by it pursuant to this Trust Agreement which are not required for the
payment or prepayment of Certificates not theretofore surrendered for such payment or prepayment to the City.
Section 13.O2. Discharge of Liabili~ o~ ~ertificates. Upon the deposit with the Trustee, in trust, at or before
maturity, of money or securities in the necessary amount (as provideci in Section 13.03) to pay or prepay any Outstanding Certificates (whether upon
or prior to their respective maturities or the prepayment date of such Certificates), provided that, if such Certificates are to be prepaid prior to
maturity, notice of such prepayment shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for
the giving of such notice, then all liability of the City in respect of such Certificates shall cease, terminate and be completely discharged, and the
Owner thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment,
subject, however, to the provisions of Section 13.04.
The City may at any time surrender to the Trustee for cancellation by it any Certificates previously executed and delivered, which the City
may have acquired in any manner whatsoever, and such Certificates, upon such surrender and cancellation, shall be deemed to be paid and retired.
Section 13.O3. Deposit of Money or Securities with Trustee. Whenever in this Trust Agreement it is provided or
permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Certificates,
the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds established pursuant to this Trust
Agreement and shall be--
(a) lawful money of the United States of America in an amount equal to the principal amount of such Certificates and all
unpaid interest thereon to maturity, except that, in the case of Certificates which are to be prepaid prior to maturity and in respect of
which notice of such prepayment shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been
made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Certificates and all unpaid
interest thereon to the prepayment date; or
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(b) Defeasance Obligations (as defined below), the principal of and interest on which when due will provide money sufficient
to pay the principal of and all unpaid interest to maturity, or to the prepayment date, as the case may be, on the Certificates to be paid or
prepaid, as such principal and interest become due, provided that, in the case of Certificates which are to be prepaid prior to the maturity
thereof, notice of such prepayment shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been
made for the giving of such notice;
provided, in each case, that the Trustee shall have been irrevocably instructed (by the terms of this Trust Agreement or by Written Request
of the City) to apply such money to the payment of such principal and interest with respect to such Certificates.
For purposes of this Section, "Defeasance Obligations" shall mean the United States Obligations and Pre-refunded Municipal Obligations
defined in paragraphs (I) and (3) of the definition of Investment Securities.
Section 13.04. Payment of Certificates After Discharl~e of Trust Agreement. Notwithstanding any provisions
of this Trust Agreement, any moneys held by the Trustee in trust for the payment of the Principal Amount relating to any Certificates, together with
interest thereon and remaining unclaimed for two years after the Principal Amount relating to all of the Certificates has become due and payable
(whether at maturity or upon call for prepayment as provided in this Trust Agreement), if such moneys were so held at such date, or two years after
the date of deposit of such moneys if deposited after said date when all of the Certificates became due and payable, shall be repaid to the City free
from the trusts created by this Trust Agreement upon receipt of an indemnification agreement acceptable to the City and the Trustee indemnifying the
City and the Trustee with respect to claims of Owners of Certificates which have not yet been paid, and all liability of the Trustee with respect to such
moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the City as aforesaid, the Trustee may (at the cost of
the City) first mail to the Owners of Certificates which have not yet been paid, at the addresses shown on the Registration Books a notice, in such
form as may be deemed appropriate by the Trustee with respect to the Certificates so payable and not presented and with respect to the provisions
relating to the repayment to the City of the moneys held for the payment thereof.
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Section 14.01. Records. The Trustee shall keep complete and accurate records of all moneys received and disbursed under this
Agreement, which shall be available for inspection by the City, the Corporation, and any Owner, or the agent of any of them, at any time during
regtdar business hours.
Section 14.02. Notices. All written notices to be given under this Agreement shall be given by mail or personal delivery to the
party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time.
Notice shall be effective upon receipt after deposit in the United States mail, postage prepaid or, in the case of personal delivery, upon delivery to the
address set forth below."
If to the City:City~C~ ~m any
City ~f'P~]~ Alto "
P. O. Box 10250 -
Palo Alto, CA 94J03~ ~
If to the Corporation:Palo Alto Public Improvement Corporation
c/o City Clerk
P. O. Box 10250
Palo Alto, CA 94303
If to the Trustee:U.S. Bank Trust National Association
Corporate Trust Services
One California Street, Suite 400
San Frar,cisco, CA 94111
Fax: .415/273-4590
Section 14.03. Governing Law. This Agreement shall be construed and governed in accordance with the laws of the State.
Section 14.04. Binding Effect; Successors. This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns. Whenever in this Agreement either the Corporation, the City or the Trustee is named or referred to, such
reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on
behalf of the Corporation, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so
expressed or not.
Section 14.05. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same agreement.
Section 14.06. Destruction of Cancelled Certificates. Whenever in this Agreement provision is made for the surrender
to or cancellation by the Trustee and the deliver,/to the City of any Certificates, the Trustee may, upon the request of the City Representative, in lieu of
such cancellation and delivery, destroy such Certificates and deliver a certificate of such destruction to the City.
Section 14.07. Headings. The headings or titles of the several Articles and Sections hereof, and any table of contents appended
to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Agreement. All references
herein to "Articles", "Sections", and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement; and the words
-32-
"herein", "hereof", "hereunder~' and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
Section 14.08. Waiver of Notice. Whenever in this Agreement the giving of notice by mail or otherwise is required, the giving
of such notice may be waived in writing by the person entitled to receive such notice and in any case the giving or receipt of such notice shall not be a
condition precedent to the validity of any action taken in reliance upon such waiver.
Section 14.09. Separability of Invalid Provisions. In case any one or more of the provisions contained in this
Agreement or in .the Certificates shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed .as~ if such invalid or illegal or
unenforceable provision had never been contained herein. The parties hereto hereby declare that they would have~nt~red into this Agreement and
each and every other section, paragraph, sentence, clause or phrase hereof a~d authorized the-delivery of the Certificates pursuant thereto
irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Agreement may be held illegal, invalid or
unenforceable.
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IN WITNESS WHEREOF, the pa~ties have executed this Agreement as of the date and year first above written.
U.S. BankTrust National As~ciation, ~-~ee
Authorized Officer
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
President
Attest:
Secreta~
CITY OF PALO ALTO
(S E A L)
Attest:
Director of Administrative Services
CityClerk
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EXHIBIT A
(FORM OF SERIES 2OO2A CERTIFICATE OF PARTICIPATION)
(TAX-EXEMPT)
CITY OF PALO ALTO
CERTIFICATE OF PARTICIPATION
(Civic Center Refinancing and Downtown Parking Improvements Project)
Series 2OO2A (Tax-Exempt)
Evidencing the Undivided Fractional Interest of the Owner
Hereof in Lease Payments to be Made by the
CITY OF PALO ALTO, CALIFORNIA
As Rental For Certain Property Pursuant
to a Lease Agreement With the
Palo Alto Public Improvement Corporation
DATED DATE:RATE OF INTEREST:MATURITY DATE:CUSIP
January __, 2002
REGISTERED OWNER:
PRINCIPAL AMOUNT:
THIS IS TO CERTIFY THAT the Registered Owner identified above, or registered assigns, as the registered owner (the "Registered Owner") of
this Certificate of Participation (the "Certificate") is the owner of an undivided fractional interest in Lease Payments under the Lease Agreement dated
as of January I, 2002, by and between the Palo Alto Public Improvement Corporation, a nonprofit public benefit corporation duly formed and acting
under the laws of the State of California (the "Corporation"), and the Ci~/of Palo Alto, a chartered municipal corporation and political subdivision
duly organized and existing under the Constitution and the laws of the State of California the ("Cit~') (the" Lease Agreement") which Lease Payments
and certain other rights and interests under the Lease Agreement have been assigned to U.S. Bank Trust National Association, as trustee (the
"Trustee"), having a corporate trust office in San Francisco, California (the "Corporate Trust Office"), provided for transfer, exchange, surrender,
registration and payment of Certificates means the corporate trust office of U.S. Bank Trust National Association in [St. Paul, Minnesota].
The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Lease Agreement, on the Maturi~/Date identified
above, the Principal Amount identified above, representing a portion of the Lease Payments designated as principal, and to receive on September I,
2002 and semiannually thereafter on March I and September I of each year (the "Payment Dates") until payment in full of said principal, the
Registered Owner's proportionate share of the Lease Payments designated as interest coming due during the interest period immediately preceding
each of the Payment Dates; provided that interest with respect hereto shall be payable from the Payment Date next preceding the date of execution of
this Certificate unless (i) this Certificate is executed on a Payment Date, in which event interest shall be payable from such Payment Date, or (ii) this
Certificate is executed after the close of business on the fifteenth (15th) day of the month immediately preceding a Payment Date and prior to such
Payment Date, in which event interest shall be payable from such Payment Date, or (iii) unless this Certificate is executed on or;~.efoj:e August 15,
2002, in which event interest shall be payable from January __, 2002. Said proportiomm:~are of the portion of the Lease Pay~_~¢s~signated as
interest is the result of the multiplica~-O~ the aforesaid portion of the Lease Payme~ts~signated as principal by the Rate of J~e~t per annum
identified a~. Rid amounts are~l~l~in lawful money of the United States of America in the case of principal and interest at maturity upon
presentation hereof at the Corporate Trust Office of the Trustee, and in the case of interest prior to maturity by check or draft mailed by the Trustee
to the Registered~l~ner hereof at the address as it appears on the registrat~_s.of the Trustee. :,: and amon~
This Certificate has bee~'~e~ecuted and delivered by the Trustee~ri~m¢o the terms of a Trust Agreement by and among the Trustee, the
Corporation and the City, dated a£of~anuary I, 2002 (the "Trust Agreem~-n~.~The City has certified that it is authorized to em.er into the Leas~
Agreement and the Trust Agreement under the constitution and laws of the State of California, for the purpose of leasing ce~in land and pu~
improvements from the Corporation. Reference is hereby made to the Lease Agreement and the Trust_Agreement (copi~o! ~hich are on file at ~
Corporate Trust Office of the Trustee) for a description of the terms on which the Certificates are de iven~ghts~them~t~r~of~t~ owners of the
Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease Agreement, to all of the
provisions of the Lease Agreement and the Trust Agreeme~ ~ ~egbtered~wne~ ~f this C~itkate, by ~€~p~i~i~ehereof,!~s~d_,agrees.
The City is obli~t~i] under the Lease Agreement t~'p~/[ease Payments from any source of a~ait~bte.funds. The obligation of the City to
pay the Lease Payments doe~'i~bt constitute an obligation of the City for which the City is obligated to le~/or pledge any form of taxation or for which
the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt of the City, the State
of (alifornb or any of its political subdivisions, and does not constitute an indebtedness within the meaning of any constitution~! or statutory debt
limitation or restriction.
To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by
the parties thereto with the written consent of the owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then
outstanding, and may be amended without such consent under certain circumstances; provided that no such amendment shall adversely affect the
interests of the owners of the Certificates or shall impair the right of any owner to receive in any case such owners proportionate share of any Lease
Payment in accordance with such owners Certificate. ¯
This Certificate is transferable by the Registered Owner hereof, in person or by his attorney duly authori7ed in writing, at the Corporate
Trust Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges, if any, provided in the Trust
Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of authorized denomination
or denominations and of the same maturity, for the same aggregate principal amount will be executed and delivered to the transferee in exchange
herefor. The City, the Corporation and the Trustee may treat the registered owner hereof as the absolute owner hereof for all purposes, whether or not
this Certificate shall be overdue, and the City, the Corporation and the Trustee shall not be affected by any notice to the contrary.
The Certificates are not subject to optional prepayment prior to.their respective stated maturities.
The Certificates are subject to prepayment on any Payment Date in whole, or in part among maturities on a pro rata basis and by lot
within a maturity, from the Her Proceeds (as defined in the Trust Agreement) of insurance or condemnation with respect to the Leas~ Property (as
defined in the Lease Agreement), which Net Proceeds are deposited in the Lease Payment Fund and credited towards the prepayment of the Lease
Payments made by the City pursuant to the Lease Agreement, at a prepayment price equal to the principal amount thereof to be prepaid together
with accrued interest to the date fixed for prepayment, without premium.
To the extent that the Trustee shall have prepaid Certificates in part pursuant to the prepayment provisions of the Trust Agreement, the
amount of the Certificates to be prepaid in subsequent years pursuant to this paragraph will be reduced to correspond to the principal components of
the Lease Payments prevailing following such redemption, determined as set forth in the Lease Agreement.
As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than thirty (30) nor more than forty-five (45) days
before the prepayment date, to the registered owner of the Certificate to be prepaid, but neither failure to receive such notice nor any defect in the
notice so mailed shall affect the sufficiency of the proceedings for prepayment.
A-2
If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest represented
hereby shall cease to accrue from and after the date fixed for prepayment.
Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to
the Trustee for registration of transfer, exchange, or payment, and any Certificate executed and delivered is registered in the name of Cede & Co. or in
such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co., or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
IN WITNESS WHEREOF, this Certificate has been executed and delivered by U.S. Bank Trust National Association, as trustee, acting
pursuant to the Trust Agreement.
Execution Date:
U.S. Bank Trust National Association, as Trustee
By:
Authorized Officer
(FORM OF ASSIGNMENT)
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Certificate and do(es) hereby irrevocably constitute and appoint
....... attorney, to transfer the same on the registration books of the Trustee, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed by an eligible guarantor NOTICE: The signature on this assignment must correspond with the name(s) as
written on the face of the within Certificate in every
particular without alteration or enlargement or any change
whatsoever.
A-4
EXHIBIT B
(FORM OF SERIES 2OO2B CERTIFICATE OF PARTICIPATION)
(TAXABLE)
CITY OF PALO ALTO
CERTIFICATE OF PARTICIPATION
(Civic Center Refinancing and Downtown Parking Improvements Project)
Series 2OO2B (Taxable)
Evidencing the Undivided Fractional Interest of the Owner
Hereof in Lease Payments to be Made by the
CITY OF PALO ALTO, CALIFORNIA
As Rental For Certain Property Pursuant
to a Lease Agreement With the
Palo Alto Public Improvement Corporation
DATED DATE:RATE OF INTEREST:MATURITY DATE:CUSIP
January__, 2002
REGISTERED OWNER:
PRINCIPAL AMOUNT:
THIS IS TO CERTIFY THAT the Registered Owner identified above, or registered assigns, as the registered owner (the "Registered Owned') of
this Certificate of Participation (the "Certificate") is the owner of an undivided fractional interest in Lease Payments under the Lease Agreement dated
as of January I, 2002, by and between the Palo Alto Public Improvement Corporation, a nonprofit public benefit corporation duly formed and acting
under the laws of the State of California (the "Corporation"), and the City of Palo Alto, a chartered municipal corporation and political subdivision
duly organized and existing under the Constitution and the laws of the State of California the ("City") (the" Lease Agreement") which Lease Payments
and certain other rights and interests under the Lease Agreement have been assigned to U.S. Bank Trust National Association, as trustee (the
"Trustee"), having a corporate trust office in San Francisco, California (the "Corporate Trust Office"), provided for transfer, exchange, surrender,
registration and payment of Certificates means the corporate trust office of U.S. Bank Trust National Association in [St. Paul, Minnesota].
The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Lease Agreement, on the Maturity Date identified
above, the Principal Amount identified above, representing a portion of the Lease Payments designated as principal, and to receive on September I,
2002 and semiannually thereafter on March I and September I of each year (the "Payment Dates") until payment in full of said principal, the
Registered 0wneds proportionate share of the Lease Payments designated as interest coming due during the interest period immediately preceding
each of the Payment Dates; provided that interest with respect hereto shall be payable from the Payment Date next preceding the date of execution of
this Certificate unless (i) this Certificate is executed on a Payment Date, in which event interest shall be payable from such Payment Date, or (ii) this
Certificate is executed after the close of business on the fifteenth (15th) day of the month immediately preceding a Payment Date and prior to such
Payment Date, in which event interest shall be payable from such Payment Date, or (iii) unless this Certificate is executed on or before August 15,
2002, in which event interest shall be payable from January __, 2002. Said proportionate share of the portion of the Lease Payments designated as
A-5
interest is the result of the multiplication of the aforesaid portion of the Lease Payments designated as principal by the Rate of Interest per annum
identified above. Said amounts are payable in lawful money of the United States of America in the case of principal and interest at maturity upon
presentation hereof at the Corporate Trust Office of the Trustee, and in the case of interest prior to maturity by check or draft mailed by the Trustee
to the Registered Owner hereof at the address as it appears on the registration books of the Trustee.
This Certificate has been executed and delivered by the Trustee pursuant to the terms of a Trust Agreement by and among the Trustee, the
Corporation and the City, dated as of January I, 2002 (the 'q'rust Agreement"). The City has certified that it is authorized to enter into the Lease
Agreement and the Trust Agreement under t~ constitution and laws of the State of California, for the purpose of leasing certain land and public
improvements from the Corporation. Refer~ ~ is hereby made to the Lease Agreement and the Trust Agreement (copies of which are on file at the
Corporate Trust Office of the Trustee) for a description of the terms on which the Certificates are delivered, the rights thereunder of the owners of the
Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease Agreement, to all of the
provisions of the Lease Agreement and the Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and agrees.
The City is obligated under the Lease Agreement to pay Lease Payments from any source of available funds. The obligation of the City to
pay the Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which
the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt of the City, the State
of Califo~" ,r any of its political subdivisions, and does not constitute an indebtedness within the meaning of any constitutional or statutory debt
limitatio ~triction.
io the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by
the parties thereto with the written consent of the owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then
outstanding, and may be amended without such consent under certain circumstances; provided that no such amendment shall adversely affect the
interests of the owners of the Certificates or shall impair the right of any owner to receive in any case such owner's proportionate share of any Lease
Payment in accordance with such owner's Certificate.
This Certificate is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Corporate
Trust Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges, if any, provided in the Trust
Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of authorized denomination
or denominations and of the same maturity, for the same aggregate principal amount will be executed and delivered to the transferee .in exchange
herefor. The City, the Corporation and the Trustee may treat the registered owner hereof as the absolute owner hereof for all purposes, whether or not
this Certificate shall be overdue, and the City, the Corporation and the Trustee shall not be affected by any notice to the contrary.
The Certificates maturing on or before September I, 20__, are not subject to optional prepayment prior to their respective stated
maturities. The Certificates maturing on or after September I, 20__, are subject to optional prepayment on any date on or after September I, 20__,
in whole or in part, from prepayments of the Lease Payments made at the option of the City pursuant to the Lease Agreement, at a prepayment price
equal to the principal amount thereof to be prepaid together with accrued interest to the prepayment date at the prepayment price (expressed as
percentages of the principal amount of Certificates or portions thereof to be prepaid) set forth in the following table, together with accrued interest to
the date fixed for prepayment:
Prepayment
Prepayment Dates Price
On or after September I, 20__ to and including August 31, 20__
On or after September I, 20__ to and including August 31, 20__
On or after September I, 20__ and thereafter
1%
The Certificates are also subject to prepayment on any Payment Date in whole, or in part among maturities on a pro rata basis and by lot
within a maturity, from the Net Proceeds (as defined in the Trust Agreement) of insurance or condemnation with respect to the Leased Property (as
defined in the Lease Agreement), which Net Proceeds are deposited in the Lease Payment Fund and credited towards the prepayment of the Lease
A-6
Payments made by the City pursuant to the Lease Agreement, at a prepayment price equal to the principal amount thereof to be prepaid together
with accrued interest to the date fixed for prepayment, ~thout premium.
To the extent that the Trustee shall have prepaid Certificates in part pursuant to the prepayment provisions of the Trust Agreement, the
amount of the Certificates to be prepaid in subsequent yea~ pursuant to this paragraph will be reduced to correspond to the principal components of
the Lease Payments prevailing following such redemption, determined as set forth in the Lease Agreement.
As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than thirty (30) nor more than forty-five (45) days
before the prepayment date, to the registered owner of the Certificate to be prepaid, but neither failure to receive such notice nor any defect in the
notice so mailed shall affect the sufficiency of the proceedings for prepayment.
If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest represented
hereby shall cease to accrue from and after the date fixed for prepayment.
Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to
the Trustee for registration of transfer, exchange, or payment, and any Certificate executed and delivered is registered in the name of Cede & Co. or in
such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co., or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
IN WITNESS WHEREOF, this Certificate has been executed and delivered by U.S. Bank Trust National Association, as trustee, acting
pursuant to the Trust Agreement.
Execution Date:
U.S. Bank Trust National Association, as Trustee
By:.
