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04-17-12 searchable packet Table of Contents Agenda3 Presentation of anti-tobacco public service announcements prepared by the Cupertino Teen Commission and the City of Cupertino Communications Department staff No written materials8 Proclamation to recognize and acknowledge Arbor Day in Cupertino No written materials9 April 3 City Council minutes Draft minutes10 Accounts Payable for period ending March 30, 2012 Draft Resolution18 Accounts Payable for period ending April 6, 2012 Draft Resolution31 Municipal Improvements, 10216 Pasadena Avenue Staff Report42 A. Map43 Alcoholic Beverage License, Wingstop #503, 19620 Stevens Creek Boulevard, Suite 190 (Marketplace) Staff Report44 Application for Alcoholic Beverage License45 Alcoholic Beverage License, Florentine’s Restaurant, 10275 South De Anza Boulevard Staff Report46 Application for Alcoholic Beverage License47 Bollinger Road Subdivision and Variance Request for lot widths Staff Report48 A. PC Resolutions #6682, #668353 B. PC Staff Report 3/27/1261 C. Aerial Survey of Cul-de-sacs66 D. Phase I Environmental Site Assessment67 E. Phase II Environmental Assessment91 F. Arborist Report117 G. Negative Declaration, ERC Recommendation, Initial Study124 H. Written Comments141 I. Plan Set143 Approve Refinancing of City debt Staff Report148 A. Draft City Resolution, approving the form and authorizing the execution of certain lease financing documents151 B. Site and Facility Lease155 C. Lease Agreement163 1 D. Assignment Agreement196 E. Trust Agreement203 F. Escrow Deposit and Trust Agreement257 G. Termination Agreement268 H. Notice of Intention275 I. Notice of Sale276 J. Preliminary Official Statement283 Appoint Cupertino Public Facilities Corporation Board of Directors Draft Resolution387 September 16, 2002 Cupertino Public Facilities Corporation minutes Draft minutes388 Approve Refinancing of City Debt Staff Report389 A. Draft Corporate Resolution. Note: The resolution refers to documents that are attached in the companion report on the City Council agenda.391 2 AGENDA CUPERTINO CITY COUNCIL ~ REGULAR MEETING SUCCESSOR TO THEREDEVELOPMENT AGENCY ~ REGULAR MEETING 10350 Torre Avenue, Community Hall Council Chamber Tuesday, April 17, 2012 6:45 PM CITY COUNCIL MEETING PLEDGE OF ALLEGIANCE ROLL CALL CEREMONIAL MATTERS ANDPRESENTATIONS 1.Subject:Presentation of anti-tobacco public service announcements prepared by the Cupertino Teen Commission and the City of Cupertino Communications Department staff Recommended Action:Receive presentation No written materials Page:No written materials in packet 2.Subject:Proclamation to recognize and acknowledge Arbor Day in Cupertino Recommended Action:Present proclamation No written materials Page:No written materials in packet POSTPONEMENTS ORAL COMMUNICATIONS This portion of the meeting is reserved for persons wishing to address the council on any matter not on the agenda. Speakers are limited to three (3) minutes. In most cases, State law will prohibit the council from making any decisionswith respect to a matter not listed on the agenda. CONSENT CALENDAR Unless there are separate discussions and/or actions requested by council, staff or a member of the public, it is requested that items under the Consent Calendar be acted on simultaneously. 3 Tuesday, April 17, 2012Cupertino City Council Successor to theRedevelopment Agency 3.Subject:April 3 City Council minutes Recommended Action:Approve minutes Draft minutes Page:10 4.Subject:Accounts Payable for period ending March 30, 2012 Recommended Action:Adopt Resolution No. 12-034 Draft Resolution Page:18 5.Subject:AccountsPayable for period ending April 6, 2012 Recommended Action:Adopt Resolution No. 12-035 Draft Resolution Page:31 6.Subject:Municipal Improvements, 10216 Pasadena Avenue Recommended Action:Accept Municipal Improvements Description:The work included sidewalk and curb & gutter improvements in the City right- of-way Staff Report A. Map Page:42 7.Subject:Alcoholic Beverage License, Wingstop #503, 19620 Stevens Creek Boulevard, Suite 190 (Marketplace) Recommended Action:Approve application for On-Sale Beer and Wine for Bona Fide Public Eating Place Staff Report Application for Alcoholic Beverage License Page:44 8.Subject:Alcoholic Beverage License, Florentine’s Restaurant, 10275 South De Anza Boulevard Recommended Action:Approve application for On-Sale Beer and Wine for Bona Fide Public Eating Place Staff Report Application for Alcoholic Beverage License Page:46 SECOND READING OF ORDINANCES 4 Tuesday, April 17, 2012Cupertino City Council Successor to theRedevelopment Agency PUBLIC HEARINGS 9.Subject:Bollinger Road Subdivision and Variance Request for lot widths Recommended Action:Planning Commission recommended on a 4-0-1 vote to approve the subdivision and variance request Description:Applications: TM-2012-01, V-2012-01, EA-2012-01 Applicant: McClellan Development (Lands of Jauch) Location: Western Terminus of Bollinger Road, APN 359- 22-077 Environmental Determination: Negative Declaration Descriptions: Tentative Map to subdivide an approximately 1.14 acre parcel into five parcels ranging from 7,040 to 11,096 square feet and Variance for reduced lot widths for four of the five new lots surrounding the proposed cul-de-sac that do not meet the minimum lot width requirements Staff Report A. PC Resolutions #6682, #6683 B. PC Staff Report 3/27/12 C. Aerial Survey of Cul-de-sacs D. Phase I Environmental Site Assessment E. Phase II Environmental Assessment F. Arborist Report G. Negative Declaration, ERC Recommendation, Initial Study H. Written Comments I. Plan Set Page:48 ORDINANCESAND ACTION ITEMS 10.Subject:Approve Refinancing of City debt Recommended Action:Adopt resolution approving the form and authorizing the execution of certain lease financing documents in connection with the offering and sale of certificates of participation relating thereto to refund the City’s outstanding certificates of participation (2002 Refinancing and Capital Improvement Project), and authorizing and directing certain actions with respect thereto Description:The resolution approves the refinancing and authorizes the execution and delivery of various documents by authorized City officials Staff Report A. Draft City Resolution, approving the form and authorizing the execution of certain lease financing documents B. Site and Facility Lease C. Lease Agreement D. Assignment Agreement E. Trust Agreement F. Escrow Deposit and Trust Agreement G. Termination Agreement H. Notice of Intention I. Notice of Sale J. Preliminary Official Statement 5 Tuesday, April 17, 2012Cupertino City Council Successor to theRedevelopment Agency Page:148 REPORTSBY COUNCIL AND STAFF ADJOURNMENT SUCCESSOR TO THE REDEVELOPMENT AGENCY MEETING Canceled for lack of business. CUPERTINO PUBLIC FACILITIES CORPORATIONMEETING ROLL CALL CONSENT CALENDAR 1.Subject:Appoint Cupertino Public Facilities Corporation Board of Directors Recommended Action:Adopt Resolution No. 12-01 appointing Cupertino City Council members as Directors of the Cupertino Public Facilities Corporation and directing that all future members of the Cupertino Public Facilities Corporation are to be Cupertino City Council members Description:The Mayor, Vice Mayor, and City Clerk are the President, Vice President, and Secretary, respectively, of the Cupertino Public Facilities Corporation. Draft Resolution Page:389 2.Subject:September16, 2002 Cupertino Public Facilities Corporation minutes Recommended Action:Approve minutes Description: Draft minutes Page:390 3.Subject:Approve Refinancing of City Debt Recommended Action: 1) Adopt Resolution No. 12-02 approving the form and authorizing the execution of certain lease financing documents in connection with the offering and sale of certificates of participation relating thereto to refinance the City of Cupertino’s outstanding certificates of participation (2002 Refinancing and Capital Improvement Project), and authorizing and directing certain actions with respect thereto 2) Amend the Corporation’s 2011-12budget in order to record the one-time sources and uses of funds needed to accomplish the debt refinancing Description:This is a companion report to the action being considered by the City Council tonight Staff Report A. Draft Corporate Resolution. Note: The resolution refers to documents that are attached in the companion report on the City Council agenda. 6 Tuesday, April 17, 2012Cupertino City Council Successor to theRedevelopment Agency Page:391 ADJOURNMENT The City of Cupertino has adopted the provisions of Code of Civil Procedure §1094.6; litigation challenging a final decision of the City Council/Redevelopment Agency must be brought within 90 days after a decision is announced unless a shorter time is required by State or Federal law. Any interested person, including the applicant, prior to seeking judicial review of the city council’s decision with respect to quasi-judicial actions, must first file a petition for reconsideration with the city clerk within ten days after the council’s decision. Any petition so filed must comply with municipal ordinance code §2.08.096. In compliance with the Americans with Disabilities Act (ADA), the City of Cupertino will make reasonable efforts to accommodate persons with qualified disabilities. If you require special assistance, please contact the city clerk’s office at 408-777-3223 at least 48 hours in advance of the meeting. Any writings or documents provided to a majority of the Cupertino City Council after publication of the packet will be made available for public inspection in the City Clerk’s Office located at City Hall, 10300 Torre Avenue, during normal business hours and in Council packet archives linked from the agenda/minutes page on the Cupertino web site. 7 CITY COUNCIL STAFF REPORT Meeting:April 17, 2012 Subject:Presentation of anti-tobacco public service announcements prepared by the Cupertino Teen Commission and the City of Cupertino Communications Department staff NO WRITTEN MATERIALS IN PACKET 8 CITY COUNCIL STAFF REPORT Meeting:April 17, 2012 Subject:Proclamation to recognize and acknowledge Arbor Day in Cupertino. NO WRITTEN MATERIALS IN PACKET 9 DRAFT MINUTES CUPERTINO CITY COUNCIL Regular Adjourned Meeting Tuesday, April 3, 2012 PLEDGE OF ALLEGIANCE At 6:45 p.m. Mayor Mark Santorocalled the regular meeting to order in the Council Chamber, 10350 Torre Avenue, Cupertino, California, and led the Pledge of Allegiance. ROLL CALL Present: Mayor Mark Santoro, Vice-Mayor Orrin Mahoney, and Council members Barry Chang, Mark Rod Sinks, and Gilbert Wong. Absent: None. CEREMONIAL MATTERS ANDPRESENTATIONS 1.Subject:Proclamations recognizing students who have been awarded the Organization of Special Needs Families (OSF) Recommended Action:Present proclamations Under postponements this item was postponed. 2.Subject:Present check for Japanese Earthquake Relief toToyokawa Sister City Committee from Sister Cities International and Kaiser Permanente Recommended Action:Make presentation Mayor Santoro presented a check in the amount of $11,350to Asif Kausar, Chair of the Toyokawa Sister City Committee. Mr. Kausar thanked Council and noted that the committee also raised $28,500 for earthquake relief in Japan. 3.Subject:Proclamation honoring retired City Manager David Knapp Recommended Action:Present proclamation Mayor Santoro presented proclamations from the Cityof Cupertino, Congressman Mike Honda,Senator Joe Simitian& Senator Paul Fong, and the Santa Clara County Board of Supervisors.He was also presented with a clock from the City. Mr. Knapp said that it has been a pleasure working for this community with its richness of people fromall over the world andsupreme schools. He said he also appreciated the support 10 April 3, 2012Cupertino City Council Page 2 th of the City Council. He noted this is his 50year of working full-time and acknowledged the staff as being very talented and dedicated. Mayor Santoro also noted that he was impressed with Mr. Knapp’s willingness to learn and try new things, and that he will miss working with him. POSTPONEMENTS Wong moved and Sinks seconded to postpone item number one and table item number 15. The motion carried unanimously. ORAL COMMUNICATIONS Eric Otto introduced studentsfrom the Monta Vista High School Government Team class. SrinivasanSrikuman, Karishma Mehrotra, and DicksonTsaipresentedaPowerPointpresentation with suggestions for attracting businesses that they believe will helpVallco Mall be more successful. CONSENT CALENDAR Wongmoved and Mahoney seconded to approve the items on the Consent Calendar with the amendment to item number 4. Ayes: Chang, Mahoney, Santoro, Sinks, and Wong. Noes: None. Abstain: None. 4.Subject:March 20 City Council minutes Recommended Action:Approve minutes Written communication for this item included an amended page five of the draft minutes. 5.Subject:March 27 City Council minutes Recommended Action:Approve minutes 6.Subject:Financial auditor contract Recommended Action:Authorize the City Manager to execute an agreement with Maze and Associates to provide financial auditing services Written communication for this item included a revised agreement for services. 7.Subject:Assembly Bill 1816 Tax Equity Allocation Resolution Recommended Action:Adopt Resolution No. 12-030 Written communicationfor this item included a draft letter from Mayor Santoro to Assembly Member Cameron Smyth. 11 April 3, 2012Cupertino City Council Page 3 8.Subject:League of California Cities "Healthy Eating, Active Living" (HEAL) campaign Recommended Action:Adopt Resolution No. 12-031 endorsing the HEAL program in concept 9.Subject:City Project, 2011 Pavement Maintenance Project, Project No. 2011-04 RecommendedAction:Accept Project No. 2011-04 Mayor Santoro reordered the agenda to take up item number 14 next. 14.Subject:Consideration of appointment of Interim City Manager and execution of employment agreement Recommended Action:Authorize the Mayor to execute an employment agreement Wongmoved andMahoneysecondedto authorize the mayor to execute an employment agreement with Amy Chanas interim City Manager. The motion carried unanimously. Mayor Santoro also noted that a recruitment firm has been hired to handle the replacement process for a new City Manager. SECOND READING OF ORDINANCES 10.Subject:Public Tree Ordinance amendments Recommended Action:Conduct second reading and adopt Ordinance No. 12-2092 (Attachment A) amending the Cupertino Municipal Code: “An Ordinance of the City Council of the City of Cupertino re-titling and amending Chapter 14.12 pertaining to Public Trees”; and adopt Resolution No. 12-032 updating the Master Tree List Description:Amendment to Chapter 14.12 (Trees) of the Cupertino Municipal Code regarding responsibilities of public tree management, increasing penalties for damaging/removing public trees and meeting requirements to become a Tree City USA Written communicationsfor this item included an amended staff report noting amendments to the redline and clean version of the first reading of the ordinance, and an amended public tree damage or removal fee schedule. Public Works Director Timm Borden reviewed the staff report and noted the minor changes that were made to the draft ordinance. Jennifer Griffin said that when she first moved into the Rancho Rinconada neighborhood, there were more trees. She indicated that many trees were being cut down and the neighbors wanted tokeep the trees and that’s why they wanted to come into Cupertino. She said she is happy with the street tree department and commended Cupertino for the respect it has for the neighborhoods thatwant to maintain its trees and populate withmoretrees. City Attorney CarolKoradediscussed the administrative citation process and explainedthat Council could add an appeal process in the ordinance similar to the administrative citation process. 12 April 3, 2012Cupertino City Council Page 4 Mahoneymoved and Wong secondedto adopt Resolution No. 12-032 updating the master tree list.The motion carried unanimously. Acting City Clerk Grace Schmidt read the title of the ordinance. Changmoved and Mahoneyseconded to read the ordinance by title only and that the City Clerk’s reading would constitute the second reading thereof. Ayes: Chang, Mahoney, Santoro, Sinks, and Wong. Noes: None. Changmoved and Mahoneyseconded to enact Ordinance No. 12-2092with a modification to include language for appeal to the City Manager.Ayes: Chang, Mahoney, Santoro, Sinks, and Wong. Noes: None. PUBLIC HEARINGS 11.Subject:Community Development Block Grant (CDBG) funds, Human Service grants and FY2012 Annual Action Plan Recommended Action:Conduct public hearing and continue final approval of the funding allocations and FY 2012 Annual Action Plan to April 17, 2012 to complete the 30 day review period Description:This is the first of two required public hearings regarding use of 2012-13 CDBG funds, Human Service Grants and the FY 2012 Annual Action Plan Written communication for this item included a staff PowerPoint presentation. Senior Planner Vera Gil reviewed the staff report. Mayor Santoro opened the public hearing at 8:03p.m. Georgia Bacil, saidthat their non-profit law office providesfree legal servicesto seniorsand they target clients who are low-income and at riskof losing their homes.She explainedthat they provide services tothe Cupertino Senior Center. She requested that the funding be restored to its previous level of $9,800. Colleen Hudsen, Live Oak Day Care, stated that theyprovide adult day care for dependent seniors who are cared for in their homes by family members but need helpduring the day when family members are at work. Live Oak Day Care providescare in a group setting Monday through Fridayfrom 9:00 am to 3:00 pm,providesbreakfast and lunch,and provides afull day of activities. She requested that Council approve full funding for their program. Wanda Hale, Program Manager from Long Term Care OmbudsmanProgram,thanked Council for itspast support. She noted that their organization goesout into nursing homes and assisted living centers to ensure thatseniors have a say in their careand that elder care abuse is not happening.She requested that Council approvefunding for their program. 13 April 3, 2012Cupertino City Council Page 5 SoniaPelia,President of Maitri Transitional Home, thanked Council for its support. She reported that last year they had 19 residents for 2010 and2011, seven that were from Cupertino inthe extremely low-income category and at risk for being homeless. Since last summer when the house was remodeled, thetotal isnow 29.She requested that Council approve funding for their program. Marjorie Rocha, Executive Director of EchoHousing, thanked Council for itspast and current support. She saidthat Echo Housing provides fair housing counselingto residents in Cupertino.She explainedthat they conducted a fair housing audit in Cupertino last year which found that over half of the landlords discriminatedagainstresidents with disabilities who requested reasonable modifications to their home such as lowering sinks so they can enjoy living in the home. She requested that Council approve full funding for their program. Sujatha Venkatraman, representing West Valley Community Services, thankedstaff and the Housing Commission for its funding recommendation. She noted that the organization provides comprehensive emergency assistance programs and the below market rate housing program. She saidthat they partner with other agencies and provide a lot of preventiveand outreachservicesin an effort to catch potential problems before they occur. She stated that they will be holding an affordable housing fair on May 21 and distributedan invitation to their volunteer appreciation event being held on April 18. The mayor closed the public hearing at 8:29p.m. and the item was continued to May 1, 2012 for a second public hearing. Council recessed from 8:29 p.m. to 8:37 p.m. 12.Subject:Fiscal Year 2012-13 Fee Schedule Recommended Action:Adopt Resolution No. 12-033 Finance Director David Woo reviewed the staff report. Wongmoved and Chang secondedto adopt Resolution No. 12-033withthe following amendments. The motion carried unanimously. Remove RHSdesignation for master storm drain area fees for low-density residential Freeze mobile vendor permit at zero and bring back to Council for further discussion Lower heritage tree designation to $100 Remove 40-400 sq feet project size thresholds for private garages from the new construction plan check fees, new construction inspection fees and consolidated schedule of total construction fees tables. In their place, use existing garage fee on the miscellaneous items fee table Bay window (structural) fee corrected to $799 Lower adult, weekday daily green golf fees for residents by $1 in order to have a $2 differential from non-residents Leave massage permit fees temporarily frozen at current levels and bring back a new proposal to Council 14 April 3, 2012Cupertino City Council Page 6 ORDINANCESAND ACTION ITEMS 13.Subject:McClellan Ranch Master Plan 2012 Update Recommended Action:Approve the Parks and Recreation Commission’s recommendations to: 1. Adopt the McClellan Ranch Master Plan 2012 Update; 2. Consider including its priority capital improvement projects in the 2012-17 Capital Improvement Program as appropriate; and 3. Rename McClellan Ranch Park to McClellan Ranch Preserve Written communicationsfor this item included emails from Rhoda Fryand Deborah Jamison, and a staff PowerPoint presentation. Public Works Director Timm Borden reviewed the staff reportand read theMaster Plan goals. Jennifer Griffin said that it’s important for the Simm’s property to be called McClellan Ranch West. She gave some history of the Snyder Hammond houseand said it would be nice to keep the house on the property, but if it’s not occupied it will burn. She stated that she felt it was important to protect the house and possibly bring it to McClellan Ranch Park. Ann Ng,memberof theFriends of Stevens Creek Trail but speaking for herself,thanked the City for the trail through McClellan Ranch. She urgedCouncil to approve the revised master plan and rename it McClellan Ranch Preserve. Ms. Ng encouraged Council to consider a trail extension to Linda Vista Park, but believes the neighbors should be informed first.She stated that theFriends would be interested in working with the City on signage and also thanked Debbie Jamison for all she has done with the preserve for so many years. Bob Power, Executive Director for Santa Clara County AudobonSociety speaking for Shani Kleinhaus, stated that they are delighted the Parks and Recreation Commissionand staff have brought themaster plan forward and was in favor of Council approving the staff recommendation. Deborah Jamison offered her historical knowledge of the facts of McClellan Ranch. She said thatit was designated as a preserve in 1976 and should be called a preserve. She saidshe felt that it’s not just another park in the City where peoplecan play ball. Ms. Jamison read the mission of McClellan Ranch from 1976 whichdoesn’t permit putting other buildings on it that have nothing to do with the historyof the propertyand felt that adding other structures would destroy the habitat.She also noted that McClellan Ranch West was added after it was purchased in 1990 and by vote of City Council. She urged Council to ask her any historical questions. Helene Davis,acting President ofCupertinoHistorical Society, stated that theSnyder Hammond house is the oldest house in Cupertino dating back to about1880.She urged Council to keep an open mind about relocating the house and expressed interest in having the home open to the public. 15 April 3, 2012Cupertino City Council Page 7 Keith Wandry statedthat the house wasn’t involved in the whole processand that moving it cameupduring the lastthe Parks and Recreation Commissionmeeting.He expressed concernthat McClellan Ranchis a small preserve and putting more structures there would takeaway from having its own ecosystem. He suggested moving the structures to another part of the City that could be made intoanhistorical and educational area. Donna Austin requested that Council keep the option open to make an historic area around the existing structure of McClellan Ranch. She discussed some of the historyofthe ranch and noted that the Historical Society owns the Snyder Hammond house that was built in 1880.She urged Council to keep an open mind for afuture study to create ahistoric village and move the house to McClellan Ranch so everyone couldenjoy it. Shealso stated thatit is possible to move it. City Naturalist at McClellan Ranch Barbara Banfield answered a question on activities at McClellan Ranch and outdoor seating. Council conducted a straw poll and concurred on the following: Move Environmental Education Center & site plan to tier two Move blacksmith shop relocation & renovation to tier two Have assessment of Snyder Hammond home completed by Cupertino Historical Society Move assessment of McClellan Ranch structures to tier one Put previous decisions for Simms, Stocklmeir, and McClellan Ranch into one document and bring to Council Remove possible extension of Stevens Creek Trail to Linda Vista from master plan Rename McClellan Ranch park to McClellan Ranch Preserve and Simms property as McClellan Ranch West 15.Subject:Consider cancelling the April 17 City Council meeting Recommended Action:Consider cancelling meeting Description:Two Council members may be absent from the meeting Under postponements this item was tabled. REPORTSBY COUNCIL AND STAFF Council members highlighted the activities of their committees and various community events. ADJOURNMENT At 11:53p.m., the meeting was adjourned in memory of Ralph Lindenmeyer, first mayor of Cupertino, CA.Mr. Lindenmeyer passed awaylast Tuesday, March 20, 2012at the age of 91. A proclamation will be sent to his surviving family. 16 April 3, 2012Cupertino City Council Page 8 ____________________________ Grace Schmidt, DeputyCity Clerk Staffreports, backup materials, and items distributed at the City Council meeting are available for review at the City Clerk’s Office, 777-3223, and also on the Internet at www.cupertino.org. Click on Agendas & Minutes, then click on the appropriate Packet. Most Council meetings are shown live on Comcast Channel 26 and AT&T U-verse Channel 99 and are available at your convenience atwww.cupertino.org. Click on Agendas & Minutes, then click Archived Webcast. Videotapes are available at the Cupertino Library, or may be purchased from the Cupertino City Channel, 777-2364. 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 PUBLIC WORKSDEPARTMENT CITY HALL 1010300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3354www.cupertino.org CITY COUNCIL STAFF REPORT Meeting:April 17, 2012 Subject Municipal Improvements, 10216 Pasadena Avenue,APN 357-18-021. Recommended Action Accept Municipal Improvements. Discussion The applicant hascompleted City-specified improvements in the City right-of-way including sidewalk andcurb & gutteras required by the improvement agreement with the City. _____________________________________ Prepared by:Chad Mosley, Associate Civil Engineer Reviewed by:Timm Borden, Director of Public Works Approved for Submission by:David W. Knapp, City Manager Attachments: A.Map 42 10120 10121 ATTACHMENTA 10135 10140 10130 10176 10181 10185 10201 10200 10208 10207 10218 10228 10232 10238 10228 21800 10261 10264 10268 21736 1020710271 21738 21744 10276 21742 10281 10284 10261 21740 10292 21801 21730 10300 10310 22168 22198 . Subject:MunicipalImprovements,10216PasadenaAvenue,APN357-18-021. 22138 RecommendedAction:AcceptMunicipalImprovements. 43 COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10300 TORRE AVENUE •CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3308www.cupertino.org CITY COUNCIL STAFF REPORT Meeting: April 17, 2012 Subject Alcoholic Beverage License,Wingstop #503,19620 Stevens CreekBoulevard, Suite 190 (Marketplace) Recommended Action Approveapplicationfor On-Sale Beer and Wine for Bona Fide Public Eating Place. Description Name of Business:Wingstop #503 Location:19620 Stevens Creek Boulevard, Suite 190 Type of Business:Restaurant Type of License:On-Sale Beer and Wine for Bona Fide Public Eating Place (41) Reason for Application:Annual Fee, Person-to-Person Transfer Discussion There are no use permit restrictions or zoning restrictions which would prohibit this use and staff has no objection to the issuance of the license. License Type 41authorizes the sale of beer and wine for consumptionon thepremises where sold. _____________________________________ Prepared by: Traci Caton, Planning Department Reviewed by: Gary Chao, City Planner; Aarti Shrivastava, Director of Community Development Approved for Submission by: David W. Knapp, City Manager Attachment: Application for Alcoholic Beverage License 44 45 COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10300 TORRE AVENUE •CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3308www.cupertino.org CITY COUNCIL STAFF REPORT Meeting: April 17, 2012 Subject Alcoholic Beverage License,Florentine’s Restaurant,10275 South De Anza Boulevard Recommended Action Approveapplicationfor On-Sale Beer and Wine for Bona Fide Public Eating Place. Description Name of Business:Florentine’s Restaurant Location:10275 South De Anza Boulevard Type of Business:Restaurant Type of License:On-Sale Beer and Wine for Bona Fide Public Eating Place (41) Reason for Application:Original & Annual Fees, State & Federal Fingerprints Discussion There are no use permit restrictions or zoning restrictions which would prohibit this use and staff has no objection to the issuance of the license. License Type 41authorizes the sale of beer and wine for consumptionon thepremises where sold. _____________________________________ Prepared by: Traci Caton, Planning Department Reviewed by: Gary Chao, City Planner; Aarti Shrivastava, Director of Community Development Approved for Submission by: David W. Knapp, City Manager Attachment: Application for Alcoholic Beverage License 46 47 COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 1010300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3308www.cupertino.org CITY COUNCIL STAFF REPORT Meeting: April17, 2012 Subject Bollinger Road Subdivision and Variance Request for lot widths Recommended Action The Planning Commissionrecommended on a 4-0-1vote(Millerabstained-SeeAttachment A) that the City Council approvethe following applications: Negative Declaration (EA-2012-01); Variance (V-2012-01) per Commission resolution no.6683; and Tentative Map (TM-2012-01) per Commission resolution no. 6682. Description Applications:V-2012-01,TM-2012-01(EA-2012-01) Applicant:Mike McClellan of McClellan Development Property Owner:Jauch Family Trust Location:Western terminus of Bollinger Road, APN 359-22-077 Application Summary: Tentative Map to subdivide an approximately 1.14 acre lot into five parcels, ranging in size from 7,040 to 11,096 square feet. Variance request for reduced lot widths for four of the five new lots surrounding the proposed cul-de-sac that do not meet the minimum lot width requirement. Project Data Summary: General Plan Designation: Low Density (1-5 Dwelling Units/Gross Acre) Zoning Designation: R1-6 (Single Family Residential –6,000square feet minimum) Total Gross Lot Area: 49,650 square feet (1.14 acre) Total Net Lot Area: 43,631 square feet (1.00 acre) Proposed Lot Areas: Lot 1: 7,040 square feet Lot 2: 8,875 square feet 48 Lot 3: 9,005 square feet Lot 4: 7,615 square feet Lot 5: 11,096 square feet xisting Land Use: EVacant land Proposed Land Use: Single-family residential Proposed Density: 4.39 dwelling per gross acre Project Consistency with General Plan: Yes Zoning: Yes (if lot width variance is granted) Discussion Planning Commission Meeting On March 27, 2012, the Planning Commission reviewed the 5-lot subdivision and variance proposal for this parcel located at the western terminus of Bollinger Road. The request involved the subdivision of a 1.14 acre parcel into five lots ranging in size from 7,040 to 11,096 square feet in size with a variance request to allow reduced lot widths for four of the five lots in the cul- de-sac that do not meet the minimum R1 lot width requirement of 60 feet. The detailed background information is in the Planning Commission staff report (See Attachment B)and other attachments (Attachments C –I). Staff would like to note that this project does not include permits for the single-family homes on each lot. At the Planning Commission hearing, six residents commentedonthe 5-lot subdivision and variance proposal for this parcel.Theresidentconcerns included: 1.The appropriateness of havingdevelopment vehicular access to Bollinger Road instead of JollymanLane; 2.The appropriateness of granting a variance for lot widths when a subdivision of four lots instead of five lots will meet all of the City’s R1 zoning regulations; 3.The on-site trees that will be removed and the off-site trees that may be affected by the proposed development; 4.The orientation of the conceptual garage and driveway on proposed Lot #5 which would impact two existing residences on the east side; 5.How will construction impact nearby properties; and 6.The project should only be one-story residences to protect the privacy of the existing neighbors. Planning CommissionComments The Planning Commission discussed the above concerns and added two more: 7.Anypublic outreach done by the applicant. 8.Any construction phasing contemplated by the applicant. 49 Each concern is described below, followed by staff’s response in italics. 1.The development should open onto Jollyman Lane instead of Bollinger Road. A Jollyman Lane access would be more convenient for school children of potential residents, while a Bollinger Road access would only worsen traffic and on-street parking for Bollinger Road neighbors. Staff response: The project property does not have any physical access to Jollyman Lane. The abutting parcel is under a different, but related, ownership; developed with a single- family residence and is not proposed for redevelopment. The subdivision street design provides a standard configuration, typical for most City cul-de-sacs and consistent with City public street standards and Santa Clara County Fire Department fire truck turnaround requirements. 2.A 4-lot subdivision proposal would not need alot widthvariance and the developer should follow theexistingruleswithout asking for variances. Staff response: The proposed 5-lot subdivision meets all City requirements except for the narrower width of the lots (40’, 45’, 54’ and 55’ measured at the front setback line). Thelots range in size from about 7,000 to 11,000 square feet; considerably larger than the minimum requirement of6,000 square feet and generally larger thanthesurrounding neighborhood lots. The width variance is typical of interior cul-de-sac lots in theneighborhood(See Attachment C). In the recent past, the City has approved a similar lot width variance request for a cul-de sac subdivision, thatis,the North Portal Avenue terminus2-lot subdivision. 3.A couple of residents had concernsabout the on-site trees that will be removed and the off- site trees that may be affected by the proposed development. Staff response: All of the trees on the property areeither fruit trees orothernon-protected treespecies. The applicant will be required to plant street trees andprivacy protection landscapingfor any newtwo-story home on each lot. The City Arborist has reviewed the project and prescribed conditions and standards to help minimize any project impacts to the off-site trees near the construction vicinity. The applicant will be required to submit a tree management/protection plan for City review and approval prior to commencement of constructionof the subdivision and residences. 4.The side yard garage/driveway orientation of the conceptual residence on Lot #5 (See last page of Plan Set) could impact the living spaces of the existing residences to the eastwith car exhaust, noise and lights. Staff Response: This project does not includeplanningpermits for the single-family homes on eachproposedlot. The building footprints presented are conceptual.TheCity Council coulddirect staff to require front yard garage/driveway access to the cul-de-sac for Lot #5 at the time a residence is proposed.(SeeStaffRecommendation section below). 5.The development will have construction impacts on the neighborhood. 50 Staff response: The Planning Commission tentative map resolution already has incorporated conditions that address: off-site tree protection, recycling of demolition debris, dust control and erosion control. The City noise control ordinance is also applicable and has particular standards for construction activities. The site is large enough to accommodate the necessary construction equipment and supplies for the project. In order to alleviate neighborhood concerns, staff is recommending that the City Council add,as a condition of approval,,the requirement for a detailed construction management plan to be approved by the City prior to issuance of any grading and building permits to addressother construction issues, such as, construction phasing, equipment staging,designated complaint hotline, and locations of portable restrooms, construction trailerand worker parking(SeeStaffRecommendation Sectionbelow). 6.The project should only be one-story residences to protect the privacy of the existing neighbors. Staff response: The project lot and its immediate neighborhood are zoned single family residential with the same potential for development intensity and the potential to build two story homes. Any future two story homes proposed on these new lots will be required to adhere to the City's privacy screening requirements. 7.Public outreach efforts by the applicant. Staff response:The applicant did reach out to the adjacent property owners and has met with several of the neighbors prior to the Planning Commission hearing. The applicant will go over their outreach efforts and conversations with the neighbors at the Council hearing. 8.Construction phasing proposed by the applicant. Staff response: The applicant has stated that he is not far enough along in his processto think about construction phasing. In order to address this concern, staff is recommending that the City Council add,as a condition of approval,the requirement for a detailed construction management plan to be approved by the City prior to issuance of any grading andbuilding permits.(See Staff Recommendation Section below). The Commission supports the proposed subdivision and the variance request for the reduced lot width due to the following reasons: The proposed lot sizes are larger than the average lot size of the neighborhood; There are numerous other interior cul-de-sac lots in the neighborhood and elsewhere in the City with similar reduced lot widths off cul-de-sacs; The narrower lot widths measured at the front setback line result from the geometry of the cul-de-sac and do not prevent the future homes from meeting the minimum building setbacks as prescribed in the R1 Ordinance; and The project will facilitate the necessary improvements to the current unfinished terminus of Bollinger Road. 51 The Planning Commission meeting minutes werenot available at the timeof the preparation of this staff report and will be provided at the Council hearing if available. Additional Staff Recommendations If the City Council approves this project per the Planning Commission recommendations, staff recommends that the following condition be added to the tentative subdivision map conditions of approval: CONSTRUCTION MANAGEMENT PLAN The applicant shall prepare a detailed construction management plan to be approved by the City prior to issuance of anygrading or demolition permitfor the subdivision construction. The plan shall address:equipment stagingarea,designate acomplaint hotlineand signage,fencing,and locations of portable restrooms, construction trailer,and worker parking. The plan shall also memorialize the City’s noise standards and other construction activity regulating conditions specified in the tentative map resolution. The applicant shall also prepare a construction management plan for City review and approval prior to the issuance of any building permits for new residences on the subject property. That plan shall also address construction phasing. Other Council Direction Staff also recommends that City Council direct staff to require front yard garage/driveway access to the cul-de-sac for Lot #5 at the time a residence is proposed. _____________________________________ Prepared by: Colin Jung, AICP, Senior Planner Reviewed by: Gary Chao, City Planner; Aarti Shrivastava, Community Development Director Approved for Submission by: David W. Knapp, CityManager Attachments: A: Planning Commission Resolution Nos. 6682, 6683 B:Planning Commission Staff Report dated March 27, 2012 C: Aerial Survey of Cul-de-sac lots with less than 60-foot lot widths. D: Phase I Environmental Site Assessment for Property Located at West Terminus of Bollinger Road in Cupertino, California prepared by Friar Associates, Inc. and undated. E: Limited Environmental Assessment (Phase II) Proposed Residential Development/Bollinger Road/Cupertino, California prepared by Friar Associates, Inc. Soil Testing completed by TestAmerica, dated 2/3/12. F:Arborist Report, prepared by Michael L. Bench, Consulting Arborist, dated 1-10-12. G: Negative Declaration, ERC Recommendation and Initial Study H: Written Neighborhood Comments I:Plan Set 52 ATTACHMENTA 53 54 55 56 57 58 59 60 ATTACHMENT B OFFICE OF COMMUNITY DEVELOPMENT CITY HALL CUPERTINO, CA 95014-3255 (408) 777-- planning@cupertino.org PLANNING COMMISSION STAFF REPORT March 27, 2012 Agenda Item No. Agenda Date: TM-2012-01, V-2012-01, (EA-2012-01) Application: Mike McClellan of McClellan Development (for Jauch Family Trust) Applicant: Application Summary: Tentative Map to subdivide an approximately1.14 acre lot into five parcels ranging in size from 7,040 to 11,096 square feet. Variance request for reduced lot widths for four of the five new-de- sac that do not meet the minimum lot width requirement. RECOMMENDATION: Staff recommends that the Commission recommendto City Councilapproval of the following applications: Negative Declaration for the project (EA-2012-01); Variance(V-2012-01)per the draft resolution (Attachment 1); and Tentative Map (TM-2012-01)per the draft resolution (Attachment 1). Please note that the final decision on the project will be made by the City Council at tentatively scheduled for April 17, 2012. PROJECT DATA Low Density (1-5 Dwelling Units/Gross Acre) General Plan Designation: R1-6 (Single Family Residential 6,000square feet minimum) Zoning Designation: 49,650square feet (1.14 acre) Total Gross Lot Area: 43,631square feet (1.00acre) Total Net Lot Area: Proposed Lot Areas: 7,040 square feet Lot 1: 8,875 square feet Lot 2: 9,005 square feet Lot 3: 7,615 square feet Lot 4: 11,096 square feet Lot 5: EVacant land xisting Land Use: Single-family residential Proposed Land Use: 4.39dwelling per grossacre Proposed Density: Yes Project Consistency with General Plan: Yes Zoning: 61 TM-2012-01, V-2012-01(EA-2012-01) Bollinger Road SubdivisionMarch 27, 2012 BACKGROUND Site Description The subject property is an infill lot at the western terminus of single-family properties that have identical zoning (R1-6)and general plan land use designations (Low Density Residential (1-5 dwellings/gross acre). The developed parcels to the north and(6,120 to 7,276 square feet)tend to be smaller than the proposed lots, while the developed p ofasimilar size(7,772 to 9,583 square feet)compared to the proposed lots. To the south is the remainder of the Jauch property developed with a single residence and-lot parcel map in 2006. 10710 695 10720 BOLLINGER RD 25 5 Project Property N DISCUSSION: Zoning and General Plan Conformance The subject site is located in a R1-6 zoning district with minimum lot size of 6,000 square feet. T applicant is proposing net lot sizes that range from 7,040 to 11 Use designation is Low Density Residential (1-5dwellings per gross acre) and the applicant is proposing a density of 4.39. The project is consistent with the R1 Ordinance (with the exception of lot 62 TM-2012-01, V-2012-01(EA-2012-01) Bollinger Road SubdivisionMarch 27, 2012 widthdiscussed later in the staff report)and General Plan. Development Proposal The applicant hasproposed a five lot subdivision for single-family residential development. All of the lots are accessed off a cul-de-sac bulb that meets Santa Clara County Fire Department requireme access. All on-site and off-site right-of-way improvements have been designed to connect and be consistent with existing Bollinger Road improvements.The applicant has request a lot width variance for four of the five lots that do not meet the minimum R1 lot wi A preliminary site diagram (see last sheet of the plan set) has been prepared to demonstrat residential development can meet the R1 zoning standards, parking requirements and provide reasonablelandscapedfront and rear yard areas.The preliminary site diagram,used in conjunction with the title sheet,also demonstratescompatible yard to yard relationships: rear to rear and side to help make the development compatible with the existing neighborh Please note that residential construction is not part of this development proposal. Any subsequent, new 2-story dwelling requires neighbor noticing and a 2-story planning permit approved by the Director of Community Development. Lot Width Variance Request The variance being proposed reduces the lot widths on four of the five lots below the 60 feet minimum required in the R1 zoning district. Lot widths are measured alo Proposed lot widths needing variances are outlined as follows: Lot #1:55 feet Lot #2: 45 feet Lot #3:40 feet Lot #4:54 feet It should be noted even with the reduced lot width request, all than typical lots in the R1-6 zoning district. Narrower lot widths are typical of interior cul-de-sac lots as shown on the survey (Attachment 2). The proposed lot widths are consistent and compatible with existing -de-sac lots in the neighborhood. For example, many properties on Vernie Court and Orline Court have lot widths less than 60 feet. Staff supports the project and recommends that the following fin variances (staff notes in : italics) 1)There are exceptional or extraordinary circumstances or conditioapplicable to the property involved that do not apply generally to property in the same dis The most logical subdivision design is a cul-de-sac style which is consistent with the general plan residential land use density and the observed lot widths of other interior cul-de-sac lots. 2)The granting of the application is necessary, for the preservati property right of the applicant, and to prevent unreasonable pro hardship; The project as proposedis consistent with the general plan land use residential density minimum requirements by a significant margin. The proposed redu other interior cul-de-sac lots in the area. 63 TM-2012-01, V-2012-01(EA-2012-01) Bollinger Road SubdivisionMarch 27, 2012 The granting of the application will not be detrimental or injurious to property or imp 3) in the vicinity and will not be detrimental to the public health convenience, and to secure the purpose of the title. Property is proposed to be developed in accordance with the Citys requirements for R1-zoned single-family homes. Lots are large enough to allow flexibility in design and without further need for development exceptions or variances. HazardousMaterials The applicant has commissioned the preparation of a Phase I and assessments (Attachments #3& #4). A site visit and search of regulatory agencies records did hazardous material spill; however, historical aerial photographs demonstrate agricultural activities on the property from the late 1930s through the 1970s. Such acti from petroleum products and pesticides from past agricultural prThe Phase II assessment involved collection of soil samples from suspected areas of huma chemicals in a state certified laboratory. The laboratory resul chemicals in the collected samples. Trees Anarborist report was prepared by one of the City Arborists for th5. The City Arborist surveyed65 trees on the property, most of which were fruit trees and sma considered 26 of the 65 trees to be significant in size (8+ inches in diameter). The arborist added to this inventory an additional 24 trees on adjacent properties because development on the project property could negatively affect thes None of the project property trees are protected by the City Prote permit is not required).And of these non-protected trees, the City Arborist considers none of them so unique or exceptional that they could not be removedand replaced. The subdivision street and storm drainage improvements will directly cause the removal of only fi remaining unprotected trees are within the building envelopes an subsequent housingconstruction. It is anticipated that future street tree and pri help compensate for this tree loss. The City arborist has made written recommendations for construct techniques to protect the significant trees on the neighboring properties. The recommenda incorporated in the tentative map resolution. Environmental Review Committee (ERC) Environmental issues described above were presented to the ERC aThe ERC voted unanimously to recommend a Negative Declaration for thmakers (Attachment 6). Prepared by: Colin Jung, AICP, Senior Planner Reviewed by:Approved by: /s/Gary Chao /s/Aarti Shrivastava Gary ChaoAarti Shrivastava City PlannerCommunity Development Director 64 TM-2012-01, V-2012-01(EA-2012-01) Bollinger Road SubdivisionMarch 27, 2012 ATTACHMENTS: Attachment 1: Resolutions for TM-2012-01, V-2012-01 Attachment 2: Aerial Survey of Cul-de-sac lots with less than 60-foot lot widths. Attachment 3:Phase I Environmental Site Assessment for Property Located at West Bollinger Road in Cupertino, California prepared by Friar Associ Attachment 4:Limited Environmental Assessment (Phase II) Proposed Residential Development/Bollinger Road/Cupertino, California prepared by Fri Soil Testing completed by TestAmerica, dated 2/3/12. Attachment 5: An Evaluation of the Existing Trees at Bollinger Road, Cupert Bench, Consulting Arborist, dated 1-10-12. Attachment 6: Initial Study and ERC Recommendation Attachment 7: Plan Set G:planning/pdreport/TMreports/2012/TM-2012-01, V-2012-01.docx 65 ATTACHMENTC 66 ATTACHMENTD 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 ATTACHMENTE 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 ATTACHMENTF 117 118 119 120 121 122 123 ATTACHMENTG 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 ATTACHMENTH 141 142 ADMINISTRATIVE SERVICESDEPARTMENT CITY HALL 1010300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3220www.cupertino.org CITY COUNCIL STAFF REPORT Meeting:April 17, 2012 Subject Approve Refinancing of Citydebt Recommended Action Adopt resolution approving the form and authorizing the execution of certain lease financing documents in connection with the offering and sale ofcertificates of participation relating thereto to refundthe City’s outstanding certificates of participation (2002 Refinancing and Capital Improvement Project), and authorizing and directing certain actions with respect thereto. Description Theresolution approvesthe refinancing and authorizesthe execution and delivery of various documentsby authorized Cityofficials. Approval of the attached resolutionprovidesfor a refinancing of the Cupertino Public Facilities Corporation’s outstanding Certificates of Participation, originally issued in 2002, to refinance certain outstanding indebtedness and to fund a portion of the costs of the Cupertino library building. Presently, there are $44.01 million of the 2002 Certificates outstanding, bearing interest rates that range from 4.00% to 5.00%. Staff has been advised that rates in the current market could produce significant savings through a refinancing of the 2002 Certificates. By adoption of the attached resolution, the City isapproving the following documents: (1) Site and Facility Lease; (2) Lease Agreement; (3) Assignment Agreement; (4) Trust Agreement; (5) Escrow Deposit and Trust Agreement; (6) Termination Agreement; (7) Notice of Intention; (8) Notice of Sale; and (9) Preliminary Official Statement. Issuance of the 2012 Certificates requires that the City enter into a lease with the Corporation. The Certificates will be repaid from rental payments made by the City to the Corporation under the lease for three facilities and the real property on which those facilities are situated. The facilities are: (1) City Hall; (2) the Community Hall and Council Chambers; (3) the library building; and, the 9.75 acre parcel on which those buildings are located. Furthermore, the resolution will authorize officers of the City to provide for the marketing of the Certificates by the Corporation by competitive sale through the use of an Official Statement, 148 award the bid to the bidder providing the lowest true interestcost, execute a lease, trust agreement, assignment agreement and take other actions necessary to close the certificate issue. Discussion City staff has engaged the services of an independent financial advisor, Magis Advisors, to assist with the structuring and sale of the 2012 Certificates. The City’s special counsel, Quint & Thimmig, will oversee the legal process and render the legal opinion on the 2012 Certificates. Quint & Thimmig was the special counsel to the City in connection with the issuanceof the 2002 Certificates to be refinanced. The financial advisor has determined that a refinancing of the 2002 Certificates could save the City as much as $275,000 per year over the remaining life of the 2002 Certificates. Such savings estimates are, of course, an estimate since the precise rates on the refinancing will not be known until the 2012 Certificates are sold pursuant to this action. Based on current market conditions however, the financial advisor estimates that the new borrowing rates willrange from 2.625% to approximately 4.00%, and a weighted effective rate of approximately 3.25%, well below the existing rates on the 2002 Certificates. Staffrecommendsthat the City Council adopt aresolution that will authorize: (1) the sale of the Certificates by competitive sale; (2) the distribution of an Official Statement relating to the Certificates; and, (3) the execution of documents necessary to close the Certificate issue in late May 2012. The financial analysis suggests anissuancesize of approximately $44.16 million. While the Certificates will be paid off in the same year 2030 as before, the principal amount of the 2012 issue is greater than the principal amount of the 2002 Certificates to be redeemed. This arises from a change in available terms that has occurred since the sale of the 2002 Certificates. Many municipal debt issues (such as the Certificates) require establishment of a “debt service reserve fund” for the benefit of the certificate/debt holders. In 2002, the City was successful in procuring a surety bond in lieu of this reserve fund, which resulted in a smaller issue of debt at that time. Since the financial crisis of 2008 however, these types of surety bonds are virtually impossible to obtain as the issuers of them generally have lower credit ratings than the City does. As a consequence, the 2012 Certificates will be structured with a debt service reserve fund equivalent to as much as six months of lease payments/debt serviceor approximately $1.6 million. However, even with the addition of this debt service reserve fund, the City’s overall debt service requirements over the remaining life of the original debt will be sharply reduced. The financial advisor has estimated the present value of the difference in total payments between the two issues at approximately $5.0 million. The attached resolution authorizes officials of the City to sell the 2012 Certificates at a competitive sale. Bid parameters, established in the Lease Agreement, dictate that the principal amount cannot exceed $50.0 million (a “ceiling” amount, not an expected amount), and that the (present value)savings of the refinancing must be 3% or more of the Certificates refinanced. 149 Presently, the financial advisor estimates that such savings are in the range of 11%, well above the threshold established in the resolution. The 2012 Certificates currently are expected to be sold at an “all-inclusive” interest cost less than 3.25%, including all related transactional costs. Fiscal Impact Based on preliminary analysis, the City’s annual debt payment savings are estimated to be more than $275,000. Total savings, over the debt term,are expected to be about $4.8 million. Below are the estimated sources and uses for the 2012 Certificates: Sources of Funds Par amount of 2012 Certificates$44,160,000 Re-offering premium785,450 Transfers from prior debt service funds2,396,798 Total Sources of Funds$47,342,248 Uses of Funds Underwriter’s discount/fee (1.3% est.)$574,080 Costs of issuance258,650 Debt Service Reserve Fund1,634,322 Deposit to refunding escrow44,870,228 Rounding amount4,968 Total Uses of Funds$47,342,248 _____________________________________ Prepared by: David Woo, Finance Director Reviewed by: Carol A. Atwood, Director of Administrative Services Approved for Submission by:David W. Knapp, City Manager Attachments: A.Draft City Resolution, approving the form and authorizing the execution of certain lease financing documents B.Site and Facility Lease; C. Lease Agreement; D. Assignment Agreement; E. Trust Agreement; F. Escrow Deposit and Trust Agreement; G. Termination Agreement; H. Notice of Intention; I. Notice of Sale; and J. Preliminary Official Statement. 150 Quint & Thimmig LLP02/10/12 02/24/12 CITY OF CUPERTINO RESOLUTION NO. _____ RESOLUTION APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF CERTAIN LEASE FINANCING DOCUMENTS IN CONNECTION WITH THE OFFERING AND SALE OF CERTIFICATES OF PARTICIPATION RELATING THERETO TO REFUND THE CITYS OUTSTANDING CERTIFICATES OF PARTICIPATION (2002 REFINANCING AND CAPITAL IMPROVEMENT PROJECT), AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS WITH RESPECT THERETO RESOLVED, by the City Council(the Council) of the City of Cupertino, California(the City): WHEREAS, the City, working with the CupertinoPublic FacilitiesCorporation(the Corporation), has heretofore caused the execution and delivery of the Certif Participation ) (2002 Refinancing and Capital Improvement Project)(the 2002Certificates), representing undivided fractional interests of the owners thereo by the City as the rental for certain property pursuant to a leathe Corporation, to refinance various public capital improvements throughout the geographic boundaries of the City; WHEREAS, the 2002Certificates are currently outstanding in the principal amount o $44,010,000; WHEREAS, the City, with the assistance of the Corporation, has determined at this time, due to prevailing interest rates in the municipal bond market and for other reasons, the 2002Certificates and to implement a lease financing for such purpose WHEREAS, it is in the public interest and for the public benefitthe Cityauthorize and direct execution of the Lease Agreement (hereinafter defined documents in connection therewith; WHEREAS, a preliminary official statement containing information offering and sale of the Certificates described below (the Preliminary Official Statement) has been prepared on behalf of the City; and WHEREAS, the documents below specified shall be filed with the Cityand the members of the Council, with the aid of its staff, shall review said documents. NOW, THEREFORE, it is hereby DECLARED and ORDERED, as follows: 03028.03 151 Certificates of Participation (2012 Refinancing Project)(the Certificates) are Section 1. hereby authorized to be executed and delivered pursuant to the p Agreement, as hereinafter defined. The below-enumerated documents, in the forms on file with the Acting City Section 2. Clerk, be and are hereby approved, and the Mayor, the City Manager, the Director of Administrative Servicesor the Directorof Finance, or the designee thereof(each, a Designated Officer), are hereby authorized and directed to execute said documents, insertions and omissions as may be approved by such officials, aActing City Clerkis hereby authorized and directedto attest to such officials signature: (a) a site and facility lease, by and between the City, as lessothe Corporation, as lessee, pursuant to which the City will lease certain existing pProperty) to the Corporation, for the purpose of leasing the Property back to the City pursuant to the Lease Agreement; (b) a lease agreement relating to the Property, between the Corporation, as lessor, and the City, as lessee (the Lease Agreement), so long as the total principal amount of the Lease Agreement does not exceed $50,000,000, and so long as the lease payments to be made by the Cityunder the Lease Agreement results in net present value savings a payments with respect to the 2002Certificatesof at least 3%; (c) a trust agreement, by and among the Corporation, the City and The Bank of New York Mellon Trust Company, N.A.,as trustee, relating to the execution and delivery of the Certificates(the Trust Agreement); (d) an escrow deposit and trustagreement, by andbetweenthe Cityand The Bank of New York Mellon Trust Company, N.A.,asescrow bank, relating to the defeasance of the 2002 Certificates; and (e) a termination agreement, by andamongthe City,the Corporationand The Bank of New York Mellon Trust Company, N.A.,assuccessor trustee for the 2002Certificates (the 2002 Trustee), whereby the City, the Corporationand the 2002Trustee agree to terminate the documents relating to the 2002Certificates. The Council hereby approves a notice of intention, in the form on file with the Section 3. Acting City Clerk(the Notice of Intention), together with any changes therein o thereto deemed advisable by any Designated Officer. The Acting City Clerkis hereby authorized and directed to cause to be published, once at least to receive bids, the Notice of Intention in , a financial publication reasonably The Bond Buyer expected to be disseminated among prospective bidders for the Certificates. The Council hereby approves a notice of sale, in the form on file with the Acting City Clerk(the Notice of Sale), together with any changes therein or additions thereto deemed ad Officer. Magis Advisors, as financial advisor to the City (theFinancial Advisor), is hereby authorized to cause to be furnished to prospective bidders copie -2- 152 The Council hereby approves the Preliminary Official Statement, Section 4. on filewith the Acting City Clerk, together with any changes therein or additions thereto deemed advisable by any Designated Officer. The Council authoriz Designated Officer to deem the Preliminary Official Statement final pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the Rule). The Fina authorized to cause to be furnished to prospective bidders copie Statement. Any Designated Officer is authorized and directed to cause the Preliminary Section 5. Official Statement to be brought into the form of a final offici Statement) and to execute said Final Official Statement, dated Certificates, and a statement that the facts contained in the Final Official Statement, and an supplement or amendment thereto (which shall be deemed an origin purpose of such statement) were, at the time of sale of the Cert material respects and that the Final Official Statement did not, on Certificates, and does not, as of the date of delivery of the Ce statement of a material fact with respect to the City or omit toterial facts with respect to the City required to be stated where necessary to make any state misleading in the light of the circumstances under which it was shall take such further actions prior to the signing of the Final Official Statement as are deemed necessary or appropriate to verify the accuracy thereof. The exe Statement, which shall include such changes and additions theret Designated Officer and such information permitted to be excluded from the Preliminary Statement pursuant to the Rule, shall be conclusive evidence of Statement by the City. The Final Official Statement, when prepared, is approved for distribution in Section 6. connection with the offering and sale of the Certificates. The Financial Advisor is hereby authorized and directed, on beha Section 7. to receive the bids at the time and place specified in the Notico examine said bids for compliance with the Notice of Sale and to verify the bid with th provided in the Notice of Sale. In the event two or more bids se cost are received, the Financial Advisor, on behalf of the City, may exercise its own discretion and judgment in making the award and may award the Certificates basis in such pro rata denominations as he shall determine. The Financial Advisor, on b discretion, reject any and all bids and waive any irregularity or informa Financial Advisor, on behalf of the City, shall award the Certif than 24 hours after the expiration of the time prescribed for thpt of bids unless such time of award is waived by the successful bidder. This Resolution shall take effect upon its adoption by this Coun Section 8. * * * * * * * * * * * * -3- 153 ADOPTEDApril 17, 2012, by the City Council of the City of Cupertino, California,by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: Mayor ATTEST: ActingCity Clerk -4- 154 Quint & Thimmig LLP 02/10/12 02/24/12 AFTER RECORDATION PLEASE RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, CA 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. TH EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALI GOVERNMENT CODE. SITE AND FACILITY LEASE Dated as of May 1, 2012 by and between the CITY OF CUPERTINO, CALIFORNIA, as Lessor and the CUPERTINO PUBLIC FACILITIES CORPORATION, as Lessee (2012 Refinancing Project) 03028.03 155 SITE AND FACILITY LEASE THIS SITE AND FACILITY LEASE (this Site and Facility LeaseŽ), d 2012, is by and between the CITY OF CUPERTINO, a municipal corpo city, duly organized and existing under and by virtue of the law lessor (the CityŽ), and the CUPERTINO PUBLIC FACILITIES CORPORA public benefit corporation organized and existing under the laws lessee (the CorporationŽ); WITNESSETH: WHEREAS, the Corporation intends to assist the City to refinance capital improvements throughout the geographic boundaries of the refund the Citys outstanding Certificates of Participation (200 Improvement Project)( the 2002 CertificatesŽ), by leasing certa the City pursuant to a Lease Agreement, dated as of May 1, 2012, recorded concurrently herewith (the Lease AgreementŽ); and WHEREAS, the City proposes to enter into this Site and Facility Corporation as a material consideration for the Corporations ag and improvements to the City; NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED, as follows: Section 1. Definitions. Capitalized terms used, but not otherwise defined, in this Sit and Facility Lease shall have the meanings ascribed to them in t Section 2. Site and Facility Lease. The City hereby leases to the Corporation and the Corporation hereby leases from the City, on the terms and condit those certain parcels of real property situated in Santa Clara C particularly described in Exhibit A attached hereto and made a p those certain improvements on the Site more particularly describ and made a part hereof (collectively, the FacilityŽ). Section 3. Term. The term of this Site and Facility Lease shall commence on the recordation of this Site and Facility Lease in the Office of the County, State of California, and shall end on July 1, 2030, unle sooner terminated as hereinafter provided. If, on July 1, 2030, Payments (as defined in and as payable under the Lease Agreement or provision shall not have been made for their payment, then th Lease shall be extended until such Lease Payments or Additional Lease Agreement), if any, shall be fully paid or provision made July 1, 2030, all Lease Payments shall be fully paid or provisio accordance with Section 4.4 or 10.1 of the Lease Agreement, the Lease shall end. Section 4. Advance Rental Payment. The City agrees to lease the Site and the Facility to the Corporation in consideration of the payment by the Corporati payment of __________ dollars ($__________). The City and the Co reason of the sale of the Certificates and deposit of proceeds p Trust Agreement, dated as of May 1, 2012, by and among the City, Bank of New York Mellon Trust Company, N.A., as trustee thereund 156 AgreementŽ), the advance rental payment referenced in the preced to have been paid. Section 5. Purpose. The Corporation shall use the Site and the Facility solely for purpose of leasing the Site and the Facility to the City pursuan provided, however for such purposes as may be incidental thereto; , that in the event of default by the City under the Lease Agreement, the Corporation and its a remedies provided in the Lease Agreement. Section 6. Citys Interest in the Site and the Facility. The City covenants that it is the owner in fee of the Site and the Facility. Section 7. Assignments and Subleases. Unless the City shall be in default under the Lease Agreement, the Corporation may not assign its rights under or sublet the Site or the Facility, except as provided in the Le written consent of the City. Section 8. Right of Entry. The City reserves the right for any of its duly authorized representatives to enter upon the Site and the Facility at any r same or to make any repairs, improvements or changes necessary f Section 9. Termination. The Corporation agrees, upon the termination of this Site and Facility Lease, to quit and surrender the Site and the Facility condition as the same were in at the time of commencement of the wear and tear excepted, and agrees that any permanent improvemen upon the Site at the time of the termination of this Site and Fa and title thereto shall vest in the City. Section 10. Default. In the event the Corporation shall be in default in the perfor of any obligation on its part to be performed under the terms of which default continues for thirty (30) days following notice an to the Corporation, the City may exercise any and all remedies g merger of this Site and Facility Lease and of the Lease Agreemen a result thereof and the City shall have no right to terminate t provided, however, remedy for such default; that so long as any Certificates are Outstanding and unpaid in accordance with the terms thereof, the Lease Payme Corporation to the Trustee under the Assignment Agreement shall Trustee. Section 11. Quiet Enjoyment. The Corporation, at all times during the term of this Site and Facility Lease, shall peaceably and quietly have, hold and e the provisions of the Lease Agreement and the Trust Agreement. Section 12. Waiver of Personal Liability. All liabilities under this Site and Facility Lease on the part of the Corporation are solely liabilities of the Cor releases each and every, member, director, officer, employee and and from any personal or individual liability under this Site an director, officer, employee or agent of the Corporation shall at circumstances be individually or personally liable under this Si anything done or omitted to be done by the Corporation hereunder Section 13. Taxes. All assessments of any kind or character and also all taxes, i possessory interest taxes, levied or assessed upon the Site and and improvements) will be paid in accordance with the Lease Agre -2- 157 Section 14. Eminent Domain. In the event the whole or any part of the Site or the Facility thereon is taken by eminent domain proceedings, the int be recognized and is hereby determined to be the amount of the t including the unpaid principal and interest with respect to any and, subject to the provisions of the Lease Agreement, the balan paid to the City. Section 15. Use of the Proceeds. The City and the Corporation hereby agree that the lease to the Corporation of the Citys right and interest in the Section 2 serves the public purposes of the City by providing fu refund the 2002 Certificates. Section 16. Partial Invalidity. If any one or more of the terms, provisions, covenants or conditions of this Site and Facility Lease shall, to any extent, unenforceable, void or voidable for any reason whatsoever by a c jurisdiction, the finding, order or decree of which becomes fina provisions, covenants and conditions of this Site and Facility L and each provision of this Site and Facility Lease shall be vali extent permitted by law. Section 17. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communic party to the other shall be in writing and shall be sufficiently party if delivered personally or if mailed by United States regi requested, postage prepaid, and, if to the City, addressed to th Administrative Services Director, City of Cupertino, 10300 Torre 95014, or if to the Corporation, addressed to the Corporation in Services Director, City of Cupertino, 10300 Torre Avenue, Cupert other addresses as the respective parties may from time to time Section 18. Binding Effect. This Site and Facility Lease shall inure to the benefit of and shall be binding upon the City and the Corporation and their res assigns. Section 19. Amendment. This Site and Facility Lease may not be amended except as permitted under Section 10.01 of the Trust Agreement. Section 20. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the sc and Facility Lease. Section 21. Applicable Law. This Site and Facility Lease shall be governed by and construed in accordance with the laws of the State of California Section 22. Execution in Counterparts. This Site and Facility Lease may be executed in any number of counterparts, each of which shall be deemed to be shall constitute but one and the same instrument. -3- 158 IN WITNESS WHEREOF, the City and the Corporation have caused thi Facility Lease to be executed by their respective officers there day and year first above written. CITY OF CUPERTINO, CALIFORNIA By Name Title Attest: Grace Schmidt Acting City Clerk CUPERTINO PUBLIC FACILITIES CORPORATION By Carol A. Atwood Treasurer Attest: Grace Schmidt Acting Secretary -4- 159 [NOTARY ACKNOWLEDGMENTS TO BE ATTACHED] 160 EXHIBIT A DESCRIPTION OF THE SITE All that certain real property situated in Santa Clara County, S PARCEL ONE: LOT 7, AS SHOWN ON THAT CERTAIN MAP ENTITLED TRACT NO. 3743 CUPE CENTER, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECO COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON OCTOBER 16, 1964, PAGE(S) 36 AND 37 PARCEL TWO: PARCELS A, B, C & D, AS SHOWN ON THAT CERTAIN PARCEL MAP ENTITLE BEING ALL OF LOT 4, TRACT NO. 3743, CITY OF CUPERTINOŽ, WHICH PA FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CALIFORNIA ON MARCH 7, 1974 IN BOOK 337 OF MAPS, AT PAGE 11. APN: 369-31-033 ARB: 371-02-044, 43, 43.1, 43.2, 43.3 Exhibit A Page 1 161 EXHIBIT B DESCRIPTION OF THE FACILITY The Property consists of the following facilities located on the City Hall and Administrative Offices : two story office building; 23,040 sq. ft., built 1965; reinfor fully sprinklered. Insured value: $6.2 million (structure only) Cupertino Community Hall/City Council Chambers : one story multi-purpose building; 6,516 sq. ft., built 2004; wood frame structure, fully sprinklered. Cupertino Library : two story, special purpose building (Class A); 53,864 sq. ft., structure, fully sprinklered. Exhibit B 162 Quint & Thimmig LLP 02/10/12 02/24/12 04/11/12 LEASE AGREEMENT Dated as of May 1, 2012 by and between the CUPERTINO PUBLIC FACILITIES CORPORATION, as Lessor and the CITY OF CUPERTINO, CALIFORNIA, as Lessee (2012 Refinancing Project) 03028.03 163 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions........................................................................................................ Section 1.2. Interpretation..................................................................................................... Section 1.3. Exhibits........................................................................................................... ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the Ci..........................3 Section 2.2. Representations, Covenants and Warranties of Corpor....................3 ARTICLE III DEPOSIT OF MONEYS Section 3.1. Deposit of Moneys.................................................................................................. Section 3.2. Payment of Delivery Costs.....................................................................................5 ARTICLE IV AGREEMENT TO LEASE; TERM OF THIS LEASE AGREEMENT; LEASE PAYMENTS Section 4.1. Lease.............................................................................................................. Section 4.2. Term of Agreement.................................................................................................. Section 4.3. Possession......................................................................................................... Section 4.4. Lease Payments..................................................................................................... Section 4.5. Quiet Enjoyment.................................................................................................... Section 4.6. Title ............................................................................................................. Section 4.7. Additional Payments................................................................................................ ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTER Section 5.1. Maintenance, Utilities, Taxes and Assessments................................................................ Section 5.2. Modification of Property..........................................................................................9 Section 5.3. Public Liability and Property Damage Insurance................................................................ Section 5.4. Fire and Extended Coverage Insurance; No Earthquake........10 Section 5.5. Rental Interruption Insurance............................................................................10 Section 5.6. Title Insurance.................................................................................................... Section 5.7. Insurance Net Proceeds; Form of Policies......................................................11 Section 5.8. Advances........................................................................................................... Section 5.9. Installation of Citys Equipment........................................................................11 Section 5.10. Liens............................................................................................................. Section 5.11. Private Activity Bond Limitation...................................................................12 Section 5.12. Federal Guarantee Prohibition.......................................................................12 Section 5.13. Rebate Requirement.............................................................................................12 Section 5.14. No Arbitrage...................................................................................................... Section 5.15. Maintenance of Tax-Exemption.......................................................................12 Section 5.16. No Condemnation..................................................................................................1 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Eminent Domain..................................................................................................... Section 6.2. Application of Net Proceeds.................................................................................13 Section 6.3. Abatement of Lease Payments in the Event of Damage ....13 -i- 164 ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS; INDEMNIFICATION Section 7.1. Disclaimer of Warranties.......................................................................................15 Section 7.2. Access to the Property............................................................................................. Section 7.3. Release and Indemnification Covenants......................................................15 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Corporation........................................................................16 Section 8.2. Assignment and Subleasing by the City......................................................16 Section 8.3. Amendment of Lease Agreement....................................................................16 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES Section 9.1. Events of Default Defined.....................................................................................20 Section 9.2. Remedies on Default...............................................................................................2 Section 9.3. No Remedy Exclusive.............................................................................................21 Section 9.4. Agreement to Pay Attorneys Fees and Expenses...................................22 Section 9.5. No Additional Waiver Implied by One Waiver.......................................22 Section 9.6. Application of Proceeds..........................................................................................22 Section 9.7. Trustee and Certificate Owners to Exercise Rights..................................22 Section 9.8. No Right to Terminate for Corporation Default........................................22 ARTICLE X PREPAYMENT OF LEASE PAYMENTS Section 10.1. Security Deposit.................................................................................................. Section 10.2. Prepayment Option...............................................................................................23 Section 10.3. Mandatory Prepayment From Net Proceeds of Insuranc Domain................................................................................................................24 Section 10.4. Credit for Amounts on Deposit........................................................................24 ARTICLE XI MISCELLANEOUS Section 11.1. Notices........................................................................................................... Section 11.2. Binding Effect.................................................................................................... Section 11.3. Severability................................................................................................................25 Section 11.4. Net-net-net Lease................................................................................................. Section 11.5. Further Assurances and Corrective Instruments...................................25 Section 11.6. Execution in Counterparts..................................................................................25 Section 11.7. Applicable Law.................................................................................................... Section 11.8. Corporation and City Representatives........................................................26 Section 11.9. Captions.......................................................................................................... EXHIBIT A: DESCRIPTION OF THE SITE EXHIBIT B: DESCRIPTION OF THE FACILITY EXHIBIT C: SCHEDULE OF LEASE PAYMENTS -ii- 165 LEASE AGREEMENT THIS LEASE AGREEMENT (the Lease AgreementŽ), dated for convenience as of May 1, 2012, by and between the CUPERTINO PUBLIC FACILITIES CORPORATION, a nonprofit, public benefit corporation organized and existing under the laws of the State of California, as lessor (the CorporationŽ), and the CITY OF CUPERTINO, a municipal corporation and general law city, duly organized and existing under and by virtue of the laws of the State of California, as lessee (the CityŽ); WITNESSETH: WHEREAS, pursuant to that certain Site and Facility Lease, dated as of May 1, 2012 (the Site and Facility LeaseŽ), the City has leased those certain pa Santa Clara County, State of California, more particularly described in Exhibit A attached hereto and made a part hereof (the SiteŽ), and those certain improvements thereon, more particularly described in Exhibit B hereto (the FacilityŽ and, with the Site, the PropertyŽ), to the Corporation, all for the purpose of enabling the City to ref improvements throughout the geographic boundaries of the City and, in particular, to refund the Citys outstanding Certificates of Participation (2002 Refinancing and Capital Improvement Project)(the 2002 CertificatesŽ); WHEREAS, the Corporation proposes to lease the Property to the City pursuant to this Lease Agreement and to assign its right to receive lease payments under this Lease Agreement (the Lease PaymentsŽ), its right to enforce payment of the Lease Payments and otherwise to enforce its interest and rights under this Lease Agreement in the event of a default hereunder by the City, to The Bank of New York Mellon Trust Company, N.A., as trustee (the TrusteeŽ), pursuant to that certain Assignment Agreement, dated as of May 1, 2012, by and between the Corporation and the Trustee; WHEREAS, pursuant to that certain Trust Agreement, dated as of May 1, 2012, by and among the City, the Corporation and the Trustee, the Trustee wil certificates of participation (the CertificatesŽ) in the Lease Payments; and WHEREAS, the proceeds of the Certificates, together with other available moneys, will be applied by the City to (a) refund the 2002 Certificates, (b) fund a reserve fund for the Certificates, and (c) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates; NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby forma themselves as follows: 166 ARTICLE I DEFINITIONS AND EXHIBITS Section 1.1. Definitions. Unless the context clearly otherwise requires or unless otherw defined herein, the capitalized terms in this Lease Agreement shall have the respective meanings specified in Section 1.01 of the Trust Agreement, dated as of May 1, 2012, by and among the City, the Corporation and the Trustee. Section 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean and include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to Articles,Ž SectionsŽ and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease Agreement; the words herein,Ž hereof,Ž hereby,Ž hereunderŽ and other words of similar import refer to this Lease Agreement as a whole and not to any particular Article, Section or subdivision hereof. Section 1.3. Exhibits. The following exhibits are attached to, and by this reference made a part of, this Lease Agreement: Exhibit A: The description of the Site. Exhibit B: The description of the Facility. Exhibit C: The schedule of Lease Payments to be paid by the City respect to the Property, showing the Lease Payment Date and amount of each such Lease Payment. -2- 167 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the Ci. The City represents, covenants and warrants to the Corporation as follows: Due Organization and Existence (a) . The City is a municipal corporation and general law city, duly organized and existing under and by virtue of the laws of the State. Authorization (b) . The laws of the State authorize the City to enter into the Site and Facility Lease, this Lease Agreement and the Trust Agreement and contemplated by and to carry out the Citys obligations under all of the aforesaid agreements. The City has duly authorized and executed all of the aforesaid agreements and such agreements constitute the legal, valid and binding agreements of the City, accordance with their respective terms. No Violations (c) . Neither the execution and delivery of the Site and Facility Le Lease Agreement or the Trust Agreement, 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, agreement or instrument to which the City is now a party or by which the City is bound, constitutes a default under any of the foregoing, or resu of any lien, charge or encumbrances whatsoever upon any of the property or assets of the City, or upon the Property, except Permitted Encumbrances. Execution and Delivery (d) . The City has duly authorized and executed this Lease Agreement in accordance with all applicable laws. Section 2.2. Representations, Covenants and Warranties of Corporation. The Corporation represents, covenants and warrants to the City as follows: Due Organization and Existence (a) . The Corporation is a nonprofit, public benefit corporation, organized and existing under and by virtue of the laws of the State; has power to enter into the Site and Facility Lease, this Lease Agreement, th Trust Agreement; is possessed of full power to own and hold, imp personal property and to lease and sell the same; has duly authorized the execution and delivery of all of the aforesaid agreements and such agreements constitute the legal, valid and binding agreements of the Corporation, enforceable against the Corporation in accordance with their respective terms. No Encumbrances (b) . The Corporation will not pledge the Lease Payments or other amounts derived from the Property and from its other rights under this Lease Agreement and will not mortgage or encumber the Property, except as provided under the terms of this Lease Agreement and the Trust Agreement. No Violations (c) . Neither the execution and delivery of the Site and Facility Le Lease Agreement, the Assignment Agreement or the Trust Agreement 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, any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance -3- 168 whatsoever upon any of the property or assets of the Corporation, or upon the Property, except Permitted Encumbrances. No Assignments (d) . Except as provided herein, the Corporation will not assign thi 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 Sect Execution and Delivery (e) . The Corporation has duly authorized and executed this Lease Agreement in accordance with all applicable laws. -4- 169 ARTICLE III DEPOSIT OF MONEYS Section 3.1. Deposit of Moneys. On the Closing Date, the Corporation shall cause to be deposited with the Trustee the net proceeds of sale of the Certificates. Amounts required to pay Delivery Costs shall be deposited in the Delivery Costs Fund and the 2002 Certificates will be transferred to the Escrow Bank for deposit in the Escrow Fund. The initial Lease Payment of ($________) allocable to the July 1, 2012, Interest Payment Date will be paid by the City to the Trustee on the Closing Date for deposit in the Lease Payment Fund. Section 3.2. Payment of Delivery Costs. Payment of Delivery Costs shall be made from the moneys deposited in the Delivery Costs Fund, which moneys sh purpose in accordance and upon compliance with Section 3.02 of the Trust Agreement. -5- 170 ARTICLE IV AGREEMENT TO LEASE; TERM OF THIS LEASE AGREEMENT; LEASE PAYMENTS Section 4.1. Lease. (a) The Corporation hereby leases the Property to the City, and the City hereby leases the Property from the Corporation, upon the terms and conditions set forth in this Lease Agreement. (b) The leasing of the Property by the City to the Corporation pursuant to the Site and Facility Lease shall not affect or result in a merger of the Citys leasehold estate pursuant to this Lease Agreement and its fee estate as lessor under the Site and Section 4.2. Term of Agreement. The Term of the Lease Agreement shall commence on the Closing Date, and shall end on July 1, 2030, unless such term is extended as hereinafter provided. If, on July 1, 2030, the Trust Agreement shall not be discharged by its terms or if the Lease Payments or Additional Payments, if any, payable hereunder shall have been abated at any time and for any reason, then the Term of the Lease Agreement shall be extended without the need to execute any amendment to this Section 4.2 until there has been deposited with the Trustee an amount sufficient to pay all obligations due under the Lease Agreement, but in no event shall the Term of the Lease Agreement extend beyond July 1, 2040. If, prior to July 1, 2030, the Trust Agreement shall be discharged by its terms, the Term of the Lease Agreement shall thereupon end. Section 4.3. Possession. The City hereby agrees to accept and take possession of the Property on or prior to the date of recordation of this Lease Agreement. Section 4.4. Lease Payments. Obligation to Pay (a) . Subject to the provisions of Articles VI and X hereof, the City agrees to pay to the Corporation, its successors and assigns, as rental for the use and occupancy of the Property during each Rental Period, the Lease Payments (denominated into components of principal and interest) in the respective amounts specified in E payable on the respective Lease Payment Dates specified in Exhibit C hereto. Any amount held in the Lease Payment Fund on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole pursuant to Article X hereof and other than amounts required for payment of Certificates not yet surrendered) shall be credited towards the Lease Payment then due and payable; and no Lease Payment need be made on any Lease Payment Date if the amounts then held in the Lease Payment Fund are at least equal to the Lease Payment then required to be paid. The Lease Payments for the Property payable in any Rental Period shall be for the use of the Property for such Rental Period. Effect of Prepayment (b) . In the event that the City prepays all remaining Lease Payments and all Additional Payments due under Section 4.7 hereof in full pursuant to Article X hereof, subject to Section 4.2 hereof, the Citys obligations under this cease and terminate including, but not limited to, the Citys obligation to pay Lease Payments under this Section 4.4; subject however, to the provisions of Se prepayment by application of a security deposit. In the event that the City optionally prepays the Lease Payments in part but not in whole pursuant to Section 10.2 hereof or pursuant to Section 10.3 hereof as a result of any insurance or condemnation award with respect to any portion of the Property, such prepayment shall be credited entirely towards the prepayment of the Lease Payments as follows: (i) the principal components of each remaining Lease Payment -6- 171 shall be reduced in such order as shall be selected by the City in integral multiples of $5,000; and (ii) the interest component of each remaining Lease Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Certificates thereby redeemed pursuant to Sections 4.01(a) or (b), as the case may be, of the Trust Agreement. Rate on Overdue Payments (c) . In the event the City should fail to make any of the payments required in this Section 4.4, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum payable with respect to the Certificates. Such interest, if received, shall be deposited in the Lease Payment Fund or in the Reserve Fund to replenish the Reserve Fund if withdrawals were made therefrom as a result of the default. Fair Rental Value (d) . The Lease Payments for each Rental Period shall constitute the total rental for each such Rental Period and shall be paid by the City consideration of the right of the use and occupancy and the continued quiet use and enjoyment of the Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments for the Property represent the fair rental value of the Property. In making such determination, consideration has been given to the obligations of the parties under this Lease Agreement, the uses and purposes which may be served benefits therefrom which will accrue to the City and the general public. Source of Payments; Budget and Appropriation (e) . Lease Payments shall be payable from any source of available funds of the City, subject to the provisions of Articles VI and X hereof. The City covenants to take such action as may be necessary to in Payments due hereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Lease Payments and for Additional Payments due under Section 4.7 hereof. To that end, the Council include in each annual budget proposal to the Council an appropriation sufficient to pay Lease Payments and Additional Payments. The City hereby expresses its present intent to appropriate Lease Payments and Additional Payments due under Section 4.7 hereof during the Term of the Lease Agreement. 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. Assignment (f) . The City understands and agrees that all Lease Payments have b assigned by the Corporation to the Trustee in trust, pursuant to the Assignment Agreement, for the benefit of the Owners of the Certificates, and the City hereby assents to such assignment. The Corporation hereby directs the City, and the City hereby agrees to pay to the Trustee at the Principal Corporate Trust Office, all payments payable by the City pursuant to this Section 4.4 and all amounts payable by the City pursuant to Article X hereof. Section 4.5. Quiet Enjoyment. During the Term of the Lease Agreement, the Corporation shall provide the City with quiet use and enjoyment of the Property and the City shall, during such Term, peaceably and quietly have and hold and enjoy the 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 -7- 172 may lawfully do so. Notwithstanding the foregoing, the Corporati inspect the Property as provided in Section 7.2. hereof. Section 4.6. Title. During the Term of the Lease Agreement, the Corporation shall hold leasehold title to the Property and the City shall hold fee title to those portions of the Property which are newly acquired or constructed and any and all additions which comprise fixtures, repairs, replacements or modifications to the Property, except for those fixtures, repairs, replacements or modifications which are added to the Property by the City at its own expense and which may be removed without damaging the Property and except for any items added to the Property by the City pursuant to Section 5.9 hereof. If the City prepays the Lease Payments in full pursuant to Article X hereof or makes the security deposit permitted by Section 10.1 hereof, or pays all Lease Payments during the Term of the Lease Agreement as the same become due and payable, subject to Section 4.2 hereof, and pays Additional Payments, if any, all right, title and interest of the Corporation in and to the Property 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 transfer of title. Section 4.7. Additional Payments. In addition to the Lease Payments, the City shall pay when due the following Additional Payments: (a) Any fees and expenses incurred by the City in connection wit leasehold estate in the Property as and when the same become due and payable. (b) Any amounts due to the Trustee pursuant to the Trust Agreement for all services rendered under the Trust Agreement and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Trust Agreement. (c) Any reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the City, the Corporation or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease Agreement or the Trust Agreement. (d) Any reasonable out-of-pocket expenses of the City in connect and delivery of this Lease Agreement or the Trust Agreement, or in connection with the execution and delivery of the Certificates, including any and all expenses incurred in connection with the authorization, execution, sale and delivery of the Certificates, or incurred by the Corporation in connection with any litigation which may at any t this Lease Agreement, the Trust Agreement, the Certificates or any of the other documents contemplated hereby or thereby, or incurred by the Corporation in connection with the Continuing Disclosure Certificate, or otherwise incurred in connection with the administration thereof. -8- 173 ARTICLE V MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of the Lease Agreement, as part of the consideration for the rental of the Property, all improvement, repair and maintenance of the Property shall be the responsibili pay, or otherwise arrange, for the payment of all utility services supplied to the 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 Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Corporation agrees to provide only the Property, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of section 1932 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease Agreement. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Corporation or the City affecting the Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due. The City may, at the Citys expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any 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 Property will be materially endangered or the Property 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. The City shall provide the Corporation with written notice of any such contest and shall provide such updates on the contest as the Corporation may reasonably request. Section 5.2. Modification of Property. The City shall, at its own expense, have the right to remodel the Property or to make additions, modifications and imp All additions, modifications and improvements to the Property shall thereafter comprise part of the Property and be subject to the provisions of this Lease Agreement. Such additions, modifications and improvements shall not in any way damage the P its nature, cause the interest component of Lease Payments to be subject to federal income taxes or cause the Property to be used for purposes other than those authorized under the provisions of State and federal law; and the Property, upon completion of any additions, modifications and improvements made thereto pursuant to this Section 5.2, shall be substantially less than the value of the 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 Property for labor or materials furnished in connection with any remodeling, additions, modifications, improv replacements made by the City pursuant to this Section 5.2; provided that if any such lien is established and the City shall first notify the Corporation of the Citys intention to do so, the City may in good faith contest any lien filed or established against the Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the -9- 174 period of such contest and any appeal therefrom and shall provide the Corporation with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Corporation. The Corporation will cooperate fully in any such contest, upon the request and at the expense of the City. Section 5.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease Agreement, insurance policies, including a standard comprehensive general insurance policy or policies in protection of the Corporation, the City and the Trustee and their respective members, officers, agents and employees. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City, and may exercise of powers authority created for such purpose or in the form of self-insurance by the City. Said policy or policies shall provide for indemnification of said parties against direct or consequential loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the 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 $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance cov be maintained in the form of insurance maintained through a joint exercise of powers authority created for such purpose or in the form of self-insurance by the City. The Net Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. Section 5.4. Fire and Extended Coverage Insurance; No Earthquake. The City shall maintain, or cause to be maintained throughout the Term of the Lease Agreement, insurance against loss or damage to any part of the Property constituting structures, if any, by fire and lightning, with extended coverage and vandalism and malicious mischief insurance; provided, however, that the City shall not be required to maintain earthquake insurance with respect to the Property. 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 such portion of the Property, if any. 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 insurance carried by the City may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers authority created for such purpose. The Net Proceeds of such insurance shall be applied as provided Section 5.5. Rental Interruption Insurance. The City shall maintain, or cause to be maintained, throughout the Term of the Lease Agreement rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property during the Term of the Lease Agreement as a result of any of the hazards covered in the insurance required by Section 5.4 hereof, if any, in an amount at least equal to two times maximum annual Lease Payments. The Net Proceeds of such insurance shall be paid to the Trustee and deposited in the Lease Payment Fund and shall be credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. Suc maintained as part of or in conjunction with any other insurance carried by the City and may be maintained in whole or in part in the form of insurance maintained through a joint exercise of powers authority created for such purpose. The City may not satisfy the requirements of this Section 5.5 for rental interruption insurance with self-insurance. -10- 175 Section 5.6. Title Insurance. (a) The City shall provide, from moneys in the Delivery Costs Fund or at its own expense, on the Closing Date, an CLTA title insurance policy in the amount of not less than the principal amount of the Certificates, insuring the Citys leasehold estate in the Property, subject only to Permitted Encumbrances. (b) The Net Proceeds of such title insurance shall be applied as provided in Section 6.2(c) hereof. Section 5.7. Insurance Net Proceeds; Form of Policies. Each policy or other evidence of insurance required by Sections 5.3, 5.4, 5.5 and 5.6 hereof shall provide that all proceeds thereunder shall be payable to the Trustee as and to the extent the Trustee as an additional insured and shall be applied as provided in Section 6.2 hereof. Insurance must be provided by an insurer rated AŽ or better by S&P or A.M. Best Company. The City shall pay or cause to be paid when due the premiums for required by this Lease Agreement. All policies evidencing required insurance shall provide thirty (30) days prior written notice to the Corporation, the City and the Trustee of any cancellation, reduction in amount or material change in coverage responsible for the sufficiency of any insurance herein required, including any forms of self- insurance and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. The City shall cause to be delivered annually on or before each July 1 to the Trustee a certification, signed by a City Representative, stating compliance with the provisions of Section 5.3 through 5.7 of this Lease Agreement. The Trustee shall be entitled to rely on such certification without independent investigation. The City shall have the adequacy of any insurance reserves maintained by the City or by a joint exercise of powers authority, if applicable, for purposes of the insurance required by Section 5.3 and 5.4 hereof reviewed at least annually, on or before each July 1, by an independent insurance consultant and shall maintain reserves in accordance with the recommendations of such consultant to the extent moneys are available for such purpose and not otherwise appropriated. Section 5.8. Advances. If the City shall fail to perform any of its obligations under Article V, the Corporation or the Trustee may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement be obligated to repay all such advances as soon as possible, with interest at a rate equal to the rate then payable with respect to the Certificates from the date of the advance to the date of repayment. Section 5.9. Installation of Citys Equipment. The City may, at any time and from time to time in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the 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 City shall repair and restore any and all damage to the 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 5.9 under a lease or conditional sale agreement, or subject to a vendors lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Property. Section 5.10. 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 Property, other than the respective rights of the Corporation and the City as provided -11- 176 herein and Permitted Encumbrances. Except as expressly provided in this Article V, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Corporation for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Section 5.11. Private Activity Bond Limitation. The City shall assure that proceeds of the Certificates are not so used as to cause the Certificates or the Lease Agreement to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. Section 5.12. Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Certificates or the Lease Agreement to be federally guaranteedŽ within the meaning of section 149(b) of the Code. Section 5.13. Rebate Requirement. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Certificates and the Lease Agreement. Section 5.14. No Arbitrage. The City shall not take, or permit or suffer to be taken by th Trustee or otherwise, any action with respect to the proceeds of the Certificates which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Certificates or the Lease Agreement to be arbitrage bondsŽ within the meaning of section 148 of the Code. Section 5.15. Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest with respect to the Certificates from the gross income of the Owners of the Certificates to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the Closing Date. Section 5.16. No Condemnation. The City hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Certificates remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the Property. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the Property, the appraised value of the Property shall not be less than the greater of (i) if the Certificates are then subject to redemption, the principal and interest components of the Certificates Outstanding through the date of their redemption, or (ii) if the Certificates are not then subject to redemption, the amount necessary to defease the Certificates to the first available redemption date in accordance with the Trust Agreement. -12- 177 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Eminent Domain. (a) If all of the 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 Property shall be taken permanently, or if all of the Property or any part thereof shall be taken temporarily under the power of eminent domain, (1) this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a partial abatement of Lease Payments as a result of the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments hereunder, in an amount to be agreed upon by the City and the Corporation, and so certified to by the parties to the Trustee, such that the resulting Lease Payments represent fair consideration for the use and occupancy portion of the Property, except to the extent of special funds, such as amounts in the Reserve Fund available for the payment of Lease Payments. (b) The City hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Certificates remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the leased property. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the leased property, the appraised value of the leased property shall not be less than the greater of (i) if such Certificates are then subject to redemption, the principal and interest components of the Certificates outstanding through the date of their redemption, or (ii) if such Certificates are not then subject to redemption, the amount necessary to defease such Certificates to the first available redemption date in accordance with the Trust Agreement. Section 6.2. Application of Net Proceeds. From Insurance Award (a) . The Net Proceeds of any insurance award resulting from any damage to or destruction of any portion of the Property constituting structures, if any, by fire or other casualty shall be paid by the City to the Trustee, as assi Assignment Agreement, deposited in the Insurance and Condemnation Fund held by the Trustee and applied as set forth in Section 7.01 of the Trust Agreement. From Eminent Domain Award (b) . The Net Proceeds of any eminent domain award resulting from any event described in Section 6.1 hereof shall be paid by the City to the Trustee, as assignee of the Corporation under the Assignment Agreement, deposited in the Insurance and Condemnation Fund and applied as set forth in Section 7.02 of the Trust Agreement. From Title Insurance (c). The Net Proceeds of any title insurance award shall be paid to the Trustee, as assignee of the Corporation under the Assignment Agreement, deposited in the Insurance and Condemnation Fund and applied as set forth in Section 7.03 of the Trust Agreement. Section 6.3. Abatement of Lease Payments in the Event of Damage or Destruction. Lease Payments shall be abated 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 Property or any portion thereof (other than any portions of the Property described in Section 5.2 hereof) to the -13- 178 extent to be agreed upon by the City and the Corporation and com Representative to the Trustee. The parties agree that the amounts of the Lease Payments under such circumstances shall not be less than the amounts of the unpaid Lease Payments as are then set forth in Exhibit C, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Property not damaged or destroyed (giving due consideration to the factors identified in the last sentence of Section 4.4(d)), based upon any appropriate method of valuation, in which event the Lease Payments shall be abated such that they represent said fair rental value. 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 as communicated by a City Representative to the Trustee. In the event of any such damage or destruction, this Lease Agreement shall continue in full force and effect and the City waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under this Section 6.3 to the extent that (a) the proceeds of rental interruption insurance or (b) amounts in the Reserve Fund, if cash funded, and/or the Insuranc and/or the Lease Payment Fund are available to pay Lease Payment be abated under this Section 6.3, it being hereby declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments. If an abatement event has occurred but remedied, the City shall be required to extend the Term of this Lease Agreement, as described in Section 4.2, so that amounts abated are recouped. -14- 179 ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS; INDEMNIFICATION 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 FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE PROPERTY OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROPERTY. IN NO EVENT SHALL THE CORPORATION OR ITS ASSIGNS BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE SITE AND FACILITY LEASE, THIS LEASE AGREEMENT OR THE TRUST AGREEMENT FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR THE CITYS USE OF THE PROPERTY. Section 7.2. Access to the Property. The City agrees that the Corporation and any City 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 Property. The City further agrees that the Corporation, any City Representative, and the Corporations successors or assigns, shall have such rights of access to the Property as may be reasonably necessary to cause the proper maintenance of the 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 the Trustee and their officers, agents, directors, employees, 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 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 or the Trust Agreement, (iii) any act or omission of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Property, (iv) any act or omission of any sublessee of the City with respect to the Property, or (v) the authorization of payment of the Delivery Costs. Such indemnification shall include the costs and expenses of defending any claim or liability arising under this Lease Agreem the transactions contemplated thereby. No indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for willful misconduct, negligence or breach of duty under this Lease Agreement by the Corporation, its officers, agents, directors, employees, successors or assigns. -15- 180 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Corporation. The Corporations rights under this Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be made by the City under this Lease Agreement (but except for its rights to give consents and approvals hereunder), have been assigned to the Trustee pursuant Agreement. Section 8.2. Assignment and Subleasing by the City. This Lease Agreement may not be assigned by the City. The City may sublease the Property or any portion thereof, but only with the written consent of the Corporation and subject to, and delivery to the Corporation of a certificate as to, all of the following conditions: (a) This Lease Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City; (b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Corporation and the Trustee a true and complete copy of such sublease; (c) No such sublease by the City shall cause the 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 (d) The City shall furnish the Corporation and the Trustee with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such sublease does not cause the interest components of the Lease Payments to become subject to federal income taxes or State personal income taxes. Notwithstanding the foregoing, the City may sublease the Property to the Corporation in connection with a future certificates of participation or lease revenue bond financing without the necessity to comply with any of the foregoing conditions, so long as the total of the unpaid principal component of the Lease Payments and the principal component of the lease payments to be paid with respect to such future certificates of participation or lease revenue bond financing does not exceed the value of the Property. Section 8.3. Amendment of Lease Agreement. Substitution of Site or Facility (a) . The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a Substitute SiteŽ) and/or a substitute facility (a Subs Former SiteŽ), or a portion thereof, and/or the Facility (the Former FacilityŽ), or a portion thereof, provided that the City shall satisfy all of the following requirements (to the extent applicable) which are hereby declared to be conditions precedent to such substitution: (i) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amended Exhibit A to the Site and Facility Lease whic description of such Substitute Site and deletes therefrom the description of the Former Site; (ii) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amended Exhibit A to this Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site; -16- 181 (iii) If a substitution of the Facility, the City shall file wit the Trustee an amended Exhibit B to the Site and Facility Lease description of such Substitute Facility and deletes therefrom th Former Facility; (iv) If a substitution of the Facility, the City shall file with the Trustee an amended Exhibit B to this Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility; (v) The City shall certify in writing to the Corporation and the Trustee that such Substitute Site and/or Substitute Facility serve the purposes of the City, constitutes property that is unencumbered, subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State; (vi) The City delivers to the Corporation and the Trustee evidence (which may be insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property following such substitution is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee that the indemnification provided pursuant to Section 12.03 of the Trust Agreement applies with respect to the Substitute Site and/or Substitute Facility; (vii) The Substitute Site and/or Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officers certificate delivered to the Trustee; (viii) The City shall obtain an amendment to the title insurance pursuant to Section 5.6 hereof which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site; (ix) The City shall provide notice of the substitution to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation; and (x) The City shall furnish the Corporation and the Trustee with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such substitution does not cause the interest components of the Lease Payments to become subject to federal income taxes or State personal income taxes. Release of Site (b) . The City shall have, and is hereby granted, the option at any from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release: (i) The City shall file with the Corporation and the Trustee an to the Site and Facility Lease which describes the Site, as revi (ii) The City shall file with the Corporation and the Trustee an amended Exhibit A to this Lease Agreement which describes the Site, as revised b (iii) The City delivers to the Corporation and the Trustee evidence (which may be insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the -17- 182 Trustee and the Corporation that the indemnification provided pursuant to Section 12.03 of the Trust Agreement applies with respect to the Site, as revised by such release; (iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agre by an officers certificate delivered to the Trustee; (v) The City shall obtain an amendment to the title insurance policy required pursuant to Section 5.6 hereof which describes the Site, as revised by such release; and (vi) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation. Release of Facility (c) . The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Facility, provided that the City shall satisfy all of the follow declared to be conditions precedent to such release: (i) The City shall file with the Corporation and the Trustee an to the Site and Facility Lease which describes the Facility, as (ii) The City shall file with the Corporation and the Trustee an amended Exhibit B to this Lease Agreement which describes the Facility, as revis (iii) The City delivers to the Corporation and the Trustee evide insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to Section 12.03 of the Trust Agreement applies with respect to the Facility, as (iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agre by an officers certificate delivered to the Trustee; and (v) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation. Generally (d) . The Corporation and the City may at any time amend or modify any of the provisions of this Lease Agreement, but only (i) with the prior written consent of the Owners of a majority in aggregate principal amount of the Outstanding Certificates, or (ii) without the consent of any of the Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreements of the City contained in this Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Corporation and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners; or -18- 183 (iii) to amend any provision thereof relating to the Code, to an whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest with respect to the Certificates under the Code, in the opinion of Bond Counsel. -19- 184 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES Section 9.1. Events of Default Defined. The following shall be events of defaultŽ under this Lease Agreement and the terms Events of DefaultŽ and DefaultŽ shall mean, whenever they are used in this Lease Agreement, any one or more of the following events: (a) Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Lease Agreement (including failure to request appropriation pursuant to Section 4.4(e) hereof) or under the Trust Agreement, other than as referred to in clause (a) of this Section 9.1, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trustee or the Owners of not less than five percent (5%) in aggregate principal amount of Certificates then outstanding; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Corporation, the Trustee and such Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar acts which may hereafter be enacted. Section 9.2. Remedies on Default. The Trustee shall have the right to re-enter and re-let the Property and to terminate this Lease Agreement. Whenever any Event of Default referred to in Section 9.1 hereof and be continuing, it shall be lawful for the Corporation to exercise any and all remedies provided, however available pursuant to law or granted pursuant to this Lease Agreement; , 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 thereof, the Corporation may exercise any and all rights of entry and re-entry upon the Property, and also, at its option, with or without such entry, may terminate this Lease Agreement; provided, that no such termination shall be effected either by operation of law or acts of the parties hereto, except only in the manner herein expressly provided. In the event of such default and notwithstanding any re-entry by the Corporation, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained and, in any event such rent and/or damages shall be pa 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 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 -20- 185 the Property, or, in the event the Corporation is unable to re-lease the Property, then for the full amount of all Lease Payments to the end of the Term of the Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same tim hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Corporation or any suit in unlawful detainer, or otherwise, brought by the Corporation for the purpose of effecting such re-entry or obtaining possession of the 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 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 whatsoever situated upon the Property, to place such property in storage or other suitable place within Santa Clara County, for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Corporation from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Property and the removal and storage of such property by the Corporation or its duly authorized agents in accordance with the provisions herein contained. The City hereby waives any and all claims for damages caused or which may be caused by the Corporation in re-entering and taking possession of the Property as herein provided and all claims for damages that may result from the destruction of or injury to the Property and all claims for damages to or loss of any property belonging to the City that may be in or upon the 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 Property in the event of such re-entry without effecting a surrender of this Lease Agreement, and further agree 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 here paragraph (b) hereof. (b) In an Event of Default hereunder, the Corporation at its option may terminate this Lease Agreement and re-lease all or any portion of the Property. In the event of the termination of this Lease Agreement by the Corporation at its option and in the manner hereinafter provided on account of default by the City (and notwithstanding Property by the Corporation in any manner whatsoever or the re-leasing of the 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 of payment of Lease Payments. Any surplus received by the Corporation from such re-leasing shall be credited towards the Lease Payments next coming due and payable. 