Authorized Officer
A-7
(FORM OF ASSIGNMENT)
For value }eceived, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within ~ificate and do(es) hereby irrevocably constitute and appoint
, attorney, to transfer the same on the registration books of the Trustee, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
" NOTICE: Signature(s) must be guaranteed by an eligible guarantor NOTICE: The signature on this assignment must correspond with the name(s) as
written on the face of the within Certificate in eve~/
particular without alteration or enlargement or any change
whatsoever.
AoE
ATTACHMENT E
OFFICIAL NOTICE OF SALE
$
CITY OF PALO ALTO
Certificates of Participation
Series 2002A (Tax-Exempt)
(Civic Center Refinancing and Downtown
Parking Improvements Project)
NOTICE IS HEREBY GIVEN that sealed proposals will be received by the City
of Palo Alto (Santa Clara County, California) (the "City"), at the offices of Jones Hall,
A Professional Law Corporation, 650 California Street, 18th Floor, San Francisco,
California 94108, on
WEDNESDAY, JANUARY 16, 2002
at 9:00 a.m. (Pacific Time) for the purchase of approximately $ principal
amount of City of Palo Alto Certificates of Participation, Series 2002A (Tax-Exempt)
(Civic Center Refinancing and Downtown ParMng Improvements Project), evidencing the
direct, undivided fractional interests of the owners thereof in lease payments to be made
by the City as the rental for certain property pursuant to a lease agreement with the Palo
Alto Public Improvement Corporation (the "Certificates"). The City may postpone the
date or change the time of the sale to any subsequent date or any other time by
providing notification via Bloomberg Financial Markets or Thomson Municipal Market
Monitor (www.tm3.com) 24 hours prior to the scheduled date and time of sale. The
actual principal amount of the Certificates may vary, higher or lower, as a function of
how the actual interest rates affect the amount of capitalized interest and the size of the
reserve fund and as a function of the actual discount taken by the successful bidder. The
definitive principal amount will be determined on the date of sale.
TERMS OF THE CERTIFICATES
DATE; FORM; DENOMINATION: The Certificates will be dated as of the date
of delivery, and will be executed and delivered in non-negotiable, fully registered form,
without coupons, in the denomination of $5,000 each or any whole multiple thereof
pursuant to a Trust Agreement, dated as of January 1, 2002 (the "Trust Agreement"), by
and among the City, the Corporation and U. S. Bank Trust National Association, San
Francisco, California, as trustee (the "Trustee"). Reference is made to the Trust
Agreement and the Lease Agreement for further details regarding the terms and
provisions of the Certificates.
The Certificates when executed and delivered wil! be registered in the name of
Cede & Co., as nominee of the Depository Trust Company, New York, New York
("DTC"), which bank will act as securities depository for the Certificates. Individual
purchase of interests in the Certificates will be made in book-entry form only, in the
principal amount of five thousand dollars ($5,000) or any integral multiple thereof, and
purchases of such interests will not receive certificates representing their interest in the
Certificates. DTC will receive payment from the Trustee of the interest and principal
and redemption premiums, if any, evidenced and represented by the Certificates in
lawful money of the United States of America, and DTC will, in turn, remit such
payments to the participants in the DTC system for subsequent disbursement to the
purchasers of interests in and beneficial owners of the Certificates.
MATURITIES: The Certificates will mature on September 1 in each of the years,
and in the amounts, as follows:
Year Principal Year Principal
(September 1)Amount (September 1)Amount
ADJUSTMENT OF PRINCIPAL AMOUNTS: The City reserves the fight to
increase or decrease the principal amount of any maturity of the Certificates by as much
as 10% as the City deems advisable in order to accomplish the optimal sizing of the
Certificate issue. Notice of such increase or decrease shall be given to the successful
bidder as soon as practicable following the notification of award, as described below.
No such adjustment will have the effect of altering the basis upon which the best bid is
determined; provided, however, that any such increase or decrease shall result in a pro rata
increase or decrease, as the case may be, in the amount of discount or premium on the
purchase of the Certificates.
INTEREST: Interest with respect to the Certificates wil! be payable from the date
of delivery, at such rate or rates to be fixed upon the sale thereof, payable semiannually
on each March 1 and September 1 (each, an "Interest Payment Date"), commencing
September 1, 2002.
PAYMENT: The Certificates and the interest with respect thereto are payable in
lawful money of the United States of America, interest being payable by check mailed to
the registered owners thereof at the address shown on the Certificate registration books
maintained by the Trustee on the 15th day of the month preceding an Interest Payment
Date. Principal will be payable upon surrender at the principal corporate trust office of
the Trustee in Los Angeles, California.
TRANSFER AND EXCHANGE: Transfer of ownership of a Certificate or
Certificates shall be made by exchanging the same for a new Certificate or Certificates
and transferring the registration of such Certificate or Certificates on the Certificate
registration books maintained by the Trustee at its principal corporate trust office in Los
Angeles, California.
OPTIONAL REDEMPTION: The Certificates are not subject to optional
prepayment prior to their respective stated maturities.
INSURANCE, TITLE INSURANCE AND CONDEMNATION REDEMPTION:
The Certificates are subject to redemption (but not in a total redemption amount of less
than $5,000) in whole or in part on any Interest Payment Date, from the net proceeds of
any insurance, title insurance or condemnation award credited towards the prepayment
of Lease Payments, at a redemption price equal to the principal amount thereof, together
with accrued interest to the date fixed for redemption, without premium.
PURPOSE: The proceeds of the Series 2002A Certificates will be applied to
refund on March 1, 2002 that certain lease agreement, dated as of March 1, 1992, by
and between the Corporation, as lessor, and the City, as lessee (the "1992 Lease") and
Certificates of Participation (1992 Civic Center Refinancing and Improvement Project)
executed and delivered in the original principal amount of $7,670,000, representing the
right to receive Lease Payments from the City under the 1992 Lease.
SECURITY: The Certificates represent direct, undivided fractional interests in
Lease Payments. In general, the City is required to pay to the Trustee specified amounts
as rental for the Palo Alto Civic Center (the "Leased Property"), which are designed to
be sufficient in both time and amount to pay the principal and premium (if any) and
interest due with respect to the Certificates. The City's obligation to pay Lease
Payments shall be in consideration of the.use and occupancy of the Leased Property
from any source of legally available funds of the City. The City has covenanted under
the Lease Agreement to take such action as may be necessary to include all Lease
Payments in its annual budgets and to make the necessary annual appropriations
therefor.
The obligation of the City to make Lease Payments does not constitute an
obligation of the City for which the City is obligated to levy or pledge any form of
taxation. Neither the Certificates nor the obligation of the City to pay Lease Payments
constitute a debt of the City, the State of California or any of its political subdivisions
within the meaning of the Constitution of the State of California.
TAX-EXEMPT STATUS: In the opinion of Jones Hall, A Professional Law
Corporation, San Francisco, California, Special Counsel, subject, however to certain
qualifications, under existing law, the portion of Lease Payments designated as and
comprising interest and received by the owners of the Certificates is excluded from gross
income for federal income tax purposes, such interest is not an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and
corporations, although for the purpose of computing the alternative minimum tax
imposed on certain corporations, and such interest is taken into account in determining
certain income and earnings. In the further opinion of Special Counsel, such interest is
exempt from California personal income taxes.
In the event that, prior to the delivery of the Certificates (a) the interest on other
obligations of the same type and character shall be declared to be subject to taxation
(either at the time of such declaration or at any future date) under any federal income
tax laws, either by the terms of such laws or by ruling of a federal income tax authority
or official which is followed by the Internal Revenue Service, or by decision of any
federal court, or (b) any federal income tax law is enacted which will have a substantial
adverse effect upon the owners of the Certificates as such, the successful bidder may, at
its option, prior to the tender of the Certificates, be relieved of its obligation to purchase
the Certificates, and in such case the deposit accompanying its bid will be returned.
LEGAL OPINION: The legal opinion of Jones Hall, A Professional Law
Corporation, San Francisco, California, Special Counsel, approving the validity of the
Lease Agreement and the Certificates will be furnished to the successful bidder without
cost. A copy of the legal opinion, certified by the official in whose office the original is
filed, will be printed on each Certificate without charge to the successful bidder.
TERMS OF SALE
FORM OF BID; MAXIMUM DISCOUNT: All bids must be for not less than all of
the Certificates hereby offered for sale and for not less than percent (__%) of
the aggregate par value thereof plus accrued interest to the delivery date. The amount of
any discount specified in any bid shall not exceed __ percent (__%) of the aggregate
principal amount of the Certificates. Each bid must be enclosed in a sealed envelope
with the envelope and bid clearly marked "Proposal for Purchase of the City of Palo
Alto Series 2002A Tax-Exempt Certificates of Participation". Each bid must be in
accordance with the terms and conditions set forth in this notice. Bids may be mailed or
delivered in care of the financial advisor at the address mentioned above, but must be
received by the date and time of sale set forth above.
FACSIMILE BIDS: Bidders may submit their bid by facsimile. Neither the City
nor Stone & Youngberg LLC take any responsibility for any difficulties in receiving fax
transmittals prior to the deadline for receipt of bids. A bid will be deemed received if
the bid form is in the process of printing in the facsimile machine in the offices of Jones
Hall by the deadline of 9:00 a.m. Please allow sufficient time for the bid to be
transmitted, as there is a time delay (typically 2-3 minutes) between the sending and
receipt of facsimile transmissions. The fax number to be used for this purpose is (415)
391-5784.
BID DEPOSIT: A good faith deposit ("Deposit") in the form of a certified or
cashier's check or a financial surety bond (a "'Financial Surety Bond") in the amount of
$ , payable to the order of the City of Palo Alto, is required for each bid to be
considered. If a check is used, it must accompany each bid. If a Financial Surety Bond
is used, it must be from an insurance company licensed to issue such a bond in the State
of California, and such bond must be submitted to the City or the City's financial
advisor prior to the opening of the bids. The Financial Surety Bond must identify each
bidder whose Deposit is guaranteed by such Financial Surety Bond.
If the Certificates are awarded to a bidder utilizing a Financial Surety
Bond, then that bidder is required to submit its Deposit to the City in the form of a
cashier's check (or wire transfer such amount as instructed by the City) not later than
3:30 p.m. Pacific Daylight Time, on the next business day following the day of award. If
such Deposit is not received by that time, the Financial Surety Bond may be drawn by
the City to satisfy the Deposit requirement. In the event the bidder fails to honor its
accepted bid, the Deposit will be retained by the City.
If the Certificates are awarded to a bidder utilizing a certified or cashier's
check, the check accompanying any accepted proposal will be held by the City following
the award to the successful bidder. If, after the award of the Certificates, the successful
bidder fails to complete its purchase on the terms stated in its proposal, the check will
be cashed by the City and the proceeds thereof will be retained by the City.
If the successful bidder completes its purchase of the Certificates on the
terms stated in its proposal, its Deposit will be applied to the purchase of the
Certifieates on the date of delivery of the Certificates. The check accompanying each
unaccepted proposal will be made available for recovery by each unsuccessful bidder.
No interest will be paid upon the deposit made by any bidder.
INTEREST RATE: Bidders must specify the rate or rates of interest which shall
be payable with respect to the Certificates. The maximum rate bid may not exceed
twelve percent (12%) per annum. Interest with respect to the Certificates is payable
semiannually on each March 1 and September 1, commencing September 1, 2002.
Bidders will be permitted to bid different rates of interest but (a) each interest rate
specified in any bid must be in a multiple of one-twentieth (1/20) or one-eighth (1/8) of
one percent; (b) interest with respect to no Certificate shall be payable at more than one
rate of interest; (c) interest with respect to each Certificate shall be computed from the
date of delivery, to its stated maturity date at the interest rate specified in the bid,
payable semiannually as set forth above; (d) interest with respect to all Certificates
maturing at any one time shall be payable at the same rate of interest; (e) any premium
must be paid as part of the purchase price, and no bid will be accepted which
contemplates the waiver of any interest or other concession by the bidder as a substitute
for payment in full of the purchase price; and (f) the maximum annual (July 1 to June 30)
amount of Lease Payments resulting from the bid shall not exceed $.
BASIS OF AWARD: Unless all bids are rejected, the Certificates will be
awarded to the bidder whose bid represents the lowest true interest cost ("TIC") to the
City. The TIC will be that nominal annual interest rate which, when compounded
semiannually and used to discount to the dated date of the Certificates all payments of
principal and interest payable with respect to the Certificates, results in an amount
equal to the principal amount of such Certificates, plus the amount of premium offered,
if any, less the amount of discount offered, if any (disregarding for the purposes of the
calculation the accrued interest to the date of delivery of the Certificates). In the event
that two or more bidders offer bids for the Certificates at the same lowest TIC, the City
will determine which bid will be accepted by lot in such matter as the City determines.
ESTIMATE OF TRUE INTEREST COST: Each bidder is requested, but not
required, to state in its bid the total true interest cost and the percentage true interest
cost (determined as described above) represented by the bid, which shall be considered
as informative only and not binding on either the bidder or the City.
RIGHT OF REJECTION: The Director of Administrative Services of the City,
pursuant to authority delegated to him bY the City Council of the City, reserves the right,
in his sole discretion, to reject any and all bids and to waive any irregularity or
informality in any bid.
PROMPT AWARD: The Director of Administrative Services of the City,
pursuant to authority delegated to him by the City Council of the City, will take action
awarding the sale of the Certificates or reject all bids not later than twenty-six (26)
hours after the expiration of time herein prescribed for the receipt of bids and until such
expiration of time all bids received shall be irrevocable. Unless such time of award is
waived by the successful bidder, the award may be made after the expiration of the
specified time if the bidder shall not have given to the City notice in writing of the
withdrawal of such proposal. Notice of the award will be given promptly to the
successful bidder.
RIGHT OF CANCELLATION: The successful bidder shall have the right, at its
option, to cancel its purchase of the Certificates if the City shall fail to cause the
execution and delivery of the Certificates and tender the same for delivery within 60
days from the date of sale thereof, and in such event the successful bidder shall be
entitled to the return of the deposit accompanying its bid.
CERTIFICATION OF REOFFERING PRICE: The successful bidder shall be
required, as a condition to the delivery of the Certificates, to certify to the City in writing
that, within one-half hour after the award, (i) the Certificates were expected to be
reoffered in a bona fide public offering, and (ii) the pric.e at which the Certificates was
expected to be sold to the public, in form and substance satisfactory to the City and to
Special Counsel.
CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION: The City
has duly notified the California Debt and Investment Advisory Commission of the
proposed sale of the Certificates. Payment of all fees to the California Debt Advisory
Commission in connection with the execution, sale and delivery of the Certificates shall
be the sole responsibility of the successful bidder, and not of the City.
NO LITIGATION: There is no litigation pending concerning the validity of the
Certificates, the existence of the City or the entitlement of the officers thereof to their
respective offices, and the successful bidder will be furnished a no-litigation certificate
certifying to the foregoing as of and at the time of delivery of the Certificates.
CUSIP NUMBERS: It is anticipated that CUSIP numbers will be printed on the
Certificates, but neither the failure to print such numbers on any Certificates nor any
error with respect thereto shall constitute cause for a failure or refusal by the purchaser
thereof to accept delivery of and pay for the Certificates in accordance with the terms
hereof. All expenses in relation to the printing of CUSIP numbers on the Certificates
shall be paid for by the City; provided, however, that the CUSIP Service Bureau charge
for the assignment of said numbers shall be the responsibility of and shall be paid for by
the purchaser.
OFFICIAL STATEMENT: A copy of the preliminary Official Statement and any
other information concerning the proposed financing will be furnished upon request to
the financial advisor of the City, Stone & Youngberg LLC, 50 California Street, Suite
2600, San Francisco, California 94111, telephone (415) 445-3200. Such preliminary
Official Statement is in a form "deemed final" by the City for purposes of SEC Rule
15c2-12 (b)(1) but is subject to revision, amendment and completion. The City will
provide the successful bidder up to 250 copies of printed copies of the final Official
Statement at no cost within seven business days after award of the Certificates. If the
successful bidder requires more than 250 copies of the final Official Statement, the
successful bidder will be required to pay the additional printing costs associated with
said additional copies.
CONTINUING DISCLOSURE: In order to assist bidders in complying with
S.E.C. Rule 15c2-12 (b)(5), the City will undertake, pursuant to the Trust Agreement and
a Continuing Disclosure Certificate, to provide certain annual financial information and
notices of the occurrence of certain events, if material. A description of this undertaking
is set forth in the Preliminary Official Statement and will also be set forth in the Final
Official Statement.
DISCLOSURE CERTIFICATE: The City will deliver to the purchaser of the
Certificates a certificate of an official of the City, dated the date of Certificate delivery,
stating that as of the date thereof, to the best of the knowledge and belief of said
official, the Official Statement does not contain an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, and
further certifying that the signatory knows of no material adverse change in the condition
of the City which would make it unreasonable for the purchaser of the Certificates to
rely upon the Official Statement in connection with the resale of the Certificates.
Dated: January __, 2002
By:/s/ Carl Yeats
Administrative Services Director
City of Palo Alto
OFFICIAL BID FORM
PROPOSAL FOR THE PURCHASE OF
$
CITY OF PALO ALTO
Certificates of Participation
Series 2002A (Tax-Exempt)
(Civic Center Refinancing and Downtown
Parking Improvements Project)
January 16, 2002
City Council
City of Palo Alto
c/o Jones Hall, A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
FAX: (415) 391-5784
NAME OF BIDDER:
(If faxed)
Ladies and Gentlemen:
We offer to purchase the $ City of Palo Alto Certificates of Participation, Series
2002A (Tax-Exempt) (Civic Center Refinancing and Downtown Parking Improvements Project) (the
"Certificates"), evidencing the direct, undivided fractional interests of the owners thereof in lease
payments to be made by the City of Palo Alto to the Palo Alto Public Improvement Corporation, in the
principal amounts, on September 1 in the years and payable as to interest as follows:
Year Principal Interest Year Principal Interest
(September 1)Amount Rate (September 1)Amount Rate
and to pay therefor the principal amount thereof, plus a premium of $
a discount on the aggregate principal amount of the Certificates of $
aggregate sum of $ ).
or minus
(making an
This proposal is made subject to all the terms and conditions of the Official Notice of Sale for
said Certificates dated January __, 2002, all of which terms and conditions are made a part hereof as
fully as though set forth in full in this proposal. This proposal is subject to acceptance, in whole or in
part, within twenty-six (26) hours after the expiration of the time for the receipt of proposals, as
specified in said Official Notice of Sale. We hereby request that __ (not to exceed 250, unless we
offer the pay the costs of printing such additional copies of the final Official Statement) printed copies
of the Official Statement pertaining to the Certificates be furnished us in accordance with the terms of
said Official Notice of Sale.
The following is our computation made as provided in the Official Notice of Sale, but not
constituting any part of the foregoing, of the net interest cost under the foregoing proposal:
Total Interest
Less Premium
Plus Discount
True Interest Cost
True Interest Rate
Following is a list of the members of our account on whose behalf this bid is made.
Respectfully submitted,
Name of firm:
Account Manager:
By:
Address:
Name, address and phone number of Bidder's representative to be contacted regarding
closing procedures:
Name:
Address:
Phone:
ATTACHMENT F
OFFICIAL NOTICE OF SALE
CITY OF PALO ALTO
Certificates of Participation
Series 2002B (Taxable)
(Civic Center Refinancing and Downtown
Parking Improvements Project)
NOTICE IS HEREBY GIVEN that sealed proposals will be received by the City
of Palo Alto (Santa Clara County, California) (the "City"), at the offices of Jones Hall,
A Professional Law Corporation, 650 California Street, 18th Floor, San Francisco,
California 94108, on
WEDNESDAY, JANUARY 16, 2002
at 9:00 a.m. (Pacific Time) for the purchase of approximately $ principal
amount of City of Palo Alto Certificates of Participation, Series 2002B (Taxable) (Civic
Center Refinancing and Downtown Parking Improvements Project), evidencing the
direct, undivided fractional interests of the owners thereof in lease payments to be made
by the City as the rental for certain property pursuant to a lease agreement with the Palo
Alto Public Improvement Corporation (the "Certificates"). The City may postpone the
date or change the time of the sale to any subsequent date or any other time by
providing notification via Bloomberg Financial Markets or Thomson Municipal Market
Monitor (www.tm3.com) 24 hours prior to the scheduled date and time of sale. The
actual principal amount of the Certificates may vary, higher or lower, as a function of
how the actual interest rates affect the amount of capitalized interest and the size of the
reserve fund and as a function of the actual discount taken by the successful bidder. The
definitive principal amount will be determined on the date of sale.