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 Property and/or of the remainder of the Term of the Lease Agreement or any termination of this Lease Agreement shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Corporation by such written notice. Section 9.3. No Remedy Exclusive. No remedy herein 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 now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall i 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 -21- 186 to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 9.4. Agreement to Pay Attorneys Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand, pay to the nondefaulting party the reasonable fees and expenses of such attorneys and such other provided, however expenses so incurred by the nondefaulting party; , that the Trustee shall not be required to expend its own funds for any payment described in this Section 9.4. 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 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 after payment of all fees and expenses of the Trustee, including indemnifications and attorneys fees, shall be 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 the Trustee under the Assignment 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 and herein. Section 9.8. No Right to Terminate for Corporation Default. The City shall not have the right to terminate this Lease Agreement as a remedy for a default by the Corporation in the performance of its obligations hereunder. -22- 187 ARTICLE X PREPAYMENT OF LEASE PAYMENTS Section 10.1. Security Deposit. Notwithstanding any other provision of this Lease Agreement, the City may, on any date, secure the payment of all or a portion of the Lease Payments remaining due by an irrevocable deposit with the Trustee or an escrow holder under an escrow deposit and trust agreement as referenced in Section 14.01(b) of the Trust Agreement, of: (a) in the case of a security deposit relating to all Lease Payments, either (i) cash in an amount which, together with amounts on deposit in the Lease Payment Fund, the Insurance and Condemnation Fund and the Reserve Fund, is sufficient to pay including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit C, or (ii) Defeasance Obligations in such amount as will, in the written opinion of an independent certified public accountant or other firm of recognized experts in such matters, together with interest to accrue thereon and, if required, all or a portion of moneys or Defeasance Obligations or cash then on deposit and interest earnings thereon in the Lease Payment Fund, the Insurance and Condemnation Fund and fully sufficient to pay all unpaid Lease Payments on their respective Lease Payment Dates; or (b) in the case of a security deposit relating to a portion of the Lease Payments, a certificate executed by a City Representative designating the portion of the Lease Payments to which the deposit pertains, and either (i) cash in an amount which is sufficient to pay the portion of the Lease Payments designated in such City Representatives certificate, including the principal and interest components thereof, or (ii) defeasance obligations in such amount as will, together with interest to be received thereon, if any, in the written opinion of an independent certified public accountant or other firm of recognized experts in such matters, be fully sufficient to pay the portion of the Lease Payments designated in the aforesaid City Representatives certificate. In the event of a deposit pursuant to this Section 10.1 as to all Lease Payments and the payment of all fees, expenses and indemnifications owed to the Trustee, all obligations of the City under this Lease Agreement shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all payments from the deposit made by the City pursuant to this Section 10.1 and the obligations of the City pursuant to Section 5.13 hereof and title to the Property shall vest in the City on the date of said deposit automatically and without further action by the City or the Corporation. Said deposit and interest earnings thereon shall be deemed to be and shall constitute a special fund for the payments provided for by this Section 10.1 and said obligation shall thereafter be deemed to be and shall constitute the installment purchase obligation of the City for the Property. Upon said deposit, the Corporation will execute or cause to be executed any and all documents as may be necessary to confirm title to the Property in accordance with the provisions hereof. In addition, the Corporation hereby appoints the City as its agent to prepare, execute and file or record, in appropriate offices, such documents as may be necessary to place record title to the Property in the City. Section 10.2. Prepayment Option. The Corporation hereby grants an option to the City to prepay the principal component of the Lease Payments in full, by paying the aggregate unpaid principal components of the Lease Payments as set forth in Exhibit C hereto, or in part, in a prepayment amount equal to the principal amount of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, without premium. Said option may be exercised with respect to Lease Payments due ____, in whole or in part on any date, commencing June 15, ____. In the event of prepayment in part, the partial prepayment shall be applied against Lease Payments in such order of payment date as shall be selected by the City. -23- 188 Lease Payments due after any such partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by, the City to the Trustee and which shall represent an adjustment to the schedule set forth in Exhibit C attached hereto taking into account said partial prepayment. Section 10.3. Mandatory Prepayment From Net Proceeds of Insurance, Title Insurance or Eminent Domain. The City shall be obligated to prepay the Lease Payments, in whole on any date or in part on any Lease Payment Date, from and to the extent of any Net Proceeds of an insurance, title insurance or condemnation award with respect to the Property theretofore deposited in the Lease Payment Fund for such purpose pursuant to Article VI hereof and Article VII of the Trust Agreement. The City and the Corporation hereby agree that such Net Proceeds shall be applied first to the payment of any delinquent Lease Payments, and thereafter shall be credited towards the Citys obligations under this Section 10.3. Lease Payments due after any such partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by, the City to the Trustee and which shall represent an adjustment to the schedule set forth in Exhibit C attached hereto taking into account said partial prepayment. 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, remaining amounts on deposit in the Lease Payment Fund or the Reserve Fund shall be credited towards the amounts then required to be so prepaid. -24- 189 ARTICLE XI MISCELLANEOUS Section 11.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in first-class form with postage fully prepaid: If to the Corporation: Cupertino Public Facilities Corporation c/o City of Cupertino 10300 Torre Avenue Cupertino, CA 95014 Attention: Administrative Services Director Telephone: (408) 777-3226 Fax: (408) 777-3109 If to the City: City of Cupertino 10300 Torre Avenue Cupertino, CA 95014 Attention: Administrative Services Director Telephone: (408) 777-3226 Fax: (408) 777-3109 If to the Trustee: The Bank of New York Mellon Trust Company, N. 700 South Flower Street, Suite 500 Los Angeles, CA 90017 Attention: Corporate Trust Department Telephone: (213) 630-6236 Fax: (213) 630-6215 The Corporation, the City and the Trustee, by notice given hereu 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 leaseŽ 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 Property hereby leased or intended so to be or for carrying out the expressed intentions 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. -25- 190 Section 11.7. Applicable Law. This Lease Agreement shall be governed by and construed in accordance with the laws of the State. Section 11.8. Corporation and City Representatives. Whenever under the provisions of this Lease Agreement the approval of the Corporation or the City is required, or the Corporation or the City is required to take some action at the request of the other, such approval or such request shall be given for the Corporation by a Corporation Representative and for the City by a City Representative, and each 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 sco Section of this Lease Agreement. -26- 191 IN WITNESS WHEREOF, the Corporation has caused this Lease Agreement to be executed in its 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, as of the date first above written. CUPERTINO PUBLIC FACILITIES CORPORATION By Carol A. Atwood Treasurer Attest: Grace Schmidt Acting Secretary CITY OF CUPERTINO, CALIFORNIA By Carol A. Atwood Administrative Services Director Attest: Grace Schmidt Acting City Clerk -27- 192 EXHIBIT A DESCRIPTION OF THE SITE All that certain real property situated in Santa Clara County, S PARCEL ONE: LOT 7, AS SHOWN ON THAT CERTAIN MAP ENTITLED TRACT NO. 3743 CUPE CENTER, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECO COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON OCTOBER 16, 1964, PAGE(S) 36 AND 37 PARCEL TWO: PARCELS A, B, C & D, AS SHOWN ON THAT CERTAIN PARCEL MAP ENTITLE BEING ALL OF LOT 4, TRACT NO. 3743, CITY OF CUPERTINOŽ, WHICH PA FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CALIFORNIA ON MARCH 7, 1974 IN BOOK 337 OF MAPS, AT PAGE 11. APN: 369-31-033 ARB: 371-02-044, 43, 43.1, 43.2, 43.3 Exhibit A 193 EXHIBIT B DESCRIPTION OF THE FACILITY The Property consists of the following facilities located on the City Hall and Administrative Offices : two story office building; 23,040 sq. ft., built 1965; reinfor fully sprinklered. Insured value: $6.2 million (structure only) Cupertino Community Hall/City Council Chambers : one story multi-purpose building; 6,516 sq. ft., built 2004; wood frame structure, fully sprinklered. Cupertino Library : two story, special purpose building (Class A); 53,864 sq. ft., structure, fully sprinklered. B Exhibit 194 EXHIBIT C SCHEDULE OF LEASE PAYMENTS Lease Total Annual Payment Principal Interest Lease Lease Date Component Component Payment Payment 6/15/12 12/15/12 6/15/13 12/15/13 6/15/14 12/15/14 6/15/15 12/15/15 6/15/16 12/15/16 6/15/17 12/15/17 6/15/18 12/15/18 6/15/19 12/15/19 6/15/20 12/15/20 6/15/21 12/15/21 6/15/22 12/15/22 6/15/23 12/15/23 6/15/24 12/15/24 6/15/25 12/15/25 6/15/26 12/15/26 6/15/27 12/15/27 6/15/28 12/15/28 6/15/29 12/15/29 6/15/30 C Exhibit Page 1 195 Quint & Thimmig LLP 02/10/12 02/24/12 AFTER RECORDATION RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, CA 94105-2874 Attention: Brian D. Quint, Esq. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION CALIFORNIA GOVERNMENT CODE. ASSIGNMENT AGREEMENT Dated as of May 1, 2012 by and between the CUPERTINO PUBLIC FACILITIES CORPORATION, as Assignor and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee (2012 Refinancing Project) 03028.03 196 ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT, dated as of May 1, 2012, by and betwe CUPERTINO PUBLIC FACILITIES CORPORATION, a nonprofit, public ben organized and existing under the laws of the State of California BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking organized and existing under and by virtue of the laws of the Un trustee (the TrusteeŽ); WITNESSETH: In the joint and mutual exercise of their powers, in considerati covenants herein contained, and for other valuable consideration agree as follows: Section 1. Recitals. (a) The Corporation and the City of Cupertino, California (the  into a lease agreement, dated as of May 1, 2012, a memorandum of concurrently herewith (the Lease AgreementŽ), whereby the Corpo to the City, and the City has agreed to lease from the Corporati property situated in Santa Clara County, State of California, mo Exhibit A hereto (the SiteŽ), and those certain improvements th described in Exhibit B hereto (the FacilityŽ and, with the Site and on the terms set forth in the Lease Agreement, which terms i obligation of the City to pay lease payments (the Lease Payment consideration of the Citys use and enjoyment of the Property. (b) Under the Lease Agreement, the Corporation is required to ca with the Trustee certain sums of money to be credited, held and Lease Agreement and with a trust agreement, dated as of May 1, 2 AgreementŽ), by and among the Corporation, the City and the Trus (c) Upon delivery of the Lease Agreement, the Corporation is req the Trustee moneys to refinance various public capital improveme geographic boundaries of the City and, in particular, to refund Certificates of Participation (2002 Refinancing and Capital Impr CertificatesŽ). For the purpose of obtaining such moneys, the Co to certain persons (the OwnersŽ) direct, undivided fractional i such direct, undivided fractional interests to be evidenced by c therein (the CertificatesŽ). In order to make such fractional i acceptable to the Corporation, the Corporation is willing to ass the Lease Agreement to the Trustee for the benefit of the Owners delivery of this Assignment Agreement, the Trustee is executing an aggregate principal amount of __________ dollars ($__________ sale are anticipated to be sufficient to permit the Corporation under the Lease Agreement and the Trust Agreement and to permit the 2002 Certificates. (d) Each of the parties has authority to enter into this Assignm taken all actions necessary to authorize its officers to execute 197 Section 2. Assignment. The Corporation, for good and valuable consideration, hereby transfers, assigns and sets over to the Trustee, for the benefit (as defined in the Trust Agreement) all of the Corporations rig Lease Agreement (excepting only the Corporations rights to give its rights under Sections 5.8, 7.3 and 9.4 but none of its oblig limitation, its obligations under Section 4.7 of the Lease Agree limitation (i) the right to receive and collect all of the Lease right to receive and collect any proceeds of any insurance maint condemnation award rendered with respect to the Property, and (i rights and remedies conferred on the Corporation pursuant to the necessary or convenient (A) to enforce payment of the Lease Paym required to be deposited in the Lease Payment Fund or the Insura established under the Trust Agreement, or (B) otherwise to prote in the event of a default by the City under the Lease Agreement. Corporation shall be administered by the Trustee in accordance w Trust Agreement and for the equal and fractional benefit of the Section 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of securing, equally and fractionally, the payments due Agreement and the Trust Agreement to, and the rights under the L Agreement of, the Owners of the Certificates delivered pursuant subject to the provisions of the Trust Agreement. Section 4. Conditions. This Assignment Agreement shall neither confer rights nor impo duties upon the Trustee beyond those expressly provided in the T assumes no responsibility for the accuracy of the recitals herei Section 5. Amendment. This Assignment Agreement may not be amended except as permitted under Section 10.01 of the Trust Agreement. Section 6. Execution in Counterparts. This Assignment Agreement may be executed in several counterparts, each of which shall be an original and all and the same instrument. -2- 198 IN WITNESS WHEREOF, the parties have executed this Assignment Ag their officers thereunto duly authorized as of the day and year CUPERTINO PUBLIC FACILITIES CORPORATION By Carol A. Atwood Treasurer Attest: Grace Schmidt Acting Secretary THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee By Aurora Y. Quiazon Vice President -3- 199 [NOTARY ACKNOWLEDGMENTS TO BE ATTACHED] 200 EXHIBIT A DESCRIPTION OF THE SITE All that certain real property situated in Santa Clara County, S PARCEL ONE: LOT 7, AS SHOWN ON THAT CERTAIN MAP ENTITLED TRACT NO. 3743 CUPE CENTER, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECO COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON OCTOBER 16, 1964, PAGE(S) 36 AND 37 PARCEL TWO: PARCELS A, B, C & D, AS SHOWN ON THAT CERTAIN PARCEL MAP ENTITLE BEING ALL OF LOT 4, TRACT NO. 3743, CITY OF CUPERTINOŽ, WHICH PA FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CALIFORNIA ON MARCH 7, 1974 IN BOOK 337 OF MAPS, AT PAGE 11. APN: 369-31-033 ARB: 371-02-044, 43, 43.1, 43.2, 43.3 Exhibit A Page 1 201 EXHIBIT B DESCRIPTION OF THE FACILITY The Property consists of the following facilities located on the City Hall and Administrative Offices : two story office building; 23,040 sq. ft., built 1965; reinfor fully sprinklered. Insured value: $6.2 million (structure only) Cupertino Community Hall/City Council Chambers : one story multi-purpose building; 6,516 sq. ft., built 2004; wood frame structure, fully sprinklered. Cupertino Library : two story, special purpose building (Class A); 53,864 sq. ft., structure, fully sprinklered. Exhibit B 202 Quint & Thimmig LLP 02/10/12 02/24/12 04/11/12 TRUST AGREEMENT Dated as of May 1, 2012 by and among THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee, the CUPERTINO PUBLIC FACILITIES CORPORATION and the CITY OF CUPERTINO, CALIFORNIA (2012 Refinancing Project) 03028.03 203 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.01. Definitions....................................................................................................... Section 1.02. Authorization..................................................................................................... Section 1.03. Interpretation.................................................................................................... Section 1.04. Exhibits.......................................................................................................... ARTICLE II THE CERTIFICATES OF PARTICIPATION Section 2.01. Authorization..................................................................................................... Section 2.02. Date; Payment of Interest......................................................................................3 Section 2.03. Maturity; Interest Rates; Percentages.............................................................3 Section 2.04. Interest.......................................................................................................... Section 2.05. Forms............................................................................................................. Section 2.06. Execution......................................................................................................... Section 2.07. Application of Proceeds and Other Moneys...............................................4 Section 2.08. Transfer and Exchange..........................................................................................4 Section 2.09. Certificates Mutilated, Lost, Destroyed or Stolen......................................5 Section 2.10. Payment........................................................................................................... Section 2.11. Execution of Documents and Proof of Ownership...................................6 Section 2.12. Registration Books................................................................................................ Section 2.13. CUSIP Numbers..................................................................................................... Section 2.14. Use of Depository................................................................................................. ARTICLE III ESTABLISHMENT AND DISBURSEMENT OF DELIVERY COSTS FUND Section 3.01. Delivery Costs Fund............................................................................................... Section 3.02. Payment of Delivery Costs..................................................................................9 ARTICLE IV REDEMPTION OF CERTIFICATES Section 4.01. Redemption........................................................................................................ Section 4.02. Selection of Certificates for Redemption.....................................................11 Section 4.03. Notice of Redemption...........................................................................................11 Section 4.04. Partial Redemption of Certificate...................................................................12 Section 4.05. Purchase of Certificates........................................................................................12 ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.01. Assignment of Rights in Lease Agreement..............................................13 Section 5.02. Establishment of Lease Payment Fund.......................................................13 Section 5.03. Deposits.......................................................................................................... Section 5.04. Application of Moneys.........................................................................................13 Section 5.05. Surplus........................................................................................................... ARTICLE VI RESERVE FUND Section 6.01. Establishment of Reserve Fund......................................................................14 Section 6.02. Deposits.......................................................................................................... Section 6.03. Transfers of Excess............................................................................................... Section 6.04. Application in Event of Deficiency in the Lease Pa.............14 Section 6.05. Transfer To Make All Lease Payments........................................................14 -i- 204 ARTICLE VII INSURANCE AND CONDEMNATION FUND; INSURANCE; EMINENT DOMAIN; TITL INSURANCE Section 7.01. Establishment of Insurance and Condemnation Fund; Insurance Award............................................................................................15 Section 7.02. Application of Net Proceeds of Eminent Domain Awar...................16 Section 7.03. Application of Net Proceeds of Title Insurance Awa.........................16 Section 7.04. Cooperation....................................................................................................... ARTICLE VIII MONEYS IN FUNDS; INVESTMENT Section 8.01. Held in Trust..................................................................................................... Section 8.02. Investments Authorized.....................................................................................18 Section 8.03. Accounting................................................................................................................................ Section 8.04. Allocation of Earnings..........................................................................................18 Section 8.05. Acquisition, Disposition and Valuation of Investme........................19 ARTICLE IX THE TRUSTEE Section 9.01. Appointment of Trustee......................................................................................20 Section 9.02. Acceptance of Trusts.............................................................................................. Section 9.03. Fees, Charges and Expenses of Trustee.......................................................23 Section 9.04. Notice to Certificate Owners of Default.......................................................24 Section 9.05. Intervention by Trustee.......................................................................................24 Section 9.06. Removal of Trustee................................................................................................ Section 9.07. Resignation by Trustee........................................................................................24 Section 9.08. Appointment of Successor Trustee.................................................................24 Section 9.09. Merger or Consolidation.....................................................................................24 Section 9.10. Concerning any Successor Trustee................................................................25 ARTICLE X MODIFICATION OR AMENDMENT OF AGREEMENTS Section 10.01. Amendments Permitted...................................................................................26 Section 10.02. Procedure for Amendment with Written Consent of C6 Section 10.03. Disqualified Certificates...................................................................................27 Section 10.04. Effect of Supplemental Agreement.............................................................27 Section 10.05. Endorsement or Replacement of Certificates Delive Section 10.06. Amendatory Endorsement of Certificates...............................................28 ARTICLE XI COVENANTS ...............29 Section 11.01. Compliance With and Enforcement of Lease Agreemen Section 11.02. Observance of Laws and Regulations.......................................................29 Section 11.03. Prosecution and Defense of Suits..................................................................29 Section 11.04. Recordation and Filing......................................................................................29 Section 11.05. Budgets.......................................................................................................... Section 11.06. Further Assurances.............................................................................................30 Section 11.07. Satisfaction of Conditions Precedent...........................................................30 Section 11.08. Continuing Disclosure.......................................................................................30 ARTICLE XII LIMITATION OF LIABILITY Section 12.01. Limited Liability of City...................................................................................31 Section 12.02. No Liability of City or Authority for Trustee Per................................................................ Section 12.03. Indemnification of Trustee...............................................................................31 -ii- 205 Section 12.04. Limitation of Rights to Parties and Certificate O.........................31 ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS Section 13.01. Assignment of Rights.........................................................................................33 Section 13.02. Remedies......................................................................................................... Section 13.03. Application of Funds..........................................................................................33 Section 13.04. Institution of Legal Proceedings...................................................................33 Section 13.05. Non-waiver....................................................................................................... Section 13.06. Remedies Not Exclusive...................................................................................34 Section 13.07. Power of Trustee to Control Proceedings.................................................34 Section 13.08. Limitation on Certificate Owners Right to Sue....................................34 Section 13.09. Parties Interested Herein..................................................................................35 ARTICLE XIV MISCELLANEOUS Section 14.01. Defeasance....................................................................................................... Section 14.02. Records.......................................................................................................... Section 14.03. Notices.......................................................................................................... Section 14.04. Governing Law.................................................................................................... Section 14.05. Binding Effect; Successors.................................................................................37 Section 14.06. Execution in Counterparts...............................................................................37 Section 14.07. Destruction of Canceled Certificates...........................................................37 Section 14.08. Headings......................................................................................................... Section 14.09. Waiver of Notice................................................................................................. Section 14.10. Payments Due on Other than Business Day..........................................38 Section 14.11. Payment of Unclaimed Moneys...................................................................38 Section 14.12. Separability of Invalid Provisions................................................................8 EXHIBIT A: DEFINITIONS EXHIBIT B: FORM OF THE CERTIFICATES -iii- 206 Quint & Thimmig LLP 02/10/12 02/24/12 04/11/12 TRUST AGREEMENT THIS TRUST AGREEMENT, dated as of May 1, 2012, by and among THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the TrusteeŽ), the CUPERTINO PUBLIC FACILITIES CORPORATION, a nonprofit, public ben organized and existing under the laws of the State of California (the CorporationŽ), and the CITY OF CUPERTINO, a municipal corporation and general law city, organized and existing under the laws of the State of California (the CityŽ); WITNESSETH: WHEREAS, the City and the Corporation have entered into a lease agreement, dated as of the date hereof (the Lease AgreementŽ), whereby the Corporation has agreed to lease certain real property and improvements (collectively, the PropertyŽ) to the City and the City has agreed to lease the Property from the Corporation; WHEREAS, for the purpose of obtaining the moneys required to be deposited by it with the Trustee all for the purpose of enabling the City to refinance various public capital improvements throughout the geographic boundaries of the City and, in particular, to refund the Citys outstanding Certificates of Participation (2002 Refinancing and Capital Improvement Project)(the 2002 CertificatesŽ), the Corporation proposes to assign and transfer certain of its rights under the Lease Agreement to the Trustee, and the Trustee has agreed to execute and deliver certificates of participation, each evidencing a direct, fractional interest in lease payments made by the City under the Lease Agreement, to provide the moneys required herein to be deposited by the Corporation; and WHEREAS, the proceeds of the Certificates, together with other available moneys, will be applied by the City to (a) refund the 2002 Certificates, (b) fund a reserve fund for the Certificates, and (c) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: 207 ARTICLE I DEFINITIONS Section 1.01. Definitions. The terms defined in Exhibit A attached hereto and by this reference incorporated herein, as used and capitalized herein, shall, for all purposes of this Trust Agreement, have the meanings ascribed to them in said Exhibit A unless the context clearly requires some other meaning. Section 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution of this Trust Agreement by the officers and persons signing it. Section 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean and include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to Articles,Ž SectionsŽ and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; the words herein,Ž hereof,Ž hereby,Ž hereunderŽ and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or subdivision hereof. Section 1.04. Exhibits. The following exhibits are attached to, and by reference made a part of, this Trust Agreement: EXHIBIT A: DEFINITIONS EXHIBIT B: FORM OF THE CERTIFICATES -2- 208 ARTICLE II THE CERTIFICATES OF PARTICIPATION Section 2.01. Authorization. The Trustee is hereby authorized and directed upon written request from the Corporation to execute and deliver, to the Original Purchaser identified in such written request, Certificates in an aggregate principal amount of __________ dollars ($__________) evidencing direct, undivided fractional interests of the Owners thereof in the Lease Payments. In no event shall such Certificates be deemed an obligation, liability or debt of the Trustee. Section 2.02. Date; Payment of Interest. Each Certificate shall be dated as of the Closing Date. Interest with respect thereto shall be payable from the Interest Payment Date next preceding the date of execution thereof, unless: (i) it is executed as of an Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (ii) it is executed after a Regular Record Date and before the following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (iii) it is executed on or before June 15, 2012, in which event interest with respect thereto shall provided, however be payable from the Closing Date; , that if, as of the date of execution of any Certificate, interest is in default with respect to any Outstanding Certificates, interest represented by such Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by wire or check mailed to the Owners as of a special record date to be fixed by the Trustee in its sole discretion, notice of which shall be given to the Owners not less than ten (10) days prior to such special record date. Section 2.03. Maturity; Interest Rates; Percentages. Maturity; Interest Rates (a) . The Certificates shall mature on July 1 in each of the respective years, and in the respective amounts, except that no Certificate may have principal maturing in more than one year, and interest represented thereby shall be computed at the respective rates, as follows: Maturity Date Principal Interest Maturity Date Principal Intere (July 1) Amount Rate (July 1) Amount Rate Payments With Respect to Certificates Equal to Total Lease Payme (b) . The total principal and interest due with respect to all Certificates shall not exceed the total Lease Payments due under the Lease Agreement. Section 2.04. Interest. Interest represented by the Certificates shall be payable on e Interest Payment Date to and including the date of maturity or redemption, whichever is earlier, as provided in Section 2.10 hereof. Said interest shall represent the portion of Lease -3- 209 Payments designated as interest and coming due during the six-month period preceding each Interest Payment Date. The portion of Lease Payments designated as interest with respect to any Certificate shall be computed by multiplying the portion of Lease Payments designated as principal with respect to such Certificate by the rate of interest applicable to such Certificate ( the basis of a 360-day year of twelve 30-day months). Section 2.05. Forms. 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. The Certificates shall be numbered consecutively, beginning with R-1. The Certificates shall be substantially in the form set forth in Exhibit B attached hereto and by this reference incorporated herein. Section 2.06. Execution. The Certificates shall be executed by and in the name of the Trustee by the manual signature of an authorized officer or signatory of the Trustee. If any officer or signatory whose signature appears on any Certificate ceases to be such officer or signatory before the date of delivery of said Certificate, such signature shall nevertheless be as effective as if the officer or signatory had remained in office until such date. Section 2.07. Application of Proceeds and Other Moneys. (a) The net proceeds received by the Trustee from the sale of the Certificates in the aggregate amount of $__________, being the face amount of the Certificates ($__________), less an underwriters discount of $_________, plus net original premium of $_________, shall forthwith be deposited by the Trustee in the following respectiv (i) The Trustee shall deposit in the Delivery Costs Fund an amou $_______; (ii) The Trustee shall deposit in the Reserve Fund an amount equ and (iii) The Trustee shall transfer the sum of $__________ to the Escrow Bank for deposit in the Escrow Fund to provide for the defeasance of the 2002 Certificates. (b) The sum of $_________ paid by the City to the Trustee (representing the first Lease Payment) shall be deposited in the Lease Payment Fund. (c) The Trustee may establish a temporary fund or account in its records to facilitate such deposits and transfers. Section 2.08. Transfer and Exchange. Transfer of Certificates (a) . The registration of any Certificate may, in accordance with its terms, be transferred upon the Registration Books by the person in whose name it is registered, in person or by his attorney duly authorized in writing upon surrender of such Certificate for cancellation at the Principal Corporate Trust Office, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for registration of transfer, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. The City shall pay any costs of the Trustee incurred in connection with such transfer, except that the Trustee may require the payment by the Certificate Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. The Trustee shall not be required to transfer (i) any Certificates or portion thereof during the period between the date fifteen (15) days prior to the date of selection -4- 210 of Certificates for redemption and such date of selection, or (ii) any Certificates selected for redemption. Exchange of Certificates (b) . Certificates may be exchanged, upon surrender thereof, at the Principal Corporate Trust Office for a like aggregate principal amount of Certificates of other authorized denominations of the same maturity. Whenever any Certificate or Certificates shall be surrendered for exchange, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. 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. The Trustee shall not be required to exchange (i) any Certificate or any portion thereof during the period between the date fifteen (15) days prior to the date of selection of Certificates for redemption and such date of selection, or (ii) any Certificate selected for redemption. Section 2.09. Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate shall become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute and deliver a new Certificate of like tenor, maturity and amount in exchange and substitution for the Certificate so mutilated, but only upon surrender to the Tru mutilated. Every mutilated Certificate so surrendered to the Trustee shall be canceled by it and destroyed with a certificate of destruction furnished to the City. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft shall be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and if an indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of like tenor, maturity and amount 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 by the City of the expenses which may be incurred by the Trustee in carrying out the duties under this Section 2.09. Any Certificate executed and delivered under the provisions of this Section 2.09 in lieu of any Certificate alleged to be lost, destroyed or stol shall be equally and fractionally entitled to the benefits of this Trust Agreement with all other Certificates secured by this Trust Agreement. The Trustee shall not be required to treat both the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the principal amount of Certificates which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be treated as one and the same. Notwithstanding any other provision of this Section 2.09, in lieu of delivering a new Certificate to replace a Certificate which has been mutilated, lost, destroyed or stolen, and which has matured or has been called for redemption, the Trustee respect to such Certificate upon receipt of the aforementioned indemnity. Section 2.10. Payment. Payment of interest due with respect to any Certificate on any Interest Payment Date shall be made to the person appearing on the Registration Books as the Owner thereof as of the Regular Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his address as it appears on the Registration Books as of such Regular Record Date or, upon written request filed with the Trustee prior to the Regular Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificates at the Principal Corporate Trust Office. -5- 211 Section 2.11. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Trust Agreement to be signed or executed by Certificate Owners may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Owners in person or by their attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust company or other depository for such Certificates. Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company located within the United States of America, or of any notary public, or other officer authorized to take acknowledgments of deeds to be recorded in such jurisdictions, stating that the persons signing such instruments acknowledged before him the execution thereof. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such certificate shall also constitute sufficient proof of his authority. (b) The fact of the ownership of Certificates by any person and the amount, the maturity and the numbers of such Certificates and the date of his holding the same shall be proved by the Registration Books. 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 pursuant to such request or consent. Section 2.12. Registration Books. The Trustee shall keep or cause to be kept, at its Principal Corporate Trust Office, sufficient records for the registration and registration of transfer of the Certificates, which shall at all reasonable times be open to inspection by the City and the Corporation during regular business hours on any Business Day with reasonable prior notice; 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 2.13. CUSIP Numbers. The Trustee, the City and the Corporation shall not be liable for any defect or inaccuracy in the CUSIP number that appears on any Certificate or in any redemption notice. The Trustee may, in its discretion, inclu statement to the effect that the CUSIP numbers on the Certificates have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trustee, the City nor the Corporation shall be liable for any inaccuracies in such numbers. Section 2.14. Use of Depository. Notwithstanding any provision of this Trust Agreement to the contrary: (a) The Certificates shall be initially executed, delivered and registered in the name of Cede & Co.,Ž as nominee of The Depository Trust Company, the depository designated by the Original Purchaser, and shall be evidenced by one Certificate maturing on each of the maturity dates set forth in Section 2.03 hereof 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: -6- 212 (i) to any successor of The Depository Trust Company or its nominee, or of any substitute depository designated pursuant to paragraph (ii) of this subsection (a) (substitute depositoryŽ); provided that any successor of The Depository Trust Company or substitute depository shall be qualified under any ap provide the service proposed to be provided by it; (ii) to any substitute depository designated in a written request of the City, upon (A) the resignation of The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository or (B) 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 any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (iii) to any person as provided below, upon (A) the resignation Trust Company or its successor (or any substitute depository or its successor) from its functions as depository or (B) 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 Trustee can be obtained. (b) In the case of any transfer pursuant to paragraph (i) or paragraph (ii) of subsection (a) of this Section 2.14, upon receipt of all Outstanding Certificates by the Trustee, together with a written request of a City Representative 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 a City Representative. In the case of any transfer pursuant to paragraph (iii) of subsection (a) of this Section 2.14, upon receipt of all Outstanding Certificates by the Trustee together with a written request of a City Representative, 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 les date of receipt of such a written request of a City Representati (c) In the case of partial redemption or an advance refunding of any Certificates evidencing all of the principal maturing in a particular year, The Depository Trust Company shall, at the Citys expense, 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 responsibili records maintained by DTC or any participant in DTC or transmitt 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 and interest due with respect to the Certificates by arranging for payment in such manner that funds for such -7- 213 payments are properly identified and are made immediately available on the date they are due, in accordance with the Letter of Representations between DTC and the Trustee. (f) So long as all Outstanding Certificates are registered in the name of Cede & Co. or its registered assigns (hereinafter, for purposes of this paragraph (f), the OwnerŽ): (i) All notices and payments addressed to the Owners shall contain the Certificates CUSIP number. (ii) Notices to the Owner shall be forwarded in the manner set forth in the form of DTCs standard form blanket issuer letter of representations executed by the City and received and accepted by DTC. -8- 214 ARTICLE III ESTABLISHMENT AND DISBURSEMENT OF DELIVERY COSTS FUND Section 3.01. Delivery Costs Fund. The Trustee shall establish a special fund designated as the Delivery Costs Fund;Ž 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 Delivery Costs Fund the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.07(a)(i) hereof and any other funds from time to time deposited with the Trustee for such purpose and identified in writing to the Trustee. Section 3.02. Payment of Delivery Costs. The moneys in the Delivery Costs Fund shall be disbursed by the Trustee to pay the Delivery Costs. (a) The Trustee shall disburse moneys in the Delivery Costs Fund only upon a receipt of a sequentially numbered requisition, signed by a City Representative, setting forth the amounts to be disbursed for payment or reimbursement of Delivery Costs and the name and address of the person or persons to whom said amounts are to be disbursed, stating that the amounts to be disbursed are for Delivery Costs properly chargeable to the Deli (b) The Trustee shall be responsible for the safekeeping and investment (in accordance with Section 8.02 hereof) of the moneys held in the Delivery Costs Fund and the payment thereof in accordance with this Section 3.02, but the Trustee shall not be responsible for the truth or accuracy of such requisitions, may rely conclusively thereon investigate or verify any statements made therein. (c) Upon written notice from a City Representative that all Delivery Costs have been paid, but in no event later than November 23, 2012, the Trustee shall transfer any moneys then remaining in the Delivery Costs Fund to the Lease Payment Fund a thereof, the Delivery Costs Fund shall be closed, the Trustee sh make payments for Delivery Costs and all further Delivery Costs shall be paid by the City. -9- 215 ARTICLE IV REDEMPTION OF CERTIFICATES Section 4.01. Redemption. Optional Redemption (a) . The Certificates maturing on or before July 1, ____, are not subject to optional redemption prior to maturity. The Certificates maturing on and after July 1, ____, are subject to optional redemption in whole or in part on any date in such order of maturity as shall be designated by the City (or, if the City shall fail to so designate the order of redemption, in pro rata among maturities) and by lot within a maturity, on or after July 1, ____, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement, without premium. Redemption From Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent (b) Domain Award . The Certificates are subject to mandatory redemption in whole or in part on any date from the Net Proceeds of an insurance, title insurance, condemnation, or eminent domain award to the extent credited towards the prepayment of the Lease Payments by the City pursuant to Section 10.3 of the Lease Agreement, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium. Mandatory Redemption. (c) The Certificates maturing on July 1, ____, are subject to mandatory redemption in part on each July 1, commencing July 1, ____, to and including July 1, ____, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to Section 4.4 of the Lease Agreement with respect to each such redemption date (subject to abatement, as set forth in Section 6.3 of the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows: Year Principal Amount of (July 1) Certificates to be Redeemed Maturity. In the event that the Trustee shall redeem Certificates maturing on July 1, ____, in part but not in whole pursuant to subsections (a) or (b) of this Section 4.01, the amount of the Certificates to be redeemed in each subsequent year pursuant to this subsection (c) shall be reduced to correspond to the principal components of the Lease Payments prevailing following such redemption as determined pursuant to Section 4.4(b) of the Lease Agreement. The Certificates maturing on July 1, ____, are subject to mandatory redemption in part on each July 1, commencing July 1, ____, to and including July 1, ____, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to Section 4.4 of the Lease Agreement with respect to each such redemption date (subject to abatement, as set forth in Section 6.3 of the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows: -10- 216 Year Principal Amount of (July 1) Certificates to be Redeemed Maturity. In the event that the Trustee shall redeem Certificates maturing on July 1, ____, in part but not in whole pursuant to subsections (a) or (b) of this Section 4.01, the amount of the Certificates to be redeemed in each subsequent year pursuant to this subsection (c) shall be reduced to correspond to the principal components of the Lease Payments prevailing following such redemption as determined pursuant to Section 4.4(b) of the Lease Agreement. Section 4.02. Selection of Certificates for Redemption. Whenever provision is made in this Trust Agreement for the redemption of Certificates and less than all Outstanding Certificates are to be redeemed, the Trustee shall select Certificates for redemption from the Outstanding Certificates not previously called for redemption in such order of maturity as shall be designated by the City, except for redemption pursuant to Section 4.01(c) (and, in lieu of such pro rata designation, among maturities), and by lot within a maturity. The Trustee shall select Certificates for redemption within a maturity by lot in any manner which the Trustee shall, in its sole discretion, deem appropriate. For the purposes of such selection, Certificates shall be deemed to be composed of $5,000 portions and any such portion may be separately redeemed. The Trustee shall promptly notify the City and the Corporation in writing of the Certificates so selected for redemption. Selection by the Trustee of Certificates for redemption shall be final and conclusive. Section 4.03. Notice of Redemption. Unless waived in writing by any Owner of a Certificate to be redeemed, notice of any such redemption shall be given by the Trustee on behalf and at the expense of the City, by mailing a copy of a redemption notice by first class mail, postage prepaid, at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to such Owner of the Certificate or Certificates to be redeemed at the address shown on the Certificate Registration Books maintained by the Trustee or at such other provided, however address as is furnished in writing by such Owner to the Trustee;, that neither the failure to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for the redemption of the Certificates. All notices of redemption shall be dated and shall state: (i) the redemption date; (ii) the redemption price; (iii) if less than all Outstanding Certificate the Certificate numbers (and, in the case of partial redemption, the respective principal amounts) of the Certificates to be redeemed; (iv) that on the redemption date the redemption price will become due and payable upon each such Certificate or redemption and that interest with respect thereto shall cease to accrue from and after said date; (v) the place where such Certificates are to be surrendered for payment of the redemption price, which place of payment shall be the Principal Corporate Trust Office; (vi) the CUSIP numbers of all Certificates being redeemed; (vii) the original date of exec Certificates; (viii) the rate of interest payable with respect to each maturity of Certificates being redeemed; (ix) the maturity date of each Certificate being redeemed; and (x) any other descriptive information needed to identify accurately the Certificates being redeemed. Notwithstanding the foregoing, in the case of any optional redemption of the Certificates under Section 4.01(a), the notice of redemption sha -11- 217 conditioned upon receipt by the Trustee of sufficient moneys to redeem the Certificates on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Certificates have not been deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Certificates to be optionally redeemed, such event shall not constitute an Event of Default; the Trustee shall send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Certificates for which notice of optional redemption was given shall remain Outstanding for all p Agreement. Notice of redemption having been given as aforesaid and the deposit of the redemption price having been made by the City, the Certificates or portions redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date interest with respect to such Certificates or portions of Certificates shall cease to be payable. Upon surrender of such Certificates for redemption in accordance with said notice, such Certificates shall be paid by the Trustee at the redemption price. Upon the payment of the redemption price of Certificates being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Certificates being redeemed with the proceeds of such check or other transfer, to the extent possible. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Certificates which have been redeemed shall be canceled by the Trustee, shall not be redelivered and shall be destroyed pursuant to Section 14.07. In addition to the foregoing notice to the Owners, notice shall also be given by the Trustee, by telecopy, registered, certified or overnight mail, to all Securities Depositories and to an Information Service which shall state the information set forth above, but no defect in said notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption. The Trustee shall have no responsibility for a defect in the CUS on any Certificate or in the redemption notice. The redemption notice may provide that the CUSIP numbers have been assigned by an independent service and a solely for the convenience of Certificate Owners and that the Trustee and the City shall not be liable in any way for inaccuracies in said numbers. Section 4.04. Partial Redemption of Certificate. Upon surrender of any Certificate redeemed in part only, the Trustee shall execute and deliver to the Owner thereof a new Certificate or Certificates of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Certificate surrendered and of the same interest rate and the same maturity. Section 4.05. Purchase of Certificates. In lieu of redemption of Certificates as provided in this Article IV, amounts held by the Trustee for such redemption may also be used on any Interest Payment Date, upon receipt by the Trustee at least ninety (90) days prior to the next scheduled Interest Payment Date of the written request of a City Representative, for the purchase of Certificates at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the City may in its discretion direct. Such purchases may be effected through the investment department of t the Trustee. The aggregate principal amount of Certificates of the same maturity purchased in lieu of redemption pursuant to this Section 4.05 shall not exceed the aggregate principal amount of Certificates of such maturity which would otherwise be subject to such redemption. Remaining moneys, if any, shall be deposited in the Lease Paymen -12- 218 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 but none of its obligations set forth in the Lease Agreement, including but not limited to all of the Corporations rights to receive and collect 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 m shall be paid directly to the Trustee and all of the Lease Payments collected or received by the Corporation shall be deemed to be held and to have been collected or received by the Corporation as the agent of the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with the Trustee within one Business Day after the receipt thereof, and all such Lease Payments and such other amounts shall be forthwith deposited by the Trustee upon the receipt thereof in the Lease Payment Fund (except as provided in Section 6.04 hereof). Section 5.02. Establishment of Lease Payment Fund. The Trustee shall establish a special fund designated as the Lease Payment Fund.Ž All moneys at any time deposited by the Trustee in the Lease Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, except only as provided in this Trust Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set forth. Section 5.03. Deposits. There shall be deposited in the Lease Payment Fund all Lease Payments received by the Trustee (except as provided in Section 6.04 hereof), including any moneys received by the Trustee for deposit therein pursuant to Sections 2.07(b), 4.01, 5.01 or Article VII hereof, or Article X of the Lease Agreement, and any other moneys required to be deposited therein pursuant to the Lease Agreement or pursuant to this Trust Agreement. Section 5.04. Application of Moneys. All amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and interest with respect to the Certificates as the same shall become due and payable in accordance with the provisions of Article II and Article IV hereof. Section 5.05. Surplus. Any surplus remaining in the Lease Payment Fund after redemption and/or payment of all Certificates, including accrued interest (if any) and payment of any applicable fees and expenses to the Trustee, or provision for such redemption or payment having been made to the satisfaction of the Trustee, shall be withdrawn by the Trustee and remitted to the City. -13- 219 ARTICLE VI RESERVE FUND Section 6.01. Establishment of Reserve Fund. The Trustee shall establish a special fund designated as the Reserve Fund.