TERMS OF THE CERTIFICATES
DATE; FORM; DENOMINATION: The Certificates will be dated as of the date
of delivery, and will be executed and delivered in non-negotiable, fully registered form,
without coupons, in the denomination of $5,000 each or any whole multiple thereof
pursuant to a Trust Agreement, dated as of January 1, 2002 (the "Trust Agreement"), by
and among the City, the Corporation and U. S. Bank Trust National Association, San
Francisco, California, as trustee (the "Trustee"). Reference is made to the Trust
Agreement and the Lease Agreement for further details regarding the terms and
provisions of the Certificates.
The Certificates when executed and delivered will be registered in the name of
Cede & Co., as nominee of the Depository Trust Company, New York, New York
("DTC"), which bank will act as securities depository for the Certificates. Individual
purchase of interests in the Certificates will be made in book-entry form only, in the
principal amount of five thousand dollars ($5,000) or any integral multiple thereof, and
purchases of such interests will not receive certificates representing their interest in the
Certificates. DTC will receive payment from the Trustee of the interest and principal
and redemption premiums, if any, evidenced and represented by the Certificates in
lawful money of the United States of America, and DTC will, in turn, remit such
payments to the participants in the DTC system for subsequent disbursement to the
purchasers of interests in and beneficial owners of the Certificates.
MATURITIES: The Certificates will mature on September 1 in each of the years,
and in the amounts, as follows:
Year Principal Year Principal
(September 1)Amount (September 1)Amount
ADJUSTMENT OF PRINCIPAL AMOUNTS: The City reserves the right to
increase or decrease the principal amount of any maturity of the Certificates by as much
as 10% as the City deems advisable in order to accomplish the optima! sizing of the
Certificate issue. Notice of such increase or decrease shall be given to the successful
bidder as soon as practicable following the notification of award, as described below.
No such adjustment will have the effect of altering the basis upon which the best bid is
determined; provided, however, that any such increase or decrease shall result in a pro rata
increase or decrease, as the case may be, in the amount of discount or premium on the
purchase of the Certificates.
INTEREST: Interest with respect to the Certificates will be payable from the date
of delivery, at such rate or rates to be fixed upon the sale thereof, payable semiannually
on each March 1 and September 1 (each, an "Interest Payment Date"), commencing
September 1, 2002.
PAYMENT: The Certificates and the interest with respect thereto are payable in
lawful money of the United States of America, interest being payable by check mailed to
the registered owners thereof at the address shown on the Certificate registration books
maintained by the Trustee on the 15th day of the month preceding an Interest Payment
Date. Principal will be payable upon surrender at the principal corporate trust office of
the Trustee in Los Angeles, California.
TRANSFER AND EXCHANGE: Transfer of ownership of a Certificate or
Certificates shall be made by exchanging the same for a new Certificate or Certificates
and transferring the registration of such Certificate or Certificates on the Certificate
registration books maintained by the Trustee at its principal corporate trust office in Los
Angeles, California.
OPTIONAL REDEMPTION: The Certificates maturing on or before September
1, 20__, are not subject to optional prepayment prior to their respective stated
maturities. The Certificates maturing on or after September 1, 20__, are subject to
optional prepayment on any date on or after September 1, 20__, in whole or in part,
from prepayments of the Lease Payments made at the option of the City pursuant to
Section 10.2 of the Lease Agreement, at a prepayment price equal to the principal
amount thereof to be prepaid together with accrued interest to the prepayment date at
the prepayment price (expressed as percentages of the principal amount of Certificates
or portions thereof to be prepaid) set forth in the follgwing table, together with accrued
interest to the date fixed for prepayment:
Prepayment Dates
Prepayment
Price
On or after September 1, 20__ and prior to August 31, 20__10_.0%
On or after September 1, 20__ and prior to August 31, 20__10_.5
On or after September 1, 20__ and thereafter 100.0
INSURANCE, TITLE INSURANCE AND CONDEMNATION REDEMPTION:
The Certificates are subject to redemption (but not in a total redemption amount of less
than $5,000) in whole or in part on any Interest Payment Date, from the net proceeds of
any insurance, title insurance or condemnation award credited towards the prepayment
of Lease Payments, at a redemption price equal to the principal amount thereof, together
with accrued interest to the date fixed for redemption, without premium.
PURPOSE: The proceeds of the Series 2002B Certificates will be applied to
finance the costs of constructing the non-parking area on the Lot S/L site, located on
Bryant Street, between Lytton Avenue and University Avenue in the City.
SECURITY: The Certificates represent direct, undivided fractional interests in
Lease Payments. In general, the City is required to pay to the Trustee specified amounts
as rental for the Palo Alto Civic Center (the "Leased Property"), which are designed to
be sufficient in both time and amount to pay the principal and premium (if any)and
interest due with respect to the Certificates. The City's obligation to pay Lease
Payments shall be in consideration of the use and occupancy of the Leased Property
from any source of legally available funds of the City. The City has covenanted under
the Lease Agreement to take such action as may be necessary to include all Lease
Payments in its annual budgets and to make the necessary annual appropriations
therefor.
The obligation of the City to make Lease Payments does not constitute an
obligation of the City for which the City is obligated to levy or pledge any form of
taxation. Neither the Certificates nor the obligation of the City to pay Lease Payments
constitute a debt of the City, the State of California or any of its political subdivisions
within the meaning of the Constitution of the State of California.
TAXABLE STATUS: In the opinion of Jones Hall, A Professional Law
Corporation, San Francisco, California, Special Counsel, under existing law, the portion
of Lease Payments designated as and comprising interest and received by the owners of
the Certificates is includable in gross income for federal income tax purposes. In the
further opinion of Special Counsel, such interest is exempt from California personal
income taxes.
LEGAL OPINION: Thelegal opinion of Jones Hall, A Professional Law
Corporation, San Francisco, California, Special Counsel, approving the validity of the
Lease Agreement and the Certificates will be furnished to the successful bidder without
cost. A copy of the legal opinion, certified by the official in whose office the original is
filed, will be printed on each Certificate without charge to the successful bidder.
TERMS OF SALE
FORM OF BID; MAXIMUM DISCOUNT: All bids must be for not less than all of
the Certificates hereby offered for sale and for not less than percent (__%) of
the aggregate par value thereof plus accrued interest to the delivery date. The amount of
any discount specified in any bid shall not exceed __ percent (__%) of the aggregate
principal amount of the Certificates. Each bid must be enclosed in a sealed envelope
with the envelope and bid clearly marked "Proposal for Purchase of the City of Palo
Alto Series 2002B Taxable Certificates of Participation". Each bid must be in
accordance with the terms and conditions set forth in this notice. Bids may be mailed or
delivered in care of the financial advisor at the address mentioned above, but must be
received by the date and time of sale set forth above.
FACSIMILE BIDS: Bidders may submit their bid by facsimile. Neither the City
nor Stone & Youngberg LLC take any responsibility for any difficulties in receiving fax
transmittals prior to the deadline for receipt of bids. A bid will be deemed received if
the bid form is in the process of printing in the facsimile machine in the offices of Jones
Hall by the deadline of 9:00 a.m. Please allow sufficient time for the bid to be
transmitted, as there is a time delay (typically 24 minutes) between the sending and
receipt of facsimile transmissions. The fax number to be used for this purpose is (415)
391-5784.
BID DEPOSIT: A good faith deposit ("Deposit") in the form of a certified or
cashier's check or a financial surety bond (a "Financial Surety Bond") in the amount of
$ , payable to the order of the City of Pato Alto, is required for each bid to be
considered. If a check is used, it must accompany each bid. If a Financial Surety Bond
is used, it must be from an insurance company licensed to issue such a bond in the State
of California, and such bond must be submitted to the City or the City's financial
advisor prior to the opening of the bids. The Financial Surety Bond must identify each
bidder whose Deposit is guaranteed by such Financial Surety Bond.
If the Certificates are awarded to a bidder utilizing a Financial Surety
Bond, then that bidder is required to submit its Deposit to the City in the form of a
cashier's check (or wire transfer such amount as instructed by the City) not later than
3:30 p.m. Pacific Daylight Time, on the next business day following the day of award. If
such Deposit is not received by that time, the Financial Surety Bond may be drawn by
the City to satisfy the Deposit requirement. In the event the bidder fails to honor its
accepted bid, the Deposit will be retained by the City.
If the Certificates are awarded to a bidder utilizing a certified or cashier's
check, the check accompanying any accepted proposal will be held by the City following
the award to the successful bidder. If, after the award of the Certificates, the successful
bidder fails to complete its purchase on the terms stated in its proposal, the check will
be cashed by the City and the proceeds thereof will be retained by the City.
If the successful bidder completes its purchase of the Certificates on the
terms stated in its proposal, its Deposit will be applied to the purchase of the
Certificates on the date of delivery of the Certificates. The check accompanying each
unaccepted proposal will be made available for recovery by each unsuccessful bidder.
No interest will be paid upon the deposit made by any bidder.
INTEREST RATE: Bidders must specify the rate or rates of interest which shall
be payable with respect to the Certificates. The maximum rate bid may not exceed
twelve percent (12%) per annum. Interest with respect to the Certificates is payable
semiannually on each March 1 and September 1, commencing September 1, 2002.
Bidders will be permitted to bid different rates of interest but (a) each interest rate
specified in any bid must be in a multiple of one-twentieth (1/20) or one-eighth (1/8) of
one percent; (b) interest with respect to no Certificate shal! be payable at more than one
rate of interest; (c) interest with respect to each Certificate shall be computed from the
date of delivery, to its stated maturity date at the interest rate specified in the bid,
payable semiannually as set forth above; (d) interest with respect to all Certificates
maturing at any one time shall be payable at the same rate of interest; (e) any premium
must be paid as part of the purchase price, and no bid will be accepted which
contemplates the waiver of any interest or other concession by the bidder as a substitute
for payment in full of the purchase price; and (f) the maximum annual (July 1 to June 30)
amount of Lease Payments resulting from the bid shall not exceed $
BASIS OF AWARD: Unless a!l bids are rejected, the Certificates will be
awarded to the bidder whose bid represents the lowest true interest cost ("TIC") to the
City. The TIC will be that nominal annual interest rate which, when compounded
semiannually and used to discount to the dated date of the Certificates all payments of
principal and interest payable with respect to the Certificates, results in an amount
equal to the principal amount of such Certificates, plus the amount of premium offered,
if any, less the amount of discount offered, if any (disregarding for the purposes of the
calculation the accrued interest to the date of delivery of the Certificates). In the event
that two or more bidders offer bids for the Certificates at the same lowest TIC, the City
will determine which bid will be accepted by lot in such matter as the City determines.
ESTIMATE OF TRUE INTEREST COST: Each bidder is requested, but not
required, to state in its bid the total true interest cost and the percentage true interest
cost (determined as described above) represented by the bid, which shall be considered
as informative only and not binding on either the bidder or the City.
RIGHT OF REJECTION: The Director of Administrative Services of the City,
pursuant to authority delegated to him by the City Council of the City, reserves the right,
in his sole discretion, to reject any and all bids and to waive any irregularity or
informality in any bid.
PROMPT AWARD: The Director of Administrative Services of the City,
pursuant to authority delegated to him by the City Council of the City, will take action
awarding the sale of the Certificates or reject all bids not later than twenty-six (26)
hours after the expiration of time herein prescribed for the receipt of bids and until such
expiration of time all bids received shall be irrevocable. Unless such time of award is
waived by the successful bidder, the award may be made after the expiration of the
specified time if the bidder shall not have given to the City notice in writing of the
withdrawal of such proposal. Notice of the award will be given promptly to the
successful bidder.
RIGHT OF CANCELLATION: The successful bidder shall have the right, at its
option, to cancel its purchase of the Certificates if the City shall fail to cause the
execution and delivery of the Certificates and tender the same for delivery within 60
days from the date of sale thereof, and in such event the successful bidder shall be
entitled to the return of the deposit accompanying its bid.
CERTIFICATION OF REOFFERING PRICE: The successful bidder shall be
required, as a condition to the delivery of the Certificates, to certify to the City in writing
that, within one-half hour after the award, (i) the Certificates were expected to be
reoffered in a bona fide public offering, and (ii) the price at which the Certificates was
expected to be sold to the public, in form and substance satisfactory to the City and to
Special Counsel.
CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION: The City
has duly notified the California Debt and Investment Advisory Commission of the
proposed sale of the Certificates. Payment of all fees to the California Debt Advisory
Commission in connection with the execution, sale and delivery of the Certificates shall
be the sole responsibility of the successful bidder, and not of the City.
NO LITIGATION: There is no litigation pending concerning the validity of the
Certificates, the existence of the City or the entitlement of the officers thereof to their
respective offices, and the successful bidder will be furnished a no-litigation certificate
certifying to the foregoing as of and at the time of delivery of the Certificates.
CUSIP NUMBERS: It is anticipated that CUSIP numbers will be printed on the
Certificates, but neither the failure to print such numbers on any Certificates nor any
error with respect thereto shall constitute cause for a failure or refusal by the purchaser
thereof to accept delivery of and pay for the Certificates in accordance with the terms
hereof. All expenses in relation to the printing of CUSIP numbers on the Certificates
shall be paid for by the City; provided, however, that the CUSIP Service Bureau charge
for the assignment of said numbers shall be the responsibility of and shall be paid for by
the purchaser.
OFFICIAL STATEMENT: A copy of the preliminary Official Statement and any
other information concerning the proposed financing wil! be furnished upon request to
the financial advisor of the City, Stone & Youngberg LLC, 50 California Street, Suite
2600, San Francisco, California 94111, telephone (415) 445-3200. Such preliminary
Official Statement is in a form "deemed final" by the City for purposes of SEC Rule
15c2-12 (b)(1) but is shbject to revision, amendment and completion. The City will
provide the successful bidder up to 250 copies of printed copies of the final Official
Statement at no cost within seven business days after award of the Certificates. If the
successful bidder requires more than 250 copies of the final Official Statement, the
successful bidder will be required to pay the additional printing costs associated with
said additional copies.
CONTINUING DISCLOSURE: In order to assist bidders in complying with
S.E.C. Rule 15c2-12{b)(5), the City will undertake, pursuant to the Trust Agreement and
a Continuing Disclosure Certificate, to provide certain annual financial information and
notices of the occurrence of certain events, if material. A description of this undertaking
is set forth in the Preliminary Official Statement and will also be set forth in the Final
Official Statement.
DISCLOSURE CERTIFICATE: The City will deliver to the purchaser of the
Certificates a certificate of an official of the City, dated the date of Certificate delivery,
stating that as of the date thereof, to the best of the knowledge and belief of said
official, the Official Statement does not contain an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, and
further certifying that the signatory knows of no material adverse change in the condition
of the City which would make it unreasonable for the purchaser of the Certificates to
rely upon the Official Statement in connection with the resale of the Certificates.
Dated: January __, 2002
By:/s/ Carl Yeats
Administrative Services Director
City of Palo Alto
OFFICIAL BID FORM
PROPOSAL FOR THE PURCHASE OF
$
CITY OF PALO ALTO
Certificates of Participation
Series 2002B (Taxable)
(Civic Center Refinancing and Downtown
Parking Improvements Project)
January 16, 2002
City Council
City of Palo Alto
c/o Jones Hall, A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
FAX: (415) 391-5784
NAME OF BIDDER:
(If faxed)
Ladies and Gentlemen:
We offer to purchase the $ City of Palo Alto Certificates of Participation, Series
2002B (Taxable) (Civic Center Refinancing and Downtown Parking Improvements Projec0 (the
"Certificates"), evidencing the direct, undivided fractional interests of the owners thereof in lease
payments to be made by the City of Palo Alto to the Palo Alto Public Improvement Corporation, in the
principal amounts, on September 1 in the years and payable as to interest as follows:
Year Principal Interest Year Principal Interest
(September 1)Amount Rate (September 1)Amount Rate
and to pay therefor the principal amount thereof, plus a premium of $
a discount on the aggregate principal amount of the Certificates of $
aggregate sum of $ .).
or minus
(making an
This proposal is made subject to all the terms and conditions of the Official Notice of Sale for
said Certificates dated January __, 2002, all of which terms and conditions are made a part hereof as
fully as though set forth in full in this proposal. This proposal is subject to acceptance, in whole or in
part, within twenty-six (26) hours after the expiration of the time for the receipt of proposals, as
specified in said Official Notice of Sale. We hereby request that __ (not to exceed 250, unless we
offer the pay the costs of printing such additional copies of the final Official Statement) printed copies
of the Official Statement pertaining to the Certificates be furnished us in accordance with the terms of
said Official Notice of Sale.
The following is our computation made as provided in the Official Notice of Sale, but not
constituting any part of the foregoing, of the net interest cost under the foregoing proposal:
Total Interest
Less Premium
Plus Discount
True Interest Cost
True Interest Rate
Following is a list of the members of our account on whose behalf this bid is made.
Respectfully submitted,
Name of firm:
Account Manager:
By:
Address:
Name, address and phone number of Bidder's representative to be contacted regarding
closing procedures:
Name:
Address:
Phone:
ATTACHMENT G
26005-57 JH:SRF 12/12/01
CONTINUING DISCLOSURE CERTIFICATE
Series 2002A (Tax-Exemp0 Series 2002B (Taxable)
CITY OF PALO ALTO
Certificates of Participation
(Civic Center Refinancing and Downtown Parking Improvements Project)
This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is
executed and delivered by the CITY OF PALO ALTO (the "City") in connection with the
execution and delivery of the certificates of participation captioned above (the "Certificates").
The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of
1, 2002 (the "Trust Agreement"), by and among U.S. Bank Trust National
Association, as trustee (the "Trustee"), the City and the Palo Alto Public Improvement
Corporation (the "Corporation"). The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the holders and beneficial owners of the
Certificates and in order to assist the Participating Underwriters in complying with S.E.C. Rule
15c2-12(b) (5).
Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement,
which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined
in this Section 2, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent
designated in writing by the City and which has filed with the City and the Trustee a written
acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule. Information on the National Repositories as of
a particular date is available on the Internet at the Securities and Exchange Commission web
site located at www.sec.gov.
"Participating Underwriter" shall mean any of the original underwriters of the Certificates
required to comply with the Rule in connection with offering of the Certificates.
"Repository" shall mean each National Repository and each State Repository.
Preliminary: subject to change.
"Ruld" shall mean Rule l5c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
"State Repository" shall mean any public or private repository or entity designated by the
State of California as a state repository for the purpose of the Rule and recognized as such by
the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is
no State Repository.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than March 1
after the end of the City's fiscal year (which fiscal year currently ends on June 30), commencing
March 1, 2002 with the report for the 2000-01 fiscal year, provide to each Repository an
Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Certificate with a copy to the Trustee. Not later than 15 Business Days prior to said date, the
City shall provide the Annual Report to the Dissemination Agent (if other than the City). The
Annual Report may be submitted as a single document or as separate documents comprising a
package, and may include by reference other information as provided in Section 4 of this
Disclosure Certificate; provided that the audited financial statements of the City may be
submitted separately from the balance of the Annual Report, and later than the date required
above for the filing of the Annual Report if not available by that date. If the City's fiscal year
changes, it shall give notice of such change in the same manner as for a Listed Event under
Section 5(c). The City shall provide a written certification with each Annual Report furnished to
the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the
Annual Report required to be furnished by the City hereunder.
(b) If the City is unable to provide to the Repositories an Annual Report by the date
required in subsection (a), the City shall, by written direction, cause the Dissemination Agent to
provide to each Repository and to the Municipal Securities Rulemaking Board and each State
Repository (with a copy to the Trustee) a notice, in substantially the form attached as Exhibit
A.
(c) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the
name and address of each National Repository and each State Repository, if any; and
(ii) if the Dissemination Agent is other than the City, file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, stating the date it was provided and listing all the Repositories to which it
was provided.
Section 4. Content of Annual Reports. The City's Annual Report shall contain or
incorporate by reference the Audited Financial Statements of the City prepared in accordance
with generally accepted accounting principles as promulgated to apply to governmental entities
from time to time by the Governmental Accounting Standards Board. If the City's audited
financial statements are not available by the time the Annual Report is required to be filed
pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a
format similar to the financial statements contained in the final Official Statement, and the
audited financial statements shall be filed i.n the same manner as the Annual Report when they
become available.
In addition to any of the information expressly required to be provided under this
Disclosure Certificate, the City shall provide such further material information, if any, as may
be necessary to make the specifically required statements, in the light of the circumstances under
which they are made, not misleading.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Certificates, if
material:
(i)
(ii)
(iii)
(iv)
(v)
(v0
(vii)
(viii)
(ix)
(x)
Principal and interest payment delinquencies.
Non-payment related defaults.
Unscheduled draws on debt service reserves reflecting f'mancial
difficulties.
Unscheduled draws on credit enhancements reflecting f'mancial
difficulties.
Substitution of credit or liquidity providers, or their failure to perform.
Adverse tax opinions or events affecting the tax-exempt status of the
security.