Ž All moneys, equal to the Reserve Requirement, at any time on deposit in the Reserve Fund shall be held by the Trustee in t Owners of the Certificates, and applied solely as provided herein. Section 6.02. Deposits. There shall be deposited in the Reserve Fund the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.07(a)(ii) hereof and any other funds from time to time deposited with the Trustee for such purpose and identified in writing to the Trustee. Moneys in the Reserve Fund shall be held in trust as a reserve for the payment when due of the Lease Payments. Section 6.03. Transfers of Excess. The Trustee shall, on or before each March 15 and September 15, value investments in the Reserve Fund at market value and transfer any moneys in the Reserve Fund then in excess of the Reserve Requirement in accordance with Section 8.04; provided, however, that the Trustee shall not liquidate an investment to make such transfer of excess unless so directed in writing by a City Representative. The Trustee shall transfer any amount in excess of such sum to the Lease Payment Fund to be applied as a credit against amounts owed by the City for the payment of Lease Payments on each Lease Payment Date thereafter, until depleted. Section 6.04. Application in Event of Deficiency in the Lease Payment Fund. If, on any Interest Payment Date, the moneys available in the Lease Payment Fund do not equal the amount of the principal and interest with respect to the Certificates then coming due and payable, the Trustee shall apply the moneys available in the Res Lease Payments by transferring the amount necessary for this purpose to the Lease Payment Fund. Upon receipt of any delinquent Lease Payment with respect to which moneys have been advanced from the Reserve Fund, such Lease Payment shall be deposited in the Reserve Fund to the extent of such advance. Section 6.05. Transfer To Make All Lease Payments. If, on any Interest Payment Date, the moneys on deposit in the Reserve Fund and the Lease Payment Fund (excluding amounts required for payment of principal and interest with respect to Certificates not presented for payment) are sufficient to pay all Outstanding Certificates, inc the Trustee shall transfer all amounts then on deposit in the Reserve Fund to the Lease Payment Fund to be applied to the payment of the Lease Payments, and such moneys shall be distributed to the Owners of Certificates in accordance with Article II and IV of this Trust Agreement. Any amounts remaining in the Reserve Fund upon payment in full of all Outstanding Certificates and all amounts due the Trustee hereunder, or upon provision for such payment as provided in Section 14.01, shall be withdrawn by the Trustee and paid to the City. -14- 220 ARTICLE VII INSURANCE AND CONDEMNATION FUND; INSURANCE; EMINENT DOMAIN; TITLE INSURANCE Section 7.01. Establishment of Insurance and Condemnation Fund; Application of Net Proceeds of Insurance Award. (a) Any Net Proceeds of insurance against damage to or destruction of any part of the Property collected by the City in the event of any such damage or destruction shall be paid to the Trustee by the City pursuant to Section 6.2(a) of the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in a special fund designated as the Insurance and Condemnation FundŽ to be established by the Trustee when deposits are required to be made therein. (b) Within ninety (90) days following the date of such deposit, the City shall determine and notify the Trustee in writing of its determination either (i) that the replacement, repair, restoration, modification or improvement of the Property is not economically feasible or in the best interest of the City, or (ii) that all or a portion of such Net Proceeds are to be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Property. (c) In the event the Citys determination is as set forth in clause (i) of paragraph (b) above, such Net Proceeds shall be promptly transferred by the Trustee to the Lease Payment Fund, applied to the prepayment of Lease Payments pursuant to Section 10.3 of the Lease Agreement and applied to the redemption of Certificates as provided in Section 4.01(b) hereof; provided, however , that in the event of damage or destruction of the Property in full, such Net Proceeds may be transferred to the Lease Payment Fund only if sufficient, together with other moneys available therefor, to cause the prepayment of the principal components of all unpaid Lease Payments pursuant to Section 10.3 of the Lease Agreement, otherwise such Net Proceeds shall be applied to the replacement, repair, restoration, modification or improvement of the provided further, however Property; , that in the event of damage or destruction of the Property in part, such Net Proceeds may be transferred to the Lease Payment Fund and applied to the prepayment of Lease Payments only if the resulting Lease Payments represent fair consideration for the remaining portions of the Property, evidenced by a certificate signed by a City Representative and a Corporation Representative. (d) In the event the Citys determination is as set forth in clause (ii) of paragraph (b) above, Net Proceeds deposited in the Insurance and Condemnation prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Property by the City, and disbursed by the Trustee upon receipt of requisitions signed by a City Representative stating with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. The Trustee shall not be responsible for the representations made in such requisitions and may conclusively rely thereon and shall be under no duty to investigate or verify any statements made therein. Any balance of the Net Proceeds remaining after such work has been completed shall be paid to the City. -15- 221 Section 7.02. Application of Net Proceeds of Eminent Domain Award. If all or any part of the Property shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain), the Net Proceeds therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund pursuant to Section 6.2(b) of the Lease Agreement and shall be applied and disbursed by the (a) If the City has given written notice to the Trustee of its determination that (i) such eminent domain proceedings have not materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under the Lease Agreement, and (ii) such proceeds are not needed for repair or rehabilitation of the Property, the City shall so certify to the Trustee and the Trustee, at the Citys written request, shall transfer such proceeds to the Lease Payment Fund to be credited towards the prepayment of the Lease Payments pursuant to Section 10.3 of the Lease Agreement and applied to the redemption of Certificates in the manner provided in Section 4.01(b) hereof. (b) If the City has given written notice to the Trustee of its determination that (i) such eminent domain proceedings have not materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under the Lease Agreement, and (ii) such proceeds are needed for repair, rehabilitation or replacement of the Property, the City shall so certify to the Trustee and the Trustee, at the Citys written request, shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing with the Trustee of requisitions of the City Representative in the form and containing the provisions set forth in Section 7.01. The Trustee shall not be responsible for the representations made in such requisitions and may conclusively rely thereon and shall be under no duty to investigate or verify any statements made therein. (c) If (i) less than all of the 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 eminent domain proceedings have materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under the Lease Agreement or (ii) all of the Property shall have been taken in such eminent domain proceedings, then the Trustee shall transfer such proceeds to the Lease Payment Fund to be credited toward the prepayment of the Lease Payments pursuant to Section 10.3 of the Lease Agreement and applied to the redemption of Certificates in the manner provided in 4.01(b) hereof. (d) In making any determination under this Section 7.02, the Cit required to, obtain at its expense, the report of an independent engineer or other independent professional consultant, a copy of which shall be filed with the Trustee. Any such determination by the City shall be final. Section 7.03. Application of Net Proceeds of Title Insurance Award. The Net Proceeds from a title insurance award shall be deposited with the Trustee in the Insurance and Condemnation Fund pursuant to Section 6.2(c) of the Lease Agreement and shall be transferred to the Lease Payment Fund to be credited towards the prepayment of Lease Payments required to be paid pursuant to Section 10.3 of the Lease Agreement and applied to the redemption of Certificates in the manner provided in Section 4.01(b). Section 7.04. Cooperation. The Corporation and the Trustee shall cooperate fully with the City, at the expense of the City, in filing any proof of loss with respect to any insurance policy maintained pursuant to Article V of the Lease Agreement and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Property or any portion thereof. Neither the Trustee nor the Corporation shall be obligated to join in such action if it believes it will be exposed to liability or has not been indemnified to its satisfaction -16- 222 from any loss, liability or expense including, but not limited t expenses. -17- 223 ARTICLE VIII MONEYS IN FUNDS; INVESTMENT Section 8.01. Held in Trust. The moneys and investments held by the Trustee under this Trust Agreement are irrevocably held in trust for the benefit of the Owners of the Certificates and for the purposes herein specified and such moneys, and any i thereon, shall be expended only as provided in this Trust Agreement and shall not (except as set forth in Section 9.03 hereof) be subject to levy, attachment or lien by or for the benefit of any creditor of the Corporation, the Trustee, the City or any Owner of Certificates. Section 8.02. Investments Authorized. Moneys held by the Trustee hereunder shall, upon written order of a City Representative, be invested and reinvested by the Trustee in Permitted Investments. The Trustee may deem all investments directed by a City Representative as Permitted Investments without independent investigation thereof. If a City Representative shall fail to so direct investments, the Trustee shall hold such moneys uninvested. Such investments, if registrable, shall be registered in the name of and held by the Trustee or its nominee. The Trustee may purchase or sell to itse agent, investments authorized by this Section 8.02. Such investments and reinvestments shall be made giving full consideration to the time at which funds are required to be available. The Trustee may act as principal or agent in the making or disposing of any investment and make or dispose of any investment through its investment department or that of an affiliate and shall be entitled to its customary fees therefor. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section 8.02, to deal with itself (in its individual capacity) or with one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The Trustee may rely on the investment directions of the City Representative as to both the suitability and legality of the directed investments. Section 8.03. Accounting. The Trustee shall furnish to the City, at least monthly, an accounting which may be in the form of its customary accounting statements of all investments made by the Trustee; provided that the Trustee shall not be obligated to deliver an accounting for any fund or account that (a) has a balance of $0.00 and (b) last reporting date. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Section 8.02 hereof. The City acknowledges that, to the extent that regulations of the Comptroller of the Currency or other applicable regulatory agency grant the City the right to receive brokerage confirmations of security transactions, at no additional cost, the City waives receipt of such confirmations. The Trustee shall furnish to the City periodic statements of account investment transactions made by the Trustee. Section 8.04. Allocation of Earnings. Unless and until otherwise directed by the City to the Trustee in writing, all interest or income received by the Trustee on investment of the Lease Payment Fund shall be retained in the Lease Payment Fund. Amounts retained or deposited in the Lease Payment Fund pursuant to this Section 8.04 shall be applied as a credit against the Lease Payment due by the City pursuant to the Lease Agreement on the Lease Payment Date following the date of deposit. All interest received by the Trustee on investment of the Reserve Fund shall be retained in the Reserve Fund in the event that amo Fund are less than the Reserve Requirement. Reserve Fund investm maturities extending beyond five years. In the event that amounts then on deposit in the Reserve Fund on the valuation date described in Section 6.03 hereof equal or exceed the Reserve Requirement, such excess shall be transferred to the Lease Payment Fund. Transfers to the Lease Payment Fund from the Reserve Fund shall be made by the Trustee on or prior to each March -18- 224 15 and September 15. All interest or income in the Delivery Costs Fund shall be retained in the Delivery Costs Fund until the Delivery Costs Fund is closed pursuant to Section 3.02 hereof. Section 8.05. Acquisition, Disposition and Valuation of Investments. The City covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Trust Agreement, or otherwise containing gross proceeds of the Certificates (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued at their market value. In determining market value of Permitted Investments, the Trustee may use, and rely conclusively and without liability upon, any generally recognized securities pricing service (including brokers and dealers in securities) available to it. -19- 225 ARTICLE IX THE TRUSTEE Section 9.01. Appointment of Trustee. The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America with a Principal Corporate Trust Office in Los Angeles, California, is hereby appointed Trustee, registrar and paying agent by the Corporation and the City for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Trust Agreement. The Corporation and the City agree that they will maintain a Trustee which shall be a corporation or association organized under the laws of any state, the United States of America, or the District of Columbia, authorized under such laws to exercise corporate trust powers, which shall have (or, in the case of a bank or trust company included in a bank holding company system, the company shall have) a combined capital and surplus of at least fifty million dollars ($50,000,000), subject to supervision or examination by federal or State authority, so long as any Certificates are Outstanding. If such corporation or association publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining authority above referred to then for the purpose of this Section 9.01, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.01, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.07. The Trustee is hereby authorized to pay the Certificates when duly presented for payment at maturity, or on redemption, or on purchase by the Trustee prior to maturity in accordance with Section 4.05 hereof, and to cancel all Certificates upon payment thereof. The Trustee shall keep records in accordance with industry standards of all funds administered by it and of all Certificates paid and discharged. Section 9.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Trust Agreement and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee, prior to the occurrence of an Event of Default and after the curing or waiver of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement and no implied duties or obligations shall be read into this Trust Agreement against the Trustee. In case an Event of Default has occurred (which has not been cured or waived) the Trustee may exercise such of the rights and powers vested in it by this Trust Agreement and shall use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such persons own affairs. (b) No provision in this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it. (c) The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder either directly or by or through attorneys, receivers or agents and shall be entitled to advice of counsel concerning all matters of trust -20- 226 be absolutely protected in relying thereon. The Trustee shall not be responsible for the misconduct of such persons selected by it with reasonable care. (d) The Trustee shall not be responsible for any recital herein, in the Assignment Agreement or in the Certificates, or for any of the supplements thereto or instruments of further assurance, or for the sufficiency of the security for the Certificates delivered hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the Corporation or the City under the Lease Agreement. (e) The Trustee shall not be accountable for the use of any Certificates delivered hereunder or the proceeds thereof. The Trustee, in its individual or any other capacity, may become the Owner or pledgee of Certificates secured hereby with the same rights which it would have if it were not the Trustee; may acquire and dispose of other bonds or evidence of indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as a depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners of Certificates, whether or not such committee shall represent the Owners of the majority in principal amount of the Certificates then Outstanding. (f) In the absence of bad faith on its part, the Trustee shall be protected in acting or refraining from acting upon any notice, request, consent, requisition, certificate, order, affidavit, facsimile, letter, telegram or other paper or document believed been signed or sent by the proper person or persons. Any action taken or omitted to be taken by the Trustee in good faith pursuant to this Trust Agreement upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any Certificate, shall be conclusive and binding upon all future Owners of the same Certificate and upon Certificates executed and delivered in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Certificate or to take any action at his request unless such person is the registered owner as shown on the Registration Books. (g) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed by a Corporation Representative or a City Representative as sufficient evidence of the facts therein contained and prior to the occurrence of an Event of Default of which the Trustee has been given notice or is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient. The Trustee may accept a certificate of a Corporation Representative or a City Representative to the effect that an authorization in the form therein set forth has been adopted by the Corporation or the City, as the case may be, as conclusive evidence that such authorization has been duly adopted, and is in full force and ef (h) The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty and the Trustee shall not be answerable for other than its negligence or willful misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers, directors, employees, affiliates and agents. (i) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the City to make any of the Lease Payments to the Trustee required to be made by the City pursuant to the Lease Agreement or failure by the Corporation or the City to file with the Trustee any document required by this Trust Agreement or a Lease Agreement to be so filed subsequent to the delivery of the Certificates, unless the Trustee shall be specifically notified in writing of such default by the Corporation, the City or -21- 227 by the Owners of at least five percent (5%) in aggregate principal amount of Certificates then Outstanding and all notices or other instruments required by thi delivered to the Trustee must, in order to be effective, be delivered at the Principal Corporate Trust Office, and in the absence of such notice so delivered the Trustee may conclusively assume there is no Event of Default except as aforesaid. (j) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (k) Notwithstanding anything elsewhere in this Trust Agreement with respect to the execution of any Certificates, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Trust Agreement, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action, deemed desirable by the Trustee for the purpose of establishing the right of the City to the withdrawal of any cash, or the taking of any other action by the Trustee. (l) All moneys received by the Trustee shall, until used or appl provided, be held in trust for the purposes for which they were segregated from other funds except to the extent required by law. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of moneys made by it in accordance with Article VIII of this Trust Agreement. (m) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Outstanding Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Trust Agre (n) Before taking any action under Article XIII hereof or this Section 9.02 at the request or direction of the Certificate Owners, the Trustee may require payment or reimbursement of its reasonable fees and expenses, including reasonable fees and expenses of counsel and receipt of an indemnity bond satisfactory to it from the Certificate Owners to protect it against all liability, except liability which is adjudicated to have resulted from its own negligence or willful misconduct in connection with any action so taken. Before being Trustee may require an opinion of Independent Counsel acceptable to the Trustee, which opinion shall be made available to the other parties hereto upon counsel to any of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed action. If it does so in good faith, the protected in relying thereon. (o) Under no circumstances shall the Trustee be liable for the obligations evidenced by the Certificates. (p) The Trustee shall not be accountable for the use or applicat Corporation or any other party of any funds which the Trustee has released in accordance with the terms of this Trust Agreement. (q) The Trustee has no obligation or duty to insure compliance by the City with the Code. (r) The Trustee makes no representation or warranty, express or implied, as to the title, value, design, compliance with specifications or legal or environmental requirements, quality, -22- 228 durability, operation, condition, merchantability or fitness for any particular purpose or for the use contemplated by the City or the Corporation of the Property. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease Agreement or this Trust Agreement for the existence, furnishing or use of the Property. (s) The Trustee makes no representations as to the validity or sufficiency of the Certificates and shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Certificates assigned to or imposed upon it. The Trustee shall not be responsible for the validity or sufficiency of the Lease Agreement or the assignment under the Assignment Agreement. The Trustee shall not be liable for the sufficiency or collection of any Lease Payments or other moneys required to be paid to it under the Lease Agreement (except as provided in this Trust Agreement), its right to receive moneys pursuant to the Lease Agreement, or the value of or title to the premises upon which the Property is located or the Property. The Trustee makes no representations an for any official statement or other offering material prepared or distributed with respect to the Certificates. (t) In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity and all persons, including wi the City or the Corporation having any claim against the Trustee arising from this Trust Agreement shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein. (u) The Trustee is authorized and directed to execute the Assignment Agreement in its capacity as Trustee hereunder. (v) The Trustee agrees to accept and act upon instructions or directions pursuant to this Trust Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the City or the Corporation elects to give the Trustee e-mail or facsimile instructions (or instructions b similar electronic method) and the Trustee in it discretion elects to act upon such instructions, the Trustees understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustees reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The City and the Corporation agree to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misu (w) In acting or omitting to act pursuant to the Lease Agreement or any other document contemplated or executed in connection herewith, the Trustee shall be entitled to all of the rights, immunities and indemnities accorded to it under this Trust Agreement and the Lease Agreement, including, but not limited to, this Article IX. Section 9.03. Fees, Charges and Expenses of Trustee. The City shall pay and reimburse the Trustee for reasonable fees for its services rendered hereun Agreement and all advances and expenditures, including but not limited to, advances to and reasonable fees and expenses of independent appraisers, accountants, consultants, counsel, agents and attorneys or other experts employed by the Trustee in connection with such services and the Trustee shall, in the Event of Default, have a first and -23- 229 hereunder to secure the same. The Trustees rights hereunder, including its rights under Section 12.03 hereof, shall survive its resignation or removal and final payment of the Certificates. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law. Section 9.04. Notice to Certificate Owners of Default. If an Event of Default occurs of which the Trustee has been given or is deemed to have notice pursuant to Section 9.02(i) hereof, then the Trustee shall, within ninety (90) days of the occurrenc thereof at the expense of the City by first class mail, postage prepaid, to the Owner of each Certificate, unless such Event of Default shall have been cured before the giving of such notice; provided, however that unless such Event of Default consists of the failure by the City to make any Lease Payment when due, the Trustee may elect not to give such notice if and so long as the Trustee in good faith determines that it is in the best interests of the Certificate Owners not to give such notice. Section 9.05. Intervention by Trustee. In any judicial proceeding to which the Corporation or the City is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of Owners of the Certificates, the Trustee may intervene on behalf of the Certificate Owners and shall do so if requested in writing by the Owners of at least twenty-five percent (25%) of the aggregate principal amount of Certificates then Outstanding, provided the Trustee shall have no duty to take such action unless it has received payment or reimbursement and has been indemnified to its satisfaction as provided in Section 9.02(n) hereof against all risk or liability arising from such action. Section 9.06. Removal of Trustee. Upon thirty (30) days notice, the City (so long as no Event of Default shall have occurred and be continuing) or the Owners of at least a majority of the aggregate principal amount of Certificates then Outstanding may, with the consent of the Corporation, remove the Trustee initially appointed, and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee and the Corporation, and may appoint a successor or successors thereto; provided that any such successor shall be a Corporation or association meeting the requirements set forth in Section 9.01 hereof. Section 9.07. Resignation by Trustee. The Trustee and any successor Trustee may, at any time, resign by giving thirty (30) days written notice by registered or certified mail to the Cit and the Corporation. Section 9.08. Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 9.06 or 9.07 hereof, the City shall promptly appoint a successor Trustee. In the event the City shall, for any reason whatsoever, fail to appoint a successor Trustee within thirty (30) days following the delivery to the Trustee of the instrument described in Section 9.06 hereof or within thirty (30) days following the receipt of notice by the City pursuant to Section 9.07 hereof, the Trustee may apply to a court of competent jurisdiction at the expense of the City, for the appointment of a successor Trustee meeting the requirements of Section 9.01 hereof. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the City purporting to appoint a successor Trustee following the expiration of such thirty (30) day period. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Section 9.09. Merger or Consolidation. Any company or association into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any -24- 230 company or association to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company or associat Section 9.01 hereof, shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 9.10. Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its or his predecessor and also the Corporation and the City an instrument in writing accepting such thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the written request of the City, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Upon such acceptance, the City shall mail, by first class mail, postage prepaid, or cause the mailing of, notice thereof to the Certificate Owners at their respective addresses set forth on the Registration Books. Should any instrument in writing from the City be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the City. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article IX, shall be filed or recorded by the successor Trustee in each recording office where the Assignment Agreement shall have been filed or recorded. -25- 231 ARTICLE X MODIFICATION OR AMENDMENT OF AGREEMENTS Section 10.01. Amendments Permitted. This Trust Agreement and the rights and obligations of the Owners of the Certificates, the Lease Agreement and the rights and obligations of the parties thereto, the Site and Facility Lease and the rights and obligations of the parties thereto and the Assignment Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement which shall become effective when the written consent of the Owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 10.03 hereof, shall have been filed with the Trustee. No such modification or amendment shall (1) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof, 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 a Lease Agreement; or (3) modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 10.02 hereof. This Trust Agreement and the rights and obligations of the Owners of the Certificates and the Lease Agreement and the rights and obligations of the respective parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but only to the extent permitted by law and only (1) to add to the covenants and agreements of the Corporation or the City; (2) to cure, correct or supplement any ambiguous or defective provision contained herein or therein and which shall not, in the opinion of nationally recognized bond counsel, materially adversely affect the interests of the Owners of the Certificates; (3) in regard to questions arising hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which shall not, in recognized bond counsel, materially adversely affect the interests of the Owners of the Certificates; (4) to make such additions, deletions or modifications as may be necessary or appropriate in the opinion of bond counsel to assure the exclusion from gross income for federal income tax purposes of the interest component of Lease Payments and the interest payable with respect to the Certificates; (5) to add to the rights of the Trustee; or (6) to maintain the rating or ratings assigned to the Certificates. Any such supplemental agreement shall become effective upon execution and delivery by the parties hereto or thereto, as the case may be. This Trust Agreement and the Lease Agreement may not be modified or amended at any time by a supplemental agreement which would modify any of the rights and obligations of the Trustee without its written assent thereto. The Trustee may request an opinion of Independent Counsel that any amendment entered into hereunder complies with the provisions of this Article X and the Trustee may rely conclusively on such opinion. Section 10.02. Procedure for Amendment with Written Consent of Certificate Owners. This Trust Agreement and the Lease Agreement may be amended by supplemental agreement as provided in this Section 10.02 in the event the consent of the Owners of the Certificates is required pursuant to Section 10.01 hereof. A copy of such supplemental agreement (or a summary thereof), together with a request to the Certificate Owners for their consent thereto, shall be mailed by first class mail, postage prepaid, by the Trustee at the expense of the City, to -26- 232 each Owner of a Certificate at his address as set forth on the Registration Books, but failure to mail copies of such supplemental agreement and request shall not affect the validity of the supplemental agreement when assented to as in this Section 10.02 provided. Such supplemental agreement shall not become effective unless there shall be filed with the Trustee the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding (exclusive provided in Section 10.03 hereof) and a notice shall have been m Section 10.02 provided. Each such consent shall be effective only if accompanied by proof of ownership of the Certificates for which such consent is given, w permitted by Section 2.11 hereof. Any such consent shall be bind 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 when the notice hereinafter in the following paragraph of this Section 10.02 provided for has been mailed. After the Owners of the required percentage of Certificates shall have filed their consents to such supplemental agreement, the Trustee shall mail by first class mail, postage prepaid, a notice at the expense of the City, to the Owners of the Certificates in the manner hereinbefore provided in this Section 10.02 for the mailing of such supplemental agreement of the notice of adoption thereof, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Certificates and will be effective as provided in this Section 10.02 (but failure to mail copies of said notice shall not affect the validity of such supplemental agreement or consents thereto). A record, consisting of the papers required by this Section 10.02 to be filed with the Trustee, shall be conclusive proof of the matters therein stated. Such supplemental agreement shall become effective upon the mailing of such last-mentioned notice, and such supplemental agreement shall be deemed conclusively binding upon the parties hereto and the Owners of all Certificates at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60) day period. Section 10.03. Disqualified Certificates. Certificates owned or held by or for the account of the City or by any person directly or indirectly controlled or controlled by, or under direct or indirect common control with the City (except any Certificates held in any pension or retirement fund) shall not be deemed Outstanding (unless all such Certificates are owned or held, in which case all such Certificates shall be deemed Outstanding) for the purpose of any vote, consent, waiver or other action or any calculation of Outstanding Certificates provided for in this Trust Agreement, and shall not be entitled to vote upon, consent to, or take any other provided, however action provided for in this Trust Agreement; , that the Trustee shall not be liable for determining whether Certificates are owned or held by the City or any such other person unless such Certificates are registered in the name of the City on the Registration Books. Section 10.04. Effect of Supplemental Agreement. From and after the time any supplemental agreement becomes effective pursuant to this Article X, this Trust Agreement or a Lease Agreement, as the case may be, shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates Outstanding, as the case may be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any supplemental agreement shall be deemed to be part of the terms and conditions of this Trust Agreement or a Lease Agreement, as the case may be, for any and all purposes. -27- 233 Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments. The City may determine that Certificates delivered after the effective date of any action taken as provided in this Article X shall bear a notation, by endorsement or otherwise, in form approved by the Trustee, as to such action. In that case, upon demand of the Owner of any Certificate Outstanding at such effective date and presentation of his Certificate for such purpose at the Principal Corporate Trust Office, a suitable notation shall be made on such Certificate. The City may determine that the delivery of substitute Certificates, so modified as in the opinion of the City is necessary to conform to such Certificate Owners action, is necessary and such substitute Certificates shall thereupon be prepared, executed and delivered. In that case, upon demand of the Owner of any Certificate then Outstanding, such substitute Certificate shall be exchanged at the Principal Corporate Trust Office, at the expense of the City, for a Certificate of the same character then Outstanding, upon surrender of such Outstanding Certificate. Section 10.06. Amendatory Endorsement of Certificates. The provisions of this Article X shall not prevent any Certificate Owner from accepting any amend Certificates held by him, provided that proper notation thereof is made on such Certificates. -28- 234 ARTICLE XI COVENANTS Section 11.01. Compliance With and Enforcement of Lease Agreement. The City covenants and agrees with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. The Corporation covenants and agrees with the Owners of the Certificates to perform all obligations and duties imposed on it under the Lease Agreement. The City will not do or permit anything to be done, or omit or r anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of their respective Lease Agreement by the Corporation thereunder. The Corporation and the City, immediately upon receiving or giving any notice, communication or other document in any way relating to or affecting their respective estates, or either of them, in the Property, which may or can in any manner affect such estate of the City or the Corporation, will deliver the same, or a copy thereof, to the Trustee. Section 11.02. Observance of Laws and Regulations. The City and the Corporation will well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the City or the Corporation, respectively, including its right to exist and carry on business as a public entity, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired. Section 11.03. Prosecution and Defense of Suits. The City shall promptly, upon request of the Trustee or any Certificate Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the 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 reasonable attorneys fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceeding. Section 11.04. Recordation and Filing. The City shall record and file, or cause to be recorded and filed, the Site and Facility Lease, the Lease Agreement (or a memorandum thereof), the Assignment Agreement and all such documents as may be required by law (and shall take all further actions which may be necessary or be reasonably required by the Trustee), all in such manner, at such times and in such places as may be r preserve, protect and perfect the security of the Trustee and the Certificate Owners. Section 11.05. Budgets. The City shall supply to the Trustee as soon as practicable, b not later than July 1 in each year, a written determination by a City Representative that the City has made adequate provision in its annual budget for the payment of Lease Payments due under the Lease Agreement in the Fiscal Year covered by such budget. The determination given by the City to the Trustee shall be that the amounts so budgeted are fully adequate for the payment of all Lease Payments and Additional Payments due under the Lease Agreement in the annual period covered by such budget. -29- 235 Section 11.06. Further Assurances. The Corporation and the City will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Trust Agreement and the Lease Agreement, or as may be requested by the assuring and confirming unto the Owners of the Certificates and the Trustee the rights and benefits provided herein. Section 11.07. Satisfaction of Conditions Precedent. The City hereby certifies, recites and declares that all acts, conditions and things required by the constitution and statutes of the State, the Lease Agreement and this Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of the Certificates, do exist, have happened and have been performed in due time, form and manner as required by law. Section 11.08. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Trust Agreement, failure of the City to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, the Trustee shall, upon payment of its fees and expenses, including reasonable counsel fees, and receipt of indemnity satisfactory to it, at the request of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Certificates, or any holder or beneficial owner of the Certificates may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. -30- 236 ARTICLE XII LIMITATION OF LIABILITY Section 12.01. Limited Liability of City. Except for the payment of Lease Payments when due in accordance with the Lease Agreement and the performance o agreements of the City contained in the Lease Agreement and this Trust Agreement, the City shall have no pecuniary obligation or liability to any of the other parties or to the Owners of the Certificates with respect to this Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of Lease Payments to the Owners by the Trustee, except as expressly set forth herein. Section 12.02. No Liability of City or Corporation for Trustee P. Neither the City nor the Corporation shall have any obligation or liability to any of the other parties or to the Owners of the Certificates with respect to the performance by the Trustee of any duty imposed upon it under this Trust Agreement. Section 12.03. Indemnification of Trustee. The City shall to the extent permitted by law indemnify and save the Trustee, its officers, employees, directors, affiliates and agents harmless from and against all claims, losses, costs, expenses, liability and damages, including reasonable legal fees and expenses (including allocated costs of internal counsel), arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Property by the Corporation or the City; (ii) any breach or default on the part of the Corporation or the City the performance of any of their respective obligations under the Lease Agreement, the Assignment Agreement, this Trust Agreement and any other agreement made and entered into for purposes of the Property; (iii) any act of the Corporation o respective agents, contractors, servants, employees, licensees with respect to the Property; (iv) any act of any assignee of, or purchaser from the Corporation or the City or of any of its or their respective agents, contractors, servants, employees or licensees with respect to the Property; (v) the authorization of payment of Delivery Costs; (vi) the actions of any other party, including but not limited to the ownership, operation or use of the Property by the Corporation or the City including, without limitation, the use, storage, presence, disposal or release of any Hazardous Substances on or about the Property; (vii) the Trustees exercise and performance of its powers and duties hereunder or as assigned to it under the Assignment Agreement or any other documents contemplated or executed in connection herewith or therewith; (viii) the offering and sale of the Certificates; (ix) the presence under or about or release from the Property, or any portion thereof, of any substance, material or waste which is or becomes regulated or classified as hazardous or toxic under State, local or federal law, or the violation of any such law by the City; or (x) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, in any official statement or other offering document utilized in connection with the sale of the Certificates. Such indemnification shall include the costs and expenses of defending against any claim or liability arising under this Trust Agreement. No indemnification will be made under this Section 12.03 or elsewhere in this Trust Agreement for willful misconduct or negligence under this Trust Agreement by the Trustee, its officers, affiliates or employees. The Citys obligations hereunder shall remain valid and binding notw payment of the Certificates or resignation or removal of the Trustee. Section 12.04. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust Agreement or in the Certificates expressed or implied is intended or shall be construed to give any person other than the City, the Corporation, the Trustee and the Owners of the Certificates, any legal or equitable right, remedy or claim unde -31- 237 Agreement or any covenant, condition or provision hereof; and all such covenants, conditions and provisions are and shall be for the sole and exclusive benefit of the City, the Corporation, the Trustee and said Owners. -32- 238 ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS Section 13.01. Assignment of Rights. Pursuant to the Assignment Agreement, the Corporation has transferred, assigned and set over to the Trustee all of the Corporations rights in and to the Lease Agreement (excepting only the Corporations rights to give approvals and consents, and its rights under Sections 5.8, 7.3 and 9.4 and its 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 Fund, and (ii) otherwise to exercise the Corporations rights and take any action to protect the interests of the Trustee or the Certificate Owners in an Event of Default. Section 13.02. Remedies. If an Event of Default shall happen, then and in each and ever such case during the continuance of such Event of Default, the Trustee may, and shall upon request of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding, and upon payment of its reasonable fees and expenses, including reasonable counsel fees, and being indemnified to its satisfaction therefor 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 13.03. Application of Funds. All moneys held by the Trustee in the funds and accounts held hereunder and all moneys received by the Trustee p action taken under the provisions of this Article XIII or Article IX of the Lease Agreement shall be applied by the Trustee in the following order upon presentation of the several Certificates: First , to the payment of the fees, costs and expenses of the Trustee and of the Certificate Owners in declaring such Event of Default, and collecting moneys owed hereunder, including reasonable compensation to its or their agents, attorneys and counsel (including allocated cost of internal counsel), including all fees and expenses past due; Second , to the payment of the whole amount then owing and unpaid with respect to the Certificates for principal and interest, with interest on the overdue principal and installments of interest at the rate per annum payable with respect to the Certificates (but such interest on overdue installments of interest shall be paid only to the extent funds are available therefor following payment of principal and interest and interest on overdue principal, as aforesaid), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid with respect to the Certificates, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. Section 13.04. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, or if there shall be nonpayment of principal or interest with respect to the Certificates, the Trustee in its discretion may and shall Owners of a majority in principal amount of the Certificates then Outstanding, and upon payment of its fees and expenses, including counsel fees, and be satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of -33- 239 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 shall be deemed most effectual in support of any of its rights or duties hereunder. If one or more Events of Default shall occur and be continuing, the Trustee shall be entitled as a matter of right to the appointment of a receiver or receivers for the Property and for any property securing the Certificates and the revenues, income, produce, and profits thereon. In the case of any receivership, insolvency, bankruptcy, reorganization, or other judicial proceedings affecting the City or the Property, the Trustee shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Trustee and Owners allowed in such proceedings for the entire amount due and payable under this Trust Agreement at the time of the institution of such proceedings, and also for any additional amount which may become due and payable there the right of any Owner to file a claim on his or her own behalf. obligated to take any such action unless offered compensation, indemnity for its potential liability, and reimbursement for its reasonable legal fees and expenses in accordance with this Section 13.04. Subject to Section 14.07 hereof, nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Certificate Owner any plan of reorganization, arrangement, adjustment, or composition affecting the Certificates or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Certificate Owners so affected. Section 13.05. Non-waiver. Nothing in this Article XIII or in any other provision of this Trust Agreement or in the Certificates, shall affect or impair the obligation of the City to pay or prepay the Lease Payments as provided in the Lease Agreement, or affect or impair the right of action, which is absolute and unconditional, of the Certificate Owners to institute suit to enforce and collect such payment. No delay or omission of the Trustee or of any Owner of any of the Certificates to exercise any right or power arising upon the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article XIII to the Trustee or to the Owners of Certificates may be exercised from time to time and as often as shall be deemed expedient by the Trustee or the Certificate Owners. Section 13.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Certificate Owners is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise. Section 13.07. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any 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, provided, however settlement or other disposal of such action; , that the Trustee shall not discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, without the consent of a majority in aggregate principal amount of the Certificates Outstanding. Section 13.08. Limitation on Certificate Owners Right to Sue. No Owner of any Certificate 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 thi 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 -34- 240 principal amount of 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 indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Certificates of any remedy hereunder; it being understood and intended that no one or more Owners of Certificates shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein pr proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates. The right of any Owner of any Certificate to receive payment of said Owners fractional interest in the Lease Payments as the same become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding the foregoing provisions of this Section 13.08 or any other provision of this Trust Agreement. Section 13.09. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Corporation and the Trustee, their officers, employees and agents, and the Owners any right, remedy or claim under or by reason of this Trust Agreement, or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Trust Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Corporation and the Trustee, their officers, employees and agents, and the Owners. -35- 241 ARTICLE XIV MISCELLANEOUS Section 14.01. Defeasance. If and when all Outstanding Certificates shall be paid and discharged and all other amounts due and owing hereunder have been paid (as set forth below) then, notwithstanding that any Certificates shall not have been surrendered for payment, all obligations of the Corporation, the Trustee and the City with respect to all Outstanding Certificates shall cease and terminate, except only the obligation of the City to pay or cause to be paid, from Lease Payments paid by or on behalf of the City from funds deposited pursuant to paragraph (b) of this Section 14.01, to the Owners of the Certificates not so surrendered and paid all sums due with respect thereto, and in the event of depo the Certificates shall continue to represent direct and fractional interests of the Owners thereof in Lease Payments under the Lease Agreement. Such payment and discharge may be accomplished in either of the following ways: (a) by well and truly paying or causing to be paid the principal to all Certificates Outstanding, as and when the same become due and payable; or (b) by irrevocably depositing with the Trustee or an escrow holder security for the payment of Lease Payments as more particularly described in Section 10.1 of the Lease Agreement, to be applied to pay the Lease Payments as the same become due and payable and prepay the Lease Payments in full on any prepayment date, pursuant to Section 10.1 of the Lease Agreement. Any funds held by the Trustee, at the time of one of the events described in paragraphs (a) or (b) of this Section 14.01, which are not required for the payment to be made to Owners, shall, after payment of all fees and expenses of the Trustee, including attorneys fees (including allocated costs of internal counsel), be paid over to the City. To accomplish defeasance, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant (AccountantŽ) verifying the sufficiency of the escrow established to pay the Certificates in full on the maturity or redemption date (VerificationŽ), (ii) an escrow deposit agreement, and (iii) an opinion of nationally recognized bond counsel to the effect that (A) the Certificates are no longer Outstanding and (B) the defeasance will not adversely affect the exclusion from gross income for federal income tax purposes of interest with respect to the Certificates; each Verification and defeasance opinion shall be acceptable in form and substance to the City, and addressed, to the City and the Trustee. Certificates shall be deemed Outstanding under this Trust Agreement unless and until they are in fact paid and retired or the above criteria are met. Section 14.02. Records. The Trustee shall keep records in accordance with industry standards of all moneys received and disbursed by it under this Trust Agreement, which shall be available for inspection by the City, the Corporation and any Owner of at least five percent (5%) of the Outstanding principal amount of the Certificates, or the agent of any of them, at any time during regular business hours on any Business Day upon reas Section 14.03. Notices. All written notices to be given under this Trust Agreement sha be given by first class mail, postage prepaid, 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 -36- 242 time. Notice shall be effective upon deposit in the United State to the address set forth below: If to the Corporation: Cupertino Public Facilities Corporation c/o City of Cupertino 10300 Torre Avenue Cupertino, CA 95014 Attention: Administrative Services Director Telephone: (408) 777-3226 Fax: (408) 777-3109 If to the City: City of Cupertino 10300 Torre Avenue Cupertino, CA 95014 Attention: Administrative Services Director Telephone: (408) 777-3226 Fax: (408) 777-3109 If to the Trustee: The Bank of New York Mellon Trust Company, N. 700 South Flower Street, Suite 500 Los Angeles, CA 90017 Attention: Corporate Trust Department Telephone: (213) 630-6236 Fax: (213) 630-6215 The Trustee agrees to notify the Corporation in the event of any prepayment by the City of Lease Payments under the Lease Agreement and upon the termination of the Lease Agreement. Section 14.04. Governing Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State. Section 14.05. Binding Effect; Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Whenever in this Trust Agreement the Corporation, the City or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Trust Agreement contained by or on behalf of the Corporation, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 14.06. Execution in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement. Section 14.07. Destruction of Canceled Certificates. Whenever in this Trust Agreement provision is made for the surrender to or cancellation by the Tr of any Certificates, the Trustee may, in lieu of such cancellation and delivery, destroy such Certificates and, upon request of the City, deliver a certificate of such destruction to the City. Section 14.08. Headings. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to Articles,Ž Sections,Ž and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; and the words herein,Ž hereof,Ž hereunderŽ and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or subdivision hereof. -37- 243 Section 14.09. Waiver of Notice. Whenever in this Trust Agreement the giving of notice by first class mail, postage prepaid, or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 14.10. Payments Due on Other than Business Day. If the date for making any payment as provided in this Trust Agreement is not a Business Day, such payment may be made on the next succeeding Business Day with the same force and effect as if done on the date provided therefore herein. Section 14.11. Payment of Unclaimed Moneys. Notwithstanding any provisions of this Trust Agreement and subject to the escheat laws of the State, any moneys held by the Trustee in trust for the payment of the principal or interest due with respect to any Certificates and remaining unclaimed two years from the date of deposit of such funds, or if the law shall have been changed and the City has notified the Trustee of such change or the Trustee notifies the City, then on the date thirty (30) days prior to the then applicable escheat provision of State law, shall, on such date, be repaid to the City (without liability for interest) free from the trusts created by this Trust Agreement, and all liability of the Truste provided, however shall thereupon cease; , that before the repayment of such moneys to the City as aforesaid, the Trustee may (at the cost and request of the City) first mail to the Owners to whom such amounts 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 amounts so payable and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof. The Trustee shall not be liable for any interest on funds held by it. The City shall not be liable for any interest on the sums paid to it pursuant to this Section 14.11 and shall not be regarded as a trustee of such money. Section 14.12. Separability of Invalid Provisions. In case any one or more of the provisions contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not affect any other provision of this Tr Agreement shall be construed as if such invalid or illegal or un been contained herein. The parties hereto hereby declare that th Trust Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the Certificates pursuant thereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable. -38- 244 IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement as of the date and year first above written. THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee By Aurora Y. Quiazon Vice President CUPERTINO PUBLIC FACILITIES CORPORATION By Carol A. Atwood Treasurer Attest: Grace Schmidt Acting Secretary CITY OF CUPERTINO, CALIFORNIA By Carol A. Atwood Administrative Services Director Attest: Grace Schmidt Acting City Clerk -39- 245 Quint & Thimmig LLP 02/10/12 02/24/12 04/11/12 EXHIBIT A DEFINITIONS Additional Payments Ž means the payments so designated and required to be paid by the City pursuant to Section 4.7 of the Lease Agreement. Assignment Agreement Ž means the Assignment Agreement, dated as of May 1, 2012, by and between the Corporation and the Trustee, together with any duly authorized and executed amendments thereto. Bond Counsel Ž means (a) Quint & Thimmig LLP, or (b) any other attorney or fi attorneys appointed by or acceptable to the City of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code. Business Day Ž means a day which is not a Saturday, Sunday or legal holiday o banking institutions in the state in which the Principal Corpora the State are closed or are required to close or a day on which the New York Stock Exchange is closed. Certificates Ž means the $__________ aggregate principal amount of certificates of participation to be executed and delivered pursuant to the Trust Agreement which evidence direct, undivided fractional Interests of the Owners thereof in City Ž means City of Cupertino, a municipal corporation and general law city, duly organized and existing under and by virtue of the laws of the State. City Representative Ž means the Mayor, the City Manager, the Director of Administrative Services, the Director of Finance, or the designee of any such official, or any other person authorized by resolution delivered to the Trustee to act on behalf of the City under or with respect to the Site and Facility Lease, the Lease Agreement and Closing Date Ž means May 23, 2012, the date upon which there is a physical de the Certificates in exchange for the amount representing the purchase price of the Certificates by the Original Purchaser. Code Ž means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced in the Lease Agreement or the Trust Agreement) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated under the Code. Continuing Disclosure Certificate Ž shall mean that certain Continuing Disclosure Certificate executed by the City and dated the date of execution and delivery of the Certificates, as it may be amended from time to time in accordance with the terms thereof. Corporation Ž means the Cupertino Public Facilities Corporation, a nonprofit benefit corporation organized and existing under and by virtue of the laws of the State. Corporation Representative Ž means the President, the Executive Director, the Treasurer and the Secretary of the Corporation, or the designee of any such official, or any other person Exhibit A 03028.03 Page 1 246 authorized by resolution delivered to the Trustee to act on behalf of the Corporation under or with respect to the Site and Facility Lease, the Lease Agreement, the Assignment Agreement and the Trust Agreement. Council Ž means the City Council of the City. Defeasance Obligations Ž means (a) cash, (b) direct non-callable obligations of the United States of America, (c) securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to wh guarantee the full faith and credit of the United States of America has been pledged, (d) Refcorp interest strips, (e) CATS, TIGRS, STRPS, and (f) defeased municipal bonds rated AAA by S&P or Aaa by Moodys (or any combination of the foregoing). Delivery Costs Ž means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation relating to the execution and delivery of the Site and Facility Lease, the Lease Agreement, the Trust Agreement and or the execution, sale and delivery of the Certificates, including but not limited to filing and recording costs, settlement costs, printing costs, reproduction and binding costs, costs for statistical data, initial fees and charges of the Trustee (including the fees and expenses of its counsel), financing discounts, legal fees and charges, insurance fees and charges (including title insurance), financial and other professional consultant fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. Delivery Costs Fund Ž means the fund by that name established and held by the Truste pursuant to Article III of the Trust Agreement. Escrow Agreement Ž means that certain Escrow Deposit and Trust Agreement, dated the Closing Date, by and between the City and the Escrow Bank, as originally entered into or as it may be amended or supplemented pursuant to the provisions thereof, created to provide for the defeasance of the 2002 Certificates. Escrow Bank Ž means The Bank of New York Mellon Trust Company, N.A., as escrow bank under the Escrow Agreement, or any successor thereto appointed as escrow bank thereunder in accordance with the provisions thereof. Escrow Fund Ž means the fund by that name created and maintained by the Escrow Bank pursuant to the Escrow Agreement. Event of Default Ž means an event of default under the Lease Agreement, as defined in Section 9.1 thereof. Facility Ž means those certain existing facilities more particularly desc to the Site and Facility Lease and in Exhibit B to the Lease Agr ;$+*+4'0&+)74.6.