Modifications to rights of Certificate holders.
Contingent or unscheduled redemption of Certificates.
Defeasances.
Release, substitution, or sale of property securing repayment of the
securities.
Rating changes.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City
shall as soon as possible determine if such event would be material under applicable Federal
securities law.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be
material under applicable Federal securities law, the City shall, by written direction, cause the
Dissemination Agent to promptly file a notice of such occurrence with the Municipal Securities
Rulemaking Board and each State Repository with a copy to the Trustee, together with written
direction to the Trustee whether or not to notify the Certificate holders of the filing of such
notice. In the absence of any such direction, the Trustee shall not send such notice to the
Certificate holders. Notwithstanding the foregoing, notice of Listed Events described in
subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice
(if any) of the underlying event is given to holders of affected Certificates pursuant to the Trust
Agreement.
Section 6. Termination of Reporting Obligation. The City's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Certificates. If such termination occurs prior to the final maturity of the
Certificates, the City shall give notice of such termination in the same manner as for a Listed
Event under Section 5 (c).
Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
and may discharge any such Dissemination Agent, with or without appointing a successor
Dissemination Agent. The initial Dissemination Agent shall be the City. Any Dissemination
Agent may resign by providing thirty days' written notice to the City and the Trustee.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it
may only be made in connection with a change in circumstances that arises from a change in
legal requirements, change in law, or change in the identity, nature, or status of an obligated
person with respect to the Certificates, or type of business conducted;
(b) the undertakings he'rein, as proposed to be amended or waived, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule
at the time of the primary offering of the Certificates, after taking into account any amendments
or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the
Certificates in the manner provided in the Indenture for amendments to the Indenture with the
consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel,
materially impair the interests of the holders or beneficial owners of the Certificates.
If the annual financial information or operating data to be provided in the Annual
Report is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall explain,
in narrative form, the reasons for the amendment and the impact of the change in the type of
operating data or f'mancial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in
which the change is made shall present a comparison between the financial statements or
information prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles. The comparison shall include a qualitative discussion
of the differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
investors to enable them to evaluate the ability of the City to meet its obligations. To the extent
reasonably feasible, the comparison shall be quantitative. A notice of the change in the
accounting principles shall be sent to the Repositories in the same manner as for a Listed Event
under Section 5(c).
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the City from disseminating any other information, using the means of dissemination
set forth in this Disclosure Certificate or any other means of communication, or including any
other information in any Annual Report or notice of occurrence of a Listed Event, in addition to
that which is required by this Disclosure Certificate. If the City chooses to include any
information in any Annual Report or notice of occurrence of a Listed Event in addition to that
which is specifically required by this Disclosure Certificate, the City shall have no obligation
under this Disclosure Certificate to update such information or include it in any future Annual
Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City to comply with any provision of
this Disclosure Certificate the Trustee, at the written direction of any Participating Underwriter
or the holders of at least 25% aggregate principal amount of Outstanding Certificates, shall, but
only to the extent moneys or other indemnity, satisfactory to the Trustee, has been furnished to
the Trustee to hold it harmless from any loss, costs, liability or expense, including fees and
expenses of its attorneys and any additional fees of the Trustee or any holder or beneficial
owner of the Certificates may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the City to comply with its
obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall
not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this
Disclosure Certificate in the event of any failure of the City to comply with this Disclosure
Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in
this Disclosure Certificate, and the City agrees to inden-m.ify and save the Dissemination Agent
and the Trustee, their officers, directors, employees and agents, harmless against any loss,
expense and liabilities which they may incur arising out of or in the exercise or performance of
its powers and duties hereunder, including the costs and expenses (including attorneys fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination
Agent's or the Trustee's respective negligence or willful misconduct. The Dissemination Agent
shall be paid compensation by the City for its services provided hereunder in accordance with
its schedule of fees as amended from time to time and all expenses, legal fees and advances
made or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent and the Trustee shall have no duty or obligation to review any information
provided to it by the City and shall not be deemed to be acting in any fiduciary capacity for the
City, the Certificate holders or any other party. The obligations of the City under this Section
shall survive resignation or removal of the Dissemination Agent and payment of the
Certificates.
Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the City, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and
beneficial owners from time to time of the Certificates, and shall create no rights in any other
person or entity.
Date:,2002
CITY OF PALO ALTO
By
Carl L. Yeats
Director of Administrative Services
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD AND EACH
STATE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer:
Name of Issue:
CITY OF PALO ALTO
City of Palo Alto Certificates of Participation (Civic Center Refinancing
and Downtown Parking Improvements Project) $ Series 2002A
(Tax-Exempt) and $ Series 2002B (Taxable)
Date of Issuance:,2002
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with
respect to the above-named Certificates as required by the Trust Agreement, dated as of
1, 2002, by and among U.S. Bank Trust National Association, as trustee, the City
and the Palo Alto Public Improvement Corporation. The City anticipates that the Annual
Report will be filed by
Dated:
CITY OF PALO ALTO
cc: Trustee
By
Carl L. Yeats
Director of Administrative Services
A-1
ATTACHMENT H
26005-57
PLEASE RECORD, AND
WHEN RECORDED, RETURN TO:
William H. Madison, Esq.
Jones Hall, A Professional Law Corporation
650 California Street, 18th Floor
San Francisco, California 94108
JH:WHM 11/19/01
12/10/01
ASSIGNMENT AGREEMENT
Dated as of January 1, 2002
by and between
the
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as trustee
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of January 1, 2002, by
and between the PALO ALTO PUBLIC IMPROVEMENT CORPORATION, a nonprofit public
benefit corporation duly organized and existing under the laws of the State of California (the
"Corporation") and U.S. Bank Trust National Association, a national banking association
organized and existing under the laws of the United Sates of America, as trustee (the "Trustee"),
under the Trust Agreement hereinafter defined.
In the joint and mutua! exercise of their powers, in consideration of the mutual
covenants herein contained, and for other valuable consideration, the parties hereto recite and
agree as follows:
Section 1. Recitals.
WHEREAS, the Corporation has heretofore leased certain real property, consisting of
the Palo Alto Civic Center (the "Leased Property"), including certain improvements financed by
lease transactions between the City and the Corporation in 1983 and 1992, more particularly
described in Exhibit A hereto, pursuant to that certain lease agreement, dated as of March 1,
1992, by and between the Corporation, as lessor, and the City of Palo Alto (the "City"), as
lessee (the "1992 Lease");
WHEREAS. the 1992 Lease has been duly terminated pursuant to a Termination
Agreement, dated as of January 1, 2002, between the parties;
WHEREAS. the City has determined that it is in the interests of the City at this time to
provide for the refinancing of the 1992 Lease and the Certificates of Participation executed and
delivered in connec;ion therewith (the "1992 Certificates"), and for the financing of the costs of
constructing the non-parking area on the Lot S/L site, located on Bryant Street, between Lytton
Avenue and Univ~.~rsity Avenue (the "Parking Structure Improvements"), by re-leasing the
Leased Property pursuant to a Lease Agreement, dated as of January 1, 2002, between the City
and the Corporation: and
WHEREAS, the Corporation will cause to be deposited with the Trustee (as hereinafter
defined) funds for the refinancing of the 1992 Lease and the financing of the Parking Structure
Improvements; and
WHEREAS, the Corporation will establish a trust pursuant to the Trust Agreement and
direct the Trustee to execute and deliver the two series of certificates of participation (the
"Certificates") representing undivided fractional interests in the Lease Payments to and
including the earlier of the maturity or redemption of the Certificates; and
WHEREAS, the Corporation will establish a trust pursuant to a Trust Agreement, dated
as of January 1, 2002, among the City, the Corporation, and U.S. Bank Trust National
Association, as Trustee (the "Trust Agreement"), and direct the Trustee to execute and deliver
two series of Certificates of Participation representing undivided fractional interests in the
Lease Payments payable by the City under the Lease Agreement (the "Certificates"); and
WHEREAS, each of the parties has authority to enter into this Assignment Agreement,
and has taken all actions necessary to authorize its respective officers to execute it.
Section 2. Assignment.
The Corporation hereby transfers, assigns and sets over to the Trustee, for the benefit of
the Owners of Certificates executed and delivered under the Trust Agreement, all of the
Corporation's rights under the Lease Agreement (excepting only the Corporation's rights under
Sections 5.8, 5.10, 7.3 and 9.4 of the Lease Agreement), including without limitation (1) the right
to receive and collect all of the Lease Payments (including Prepayments thereof) from the City
under the Lease Agreement, and (2) the right to exercise such rights and remedies conferred on
the Corporation pursuant to the Lease Agreement as may be necessary or convenient (i) to
enforce payment of the Lease Payments, prepayments thereof and any other amounts required
to be deposited in the Lease Payment Fund established under the Trust Agreement, or (ii)
otherwise to protect the interests of the Certificate Owners in the event of a default by the City
under the Lease Agreement. All rights assigned by the Corporation shall be administered by the
Trustee in accordance with the provisions of the Trust Agreement and for the equal and
proportionate benefit of the Owners of Certificates.
Section 3. Termination of Rights.
The Trustee, as successor to the 1992 Trustee for the 1992 Certificates (the "1992
Trustee"), hereby consents to the termination of its rights under the 1992 Lease as assignee of
the Corporation pursuant to the 1992 Assignment.
Section 4. Acceptance.
The Trustee hereby accepts the assignments made herein for the purpose of securing,
equally and proportionately, the payments due pursuant to the Lease Agreement and Trust
Agreement to, and the rights under the Lease Agreement and Trust Agreement of, the Owners of
the Certificates delivered pursuant to the Trust Agreement, all subject to the provisions of the
Trust Agreement.
Section 5. Conditions.
This Assignment Agreement shall confer no rights or impose no duties upon the Trustee
beyond those expressly provided in the Lease Agreement and Trust Agreement.
Section 6. Execution.
This Assignment Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same instrument.
-2-
IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their
officers thereunto duly authorized as of the day and year fin'st written above.
PALO ALTO PUBLIC IMPROVEMENT
CORPORATION
President
Attest:
Secretary
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee, and as successor
to the 1992 Trustee
Authorized Officer
-3-
STATE OF CALIFORNIA
COUNTY OF
)
) ss
)
On before me,, Notary
Public, personally appeared , personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s),, or the entity upon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
26005-57 JH:SRF 11/29/01
AGENDA DRAFT 12/11/01
PRELIMINARY OFFICIAL STATEMENT DATED ,2002
Ratings:
Standard & Poor's:_
NEW ISSUE - BOOK-ENTRY ONLY See "RATINGS."
In the opinion of Jones Hall. A Professional Law Corporation. San Francisco. California. Special Counsel. subject, however, to certain
~edualificarJons described herein, under existing law. the interest represented by the Series 2002A Certiiicates is excluded from gross income for
eral income tax purposes and such interest is not an item of tax preference for purposes of federal alternative minimum tax imposed on
individuals and corporations although for the purpose of computing the alternative minimum tax imposed on certain corporations, such
interest is taken into account in determining certain income and earnings. THE INTEREST REPRESENTED BY THE SERIES 2002B
CERTIFICATES WILL BE SUBJECT TO ALL APPLICABLE FEDERAL TAXATION. In the further opinion of Special Counsel, the
interest represented by the Series 2002A Certificates and the Ser~es 2002B Certificates is exempt from California personal income taxes. See
"TAX MATTERS."
$$*
Series 2002A (Tax-Exempt)Series 2002B (Taxable)
City of Palo Alto
Certificates of Participation
(Civic Center Refinancing and Downtown Parking Improvements Project)
Evidencing Proportionate Undivided Interests in
Lease Payments to be Made by the
CITY OF PALO ALTO
As the Rental for Certain Leased Property Pursuant to a
Lease Agreement with the
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
Dated: Date of Delivery Due: March 1, as shown below
The Series 2002A Certificates and the Series 2002B Certificates (collectively. the "Certificates") evidence and represent
proportionate undivided interests of the Owners thereof in the Lease Payments (which include principal and interest
components) to be made by the City of Palo Alto, a chartered municipal corporation (the "City") for the right to the tase of certain
real property and improvements ~onstitutin~ the City's Civic Center (the "Leased Property") pursuant to that certain Lease
Agreement. dated as of January 1, 2002 (the Lease Agreement"). bv and between the City, as lessee; and the Palo Alto Public
Improvement Corporation (the "Corporation"), as lessor. ~
The Series 2002A Certificates are being executed and delivered to provide funds to (i) (i) provide funds to refund on a
current basis the outstanding City of Palo Alto Certificates of Participation (1992 Civic Center Refinancing and Improvement
Project) (the "1992 Certificates"). (ii) fund a portion of the reserve fundfor the Certificates. and (iii) pay certain costs incurred in
connection with the execution and delivery of the Certificates. See "FINANCING PLAN."
The Series 2002B Certificates are being executed and delivered to provide funds to (i) finance the construction of certain
improvements to the non-parking area contained in the City's Bryant/Florence Garage complex (the "Project"). (ii) fund a portion
of the reserve fund for the Certificates, and (iii) pay certain cos(s incurred in connection with the execution and delivery of the
Certificates. See "FINANCING PLAN.~
Interest represented by the Certificates is payable on September 1. 2002 and each March 1 and September 1 thereafter. The
Certificates will be delivered as fully registered Certificates without coupons in the denomination of $5,000 or any integral
multiple of $5,000, except that no Certificate may have principal maturing in more than one year.
The City has covenanted to make the Lease Payments for the Leased Property as provided for in the Lease Agreement. to
include all such Lease Payments in each of its budgets and to make the necessary annual appropriations for all such Lease
Payments.
The Certificates will be initially delivered only in book-entry form. registered to Cede & Co. as nominee of The Depository
Trust Company, New York, New York ("DTC"). which will act as securities depository of the Certificates. Interest and principal
represented by the Certificates are payable by U.S. Bank Trust National Association, San Francisco, California, as Trustee, to
DTC, which remits suchpayments to its Participants for subsequent distribution to the beneficial owners of the Certificates. See
"THE CERTIFICATES - General" and ~APPENDIX F - Book-Entry Only System."
The Certificates are subject to prepayment prior to maturity as des~ibed in this Official Statement. See "THE
CERTIFICATES - Prepayment."
The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance
policy to be issued concurrently with the delivery of the Certificates by
[INSERT INSURER LOGO]
The obligation of the City to make the Lease Payments does not constitute a debt of the City or the State of California or
of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does
Preliminary: subject to change.
not constitute an obligation for which the City or the State of California is obligated to lev3~ or pledge any form of taxation or
for which the City or the State of California levied or pledged any form of taxation.
This cover page contains information for reference only. Investors must read the entire Official Statement to obtain
information essential in making an informed investment decision. See "RISK FACTORS" for a discussion of factors that should be
considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates.
SERIES 2002A MATURITY SCHEDULE"
Maturity Principal Interest Price or Maturity Principal Interest Price or
~Amount Rate Yield ~Amount Rate Yield
Ito come]
SERIES 2002B MATURITY SCHEDULE*
Maturity Principal Interest Price or Maturity Principal Interest Price or
(March~)Amount Rat__.Ae Yield (March I)Amount Rate Yield
[to come]
The Certificates will be sold and awarded by competitive bid held on 2002. as set forth in the O/~cia/ Notice of Sale dated
¯ 2002. The Cerdt~cates will be offered when, as and if executed and delivered and received by the Underwriter, subject to the approval as to their
iegality by ]ones Hall, A Professional Law Corporation, San Francisco. California. Special Counsel. Jones Hall. A Professional Law Corporation. is also acting
as Disclosure Counsel to the City. In addition, certain legal matters wiJJ be passed upon for the City and the Corporation by the City Attorney. It is anticipated
that the Certificates in definitive form will be available/'or delivery to DTC in New York, New York on or about 2002.
Dated:2002
No dealer, broker, salesperson or any other person has been authorized to give any information or make
any representation with respect to the Certificates, other than as contained in this Official Statement,
and, if given or made, any such information or representation must not be relied upon as having been
authorized by the City.
This Official Statement does not constitute an offer of any securities other than those described on the
cover page or an offer to sell or a solicitation of an offer to buy, nor may there be any sale of the
Certificates by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or
sale. This Official Statement is not to be construed as a contract with the purchasers of the
Certificates.
The information set forth in this Official Statement has been furnished by the City and other sources
which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. The
information and expressions of opinion in this Official Statement are subject to change without notice
and neither the delivery of this Official Statement nor any sale of the Certificates will, under any
circumstances, create any implication that there has been no change in the affairs of the City since the
date of this Official Statement.
Summaries and references to statutes and documents in this Official Statement do not purport to be
comprehensive or definitive and are qualified in their entireties by reference to each such statute or
document.
This Official Statement is submitted in connection with the sale of the Certificates and may not be
reproduced or be used, as a whole or in part, for any other purpose.
In connection with the offering of the Certificates, the Underwriter may overallot or effect transactions
which stabilize or maintain the market price of the Certificates at a level above that which might
otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any
time. The Underwriter may offer and sell the Certificates to certain dealers and dealer banks and
banks acting as agent and others at prices lower than the public offering prices stated on the cover page
of this Official Statement, and those public offering prices may be changed from time to time by the
Underwriter.
The Certificates have not been registered under the Securities Act of 1933, as amended, in reliance upon
an exemption contained in that act. The Certificates have not been registered or qualified under the
securities taws of any state.
During the initial offering period for the Certificates, copies of the Lease Agreement and Trust
Agreement may be obtained, upon written request, from the City. After delivery of the Certificates
copies of those documents may be obtained from the Trustee.
CITY OF PALO ALTO
CITY COUNCIL MEMBERS
Bern Beecham, Council Member
Jim Burch, Coundl Member
Hillary Freeman, Council Member
Yoriko Kishimoto, Council Member
Judy Kleinberg, Coundl Member
Nancy Lytle, Council Member
Jack Morton, Council Member
Dena Mossar, Council Member
Victor Ojakian, Councii Member
CITY STAFF
Frank Benest, City Manager
Emily Harrison, Assistant City Manager
Carl L. Yeats, Director of Administrative Services
Joseph Saccio, Deputy Director of Administrative Services
Tarun A. Narayan, Senior Financial Analyst, Administrative Services
Ariel Pierre Calonne, City Attorney
Donna G. Rogers, City Clerk
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Jones Hall
A Professional Law Corporation
San Francisco, California
Financial Advisor
Stone & Youngberg LLC
San Francisco, California
Trustee
U.S. Bank Trust National Association
San Francisco, California
TABLE OF CONTENTS
INTRODUCTION 1
CONTINUING DISCLOSURE 3
FINANCING PLAN 4
Estimatecl Sources and Uses of Funds 4
Refunding of the 1992 Certificates 4
The Project 5
THE CERTIFICATES 6
General 6
Registration, Transfers and Exchanges 6
Prepayment 6
LEASE PAYMENT SCHEDULE 8
SECURITY AND SOURCES OF PAYMENT
FOR THE CERTIFICATES 9
Nature of the Certificates 9
Covenant to Appropriate Funds for Rental
Payments 9
Abatement 9
Action on Default 9
Reserve Fund 10
Lease Payments 11
Additional Payments 11
Insurance 12
Substitution or Release of Leased Property 13
Additional Lease Payments 14
THE CORPORATION 15
THE CITY AND CITY FINANCES 15
General 15
Accounting Policies and Financial Reporting 15
Economic Outlook for the City 16
General Fund Financial Summary 16
Budgetary Process 18
Tax Receipts 18
Sales Taxes 19
Property Taxes 20
Rental Income
Outstanding General Fund Debt and Lease
Obligations 22
Direct and Overlapping Debt 23
Investment of City Funds 23
RISK FACTORS 25
General Considerations - Security for the
Certificates 25
Eminent Domain 26
Abatement 26
Limited Recourse on Default; No Acceleration
26
Limitation on Remedies; Bankruptcy 26
Substitution or Release of Leased Property 27
Loss of Tax Exemption 27
Seismic Considerations 27
No Liability of Corporation to the Owners 27
CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND
APPROPRIATIONS 28
Article XIIIA of the California Constitution 28
Legislation Implementing Article XIIIA 28
Article XIIIB of the California Constitution 28
Proposition 62 29
Proposition 218 29
Unitary Property 30
Future Initiatives 31
TAX MATTERS 32
CERTAIN LEGAL MATTERS 32
LITIGATION 33
FINANCIAL ADVISOR 33
UNDERWRITING 33
RATINGS 33
APPENDIX A -
APPENDIX B -
APPENDIX C -
APPENDIX D -
APPENDIX E -
APPENDIX F -
Summary of Principal Legal Documents
General Information About the City of Palo Alto
Audited Financial Statements of the City for the Year Ended
June 30, 2001
Proposed Form of Special Counsel Opinion
Form of Continuing Disclosure Certificate
Book-Entry Only System
OFFICIAL STATEMENT
$ * $ *
Series 2002A (Tax-Exempt) Series 2002B (Taxable)
CITY OF PALO ALTO
Certificates of Participation
(Civic Center Refinancing and Downtown Parking Improvements Project)
INTRODUCTION
This Official Statement, including the cover page and attached Appendices (the "Official
Statement"), provides certain information concerning the execution, sale and delivery by the
City of Palo Alto, a chartered municipal corporation (the "City"), of the Certificates captioned
above (the "Series 2002A Certificates" and the "Series 2002B Certificates" and, collectively, the
"Certificates").