+5< means (a) Cash (insured at all times by the Federal Deposit Insurance Corporation), and (b) obligations of, or obligations guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States including: (i) Un all direct or fully guaranteed obligations, (iii) Farmers Home Administration, (iv) General Services Administration, (v) Guaranteed Title XI financing, (vi) Government National Mortgage Association (GNMA), and (vi) State and Local Government Series. Exhibit A Page 2 247 Fiscal Year Ž means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period selected by the City as its fiscal year. Independent Counsel Ž 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 City or the Trustee. A&829;7.=598,1;?5/1<B means the Electronic Municipal Market Access System (referred to as EMMAŽ), a facility of the Municipal Securities Rulemaking Bo http://emma.msrb.org) or, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other national information services providing information or disseminating notices of redemption of obligations similar to the Certificates. Insurance and Condemnation Fund Ž means the fund by that name established and held by the Trustee pursuant to Section 7.01 of the Trust Agreement. Interest Payment Date Ž means the first (1st) day of January and July in each year, commencing July 1, 2012, so long as any Certificates are Outstanding. Lease Agreement Ž means that certain agreement for the lease of the Property by the Corporation to the City, dated as of May 1, 2012, together with any duly authorized and executed amendments thereto. Lease Payment Date Ž means the fifteenth (15th) day of June and December in each year during the Term of the Lease Agreement, commencing June 15, 2012 Lease Payment Fund Ž means the fund by that name established and held by the Truste pursuant to Section 5.02 of the Trust Agreement. Lease Payments Ž means the total payments required to be paid by the City pursuant to Section 4.4 of the Lease Agreement, including any prepayment thereof pursuant to Article X of the Lease Agreement, which payments consist of an interest component and a principal component, as set forth in Exhibit C to the Lease Agreement. (990@C< Ž means Moodys Investors Service, New York, New York, or its successors. Net Proceeds ,Ž when used with respect to insurance or condemnation proceeds, means any insurance proceeds or condemnation award paid with respect to the Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof. 2002 Certificates Ž means the Certificates of Participation (2002 Refinancing and Capital Improvement Project), evidencing 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 Corporation, currently outstanding in the principal amount of $44,010,000. Original Purchaser Ž means the first purchaser of the Certificates upon their delivery by the Trustee on the Closing Date. Outstanding, Ž when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 10.03 of the Trust Agreement) all Certificates theretofore executed and delivered by the Trustee under the Trust Agreement except: Exhibit A Page 3 248 (a) Certificates theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Certificates for the payment or redemption of which funds or Defeasance Obligations in the necessary amount shall have theretofore been deposited with the Trustee or an escrow holder (whether upon or prior to the maturity or redemption date of such Certificates), provided that, if such Certificates are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Section 4.03 of the Trust Agreement or provision satisfactory to the Trustee shall have been made for the giving of such notice; and (c) Certificates in lieu of or in exchange for which other Certi executed and delivered by the Trustee pursuant to Section 2.09 of the Trust Agreement. OwnerCertificate OwnerOwner of a Certificate, Ž or Ž or Ž or any similar term, when used with respect to a Certificate means the person in whose name such Certificate shall be registered on the Registration Books. Participating Underwriter Ž shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. Permitted Encumbrancesad Ž means, as of any particular time: (a) liens for general valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions of Article V of the Lease Agreement, permit to remain unpaid; (b) the Site and Facility Lease; (c) the Lease Agreement; (d) the Assignment Agreement; (e) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (f) 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 Property; and (g) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease Agreement and to which the Corporation and the City agree in writing do not reduce the value of the Property. Permitted Investments Ž means any of the following: (a) Federal Securities; (b) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including Economic Community Development Administration, (iii) U.S. Maritime Administration, (iv) Small Business Administration, (v) U.S. Department of Housing & Urban Development (PHAs), (vi) Federal Housing Administration, and (vii) Federal Financing (c) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: (i) senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), (ii) obligations of the Resolution Funding Corporation (REFCORP), and (iii) senior debt obligations of the Federal Home Loan Bank System; (d) U.S. dollar denominated deposit accounts, federal funds and with domestic commercial banks, which may include the Trustee and its affiliates, which have a rating on their short term certificates of deposit on the date of purchase of P-1Ž by Moodys and A-1Ž or A-1+Ž by S&P and maturing not more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); Exhibit A Page 4 249 (e) Commercial paper which is rated at the time of purchase in the single highest classification, P-1Ž by Moodys and A-1+Ž by S&P and which matures not more than 270 calendar days after the date of purchase; (f) Investments in a money market fund rated AAAmŽ or AAAm-GŽ or better by S&P, including funds for which the Trustee, its parent holding compan subsidiary of the Trustee, provide investment advisory or other management services; (g) Pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the escrowŽ), in the highest rating category of Moodys or S&P or any successors thereto; or (B) (i) which are fully secured as to principal, interest and redemption premium, if any, by an escrow consisting only of cash or obligat above, which escrow may be applied only to the payment of such principal, interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal, interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (h) Municipal obligations rated Aaa/AAAŽ or general obligations rating of A2/AŽ or higher by both Moodys and S&P; (i) the Local Agency Investment Fund maintained by the State; an (j) Shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclus permitted by section 53635 of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended, including but not limited to the Californi (CAMP). Principal Corporate Trust Office Ž means the corporate trust office of the Trustee located at 700 South Flower Street, Suite 500, Los Angeles, CA 90017, Attention: Corporate Trust Department, or, solely for the purposes of the presentation of Certificates for payment, transfer or exchange, the designated corporate trust operations office of the Trustee or such other office designated by the Trustee from time to time. Proceeds ,Ž when used with reference to the Certificates, means the face amount of the Certificates, less original issue discount. Property Ž means, collectively, the Site and the Facility. Rating Category Ž means, with respect to any Permitted Investment, one of the generic categories of rating by Moodys or S&P applicable to such Permitted Investment, without regard to any refinement or graduation of such rating category by a plus or minus sign or a numeral. Exhibit A Page 5 250 Registration Books Ž means the records maintained by the Trustee pursuant to Section 2.12 of the Trust Agreement for registration of the ownership and transfer of ownership of the Certificates. Regular Record Date Ž means the close of business on the fifteenth (15th) day of the month preceding each Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. Rental Period Ž means each twelve-month period during the Term of the Lease Agreement commencing on July 2 in any year and ending on July 1 in the next succeeding year; provided, however , that the first Rental Period shall commence on the Closing Date and shall end on July 1, 2012. Reserve Fund Ž means the fund by that name established and held by the Truste pursuant to Section 6.01 of the Trust Agreement. Reserve Requirement Ž means an amount equal to 50% of the maximum annual Lease Payments, which amount shall be $__________ on the Closing Date. The amount of the Reserve Requirement shall not be reduced unless the Certificates are partially refunded, in which such amount shall be reduced to an amount equal to 50% of the maximum annual Lease Payments relating to the Certificates not so refunded, as specified in a certificate of a City Representative delivered to the Trustee. P S&Ž means Standard & Poors Ratings Services, a division of The Mc Companies, Inc., New York, New York, or its successors. Securities Depositories th Ž means The Depository Trust Company, 55 Water Street, 50 Floor, New York, NY 10041 Attention: Call Notification Department; or to such other addresses and/or such other registered securities depositories holding substantial amounts of obligations of types similar to the Certificates. Site Ž means that certain real property more particularly described in Exhibit A to the Site and Facility Lease and in Exhibit A to the Lease Agreement. Site and Facility Lease Ž means the Site and Facility Lease, dated as of May 1, 2012, by and between the City, as lessor, and the Corporation, as lessee, together with any duly authorized and executed amendments thereto. State Ž means the State of California. Term of the Lease Agreement Ž means the time during which the Lease Agreement is in effect, as provided in Section 4.2 of the Lease Agreement. Trust Agreement Ž means the Trust Agreement, dated as of May 1, 2012, by and amo the City, the Corporation and the Trustee, together with any duly authorized amendments thereto. Trustee Ž means The Bank of New York Mellon Trust Company, N.A., or any successor thereto, acting as Trustee pursuant to the Trust Agreement. Exhibit A Page 6 251 Quint & Thimmig LLP 02/10/12 02/24/12 04/11/12 EXHIBIT B FORM OF THE CERTIFICATES Certificate of Participation (2012 Refinancing Project) Evidencing a Direct, Undivided Fractional Interest of the Owners Hereof in Lease Payments to be Made by the CITY OF CUPERTINO, CALIFORNIA As the Rental for Certain Property Pursuant to a Lease Agreement with the Cupertino Public Facilities Corporation RATE OF INTEREST MATURITY DATE DATED DATE CUSIP ______% July 1, ____ May __, 2012 231210 ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: __________________________ DOLLARS THIS IS TO CERTIFY THAT the registered owner identified above, or registered assigns (the OwnerŽ), as the registered owner of this Certificate of Participation (the CertificateŽ), is the owner of a direct, undivided, fractional interest in a portion of the lease payments (the Lease PaymentsŽ) to be paid by the City of Cupertino, a municipal corporation and general law city, duly organized and existing under the laws of the State of California (the CityŽ), pursuant to that certain Lease Agreement, dated as of May 1, 2012, by and between the Cupertino Public Facilities Corporation, a nonprofit, public benefit corporation organized and existing under the laws of the State of California (the CorporationŽ) and the City (the Lease AgreementŽ), which Lease Payments, prepayments and certain other rights and interests under the Lease Agreement have been assigned to The Bank of New York Mellon Trust Company, N.A., as trustee (the TrusteeŽ), having a corporate trust office in Los Angeles, California, or any other such location so designated by the Trustee (the Principal Corporate Trust OfficeŽ). The Owner 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 direct, undivided fractional portion of the Lease Payments designated as principal coming due on such date, and to receive on January 1 and July 1 of each year, commencing July 1, 2012 (each, an Interest Payment DateŽ), until payment in full of said Principal Amount, the Owners direct, undivided fractional share of the Lease Payments designated as interest coming due during the six months immediately preceding each of the Interest Payment Dates; provided that interest represented hereby shall be payable from the Interest Payment Date next preceding the date of execution of this Certificate unless (i) this Certificate is executed on an Interest Payment Date, in which event interest shall be payable from such Interest Payment executed after the close of business on the fifteenth (15th) day of the month immediately preceding an Interest Payment Date, and prior to such Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (iii) this Certificate is executed on or before June 15, 2012, in which event interest shall be payable from the Dated Date stated provided, however above; , that if, as of the date of execution of any Certificate, inter default with respect to any Outstanding Certificates, interest represented by such Certificate Exhibit B 03028.03 Page 1 252 shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by check of the Trustee mailed to the registered owners of the Certificates as of a special record date to be fixed by the Trustee in its sole discretion, notice of which shall be given to the registered owners of the Certificates not less than ten (10) days prior to such special record date. Said direct, undivided fractional share of the portion of the Lease Payments designated as interest is the result of the multiplication of the aforesaid portion of the Lease Payments designated as principal by the Rate of Interest per annum identified above. Interest represented hereby is payable in lawful money of the United States of America by check mailed by the Trustee on each Interest Payment Date by first class mail to the Owner at his address as it appears on the registration books of the Trustee, as of the close of business on the fifteenth (15th) day of the month immediately preceding each Interest Payment Date or, upon written request filed with the Trustee prior to the fifteenth (15th) day of the month immediately preceding the Interest Payment Date by a registered owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by each registered owner in such written request. Principal represented hereby is payable in lawful money of the United States of America by check of the Trustee upon presentation and surrender hereof at the Principal Corporate Trust Office. 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 May 1, 2012 (the Trust AgreementŽ). The City is authorized to enter into the Lease Agreement and the Trust Agreement under the laws of the State of California. Reference is hereby made to the Lease Agreement and the Trust Agreement (copies of which are on file at the Principal Corporate Trust Office) for a description of the terms on which the Certificates are delivered, the rights thereunder of the registered owners of the Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease Agreement, all of the provisions of which the Owner of this Certificate, by acceptance hereof, assents and agrees. The City is obligated under the Lease Agreement to pay Lease Pay source of legally available moneys and the City has covenanted in the Lease Agreement to make the necessary annual appropriations therefor. The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. To the extent and in the manner permitted by the terms of the Tr provisions of the Trust Agreement may be amended by the parties thereto with the written consent of the registered 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 impair the right of any registered owner to receive, in any case, such registered owners fractional share of any Lease Payment or prepayment thereof in accordance with such registered owners Certificate, without the consent of such registered owner. This Certificate is transferable and exchangeable by the Owner, in person or by his attorney duly authorized in writing, at the Principal Corporate Trust Office, but only in the manner, subject to the limitations and upon payment of any charg Agreement and upon surrender and cancellation of this Certificate. Upon such transfer, a new Certificate or Certificates of an authorized denomination or denominations for the same aggregate principal amount will be delivered to the transferee i The City, the Corporation and the Trustee may treat the Owner as the absolute owner hereof for Exhibit B Page 2 253 all purposes, whether or not the payments represented by this Certificate shall be overdue and the City, the Corporation and the Trustee shall not be affected by any notice to the contrary. The Certificates are subject to extraordinary redemption, in whole or in part, on any Interest Payment Date, in an order of maturity determined by the City, from the Net Proceeds of insurance or eminent domain proceedings credited towards the redemption of the Lease Payments pursuant to the Lease Agreement, at a redemption price equal to 100% of the principal amount to be redeemed, together with accrued interest represented thereby to the date fixed for redemption, without premium. The Certificates maturing on or before July 1, ____, are not subject to optional redemption prior to maturity. The Certificates maturing on and after July 1, ____, are subject to optional redemption in whole or in part on any date in such order of maturity as shall be designated by the City (or, if the City shall fail to so designate the order of redemption, in pro rata among maturities) and by lot within a maturity, on or after July 1, ____, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement, without premium. The Certificates maturing on July 1, ____, are subject to mandatory redemption in part on each July 1, commencing July 1, ____, to and including July 1, ____, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date (subject to abatement, as set forth in the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows: Year Principal Amount of (July 1) Certificates to be Redeemed Maturity. The Certificates maturing on July 1, ____, are subject to mandatory redemption in part on each July 1, commencing July 1, ____, to and including July 1, ____, from the principal components of scheduled Lease Payments required to be paid by the City pursuant to the Lease Agreement with respect to each such redemption date (subject to abatement, as set forth in the Lease Agreement), at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows: Year Principal Amount of (July 1) Certificates to be Redeemed Maturity. Notice of redemption is to be given by the Trustee by mailing a redemption notice by first class mail at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to the registered owner of the Certificate or Certificates to be redeemed at the address shown on the Certificate registration books maintained by the Trustee. Notice of Exhibit B Page 3 254 redemption having been given as aforesaid, the Certificates or portions of Certificates so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) interest with respect to such Certificates cease to accrue and be payable. Neither the failure to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for the redemption of Certificates. Notwithstanding the foregoing, in the case of any optional redemption of the Certificates, the notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Certificates on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Certificates have not been deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Certificates to be optionally redeemed, such event shall not constitute an Event of Default; the Trustee shall send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Certificates for which notice of optional redemption was given shall remain Outstanding for all purposes o The Trustee has no obligation or liability to the registered owners of the Certificates to make payments of principal or interest with respect to the Certificates. The Trustees sole obligations are to administer, for the benefit of the registered owners of the Certificates, the various funds and accounts established under the Trust Agreement. The Trustee makes no representation concerning the recitals contained in the Trust Agreement or in this Certificate. The City has certified, recited and declared that all conditions, things and acts required by the constitution and statutes of the State of California, the Lease Agreement and the Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of this Certificate, do exist, have happened and have been performed in due time, form and manner as required by law. Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation (DTCŽ), to the City or its agent for registration of transfer, exchange, or payment, and any Certificate executed 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 HEREO OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the reg hereof, Cede & Co., has an interest herein. IN WITNESS WHEREOF, this Certificate has been executed by The Bank of New York Mellon Trust Company, N.A., as trustee, acting pursuant to the Trust Agreement. Date of Execution: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee By Authorized Signatory Exhibit B Page 4 255 ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign a (Name, Address and Tax Identification or Social Security Number of Assignee) the within Certificate and do(es) hereby irrevocably constitute , attorney, to transfer the same on the registration books of the premises. Dated: _________________________ Signature Guaranteed: NOTICE: Signature guarantee shall be made by a NOTICE: The signature(s) on this Assignment must guarantor institution participating in the Securities correspond with the name(s) as written on the face of Transfer Agents Medallion Program or in such other the within Certificate in every particular, without guarantee program acceptable to the Trustee. alteration or enlargement or any change whatsoever. Exhibit B Page 5 256 Quint & Thimmig LLP 02/10/12 02/24/12 ESCROW DEPOSIT AND TRUST AGREEMENT by and between the CITY OF CUPERTINO, CALIFORNIA and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Bank Dated May 23, 2012 Relating to the Refunding of City of Cupertino, California Certificates of Participation (2002 Refinancing and Capital Improvement Project) 03028.03 257 ESCROW DEPOSIT AND TRUST AGREEMENT This ESCROW DEPOSIT AND TRUST AGREEMENT is made and entered into day of April, 2012, by and between the CITY OF CUPERTINO, a muni general law city organized and existing under the laws of the St THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as successor tr Western Trust Company (the 2002 TrusteeŽ) under the 2002 Trust defined, as escrow bank hereunder (the Escrow BankŽ); WITNESSETH: WHEREAS, the City has heretofore entered into a facilities lease 2002, by and between the Cupertino Public Facilities Corporation (the CorporationŽ) and the City (the 2002 LeaseŽ), pursuant to which the Corporation agree and improvements (the 2002 PropertyŽ) to the City, and the City payments (the 2002 Lease PaymentsŽ) to the Corporation; WHEREAS, the 2002 Lease provides that in the event that the City deposit on its behalf of, moneys in an amount, together with inv make all or a portion of the 2002 Lease Payments when and as due the City under the 2002 Lease and all of the security provided b excepting only the obligation of the City to make the 2002 Lease shall cease and terminate, and unencumbered title to the 2002 Pr without further action by the City or the Corporation; WHEREAS, pursuant to an assignment agreement, dated as of Octobe 2002 Assignment AgreementŽ), by and between the Corporation and Corporation assigned to the 2002 Trustee its rights to receive 2 under the 2002 Lease and the right to exercise such rights and r Corporation under the 2002 Lease to enforce payment of the 2002 WHEREAS, pursuant to a trust agreement, dated as of October 1, 2 the City, the Corporation and the 2002 Trustee (the 2002 Trust agreed, among other matters, to execute and deliver certificates CertificatesŽ and the 2002B CertificatesŽ and, collectively, th undivided fractional interests of the owners thereof to receive the City and to apply such 2002 Lease Payments to the payment of respect to the 2002 Certificates, and to administer certain fund to the 2002 Trust Agreement; WHEREAS, the City has determined that, as a result of favorable conditions and for other reasons, it is in the best interests of Citys obligation to make the 2002 Lease Payments under the 2002 to provide for the defeasance of the 2002 Certificates and, to t certain real property and improvements (the PropertyŽ) from the certain Lease Agreement, dated as of May 1, 2012 (the Lease Agr WHEREAS, the City proposes to make the deposit of moneys referen Lease and to appoint the Escrow Bank for the purpose of applying the payment and prepayment of the 2002 Lease Payments in accord 258 provided by this Escrow Deposit and Trust Agreement and of apply Payments to the payment and redemption of the 2002 Certificates Trust Agreement and the Escrow Bank desires to accept said appoi WHEREAS, to obtain moneys to make such deposit, the Corporation and transfer certain of its rights under the Lease Agreement to Trust Company, N.A., as trustee (the TrusteeŽ), pursuant to tha Agreement, dated as of May 1, 2012, by and between the Corporati enter into that certain Trust Agreement, dated as of May 1, 2012 and among the Corporation, the City and the Trustee, whereby the deliver certificates of participation in the principal amount of CertificatesŽ), each evidencing a direct, undivided fractional made by the City under the Lease Agreement; WHEREAS, the City wishes to make such a deposit with the Escrow into this Escrow Deposit and Trust Agreement for the purpose of conditions for the deposit and application of amounts so deposit WHEREAS, the Escrow Bank has full powers to act with respect to and trust created herein and to perform the duties and obligatio this Escrow Deposit and Trust Agreement; NOW, THEREFORE, in consideration of the above premises and of th and covenants herein contained and for other valuable considerat agree as follows: Section 1. Appointment of Escrow Bank. The City hereby appoints the Escrow Bank as escrow bank for all purposes of this Escrow Deposit and Trust Ag with the terms and provisions of this Escrow Deposit and Trust A Bank hereby accepts such appointment. Section 2. Establishment of Escrow Fund. There is hereby created by the City with, and to be held by, the Escrow Bank, as security for the payment of the hereinafter set forth, an irrevocable escrow to be maintained in of the City and for the benefit of the owners of the 2002 Certif the Escrow Fund.Ž All moneys deposited in the Escrow Fund shall the payment of the principal and interest with respect to the 20 the provisions of the 2002 Trust Agreement. If at any time the E knowledge that the moneys in the Escrow Fund will not be suffici required by Section 4 hereof, the Escrow Bank shall notify the C immediately cure such deficiency. The Escrow Bank shall have no Section 3. Deposit into Escrow Fund; Investment of Amounts. (a) Concurrently with delivery of the Certificates, the City sha the Escrow Bank for deposit into the Escrow Fund the amount of $ available funds, derived as follows: (i) $____________ from the proceeds of the sale of the Certifica (ii) $___________ from amounts on deposit in the funds and accou under the 2002 Trust Agreement (the 2002 FundsŽ). -2- 259 (b) The Escrow Bank shall hold all amounts deposited in the Escr uninvested. (c) The Escrow Bank shall not be liable or responsible for any l compliance with the provisions of this Escrow Deposit and Trust Section 4. Instructions as to Application of Deposit. The moneys deposited in the Escrow Fund pursuant to Section 3 shall be applied by the Escrow Bank f redeeming all outstanding 2002 Certificates in full on June 12, principal amount thereof, plus accrued interest, as more particu attached hereto and hereby made a part hereof. Following the fin Certificates, together with accrued interest to the payment date any remaining amounts relating to the 2002 Certificates to the T Payment Fund created and maintained by the Trustee pursuant to t applied as a credit against payments of principal and interest w These instructions shall constitute the Written Request of the C 13.01 of the 2002 Trust Agreement, signifying the Citys intenti evidenced by the 2002 Certificates and the 2002 Trust Agreement. The Escrow Bank, in its capacity as 2002 trustee, has previously timely notice for redemption of the 2002 Certificates on the Jun provisions of the 2002 Trust Agreement. Section 5. Application of 2002 Certificate Funds. On the date of original delivery of the Certificates and the deposit of a portion of the proceeds thereo Section 3, the Escrow Bank, as 2002 Trustee, is hereby directed deposit in the 2002 Funds ($_________) and transfer such sum to Any amounts remaining on deposit in any fund or account establis Trust Agreement for the 2002 Certificates, including any investm date of original delivery of the Certificates, shall be transfer for deposit in the Lease Payment Fund created and maintained by Trust Agreement and applied as a credit against payments of prin to the Certificates. Section 6. Application of Certain Terms of the 2002 Trust Agreem. All of the terms of the 2002 Trust Agreement relating to the making of payments of p respect to the 2002 Certificates are incorporated in this Escrow if set forth in full herein. The provisions of the 2002 Trust Ag from liability and protections afforded the 2002 Trustee and the resignation and removal of the 2002 Trustee are also incorporated in this Escrow Deposit and Tr full herein and shall be applicable to the Escrow Bank and shall with respect to any resignation or removal of the Escrow Bank he Section 7. Escrow Bank. (a) The Escrow Bank shall look solely to the City for compensati this Escrow Deposit and Trust Agreement and shall have no right Fund for fees, compensation, costs or expenses. The City shall a for out-of-pocket costs such as cost of giving notice of redempt fees and other costs and expenses relating hereto, but under no deposited in the Escrow Fund be deemed to be available for said -3- 260 (b) The City agrees to indemnify the Escrow Bank, its agents and employees for, and hold the Escrow Bank, its agents and its offi harmless from, liabilities, obligations, losses, damages, penalt claims, costs, expenses and disbursements of any kind (including fees and disbursements of counsel or accountants for the Escrow on, incurred by, or asserted against the Escrow Bank or such oth or in connection with, the performance of its duties as Escrow B negligence or willful misconduct of any indemnified party. Such termination or discharge of this Escrow Deposit and Trust Agreem resignation of the Escrow Bank. (c) The Escrow Bank shall not have any liability hereunder excep negligence or willful misconduct. The Escrow Bank shall have no Escrow Deposit and Trust Agreement in the case of any default by the covenants or agreements contained in the 2002 Trust Agreemen (d) The Escrow Bank may consult with counsel of its own choice ( for the City) and the opinion of such counsel shall be full and suffer in good faith any action hereunder in accordance with suc (e) The Escrow Bank shall not be responsible for any of the reci contained herein, in the 2002 Trust Agreement or in the Trust Ag (f) The Escrow Bank may become the owner of, or acquire any inte Certificates with the same rights that it would have if it were engage or be interested in any financial or other transaction wi (g) The Escrow Bank shall not be liable for the accuracy of any the sufficiency of the moneys deposited with it to pay the princ 2002 Certificates. (h) The Escrow Bank shall not be liable for any action or omissi Escrow Deposit and Trust Agreement, under the 2002 Trust Agreeme Agreement. (i) Whenever in the administration of this Escrow Deposit and Tr Escrow Bank shall deem it necessary or desirable that a matter b taking or suffering any action hereunder, such matter (unless ot herein specifically prescribed) may, in the absence of negligenc of the Escrow Bank, be deemed to be conclusively proved and esta City and shall, in the absence of negligence or willful miscondu be full warrant to the Escrow Bank for any action taken or suffe this Escrow Deposit and Trust Agreement upon the faith thereof. (j) The Escrow Bank may conclusively rely, as to the truth and a and correctness of the opinions and the calculations provided to Deposit and Trust Agreement, and shall be protected in acting, o any written notice, instruction, request, certificate, document Bank in accordance with this Escrow Deposit and Trust Agreement the Escrow Bank to have been signed or presented by the proper p any fact or matter stated in such notice, instruction, request, (k) The Escrow Bank may at any time resign by giving written not resignation. The City shall promptly appoint a successor Escrow -4- 261 Resignation of the Escrow Bank will be effective only upon accep successor Escrow Bank. If the City does not appoint a successor, any court of competent jurisdiction for the appointment of a suc may thereupon, after such notice, if any, as it may deem proper required by law, appoint a successor Escrow Bank. After receivin Escrow Bank, the City may appoint a temporary Escrow Bank until successor Escrow Bank. Any such temporary Escrow Bank so appoint immediately and without further act be superseded by the success (l) The Escrow Bank shall perform such duties and only such duti forth in this Escrow Deposit and Trust Agreement, and no implied obligations shall be read into this Escrow Deposit and Trust Agr (m) None of the provisions of this Escrow Deposit and Trust Agre Escrow Bank to expend or risk its own funds or otherwise to incu otherwise, in the performance of any of its duties hereunder. Th of the trusts or powers hereunder or perform any duties hereunde agents, attorneys, custodians or nominees appointed with due car for any willful misconduct or negligence on the part of any agen so appointed. Anything in this Escrow Deposit and Trust Agreemen notwithstanding, in no event shall the Escrow Bank be liable for consequential loss or damage of any kind whatsoever (including b even if the Escrow Bank has been advised of the likelihood of su of the form of action. (n) Any company into which the Escrow Bank may be merged or conv it may be consolidated or any company resulting from any merger, which it shall be a party or any company to which the Escrow Ban substantially all of its corporate trust business, provided such this Escrow Deposit and Trust Agreement, shall be the successor the execution or filing of any paper or any further act, notwith contrary. (o) The Escrow Bank shall not be liable to the parties hereto or default hereunder if and to the extent its performance hereunder majeure. The term force majeureŽ means an occurrence that is be Bank and could not have been avoided by exercising due care. For God, terrorism, war, riots, strikes, fire, floods, earthquakes, occurrences. (p) The Escrow Bank agrees to accept and act upon instructions o this Escrow Deposit and Trust Agreement sent by unsecured e-mail other similar unsecured electronic methods, provided, however, t received an incumbency certificate listing persons designated to directions and containing specimen signatures of such designated incumbency certificate shall be amended and replaced whenever a deleted from the listing. If the City elects to give the Escrow (or instructions by a similar electronic method) and the Escrow upon such instructions, the Escrow Banks understanding of such controlling. The Escrow Bank shall not be liable for any losses, or indirectly from the Escrow Banks reliance upon and complianc notwithstanding such instructions conflict or are inconsistent w instruction. The City agrees to assume all risks arising out of to submit instructions and directions to the Escrow Bank, includ -5- 262 the Escrow Bank acting on unauthorized instructions, and the ris third parties. Section 8.No Rights to Others. Nothing in this Escrow Deposit and Trust Agreement expressed or implied is intended or shall be construed to give t the Escrow Bank and the owners of the 2002 Certificates any lega claim under or in respect to this Escrow Deposit and Trust Agree conditions or provisions herein contained; and all such covenant and shall be held to be for the sole and exclusive benefit of th owners of the 2002 Certificates. Section 9. Notices. All notices, requests, demands and other communications under Escrow Deposit and Trust Agreement by any person shall be in wri specified herein) and shall be sufficiently given on the date of the person to whom notice is to be given or on receipt if sent b facility or courier or if mailed by registered or certified mail addressed as follows: (a) if to the City, to the City of Cupertino, 10300 Torre Avenue and (b) if to the Escrow Bank, to The Bank of New York Mellon Trust South Flower Street, Suite 500, Los Angeles, CA 90017, Attention Section 10. Amendment. This Escrow Deposit and Trust Agreement may be modified or amended at any time by a supplemental agreement which shall beco written consents of the owners of one hundred percent (100%) in the 2002 Certificates then outstanding shall have been filed wit Deposit and Trust Agreement may be modified or amended at any ti agreement, without the consent of any such owners, but only (1) agreements of any party, other covenants to be observed, or to s herein or therein reserved to the City, (2) to cure, correct or defective provision contained herein, (3) in regard to questions the parties hereto or thereto may deem necessary or desirable an counsel, shall not materially adversely affect the interests of the Certificates, and that such amendment will not cause interes2002 Certificates or represented by the Certificates to become subjec Section 11. Section Headings. All section headings contained in this Escrow Deposit and Trust Agreement are for convenience of reference only and are no scope of any provision of this Escrow Deposit and Trust Agreemen Section 12.Governing Law. This Escrow Deposit and Trust Agreement shall be construed and governed in accordance with the laws of the State of Califor Section 13.Severability. In case any one or more of the provisions contained in this Es Deposit and Trust Agreement shall for any reason be held to be i any respect, such invalidity, illegality or unenforceability sha this Escrow Deposit and Trust Agreement, but this Escrow Deposit be construed as if such invalid or illegal or unenforceable prov herein. Section 14.Counterparts. This Escrow Deposit and Trust Agreement may be executed in any number of counterparts and each of such counterparts shall f -6- 263 an original; and such counterparts, or as many of them as the Ci preserve undestroyed, shall together constitute but one and the Section 15.Business Days. Whenever any act is required by this Escrow Deposit and Trust Agreement to be done on a specified day or date, and such than a business day for the Escrow Bank, then such act may be do business day. -7- 264 IN WITNESS WHEREOF, the City and the Escrow Bank have each cause Deposit and Trust Agreement to be executed by their duly authori first above written. CITY OF CUPERTINO, CALIFORNIA By Carol A. Atwood Administrative Services Director Attest: Grace Schmidt Acting City Clerk THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as 2002 Trustee and as Escrow Bank By Aurora Y. Quiazon Vice President -8- 265 Exhibit A 266 EXHIBIT A PAYMENT AND REDEMPTION SCHEDULE OF 2002 CERTIFICATES Redemption Maturing Called Redemption Total Date Principal Principal Interest Premium Payment 6/12/12 „ $44,010,000 „ Exhibit A 267 Quint & Thimmig LLP 02/10/12 02/24/12 AFTER RECORDATION RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, CA 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. TH EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALI GOVERNMENT CODE. TERMINATION AGREEMENT Dated as of May 1, 2012 by and among the CITY OF CUPERTINO, CALIFORNIA the CUPERTINO PUBLIC FACILITIES CORPORATION, and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Successor Trustee Relating to the Refunding of the City of Cupertino (Santa Clara County, California) Certificates of Participation (2002 Refinancing and Capital Improvement Project) 03028.03 268 TERMINATION AGREEMENT This TERMINATION AGREEMENT is dated as of May 1, 2012, and is by the CITY OF CUPERTINO, CALIFORNIA (the CityŽ), the CUPERTINO PU FACILITIES CORPORATION, (the CorporationŽ), THE BANK OF NEW YOR TRUST COMPANY, N.A., as successor trustee to BNY Western Trust C (the 2002 TrusteeŽ). WITNESSETH: WHEREAS, the City and the Corporation have heretofore entered in dated as of October 1, 2002 (the 2002 LeaseŽ), pursuant to whic City entered into a transaction for the lease financing of certa thereof (the 2002 ProjectŽ), and the City agreed to make certai Lease PaymentsŽ) to the Corporation; WHEREAS, pursuant to an Assignment Agreement, dated as of Octobe 2002 Assignment AgreementŽ), by and between the Corporation and Corporation assigned to the 2002 Trustee, among other things, it Payments from the City under the 2002 Lease and the right to exe remedies conferred on the Corporation under the 2002 Lease to en Lease Payments; WHEREAS, pursuant to a Trust Agreement, dated as of October 1, 2 among the City, the Corporation and the 2002 Trustee, the 2002 T matters, to execute and deliver certificates of participation (t2002 CertificatesŽ) representing undivided fractional interests of the owners thereo Payments made by the City; WHEREAS, the 2002 Lease provides that in the event that the City the deposit on its behalf of moneys for the prepayment of the 20 the obligations of the City under the 2002 Lease and all of the such obligations, excepting only the obligation of the City to m from said deposit, shall cease and terminate, and unencumbered t be vested in the City without further action by the City or the WHEREAS, the City has determined that, as a result of favorable conditions and for other reasons, it is in the best interests of the City's obligation to make the 2002 Lease Payments under the thereof, to provide for the redemption of the 2002 Certificates, Corporation proposes to lease certain real property and improvem pursuant to that certain Lease Agreement, dated as of May 1, 201 a memorandum of which has been recorded concurrently herewith; WHEREAS, to obtain moneys to make such deposit, the Corporation assign and transfer certain of its rights under the Lease Agreem Mellon Trust Company, N.A., as trustee (the TrusteeŽ), pursuant Agreement, dated as of May 1, 2012, by and between the Corporati has been recorded concurrently herewith, and to enter into that as of May 1, 2012 (the Trust AgreementŽ), by and among the Corp Trustee, whereby the Trustee agrees to execute and deliver certi 269 principal amount of $___________ (the CertificatesŽ), each evid fractional interest in the lease payments made by the City under WHEREAS, upon delivery of the Certificates and deposit of a port for prepayment of the 2002 Lease Payments, the 2002 Lease and th thereto need not be maintained (except as otherwise provided bel now desire to provide for the termination of such documents as p NOW, THEREFORE, in consideration of the foregoing and for other receipt and sufficiency of which are hereby acknowledged, the pa Section 1 . Termination. (a) By virtue of the deposit of a portion of the proceeds of the prepayment of the 2002 Lease Payments, all obligations of the Ci cease and terminate, excepting only the obligation of the City t payments from such deposit and title to the 2002 Project shall v said deposit automatically and without further action by the Cit deposit and interest earnings thereon shall be deemed to be and for the prepayment of the 2002 Lease Payments. (b) In accordance with the foregoing, the following agreements ( purchase contained therein), are hereby terminated and are of no for the provisions which, by their terms, survive but which do n (i) Site and Facility Lease, dated as of October 1, 2002, by and between the City and the Corporation, recorded on October 16, 2002, as Document N Clara County Records; (ii) 2002 Lease, recorded by memorandum, on October 16, 2002, as No. 16538504, Santa Clara County Records; and (iii) 2002 Assignment Agreement, recorded on October 16, 2002, as Docu No. 16538505, Santa Clara County Records. (c) From and after the date hereof, none of the parties shall ha obligations thereunder. Section 3. Execution in Counterparts. This Termination Agreement may be executed in several counterparts, each of which shall be an original and all and the same instrument. -2- 270 IN WITNESS WHEREOF, the parties hereto have duly executed this T Agreement. CUPERTINO PUBLIC FACILITIES CORPORATION By Carol A. Atwood Treasurer Attest: Grace Schmidt Acting Secretary CITY OF CUPERTINO, CALIFORNIA By Carol A. Atwood Administrative Services Director Attest: Grace Schmidt Acting City Clerk THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as 2002 Trustee By Aurora Y. Quiazon Vice President -3- 271 NOTARY ACKNOWLEDGMENTS TO BE INSERTED 272 EXHIBIT A DESCRIPTION OF THE SITE All that certain real property situated in Santa Clara County, S PARCEL ONE: BEGINNING at the Southwest corner of the Southeast 1/4 of the No South, Range 2 West, in the centerline of Stevens Creek Boulevar East along the centerline of Stevens Creek Boulevard, 491.66 fee centerline of Stevens Creek Boulevard, with the Westerly line of Parrish, et ux, to Antone Saich, Deed dated June 5, 1905 in Book Records; thence North 0º 15' East along the said Westerly line o to a point on the Northerly line of the Southeast 1/4 of the Nor Range 2 West; thence North 89º 55' West along said Northerly lin of Section 14, 491.66 feet, more or less, to the Northwest corne Section 14; thence South along the Westerly line of said Southea 1301.19 feet, more or less, to the point of beginning being a pa Northeast 1/4 of Section 14, Township 7 South, Range 2 West, M.D PARCEL TWO: Parcel 1, as shown on that certain Parcel Map filed for record i Santa Clara, State of California on May 26, 1989 in Book 600 of PARCEL THREE: BEGINNING at the point of intersection of the Northerly line of the most Easterly line of that certain parcel of land described Stoneson Development Corporation, recorded May 4, 1960 in Book 4 Santa Clara County Records; thence leaving said Point of Beginning along said Northerly line West, 1.00 feet; thence leaving said Northerly line North 44º 13' 55" West, 21.20 thence along a line parallel with said Easterly line of the land Corporation, North 0º 48' 05" East, 107.00 feet; thence Northerly along the arc of a tangent curve to the left ha angle of 48º 51' 10" for an arc length of 289.90 feet; thence North 41º 56' 55" East, 15.00 feet; thence along the arc feet, through a central angle of 0º 11' 12" an arc length of 1.1 thence along the arc of a curve to the left having a radius of 2 an arc length of 30.12 feet to a point of reverse curvature; thence along the arc of a curve to the right whose tangent bears 160.00 feet, through a central angle of 38º 11' 12", an arc leng the lands conveyed to Stoneson Development Corporation; thence along said Easterly line South 0º 48' 05" West, 435.04 fe Exhibit A Page 1 273 PARCEL FOUR: ALL OF PARCEL B, as shown upon that certain Parcel Map filed for the County of Santa Clara, State of California on September 3, 1 APN: 326-27-033; -29-006; -29-022; 54-041 ARB: 326-27-033; -326-29-014; -015.02; -016; -006 Exhibit A Page 2 274 Quint & Thimmig LLP 02/10/12 02/24/12 NOTICE OF INTENTION TO SELL SECURITIES $_________ (Preliminary, subject to change) Certificates of Participation (2012 Refinancing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF CUPERTINO (Santa Clara County, California) As the Rental for Certain Property Pursuant to a Lease Agreement with the Cupertino Public Facilities Corporation NOTICE IS HEREBY GIVEN, pursuant to section 53692 of the Califor Code, that the City of Cupertino (the CityŽ) invites bids for t (preliminary, subject to change) aggregate principal amount of t participation (the CertificatesŽ). Bids will be received on WEDNESDAY, MAY 9, 2012 electronically only at 10:00 A.M., through the I-Deal LLC BiDCOMP/PARITY© system, and the sale will be awarded by the City within 26 hours after the expir the receipt of bids. The sale of the Certificates will be conduc set forth in the Official Notice of Sale for the Certificates. S Preliminary Official Statement describing the Certificates will bidders by the financial advisor to the City, Magis Advisors, 13 Newport Beach, CA 92660, telephone (949) 428-8363. Bids will be entertained only from bidders to whom such Official Notice of Sale and Preliminary Off distributed. Dated: May 2, 2012 BOND BUYER [TO BE PUBLISHED IN THE ON MAY 2, 2012] 02028.03 275 Quint & Thimmig LLP 02/10/12 02/24/12 OFFICIAL NOTICE OF SALE $_________* Certificates of Participation (2012 Refinancing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF CUPERTINO (Santa Clara County, California) As the Rental for Certain Property Pursuant to a Lease Agreement with the Cupertino Public Facilities Corporation electronic bids only NOTICE IS HEREBY GIVEN that will be received by representatives of the City of Cupertino (the CityŽ) for the purchase of $_____ amount of Certificates of Participation (2012 Refinancing Projec evidencing the direct, undivided fractional interests of the own (the Lease PaymentsŽ) to be made by the City as the rental for lease agreement (the Lease AgreementŽ) with the Cupertino Publi CorporationŽ), more particularly described below. DATE AND TIME WEDNESDAY, MAY 9, 2012, at 10:00 A.M. (Pacific Time). : SUBMISSION OF BIDS: Bids may be submitted (for receipt not later than the time set electronically only forth above) through the I-Deal LLC BiDCOMP/PARITY© system. See FORM OF BIDŽ herein. Bidders should be aware that the par amount of the Certificates OCBRACBGDQFCOCDRKBGKELDACOQ?GKJ?QROGQGCPLDQFC,GQUXPLRQ JCCQGQPJGKGJRJP?SGKEPEL?IP@RQGK?KUCSCKQJ?U@C?BHRPQCB OCDRKBGKEOCNRGOCJCKQP$9CCV*-1;9:4.5:6/7805,07*3*46;5:9*5- 4*:;80:0.9W+.36<$ ISSUE; BOOK ENTRY: The Certificates will be dated as of their date of delivery and will be executed and delivered in fully registered form, without of $5,000 each or any whole multiple thereof, pursuant to the Tr May 1, 2012 (the Trust AgreementŽ), by and among the City, the of New York Mellon Trust Company, N.A., as trustee (the Trustee resolution of the City Council of the City, adopted on April 17, Certificates will be executed and delivered in a book entry-only distribution of the Certificates made to the public. The Deposit New York (DTCŽ), will act as depository for the Certificates wh custody. The Certificates will be registered in the name of Cede behalf of the participants in the DTC system and the subsequent Certificates. Reference is made to the Trust Agreement for furth and provisions of the Certificates. *Preliminary, subject to change. 03028.03 276 MATURITIES: The Certificates will mature, or be subject to mandatory sinkin Each redemption, on July 1, in the years and in the amounts, as set f bidder is required to specify in its bid whether, for any partic alternately, be subject to mandatory sinking fund redemption in Maturity Date Principal Maturity Date Principal (July 1) Amount* (July 1) Amount* 2012 2022 2013 2023 2014 2024 2015 2025 2016 2026 2017 2027 2018 2028 2019 2029 2020 2030 2021 *Preliminary, subject to change. ADJUSTMENT OF PRINCIPAL AMOUNTS AND OF MATURITIES : The maturity amounts set forth in this Official Notice of Sale reflect certai financial advisor with respect to the likely interest rates of a premium/discount likely to be specified in such a winning bid. T forth above for the Certificates may be adjusted either upward o achieve approximately equal annual savings after award of the Ce the successful bidder. The successful bidder will be notified of the actual principal amounts and maturity schedule relating to the Certificates within 6 hour time prescribed for the receipt of proposals. Any increase or de000 increments of principal amounts. In the event of any such adjust recalculation of the bids submitted will be required or permittessful bid may be withdrawn. The successful bidder will not be permitted to change the interest rates in its bid. INTEREST : Interest with respect to the Certificates, calculated on a 30/ at a rate or rates to be fixed upon the sale thereof but not to payable semiannually on each January 1 and July 1, commencing Ju PAYMENT : Principal of the Certificates will be payable upon surrender t Interest with respect to the Certificates will be payable by che mail to the owner at the address listed on the registration book such purpose. OPTIONAL REDEMPTION : The Certificates maturing on or before July 1, ____, are not subject to optional redemption prior to maturity. The Certif July 1, ____, are subject to optional redemption in whole or in of maturity as shall be designated by the City (or, if the City pro rata of redemption, in among maturities) and by lot within a maturity, on or after Jul ____, at a redemption price equal to the principal amount of the together with accrued interest, without premium, to the date fix proceeds of the optional prepayment of Lease Payments made by th Lease Agreement. REDEMPTION FROM NET PROCEEDS OF INSURANCE, TITLE INSURANCE, CONDEMNATION OR EMINENT DOMAIN AWARD: The Certificates are subject to mandatory redemption in whole on any date or in part, on any Int -2- 277 net proceeds of an insurance, title insurance, condemnation, or extent credited towards the prepayment of the Lease Payments by Lease Agreement, at a redemption price equal to the principal am together with accrued interest to the date fixed for redemption, SINKING FUND REDEMPTION: Any bidder may, at its option, specify that one or more maturities of the Certificates will consist of term Certifi mandatory sinking fund redemption in consecutive years immediate thereof, as designated in the bid of such bidder. In the event t bidder specifies that any maturity of Certificates will be term Certificates will be subject to mandatory sinking fund redemptio designated in the bid, in the respective amounts for such years heading MATURITIES,Ž at a redemption price equal to the princip redeemed together with accrued interest thereon to the redemptio PURPOSE : The proceeds of the Certificates, together with other availabl be applied by the City to provide funds to (a) to refund the Cit Participation (2002 Refinancing and Capital Improvement Project) the Certificates, and (c) pay costs incurred in connection with Certificates. SECURITY : The Certificates represent direct, undivided fractional intere Payments. In general, the City is required to pay to the Trustee certain real property and improvements (the PropertyŽ), which a both time and amount to pay the principal and premium (if any) a to the Certificates. The Citys obligation to pay Lease Payments use and occupancy of the Property from any source of legally ava covenanted under the Lease Agreement to take such action as may Lease Payments in its annual budgets and to make the necessary a 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 THE OBLIGATION OF THE CITY TO PAY LEASE PAYMENTS CONSTITUTES A D THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIV WITHIN THE MEANING OF THE CONSTITUTION OF THE STATE OF CALIFORNI RATING: Standard & Poors Ratings Services has assigned the underlying r Thecost of obtaining such rating will be borne entirely by the ____ to the Certificates. City and not by the successful bidder . Any additional ratings desired by the purchaser of the Certificates, as well as the fees associated with such ratings, the purchaser. TERMS OF SALE BID SPECIFICATIONS AND INTEREST RATES . All bids must be unconditional. Bidders may specify no more than ten separate interest rates pro interest rate specified must be in a multiple of 1/20 or 1/8 of rate specified may not exceed 6%; (iii) a zero rate of interest Certificates of the same maturity date shall bear interest to th interest rate specified in the bid; (v) the interest rate on any less than the interest rate on any prior maturity; and (vi) no b -3- 278 provides for the cancellation and surrender of any interest paym or other concession by the bidder as a substitute for payment in the Certificates. Bids that do not conform to the terms of this 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 100% thereof. The amount of any discount specified in any bid shall n aggregate principal amount of the Certificates. Electronic Bids . To the extent any instructions or directions set forth in BiDCOMP/PARITY© conflict with this Official Notice of Sale, the of Sale shall control. For further information about BiDCOMP/PAR Magis Advisors (the Financial AdvisorŽ) at (949) 428-8363 or Bi 404-8102. THE CITY RETAINS ABSOLUTE DISCRETION TO DETERMINE WHETHER ANY BID IS TIMELY, LEGIBLE AND COMPLETE. NONE OF THE CITY, THE FINAN ADVISOR, OR QUINT & THIMMIG LLP (SPECIAL COUNSELŽ) TAKES ANY RESPONSIBILITY FOR INFORMING ANY BIDDER PRIOR TO THE TIME FOR RE BIDS THAT ITS BID IS INCOMPLETE, ILLEGIBLE OR NOT RECEIVED. EACH BIDDER SUBMITTING AN ELECTRONIC BID UNDERSTANDS AND AGREES BY DOING SO THAT IT IS SOLELY RESPONSIBLE FOR ALL ARRANGE WITH BiDCOMP/PARITY© AND THAT BiDCOMP/PARITY© IS NOT ACTING AS A AGENT OF THE CITY. INSTRUCTIONS AND FORMS FOR SUBMITTING ELECTRO BIDS MUST BE OBTAINED FROM BiDCOMP/PARITY© AND THE CITY ASSUMES RESPONSIBILITY FOR ENSURING OR VERIFYING BIDDER COMPLIANCE WITH PROCEDURES OF BiDCOMP/PARITY©. THE CITY SHALL ASSUME THAT ANY BI RECEIVED THROUGH BiDCOMP/PARITY© HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE BIDDER. THE CITY WILL MAKE ITS BEST EFFORTS TO ACCOMMODATE ELECTRONIC BIDS; HOWEVER THE CITY, THE FINANCIAL ADVISOR AND SPECIAL COUNSE ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID SUBM ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED, REC OR ACCEPTED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICI FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE CITY AND THE CITY NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY BiDCOMP/PARITY© AS TH OFFICIAL TIME. BEST BID: The Certificates will be awarded to the responsible bidder or bi lowest true interest cost offering to purchase the Certificates at the to the City. The true interest cost of each bid will be determined on the basis of the present semiannual payments resulting from the interest rates specified value will be calculated to the dated date of the Certificates (2012) and will be based on the proposed bid amount (par value less any premium). For the purpose of making such determination, it shall Certificate designated as term certificates by the bidder shall dates and in the amounts as shown under the section entitled MA bidder is requested, but not required, to state in his bid the p City, which shall be considered as informative only and shall no bidder or the City. The determination of the best bid by the Cit binding and conclusive on all bidders. -4- 279 RIGHT OF CANCELLATION OF SALE BY CITY: The City reserves the right, in its sole discretion, at any time to cancel the public sale of the Ce shall cause notice of cancellation of this invitation for bids a Bond Buyer Wire Certificates to be communicated through the as promptly as practicable. However, no failure to publish such notice or any defect or omis cancellation of the public sale of the Certificates. RIGHT TO MODIFY OR AMEND: The City reserves the right, in its sole discretion, to modify or amend this official Notice of Sale including, but not and change the principal amount and principal amortization sched offered, however, such modifications or amendments shall be made California time, on the business day prior to the bid opening an Bond Buyer Wire . RIGHT OF POSTPONEMENT BY CITY: The City reserves the right, in its sole discretion, to postpone, from time to time, the date established Bond Buyer Wire such postponement will be communicated through the not later than 10:00 A.M., California time, on the business day prior to any announce Bond Buyer any date is postponed, any alternative sale date will be announc Wire at least 24 hours prior to such alternative sale date. On any s bidder may submit a bid for the purchase of the Certificates in the provisions of this Official Notice of Sale, except for the d Bond Buyer Wire changes announced through the at the time the sale date and time are announced. RIGHT OF REJECTION: The City reserves the right, in its sole discretion, to reject and all bids and to waive any irregularity or informality in any accepted later than 10:00 A.M. on the date set for receipt of bi PROMPT AWARD: Pursuant to authority granted by the Council, the City Manager, or the City Managers designee, will take action awarding the Ce not later than twenty-six (26) hours after the expiration of the receipt of proposals; provided, that the award may be made after specified time if the bidder shall not have given to said Board withdrawal of such proposal. PLACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY: It is expected that said Certificates will be delivered to DTC for the account of thssful bidder within twenty (20) days from the date of sale thereof. The successful b option, to cancel its obligation to purchase the Certificates if for delivery within sixty (60) days from the date of the sale th successful bidder shall be entitled to the return of the deposit GOOD FAITH DEPOSIT : A good faith deposit (DepositŽ) in the form of a certified or cashiers check or a wire transfer, in the amount of $250,000 Trustee, must be remitted by the winning bidder within 48 hours bid. The Deposit shall be cashed by the Trustee on behalf of the toward the purchase price of the Certificates. If after the awar successful bidder or bidders fail to complete their purchase on the terms stated in their bid, the Deposit will be retained by the City. No interest on the Deposit CHANGE IN TAX EXEMPT STATUS: At any time before the Certificates are tendered for delivery, the successful bidder may disaffirm and withdraw h received by private holders from Certificates of the same type a -5- 280 to be taxable income under present federal income tax laws, eith Revenue Service or by a decision of any federal court, or shall requited to be taken into account in computing federal income ta minimum taxes and environmental taxes payable by corporations) b law enacted subsequent to the date of this notice. CLOSING PAPERS; CERTIFICATE PRINTING: Each proposal will be understood to be conditioned upon the City furnishing to the purchaser, withou payment for and delivery of the Certificates, the following clos of delivery: (a) The opinion of Quint & Thimmig LLP, San Francisco, Californi approving the validity of the Certificates and stating that, sub with certain covenants, interest with respect to the Certificate of the owners thereof for federal income tax purposes and is not preference in computing the federal alternative minimum tax for but such interest is taken into account in computing an adjustme federal alternative minimum tax for certain corporations, and th Certificates is exempt from personal income taxation imposed by tax consequences to holders of the Certificates, if any, are not (b) A certificate of the City certifying that on the basis of th circumstances in existence on the date of issue, it is not expec Certificates will be used in a manner that would cause the Certi (c) A certificate of the City, signed by officers and representa that the officers and representatives have signed the Certificat manual signature, and that they were respectively duly authorize (d) The receipt of the City evidencing the receipt of the purcha Certificates; and (e) A certificate of the City, certifying that there is no known pending affecting the validity 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 a respect thereto shall constitute cause for a failure or refusal delivery of and pay for the Certificates in accordance with the All expenses of printing CUSIP numbers on the Certificates and t charge for the assignment of said numbers shall be paid by the s CERTIFICATION OF REOFFERING PRICE: The successful bidder shall be required, as a condition to the issuance of the Certificates, to deliver t substance satisfactory to Special Counsel, stating (i) that, as Certificates were expected to be reoffered in a bona fide public price at which a substantial amount (at least 10%) of each matur sold to the public, and (iii) that no Certificates of a single m the general public and at a discount from that price to institut CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION: The successful bidder will be required, pursuant to State law, to pay any fees to the C Debt and Investment Advisory Commission when due. -6- 281 DTC FEES : All fees due DTC with respect to the Certificates shall be pai successful bidder or bidders. OFFICIAL STATEMENT : The City has caused to be prepared a Preliminary Official Statement describing the Certificates in a form deemed final by Rule 15c2-12 of the Securities and Exchange Commission under the 1934, as amended, except for certain information which is permit to be omitted from the Preliminary Official Statement. A copy of Statement will be furnished upon request to Magis Advisors, 1301 Dove Street, Suite 380, Newport Beach, CA 92660, telephone (949) 428-8363. The City will furnish to the successful bidder within seven business days following the date of award, a one hundred (100) copies of the Official Statement for use in co Certificates. DISCLOSURE CERTIFICATE: The City will deliver to the purchaser of the Certificates a certificate of an official of the City, dated the date of Cert the date thereof, to the best of the knowledge and belief of sai does not contain an untrue statement of a material fact or omit necessary in order to make the statements made therein, in the l which they were made, not misleading, and further certifying tha material adverse change in the condition of the City which would purchaser of the Certificates to rely upon the Official Statemen the Certificates. 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 res the Certificates and a Continuing Disclosure Certificate, to pro of certain events. A description of this undertaking is set fort Statement and will also be set forth in the final Official State ADDITIONAL INFORMATION REQUESTS . Requests for additional information about the Certificates or the City may be directed to the City's Director, Carol A. Atwood, telephone (408) 777-3226; or, the Cit Quint, Quint & Thimmig LLP, telephone (415) 765-1550; or, the Fi Schaefer, Magis Advisors, telephone (949) 428-8363. Dated: April 20, 2012 -7- 282 PRELIMINARY OFFICIAL STATEMENT DATED APRIL 20, 2012 NEW ISSUEV.<44*773-6;9>RATING: : 8(W???X :DDW9);16/XGDODHL In the opinion of Quint & Thimmig LLP, San Francisco, CaliforniaSpecial Counsel, subject to compliance by the City with certain covenants, interest with respect to the Certificates is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but suinterest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Special Counsel, interest with respect to the Certificates is exempt from personal income taxation imposed by the State of California. See TAX MATTERSŽ herein. $___________* CERTIFICATES OF PARTICIPATION (2012 Refinancing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF CUPERTINO (Santa Clara County, California) As the Rental for Certain Property Pursuant to a Lease Agreement with the Cupertino Public Facilities Corporation Dated: Date of Delivery Due: July 1, as set forth below The $__________* Certificates of Participation (2012 Refinancingoject) (the CertificatesŽ), are being executed and delivered to provide funds to (a) refinance various public capital improvements throughout the geographic boundaries of thety and, in particular, to refund the Citys outstanding Certificates of Participation (2002 Refinancing and Capital Improvement Project), (b) fund a reserve fund for the Certificates, and (c) pay costs incurred in connection with execting and delivering the Certificates. The Certificates will evidence direct, undivided fractional interests of the owners thereof in Lease Payments (as defined herein) to be made by the City of Cupertino, California (the CityŽ) to the Cupertino Public Facilities Corporation (the Cord herein) under and pursuant to a Lease Agreement, dated as of May 1, 2012, by and between the Corporation and the City (the Lease AgreementŽ). The Corporation will assign its right to receive Lease Payments from the City under the Lease Agreement and its right to enforce payment of the Lease Payments when due or otherwise protect its interest in the event of a default by the City thereunder to The Bank of New York Mellon Trust Company, N.A., Ls Angeles, California, as trustee (the TrusteeŽ), for the benefit of the registered owners of the Certificates. The Certificates will be executed and delivered in book-entry form only, and will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (referred to herein as DTCŽ). Purchasers of the Certificates (the Beneficial OwnersŽ) will not rceive physical certificates representing their interest in the Certificates. Interest with respect to the Certificates accrues from their date of delivery, and is payable semiannually by check mailed on each January 1 and July 1, commencing July 1, 2012. The Certificates may be executed and delivered in denominations of $5,000 or any integral multiple thereof. Payments of principal and interest with respect to the Certificates will be paid by the Trustee to DTC fr subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Certificates. (See THE CERTIFICATES„Book-Entry-Only SystemŽ herein). The Certificates are subject to redemption, as described herein. The City will covenant in the Lease Agreement to make all Lease Payments due under the Lease Agreement, subject to abatement during any period in which by reason of damage or destruction of the Property, or by reason of eminent domain proceedings with respect to the Property, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof. The City will covenant in 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 for all such Lease Payments. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A DEBT OR INDEBTEDNESS OF THE CITY OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS OR RESTRICTION OR AN OBLIGATION 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. MATURITY SCHEDULE CUSIP Prefix: 231210 Maturity Principal Interest Price or CUSIP Maturity Principal (July 1) Amount Rate Yield Suffix (July 1) Amount Rate Yield Suffix 2012 2022 2013 2023 2014 2024 2015 2025 2016 2026 2017 2027 2018 2028 2019 2029 2020 2030 2021 electronically only Bids for the purchase of the Certificates will be received by the City on Wednesday, May 9, 2012, , through the I-Deal LLC BiDCOMP/PARITY© system, between 9:30 .. and 10:00 .., Pacific Standard time. The Certificates will be sold pursuantto the terms of sale set forth in the Official Notice of Sale, dated April 20, 2012. AMAM The cover page contains certain information for general reference only. It is not a summary of all the provisions of the Certificates. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See RISK FACTORSŽ herein for a discussion of special risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates. The Certificates will be offered when, as and if delivered and rd by the Underwriter subject to approval by Quint & Thimmig LLP, San Francisco, California, as Special Counsel. Certain matters will be passed upon for the City by the City Attorney. Certain matters will be passed upon for the City by Quint & Thimmig LLP, San Francisco, California, as Disclosure Counsel. It is anticipated that the Certificates will be available for delivery to DTC in New York, New York, on or about May 23, 2012. Dated: May __, 2012 *Preliminary, subject to change.  Copyright 2012, American Bankers Association. CUSIP® is a regia herein is provided by the CUSIP Service Bureau, operated by Standard & Poors, a division of The McGraw-Hill Companies, Inc.rve in any way as a substitute for the CUSIP Services Bureau. CU numbers have been assigned by an independent company not affiliaf the registered owners of the Certificates. The City is not responsible for the selection or uses of these CUSIP numbers, anificates or as included herein. The CUSIP number for a specific is subject to being changed after the delivery of the Certificat limited to, a refunding in whole or in part or as a result of t of secondary market portfolio insurance or other similar enhancetain maturities of the Certificates. 283 284 CITY OF CUPERTINO, CALIFORNIA Cupertino City Hall 10300 Torre Avenue Cupertino, CA 95014-3202 (408) 777-3200 Fax: (408) 777-3366 http://www.cupertino.org CITY COUNCIL Mayor Mark Santoro, Vice Mayor Orrin Mahoney, Council Member Gilbert Wong, Council Member Barry Chang, Council Member Rod G. Sinks, CITY OFFICIALS City Manager* David Knapp, Administrative Services Director Carol Atwood, Finance Director David Woo, Acting City Clerk Grace Schmidt, City Attorney Carol Korade, SPECIAL SERVICES Financial Advisor Magis Advisors Newport Beach, California Special Counsel and Disclosure Counsel Quint & Thimmig LLP San Francisco, California Trustee The Bank of New York Mellon Trust Company, N.A. Los Angeles, California *Mr. Knapp, City Manager of the City since 2000, has announced that he will become the City Manager o Highland Park, Illinois, effective as of May 11, 2012. Amy Chan, retired city manager of the City of Sunnyvale, has been selected to serve as Interim City Manager until a permanent city manager is selected. The City has retained a recruitment firm to find a permanent city manager, a process that is expected to be completed by the en 285 No dealer, broker, salesperson or other person has been authorized to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of the Certificates any jurisdiction in which it is unlawful for such person to make an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information set forth herein has been obtained from the City and from other sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The information and expressions of opinions herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. This Official Statement is submitted in connection with the sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of the Certificates, the Lease Agreement, the Trust Agreement, the Assignment Agreement, the Site and Facility Lease, or other documents, are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Director Finance for further information. See INTRODUCTION„Other Information.Ž IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT 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, INSTITUTIONAL INVESTORS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements.Ž Such statements are generally identifiable by the terminology used such as plan,Ž expect,Ž estimate,Ž budgetŽ or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the Citys forecasts in any way. Neither the City nor the Corporation is obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur or do not occur. The execution, sale and delivery of the Certificates has not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities. The City maintains a website. Unless specifically indicated otherwise, the information presented on not such website is incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Certificates. 286 TABLE OF CONTENTS Other Post Employment Benefits................................37 INTRODUCTION.............................................................. Short-Term Obligations................................................38 General......................................................... Long-Term Obligations................................................38 Source of Payment for the Certificates.........................2 Overlapping Debt................................................ The City........................................................ Continuing Disclosure....................................................2THE CORPORATION................................................. Summaries of Documents.......................................... CONSTITUTIONAL AND STATUTORY Other Information............................................... LIMITATIONS ON TAXES, REVENUES AND SOURCES AND USES OF FUNDS...................................4APPROPRIATIONS..........................................................41 Article XIIIA of the California Constitution..............41 PLAN OF FINANCING............................................... Article XIIIB of the California Constitution...............42 THE PROPERTY.............................................................. Proposition 218............................................................. Proposition 1A of 2004..................................................44 SEMI-ANNUAL DEBT SERVICE.....................................7 Proposition 22.................................................. THE CERTIFICATES................................................ Proposition 26.................................................. General......................................................... Future Initiatives.............................................. Redemption...................................................... RISK FACTORS.................................................... Transfer and Exchange of Certificates..........................9 Lease Payments Are Not Debt....................................46 Book-Entry Only System..............................................10 Valid and Binding Covenant to Budget and SOURCE OF PAYMENT FOR THE CERTIFICATES..11 Appropriate..................................................... General......................................................... Abatement....................................................... Lease Payments; Covenant to Appropriate...............11 Risk of Uninsured Loss.................................................47 Insurance....................................................... Eminent Domain.................................................. Abatement....................................................... Hazardous Substances..................................................48 Eminent Domain.................................................. Earthquakes..................................................... Reserve Fund.................................................... Bankruptcy...................................................... Optional Prepayment....................................................13 Limitations on Remedies..............................................49 Mandatory Prepayment from Net Proceeds of Risk of Tax Audit............................................... Insurance, Title Insurance or Eminent Domain......14 Revenue Concentration................................................50 Substitution or Release of Site or Facility..................14 State Budgets................................................... Amendment of Lease Agreement...............................16 Loss of Tax Exemption.................................................55 Limited Secondary Market...........................................55 THE CITY........................................................ Changes in Law.................................................. CITY FINANCIAL INFORMATION..............................18 Taxability Risk................................................. Financial Statements.....................................................18 ABSENCE OF LITIGATION........................................... Budgetary Process.........................................................18 City Financial Management Policies..........................21 CONTINUING DISCLOSURE........................................56 Current Investments............................................. FINANCIAL ADVISOR............................................... Principal Sources of General Fund Revenues...........22 Property Taxes.................................................. LEGAL MATTERS............................................................57 Sales and Use Taxes......................................................27 TAX MATTERS................................................................ Motor Vehicle In-Lieu Tax...........................................28 General Fund Revenues and Expenditures...............30 UNDERWRITING.................................................... Dissolution of Redevelopment Agencies...................32 RATINGS......................................................... OTHER FINANCIAL INFORMATION.........................33 FINANCIAL STATEMENTS...........................................6 Labor Relations................................................. ADDITIONAL INFORMATION....................................60 Risk Management................................................. Employee Retirement Plans.........................................34 APPENDIX A GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011 APPENDIX C INVESTMENT POLICY OF THE CITY APPENDIX D FORM OF OPINION OF SPECIAL COUNSEL APPENDIX E SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS APPENDIX F DTCS BOOK-ENTRY ONLY SYSTEM APPENDIX G FORM OF CONTINUING DISCLOSURE CERTIFICATE 287 288 $____________* CERTIFICATES OF PARTICIPATION (2012 Refinancing Project) Evidencing Direct, Undivided Fractional Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF CUPERTINO as the Rental for Certain Property Pursuant to a Lease Agreement with the Cupertino Public Facilities Corporation INTRODUCTION This introduction does not purport to be complete and reference is made to the body of this Official Statement, appendices and the documents referred to herein for more complete information with respect to matters concerning the captioned Certificates. Potential investors are encouraged to read this entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement and in APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„ DEFINITIONS. General This Official Statement, including the cover page and appendices furnish information in connection with the execution, sale and delivery of $_________* aggregate principal amount of Certificates of Participation (2012 Refinancing Project) (the CertificatesŽ). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of May 1, 2012 (the Trust AgreementŽ), by a Cupertino (the CityŽ), the Cupertino Public Facilities Corporat Bank of New York Mellon Trust Company, N.A., as trustee (the TrusteeŽ). Proceeds of the Certificates will be used to (a) to refinance various public capital improvements throughout the geographic boundaries of the City and, in particular, to provide for the refunding of the Citys outstanding Certificates of Participation (2002 Refinancing and Capital Improvement Project) (the 2002 CertificatesŽ), (b) fund a reserve fund for the Certificates, and (c) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates. See PLAN OF FINANCING.Ž The City will lease certain existing property (collectively, the PropertyŽ) to the Corporation pursuant to a Site and Facility Lease, dated as of May 1, 2012 (the Site and Facility LeaseŽ). The Corporation will lease the Property back to the City pursuant to a Lease Agreement, dated as of May 1, 2012 (the Lease AgreementŽ). The Certificates are payable solely from and secured by certain lease payments (Lease PaymentsŽ) to be made by the City to the Corporation pursuant to the Lease Agreement. See SOURCE CERTIFICATESŽ and THE PROPERTY.Ž Interest with respect to the Certificates is payable on January 1 and July 1 of each year, commencing July 1, 2012. The Certificates will mature in the amounts and on the dates and be payable at the interest rates shown on the cover of this Official Statement. See THE CERTIFICATES.Ž * Preliminary, subject to change. 289 The Certificates will be delivered in fully registered form only Co., as nominee of the Depository Trust Company, New York, New Y as the depository for the Certificates and all payments due with respect to the Certificates will be made to Cede & Co. Ownership interests in the Certificates may be purchased only in book- entry form. See THE CERTIFICATES„Book-Entry Only SystemŽ and AP BOOK-ENTRY ONLY SYSTEM. Source of Payment for the Certificates The Certificates represent direct, undivided fractional interests of the Owners thereof in the Lease Payments to be paid by the City to the Corporation pursuant to the Lease Agreement. Lease Payments are calculated to be sufficient to permit the payment of the principal and interest with respect to the Certificates when due. The Lease Payments are payable by the City from its general fund for the right to use and possess the Property. The Lease Payments are 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 Property or any portion thereof. The City will covenant under the Lease Agreement to take such action as necessary to include the Lease Payments in its annual budget and to make all necessary appropriations therefor (subject to abatement under certain circumstances described in the Lease Agreement). Pursuant to an Assignment Agreement, dated as of May 1, 2012 (the Assignment AgreementŽ), by and between the Corporation and the Trustee, the Corporation will assign to the Trustee, for the benefit of the Owners of the Certificates, certain of its rights under the Lease Agreement, including its right to receive Lease Payments from the City for the purpose of securing the payment of principal and interest with respect to the Certificates. See SOURCE OF PAYMENT FOR THE CERTIFICATESŽ and RISK FACTORS.Ž A Reserve Fund equal to the Reserve Requirement will be funded f the Certificates. Money in the Reserve Fund will be used by the Trustee in the event amounts in the Lease Payment Fund are insufficient to pay principal and/or interest with respect to the Certificates. See SOURCE OF PAYMENT FOR THE CERTIFICATES„Reserve Fund.Ž THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES AN INDEBTEDNESS OF THE CITY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS. The City The City is located in Santa Clara County (the CountyŽ) at the southern end of the San Francisco Bay Peninsula, approximately 11 miles northwest of San Jose and approximately 42 miles south of San Francisco. The City limits encompass approximately 13 square miles. As of January 1, 2011, the population of the City was approximately 58,747. See THE CITY,Ž CITY FINANCIAL INFORMATIONŽ and APPENDIX A„GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY. Continuing Disclosure The City will covenant in a Continuing Disclosure Certificate to prepare and deliver an annual report to the Municipal Securities Rulemaking Board (the -2- 290 Electronic Municipal Market Access system. See CONTINUING DISCLOSUREŽ and APPENDIX G„FORM OF CONTINUING DISCLOSURE CERTIFICATE. Summaries of Documents This Official Statement contains descriptions of the Certificates, the Trust Agreement, the Site and Facility Lease, the Lease Agreement, the Assignment agreements and documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive and reference is made complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document and, with respect to certain and principles of equity relating to or affecting creditors rig documents described herein are available for inspection during business hours at the corporate trust office of the Trustee at 700 South Flower Street, Suite 500, Los Angeles, CA 90017. Other Information This Official Statement speaks only as of its date as set forth on the cover hereof, the information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the City since the date hereof. Unless otherwise expressly noted, all references to internet websites in this Official Statement, including without limitation, the Citys website, are shown for reference and convenience only and none of their content is incorporated herein by reference. The information contained within such websites has not been reviewed by the City and the City makes no representation regarding the accuracy or completeness of the information therein. -3- 291 SOURCES AND USES OF FUNDS The following table shows the estimated sources and uses of the of the Certificates and other moneys: TABLE 1 Sources Par Amount of the Certificates Plus: Net Original Issue Premium Less: Underwriters Discount Plus: Released Moneys from 2002 Certificates (1) Plus: City Contribution Total Sources Uses (1) Deposit to Escrow Fund (2) Deposit to Reserve Fund (3) Deposit to Delivery Costs Fund Total Uses (1) Amounts deposited in the Escrow Fund will be used to defease the 2002 Certificates. See PLAN OF FINANCING. (2) The sum deposited in the Reserve Fund is equal to the Reserve Requirement being an amount equal to 50% of maximum annual Lease Payments (3) Delivery Costs include fees and expenses of the financial advisor, special counsel, disclosure counsel and the Trustee, printing expenses, rating fees, title insurance and oth PLAN OF FINANCING Proceeds of the Certificates will be used to (a) provide for the defeasance and refunding of the 2002 Certificates, (b) fund the Reserve Fund, and (c) pay delivery costs incurred in connection with the execution, delivery and sale of the Certificates. A portion of the net proceeds of the Certificates will be used to refund, on a current basis, the 2002 Certificates. Under terms of an Escrow Deposit and Trust Agreement, dated as of the date of delivery of the Certificates, by and between the City and The Bank of New York Mellon Trust Company, N.A., as escrow bank, an escrow fund (the established. At closing, the total amount required to pay the pr to the 2002 Certificates to and including June 12, 2012, and to redeem all outstanding 2002 Certificates on June 12, 2012, at a redemption price equal to 100% of the principal amount of the 2002 Certificates, plus accrued interest to the date of redemption, will be deposited in the Escrow Fund. THE PROPERTY Pursuant to the Site and Facility Lease, the City will lease the Corporation. Pursuant to the Lease Agreement, the Corporation wi back to the City. See APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„Site and Facility Lease and APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„Lease Agreement. -4- 292 The Property consists of: City Hall and Administrative Offices  : two story office building; 23,040 sq. ft., built 1965; reinforced concrete, fully sprinklered. Insured value: $6.2 million (structure only) Cupertino Community Hall/City Council Chambers  : one story multi-purpose building; 6,516 sq. ft., built 2004; wood frame structure, fully sprinklered. Insured value: $2.1 million (structure only) Cupertino Library  : two story, special purpose building (Class A); 53,864 sq. ft., built 2004; steel frame structure, fully sprinklered. Insured value: $22.3 million (structure only) Land  : 9.75 acres at corner of Torre Avenue and Rodrigues Street, the site of the above three buildings. Fee owned by the City. Appraised value: $23.4 million. Total value of all leased assets: $54 million Photos of these facilities are shown on the following page. For a description of certain terms of the Lease Agreement see SOURCE OF PAYMENT FOR THE CERTIFICATESŽ and APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„LEASE AGREEMENT. Pursuant to the Lease Agreement, the City may substitute the Property, in whole or in part, by other properties, upon the satisfaction of certain conditions. For more information regarding the substitution of property see SOURCE OF PAYMENT FOR THE CERTIFICATES„Substitution or Release of Site or FacilityŽ and AP OF THE PRINCIPAL LEGAL DOCUMENTS„Lease Agreement. The City has not granted any security interest in the Property for the benefit of the Certificates and there is no remedy of foreclosure on the Property upon the occurrence of an Event of Default under the Lease Agreement. For a discussion of remedies upon an Event of Default under the Lease Agreement, see RISK FACTORS„Limitations on Remedies.Ž -5- 293 City Hall and Administrative Offices Cupertino Community Hall/City Council Chambers Cupertino Library -6- 294 SEMI-ANNUAL DEBT SERVICE The following table shows the scheduled semi-annual debt service for the Certificates: TABLE 2 Interest Payment (1) Date Principal Interest Total 7/1/12 1/1/13 7/1/13 1/1/14 7/1/14 1/1/15 7/1/15 1/1/16 7/1/16 1/1/17 7/1/17 1/1/18 7/1/18 1/1/19 7/1/19 1/1/20 7/1/20 1/1/21 7/1/21 1/1/22 7/1/22 1/1/23 7/1/23 1/1/24 7/1/24 1/1/25 7/1/25 1/1/26 7/1/26 1/1/27 7/1/27 1/1/28 7/1/28 1/1/29 7/1/29 1/1/30 7/1/30 TOTAL (1) Principal and interest payments with respect to the Certificates on each January 1 and July 1 are derived from Lease Payments made by the City on the preceding December 15 and June 15. The July 1 payments are derived from the City prior fiscal year budget. -7- 295 THE CERTIFICATES General The Certificates will be executed and delivered in the aggregate principal amount and will mature on the dates and interest with respect thereto will be payable at the rates per annum as set forth on the cover of this Official Statement. The Certificates will be delivered in the form of fully registered Certificates without coupons in the denomination of $5,000 or any integral multiple thereof. Interest with respect to the Certificates will day year of twelve 30-day months and will be payable on January 1 and July 1 of each year, commencing July 1, 2012 (each an Interest Payment DateŽ), until maturity or earlier redemption thereof. The Certificates will be initially executed, delivered and registered in the name of Cede & Co.Ž as nominee of DTC and will be evidenced by each of the maturity dates in a denomination corresponding to the total principal therein designated to mature on such date. See THE CERTIFICATES„Book-Entry Only System.Ž Interest with respect to the Certificates will be payable from the Interest Payment Date next preceding the date of execution thereof, unless: (i) it is executed as of an Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (ii) it is executed after a Regular Record Date (i.e., the close of business on the 15th day of the month preceding each Interest Payment Date, whether or not such 15th day is a Business Day) and before the following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date; or (ii 15, 2012, in which event interest with respect thereto will be payable from its dated date; provided, however , that if, as of the date of execution of any Certificate, interest is in default with respect to any Outstanding Certificates, interest represented by such Certificate shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates. Payment of defaulted interest shall be paid by check mailed to the Owners as of a special record date to be fixed by the Trustee in its sole discretion, notice of which shall be given to the Owners not less than ten (10) days prior to such special record date. Payment of interest due with respect to any Certificate on any Interest Payment Date will be made to the person appearing on the Registration Books as the Owner thereof as of the Regular Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his or her address as it appears on the Registration Books as of such Regular Record Date or, upon written request filed with the Trustee prior to the Regular Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificates at the Principal Corporate Trust Office. Redemption Optional Redemption . The Certificates maturing on or before July 1, 2020, are not subject to optional redemption prior to maturity. The Certificates maturing on and after July 1, 2021, are subject to optional redemption in whole or in part on any date in such order of maturity as shall pro be designated by the City (or, if the City shall fail to so designate the order of redemption, in rata among maturities) and by lot within a maturity, on or after July 1, 2020, at a redemption price equal to the principal amount of the Certificates to be redeemed, together with accrued -8- 296 interest, without premium, to the date fixed for redemption, from the proceeds of the optional prepayment of Lease Payments made by the City pursuant to the Lease Agreement. Extraordinary Redemption from Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent Domain Award . The Certificates are subject to extraordinary redemption in wh any date or in part on any Interest Payment Date from the Net Proceeds of an insurance, title insurance, condemnation or eminent domain award, to the extent credited towards the prepayment of the Lease Payments by the City pursuant to the Lease Agreement, in such order of maturity as shall be designated by the City (or, if the City shall fail to so designate the order pro rata of redemption, in among maturities) and by lot within a maturity, at a redemption price equal to the principal amount of the Certificates to be redeemed, together with accrued interest to the date fixed for redemption, without premium. Selection of Certificates for Redemption . Whenever provision is made in the Trust Agreement for the redemption of Certificates and less than all of the Outstanding Certificates are to be redeemed, the Trustee will select Certificates for red Certificates not previously called for redemption in such order pro rata by the City (and, in lieu of such designation, among maturities) and by lot within a maturity. The Trustee will select Certificates for redemption within a maturity by lot in any manner which the Trustee will, in its sole discretion, deems app selection, Certificates will be deemed to be composed of $5,000 portions and any such portion may be separately redeemed. The Trustee will promptly notify the Certificates so selected for redemption. Selection by the Trustee of Certificates for redemption will be final and conclusive. Notice of Redemption . Unless waived in writing by any Owner of a Certificate to be redeemed, notice of any such redemption will be given by the Tru expense of the City, by mailing a copy of a redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption, to such Owner of the Certificate or Certificates to be redeemed at the address shown on the Registration Books or at such other address as is furnished in writing by such Owner to the provided, however Trustee; , that neither the failure to receive such notice nor any defect in any notice will affect the sufficiency of the proceedings for the redemption of the Certificates. Effect of Redemption . If notice of redemption has been given as described above, the Certificates or portions of Certificates so to be redeemed will, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date, interest with respect to such Certificates or portions of Certificates will cease to be payable. Partial Redemption of Certificate . Upon surrender of any Certificate redeemed in part only, the Trustee will execute and deliver to the Owner thereof a new authorized denominations equal in aggregate principal amount to the unredeemed portion of the Certificate surrendered and of the same interest rate and the same maturity. Transfer and Exchange 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 or her attorney duly authorized in writing upon surrender of such Certificate for cancellation at the Principal Corporate Trust Office, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for registration of transfer, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. The City shall pay any costs of the Trustee incurred in connection with such transfer, except that the -9- 297 Trustee may require the payment by the Certificate Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. The Trustee shall not be required to transfer (i) any Certificates or portion thereof during the period between the date fifteen (15) days prior to the date of selection of Certificates for redemption and such date of selection, or (ii) any Certificates selected for redemption. Certificates may be exchanged, upon surrender thereof, at the Principal Corporate Trust Office for a like aggregate principal amount of Certificates of other authorized denominations of the same maturity. Whenever any Certificate or Certificates shall be surrendered for exchange, the Trustee shall execute and deliver a new Certificate or Certificates for like aggregate principal amount in authorized denominations. 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. The Trustee shall not be required to exchange (i) any Certificate or any portion thereof during the period between the date fifteen (15) days prior to the date of selection of Certificates for redemption and such date of selection, or (ii) any Certificate selected for redemption. Book-Entry Only System The Certificates will be initially executed, delivered and registered as one fully registered certificate for each maturity, without coupons, in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Certificates. Individual purchases may be made in book-entry form only, in the principal amount of $5,000 and integral multiples thereof. Purchasers will not receive physical certificates representing their interest in the Certificates purchased. Principal and interest will be paid to D principal and interest to its participants for subsequent disbursement to the beneficial owners of the Certificates as described herein. So long as DTCs book-entry system is in effect with respect to the Certificates, notices to Owners of the Certificates by th DTC. Notices and communication by DTC to its participants, and then to the beneficial owners of the Certificates, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. See APPENDIX F„DTCS BOOK-ENTRY ONLY SYSTEM. In the event that such book-entry system is discontinued with respect to the Certificates, the City will cause the Trustee to execute and deliver replaceme certificates and, thereafter, the Certificates will be transfera and conditions provided in the Trust Agreement. In addition, the then apply: Payment of interest due with respect to any Certificate on any Interest Payment Date will be made to the person appearing on the Registration Books as the Owner thereof as of the Regular Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his or her address as it appears on the Registration Books as of such Regular Record Date or, upon written request filed with the Trustee prior to the Regular Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer in immediately available funds to an account in the United States designated by such Owner in such written request. Any such written request will remain in effect until re The principal and redemption price with respect to the Certificates at maturity or upon prior redemption shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificates at the Principal Corporate Trust Office. -10- 298 SOURCE OF PAYMENT FOR THE CERTIFICATES General Each Certificate represents a direct, undivided fractional interest in the Lease Payments. Pursuant to the Lease Agreement, the City will lease the Propert agree to make Lease Payments. See THE PROPERTY.Ž Upon satisfaction of certain conditions set forth in the Lease Agreement, the City may substitute the Pr See Substitution or Release of Site or FacilityŽ below. As security for the Certificates, the Corporation will assign to payment of principal and interest with respect to the Certificates, the Corporations rights, title and interest in the Lease Agreement (with certain exceptions), including the right to receive Lease Payments to be made by the City under the Lease Agreement. The Lease Payments are designed to be sufficient, in both time and amount, to pay when with respect to the Certificates. The Lease Payments are payable by the City from any source of legally available funds. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES AN INDEBTEDNESS OF THE CITY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS. Lease Payments; Covenant to Appropriate Pursuant to the Lease Agreement, the City has agreed to make Lease Payments for the lease of the Property which are calculated to be sufficient to pay principal and interest due with respect to the Certificates. Lease Payments will be made by the and December 15 in each year, in advance of the corresponding July 1 and January 1 Interest Payment Dates. The City will also pay as additional payments (Additional PaymentsŽ), amounts required for the payment of all costs and expenses incurred by the City to comply with the provisions of the Trust Agreement and the Lease Agreement or in connection with the execution and delivery of the Certificates. The City has covenanted under the Lease Agreement to take such action as may be necessary to include all Lease Payments and Additional Payments in its annual budget and to make the necessary annual appropriations for all such payments. Under certain circumstances described under the Lease Agreement, however, Lease Payments are subject to abatement during periods of substantial interference with the Citys use and occupancy of the Property or any portion thereof. See SOURCE OF PAYMENT FOR THE CERTIFICATES„Abatement.Ž Insurance The City is required to keep or cause to be kept casualty insurance against loss or damage by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, in an amount at least equal to one hundred percent (100%) of the replacement cost of the Property. Such insurance shall, as nearly as practicable, co windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. The City is not required by the Lease earthquake coverage with respect to the Property and the City does not expect to purchase such coverage. -11- 299 To insure against loss of rental income caused by perils mentioned above, the City is required to maintain, or cause to be maintained throughout the term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property as a result of any of the hazards described above in an amount equal to two times the maximum annual Lease Payments. Public liability and property damage insurance coverage is requi liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liab insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintai with any other liability insurance coverage carried by the City and may be maintained in the form of insurance maintained through a joint exercise of powers authority created for such purpose or in the form of self-insurance by the City. The net proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. The City shall provide, from moneys in the Delivery Costs Fund or at its own expense, on the Closing Date, a CLTA title insurance policy in the amount of not less than the principal amount of the Certificates, insuring the Citys leasehold estate in the Property, subject only to Permitted Encumbrances. See APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„LEASE AGREEMENT„Insurance. Abatement Pursuant to the Lease Agreement, Lease Payments will be abated d which, by reason of damage or destruction, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof (other than certain portions of the Property which have been modified by the City as described in the Lease Agreement) to the extent to be agreed upon by the City and the Corporation and com Representative to the Trustee. The parties agree that amounts of the Lease Payments under such circumstances shall not be less than the amounts of the unpaid Lease Payments as are then set forth in an exhibit attached to the Lease Agreement, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Property not damaged or destroyed (giving due consideration to the factors identified related to fair rental value as discussed in the Lease Agreement), based upon the opinion of an MAI appraiser with expertise in valuing such properties, or based upon any other appropriate method of valuation, in which event the Lease Payments will be abated such that they represent said fair rental value. Such abatement will continue for the period commencing with such dama ending with the substantial completion of the work of repair or reconstruction as communicated by a City Representative to the Trustee. In the event of any such damage or destruction, the Lease Agreement will continue in full force and right to terminate the Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there will be no abatement of Lea Agreement to the extent that (a) the proceeds of rental interruption insurance or (b) amounts in the Reserve Fund and/or the Insurance and Condemnation Fund and/ Fund are available to pay Lease Payments which would otherwise be abated under the Lease Agreement. See SOURCE OF PAYMENT FOR THE CERTIFICATES„Insurance,Ž APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„Lease Agreement„Insur -12- 300 and APPENDIX E„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„Lease Agreement„Abatement of Lease Payments in the Event of Damage or Destruction. Eminent Domain Pursuant to the Lease Agreement, if all of the 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 Property is taken permanently, or if all of the 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 the parties waive the benefit of any law to the contrary, and (2) there will be a Payments as a result of the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments under the Lease Agreement, in an amount to be agreed upon by the City and the Corporation and communicated to the Trustee such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property, except to the extent of special funds, such as amounts in the Reserve Fund available for the payment of Lease Payments. The Net Proceeds of such eminent domain award are required to be applied to the redemption of Certificates as provided in the Lease Agreement and the Trust Agreement. Reserve Fund The Trust Agreement provides that the Trustee will establish and maintain a reserve fund (the Reserve FundŽ). Pursuant to the Trust Agreement, imme and delivery of the Certificates, the amount deposited in the Reserve Fund will equal the Reserve Requirement.Ž Except as otherwise expressly provided in the Trust Agreement, all money in the Reserve Fund will be held in trust as a reserve for the payment when due of the Lease Payments on behalf of the City. Reserve RequirementŽ means an amount equal to 50% of the maximum annual Lease Payments, which amount shall be $__________ on the Closing Date. The amount of the Reserve Requirement shall not be reduced unless the Certificates are partially refunded, in which such amount shall be reduced to an amount equal to 50% of the maximum annual Lease Payments relating to the Certificates not so refunded. Optional Prepayment Pursuant to the Lease Agreement, the City has an option to prepay the principal components of the Lease Payments in full, by paying the aggregate unpaid principal components of the Lease Payments, or in part, in a prepayment amount equal to the principal amount of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, together with the premium set forth for the redemption of Certificates. See THE CERTIFICATES„Redemption„Optional Redemption.Ž Said option may be exercised with respect to Lease Payments due on and after June 15, ____, in whole or in part on any date, commencing June 15, ____. In the event of prepayment in part, the partial prepayment will be applied against Lease Payme date as will be selected by the City. Lease Payments due after a be in the amounts set forth in a revised Lease Payment schedule caused to be provided by, the City to the Trustee and which will schedule set forth in the Lease Agreement taking into account said partial prepayment. The Trustee agrees to notify the Corporation in the event of any prepayment of Lease Payments, as provided in the Trust Agreement. -13- 301 Mandatory Prepayment from Net Proceeds of Insurance, Title Insur The City will be obligated to prepay the Lease Payments, in who part on any Lease Payment Date, from and to the extent of any Net Proceeds of an insurance, title insurance or condemnation award with respect to the Property theretofore deposited in the Lease Payment Fund for such purpose pursuant to the Lease Agreement and the Trust Agreement. The City and the Corporation agree that such Net Proc the payment of any delinquent Lease Payments, and thereafter wil Citys obligations under the mandatory prepayment provisions of the Lease Agreement. Lease Payments due after any such partial prepayment will be in the am Lease Payment schedule which will be provided by, or caused to b Trustee and which will represent an adjustment to the schedule s Agreement taking into account said partial prepayment. See THE CERTIFICATES„ Redemption„Extraordinary Redemption from Net Proceeds of Insurance, Title Insurance, Condemnation or Eminent Domain Award.