All capitalized terms used in this Official Statement and not otherwise defined have the
meanings set forth in the Trust Agreement and the Lease Agreement (as defined below). See
"APPENDIX A - Summary of Principal Legal Documents."
Authority for Execution and Delivery. The Certificates will be executed and delivered
pursuant to a Trust Agreement, dated as of January 1, 2002 (the "Trust Agreement"), by and
among U.S. Bank Trust National Association, San Francisco, California, as trustee (the
"Trustee"), the City and the Corporation, and the charter of the City (the "Charter").
Terms of Certificates. Interest will accrue on the principal components of each
Certificate at the applicable interest rate set forth on the cover of this Official Statement from
the date of delivery of that Certificate until its date of maturity or prior prepayment. Interest
with respect to the Certificates is payable o~a each March 1 and September 1, commencing
September 1, 2002. The Certificates will be delivered as fully registered Certificates without
coupons in the denomination of $5,000 or any integral multiple of $5,000, except that no
Certificate may have principal maturing in more than one year. The Certificates are subject to
prepayment before maturity as described in this Official Statement. See "THE CERTIFICATES."
Security for the Certificates. The Certificates evidence and represent undivided
fractional interests of the registered owners (the "Owners") thereof in Lease Payments to be
made by the City to the Palo Alto Public Improvement Corporation (the "Corporation") for the
right to the use and occupancy of certain real property and improvements consisting of the
City's Civic Center (the "Leased Property"). The Leased Property will be leased by the City
from the Corporation pursuant to a Lease Agreement, dated as of January 1, 2002 (the "Lease
Agreement"), between the City, as lessee, and the Corporation, as lessor. In order to facilitate
the conveyance accomplished by the Lease Agreement, the City will lease the Site to the
Corporation pursuant to a Property Lease, dated as of January 1, 2002 (the "Property Lease").
The Trustee and the Corporation will enter into an Assignment Agreement, dated as of
January 1, 2002 (the "Assignment Agreement"), pursuant to which the Corporation will assign
to the Trustee for the benefit of the Owners of the Certificates substantially all of the
Corporation's right, title and interest in and to the Lease Agreement, including its fight to
receive the Lease Payments scheduled to be paid by the City due under the Lease Agreement.
Preliminary: subject to change.
The City covenants under the Lease Agreement to take such action as may be necessary
to include all Lease Payments due under the Lease Agreement in the operating budget for each
Fiscal Year and to make the necessary annual appropriations therefor, subject to abatement (as
described herein).
Abatement Risk. Lease Payments are subject to complete or partial abatement in the
event and to the extent that there is substantial interference with the City's right to use and
occupancy of the Project or any portion thereof. Abatement of Lease Payments under the Lease
Agreement, to the extent payment is not made from alternative sources as set forth below,
would result in all Certificate Owners receiving less than. the full amount of principal and
interest represented by the Certificates. See "THE PROJECT" and "RISK FACTORS -
Abatement." To the extent proceeds of an eminent domain or insurance award are available to
pay Lease Payments, or to the extent that moneys are available in the Lease Payment Fund or
the Reserve Fund, Lease Payments (or a portion thereof) may be made during periods of
abatement.
Lease Payments Are Not Debt. THE OBLIGATION OF THE CITY TO MAKE THE
LEASE Payments DOES NOT CONSTITUTE A DEBT OF THE CITY OR THE STATE OF
CALIFORNIA (THE "STATE") OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN
THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR
RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY
OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR
WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF
TAXATION.
Purposes. The proceeds of the sale of the Series 2002A Certificates will be used to
(i) provide funds to refund on a current basis the outstanding City of Palo Alto Certificates of
Participation (1992 Civic Center Refinancing and Improvement Project) (the "1992
Certificates"), (ii) fund a portion of the reserve fund for the Certificates, and (iii) pay certain
costs incurred in connection with the execution and delivery of the Certificates. See
"FINANCING PLAN."
The proceeds of the sale of the Series 2002B Certificates will be used to (i) finance the
construction of certain improvements to the non-parMng area contained in the City's
Bryant/Florence Garage complex (the "Project"), (ii) fund a portion of the reserve fund for the
Certificates, and (iii) pay certain costs incurred in connection with the execution and delivery of
the Certificates. See "FINANCING PLAN."
-2-
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the holders and beneficial owners of the
Certificates to provide certain financial information and operating data relating to the City by
no later than March 1 following the end of the City's fiscal year (which fiscal year currently
ends on June 30), commencing with the report for the 2000-01 Fiscal Year (the "Annual Report"),
and to provide notices of the occurrence of certain enumerated events, if material. The City will
file, or cause to be filed, the Annual Report with each Nationally Recognized Municipal
Securities Information Repository, and with the appropriate State information depository, if
any. The City will file, or cause to be filed, the notices of material events with the Municipal
Securities Rulemaking Board (and with the appropriate State information depository, if any).
The specific nature of the information to be contained in the Annual Report or the notices of
material events is set forth below in "APPENDIX E - Form of Continuing Disclosure Certificate."
These covenants have been made in order to assist the Underwriter in complying with S.E.C.
Rule 15c2-12(b)(5) (the "Rule").
The City has never failed to comply, in all material respects, with an undertaking under
the Rule.
-3-
FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the estimated sources and uses of funds for the 2001
Bonds (exclusive of accrued interest):
Sources of Funds:
Par Amount of Certificates
Les~ Original Issue Discount
Les~ Underwriter's Discount
Funds Relating to 1992 Certificates
Total Sources
Series 2002A Series 2002B
$.__
(__)(__)
(__)(___)
N/A
Uses of Funds:
Reserve Fund 111
Costs of Issuance Fund [21
Escrow Fund [3]N/A
Construction Fund N/A
Total Uses $__
Equal to the respective Reserve Requirements for the Series 2002A Certificates and the Series 2002B
Certificates.J2]Includes legal, rating agency and printing costs, and other miscellaneous costs of
issuance.
Represents funds to be used to refund the 1992 Certificates.
Refunding of the 1992 Certificates
A portion of the proceeds of the Certificates will be used to refund on a current basis the
remaining outstanding portion of the 1992 Certificates, which are currently outstanding in the
amount of $ . The Corporation executed and delivered the 1992 Certificates for
the purposes of (i) refinancing its obligations under certain lease transactions between the City
and the Corporation entered into in 1983 pursuant to a lease agreement dated as of October 1,
1983, by and between the Corporation, as lessor, and the City, as lessee, and (ii) financing
certain additional improvements to the Civic Center.
Proceeds of the Certificates used for refunding, together with certain funds held in the
funds and accounts related to the 1992 Certificates and made available through the defeasance
of the 1992 Certificates, will be deposited in an irrevocable escrow (the "Escrow Fund") to be.
established under the Trust Agreement and held in escrow by the Trustee on behalf of the City
and for the benefit of the owners of the 1992 Certificates. All money and Federal Securities on
deposit in the Escrow Fund will be applied to redeem all remaining 1992 Certificates in full on
March 1, 2002. The deposit ifi the Escrow Fund will result in the defeasance of the 1992
Certificates as of the Closing Date.
The fund and Federal Securities held by the Trustee in the Escrow Fund are pledged to
the payment of the 1992 Certificates. Neither the principal of the fund deposited in the Escrow
Fund nor the interest thereon will be available for the payment of principal of and interest
with respect to the Certificates.
-4-
The Project
A portion of the proceeds of the Certificates will be used to fund the construction of the
Project, which will consist of a non-parking area contained in an extension of the
Bryant/Florence parking garage on lot S/L, which is located in the City on Bryant Street
between Lytton Avenue and University Avenue. This will be a two story above-ground
structure of approximately 7,638 square feet. Upon completion the City intends to lease the
Project to one or more commercial tenants for retail and office use. The upon completion of the
Project the building will contain utility connections, but the completion of the interior space will
be the responsibility of future tenants. Construction will begin concurrently with the parking
garage in the spring of 2002 and is expected to be complete in fall of 2003.
-5-
General
THE CERTIFICATES
The Certificates evidence and represent proportionate undivided interests of the Owners
thereof in the principal and interest components of Lease Payments to be made by the City
pursuant to the Lease Agreement.
The Certificates will be delivered as fully registered Certificates without coupons in the
denomination of $5,000 or any integral multiple of $5,000, except that no Certificate may have
principal maturing in more than one year. Interest represented by each Certificate will accrue on
the principal components represented by such Certificate at the applicable interest rate from
their date of delivery until its date of maturity or prior prepayment, with interest becoming
payable on each March 1 and September 1 (each~ an "Interest Payment Date"), commencing
September 1, 2002.
Interest evidenced by each Certificate will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
Registration, Transfers and Exchanges
The Certificates will be executed and delivered as fully registered Certificates, registered
in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New
York ("DTC"), and will be available to actual purchasers of the Certificates (the "Beneficial
Owners") in the denominations set forth above, under the book-entry system maintained by
DTC, only through brokers and dealers who are or act through "DTC Participants" (as defined
herein). Beneficial Owners will not be entitled to receive physical delivery of the Certificates. If
the book-entry-only system is no longer used with respect to the Certificates, the Certificates
will be registered and transferred in accordance with the Trust Agreement. See "APPENDIX F -
Book-Entry Only System."
Prepayment
No Optional Prepayment of Series 2002B Certificates. The Series 2002A Certificates
are not subject to optional redemption before their stated maturities.
Optional Prepayment of Series 2002B Certificates. The Series 2002B Certificates
maturing on or before March 1, 20__ are not subject to optional prepayment prior to their
respective stated maturities. The Series 2002B Certificates maturing on or after March 1, 20__
are subject to prepayment on any date on or after March 1, 20__, in whole or in part, from
prepayments of the Lease Payments made at the option of the City pursuant to the Lease
Agreement, at a prepayment price equal to the principal amount to be prepaid together with
accrued interest to the prepayment date at the prepayment price (expressed as percentages of
the principal amount of Series 2002B Certificates or portions thereof to be prepaid) set forth in
the following table, together with accrued interest to the date fixed for prepayment.
Series 2002 B Certificates
Prepayment Period
Series 2002B Certificates
Prepayment Price
March 1, 20__ to and including February 28, 20__
March 1, 20__ to and including February 28, 20__
March 1, 20__ and thereafter
-6-
Prepayment from Net Proceeds of Insurance and Condemnation. The Certificates are
also subject to prepayment on any Payment Date, in whole or in part, from the Net Proceeds of
insurance or condemnation with respect to the Leased Property, which Net Proceeds are
deposited in the Lease Payment Fund and credited towards the prepayment of the Lease
Payments made by the City pursuant to the Lease Agreement, at a prepayment price equal to
the principal amount of the Certificates to be prepaid, together with accrued interest to the date
fixed for prepayment, without premium.
Selection of Certificates for Prepayment. Whenever less than all of the outstanding
Certificates are to be prepaid on any one date, the Trustee will select Certificates for
prepayment from the Outstanding Certificates not previously called for prepayment, among
maturities on a pro rata basis in integral multiples of $5,000 and by lot within a maturity in any
manner deemed fair by the Trustee. For the purposes of such selection, Certificates will be
deemed to be composed of $5,000 portions, and any such portion may be separately prepaid.
The Trustee will promptly notify the City and the Corporation in writing of the Certificates so
selected for prepayment.
Notice of Prepayment. The Trustee will mail notice of the prepayment of the
Certificates by first class mail to the respective Owners of Certificates designated for
prepayment at their addresses appearing on the Registration Books, at least 30 days but not
more than 45 days prior to the prepayment date. Neither failure to receive such notice so
mailed nor any defect in any notice so mailed will affect the sufficiency of the proceedings for
the prepayment of the Certificates.
Partial Prepayment. If a Certificate is prepaid in part only, the Trustee will execute,
authenticate and deliver to the Owner thereof, at the expense of the City, a new Certificate or
Certificates of authorized denominations equal in aggregate principal amount to the unprepaid
portion of the Certificate surrendered and of the same interest rate and the same maturity.
Effect of Prepayment. If notice of prepayment has been duly given and moneys for the
payment of the prepayment price of the Certificates to be prepaid are held by the Trustee, then
the Certificates will become due and payable on the date of prepayment, and, upon
presentation and surrender thereof at the Corporate Trust Office of the Trustee, those
Certificates will be paid at the unpaid principal amount (or applicable portion thereof) with
respect thereto, plus interest accrued and unpaid to the date of prepayment. From and after
the date of prepayment, interest represented by the prepaid Certificates will cease to accrue
and become payable. All moneys held by or on behalf of the Trustee for the prepayment of
Certificates will be held in trust for the account of the owners of the Certificates so to be
prepaid.
-7-
Payment
Date
LEASE PAYMENT SCHEDULE
Following is the annual schedule of Lease Payments due with respect to the Certificates.
Series 2002A Certificates Series 2002B Certificates
Principal Interest Annual ] Payment Principal Interest Annual
Component Component TotalI Date Component Component Total
-8-
SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES
Nature of the Certificates
Each Certificate evidences and represents an undivided fractional interest in the
principal component of the Lease Payments due under the Lease Agreement on the payment
date or prepayment date of such Certificate, and the interest component of all Lease Payments
(based on the stated interest rate with respect to such Certificate) to accrue from the date of
delivery of that Certificate to its payment date or prepayment date, as the case may be.
Under the Assignment Agreement the Corporation will assign to the Trustee, for the
benefit of the Owners of the Certificates, substantially all of the Corporation's right, title and
interest in and to the Lease Agreement, including its right to receive Lease Payments to be paid
by the City. The City will pay Lease Payments directly to the Trustee, as assignee of the
Corporation. See "- Lease Payments" below.
Covenant to Appropriate Funds for Rental Payments
The City will.c0venant in the Lease Agreement to take such action as may be necessary
to include all Lease Payments due under the Lease Agreement in each of its budgets and to
make the necessary annual appropriations for all such Lease Payments, except to the extent
such Lease Payments are payable from amounts on deposit in the Lease Payment Fund, and
subject to abatement.
Abatement
Lease Payments are to be paid by the City in each rental period for and in consideration
of the right to use and occupy the Leased Property during each such period. Except as
otherwise provided in the Lease Agreement, Lease Payments will be subject to abatement
during any period in which there is substantial interference with the use and possession of all or
a portion of the Leased Property by the City as the result of material damage, destruction, title
defect or condemnation.
To the extent proceeds of an eminent domain or insurance award are available to pay
Lease Payments, or to the extent that moneys are available in the Lease Payment Fund or the
Reserve Fund, Lease Payments (or a portion thereof) may be made during periods of abatement.
Action on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of the
Corporation under the Lease Agreement, may exercise any and all remedies available pursuant
to law or granted pursuant to the Lease Agreement. However, there is no right under any
circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not
then in default to be immediately due and payable. The Corporation and the Trustee (as
assignee of the Corporation) has the right to re-enter or repossess the Leased Property and the
right to terminate the Lease Agreement. See "RISK FACTORS - Limited Recourse on Default."
For a description of the events of default and permitted remedies of the Trustee (as
assignee of the Corporation) contained in the Lease Agreement and the Trust Agreement, see
"APPENDIX A - Summary of Principal Legal Documents."
-9-
Reserve Fund
Establishment. The Trustee will establish a reserve fund (the "Reserve Fund") under the
Trust Agreement and will hold the Reserve Fund in trust for the benefit of the Owners of the
Certificates. Within the Reserve Fund the Trustee will create two accounts, the Series 2002A
Reserve Account and the Series 2002B Reserve Account, each of which will be initially funded
through the deposit of a portion of Certificate proceeds. See "FINANCING PLAN - Estimated
Sources and Uses of Funds."
Reserve Requirements. Moneys in the Series 2002A Reserve Account will at all times be
in the amount of the Series 2002A Reserve Requirement, which is defined to be, as of the date of
calculation, amount equal to the lesser of (i) 10% of the original Principal Amount of the Tax-
Exempt Lease Payments, (ii) 125% of average annual Tax-Exempt Lease Payments, or (iii)
maximum annual Tax-Exempt Lease Payments.
Moneys in the Series 2002B Reserve Account will at all times be in the amount of the
Series 2002B Reserve Requirement, which is defined to be, as of the date of calculation, amount
equal to the lesser of (i) 10% of the original Principal Amount of the Taxable Lease Payments,
(ii) 125% of average annual Taxable Lease Payments, or (iii) maximum annual Taxable Lease
Payments.
Application of 2002A Reserve Account. If on any Payment Date the moneys available
in the Tax-Exempt Lease Payment Account do not equal the amount of the principal and
interest and prepayment premiums (if any) represented by the Series 2002A Certificates then
coming due and payable, the Trustee will apply the moneys available in the Series 2002A
Reserve Account to make delinquent Tax-Exempt Lease Payments on behalf of the City by
transferring the amount necessary for this purpose to the Tax-Exempt Lease Payment Account.
Upon receipt of any delinquent Lease Payment or portion thereof with respect to which moneys
have been advanced from the Series 2002A Reserve Account, such Lease Payment or portion
thereof shall be deposited in the Series 2002A Reserve Account to the extent of such advance.
If on any Payment Date the moneys on deposit in the Series 2002A Reserve Account and
the Tax-Exempt Lease Payment Account (excluding amounts required for payment of principal,
interest and prepayment premium, if any, represented by any Series 2002A Certificates
theretofore having come due but not presented for payment) are sufficient to pay all
Outstanding Series 2002A Certificates, including all principal, interest and prepayment
premiums (if any), the Trustee will, at the request of the City, transfer all amounts then on
deposit in the Series 2002A Reserve Account to the Tax-Exempt Lease Payment Account to be
applied to the payment of the Tax-Exempt Lease Payments on behalf of the City, and such
moneys will be distributed to the Owners of Series 2002A Certificates.
If any amounts remain in the Series 2002A Reserve Account on the date of payment in
full or provision for such payment of all Outstanding Series 2002A Certificates, the Trustee will
withdraw those funds and, at the request of the City, apply them toward payment in full of all
Outstanding Certificates or pay them to the City.
Application of Series 2002 B Reserve Accoufit. If on any Payment Date the moneys
available in the Taxable Lease Payment Account do not equal the amount of the principal and
interest and prepayment premiums (if any) represented by the Series 2002B Certificates then
coming due and payable, the Trustee will apply the moneys available in the Series 2002B
Reserve Account to make delinquent Taxable Lease Payments on behalf of the City by
transferring the amount necessary for this purpose to the Taxable Lease Payment Account.
Upon receipt of any delinquent Lease Payment or portion thereof with respect to which moneys
-10-
have been advanced from the Series 2002B Reserve Account, such Lease Payment or portion
thereof will be deposited in the Series 2002B Reserve Account to the extent of such advance.
If on any Payment Date the moneys on deposit in the Series 2002B Reserve Account and
the Taxable Lease Payment Account (excluding amounts required for payment of principal,
interest and prepayment premium, if any, represented by any Series 2002B Certificates
theretofore having come due but not presented for payment) are sufficient to pay all
Outstanding Series 2002B Certificates, including all principal, interest and prepayment
premiums (if any), the Trustee will, at the request of the City, transfer all amounts then on
deposit in the Series 2002B Reserve Account to the Taxable Lease Payment Account to be
applied to the payment of the Taxable Lease Payments on behalf of the City, and such moneys
will be distributed to the Owners of Series 2002B Certificates.
If any amounts remain in the Series 2002B Reserve Account on the date of payment in
full or provision for such payment of all Outstanding Series 2002B Certificates, the Trustee will
withdraw those funds and, at the request of the City, apply them toward payment in full of all
Outstanding Certificates or pay them to the City.
Investments. Under the Trust Agreement, moneys held by the Trustee in the Reserve
Fund will be invested by the Trustee upon the written request of the City only in Investment
Securities. Investment earnings on the Reserve Fund, to the extent they are not needed to
maintain the Reserve Fund at the Reserve Requirement, will be transferred to the Lease Payment
Fund to pay principal of, interest on and premium, if any, on the Certificates as they become
due and payable. Investment Securities in the Reserve Fund will be valued annually, and if a
withdrawal from the Reserve Fund occurs, those Investment Securities will be valued
immediately after such withdrawal and monthly thereafter until the Reserve Fund is at its
required level.
Lease Payments
For the right to the use and occupancy of the Project and Site, the Lease Agreement
requires the City to make Lease Payments. Scheduled Lease Payments relating to the
Certificates are set forth above under the heading "LEASE PAYMENT SCHEDULE."
THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL
SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN
OBLIGATION FOR WHICH THE CITY OR THE STATE IS OBLIGATED TO LEVY OR
PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS
LEVIED OR PLEDGED ANY FORM OF TAXATION.
Additional Payments
Costs of Issuance and Other Expenses. The City is obligated under the Lease Agreement
to pay when due, during the term of the Lease Agreement, in addition to the Lease Payments,
all costs and expenses incurred by the Corporation to comply with the provisions of the Trust
Agreement, including without limitation all Costs of Issuance (to the extent not paid from
amounts on deposit in the Costs of Issuance Fund), compensation due to the Trustee, and all
reasonable costs and expenses of auditors, engineers and accountants.
Maintenance, Utilities, Taxes and Assessments. In addition, throughout the term of the
Lease Agreement, all improvement, repair and maintenance of the Leased Property is the
responsibility of the City, and the City will pay for or otherwise arrange for the payment of all
-11-
utility services supplied to the Leased Property, and will pay for or otherwise arrange for the
payment of the cost of the repair and replacement of the Leased Property resulting from
ordinary wear and tear or want of care on the part of the City or any assignee or lessee of the
Leased Property.
The City will also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Corporation or the City affecting the Leased Property or the
interests or estates therein; provided that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
is obligated to pay only such installments as are required to be paid during the Term of the
Lease Agreement.
Insurance
The City agrees in the Lease Agreement that for the term of such Lease Agreement it will
maintain insurance with respect to the Leased Property against the risks and in the amounts
described in the following paragraphs.
Public Liability and Property Damage Insurance. The City is obligated under the Lease
Agreement to maintain a standard comprehensive general insurance policy or policies in
protection of the Corporation, City, and their respective members, officers, agents and
employees. This insurance coverage will provide for indemnification of those parties against
direct or contingent loss or liability for damages for bodily and personal injury, death or
property damage occasioned by reason of the operation of the Project. This insurance coverage
will provide coverage in the minimum liability limits of $1,000,000 for personal injury or death
of each person and $3,000,000 for personal injury or deaths of two or more persons in each
accident or event, and in a minimum amount of $150,000 (subject to a deductible clause of not
to exceed $250,000, or such higher amount as the City may determine, provided that such
higher deductible will be considered a self insured retention which must meet the requirements
the Lease Agreement) for damage to property resulting from each accident or event. Such public
liability and property damage insurance may, however, be in the form of a single limit policy in
the amount of $3,000,000 per occurrence covering all such risks. Such liability insurance may be
maintained as part of or in conjunction with any other liability insurance coverage carried by the
City.
The City is under no obligation to provide insurance against loss or damage occasioned
by the perils of earthquake or flood.
Fire and Extended Coverage Insurance. The City is obligated under the Lease Agreement
to maintain insurance against loss or damage to any structures constituting any part of the
Leased Property by fire and lightning, with extended coverage and vandalism and malicious
mischief insurance. This extended coverage insurance will, as nearly as practicable, cover loss
or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other
hazards as are normally covered by such insurance. Such insurance must be in an amount equal
to 100% of the replacement cost of the Leased Property. Such insurance may be subject to
deductible clauses of not to exceed $100,000 for any one loss. Such insurance may be
maintained as part of or in conjunction with any other fire and extended coverage carried by the
City. The net proceeds of such insurance will be applied as provided in the Lease Agreement.
Title Insurance. The City is obligated under the Lease Agreement to obtain on the
Closing Date a title insurance policy which insures the leasehold estate created under the Lease
Agreement, in an amount equal to the principal amount of the Certificates.
-12-
Rental Interruption Insurance The City is obligated under the Lease Agreement to
procure and maintain, or cause to be procured and maintained, throughout the term of the
Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the
use of the buildings, facilities and other improvements constituting any part of the Project, as a
result of any of the hazards covered in the fire, extended coverage and title insurance described
above. This insurance coverage must be in an amount at least equal to the maximum Lease
Payments coming due and payable during any two consecutive Fiscal Years during the Term of
the Lease. This insurance may be maintained as part of or in conjunction with any other
insurance coverage carried by the City, and may be maintained in whole or in part in the form of
the participation by the City in a joint powers authority or other program providing pooled
insurance; provided that this insurance may not be maintained by the City in the form of self-
insurance. The net proceeds of this insurance will be credited toward the payment of the Lease
Payments allocable to the insured improvements as the same become due and payable, or to the
extent there has been a draw on a Reserve Fund Surety Bond, to reimburse the Insurer as a result
of a draw on the Reserve Fund Surety Bond.
Net Proceeds; Form of Insurance. All proceeds of such insurance must be payable to the
Trustee as and to the extent required under the Lease Agreement. All policies of insurance
required by the Lease Agreement must be in form satisfactory to the Trustee. The City will pay
or cause to be paid when due the premiums for all insurance policies required by the Lease
Agreement. All such policies must provide that the Trustee will be given 30 days' notice of each
expiration, any intended cancellation thereof or reduction of the coverage provided thereby.
The Trustee will not be responsible for the sufficiency of any required insurance and will be fully
protected in accepting payment on account of such insurance or any adjustment, compromise or
settlement of any loss agreed to by the Trustee. The City will cause to be delivered to the
Trustee annually evidence that the insurance policies required by the Lease Agreement are in full
force and effect.
Substitution or Release of Leased Property
Substitution of Leased Property. Under the Lease Agreement, the City will have the
option at any time to substitute other land, facilities, improvements or other property (a
"Substitute Property") for the Leased Property or any portion thereof (a "Former Property"),
provided that the City satisfies certain requirements, including the following:
(a) The City must notify S&P in writing of such substitution;
(b) The City must certify in writing to the Corporation and the Trustee that the
estimated fair market value of the Substitute Property is at least equal to estimated fair
market value of the Former Property, except that the estimated fair market value of the
Substitute Property, together with the portion of the Leased Property remaining after the
removal of the Former Property, is not required to exceed the aggregate principal
components of the unpaid Lease Payments; and this certification must be accompanied
by an appraisal prepared by an appraiser who is independent of the City;
(c) The City must certify in writing to the Corporation and the Trustee that the
estimated useful life of the Substitute Property at least extends to the date on which the
fin!l Lease Payment becomes due and payable under the Lease Agreement; and
(d) The City must obtain a CLTA policy of title insurance, meeting the
requirements of the Lease Agreement, with respect to the Substitute Property.
-13-
Removal of Property from Leased Property. The City also will have the option at any
time to remove any property from the description of the Leased Property, provided that the
City satisfies certain conditions set forth in the Lease Agreement, including the following:
(a) The City must receive written evidence from S&P that such removal will not
cause the withdrawal or reduction of the rating then assigned to the Certificates by S&P;
(b) The City must obtain a report of an independent appraiser certifying that the
appraised value of the Leased Property which will remain following such removal is not
less than the aggregate principal amount of the Outstanding Certificates: and
(c) The City must obtain and cause to be filed with the Trustee and the
Corporation an opinion of Bond Counsel stating that such removal does not cause
interest with respect to the Certificates to become includable in the gross income of the
Certificate Owners for federal income tax purposes.
Additional Lease Payments
The Lease may be amended to obligate the City to pay additional amounts of rental
under the Lease for the use and occupancy of the Leased Property or any portion thereof, but
only if the City has filed with the Trustee written certification of the City that such amendments
will not of themselves cause a reduction or withdrawal of any rating then assigned to the
Certificates.
-14-
THE CORPORATION
The Corporation is a nonprofit, 501(c)(4) corporation formed by the City in 1983 for the
purpose, inter alia, of rendering financial assistance to the City by f'mancing, acquiring,
constructing, improving, leasing and selling buildings, improvements, equipment and other real
and personal property for the benefit of residents of the City and surrounding areas. The City
Council of the City sits as the Board of Directors of the Corporation.
THE CITY AND CITY FINANCES
General
The City is located in northern Santa Clara County, approximately 35 miles south of the
City of San Francisco. The City had a population of approximately 60,835 as of june 30, 2001.
It is part of the San Francisco Bay metropolitan area. Partly due to the presence of Stanford
University, which is adjacent to the City, Palo Alto is considered the birthplace of the high
technology industry that has made Santa Clara County famous worldwide as Silicon Valley.
The 630-acre Stanford Research Park includes the headquarters of such prestigious and
innovative high-tech leaders as Hewlett-Packard, Varian Associates, Watkins-Johnson and
Alza. Palo. Alto is a major employment center, including Stanford University, Stanford
University Medical Center, Lockheed Martin Missiles and Space, Palo Alto Medical Center, and
Xerox.
For general and demographic information regarding the City, see "APPENDIX B -
General Information About the City of Palo Alto."
The following selected financial information provides a brief overview of the City's
finances. This financial information has been extracted from the City's audited financial
statements and, in some cases, from unaudited information provided by the City's
Administrative Services Department. The most recent audited financial statements of the City
with an unqualified auditor's opinion is included as APPENDIX C.
Accounting Policies and Financial Reporting
The accounts of the City are organized on the basis of funds and account groups, each
of which is considered a separate entity. The operations of each fund are accounted for with a
separate set of self-balancing accounts that comprise its assets, liabilities, fund equity,
revenues, and expenditures or expenses, as appropriate. Government resources are allocated to
and accounted for in individual funds based upon the purposes for which they are to be spent
and the means by which the spending activities are controlled. The basis of accounting for all
funds is more fully explained in the "Notes to the City of Palo Alto General Purpose Financial
Statements" contained in Appendix C.
The City Council employs an independent certified public accountant annually to
examine the combined financial statements of the City in accordance with generally accepted
auditing standards, including such tests of the accounting records and such other auditing
procedures as such accountant considers necessary. As soon as practicable after the end of the
fiscal year, a final audit and report is submitted by such accountant to the City Council and a
copy of the financial statements as of the close of the fiscal year is published.
-15-
Economic Outlook for the City
As a result of the current recession, the City has experienced weakness in some General
Fund revenue sources. During the current fiscal year (2001-02), actual sales, transient
occupancy, and documentary transfer tax revenues have been lower than forecast. To meet
potential revenue shortfalls, the City is implementing a plan to constrain expenditures. This
plan includes a hiring freeze on non-essential positions, curtailment of travel and meeting
activities, and other expense reductions. When combined with new fee and revenue
enhancement measures, these cost constraints are expected to offset anticipated revenue
shortfalls.
As indicated in its ten year Long Range Financial Plan, the City anticipates economic
improvement toward the latter half of calendar year 2002. Technology firms such as Intel,
Cisco, AMD and Sun Microsystems that were particularly hard hit by the economic slowdown
are beginning to see firmer orders for their products. A gradual upturn in the technology sector
that results in higher consumer confidence and business spending and that builds on the City's
solid, diversified sales tax and revenue base should offset temporary weaknesses in City
resources.
General Fund Financial Summary
The information contained in the following table has been derived from the City's general
fund audited financial statements for the past three fiscal years.
See "APPENDIX C - Audited Financial Statements of the City for the Year Ended June
30, 2001" for the general fund balance sheet, a comparison of adopted budgets to actual
performance, and other financial information with respect to the City's general fund..
-16-
Table 1
CITY OF PALO ALTO
General Fund
Statement of Revenues, Expenses and Changes in Retained Earnings
(in $000's)
REVENUES
Property taxes
Sales taxes
Utility users' tax
Transient occupancy tax
Other taxes and fines
Fire protection and emergency communication services
From other agencies
Service fees and permits
Interest earnings
Rental income
Other
Total Revenues
EXPENDITURES
City Council
City Manager
City Attorney
City Clerk
City Auditor
Administrative Services
Information Resources
Human Resources
Public works
Planning and community environment
Public safety- Police
Public safety- Fire
Community services
School site operations
Total Expenditures
EXCESS OF REVENUES OVER (UNDER)
EXPENDITURES
OTHER FINANCING SOURCES (USES):
Operating transfers in
Operating transfers out
Total other financing sources (uses)
EXCESS OF REVENUES AND OTHER FINANCING
SOURCES OVER (UNDER) EXPENDITURES AND
OTHER FINANCING USES
.199._._~9 2000 200.._.~1
FUND BALANCES, BEGINNING OF YEAR
Residual equity transfers in
Residual equity transfers out
FUND BALANCES, END OF YEAR
Source: City of Palo Alto Audited Financial Statements. 1998-2001.
-17-
Budgetary Process
Budgetary control is maintained by an annual appropriation ordinance, which is
amended by City Council action, as required, throughout the year. The budget for each Fiscal
Year is initially presented to the Finance Committee of the City Council, and then to the City
Council as a whole for review, comment and action.
The level of budgetary control (the level at which expenditures may not legally exceed
appropriations) is by department in the General Fund and by fund for the Special Revenue,
Debt Service, Enterprise, and Internal Service Funds. The City utilizes an encumbrance system
to track purchase orders as they are issued, and corresponding appropriation amounts are
reserved for later payment to avoid overcommitment of funds.
Tax Receipts
Taxes received by the City include property taxes, sales taxes, transient occupancy
taxes, utility users taxes and others. Of such taxes, sales taxes (approximately __% of the
City's 2000-01 General Fund revenues) and property taxes (approximately __% of 2000-01
General Fund revenues), constitute major sources of General Fund revenues. The City believes
that none of the general taxes currently imposed by or for the benefit of the City are affected by
Proposition 62 or Proposition 218. See "CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND APPROPRIATIONS - Proposition 62" and " - Proposition
218."
The following table sets forth tax revenues received by the City for the past five fiscal
years by source:
Table 2
CITY OF PALO ALTO
General Fund Tax Revenues by Source
For Fiscal Years 1996-97 through 2000-01
(in $000's)
1996-97 1997-98 1998.99 1999-00 2000-01
Source:
Sales taxes S18,277 20,011 20,225 22,867 25,786
Property taxes 7,735 8,903 9,521 10,770 12,110
Transient Occupancy Tax 5,107 5,846 6,551 8,293 9,359
Utility Users Tax 5,509 5,780 6,039 5,861 6,895
Other taxes and fines 5.299 6.694 7,255 9.096 8.887
Total $41,927 47,234 49,591 56,887 63,037
Source: City of Palo Alto, Administrative Services Department, Comprehensive Annual Financial Report (2000-01).
-18-
Sales Taxes
Sales tax represents the largest source of revenue to the City. A sales tax is imposed on
retail sales or consumption of personal property. The tax rate is established by the State
Legislature. Effective. , [199_][200_], the statewide tax rate is __%. An additional
__% is collected in Santa Clara County for transportation purposes. The State collects and
administers the tax, and makes distributions on taxes collected within the City as follows:
Table 3
CITY OF PALO ALTO
Sales Tax Rates
State General Fund .....................................................................................%
County Transportation Fund (Transp. Dev. Act) .....................................
County Transportation Fund .....................................................................
City ...........................................................................................................~
Total ..............................................................................................%
The State's actual administrative costs with respect to the portion of sales taxes
allocable to the City are deducted before distribution and are determined on a quarterly basis.
-19-
During the first two quarters of calendar year 2001, total sales tax revenues in the City
amounted to $$8,948,730, a __% [increase] [decrease] from the sales tax revenues for the first
two quarters of calendar year 2000. The following table shows annual sales tax revenues for the
City for the last five years and the first two quarters of 2000-01.
Table 4
CITY OF PALO ALTO
Sales Tax Revenues
1st & 2d Q.
1996 1997 199._~8 "199...~9 2000 200_._~1
ApparelStores $ 953,197 $ 992,026 $ ],032.406 $1,]55.528 $1,303.284 $ 650,098
Department Stores 2,433,319 2,821,052 2,758,758 2,863,543 3,104,704 1,281,902
Furniture/Appliance 1.067.197 1.159.748 1.148.431 346.464 375.351 144.350
DrugStores 163.495 211.342 136.618 165.077 230.613 128.750
Recreation Products 290.722 3t8.361 314.138 348.967 369.939 164.582
Florist/Nursery 43.787 "46.214 81.679 104.170 106.769 53.492
Miscellaneous Retail 1.426.493 1.685.460 1.899.791 2.170.812 2.557.252 980.738
Restaurants 1.811.171 1.958.925 2.082.419 2.289.402 2.511.032 1.161.305
Food Markets 315.283 336.903 346.451 357.305 365.133 172.301
Liquor Stores 37.732 42.769 47.820 55.803 62.928 39.785
Food Processing Equipment 16.597 14.709 12.135 816 61 S 110
Auto Parts/Repair 170.239 199.058 186.909 172.760 181.193 86.453
Auto Sales- New 1.497.169 1.813.601 2.124.141 2.420.424 2.916.177 1.249.042
Auto Sales - Used 100.687 116.174 127.794 134.399 224.791 97.190
Service Stations 322.081 283.312 274.764 287.577 329.534 183.796
Misc. Vehicle Sales 12.032 (44.089)(23.766)62.929 193.471 85.054
Building Materials - Whsle 79.837 79.241 60.963 56.329 57.396 31.138
Building Materials - Retail 157.095 169.152 169.842 151.529 190,055 92.692
Retail Store Totals 10.898.133 12.203.958 12.781.293 13.143.834 15.080.237 6.602.778
Business toBusiness 4.050.717 4,149,289 3.944.535 5,523,977 6.074.739 2,297,091
Miscellaneous 166.495 197.787 187.305 199.222 198.997 48.861
Total $ 15,115.345 $ 16,551,034 $ 16.913.133 $ 18,867,033 $21,353.973 $8.948,730
Percentage Change N/A 9.5%2.2%11.6%13.2%N/A
Source: MBIA MuniServices Sales Tax Analysis and Reporting Service for the City of Palo Alto.
Property Taxes
Property taxes represent the [[fourth]] largest source of General Fund revenue. It has
also been the primary revenue source affected by voter initiatives and legislative actions. With
approval of Proposition 13, property tax revenues were first curtailed almost 20 years ago
when they were reduced by two-thirds and thereafter limited to 2% annual increases or the CPI,
whichever was less.
Assessed Valuation. All property is assessed using full cash value as defined by Article
XIIIA of the State Constitution. State law provides exemptions from ad valorem property
taxation for certain classes of property such as churches, colleges, non-profit hospitals, and
charitable institutions. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES AND APPROPRIATIONS" above.
-20-
Future assessed valuation growth allowed under Article XIIIA (new construction, certain
changes of. ownership, 2% inflation) will be allocated on the basis of "situs" among the
jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and
schools will share the growth of "base" revenues from the tax rate area. Each year's growth
allocation becomes part of each agency's allocation in the following year.
For assessment and collection purposes, property is classified as either "secured" or
"unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured
roll" is that part of the assessment roll containing State-assessed property and real property
having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the
taxes. Unsecured property comprises all property not attached to land such as personal
property or business property. Boats and airplanes are examples of unsecured property.
Unsecured property is assessed on the.unsecured roll.
The following table shows assessed valuations and tax levies for the past five fiscal
years. Because the City participates in the County's Teeter Plan (see "County Tax Loss Reserve
Account ('Teeter Plan ')" below), the City receives one hundred percent of taxes levied.
Table 5
CITY OF PALO ALTO
Assessed Value of Taxable Property and Total Current Tax Levy
Fiscal Years 1996-97 through 2000-01
Fiscal
Year
1996-97
1997-98
1998-99
1999-00
2000-01
Net Local Public Total Assessed Total
Secured Roll Utilities Unsecured Value [1]Current Levy_
[1] Net of homeowners' exemption,
Source: California Mu,nicipal Statistics. Inc.
County Tax Loss Reserve Account ("Teeter Plan"). Santa Clara County has elected to
follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code,
known as the "Teeter Plan," as to general taxes entered and collected on the secured tax roll.
Under the Teeter Plan, the County remits tax revenues to the respective taxing agencies, without
regard to the amounts actually collected and without regard to any delinquencies. The County
also remits to the City any supplemental property taxes collected above the original amounts
levied as a result of resale or property improvements completed throughout the year. The
County has established a special fund known as the Tax Loss Reserve Fund for the purpose of
insuring the County against delinquencies. All collections as a result of delinquencies, including
interest and penalties, are retained by the County and are used to restoi-e the balance in such
fund to its necessary balance, if required.
The effect of the Teeter Plan is that the Tax Revenues will be remitted to the City by the
County based on the amount of taxes actually levied, such that the City will receive 100% of the
amounts due to it whether or not any tax payments are delinquent. The City has participated
in the Teeter Plan since fiscal year 1993-94 and, although no assurance can be given, the City
expects that the County will continue to follow, and that the City will continue to participate
in, the Teeter Plan during the term of the Certificates.
-21-
Table 6
CITY OF PALO ALTO
Top Ten Local Secured Taxpayers
Fiscal Year 2000-01
2000-01 Percentage of Net
Property Primary Assessed Assessed
Owner Land Use Valuation Valuation [1]
$
Total $---%
[1]2000-01 Local Secured Assessed Valuation: $
Source:California Municipal Statistics. Inc.
Rental Income
In fiscal year 2000-01, Rental Income contributed __% of the City's General Fund
revenues. The primary sources of rental income are [[charges to the City's landfill site and
charges to City utilities for use of City land for substations.]] Rentals are based on an outside
appraisal performed at least every five years.
Outstanding General Fund Debt and Lease Obligations
The City currently has outstanding general fund debt and lease obligations described
below. The City has never defaulted on the payment of principal of or interest on any of its
indebtedness. The City has complied with all significant bond covenants relating to reserve and
sinking fund requirements, proofs of insurance, and budgeted revenues and maintenance costs.
1992 Certificates of Participatiorr The 1992 Certificates were outstanding in the
principal amount of $ as of June 30, 2001. The 1992 Certificates are being fully
defeased with Certificate proceeds.
1998 Certificates of Participation: The City executed and delivered certificates of
participation captioned "City of Palo Alto Certificates of Participation (Golf Course Capital
Improvements and Refinancing Project) Series 1998" in the original principal amount of
$7,750,000, which were outstanding in the principal amount of $6,640,000 as of June 30, 2001.
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Direct and Overlapping Debt
Contained within the City are overlapping local agencies providing public services which
have issued general obligation Certificates and other types of indebtedness. Direct and
overlapping bonded indebtedness is shown in the following table.
Table 7
CITY OF PALO ALTO
Statement 0f Direct and Overlapping Debt As of
[TO COME]
Investment of City Funds
Investment Policies. As a chartered city, the City operates its pooled idle cash
investments under the prudent investor rule and in conformance with State law. The City's
Director of Administrative Services, as treasurer, is charged with the responsibility of
safeguarding the City's assets, receiving all payments due the City and investing all pooled idle
cash. The investment function is under the supervision of the Deputy Director of
Administrative Services, who is accountable to the Director of Administrative Services. The
duties of the Deputy Director of Administrative Services includes managing the City's portfolio
of treasury investments, remaining accountable for the City's treasury balance, developing and
monitoring the City's cash flow model and developing long-term revenue and financing
strategies and forecasts. In all circumstances, approval from the Director of Administrative ¯
Services is required before selling securities from the City's portfolio.
The Administrative Services Department submits a quarterly report to the City Council
which includes a detailed list of all securities, investments and moneys held by the City, a
report on compliance with the City's Investment Policy, and an assessment of the City's ability
to meet its expenditure requirements for the next six months.
The City's Investment Policy requires review by the City Council annually, as part of the
budget process. The policy's objective is to maintain the level of investment of all idle funds as
close to 100% as possible and to insure that sufficient funds are always available to meet
current expenditures, while investing in instruments that provide safety, liquidity and yield.
The City's investment policy and State statutes authorize the City to invest in the
following:
Securities of the U.S. Government or its agencies, which includes callable and
multi-step-up securities, provided that (i) the potential call dates are known at
the time of purchase, (ii) the interest rates at which they "step-up" are known at
the time of purchase, and (iii) the entire face value of the security is redeemed at
the call date;
Certificates of deposit (or time deposits);
Banker's acceptance notes;
Short-term commercial paper (maturing in 180 or fewer days);
Local Agency Investment Fund;
Short-term repurchase agreements;
City of Palo Alto bonds;
Money market deposit accounts;
Mutual funds which are limited essentially to the above investments (and further
defined in the City's Investment Policy); and
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¯Negotiable Certificates of Deposit & Medium-Term Corporate Notes.
State statutes require that all deposits be insured or collateralized. Depositories holding
public funds on deposit are required to maintain collateral in the form of a pool of government
securities with a market value of at least 10 percent in excess of the City's deposit or 50% in
excess of the deposit as collateral in mortgage pools.
The City's Investment Policy was most recently amended, reviewed and approved by
the City Council on [[June 22, 1998.]]
Investment Portfolio. According to the City Treasurer's Quarterly Report for the first
quarter of fiscal year 2001-02, the City has invested funds with a market value totaling
approximately $342 million. As of June 30, 2001, 94% of the portfolio consisted of Federal
agency notes and U.S. Treasury securities. The average maturity of the portfolio was 2.4 years.
As of June 30, 2001, the market value of the City's investment portfolio ($338 million) was
102% of the investment portfolio's book value" ($333 million).
The following table summarizes certain information relating to the City's investment
portfolio as of June 30, 2001:
Table 8
CITY OF PALO ALTO
Investment Portfolio Summary
(as of June 30, 2001)
Type of Investment
State of California Local Agency Investment
Fund (LAIF)
Mutual funds (government securities)
Cash in banks (overdraft) and on hand
U,S. Agency Obligations:
Maturities of less than 1 year
Maturities of 1 to 3 years
Maturities of 3 to 5 years
Maturities of more than 5 years
Mortgage Backed Securities Maturing in 15 years
Total:
Book Value
$20,616
6,459
(818)
74,069
118,463
76,119
37,668
162
$332,737
Market Value[l]
$20,662
6,459
(818)
74,832
121,219
78,141
37,496
134
$338,125
[1] Market Value as of june 30, 2001.
Source: City of Palo Alto
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RISK FACTORS
The following factors, along with the other information in this Official Statement, should
be considered by potential investors in evaluating purchase of the Certificates. However, the
following does not purport to be an exhaustive listing of risks and other considerations which
may be relevant to an investment in the Certificates. In addition, the order in which the
following factors are presented is not intended to reflect the relative importance of any such
risks.
General Considerations - Security for the Certificates
The obligation of the City to make the Lease Payments does not constitute a debt of the
City or the State or of any political subdivision thereof within the meaning of any constitutional
or statutory debt limit or restriction, and does not constitute an obligation for which the City or
the State is obligated to levy or pledge any form of taxation or for which the City or the State
has levied or pledged any form of taxation.
Although the Lease Agreement does not create a pledge, lien or encumbrance upon the
funds of the City, the City is obligated, subject to abatement, under the Lease Agreement to pay
the Lease Payments from any source of legally available funds and the City has covenanted in
the Lease Agreement that it will take such action as may be necessary to include all rental
payments due under the Lease Agreement in its annual budgets and to make necessary annual
appropriations for all such rental payments. The City is currently liable and may become liable
on other obligations payable from general revenues, some of which may have a priority over the
Lease Payments.
The City has the capacity to enter into other obligations which may constitute additional
charges against its revenues. To the extent that additional obligations are incurred by the City,
the funds available to make Lease Payments may be decreased. If the City's revenue sources
are less than its total obligations, the City could choose to fund other activities before making
Lease Payments and other payments due under the Lease Agreement.
The City's ability to collect, budget and appropriate various revenues is subject to
current and future State laws and constitutional provisions, and it is possible that the
interpretation and application of these provisions could result in an inability of the City to pay
the Lease Payments when due. See "RISK FACTORS - Relevant Pending Litigation" and
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS."
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Eminent Domain
If the Leased Property is taken permanently under the power of eminent domain or sold
to a government threatening to exercise the power of eminent domain, the term of the Lease
Agreement will cease as of the day possession is taken. If less than all of the Leased Property
is taken permanently, or if the Leased Property or any part thereof is taken temporarily, under
the power of eminent domain, (1) the Lease Agreement will continue in full force and effect and
will not be terminated by virtue of such taking, and (2) there will be a partial abatement of
Lease Payments as a result of the application of the Net Proceeds of any eminent domain
award to the prepayment of the Lease Payments, in an amount to be agreed upon by the City
and the Corporation such that the resulting Lease Payments represent fair consideration for the
use and occupancy of the remaining usable portion of t~e Leased Property. The City covenants
in the Lease Agreement to contest any eminent domain award which is insufficient to either: (i)
redeem the Certificates in whole, if all of the Leased Property is condemned; or (ii) redeem a
pro rata share of Certificates, in the event that less than all of the Leased Property is
condemned.
Abatement
The Leased Property is currently operational as the City's Civic Center. The Lease
Agreement provides that the amount of Lease Payments will be subject to abatement during any
period in which by reason of damage or destruction there is substantial interference with the use
and occupancy by the City of the Leased Property. The amount of such abatement will be
agreed upon by the City and the Corporation such that the resulting Lease Payments represent
fair consideration for the use and occupancy of the portions of the Leased Property not
damaged or destroyed. Such abatement will continue for the period commencing with such
damage or destruction and ending with the substantial completion of the work of repair or
reconstruction. In the event of any such damage or destruction, the Lease Agreement will
continue in full force and effect and the City, in the Lease Agreement, waives any fight to
terminate the Lease Agreement by virtue of any such damage and destruction.
However, there will be no abatement of Lease Payments to the extent that the proceeds
of an eminent domain or insurance award are available to pay Lease Payments, or to the extent
that moneys are available in the Lease Payment Fund or the Reserve Fund, it being declared in
the Lease Agreement that such proceeds and amounts constitute special funds for the payment
of the Lease Payments.
Following the period for which funds are available from the Reserve Fund or other funds
and accounts established under the Trust Agreement for payment of Lease Payments, or in the
event that casualty insurance proceeds are insufficient to provide for complete repair or
replacement of such portion of the Leased Property or prepayment of the Certificates, there
could be insufficient funds to make payments to Owners in full.
Limited Recourse on Default; No Acceleration
If the City defaults on its obligation to make Lease Payments, there is no available
remedy of acceleration of the total Lease Payments due over the term ofthe Lease Agreement.
The City will only be liable for Lease Payments on an annual basis, and the Trustee would be
required to seek a separate judgment in each fiscal year for that fiscal year's rental payments.
Limitation on Remedies; Bankruptcy
The rights of the Owners of the Certificates are subject to the limitations on legal
remedies against cities in the State, including State constitutional limits on expenditures and
-26-
limitations on the enforcement of judgments against funds needed to serve the public welfare
and interest, by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditors' rights, by equitable principles,
by the exercise of judicial powers in appropriate cases and by the exercise by the federal and
State governments of their sovereign powers. The opinions of counsel, including Special
Counsel, delivered in connection with the Certificates will be so qualified. Under Chapter 9 of
the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings
for public agencies such as the City, there are no involuntary petitions in bankruptcy.
Bankruptcy proceedings, if initiated, or the exercise of powers by the federal or State
government, could subject the owners of the Certificates to judicial discretion and interpretation
of their rights in bankruptcy proceedings or otherwise and consequently may entail risk or
delay, limitation or modification of their rights~
Substitution or Release of Leased Property
As described above (see "SECURITY AND SOURCES OF PAYMENT FOR THE
CERTIFICATES - Release or Substitution of Leased Property"), the Lease Agreement permits
the City to substitute additional real property and/or improvements for existing Leased
Property upon compliance with certain conditions set forth in the Lease Agreement.
In the case of both substitution and release ~of Leased Property, the Lease Agreement
requires with respect to the value of the remaining Leased Property that its value at least equal
the aggregate principal components of the unpaid Lease Payments and the Outstanding
Certificates. Consequently, a portion of the Leased Property could be replaced with less
valuable property, or could be released altogether. Such replacement or release could have an
adverse impact on the security for the Certificates, particularly if an event requiring abatement
of Lease Payments were to occur subsequent to such substitution or release.
Loss of Tax Exemption
As discussed under the heading "TAX MATTERS," the interest represented by the Series
2002A Certificates could become includable in gross income for purposes of federal income
taxation retroactive to the date of delivery of the Series 2002A Certificates as a result of acts or
omissions of the City in violation of its covenants in the Trust Agreement and the Lease
Agreement. Should such an event of taxability occur, the Series 2002ACertificates would not
be subject to a special prepayment and would remain Outstanding until maturity or until
prepaid under the prepayment provisions contained in the Trust Agreement.
Seismic Considerations
The City, like much of California, is subject to seismic activity that could result in
interference with its right to use and possession of the Leased Property. There are several major
active fault zones transecting Santa Clara County that could cause "strong ground motion" at
the site of the Leased Property during its useful life. Those major fault zones, listed in order of
proximity to the Leased Property, are the San Andreas, Hayward, Calaveras and San Gregorio
faults. The City is not obligated by the Lease Agreement or otherwise to maintain
earthquake insurance with respect to the Leased Property. However, the City completed a
seismic retrofit of the Civic Center property in 19
No Liability of Corporation to the Owners
Except as expressly provided in the Trust Agreement, the Corporation will not have any
obligation or liability to the Owners of the Certificates with respect to the payment when due of
the Lease Payments by the City, or with respect to the performance by the City of other
-27-
agreements and covenants required to be performed by it contained in the Lease Agreement or
the Trust Agreement, or with respect to the performance by the Trustee of any right or obligation
required to be performed by it contained in the Trust Agreement.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS
Article XIIIA of the California Constitution
In 1978 California voters approved Proposition 13, adding Article XIIIA to the
California Constitution. Article XIIIA was subsequently amended in 1986, as discussed below.
Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash
value thereof, except that additional ad valorem taxes may be levied to pay debt service on
indebtedness approved by the voters prior to July 1, 1978 and on bonded indebtedness for the
acquisition or improvement of real property which has been approved on or after July 1, 1978
by two-thirds of the voters voting on such indebtedness. Article XIIIA defines full cash value to
mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under
"full cash" or thereafter, the appraised value of real property when purchased, newly
constructed, or a change in ownership have occurred after the 1975 assessment." This full cash
value may be increased at a rate not to exceed 2% per year to account for inflation.
Article XIIIA has subsequently been amended to permit reduction of the "full cash value"
base in the event of declining property values caused by damage, destruction or other factors, to
provide that there would be no increase in the "full cash value" base in the event of
reconstruction of property damaged or destroyed in a disaster.
Legislation Implementing Article XIIIA
Legislation has been enacted and amended a number of times since 1978 to implement
Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any
property tax (except to pay voter-approved indebtedness). The 1% prope.rty tax is
automatically levied by the county and distributed according to a formula among taxing
agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes
levied prior to 1979, but is subject to legislative change at any time.
Increases of assessed valuation resulting from reappraisals of property due to new
construction, change in ownership or from the 2% annual adjustment are allocated among the
various jurisdictions in the "taxing area" based upon their respective "situsi" Any such allocation
made to a local agency continues as part of its allocation in future years.
Article XIIIB of the California Constitution
At the statewide special election on November 6, 1979, the voters approved an initiative
entitled "Limitation on Government Appropriations" which added Article XIIIB to the California
Constitution. Under Article XIIIB, state and local government entities have an annual
"appropriations limit" which limits the ability to spend certain moneys which are called
"appropriations subject to limitation" (consisting of tax revenues and certain state subventions
together called "proceeds of taxes" and certain other funds) in an amount higher than the
"appropriations limit." Article XIIIB does not affect the appropriation of monies which are
excluded from the definition of "appropriations limit" including debt service on indebtedness
existing or authorized as of September 1, 1979, or bonded indebtedness subsequently approved
by the voters. In general terms, the "appropriations limit" is to be based on certain 1978-79
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expenditures, and is to be adjusted annually to reflect changes in the consumer price index,
population and services provided by these entities. Among other provisions of Article XIIIB, if
those entities' revenues in any year exceed the amounts permitted to be spent, the excess would
have to be returned by revising tax rates or fee schedules over the subsequent two years.
Section 7910 of the Government Code of the State of California requires the City to
adopt a formal appropriations limit for each fiscal year. The City's appropriations limit for
fiscal year 2001-02 is $79.7 million. The limit was calculated by applying a growth factor of
6.6% to the City's fiscal year 2000-01 limit of $74.8 million. The City's appropriations subject
to limitation for fiscal year 2001-02 are $71.4 million. This results in an unused appropriations
limit for fiscal year 2001-02 of $8.3 million.
Proposition 62
Proposition 62 was a statutory initiative adding Sections 53720 to 53730, inclusive, to
the California Government Code. It confirmed the distinction between a general tax and special
tax, established by the State Supreme Court in 1982 in City and County of San Francisco v. Farre11,
by defining a general tax as one imposed for general governmental purposes and a special tax
as one imposed for specific purposes. Proposition 62 further provided that no local government
or district may impose (i) a general tax without prior approval of the electorate by majority
vote or (ii) a special tax without such prior approval by two-thirds vote. It further provided
that if any such tax is imposed without such prior approval, the amount thereof must be
withheld from the levying entity's allocation of annual property taxes for each year that the tax
is collected. By its terms, Proposition 62 applies only to general and special taxes imposed on
or after August 1, 1985. Proposition 62 was generally upheld in Santa Clara County Local
Transportation Authority v. Guardino, a California Supreme Court decision filed September 28,
1995.
In March 1992, the City Council of the City approved a Real Property Transfer Tax (the
"Property Transfer Tax"). The Property Transfer Tax is imposed on the transfer of real
property in the City, at the rate of $3.30 per $1,000 of the value of the consideration so
transferred. In fiscal Year 2000-01, the Property Transfer Tax generated approximately $4.4
million in revenue. In the opinion of the City Attorney, the Property Transfer Tax is not
impacted by Proposition 62 because the City is a charter city. The City's authority to impose
local taxes under the "home rule" authority of the California Constitution, therefore, cannot be
restricted by a statutory initiative like Proposition 62. The California Supreme Court did not
reach this constitutional issue in Guardino.
Proposition 218
On November 5, 1996, California voters approved Proposition 218--Voter Approval
for Local Government Taxes--Limitation on Fees, Assessments, and Charges--Initiative
Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the California
Constitution, imposing certain vote requirements and other limitations on the imposition of new
or increased taxes, assessments and property-related fees and charges. Proposition 218 states
that all taxes imposed by local governments shall be deemed to be either general taxes or special
taxes. Special purpose districts, including school districts, have no power to levy general taxes.
No local government may impose, extend or increase any general tax unless and until such tax is
submitted to the electorate and approved by a majority vote. No local government may
impose, extend or increase any special tax unless and until such tax is submitted to the
electorate and approved by a two-thirds vote.
Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed
by any agency upon any parcel of property or upon any person as an incident of property
-29-
ownership except: (i) the ad valorem property tax imposed pursuant to Article XIII and Article
XIIIA of the California Constitution, (ii) any special tax receiving a two-thirds vote pursuant to
the California Constitution, and (iii) assessments, fees and charges for property related services
as provided in Proposition 218. Proposition 218 then goes on to addvoter require.ments for
assessments and fees and charges imposed as an incident of property ownership, other than
fees and charges for sewer, water, and refuse collection services. In addition, all assessments
and fees and charges imposed as an incident of property ownership, including sewer, water,
and refuse collection services, are subjected to various additional procedures, such as hearings
and stricter and more individualized benefit requirements and findings. The effect of such new
¯ provisions will presumably be to increase the difficulty a local agency will have in imposing,
increasing or extending such assessments, fees and charges.
Proposition 218 also extended the initiative power to reducing or repealing any local
taxes, assessments, fees and charges. This extension of the initiative power is not limited to
taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could
result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges,
subject to overriding federal constitutional principles relating to the impairments of contracts.
Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative
scrutiny before its impact on the City and its obligations can be determined. Certain provisions
of Proposition 218 may be examined by the courts for their constitutionality under both State
and federal constitutional law. The City is not able to predict the outcome of any such
examination.
A portion of the City's general fund revenues are derived from quarterly transfers of
revenues from the City's water enterprise as required by an amendment to the City Charter
approved by the City's voters in 1950. For Fiscal Year 1997-98, these transfers accounted for
approximately 2% of the general fund revenues, and the City has budgeted that the transfers
will account for approximately 2% of the 1998-99 general fund revenues. The City believes that
its ability to pay Lease Payments would not be adversely affected if these transfers were
successfully challenged under Proposition 218.
The foregoing discussion of Proposition 218 should not be considered an exhaustive or
authoritative treatment of the issues. The City does not expect to be in a position to control the
consideration or disposition of these issues and cannot predict the timing or outcome of any
judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals
and legislative enactments may all affect the impact of Proposition 218 on the Certificates as
well as the market for the Certificates. Legislative and court calendar delays and other factors
may prolong any uncertainty regarding the effects of Proposition 218.
Unitary Property
AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most
utility property assessed by the State Board of Equalization ("Unitary Property"), commencing
with the 1988-89 fiscal year, will be allocated as follows: (i) each jurisdiction will receive up to
102% of its prior year State-assessed revenue; and (ii) if county-wide revenues generated from
Unitary Property are less than the previous year's revenues or greater than 102% of the previous
year's revenues, each jurisdiction wil! share the burden of the shortfall or benefit of the excess
revenues by a specified formula. This provision applies to all Unitary Property except
railroads, whose valuation will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any
State-assessed properties nor a revision of the methods of assessing utilities by the State Board
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of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be
shared by all jurisdictions in a county.
Future Initiatives
Article XIIIA, Article XIIIB, Proposition 62 and Proposition 218 were each adopted as
measures that qualified for the ballot through California's initiative process. From time to time
other initiative measures could be adopted, further affecting the City's revenues.
-3t-
TAX MATFERS
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,
Special Counsel, subject, however to the qualifications set forth below, under existing law, the
portion of Lease Payments designated as and comprising interest and received by the owners of
the Series 2002A Certificates is excluded from gross income for federal income tax purposes
and is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations, provided, however, that, for the purpose of
computing the alternative minimum tax imposed on corporations (as defined for federal income
tax purposes), such interest is taken into account in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition that the
City comply with all requirements of the Code that must be satisfied subsequent to the delivery
of the Lease Agreement in order that such interest be, or continue to be, excluded from gross
income for federal income tax purposes. The City has covenanted to comply with each such
requirement. Failure to comply with certain of such requirements may cause the inclusion of
such interest in gross income for federal income tax purposes to be retroactive to the date of
delivery of the Lease Agreement.
Interest payable with respect to the Series 2002B Certificates will be subject to all
applicable federal taxation.
In the further opinion of Special Counsel, interest payable with respect to the Series
2002A Certificates and the Series 2002B Certificates is exempt from California personal income
taxes.
Owners of the Certificates should also be aware that the ownership or disposition of, or
the accrual or receipt of interest with respect to, the Certificates have federal or state tax
consequences other than as described above. Special Counsel expresses no opinion regarding
any federal or state tax consequences arising with respect to the Lease Agreement and the
Certificates other than as expressly described above.
CERTAIN LEGAL MATTERS
The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco,
California, Special Counsel, substantially in the form attached as Appendix D, will be made
available to purchasers at the time of original delivery of the Certificates, and a copy thereof
will accompany each Certificate. Jones Hall is also acting as Disclosure Counsel to the City.
Certain legal matters will be passed upon for the Corporation and the City by the City
Attorney.
Payment of the fees and expenses of Special Counsel and Disclosure Counsel are
contingent upon the execution and delivery of the Certificates.
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LITIGATION
There is no litigation pending or, to the City's knowledge, threatened in any way to
restrain or enjoin the execution or delivery of the Certificates, the Lease Agreement or the Trust
Agreement, to contest the validity of the Certificates, the Lease Agreement or the Trust
Agreement, or any proceeding of the City with respect thereto. In the opinion of the City and its
counsel, there are no lawsuits or claims pending against the City which will materially affect the
City's finances so as to impair its ability to pay Lease Payments when due.
FINANCIAL ADVISOR
Stone & Youngberg, LLC, San Francisco, California, served as financial advisor to the
City (the "Financial Advisor") with respect to execution and delivery of the Certificates. The
Financial Advisor has not independently verified any of the data contained in this Official
Statement or conducted a detailed investigation of the affairs of the City to determine the
accuracy or completeness of this Official Statement. The Financial Advisor assumes no
responsibility for the accuracy or completeness of any of the information contained in this
Official Statement.
UNDERWRITING
The Cert ~:ca.'.es were sold pursuant to competitive sale, and were awarded to
.,~~se proposal represented the lowest true interest rate to the City. The
Certificates are k- ing purchased by at a purchase price of $__ (plus accrued
interest of $), which represents the aggregate principal component of the Certificates
($) 1~ s an original issue discount ($) and less an underwriter's discount
($.).
RATINGS
Standard Poor's, A Division of the McGraw-Hill Companies ("Standard & Poor's")
has assigned its r~ ~nicipal bond rating of ....~ to the Certificates with the understanding that
upon delivery of ~. ~ Certificates a policy insuring the payment when due of the principal of and
interest with resp~: ~ to: the Certificates will be issued by the Insurer.
[In addition, Standard & Poor's has assigned an underlying rating (without regard to the
Municipal Bond Insurance Policy) of "__"to the Certificates.]
Such ratings reflect only the views of such organizations and an explanation of the
significance of such ratings may be obtained from Moody's and Standard & Poor's. There is no
assurance that such ratings will continue for any given period of time or that such ratings will
not be revised downward or withdrawn entirely by such organizations, if in their judgment
circumstances so warrant. Any such downward revision or withdrawal of such ratings may
have an adverse effect on the market price of the Certificates.
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EXECUTION
The execution and delivery of this Official Statement have been duly authorized by the
City Council of the City.
CITY OF PALO ALTO
By: \s\ Carl L. Yeats
Director of Administrative Services
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APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX B
GENERAL INFORMATION ABOUT THE CITY OF PALO ALTO
The following information relating to the City of Palo Alto, Santa Clara County, California (the
"City") is supplied solely for purposes of information.
Demographic Information
CITY OF PALO ALTO
General Economic Data
Date of Incorporation April 16, 1894
Incorporated as Charter City July 1, 1909
Form of Government Council-Manager
Population 60,835
Land Area (square miles)25.98
City Maintained Trees 38,094
Police Protection:
No. of Station(s)1
No. of Full-Time Positions 176
No. of Police Patrol Vehicles 33
Fire Protection:
No. of Station(s)8
No. of Full-Time Positions 130
No. of Fire Apparatus 24
No. of Fire Hydrants 1,729
Community Services:
Acres- Downtown Parks 170
Acres- Open Space 3,731
Parks 33
Golf Course 1
Tennis Courts 52
Athletic Center 1
Community Centers 4
Theaters 3
Cultural Center 1
Junior Museum and Zoo 1
Swimming Pools 1
Nature Centers 2
Libraries 6
No. of Housing Units 26,048
Commercial and Industrial Space 27.3 million square feet
Municipal Utility Plants:
Water:
Millions of CCF Sold 5.9
Accounts 19,335
Miles of Water Mains 222
Wastewater:
Millions of Gallons Processed 9,243
Accounts 21,752
Miles of Sanitary Sewer Lines 218
Electric:
Millions of KWH Sold 1,057
Accounts 28,09 ?
Pole Miles of Overhead Lines 227
Trench Miles of Underground Lines 220
Gas:
Millions of Therms Sold 36.7
Accounts 23.101
Miles of Gas Mains 201
Source: City of Palo Alto, Comprehensive Annual Financial Report. Fiscal Year ending June 30, 2001.
B-1
Municipal Government
The City of Palo Alto was incorporated in 1894. Its first Charter was granted by the
State of California in 1909, and Palo Alto continues to operate as a charter city. Chartered
cities may establish their own laws and regulations as long as they do not conflict with those of
the State. Municipal operations are conducted under the Council-Manager form of government.
The nine Council Members are elected at large for four-year, staggered terms. The Mayor and
Vice Mayor are elected annually at the first Council meeting in January. The Mayor presides
over all Council meetings. The City Manager is responsible for the operation of all municipal
functions, except the offices of the City Attorney, City Clerk, and City Auditor. These officials
are appointed by, and report directly to, the City Council.
The City provides a full range of municipal services and maintains municipal electric,
water, gas, wastewater collection, wastewater treatment, storm drainage, and refuse utilities for
the benefit of City residents and businesses. The City's parks, recreation and cultural facilities
are numerous, and include 35 parks, a golf course, four community centers, a Cultural Center, a
Community Theater, a Children's Theater, and a Junior Museum. The City offers a wide array
of social, recreational and cultural events, including human services for seniors and youth,
subsidized child care, classes, concerts, exhibits, team sports and special events. The City and
the Palo Alto Unified School District have an agreement to jointly fund the costs of maintaining
and rehabilitating school athletic fields, recognizing the significant recreational use of these
facilities by the community. In addition, the City offers a high level of library and public safety
services. Palo Alto has six libraries and eight fire stations providing services throughout the
community.
Population
The following table shows a historical comparison of the respective populations of the
City, the County and the State of California since 1980.
CITY OF PALO ALTO, SANTA CLARA COUNTY, AND STATE OF CALIFORNIA
Population Comparison
City of Percent
Year Palo Alto Change_
1980 55,225 --
1990 55,900 1.2%
1996 58,500 4.7
1997 59,900 2.4
1998 60,500 1.0
1999 61,200 1.2
2000 58,900 (3.8)
2001 60,800 3.2
Santa Clara
County
1,295071
1,497 577
1,683.300
1,671 400
1,701 400
1,717 600
1,698 800
1,723 700
Percent State of Percent
Chang.~_~alifornia C h a_C_h_a_p_~
--23,668,562 __
15.6%29,760,021 24.9
12.4 32,232,000 8.9
(0.7)32,670,000 1.4
1.8 33,226,000 1.7
1.0 33,766,000 1.6
(1.1)34,207,000 1.3
1.5 34,818,000 1.8
Sources: U.S. Department of Commerce, Bureau of the Census (1980, 1990 and 2000): State Department of Finance
(1996-1999 and 2001).
City Employees Retirement Program
The City contributes to the California Public Employees Retirement System ("PERS"), an
agent multiple-employer public employee retirement system that acts as a common investment
and administrative agent for participating public entities within the state of California. All
permanent City employees are eligible to participate in PERS. Participants in the plan vest after
5 years of employment. Employees in the plan are eligible to retire after ages 50 and receive
B-2
The following table shows major employers in the Palo Alto area as of March 31, [2000].
CITY OF PALO ALTO
Major Employers
As of March 31, [2000]
Name of Products/No. of
Company Services Employees
Stanford
Space Systems/LORAL
Palo Alto Medical Foundation
Foothill College
VA Palo Alto Health Care
Roche Bioscience
Agilent Technologies
Hewlett Packard Company
Palo Alto Unified School District
Stanford University Hospital
Education 5,000+
R&D 3,000-5,000
Health Care 1,500+
Education 1,000- !,500
Health Care 1,000+
Pharmaceutical Mfg.1,000+
High Tech 1,000+
Electronics 1,000+
Education 750 to 1,000
Health Care 750 to 1,000
Source: Palo Alto Chamber of Commerce
The table below outlines labor force information for the County.
COUNTY OF SANTA CLARA
Employment Rates and Employment by Industry
1996 1997 1998 1999 2000
Civilian Labor Force (1)895,000 937,500 958,800 965,500 1,003,900
Employment 862,800 909,200 927,900 936,300 984,000
Unemployment 32,200 28,300 30,900 29,200 19,900
Unemployment Rate 3.6%3.0%3.2%3.0%2.0%
~age & Salary Employment:
Total All Industries (2)885,000 931,700 961,500 976,600 1,030,500
Agriculture 5,100 5,100 5,200 5,300 5,300
Mining 100 100 100 100 200
Construction 32,700 37,300 41,700 45,500 48,700
Manufacturing 245,900 258,200 261,300 250,700 260,200
Transportation, Public Utilities 25,400 27,200 28,300 28,300 29,100
Wholesale Trade 52,400 56,000 56,400 56,000 56,400
Retail Trade 122,200 126,700 130,100 134,000 139,300
Finance, Insurance, Real Estate 30,000 30,600 31,800 32,300 32,100
Services 283,900 301,800 317,800 332,900 364,500
Government 87,400 88,500 88,900 91,400 94,700
(1)Labor force data is by place of residence: includes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(2)Industry employment is by place of work: excludes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
Source: State of California Employment Development Department.
B-4
Personal Income
Owing to the presence of relatively high-wage skilled jobs and wealthy residents, the
County historically achieves high rankings among all California counties on a variety of income
measurements. As reported in the 2000 Sales & Marketing Management magazine "Survey of
Buying Power," the County's 2000 median household effective buying income of $72,124 was
the highest among California counties. Since 1982, the median household effective buying
income for the County has consistently exceeded that of California and the United States.
"Effective buying income" ("EBI") is a classification developed exclusively by Sales 8z
Marketing Management magazine to distinguish it from other sources reporting income statistics.
EBI is defined as "money income" less personal tax and nontax payments - a number often
referred to as "disposable" or "after-tax" income. Money income is the aggregate of wages and
salaries, net farm and nonfarm self-emp!oyment income, interest, dividends, net rental and
royalty income, Social Security and railroad retirement income, other retirement and disability
income, public assistance income, unemployment compensation, Veterans Administration
payments, alimony and child support, military family allotments, net winnings from gambling
and other periodic income. Money income does not include money received from the sale of
property (unless the recipient is engaged in the business of selling property); the value of "in-
kind" income such as food stamps, public housing subsidies, medical care, employer
contributions for persons, etc.; withdrawal of bank deposits; money borrowed; tax refunds;
exchange of money between relatives living in the same household; gifts and lump-sum
inheritances, insurance payments, and other types of lump-sum receipts. EBI is computed by
deducting from money income all personal income taxes (federal, state and local), personal
contributions to social insurance (Social Security and federal retirement payroll deductions),
and taxes on owner-occupied nonbusiness real estate.
B-5
CITY, COUNTY, STATE AND UNITED STATES
Effective Buying Income
Year
1996
Total Effective Buying
Area Income ($000)
City of Palo Alto $1,725,347
Santa Clara County 30,823,435
State of California 492,516,991
United States 4,161,512,384
Median Household
Effective Buying Income
$55,311
49,298
35,216
33,482
1997 City of Palo Alto $2,037,829
Santa Clara County 36,500,763
State of California 524,439,600
United States 4,399,998,035
$62,082
54,407
36,483
34,618
1998 City of Palo Alto $2,235,446
Santa Clara County 39,640,732
State of California 551,999,317
United States 4,621,491,738
$67,180
57,144
37,091
35,377
1999 City of Palo Alto $2,295,477
Santa Clara County 42,267,784
State of California 590,376,663
United States 4,877,786,658
$72,370
61,122
39,492
37,233
2000 City of Palo Alto $2,548,71t
Santa Clara County 47,115,360
State of California 652,190,282
United States 5,230,824,904
$87,037
72,124
44,464
39,129
Source: Sales & Marketing Management "Survey of Buying Power."
B-6
Building Activity
The following table shows the number and valuation of building permits in the City for
the past ten fiscal years.
CITY OF PALO ALTO
Building Permits and Valuation
(Dollars in Thousands)
Commercial & Industrial Residential
Fiscal Property No. of No. of No. ofYea.__~r Values Permits Valuation Permits Valuation Permit._____~s
All Others
Valuation
1992 $6,949,429 366 $82,902 1,087 $38,10119937,443,688 395 71,167 1,079 33,06519947,592,131 400 64,001 1,081 "37,28419957,795,396 384 44,471 1,032 35,56319968,058,927 410 72,271 1,194 58,26219978,206,532 377 94,485 1,095 57,61719988,885.623 374 !36,761 1,154 61,31619999,623,868 330 73,462 1.167 71,989200010,533,778 428 127,107 1,113 139,674200111,609,915 820 157,088 2.599 78,345
Sources:Property values: Santa Clara
Environment Department.County: permit information:City of Palo Alto.
63 $2,692
65 2,506
96 3,823
72 7,055
89 11.052
106 5,874
80 6,704
106 47,325
371 23,113
25 4,200
Planning and Community
B-7
APPENDIX D
PROPOSED FORM OF SPECIAL COUNSEL OPINION
D-1
APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX F
BOOK-ENTRY ONLY SYSTEM
DTC will act as securities depository for the Certificates. The Certificates will be
executed and delivered as fully-registered securities registered inthe name of Cede & Co.
(DTC's partnership nominee). One fully-registered Certificate will be issued for each maturity
of the Certificates, each in the initial aggregate principal amount of such maturity, and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing companies, and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Certificates under the DTC system must be made by or through Direct
Participants, which will receive credit for the Certificates on DTC's records. The ownership
interest of each Beneficial Owner is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive ~vritten confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers
of ownership interest in the Certificates are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
Certificates representing their ownership interests in Certificates, except in the event that use of
the book-entry system for the Certificates is discontinued.
To facilitate subsequent transfers, all Certificates deposited by Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Certificates with DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates;
DTC's records reflect only the identity of the Direct Participants to whose accounts such
Certificates are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
F-1
Prepayment notices will be sent to Cede & Co. If less than all of the Certificates within
a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such maturity to be prepaid.
Neither DTC nor Cede & Co. will consent or vote with respect to Certificates. Under its
usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Certificates are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal and interest payments with respect to the Certificates will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to believe that it
will not receive payment on a payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of principal
and interest to DTC is the responsibility of the City or the Trustee, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
The City and the Trustee cannot and do not give any assurances that DTC will
distribute to Participants, or that Participants or others will distribute payments of principal or
interest with respect to the Certificates paid to DTC or its nominee as the registered Owner, or
any prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely
basis or will serve and act in the manner described in this Official Statement. The City and the
Trustee are not responsible or liable for the failure of DTC or any Participants to make any
payment or give any notice to a Beneficial Owner with respect to the Certificates or any error or
delay relating thereto.
The foregoing description of the procedures and record-keeping with respect to
beneficial ownership interests in the Certificates, payment of principal, interest and other
payments with respect to the Certificates to Participants or Beneficial Owners, confirmation
and transfer of beneficial ownership interests in such Certificates and other related transactions
by and between DTC, the Participants and the Beneficial Owners is based on information
provided by DTC. Accordingly, the City takes no responsibility for the accuracy thereof.
Discontinuance of DTC Service. If (a) DTC determines not to continue to act as
securities depository for the Certificates, or (b) the City determines to remove DTC from its
functions as a depository, DTC's role as securities depository for the Certificates and use of the
book-entry system will be discontinued. If the City fails to select a qualified securities
depository to replace DTC, the City will cause the Trustee to execute and deliver new
Certificates in fully registered form in such denominations numbered in the manner determined
by the Trustee and registered in the names of such persons as are requested by the Beneficial
Owners thereof. Upon such registration, such persons in whose names the Certificates are
registered will become the registered Owners of the Certificates for all purposes.
Transfer and Exchange of Certificates. The following provisions regarding the exchange
and transfer of the Certificates apply only during any period in which the Certificates are not
subject to DTC's book-entry system. While the Certificates are subject to DTC's book-entry
system, their exchange and transfer will be effected through DTC and the Participants and will
be subject to the procedures, rules and requirements established by DTC.
F-2
The registration of any Certificate may, in accordance with its terms, be transferred
upo:~ -ine Registration Books by the person in whose name it is registered, in person or by his
duly authorized attorney, upon surrender of such Certificate for cancellation at the Corporate
Trust Office of the Trustee in San Francisco, California, accompanied by delivery of a written
instrument of transfer in a form approved by the Trustee, duly executed. Whenever any
Certificate or Certificates is surrendered for registration of transfer, the Trustee will execute,
authenticate and deliver a new Certificate or Certificates of the same matui-ity and aggregate
principal amount, in any authorized denominations.
Certificates may be exchanged at the Corporate Trust Office of the Trustee, for a like
aggregate principal amount of Certificates of other authorized denominations of the same
maturity. The City will pay any costs of the Trustee incurred in connection with such exchange,
¯ except that the Trustee may require the payment by the Certificate Owner requesting such
exchange of any tax or other governmental charge required to be paid with respect to such
exchange.
F-3
EXHIBIT C
Non Parking Area Improvements and Civic Center Refinancing
Item Dollars Will go to
$2,700,000Construction Costs
Design Costs
Bond Reserve
Issuance Costs:
Bond Counsel (incl. expenses)
Disclosure Counsel (incl. expenses)
Bond Ratings
Financial Advisor (incl. expenses)
Official Statement Printing &
Distribution
Underwriter's Discount
Trustee Fee (first yr. setup & legal)
Title & Other Insurance
Cashflow Verification
Miscellaneous
Total
Refunding of !992 Civic Center
Certificates of Participation Bonds
Contingency for Potential Issuance
and Other Costs
Construction to began in
Spring 2002 and is scheduled
for completion in Fall 2003
$400,000
$700,000 (estimate)
$47,000
27,000
10,000
~,000
15,000
125,000
7,500
12,000
3,000
3,500
$285,000 (estimates)
$4,200,000
$715,000
1.City of Palo Alto for
construction costs to be
incurred.
2.U.S. BankTrust (trustee)
will hold funds in trust
account.
1.City ofPalo Alto forcosts
already incurred.
U.S. Bank Tmst. Interest
earnings will be applied
to,yard bond interest and
principal payment.
Jones Hall
Jones Hall
Standard & Poors
Stone & Youngberg LLC
TBD
TBD
U.S. Bank Trust National Assoc.
TBD
TBD
TBD
1.U.S. Bank Trust, acting as
Trustee, will pay current
bond holders
TOTAJ~ Costs Not to Exceed $9,000,000