Ž Substitution or Release of Site or Facility Substitution of Site or Facility . The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a Substitute SiteŽ) and/or a substitute facility (a Substitute FacilityŽ) for the Site (the Former SiteŽ), or a portion thereof, and/or the Facility (the Former FacilityŽ), or a portion thereof, provided that the City shall satisfy all of the following requirements (to the extent applicable) which are hereby declared to be conditions precedent to such substitution: (i) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amendment to the Site and Facility Lease which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site; (ii) If a substitution of the Site, the City shall file with the Corporation and the Trustee an amendment to the Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site; (iii) If a substitution of the Facility, the City shall file wit the Trustee an amendment to the Site and Facility Lease which ad description of such Substitute Facility and deletes therefrom the description of the Former Facility; (iv) If a substitution of the Facility, the City shall file with the Trustee an amendment to the Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description o (v) The City shall certify in writing to the Corporation and the Trustee that such Substitute Site and/or Substitute Facility serve the purposes of the City, constitutes property that is unencumbered, subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of (vi) The City delivers to the Corporation and the Trustee evidence (which may be insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property following such substitution is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee that the indemnification provided pursuant to the Trust Agreement applies with respect to the Substitute Site and/or Substitute Facility; -14- 302 (vii) The Substitute Site and/or Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agreement, as evidenced by an officers certificate delivered to the Trustee; (viii) The City shall obtain an amendment to the title insurance pursuant to the Lease Agreement which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site; (ix) The City shall provide notice of the substitution to any rating agency then rating the Certificates which rating was provided at the request Corporation; and (x) The City shall furnish the Corporation and the Trustee with a written opinion of Bond Counsel, which shall be an Independent Counsel, stating that such substitution does not cause the interest components of the Lease Payments to become subject to federal income taxes or State personal income taxes. Release of Site . The City shall have, and is granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release: (i) The City shall file with the Corporation and the Trustee an amendment to the Site and Facility Lease which describes the Site, as revised by such release; (ii) The City shall file with the Corporation and the Trustee an amendment to the Lease Agreement which describes the Site, as revised by such rel (iii) The City delivers to the Corporation and the Trustee evide insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Site, as revised by such release; (iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agre by an officers certificate delivered to the Trustee; (v) The City shall obtain an amendment to the title insurance policy required pursuant to the Lease Agreement which describes the Site, as revised by such release; and (vi) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation. Release of Facility . The City shall have, and is hereby granted, the option at any from time to time during the Term of the Lease Agreement to rele provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release: (i) The City shall file with the Corporation and the Trustee an amendment to the Site and Facility Lease which describes the Facility, as revised by such release; -15- 303 (ii) The City shall file with the Corporation and the Trustee an amendment to the Lease Agreement which describes the Facility, as revised by such (iii) The City delivers to the Corporation and the Trustee evide insurance values or any other reasonable basis of valuation and need not require an appraisal) that the value of the Property, as revised by such release, is equal to or greater than the Outstanding principal amount of the Certificates and confirms in writing to the Trustee and the Corporation that the indemnification provided pursuant to the Trust Agreement applies with respect to the Facility, as revised by such release; (iv) Such release shall not cause the City to violate any of its covenants, representations and warranties made herein and in the Trust Agre by an officers certificate delivered to the Trustee; and (v) The City shall provide notice of the release to any rating agency then rating the Certificates which rating was provided at the request of the City or the Corporation. Amendment of Lease Agreement The Corporation and the City may, at any time, amend or modify any of the provisions of the Lease Agreement, but only (a) with the prior written consent of the Owners of a majority in aggregate principal amount of the Outstanding Certificates, or (b) without the consent of any of the Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreements of the City contained in the Lease Agreement, other covenants and agreements thereafter to be obser surrender any rights or power reserved in the Lease Agreement to or conferred upon the City; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision cont Agreement, or in any other respect whatsoever as the Corporation and the City may deem necessary or desirable, provided that, in the opinion of Special Counsel, such modifications or amendments will not materially adversely affect Owners; or (iii) to amend any provision thereof relating to the Code, to an whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest with respect to the Certificates under the Code, in the opinion of Special Counsel. THE CITY The City is located in the County, at the southern end of the San Francisco Bay Peninsula, approximately 11 miles northwest of San Jose and approximately 42 miles south of San Francisco. The City is bordered by the cities of San Jose, Saratoga, Sunnyvale, Santa Clara and Los Altos. The City was incorporated on October 10, 1955 as a general law city. The City, located in the heart of the Silicon Valley, was born from a community of farmers. In 1955, when Cupertino officially became the 13th city in Santa Clara County, its population was about 2,000 and its geographical area encompassed 3.79 square miles. Today, with a population of approximately 58,747 and city limits stretching across 13 square miles, the -16- 304 City is considered to be one of the San Francisco Bay Areas most prestigious cities in which to live and work. Among the many factors that make the City so desirable are the Citys highly acclaimed educational programs, its vibrant business environment, its convenient access to major transportation systems and its attractive well-planned neighborhoods. The excellent reputation of the Citys schools has also been an attraction for families w to jobs in the County. The City occupies the geographic center of Silicon Valley. The C headquarters for major corporations such as Apple, Seagate Technology, Verigy and Durect Corporation, and houses sixty high-tech firms. The City has thirteen shopping centers including its own regional mall, Vallco. With Hewlett-Packard, a primary employer, leaving the City in 2012, Apple purchased their properties as part of 155 acres acquired for construction of a second corporate campus that will accommodate 12,000 people. The City is reviewing their plans for approximately three million square feet of offices, research, parking and other facilities. The Citys geographic location is a major factor affecting its economic position. The City is served by a network of freeways; Interstate 880 connects the City with the Oakland International Airport and the Port of Oakland. Interstates 280 and 680 provide access to the peninsula and eastern regions of the San Francisco Bay Area and State Route 17 serves to connect the City with the Pacific Coast at Santa Cruz. All of these interstate highways connect to U.S. 101, a major north-south highway linking San Francisco and Los Angeles. Besides the Citys proximity to San Francisco and the Silicon Valley and its transportation access, other factors contribute to its attractiveness to businesses, and their ability to attract and retain quality employees. These factors include the low crime rate, moderate climate, well-educated labor pool, excellent schools, housing stock, community parks, public facilities and high median income households. The City Council is made up of five members, elected at large, s The Mayor is selected for a one-year term from among the members City operates under a council-manager form of government. The City Council appoints the City Manager, City Attorney and City Treasurer. The City has 163 authorized full-time benefited employee positions. City departments include Administration (City Council, commissions, city manager, city attorney); Administrative Services (finance, human resources, information technology, city clerk, neighborhood watch, emergency preparedness, code enforcement); Community Development (planning, building, and economic development); Parks and Recrea (engineering, maintenance, transportation, solid waste, and storm drain management); and Public and Environmental Affairs. Police service is provided by a City contract with the Santa Clara County Sheriffs Department, and fire service is provided by a separate taxing entity, the Santa Clara County Fire District. Assisting the City Council are several citizen advisory commissions/committees which include housing, telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teen, economic development, strategic planning, and public safety. Members of the volunteer boards are appointed by the City Counci announced so that interested residents may apply for the positions. Residents are kept informed Cupertino Scene about city services and programs through the , a monthly newsletter; The City Channel, Cupertinos government access cable TV channel; and the citys website. -17- 305 Cupertino Union School District serves 18,000 students in a 26 square mile area that includes Cupertino and portions of five other cities. The district has 20 elementary schools and five middle schools, including several choice programs. The Fremont Union High School District serves 10,000 students in a 42 square mile area covering all of Cupertino, most of Sunnyvale and portions of San Jose, Los Altos, Saratoga, and San See APPENDIX A„GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY for a general description of the City as well as certain demographic and statistical information. CITY FINANCIAL INFORMATION Financial Statements The Citys accounting policies conform to generally accepted acc audited financial statements also conform to the principles and standards for public financial reporting established by the Governmental Accounting Standards Board. Basis of Accounting and Financial Statement Presentation . The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. Audited Financial Statements . The City retained the firm of Macias Gini & OConnell LLP, Walnut Creek, California (the Citys AuditorŽ), to examine the general purpose financial statements of the City as of and for the year ended June 30, 2011. The audited financial statements for fiscal year ended June 30, 2011, are included in APPENDIX B„ COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011. The City has not requested, and the Citys Auditor has not provided, any review or update of such financial statements in connection with their inclusion in this Official Statement. The City has selected a new firm, Maze and Associates Accountancy Corporation, to become the Citys auditor, starting with the financial statements for the fiscal year ending June 30, 2012. The City has been awarded the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada for each of the past seventeen years. Budgetary Process The City Council adopts an annual budget with appropriations for all City funds prior to the beginning of the fiscal year, which begins on July 1 of each year. The City Council has the legal authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The level of budgetary control (that is, the level at which -18- 306 expenditures cannot legally exceed the appropriated amount) for the Citys operating budget is the program area within each fund, and for the capital improvement budget it is each individual capital improvement project within each fund. For the operating budget, the City Manager has the authority to move appropriations between accounts (without dollar limitation) within a budget program and within the same fund as long as the transfers are within the same program area. For the capital improvement program, the City Manager has the authority to transfer appropriations (with no dollar limitation) between capi fund as long as the transfers are within the responsibility of the same department. All other appropriation changes require the approval of the City Council. All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by the City Council. -19- 307 The following table shows the Citys budget and actual results for general fund revenues and expenditures for fiscal years 2009-10 and 2010-11 and the adopted budget for fiscal year 2011-12. TABLE 3 City of Cupertino General Fund Budget Summary Fiscal Years 2009-10 through 2011-12 FY10-11 FY10-11 FY10-11 FY11-12 FY09-10 FY09-10 FY09-10 Actual Variance Budget Final Budget Actual Variance Final Budget $36,414 ,000 969,000 555,000 2,618,000 1,552,000 650,000 100,000 43,118,000 1,741,000 8,980,000 1,658,000 4,542,000 4,244,000 4,134,000 12,211,000 37,510,000 5,608,000 35,000 (6,431,000) (6,396,000) $(1,048,000) Source: City of Cupertino Finance Department. -20- 308 City Financial Management Policies The City Council has adopted a comprehensive set of financial management policies to provide for: (i) establishing targeted general fund reserves; and (ii) the prudent investment of City funds. The Citys practice is to incur debt only after deliberation over the effect of such debt on the Citys General Fund and other resources of the City, and in those circumstances where the use of debt would be appropriate to the scale and economic life of the asset being financed and the accumulation or availability of reserves to fund the capital requirement. The City last issued debt in 2002 (the 2002 Certificates), which is being refinanced with the proceeds of the Certificates. Reserves Policy . The following table shows the Citys reserve policy guidance, reserves for fiscal year 2010-11 and proposed reserves for fiscal year 2011-12. TABLE 4 RESERVES BY Policy FY 2010-11 FY 2011-12 CATEGORY: Guidance ActualProposed Economic Uncertainty I $12,500,000 $12,500,000 $12,500,000 Economic Uncertainty II 1,400,000 1,400,000 1,400,000 Utility User Tax 534,000 „ Capital Improvement 5,000,000 1,354,346 735,000 Infrastructure 1,100,000 1,000,000 1,100,000 Undesignated 500,000 3,380,279 559,000 $20,500,000 $20,168,625 $16,294,000 RESERVES BY FUND: (1) General $14,400,000 17,814,279 $14,459,000 Capital Improvement 6,100,000 2,354,346 1,835,000 Total$20,500,000 $20,168,625 $16,294,000 Source: City of Cupertino Finance Department. (1) Excludes encumbrances. Investment Policy . The investment of funds of the City (except pension and retirement funds) is made in accordance with the Citys Investment Policy, most recently approved on et seq February 7, 2012 (the Investment PolicyŽ), and section 53601 . of the California Government Code. The Investment Policy is subject to revision at any time and is reviewed at least annually to ensure compliance with the stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts held under the Trust Agreement are invested at the direction of the City in Permitted Investments, as defined in the Trust Agreement, and are subject to certain limitations contained therein. See APPENDIX C THE CITY and APPENDIX D„SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS„ TRUST AGREEMENT„Investments. -21- 309 Current Investments The assets of the Citys investment portfolio, as of January 31, 2012, are shown in the following table: TABLE 5 City of Cupertino Investment Portfolio (As of January 31, 2012) Par Type Value U.S. Treasury Notes $37,000,000 California Local Agency Inv. Fund (LAIF) 598,090 Money Market Mutual Funds 13,195,819 Cash on Hand 2,591,714 Total cash and investments $53,385,623 Source: City of Cupertino. Principal Sources of General Fund Revenues Sales taxes were the single largest revenue source to the genera 11, representing approximately 33% of revenues, followed by property taxes representing approximately 27%. These sources represented an aggregate of approximately 60% of the general fund revenues for fiscal year 2010-11. For a discussion of potential State Budget impacts on general fund revenues, see „State Budgets.Ž For a discussion Ad valorem property taxes, see „Sales TaxŽ and „ Property Taxation.Ž In addition, the City receives the following local taxes: Utility User Tax . The utility tax, which was approved by voters in 1990, is assessed on gas, electric and telecommunication service provided within the 2.4% of user charges. The tax is for general City purposes. In March 2002, voters approved an extension of the utility tax from a sunset date of 2015 to 2030. In order to be consistent with existing collection practices and maintain current revenues, vot ordinance to update the tax with modern telecommunication techno Franchise Taxes . The City levies a 2% to 10% franchise tax on revenues collected by gas, electric, water, cable and solid waste franchises.. Transient Occupancy Taxes . The City levies a transient occupancy tax on hotel facilities located in the City at the rate of 12% of room revenues. In November 2011, voters approved a rate increase from 10% to 12%. Four hotels operate in the City with a fifth under construction. The tax is for general City purposes.. Property Transfer Taxes . A documentary stamp tax is assessed for recordation of real property transfers. Construction Tax . An excise tax is imposed on the construction of buildings and home lots in the City. Depending on the building use, the tax rate is $590.16 per dwelling unit, $2.54 or $1.27 per square foot of building area, or $198.67 per room, as of April 1, 2012. This general purpose tax is adjusted quarterly by the consumer price index. -22- 310 Business License Tax . Any entity that conducts business in the City is required to o business license. The entity pays a minimum tax of $119 per year for the license. This general purpose tax is adjusted annually by the consumer price index. The following table shows the Citys general fund tax revenues by source for the most recent five fiscal years: TABLE 6 City of Cupertino Tax Revenues By Source Actual Actual Actual Actual Budget Source 2007-08 2008-09 2009-10 2010-11 2011-12 Property Taxes $ 6,893,098 $ 7,441,895 $ 6,018,460 $ 7,245,342 $ Property tax in lieu of motor vehicle fee 3,894,502 4,299,902 4, Sales taxes 13,154,749 14,139,190 9,930,530 14,539,243 14,283,00 Transient Occupancy Tax 2,711,590 2,140,274 2,142,137 2,536,501 Utility User Tax 3,175,724 3,205,073 3,271,452 3,227,942 3,540,000 Franchise Tax 2,547,439 2,618,125 2,597,930 2,841,344 2,860,000 1,486,395 1,017,417 1,151,337 1,381,065 1,190,000 Other Taxes $34,863,497 $36,861,876 $29,532,758 $36,176,232 $36,414,000 Total Tax Revenues Source: City of Cupertino Finance Department. In addition, the City receives the following general fund revenu Licenses and Permits . These revenues consist primarily of building construction perm fees. Fines, Forfeitures and Penalties . These revenues include parking citations and other fines for municipal code violations. Use of Money and Property . These revenues consist primarily of investment earnings and rental/concession income. Charges for Services . The City charges fees for plan checking, building inspection and a variety of other municipal services. -23- 311 The following table illustrates other revenue sources: TABLE 7 City of Cupertino Other Revenue Sources Actual Actual Actual Actual Budget Source 2007-08 2008-09 2009-10 2010-11 2011-12 Licenses and Permits $2,656,017 $2,740,463 $2,583,131 $2,90 Fines and Forfeitures 722,087 761,320 736,239 695,666 65 Use of Money and Property 2,015,653 1,163,492 685,490 727,9 Intergovernmental 659,487 421,238 625,523 689,239 555,000 Charges for Services 1,363,196 1,265,509 1,333,729 1,944,60 Other/Miscellaneous 85,388 79,042 81,352 58,881 100,000 Total Other Revenues $7,501,828 $6,431,064 $6,045,464 $7,018,322 $6,444,000 Source: City of Cupertino Finance Department. Property Taxes When Proposition 13 passed in 1978, it froze property tax rates at their current levels. This action created problems for cities such as the City that at the time had low property tax rates. Section 98 of the California Revenue and Taxation Code was passed to correct this situation giving these cities what is referred to as Tax Equity Allocation (TEA). In exchange for trial court funding, counties had to provide at least seven percent of property taxes to these cities with Educational Revenue Augmentation Fund (ERAF) impacts backfilled by the state. However, the County did not receive enough trial court funding to offset increasing the TEA to seven percent for the City and three other effected cities in the County. Consequently, legislation was enacted which limited the four cities to 55% of what other TEA cities in the state receive. In 2006, Assembly Bill 117 repealed the 55% limit, however the four cities were required to remit the Countys higher ERAF rate to the State on TEA funds so that the State budget would not be impacted. As a result the City is still being appor property taxes. State legislation has been introduced to phase out the higher ERAF rate requirement for the four cities. Tax Levies, Collections and Delinquencies . Property taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County. Property taxes collected in advance are recorded as deferred revenue and recognized as revenue in the year they become available. The County levies, bills and collects property taxes for the City. Property taxes paid to the City by the County within 60 days after the end of the fiscal year are availableŽ and are, therefore, recognized as revenue. For assessment and collection purposes, property is classified either as securedŽ or unsecuredŽ and is listed accordingly on separate parts of the assessment roll. The secured rollŽ is that part of the assessment roll containing State/assessed public utilities property and property the taxes on which are a lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll.Ž Secured and unsecured property taxes are levied based on the assessed value as of January 1, the lien date, of the preceding fiscal year. Secured property tax is levied on October 1 and due in two installments, on November 1 and March 1. Collection dates are December 10 and April 10 which are also the delinquent dates. At that time, delinquent accounts are assessed a penalty of 10%. Accounts that remain unpaid on June 30 are charged an additional 1.5% per month. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month -24- 312 to the time of redemption, plus costs and a redemption fee. If t five years or more, the property is deeded to the State and then is subject to sale by the County Treasurer. Unsecured property tax is levied on July 1 and due on July 31, and has a collection date of August 31 which is also the delinquent date. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The taxing authority has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County C to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorders office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal p possessory interests belonging or assessed to the assessee. Assessed Valuation . All property is assessed using full cash value as defined by A XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, nonprofit hospitals and charitable institutions. Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of situsŽ among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of baseŽ revenues from the tax rate area. Each years growth allocation becomes part of each agencys allocation in the following year. The passage of Assembly Bill 454 in 1987 changed the manner in w operating nonunitary property is assessed by the State Board of Equalization. The legislation deleted the formula for the allocation of assessed value attributed to such property and imposed a State-mandated local program requiring the assignment of the assessment value of all unitary and operating non-unitary property in each county of each State assessee other than a regulated railway company. The legislation established formulas for the computation of applicable county-wide rates for such property and for the allocation of property tax revenues attributable to such property among taxing jurisdictions in the county beginning in fiscal year 1988-89. This legislation requires each County to issue each State assessee, other than a regulated railway company, a single tax bill for all unitary and operating nonunitary property. Assessment Appeals . Property tax values determined by the County Assessor may be subject to appeal by property owners. Assessment appeals are annually filed with the Assessment Appeals Board for a hearing and resolution. The resolution of an appeal may result in a reduction to the County Assessors original taxable value and a tax refund to the applicant/property owner. Each assessment appeal could result in a reduction of the taxable value of the real property, personal property or possessory interest of the property which is the subject of the appeal. Alternatively, an appeal may be withdrawn by the applicant or the Assessment Appeals Board may deny or modify the appeal at a hearing or by stipulation. Effect of Delinquencies and Foreclosures on Property Tax Collect . As described above, once an installment of property tax becomes delinquent, penalties are assessed commencing on the applicable delinquency date until the delinquent installment(s) and all assessed penalties are paid. In the event of foreclosure and sale of property by a mortgage holder, all past due property taxes, penalties and interest are required to be paid before the property can be transferred to a new owner. -25- 313 The level of default and foreclosure activity has affected certain homeowners nationwide. Within the State, the greatest impacts to date are in regions of the Central Valley, the Inland Empire, and other areas in the State where the large numbers of new mortgages were originated in more affordable areas. The increased level of default and foreclosure activity h resulted in downward pressure on home prices in the affected areas. Set forth in the table below are assessed valuations for secured and unsecured property within the City for the five most recent fiscal years. TABLE 8 City of Cupertino Assessed Valuations Local Secured Utility Unsecured Total Fiscal Year 2007-08 $11,512,949,952 „ $417,564,226 $11,930,514,178 2008-09 12,637,622,059 $1,390,000 533,413,228 13,172,425,287 2009-10 12,979,346,158 1,390,000 564,277,611 13,545,013,769 2010-11 13,017,910,372 1,390,000 476,332,025 13,495,632,397 2011-12 13,219,574,367 1,390,000 527,795,261 13,748,759,628 Source: California Municipal Statistics, Inc. Santa Clara County only provides secured tax charge and delinquency information for general obligation bond debt service levies. Since the City does not have any general obligation bonds outstanding, there is no information to report. Teeter Plan . The Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter PlanŽ) has been adopted by 53 of the 58 counties, including the et seq. County, as provided for in section 4701 of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency, including cities, levying property taxes in a county receives the amount of uncollected taxes credited to its fund, in the same manner as if the amount credited had been collected. In return, the county receives and retains delinquent payments, penalties and interest as collected, that would have b However, although a local agency receives the total levy for its property taxes without regard to actual collections, to the extent of a reserve established and held by its county for this purpose the basic legal liability for property tax deficiencies at all times remains with the local agency. The Teeter Plan is to remain in effect unless the county board of supervisors orders its discontinuance or unless, prior to the commencement of any fiscal year of the county, the board of supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the county. The board of supervisors may, after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan wit agency in its county. Thus, so long as the County maintains its policy of collecting taxes pursuant to said procedures and the City meets the Teeter Plan r receive 100% of the annual installments levied without regard to actual collections in the City. There is no assurance, however, that the County Board of Supervisors will maintain its policy of apportioning taxes pursuant to the aforementioned procedures. In 1978, the voters of the State passed Proposition 8, a constitutional amendment to Article XIIIA that allows a temporary reduction in assessed value when real property suffers a decline in value. A decline in value occurs when the current market value of real property is less than the current assessed (taxable) factored base year value as of the lien date, January 1. See CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES APPROPRIATIONS„Article XIIIA of the California Constitution.Ž -26- 314 Principal Taxpayers . The following table sets forth the principal secured property taxpayers in the City as of fiscal year 2011-12, the most current information available. TABLE 9 City of Cupertino Largest Local Secured Property Tax Payers Fiscal Year 2011-12 2011-12 % of Property Owner Primary Land Use Assessed Valuation Total (1) Campus Holdings Inc. Office Building $ 545,464,480 4.13% 1. Apple Computer Inc. Office Building 440,120,324 3.33 2. Cupertino City Center Buildings Office Building 95,152,610 0.72 3. Vallco Shopping Mall LLC Shopping Center 92,573,571 0.70 4. Irvine Company LLC Apartments 71,194,693 0.54 5. ECI Two Results LLC Industrial 64,836,485 0.49 6. Villa Serra Apartments LP Apartments 61,926,014 0.47 7. Rocktino Fee LLC Office Building 61,822,271 0.47 8. Cupertino Village LP Shopping Center 54,910,380 0.42 9. 500 Forbes LLC Commercial Land 54,850,604 0.41 10. Seagate Technology LLC Office Building 52,479,909 0.40 11. Berg Family Partners LP Office Building 52,342,382 0.40 12. WW Dasc Owner LLC Office Building 44,331,319 0.34 13. SFERS Real Estate Corp. Apartments 43,001,856 0.33 14. MOF II Tantau Holdings Inc. Office Building 38,079,933 0.29 15. PPC Siena LLC Apartments 37,005,262 0.28 16. Cupertino Office Partners LLC Office Building 36,460,180 0.28 17. Forge-Homestead LP Apartments 36,225,115 0.27 18. Cupertino Property Development I LLC Shopping Center 35,805,835 0.27 19. DB RE California Residential 1, LLC Apartments 32,103,066 0.24 20. TOTAL OF TOP 20 $1,950,686,289 14.76% Source: California Municipal Statistics, Inc. (1) 2011-12 Local Secured Assessed Valuation: $13,219,574,367. Sales and Use Taxes A sales tax is imposed on the privilege of consuming personal property in California. California does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide. In addition, many of Californias cities, counties, towns and communities have special taxing jurisdiction to impose a transaction (sales) or use tax. These so- called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. These district taxes can vary up to 1%, and more than one district tax may be in effect for a particular location. As of April 1, 2012, the Santa Clara Valley Transportation Authority collects a 0.5% district tax, and the Santa Clara County Transit District collects and additional 0.5% district tax. The Citys share of sales tax is approximately 1% when one considers the combined City share of 0.75% and the States 0.250% Fiscal Recovery Funding (Triple-Flip swap) explained below. With the enactment of the Triple Flip, the City now receives the 0.250% as reclassified revenue through property tax as an in lieu remittance, the payment of which heretofore coincides with the County property tax calendar. The State collects and administers the tax, and makes distributions on taxes collected within the City as follows: -27- 315 TABLE 10 City of Cupertino Sales Tax Rates State General Fund 3.9375% State and Local Revenue Fund (2011) 1.0625 State Fiscal Recovery (to the City) 0.2500 State Local Public Safety Fund 0.5000 State Local Revenue Fund 0.5000 City General Fund 0.7500 County Transportation 0.2500 Subtotal 7.250% Santa Clara Valley Transportation Authority 0.5000 Santa Clara County Transit District 0.5000 Total 8.2500% 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. On March 2, 2004, voters approved a bond initiative formally known as the California Economic Recovery Act.Ž This act authorized the issuance of $15 billion of Economic Recovery Bonds to finance ongoing State budget deficits, which are payable from a fund established by the redirection of tax revenues known as the Triple Flip.Ž The State issued $11.3 billion of Economic Recovery Bonds prior to June 30, 2004. Under the Triple Flip,Ž one-quarter of local governments one percent share of the sales tax imposed on taxable transactions within their jurisdiction is being redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, State legislation provides for certain property taxes to be redirected to local government. Because these property tax monies were previously earmarked for schools, the legislation provides for schools to receive other State general fund revenues. It is expected that the swap of sales taxes for property taxes will terminate once the Economic Recovery Bonds are repaid, which is currently expected to occur in approximately 9 to 13 years. See RISK FACTORS„State Budget InformationŽ herein. Motor Vehicle In-Lieu Tax Vehicle license fees are assessed in the amount of 2% of a vehicles depreciation market value for the privilege of operating a vehicle on Californias public highways. A program to offset (or reduce) a portion of the vehicle license fees (VLFŽ) paid by vehicle owners was established by Chapter 322, Statutes of 1998. Beginning January 1, 1999, a permanent offset of 25% of the VLF paid by vehicle owners became operative. Various pieces of legislation increased the amount of the offset in subsequent years to the existing statutory level of 67.5% of 2% (resulting in the current effective rate of 0.65%). This level of offset was estimated to provide tax relief of $3.95 billion in the fiscal year 2003-04. In connection with the offset of the VLF, the Legislature authorized appropriations from the State general fund to backfillŽ the offset so that the local governments, which receive all of the vehicle license fee revenues, would not experience any loss established the VLF offset program also provided that if there were insufficient general fund moneys to fully backfill the VLF offset, the percentage offset w (i.e., the license fee payable by drivers would be increased) to assure that local governments would not be disadvantaged. In June 2003, the State Director of Finance ordered the suspension of VLF offsets due to a determination that insufficient general fund moneys would be available for this purpose, and, beginning in October 2003, VLF paid by vehicle owners were restored to the 1998 level. However, the offset suspension was rescinded by the Governor on November 17, -28- 316 2003, and offset payments to local governments resumed. Local governments received backfill payments totaling $3.80 billion in fiscal year 2002-03. Backfill payments totaling $2.65 billion were expected to be paid to local governments in fiscal year 2003-04. The State-local agreement also provided for the repayment in August 2006 of approximately $1.2 billion in backfill that was not received by local governments during the time period between the suspension of the offsets and the implementation of higher fees. This repayment obligation was codified by Proposition 1A, which was approved by voters in the November 2004 general election and was repaid early by the State in August 2005. For a description of Proposition 1A, see CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS„Proposition 1A.Ž Beginning in fiscal year 2004-05, the State-local agreement permanently reduced the VLF rate to 0.65% and replaced the backfill with a like amount of property taxes. Subsequent to fiscal year 2004-05, each Citys property tax in-lieu of VLFŽ increased proportionally to increases in such citys assessed valuation. However, in fiscal years 2004-05 and 2005-06, the State shiftedŽ $700 million in city and county taxes to the States General Fun The following table sets forth the Motor Vehicle License Fees and Property Tax In-Lieu of VLF received by the City for the last four fiscal years. TABLE 11 City of Cupertino Property Tax In-Lieu of VLF 2007-08 2008-09 2009-10 2010-11 Motor Vehicle License Fees $ 266,789 $ 171,621 $ 166,440 $ Property Tax In-Lieu of VLF 3,894,502 4,299,902 4,420,901 4,404,795 TOTAL $4,161,291 $4,471,523 $4,587,341 $4,664,084 Source: City of Cupertino Finance Department. Senate Bill 89 was signed into law as part of the States Fiscal Year 2011-12 Budget Act. SB 89 increases motor vehicle license fees (VLFŽ) by $12. This new funding source "frees up" $300 million of VLF revenue that had been used to fund DMV operations. Under the provisions of SB 89, this money is transferred to a new Local Law Enforcement Services Account (LLESAŽ) to fund law enforcement grants. In addition, beginning July 1, 2011, SB 89 transfers the remaining VLF revenue previously allocated to cities to the receiving $130 million in VLF revenues, under SB 89 they would only receive $75 million in earmarked grants. This has the effect of reducing the Citys revenues by $240,000 in FY 11-12. -29- 317 General Fund Revenues and Expenditures The following two tables summarize the General Fund Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance of the Citys general fund for the fiscal years 2007-08 through 2010-11. TABLE 12 City of Cupertino General Fund Balance Sheet Fiscal Years 2007-08 through 2010-11 Fiscal Year Ended June 30, 2008 2009 2010 2011 Assets: Cash and investments $18,243,676 $22,615,824 $18,294,292 $23,173,690 Receivables: Accounts 2,147,855 1,759,822 3,197,767 2,604,221 Interest „ „ „ 47,183 Intergovernmental - State Proposition 1A „ „ „ 1,419,497 Loans 1,299,556 1,222,918 1,204,540 953,070 Prepaid items 22,082 7,003 73,474 70,880 Due from other funds 1,457,512 837,629 39,788 „ Advance to other funds 263,324 „ „ „ Other assets 3,884 3,884 3,884 3,884 Total assets $23,437,889 $26,447,080 $22,813,745 $28,272,425 Liabilities and Fund Balances: Liabilities: Accounts payable and accruals $1,777,465 $2,373,835 $2,878,151 $3,541,911 Accrued payroll and benefits 303,385 372,983 440,206 Deposits 1,669,210 1,484,816 1,608,232 1,993,988 Advance from other funds „ „ 504,497 504,497 Unearned revenue 21,346 18,589 32,044 482,571 Deferred revenue „ „ 1,419,497 1,419,497 Total liabilities 3,771,406 4,250,223 6,882,627 8,465,548 Fund balance: (pre-GASB 54 implementation) Reserved for: Encumbrances 429,909 497,484 436,166 Advances to other funds 263,324 „ „ Prepaid items 22,082 7,003 73,474 Loans receivable 1,299,556 1,222,918 1,204,540 Public access television 654,043 597,878 594,110 Unreserved, reported in: General Fund 16,997,569 19,871,574 13,622,828 Total fund balance 19,666,483 22,196,857 15,931,118 Total liabilities and fund balance $23,437,889 $26,447,080 $22,813,745 Fund balance: (post- GASB 54 implementation) Nonspendable 1,023,950 Restricted 663,254 Assigned 14,739,394 Unassigned 3,380,279 Total fund balance 19,806,877 Total liabilities and fund balance $28,272,425 Source: City of Cupertino. -30- 318 Fund Balance Reporting Changes . Fund balance is a financial measure that represents the difference between a funds assets and liabilities. The objective of fund balance reporting is to isolate that portion of fund balance that is unavailable to support the following periods budget. Fund Balance Reporting Governmental Accounting Standards Board ŽGASBŽ) Statement No. 5 and Governmental Fund Type Definitions (GASB 54Ž), which is effective for periods beginning after June 15, 2010, significantly changed how this information is reported in governmental financial statements. Prior to the adoption of GASB 54, fund balances were either classified as reserved or unreserved. In addition, some governments identified part of unreserved fund balance as designated.Ž The City implemented GASB 54 in fiscal GASB 54 requires reporting of fund balance using a hierarchy of fund balance classifications based primarily on the extent to which governmen the financial resources reported in the funds. The hierarchy of fund balance is: (1) Non-spendable Fund Balance: amounts that cannot be spent due to form, including inventories, prepaid amounts, long-term loan and notes receivables, and/or property held for resale; and, amounts that must be maintained intact legally or contractually (corpus or principal of a permanent fund); (2) Restricted Fund Balance: amounts constrained for a specific purpose by external parties, constitutional provision or enabling legislation. (Note: this is the same definition used *81+#14*4+1*2(9*9-3-498=*4,&*4*/-3-49>8"18+:88154*4,4*2<818=.57(9*9- by GASB No. 34, and Local Governments , for restricted net assets.); (3) Committed Fund Balance: amounts constrained for a specific p government using its highest level of decision-making authority, such as the City Council, and which would require action by the same group to remove or change the constraints placed on the resources; (Note that such action must occur prior to year-end, but the amount can be determined in the subsequent period); (4) Assigned Fund Balance: for the general fund, amounts constrained for the intent to be used for a specific purpose by a governing board or a body or official that has been delegated authority to assign amounts; (Note that for governmental funds other than the general fund, this includes any remaining positive amounts not classified as non-spendable, restricted or committed); and (5) Unassigned Fund Balance: amounts not classified as non-spendable, restricted, committed or assigned. The general fund is the only fund that would report a positive amount in unassigned fund balance. -31- 319 TABLE 13 City of Cupertino General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Fiscal Years 2007-08 through 2010-11 Fiscal Year Ended June 30, 2008 2009 2010 2011 Revenues: Taxes $33,863,497 $34,861,876 $29,532,759 $36,176,232 Use of money and property 2,015,653 1,163,492 685,490 727,983 Intergovernmental 659,487 421,238 625,523 689,239 Licenses and permits 2,656,017 2,740,463 2,583,131 2,901,944 Charges for services 1,363,196 1,265,509 1,333,729 1,944,609 Fines and forfeitures 722,087 761,320 736,239 695,666 85,388 79,042 81,352 58,881 Other revenue 41,365,325 41,292,940 35,578,223 43,194,554 Amounts available for appropriation Charges for appropriation (outflows): Administration 1,351,273 1,336,921 1,469,004 1,528,070 Law enforcement 7,456,661 8,133,168 8,384,310 8,434,885 Public information/environmental affairs 1,169,247 1,486,443 1,487,265 1,497,263 Administrative services 3,797,156 3,634,043 3,733,414 3,695,076 Recreation services 3,745,244 3,789,260 4,003,764 4,117,477 Community development 3,417,590 3,209,030 3,069,287 3,237,643 10,073,546 10,687,626 10,809,048 11,152,029 Public works 31,010,717 32,276,491 32,956,092 33,662,443 Total charges for appropriations EXCESS OF REVENUES OVER 10,354,608 9,016,449 2,622,131 9,532,111 EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from sale of capital assets „ „ „ 1,055,449 Transfers in 1,300,165 623,925 487,015 337,482 Transfers (out) 18,334,750 (7,110,000) (9,374,885) (7,049,283) 17,034,585 (6,486,075) (8,887,870) (5,656,352) Total other financing sources (uses) NET CHANGE IN FUND BALANCE (6,679,977) 2,530,374 (6,265,739) 3,875,759 26,346,460 19,666,483 22,196,857 15,931,118 BEGINNING FUND BALANCE $19,666,483 $22,196,857 $15,931,118 $19,806,877 ENDING FUND BALANCE Source: City of Cupertino. Dissolution of Redevelopment Agencies On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos , finding ABx1 26 (AB 26Ž), a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all redevelopment agencies in California were dissolved as of February 1, 2012, and all net tax increment revenues, after payment of -32- 320 redevelopment bonds debt service and administrative costs, will be distributed to cities, counties, special districts and school districts. The Court also found that ABx1 27, a companion bill to AB 26, violated the California Constitution, as amended by Proposition 22. ABx1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to school districts and county offices of education, totaling $1.7 billion statewide. The Citys redevelopment agency, established in 2000, had no bon property ownership and had relatively few outstanding public improvement and affordable housing obligations. The annual $250,000 administrative cost allowance allocated to the City, as successor agency, to wind-down these outstanding agreements, covers the previous administrative costs that the City was spending on redevelopment agency activities. However, the administrative costs allowance will end after the outstanding agreements expire, and the Citys General Fund may be impacted with all or a portion of the administrative costs. OTHER FINANCIAL INFORMATION Labor Relations Most City employees are represented by two labor union associations, the principal one being the unaffiliated Cupertino City Employees Association, wh 39% of all City employees. Approximately 70% of all permanent City employees are covered by negotiated agreements with management, confidential, and city attorney employees being unrepresented. The City has never had an employee work stoppage. Negotiated agreements have the following expiration dates: TABLE 14 City of Cupertino Negotiated Employee Agreements Contract Number of Bargaining Unit Expiration Date Employees Cupertino City Employees Association June 30, 2012 64 Operating Engineers Local 3 June 30, 2012 50 Source: City of Cupertino Finance Department. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries insurance. However, the Property that is the subject of the Lease Agreement is not insured against earthquake risk. General and Property Liability Insurance . The City is self-insured for the first $250,000 of general and property liability for each occurrence, and the excess (up to $10,000,000 for each occurrence and annual aggregate) is covered through the Citys participation in the Association of Bay Area Governments Pooled Liability Assurance Network (ABAG consists of 31 agencies within the San Francisco Bay Area. The stated purpose of the ABAG PLAN is to provide certain levels of liability insurance coverage, claims management, risk management services, and legal defense to its participating members. ABAG PLAN is governed by a Board of Directors, which comprises officials appointed by each participating member. Premiums paid to ABAG are subject to possible refund based on the results of actuarial studies -33- 321 and approval by the Board of Directors. Complete financial statements for ABAG PLAN may be obtained from their offices at the following address: ABAG PLAN, Finance Department, P.O. Box 2050, Oakland, CA 94604. Premiums are revised each year based on the Citys claims experience and risk exposure. For the year ended June 30, 2011, the City paid ABAG PLAN premiums of $182,583. Workers Compensation Insurance . The City belongs to the CSAC Excess Insurance Authority (EIA), a joint power authority which provides excess workers compensation liability claims coverage above the Citys self-insured retention of $500,000 per occurrence. Losses above the self-insured retention are pooled with excess reinsurance purchased to a $50,000,000 statutory limit. EIA was established in 1979 for the purpose of creating a risk management pool for all California public entities. EIA is governed by a Board of Directors consisting of representatives of its member public entities. Complete financial statements for EIA may be obtained from their offices at the following address: CSAC Excess Insurance Authority, Finance Department, 75 Iron Point Circle, Suite 200, Folsom, CA 95630. For the year ended June 30, 2011, the City paid premiums of $50,033 to EIA. It is the Citys practice to obtain biennial actuarial studies for the self-insured workers compensation liability. The claims liabilities included in the workers compensation internal service fund is based on the results of actuarial studies and include amounts for claims incurred but not reported and loss adjustment expenses. Claim liabilities effects of inflation, recent claim settlement trends, including frequency and amount of payouts, and other economic and social factors. Inflation of 2.5%, annual rate of return of 3%, claim severity increase at 2.5% were assumed. In the current year, management used actuarial estimates based on an 80% confidence level. Settlements have not exceeded insurance coverage in the past three years. See APPENDIX B„COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011„Notes to Basic Financial Statements„NOTE 10. Employee Retirement Plans Plan Description . Substantially all City employees are eligible to participate in pension plans offered by California Public Employees Retirement System (CalPERS), an agent multiple employer defined benefit pension plan which acts as a common investment and administrative agent for its participating member employers. CalPERS provides r benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. The Citys employees participate in the Miscellaneous Employee Plan (Plan). Benefit provisions under the Plan are established by State statute and City resolution. Benefits are based on years of credited service and compensation. Audited annual financial statements are available from CalPERS at www.ca Funding Policy. The contribution requirements of plan members and the City are established by and may be amended by CalPERS. The City is required to contribute at an actuarially determined rate. Based on the June 30, 2009 actuarial report, the Plans provisions and benefits in effect at June 30, 2012, are summarized as follows: Benefit vesting schedule 5 years service Benefit payments Monthly for life Eligible retirement age 50 with at least 5 years of credited service Benefits, as a % of annual salary multiplied by years of service and annual salary 2% - 2.7% Required employee contribution rates 8% Required employer contribution rates 20.690% (increased from 16.751% in prior year) -34- 322 The City covered 75% of the employees required payroll contributions for fiscal year 2011. The City uses the actuarially determined percentages of payroll to calculate and pay 100% of the required contributions to CalPERS. This results in no net contributions. The following tables are extracted from the Citys most recent Actuarial Valuation Report, as of June 30, 2010, for the Miscellaneous Plan of the City of Cupertino. The tables show required contributions to the plan as determined by the CalPERS actuary for fiscal years 2011-12 and 2012-13, as well as the funded status of the plan as of June 30, 2009 and June 30, 2010. Also shown is a table showing the history of the valuation of the plan for the periods ending June 30, 2006 through June 30, 2010. The contribution rate for the Fiscal Year 2012-13 is projected by the actuary in the Actuarial Valuation Report. Required Contributions (1) Fiscal Year Fiscal Year 2011-2012 2012-2013 Employer Contribution Required (in Projected Dollars) Payment for Normal Cost $1,284,279 $1,401,612 Payment on the Amortization Bases 1,373,197 1,479,035 Total $2,657,476 $2,880,647 Employer Contribution Required (Percentage of Payroll) Payment for Normal Cost 10.00% 10.25% Payment on the Amortization Bases 10.69% 10.81% Total 20.69% 21.06% (1) Projected Funded Status As of June 30, 2009 As of June 30, 2010 Present Value of Projected Benefits $90,473,209 $96,213,199 Entry Age Normal Accrued Liability 74,955,504 79,939,987 Actuarial Value of Assets (AVA) 57,934,851 61,358,259 Unfunded Liability (AVA) 17,020,653 18,581,728 Market Value of Assets (MVA) 42,327,575 48,283,300 Unfunded Liability (MVA) 32,627,929 31,656,687 Funded Status (MVA) 56.50% 60.40% Valuation History Actuarial Market Value of Value of Funded Funded Annual Valuation Accrued Assets Assets Ratio Ratio Covered Date Liability (AVA) (MVA) (AVA) (MVA) Payroll 6/30/2006 $54,287,591 $44,876,584 $47,742,657 82.70% 87.90% $10,133,914 6/30/2007 59,241,300 50,157,077 58,092,800 84.70% 98.10% 10,751,350 6/30/2008 65,337,134 54,571,233 55,583,004 83.50% 85.10% 11,009,984 6/30/2009 74,955,504 57,934,851 42,327,575 77.30% 56.50% 11,668,964 6/30/2010 79,939,987 61,358,259 48,283,300 76.80% 60.40% 12,428,055 Annual Pension Cost . The required contribution was determined as part of the June 30, 2009 actuarial valuations using the entry age normal method. The actuarial assumptions included (a) 7.75 % investment rate of return (net of administrative expenses), (b) projected -35- 323 annual salary increases ranging from 3.25% to 14.45% and (c) 3.25% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.0%. The actuarial value of CalPERS assets was determined using techniques that smooth the e in the market value of investments over a fifteen-year period. The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Initial unfunded liabilities are amortized over a closed period that depends on t CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year rolling period, which results in an amortization gains or losses each year. Recent Annual Pension Costs, which equal the Annual Required Contribution to CalPERS, were as follows: Annual Percent of Pension Cost APC Fiscal Year (APC) Contributed 6/30/2009 $1,835,521 100% 6/30/2010 1,841,350 100% 6/30/2011 2,088,898 100% The City has only miscellaneous employee groups under CalPERS an public safety employee plans. The City has adopted a Policy Statement on Local Government Retirement Benefits that addresses rising pension costs and has resolved to meet and confer with employee bargaining groups to discuss implementing a second tier lower cost retirement benefit plan for new employees hired. See APPENDIX B„COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011„Notes to Basic Financial Statements„NOTE 11. At the March 14, 2012 meeting, the CalPERS Board of Administration approved a recommendation to lower the CalPERS discount rate assumption, or the rate of investment return the pension fund assumes, from 7.75 to 7.50 percent. This will increase public agency employer rates for fiscal year 2013-14. Public agency employer contribution rates are estimated to increase by approximately 1.0% to 2.0% of payroll for Miscellaneous Plans, such as the Citys. These increases are to be phased in over a period of two years beginning in fiscal year 2013-14. The Citys preliminary estimate of the future effect of this change, based on its payroll data for FY 2009-2010, ranges from $124,280 per year to as much as $248,561 per year based on that estimate. Details of the phase-in have yet to be developed by CalPERS. The measured impact of the change in the discount rate assumption will be known when th completes the June 30, 2011 actuarial valuations in fall of 2012. The CalPERS June 30, 2011 valuations will set the employer rates that take effect on July 1,2013. Accounting and Financial Reporting In June 2011, GASB issued an exposure draft entitled for Pensions (amending GASB Statement No. 27) that would change the standards used by governments that provide pension benefits to employees. Most of the proposed changes would apply to defined benefit plansŽ such as the CalPERS plan in which the City participates. The public comment period closed September 30, 2011, and the GASB plans to deliberate and issue a final statement regarding reporting by June 2012. Under current reporting standards, a government participating in a multiple employer plan, such as CalPERS, is required to report a pension liabilit -36- 324 employers contractually required contribution and the employers actual contributions. The exposure draft, as currently written, would require a net pension liabilityŽ be reported differently by governments on their financial statements. The net pension liabilityŽ would be the future pension obligation, minus the value of the assets set benefits to current employees, retirees, and their beneficiaries. The exposure draft further defines the methods and assumptions used to measure the net pens The City is unable to estimate the effect of these proposed changes on its financial reporting until the GASB issues final guidance. Other Post Employment Benefits Plan Description . Permanent employees who retire under the Citys CalPERS retirement plan are, pursuant to their respective collective bargaining agreements, eligible to have their medical insurance premiums paid by the City. Retirees receive the amount necessary to pay the cost of his/her enrollment, including the enrollment of his/her family members, in a health benefit plan provided by CalPERS up to the maximum received by active employees in their respective bargaining unit. The City contracts with CalPERS for this insured-benefit plan es Public Employees Medical and Hospital Care Act (PEMHCA). The plan offers employees and retirees three CalPERS self-funded options, setup as insurance third-party insured health plans. The plans medical benefits an by CalPERS and the insurance providers. The City contribution is resolution. Retirees and active employees pay the difference between the premium rate and the Citys contribution. Premiums and City contributions are based o selected by actives and retirees, with the Citys potential contribution ranging from zero to $1,326 per month per employee or retiree. The responsibility for benefit payments has transferred to the insurers and the City does not guarantee the benefits in the event of default by the insurers. A comprehensive annual financial report of CalP plans, is available at www.calpers.ca.gov. The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement Health Care Plan Trust Program (PARS Trust), an agent-multiple employer irrevocable trust established to fund other postemployment benefits. The PARS Trust is approved by the Internal Revenue Code Section 115 and invests funds in equity, bond, and money market mutual funds. Copies of PARS Trust annual financial report may be obtained from PARS at 4350 Von Karman Avenue, Suite 100, Newport Beach, CA 92660. A separate report for the Citys portion of the PARS Trust is available at the Citys Finance Department. An employee is eligible for lifetime medical benefits under the his/her spouse or declared domestic partner at the time of retirement, if all criteria listed below are met:  The employee was hired or the City Council member was elected prior to August 1, 2004, and the employee has five or more full-time years of service and the City Council member has five or more years of elected service with the City of Cupertino; or  The employee was hired or the City Council member was elected on or after August 1, 2004, and the employee has ten or more full-time and/or elected service, five years of which must be from the City of Cupertino;  The employee is eligible for retirement as defined under the CalPERS retirement system; and  The employee retires from the City of Cupertino. -37- 325 In addition, the eligible employees dependent children at the t are under 23 years old are eligible for medical benefits. In addition to extending the eligibility of dependents from age 23 to age 26 in accordance with the recent healthcare reform act, effective July 1, 2010, employees that retire or resign from service with the City of Cupertino and who are not eligible for retiree medical benefits can continue on the Citys medical and dental plans provided that they pay the premiums in full. Funding Policy . The contribution requirements to the OPEB Plan are established budget adoption and may be amended by the City Council. The cost of the benefits provided by the OPEB Plan is currently being paid by the City on a fully pre expressed intent to fully fund the annual required contribution (ARC) each year. Based on the actuarial valuation date of January 1, 2011, the annual required contribution rate is 14.20% of annual covered payroll. For the year ended June 30, 2011, the City contributed $2,000,000 to the PARS Trust and paid $688,723 in healthcare premium payments to fully pre-fund OPEB Plan. Annual OPEB Cost . Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The City has reduced future OPEB costs by introducing a lower cost second tier of OPEB benefits in 2004, reserving funds for OPEB since 2004, establishing and funding a separate trust fund for OPEB liabilities in 2010, and capping City payments toward OPEB insurance premiums since 2002, subject to employee bargaining group agreements. The following table shows the history of the valuation of the plan for the periods ending January 1, 2007, January 1, 2009, and January 1, 2011. Unfunded Actuarial Actuarial UAAL as Actuarial Accrued Accrued Percentage Valuation Actuarial Liability Liability Funded Covered of Covere Date Asset Value (Entry Age) (UAAL) Ratio Payroll Payroll 1/1/2007 „ $21,981,544 $21,981,544 0.0% $11,118,000 197.7% 1/1/2009 „ $18,069,366 $18,069,366 0.0% $11,892,000 151.9% 1/1/2011 $7,438,341 $20,869,058 $13,430,717 35.6% $12,724,000 10 See APPENDIX B„COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011„Notes to Basic Financial Statements„NOTE 12. Short-Term Obligations The City currently has no outstanding short-term obligations. Long-Term Obligations The 2002 Certificates will be refunded with the proceeds of this issue. The City has no other outstanding general fund indebtedness. Overlapping Debt Set forth below is a direct and overlapping debt report (the Debt ReportŽ) prepared by California Municipal Statistics, Inc. and effective March 1, 2012. The Debt Report is included for -38- 326 general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in markets by public agencies whose boundaries overlap the boundari part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The contents of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the respective percentage of the assessed valuation of the overlapping public agencies identified in column 1 which is represented by property located in the City; and (3) the third column is an apportionment of the dollar amount of each public agencys outstanding debt (which amount is not shown in the table) to property in the City, as determined by multiplying the total outstanding debt of each agency by the percentage of the Citys assessed valuation represented in column 2. -39- 327 TABLE 15 City of Cupertino Direct and Overlapping Bonded Debt as of March 1, 2012 2011-12 Assessed Valuation: $13,748,759,628 Redevelopment Incremental Valuation: 83,317,937 Adjusted Assessed Valuation: $13,665,441,691 OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/12 Santa Clara County 5.092% $ 16,131,456 Foothill-DeAnza Community College District 13.865 88,083,553 West Valley Community College District 0.640 1,350,156 Santa Clara Unified School District 2.050 9,042,448 Fremont Union High School District 29.932 78,004,321 Cupertino Union School District 48.980 59,105,408 El Camino Hospital District 1.393 1,981,960 Santa Clara Valley Water District Benefit Assessment District 5.092 6,794,765 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $260,494,067 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Santa Clara County General Fund Obligations 5.092% $ 39,253,464 Santa Clara County Pension Obligations 5.092 19,504,133 Santa Clara County Board of Education Certificates of Participation 5.092 640,574 Foothill-De Anza Community College District Certificates of Participation 13.865 2,718,233 West Valley-Mission Community College District General Fund Obligations 0.640 422,304 Santa Clara Unified School District Certificates of Participation 2.050 266,090 City of Cupertino Certificates of Participation 100. 44,010,000 (1) Santa Clara County Vector Control District Certificates of Participation 5.092 193,496 Midpeninsula Regional Open Space Park District Certificates of 7.806 10,809,336 Participation TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $117,817,630 COMBINED TOTAL DEBT $378,311,697 (2) Ratios to 2011-12 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.89% Ratios to Adjusted Assessed Valuation: Total Direct Debt ($44,010,000) 0.32% Combined Total Debt 2.77% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0 Source: California Municipal Statistics, Inc. (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. THE CORPORATION The Corporation is a nonprofit, public benefit corporation duly organized and existing under the laws of the State of California and is entitled to purchase personal and real property and to sell or lease such property, to contract for construction and improvements and to execute operating agreements regarding such property. The Corporation was formed for the purpose of providing financial assistance to public entities by acquiring, constructing, developing and -40- 328 refinancing certain facilities for the use and benefit of the pu liability to the Owners of the Certificates. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS Article XIIIA of the California Constitution On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to the California Constitution, among other things affects the valuation of real property for the purpose of taxation in that it defines the full cash property value to mean the county assessors valuation of real property as shown on the 1975-76 tax bill under full cash value,Ž or thereafter, the appraised value of real property newly constructed, or when a change in ownership has occurred after the 1975 assessment.Ž The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a rate n reduced in the event of declining property value caused by damage, destruction or other factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition. Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of assessed value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness and pension liability are also applied to 100% of assessed value. The voters of the State subsequently approved various measures which further amended Article XIIIA. One such amendment generally provides that the purchase or transfer of (i) real property between spouses or (ii) the principal residence and the first $1,000,000 of the Full Cash Value of other real property between parents and children, do not constitute a purchaseŽ or change of ownershipŽ triggering reappraisal under Article XIIIA. Other amendments permitted the State Legislature to allow persons over the age of 55 who meet certain criteria or severely disabled homeownersŽ who sell their residence and buy or build another of equal or lesser value within two years in the same county, to transfer the old residences assessed value to the new residence. Other amendments permit the State Legislature to allow persons who are either 55 years of age or older, or who are severely disabled,Ž to transfer the old residences assessed value to their new residence located in either the same or a different county and acquired or newly constructed within two years of the sale of their old residence. In the November 1990 election, the voters approved an amendment of Article XIIIA to permit the State Legislature to exclude from the definition of new constructionŽ certain additions and improvements, including seismic retrofitting improvements and improvements utilizing earthquake hazard mitigation technologies constructed or installed in existing buildings after November 6, 1990. Article XIIIA has also been amended to provide that there would be no increase in the Full Cash Value base in the event of reconstruction of the property damaged or destroyed in a disaster. -41- 329 Section 51 of the California Revenue and Taxation Code permits c have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently recaptureŽ such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessors measure of the restoration of value of the damaged property. Section 4 of Article XIIIA also provides that cities, counties and special districts cannot, without a two-thirds vote of the qualified electors, impose spec interpreted to include special fees in excess of the cost of providing the services or facility for which the fee is charged, or fees levied for general revenue pur Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA. Article XIIIB of the California Constitution On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the voters through their approval of Proposition 111. Article XIIIB of the California Constitution limits the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of liv rendered by the governmental entity. The base yearŽ for establishing such appropriation limit is fiscal year 1978-79. Increases in appropriations by a governmental entity are also permitted (1) if financial responsibility for providing services is transferred to the governmental entity, or (2) for emergencies so long as the appropriations limits for the three years following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing servic government entity. Appropriations subject to Article XIIIB include generally any authorization to expend during the fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not include debt service on indebtedness existing or legally authorized as of January 1, 1979, on bonded indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an election for such purpose, appropriations required to comply with mandates of courts or the Federal government, appropriations for qualified outlay projects, and appropriations by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January l, 1990 levels. Proceeds of taxesŽ include, but are not limited to, all tax revenues and the proceeds to any entity of government from (1) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (2) the investment of tax revenues and (3) certain State subventions received by local governments. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate proceeds of taxesŽ received by the City over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. As amended in June 1990, the appropriations limit for the City in each year is based on the limit for the prior year, adjusted annually for changes in the costs of living and changes in population, and adjusted, where applicable, for transfer of fina services to or from another unit of government. The change in the cost of living is, at the Citys -42- 330 option, either (1) the percentage change in California per capita personal income, or (2) the percentage change in the local assessment roll for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in population is, at the Citys option, either (1) the percentage change in City population, or (2) the percentage change in County population. Article XIIIB permits any government entity to change the appropriations limit by vote of the electorate in conformity with statutory and Constitutional voting requirements, but any such voter-approved change can only be effective for a maximum of four years. The Citys appropriation limit was $70,733,348 for fiscal year 2009-10 and $69,805,324 for fiscal year 2010-11, which is well above the total City budget amounts for both years.. Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, a constitutional initiative, entitled the Right to Vote on Taxes ActŽ (Proposition 218Ž). Proposition 218 added Articles XIIIC and XIIID to the California Constitution and contained a number of interrelated provisions affecting the ability of local governments, including the City, to levy and collect both existing and future taxes, assessments, fees and charges. The City is unable to predict whether and to what extent Proposition 218 may be held to be constitutional or how its terms will be interpreted and applied by the courts. Proposition 218 could substantially restrict the Citys ability to raise future revenues and could subject certain existing sources of revenue to reduction or repeal, and increase the Citys costs to hold elections, calculate fees and assessments, notify the public and defend its fees and assessments in court. However, the City does not presently believe that the potential financial impact on the City as a result of the provisions of Proposition 218 will adversely affect the Citys ability to pay its debt obligations and perform its other obligations payable from the General Fund as and when due. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes, even if deposited in the Citys General Fund, require a two- thirds vote. Further, any general purpose tax that the City imposed, extended or increased without voter approval after December 31, 1994 may continue to be imposed only if approved by a majority vote in an election held within two years of November 5, 1996. The City has not enacted, imposed, extended or increased any tax without voter approval since January 1, 1995. These voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues through General Fund taxes, and no assurance can be giv to impose, extend or increase such taxes in the future to meet increased expenditure requirements. Article XIIIC also expressly extends to voters the power to reduce or repeal local taxes, assessments, fees and charges through the initiative process, regardless of the date such taxes, assessments, fees or charges were imposed. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. SB 919 provides that the initiative powers extended to voters under Article XIIIC likely excludes actions construed as impairment of contracts under the contract clause of the United States Constitution. SB 919 provides that the initiative power provided for in Proposition 218 shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after November 6, 1998, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rightsŽ protected by the United States Constitution. However, no assurance can be given that the voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes, assessments, -43- 331 fees or charges that currently are deposited into the Citys General Fund. Further, feesŽ and chargesŽ are not defined in Article XIIIC or SB 919, and it is unclear whether these terms are intended to have the same meanings for purposes of Article XIIIC as they do in Article XIIID. Accordingly, the scope of the initiative power under Article XIIIC could include all sources of General Fund monies not received from or imposed by the federal or State government or derived from investment income. The initiative power granted under Article XIIIC of Proposition 218, by its terms, applies to all local taxes, assessments, fees and charges. The City is unable to predict whether the courts will ultimately interpret the initiative provision to be limited to property related local taxes, assessments, fees and charges. No assurance can be given that th the future, approve an initiative which reduces or repeals local taxes, assessments, fees or charges which are deposited into the Citys General Fund. The Ci that the initiative power was exercised so that all local taxes, assessments, fees and charges which may be subject to the provisions of Proposition 218 are reduced or substantially reduced, the financial condition of the City, including its General Fund, affected. As a result, there can be no assurances that the City would be able to pay the Lease Payments as and when due or any of its other obligations payable from the General Fund. Article XIIID of Proposition 218 adds several new requirements to make it more difficult for local agencies to levy and maintain assessmentsŽ for municipal services and programs. AssessmentŽ is defined in Proposition 218 and SB 919 as any levy or charge upon real property for a special benefit conferred upon the real property. This inc imposed in City service areas and in special districts. In most instances, in the event that the City is unable to collect assessment revenues relating to specific programs as a consequence of Proposition 218, the City will curtail such services rather than use amounts in the General Fund to finance such programs. Accordingly, the City anticipates that any impact Proposition 218 may have on existing or future taxes, fees, and assessments will not adversely affect the ability of the City to pay the Lease Payments as and when due. However, that the City may or will be able to reduce or eliminate such se assessments that presently finance them are reduced or repealed. Article XIIID also adds several provisions, including notice requirements and restrictions on use, affecting feesŽ and chargesŽ which are defined as any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a local government upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.Ž The annual amount of revenues that are received by the City and deposited into its General Fund which may be considered to be property related fees and charges under Article XIIID of Proposition 218 is not substantial. Accordingly, presently the City does not anticipate that any impact Proposition 218 may have on future fees and charges will not adversely affect the ability of the City to pay the Lease Payments as and when due. However, no assurance can be given that the City may or will be such services in the event the fees and charges that presently finance them are reduced or repealed. Additional implementing legislation respecting Proposition 218 may be introduced in the State legislature from time to time that would supplement an statutory law. No assurance may be given as to the terms of such legislation or its potential impact on the City. Proposition 1A of 2004 Proposition 1A, proposed by the Legislature in connection with the 2004-05 Budget Act, approved by the voters in November 2004 and generally effective in 2007-08 Fiscal Year, -44- 332 provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such shifting occurred in the 2009-10 Fiscal Year. The State may also approve voluntary exchanges of local sales tax and property tax governments within a county. Proposition 1A also provides that if the State reduces the VLF rate then in effect, 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or 25 community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. Proposition 1A may result in increased and more stable City revenues. The magnitude of such increase and stability is unknown and would depend on fu However, Proposition 1A could also result in decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing spending on other State programs or other action, some of which could be adverse to the finances of the City. See RISK FACTORS„State BudgetsŽ for information relating to Proposition 1A and the suspension of Proposition 1A in the States 2009-10 budget. Proposition 22 Proposition 22, entitled The Local Taxpayer, Public Safety and Transportation Protection Act,Ž was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the States authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse loca governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. Proposition 26 On November 2, 2010, the voters passed Proposition 26, which amends the State Constitution to require that certain state and local fees be approved by two-thirds of each house of the Legislature instead of a simple majority, or by local voters. The change in law affects regulatory fees and charges such as oil recycling fees, hazardous materials fees and fees on alcohol containers. Proposition 26 included a provision that repealed State laws enacted between January 1, 2010, and November 2, 2010, that raised fees by a simple majority vote unless they were approved again by two-thirds of each house of the Legislature. The repeal become effective November, 2011. -45- 333 The Legislative Analysts Office was unable to specify Proposition 26s anticipated fiscal impact, but it estimated that passage of Proposition 26 would reduce government revenues and spending over time by up to billions of dollars annually compared to what otherwise would have occurred. Future Initiatives Article XIIIA, Article XIIIB, Proposition 218, Proposition 1A and Proposition 22 were each adopted as measures that qualified for the ballot pursuant to the States initiative process. From time to time, other initiative measures could be adopted, which may place further limitations on the ability of the State, the City or local distr increase appropriations which may affect the Citys revenues or its ability to expend its revenues. RISK FACTORS This section provides a general overview of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in evaluating an investment in the Certificates. This section is not meant to be a comprehensive or definitive discussion of the risks associated with an investment in the Certificates, and the order in which this information is presented does not necessarily reflect the relative importance of various risks. Potential investors in the Certificates are advised to consider the following factors, among others, and to review this entire Official Statement to obtain information essential to the making of an informed investment decision. Any one or more of the risk factors discussed below, among others, could lead to a decrease in the market value and/or in the marketability of the Certificates. There can be no assurance that other risk factors not discussed herein will not become material in the future. Lease Payments Are Not Debt The obligation of the City to make the Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to make Lease Payments does not constitute a debt of the City, the State of California or any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated 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, for so long as the Property is available for its use, it will make the necessary annual appropriations within its budget for the Lease Payments. The City is currently liable and may become liable on other obligations payable from general revenues priority over the Lease Payments, or which the City, in its discretion, may determine to pay prior to the Lease Payments. The City has the capacity to enter into other obligations payable from the Citys general fund, without the consent of or prior notice to the Owners of the Certificates. To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. In the event the Citys revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments. The same result could occur if, because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. The Citys appropriations, however, have never exceeded the limitations on appropriations under Article XIIIB of the -46- 334 California Constitution. For information on the Citys current l CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS…Article XIIIB of the California Constitution.Ž Valid and Binding Covenant to Budget and Appropriate Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to include Lease Payments due in its annual budgets an appropriations for all such payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials 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 such covenants. A court, however, in its discretion may decline to enforce such covenants. Upon delivery of the Certificates, Speci opinion (substantially in the form of APPENDIX D…FORM OF OPINION OF SPECIAL COUNSEL) to the effect that, subject to the limitations and qualifications described therein, the Lease Agreement constitutes a valid and binding obligation of the City. Abatement In the event of loss or substantial interference in the use and possession by the City of all or any portion of the Property caused by material damage, title defect, destruction to or condemnation of the Property, Lease Payments will be subject to such component of the Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the Citys r be available in lieu of Lease Payments, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such component of the Property or redemption of the Certificates, there could be insufficient funds to make payments to Owners in full. Reduction in Lease Payments due to abatement as provided in the Lease Agreement does not constitute a default thereunder. It is not possible to predict the circumstances under which such an abatement of rental may occur. In addition, there is no statute, case or other law specifying how such an abatement of rental should be measured. For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter, it may be that the value of the Property is substantially higher or lower than its value at the time of the execution and delivery of the Certificates. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the Certificates. Risk of Uninsured Loss The City covenants under the Lease Agreement to maintain certain insurance policies on the Property. See SOURCE OF PAYMENT FOR THE CERTIFICATES„Insura insurance policies do not cover all types of risk, and the City need not obtain insurance except as available on the open market from reputable insurers. For instance, the City does not covenant to maintain earthquake insurance. The Property could be damaged or destroyed due to earthquake or other casualty for which the Property is uninsured. Additionally, the Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Lease Payments could occur and could continue indefinitely. T the providers of the Citys liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from condemnation of the Property will be suff Certificates. -47- 335 Under the Lease Agreement the City may obtain casualty insurance which provides for a deductible up to $250,000. Should the City be required to meet such deductible expenses, the availability of general fund revenues to make Lease Payments may be correspondingly affected. The City is not obligated under the Lease Agreement to procure and maintain, or cause to be procured and maintained, earthquake insurance on the Property. Depending on its severity, an earthquake could result in abatement of Lease Payments under the Lease Agreement. See „Abatement.Ž Eminent Domain If the 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 Property is taken permanently, or if the Property or any part thereof is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect and will not be terminated by virtue of such taking, and (b) there will be a par as a result of the application of 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 the Property. The City covenants in the Lease Agreement to contest any eminent domain award which is insufficient to either: (i) prepay the Lease Payments in whole, if all the Property is condemned; or (ii) prepay a pro rata share of Lease Payments, in the event that less than all of the Property is condemned. Hazardous Substances The existence or discovery of hazardous materials may limit the beneficial use of the Property. In general, the owners and lessees of the Property may be required by law to remedy conditions of such parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as CERCLAŽ or the Superfund Act,Ž is the widely applicable of these laws, but California laws with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or lessee is obligated to remedy a hazardous substance condition of the property whether or not the owner or lessee had anything to do with creating or handling the hazardous substance. Further it is possible that the beneficial use of the Property may be limited in the future resulting from the current existence on the Property of a substance currently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the current existence on the Property of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method in which it is handled. All of these possibilities could use of the Property. The City is unaware of the existence of hazardous substances on the Property site which would materially interfere with the beneficial use thereof. Earthquakes The City is not legally obligated under the Lease Agreement to maintain, or cause to be maintained, earthquake insurance on the Property and no assurance is made that any earthquake insurance will be maintained. If there were to be an occurrence of severe seismic -48- 336 activity in the City, there could be substantial damage to and interference with the Citys right to use and occupy all or a portion of the Property, which could result in Lease Payments being subject to abatement. Additionally, severe seismic activity in the City could impact the Citys general fund expenditures. See CERTAIN RISK FACTORS„AbatementŽ above. Bankruptcy The City is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the Bankruptcy CodeŽ). However, pursuant to Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. In the event the City were Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Among t bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existenc secured debt which may have a priority of payment superior to that of Owners of Certificates; and (iv) the possibility of the adoption of a plan for the adjustment of the Citys debt (a PlanŽ) without the consent of the Trustee or all of the Owners of Certificates, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable. In addition, the City could either reject the Lease Agreement or assume the Lease Agreement despite any provision of the Lease Agreement which makes the bankruptcy or insolvency of the City an event of default thereunder. In the event the City rejects the Lease Agreement, the Trustee, on behalf of the Owners of the Certificates, would have a pre-petition claim that may be limited under the Bankruptcy Code and treated over the objections of the Trustee or Owners of the Certificates. Moreover, such rejection would terminate the Lease Agreement and the Citys obligations to make payments thereunder. Limitations on Remedies The rights of the Owners of Certificates are subject to the limitations on legal remedies against cities in the State, including applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors rights generally, now or hereafter in effect, and to the application of general principles of equity, including concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. 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. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of Certificates and the Trustee could be prohibited from taking any steps to enforce their rights under the Lease Agreement, and from taking any steps to collect amounts due from the City under the Lease Agreement. All legal opinions with respect to the enforcement of the Lease Agreement and the Trust Agreement will be expressly subject to a qualification that such bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors rights generally and by applicable principles of equity if equit -49- 337 Risk of Tax Audit In December 1999, as a part of a larger reorganization of the Internal Revenue Service (the IRSŽ), the IRS commenced operation of its Tax Exempt and Government Entities Division (the TE/GE DivisionŽ), as the successor to its Employee Plans and Exempt Organizations division. The new TE/GE Division has a subdivision that is speci bond compliance. Public statements by IRS officials indicate that the number of tax-exempt bond examinations (which would include the issuance of securities such as the Certificates) is expected to increase significantly under the new TE/GE Division. There is no assurance that if an IRS examination of the Certificates was undertaken that it would not adversely affect the market value of the Certificates. See TAX MATTERS.Ž The City has not been contacted by the IRS regarding the examination of any of its bond transactions. Revenue Concentration The City is highly dependent on sales tax revenues, especially sales tax revenues generated from so-called business-to-business transactions. The Citys sales tax revenues are generated from four principal economic categories: (1) business- electronic equipment and software manufacturers and distributors (approximately 73% of projected sales tax revenues in FY 2011-12); (2) general retail (approximately 12% of projected sales tax revenues); (3) food products (approximately 9% of projected revenues); and, (4) other sources (approximately 6% of projected sales tax revenues). Because the City is home to numerous high-tech companies, many of which engage in taxable transactions, the City is vulnerable to downturns in the high-tech industry, whether such downturns are isolated to the industry or result from general economic downturns. The City handles this vulnerability through its adopted reserve policy. For example, current City policy establishes two levels of reserves of fund balance in its Uncertainty IŽ and Economic Uncertainty II.Ž The first reserve category is the larger of the two and is designed to protect against economic downturns and major unforeseen outlays. The second category is designed to buffer the Citys financial resources against unplanned shifts of funds to the State to address the States budget deficits. The Citys current established policy guidance for these two categories is $12.5 million and $1.4 million, respectively. Sales tax revenues account for approximately one-third of the Citys estim the adopted fiscal year 2011-12 budget, and projected sales tax revenues in fiscal year 2011-12 are approximately $14.28 million. The City believes that it is well protected against sudden, unplanned disruptions to this important revenue source. See Table 4 in CITY FINANCIAL MANAGEMENT POLICIESŽ and Table 12 in GENERAL FUND REVENUES AND EXPENDITURESŽ for additional information regarding the Citys established policy. State Budgets '/,-4114;03.03-462(8043*43*,6303.8/,&8(8,=s budgets has been obtained from publicly available information which the City believes to be reliable; however, the City does not guaranty the accuracy or completeness of this information and has not independently verified such information. Furthermore, it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable by or the responsibility of the State of California. State Budget . The State of California is experiencing significant financial and budgetary stress. State budgets are affected by national and state economic conditions and other factors over which the City has no control. The States financial condition and budget policies affect -50- 338 communities and local public agencies throughout California. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. Each State budget contains a number of measures which impact the Citys finances. The States fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the Governors BudgetŽ). Under State law, the annual proposed Governors Budget cannot provide for projected expenditures in excess of projected revenues and balan Following the submission of the Governors Budget, the California Legislature takes up the proposal. Under the California State Constitution, money may be drawn from the Treasury only through an appropriation made by law. The primary sources of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. Prior to the November 2, 2010 California General Election, the Budget Act required approval by a two-thirds majority vote of each House of the Legislature. On November 2, 2010, California voters passed Proposition 25, which amended this legislative vote requirement to a simple majority. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature. Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (except for K-14 education) must be approved by a two-thirds majority vote in each House of the Legislature and be signed by the Governor. Bills containing K-14 education appropriations only require a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. 2011/12 Adopted State Budget . On June 28, 2011, the State Legislature passed, and on June 30, 2011 the Governor signed, the State budget for Fiscal Year 2011/12. The adopted State budget assumed that revenues would be an additional $4 billion h May Revision, and contains a triggerŽ mechanism pursuant to which certain expenditure reductions will be made without further legislative action in th revenues are not expected to be realized (as determined by the State Director of Finance). The adopted budget does not contain the tax extensions proposed in the May Revision. On December 13, 2011, the State Director of Finance determined that State revenues had fallen short of targets and implemented the trigger mechanism. In connection with the adopted State Budget for Fiscal Year 2011/12, the legislation was enacted providing for significant changes to the current funding mechanism for redevelopment agencies. In addition, the adopted State Budget for Fiscal Year 2011/12 changed the allocation of certain VLF funds for local public safety. &.4+0-.051'0./.1+*" !"!#%3*,+2 . On January 5, 2012 Governor Brown announced his proposed budget for Fiscal Year 2012/13 (the Proposed 2012/13 BudgetŽ) which includes a total of $10.3 billion in cuts and revenues to balance the budget and creates a $1.1 billion reserve. The Proposed 2012/13 Budget assumes a budget deficit of approximately $9.2 billion and that voters will pass the Governors ballot measure proposed for the November 2012 election to raise taxes by approximately $7 billion. The ballot measure proposes an income tax increase of up to 2% on high-income earners for five years and a temporary one-half cent sales -51- 339 tax increase. If passed, this measure will provide new revenues protect the 2011 realignment funds for local public safety, as well as generating an estimated $6.9 billion through Fiscal Year 2012/13. After accounting for the increased Proposition 98 minimum guarantee, the measure would provide $4.4 billion in net benefit to the General Fund budget and prevent deeper cuts to schools, protect local public balancing the budget. The proposed ballot measure would also provide some constitutional protection for the funds dedicated in 2011 to counties and local law enforcement to fund the realignment of various State responsibilities to the local level. Should the voters reject the tax measure in November, the Proposed 2012/13 Budget provides for an additional $5.4 billion in trigger cuts that would affect K-12 schools (in the amount of approximately $4.8 billion), higher education, courts, fire protection and a variety of parks servic Items in the Proposed 2012/13 Budget affecting California cities include the following areas: Public Safety  . The Proposed 2012/13 Budget maintains state subvention grants for law enforcement, including funding the Citizens Option for Public Safety program and county sheriffs programs. However, there are no additional allocations in the Proposed 2012/13 Budget for frontline law enforcement to mitigate impacts of public safety realignment. In addition, the Proposed 2012/13 Budget provides for partial restoration of the Department of Justice Division of Law Enforcement programs, through the creation of the California Bureau of Special Investigations, however this action is subject to significant cuts in the event the Governors ballot measure does not pass in November of 2012. If those trigger cuts are engaged, there would also be a 10% reduction to CalFire State response capabilities that would include reductions to the air response program and fire station closures. Realignment  . While the 2011 Public Safety Realignment is proceeding as plan 2011/12 State Budget, several modifications have been made in the Proposed 2012/13 Budget including a change between counties and the Division of J would begin on January 1, 2013 when the Division of Juvenile Justice will no longer accept new juvenile inmates. Instead, counties will assume juvenile inmate supervision duties and would receive $10 million in planning grants for Fiscal Year 2012/13. The 2011 trigger cuts imposed on county juvenile inmate contracts with the Division of Juvenile Justice, which dramatically increased the cost for counties, will be suspended and likely eliminated to provide additional resources for the ne under county supervision. Corrections  . The Proposed 2012/13 Budget includes additional grants for State Senate Bill 678 programs to counties, awarded to agencies that maintain custody over felony probationers rather than returning them to prison; increases alternative custody options for low-risk female offenders with prior serious or violent offenses, such as GPS monitoring with savings through reduced housing costs transferred to fund treatment programs for this population; continued conversion and repurposing of existing facilities from female to male inmate facilities, and ongoing study in need for youth to adult facility conversion. Economic Development  . The Proposed 2012/13 Budget proposes the introduction of legislation to reform the enterprise zone program and legislation to move to a mandatory single sales factor for apportioning multistate business income. In addition, the Proposed 2012/13 Budget would apply $4.1 million in State General Fund money to further the work of the Governors Office of Business and Econom -52- 340 Employee Relations  . The Proposed 2012/13 Budget would implement a surcharge on employers to fund unemployment insurance interest payments for loans received from the Federal Unemployment Account to pay unemployment insurance benefits and would account for the increases in employee wages that have occurred since the requirements were last adjusted in 1992. In addition, the Proposed 2012/13 Budget would decrease the Governors discretionary Workforce Investment Act funding, which reflects a 10% reduction in federal discretionary funding and wo and Workforce Development Fund by $2.3 million to expand educati efforts. Transportation  . The Proposed 2012/13 Budget continues the use of weight feesŽ to offset State transportation-related debt service costs, providing State general fund relief totaling $349.5 million. In addition, under the Gas Tax Swap implemented in 2010 (which provides for the gasoline excise tax to be adjusted each year to keep the Gas Tax Swap revenue neutral), the actual Fiscal Year 2012/13 rate will be set by the State Board of Equalization prior to March 1, 2012. Environment  . If the Governors ballot measure is not approved in November of 2012, the trigger cuts would include a 20% reduction in flood control floodplain mapping and risk awareness programs and a reduction o lifeguards) and elimination of 20% of park rangers. However, the core functions by the Department of Fish and Game would be retained, including permitting and data collection and monitoring activities of sensitive endangered spe Proposed 2012/13 Budget includes a framework to invest proceeds from Cap and Trade fees to reduce greenhouse gases consistent with State Assembly B funding for local government programs including the following: f emissions through energy efficiency, clean and renewable distributed energy generation, including local public buildings; funding to reduce emissions th of state-of-the-art systems to move goods and freight, deploy advanced technology vehicles and vehicle infrastructure, advanced biofuels and low-carbon and efficient public transportation; funding to reduce emissions associated wi supply, land and natural resource conservation and management, and sustainable agriculture; and funding to reduce emissions through strategic p development of major infrastructure including transportation and housing. Restructuring and Reorganizing State Government  . The Proposed 2012/13 Budget includes a comprehensive package of reorganizations and eliminations of two state agencies, 39 state entities and nine programs. Of particular interest to cities are the following restructuring proposals: transfers of the Department of Resources, Recycling and Recovery (CalRecycleŽ) back to the California Environmental Protection Agency; reducing the number of Regional Water Boards from nine to eight the number of members on the boards from nine to seven; eliminating the State Geology and Mining Board and transfer its responsibilities to various existing offices. As it relates to transportation agencies, the Proposed 2012/13 Budget consolidates CalTrans, Department of Motor Vehicles (DMVŽ), the High Speed Rail Authority, the Highway Patrol, the California Transportation Commission and the Board of Pilot Commissioners into a newly created Transportation Agency; and eliminates the Office of Traffic Safety, which distributes federal grants to State, county, city and other entities, and would transfer duties to the DMV. In addition, a new agency will inclu Consumer Affairs, Housing and Community Development, Fair Employment and Housing, Alcoholic Beverage Control, and the new restructured Department of Business Oversight. The California Emergency Management Agency and California Technology Agencies would be under the newly created Government Operations Agency and the California Highway Patrol would be moved under the newly created Transportation -53- 341 Agency. Also, various behavioral health programs would be consolidated, including Parolee Service Network, formerly under the Department Mental Health and Department of Alcohol and Drug Programs, to the Department of Health Care Services and the DMV would be moved to the State Transportation Agency. The Fair Employment and Housing Agency would be moved under a newly creat and Consumer Services Agency; the Public Employees Retirement S moved to become under the newly created Government Operation Agency; the Fair Employment and Housing Commission would be eliminated and its functions transferred to the Department of Fair Employment and Housing. LAO Overview of Proposed 2012/13 Budget . The LAOs 2012/13 Budget: Overview of the Governors Budget,Ž released on January 11, 2012 (the 2012/13 LAO ReportŽ), recognizes that the Governors proposed tax initiative is the cornerstone of the Proposed 2012/13 Budget which includes proposals to restructure education finance, reduce soci programs substantially, and implement trigger cuts--primarily af not approve the tax measure. The 2012/13 LAO Report also recognizes that the Governors plan would continue the difficult task of restoring the State budget to balance, but the difficulty in knowing how much taxable income will be attributable to high- income Californians makes the States revenue estimates a bigger question than usual. With regard to the Governors major proposals, the LAO believes that the Governors education restructuring proposals would institute lasting improvements to the system, and that, while his social services and child care proposals have merit, they involve considerable drawbacks as well, given potentially severe impacts on affected families. Moreover, the 2012/13 LAO Report states that while the Governors tax initiative would improve the financial outlook of public education over the next several years, his trigger plan would create significant uncertainty for educational institutions in their planning for Fiscal Year 2012/13. This uncertainty is likely to be particularly problematic for schools, as most will feel compelled to build their Fiscal Year 2012/13 budgets assuming the trigger cuts will be implemented. This means schools in Fiscal Year 2012/13 likely will implement most, if not all, of the reductions that many hop believes the State Legislature should be very deliberate in structuring a workable trigger package and designing tools to help public agencies respond to p particular, the LAO recommends that the State Legislature be cautious in setting the size of the trigger reduction; determining the specific reductions to impose; and designing tools for public agencies respond to the trigger cuts. Information relating to the Governors Proposed Budget is available at the State Department of Finance website at http://www.ebudget.ca.gov. The Budget begins a lengthy process of negotiation with the State legislature, and the adopted State Budget for Fiscal Year 2012/13 could differ significantly from the Governors Proposed Budget. As part of the process for developing a State budget, the Department of Finance also prepares an update to the Governors Budget containing a revised estimate of General Fund revenues for the current and ensuing fiscal years, any proposals to adjust expenditures to reflect updated revenue estimates, and all proposed adjustments to Propo the Legislature by May 14 of each year. This update is referred Legislature typically waits for the May Revision update before f on major programs such as Education, Corrections, and Health and Human Services. Ongoing State Budget Risks . The States financial difficulties may affect the amount and timing of payments to or for the benefit of cities of funds provided by the State. From time to time, some of the States budget solutions may increase the financial stress of cities and other local governments because they (1) decrease local revenues (particularly the property tax, road improvement funding, public safety or other categorical funded initiatives) or (2) directly or indirectly increase demand for local programs (such as public safety or indigent health -54- 342 programs). There can be no assurances that the States financial difficulties will not materially adversely affect the financial condition of the City. The financial condition of the State is subject to a number of other risks in the future, including particularly potential significant increases in required state contributions to the Public Employees Retirement System, increased financial obligations related to other post- employment benefits, and increased debt service. As noted above, the State is facing significant financial stress. There can be no assurances that, as a result of the current or any future State financial stress, the State will not significantly reduce or delay revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of its efforts to address the State financial difficulties. Aside from AB X1 26 described above no new proposals to reduce or delay material sources of revenues to cities were included in the adopted Fiscal Year 2011/12 Budget. However, in Fiscal Years 2008/09 and 2009/10 the State either deferred payments or issued IOUs which could not immediately be cashed. No prediction can be made by the City as to what measures the State will adopt to respond to the current or difficulties. The City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on the Citys finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affec economic conditions and other factors, including the current economic downturn, over which the City has no control. There can be no assurances that State actions to respond to State financial difficulties will not adversely affect the financial condition of the City. Loss of Tax Exemption As discussed under the caption TAX MATTERS,Ž in order to mainta from gross income for federal income tax purposes of the interest with respect to the Certificates, the City has covenanted in the Lease Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest with respect to the Certificates under section 103 of the Code. Interest with respect to the Certificates could become includabl Federal income taxation retroactive to the date the Certificates were delivered, as a result of acts or omissions of the City in violation of the Code. Should such an event of taxability occur, the Certificates are not subject to early redemption and will remain outstanding to maturity or until prepaid under the optional redemption or mandatory sinking fund the Trust Agreement. Limited Secondary Market As stated herein, investment in the Certificates poses certain economic risks which may not be appropriate for certain investors, and only persons with substantial financial resources who understand the risk of investment in the Certificates should consider such investment. There can be no guarantee that there will be a secondary market Certificates or, if a secondary market exists, that the Certificates can or could be sold for any particular price. Changes in Law There can be no assurance that the electorate of the State will not at some future time adopt additional initiatives or that the Legislature will not enact legislation that will amend the laws or the Constitution of the State resulting in a reduction of the general fund revenues of the City and consequently, having an adverse effect on the security for the Certificates. -55- 343 Taxability Risk As discussed under the caption TAX MATTERS,Ž interest with resp Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date the Certificates were delivered, as a result of future acts or omissions of the City in violation of its covenants in the Lease Agreement. There is no provision in the Certificates or the Trust Agreement for special redemption or acceleration or for the payment of additional interest should such an event of taxability occur, and the Certificates will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Trust Agreement. In addition, as discussed under the caption TAX MATTERS,Ž Congr considering in the future legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal tax legislation. The City can provide no assurance that federal tax law will not change while the Certificates are outstanding or that any such c the exclusion of interest with respect to the Certificates from gross income for federal income tax purposes. If the exclusion of interest with respect to the Certificates from gross income for federal income tax purposes were amended or eliminated, it is likely that the market price for the Certificates would be adversely impacted. ABSENCE OF LITIGATION At the time of delivery of and payment for the Certificates, the is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court or regulatory agency, public board, or body pending or threatened against the City or the Corporation affecting their existence or the titles of their respective officers or seeking to restrain or to enjoin the issuance, sale, or delivery of the Certificates, or the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, any agreemen and any purchaser of the Certificates, the Lease Agreement, the Trust Agreement, the Assignment Agreement, the Site and Facility Lease or any other applicable agreements or any action of the City or the Corporation contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the City or the Corporation or their authority with respect to the Certificates or any action of the City or the Corporation contemplated by any of said documents, nor, to the knowledge of the City or the Corporation, is there any basis therefor. CONTINUING DISCLOSURE Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the RuleŽ), the City has entered into an agreement with The Bank of New York Mellon Trust Company, N.A., as Trustee and Dissemination Agent (the Dissemination AgentŽ), for the benefit of holders of the Certificates to provide certain financial information and operating data relating to the City and the balances of funds relating to the Certificates, by not later than April 1 of each fiscal year commencing with the report for the 2011-12 fiscal year (the Annual InformationŽ), and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The Annual Information and notices of material events will be filed by the City or the -56- 344 Dissemination Agent, with the Municipal Securities Rulemaking Board (the MSRBŽ), via its Electronic Municipal Market Access (EMMAŽ) system. The nature of the information to be provided in the Annual Information and the notices of material events is set forth in APPENDIX G„FORM OF CONTINUING DISCLOSURE CERTIFICATE. The City has not fa in any material respect with any of its prior undertakings to provide continuing disclosure. FINANCIAL ADVISOR The City has retained Magis Advisors, Newport Beach, California, as financial advisor (the Financial AdvisorŽ) in connection with the planning, sale The fees of the Financial Advisor are not contingent upon the delivery of the Certificates. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. LEGAL MATTERS All legal matters in connection with the execution and delivery of the Certificates are subject to the approval of Quint & Thimmig LLP, San Francisco, C Special Counsels opinion with respect to the Certificates will be substantially in the form set forth in APPENDIX D„FORM OF OPINION OF SPECIAL COUNSEL. Certain legal matters will also be passed on for the City by Quint & Thimmig LLP, as Disclosure Counsel, and for the City by Carol Korade, Esq., City Attorney. The fees and expenses of Special Counsel and Disclosure Counsel are contingent upon the execution and delivery of the Certificates. TAX MATTERS Federal tax law contains a number of requirements and restrictions which apply to the Certificates, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The City has covenanted to comply with all requirements that must be satisfied in order for the interest with respect to the Certificates to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest with respect to the Certificates to become includable in gross income for federal income tax purposes retroactively to the date of delivery of the Certificates. Subject to the Citys compliance with the above referenced coven law, in the opinion of Quint & Thimmig LLP, Special Counsel, int Certificates is excludable from the gross income of the owners thereof for federal income tax purposes, and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest with respect to the Certificates is taken into account, however, in computing an adjustment used in alternative minimum tax for certain corporations. In rendering its opinion, Special Counsel will rely upon certifi respect to certain material facts within its knowledge. Special Counsels opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Internal Revenue Code of 1986, as amended (the CodeŽ), includes provisions for an alternative minimum tax (AMTŽ) for corporations in addition to the corporate regular tax in -57- 345 certain cases. The AMT for a corporation, if any, depends upon t minimum taxable income (AMTIŽ), which is the corporations taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporations adjusted current earningsŽ over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). Adjusted current include certain tax-exempt interest, but not interest with respect to the Certificates. Ownership of the Certificates may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Certificates should consult their tax advisors collateral consequences. The issue price (the Issue PriceŽ) for each maturity of the Certificates is the price at which a substantial amount of such maturity of the Certificates is first sold to the public. The Issue Price of a maturity of the Certificates may be different from the price set forth, or the price corresponding to the yield set forth, on the cover page hereof. Owners of Certificates who dispose of Certificates prior to the stated maturity (whether by sale, redemption or otherwise), purchase Certificates in the price different from the Issue Price, or purchase Certificates subsequent to the initial public offering, should consult their own tax advisors. If a Certificate is purchased at any time for a price that is less than the Certificates stated redemption price at maturity (the Reduced Issue PriceŽ), the pu having purchased a Certificate with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Certificate is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchasers election, as it accrues. Such treatment would apply to any purchaser who purchases a Certificate for a price that is less than its Revised Issue Price. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such Certificate. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Certificates. An investor may purchase a Certificate at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as bond premiumŽ and must be amortized by an investor on a constant yield basis over the remaining term of the Certificate in a manner that takes into account potential call dates and call p amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it reduces the investors basis in the Certificate. Investors who purchase a Certificate at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Certificates basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Certificate. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the Certificates. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal tax -58- 346 legislation. Special Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the ServiceŽ) has an ongoing program of auditing tax exempt obligations to determine whether, in the view of the Service, interest on such tax exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will Certificates. If an audit is commenced, under current procedures the Service may treat the Issuer as a taxpayer and the Owners may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Certificates until the audit is concluded, regardless of the ult Payments of interest with respect to, and proceeds of the sale, redemption or maturity of, tax exempt obligations, including the Certificates, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Certificate owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Certificate owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. In the further opinion of Special Counsel, interest with respect to the Certificates is exempt from California personal income taxes. Ownership of the Certificates may result in other state and local tax consequences to certain taxpayers. Special Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Certificates. Prospective purchasers of the Certificates should consult their tax advisors regarding the applicability of any such state and local taxes. The complete text of the final opinion that Special Counsel expects to deliver upon the delivery of the Certificates is set forth in APPENDIX D„FORM OF COUNSEL. UNDERWRITING The Certificates will be purchased by ______________, as underwriter (the UnderwriterŽ), at an aggregate purchase price of $__________ (consisting of the $________ aggregate principal amount of the Certificates, plus net original issue premium of $_________, less an Underwriters discount of $_____________). The initial public offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than sai RATINGS Standard & Poors ratings Services (S&PŽ) has assigned the rating of ____ to the Certificates. Such rating reflects only the view of such organization and any desired explanation of the significance of such rating should be obtained from S&P at the following address: 55 Water Street, New York, NY 10041, (212) 208-8000. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of -59- 347 its own. There is no assurance such rating will continue for any such rating will not be revised downward or withdrawn entirely b S&P, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price for the Certificates. FINANCIAL STATEMENTS The Citys Audited Financial Statements for fiscal year ended June 30, 2011, which include the Citys 2010-11 audited financial statements and the Citys Auditors Report regarding such financial statements, are set forth in APPENDIX B ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011. The Citys Auditor was not requested to consent to the inclusion of its report in Appendix B and it has not undertaken to update financial statements included in Appendix B. No opinion is expressed by the Citys Auditor with respect to any event subsequent to its report. ADDITIONAL INFORMATION All of the preceding summaries of the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site and Facility Lease, and other documents are made subject to the provisions of such documents respectively an complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Certificates. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates wi References are made herein to certain documents and reports whic thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. The City will furnish a certificate dated the date of delivery of the Certificates, from an appropriate officer of the City, to the effect that to the best of such officers knowledge and belief, and after reasonable investigation, (i) neither the Official Statement or any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (ii) since the date of the Official Statement, no event has occurred which should have been set forth in an amendment or supplement to the Official Statement which has not been set forth in such an amendment or supplement, and the Certificates, the Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site and Facility Lease, and other applicable agreements conform as to form and tenor to the descriptions thereof contained in the Official Statement; and (iii) the City has complied with all the agreements and has satisfied all the conditions on its part to be performed or satisfied under the Trust Agreement at and prior to the date of the issuance of the Certificates. -60- 348 The execution and delivery of the Official Statement by the City have been duly authorized by the City Council on behalf of the City. CITY OF CUPERTINO By Administrative Services Director -61- 349 THIS PAGE INTENTIONALLY LEFT BLANK 350 APPENDIX A GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY Population Population figures for the City, the County and the State for the last five years are shown in the following table. CITY OF CUPERTINO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA Population Estimates Year City County State 2007 55,078 1,805,314 37,559,440 2008 55,551 1,837,075 37,883,992 2009 55,840 1,857,621 38,292,687 2010 58,227 1,781,427 38,648,090 2011 58,747 1,797,375 37,510,766 Source: State Department of Finance estimates (as of January 1) Appendix A Page 1 351 Employment The Countys unemployment rate has consistently been one of the lowest in California, and continues to be among the lowest level of all Bay Area Counties at 8.7% as of December 2011, compared to the State unemployment level of 10.9% during the same month. The table below illustrates unemployment levels in the City compared to the County, State and national unemployment levels for the past five years. CITY OF CUPERTINO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA AN STATES CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT ANNUAL AVERAGES (1) Civilian Labor Unemployment Year Area Force Employment Unemployment Rate 2006 City 23,200 22,500 700 2.8 County 823,600 786,700 36,900 4.5 State 17,718,500 16,851,600 866,900 4.9 United States 151,428,000 144,427,000 7,001,000 4.6 2007 City 23,700 23,000 700 3.0 County 845,100 805,600 39,500 4.7 State 17,970,800 17,011,000 959,800 5.3 United States 153,124,000 146,047,000 7,078,000 4.6 2008 City 24,300 23,400 900 3.8 County 869,700 818,000 51,800 6.0 State 18,251,600 16,938,300 1,313,200 7.2 United States 154,287,000 145,362,000 8,924,000 5.8 2009 City 24,000 22,300 1,700 7.1 County 874,300 776,900 97,400 11.1 State 18,250,200 16,163,900 2,086,200 11.4 United States 154,142,000 139,877,000 14,265,000 9.3 2010 City 24,000 22,300 1,700 7.2 County 875,800 785,600 90,200 10.3 State 18,176,200 15,916,300 2,259,900 12.4 United States 153,889,000 139,064,000 14,825,000 9.6 Source: California Employment Development Department for County and State figures. United States Bureau of Labor Statistics for United States figures. Appendix A Page 2 352 Personal Income The County enjoys one of the highest levels of effective buying income in the Bay Area and in the entire United States. The table below compares the City effective income with that of the County, the State and the United States. COUNTY OF SANTA CLARA, STATE OF CALIFORNIA AND UNITED STATES EFFECTIVE BUYING INCOME Total Effective Median Household Buying Income Effective Year Area (000s Omitted) Buying Income 2006 $ 2,010,685 $85,232 City 49,261,000 65,458 County California 764,120,962 46,275 United States 41,255 6,107,092,244 2007 City $ 2,134,133 $87,395 County 52,377,985 67,498 814,894,438 48,203 California 6,300,794,040 41,792 United States 2008 City $ 2,188,480 $89,134 County 53,987,635 68,929 California 832,531,445 48,952 6,443,994,426 42,303 United States 2009 City $ 2,234,530 $90,492 County 55,561,405 71,077 49,736 California 844,823,319 43,252 United States 6,571,536,768 2010 $ 2,250,630 $88,299 City 53,692,143 68,047 County 47,177 California 801,393,027 41,368 United States 6,365,020,076 2011 $ 2,481,825 $87,781 City 54,491,135 67,801 County 47,062 California 814,578,457 41,253 United States 6,438,704,663 Source: Nielsen Claritas, Inc. Appendix A Page 3 353 Employment by Industry Over the past several decades, the County has evolved from a bed San Francisco businesses to a more self-sufficient, diversified business community. The County has developed a community of small entrepreneur businesses that are service, professional, technical and scientific in operation. The tables below illustrates the continued growth of the Countys employment base and the contribution of the key economic sectors. Santa Clara County Wage and Salary Employment by Industry Annual Average (1) (2)(2)(2)(3)(3) 2006 2007 2008 2009 2010 Civilian Labor Force 823,600 845,100 869,700 874,300 875,800 Civilian Employment 786,700 805,600 818,000 776,900 785,600 Civilian Unemployment 36,900 39,500 51,800 97,400 90,200 Civilian Unemployment Rate 4.5% 4.7% 6.0% 11.1% 10.3% Industry Employment Total Wage and Salary 879,800 900,300 905,200 847,500 843,100 Total Farm 3,800 3,900 3,700 3,500 3,500 Total Nonfarm 876,000 896,500 901,500 844,000 839,500 Goods Producing Natural Resources and Mining 300 300 300 200 200 Construction 44,900 45,500 42,800 33,400 31,500 Manufacturing 160,600 163,800 165,200 153,300 150,100 Subtotal Goods Producing 205,800 209,600 208,200 186,900 181, Service Providing Trade, Transportation and Utilities 134,500 137,300 135,300 124,200 122,500 Information 37,400 39,500 42,200 41,500 43,800 Financial Activities 36,700 36,800 34,200 31,200 30,500 Professional and Business Services 170,300 176,600 178,000 Education and Health Services 99,700 102,500 107,200 108,4 Leisure and Hospitality 73,700 75,300 76,600 73,500 73,200 Other 24,300 24,600 25,000 24,100 25,100 Government 93,600 94,300 94,900 93,400 90,600 Subtotal Service Providing 670,200 686,900 693,300 657,100 65 Source: State of California Information Division, Employment Development Department, Labor Market. (1) The unemployment rate is calculated using unrounded data. Totals may not add up due to independent rounding. Not seasonally adjusted. (2) Based on a 2009 benchmark. (3) Based on a 2010 benchmark. Appendix A Page 4 354 City of Cupertino Major Employers Fiscal Year 2010-11 Fiscal Year 2001-02 Percentage Percentage Number of of Total City Number of of Total City Employer Employees Employment Employees Employment Apple, Inc. 12,000 12.00% 6,000 9.70% Hewlett-Packard 3,000 3.00% 4,682 7.60% Compaq „ „ 2,500 4.10% Cupertino Union School District 1,490 1.50% 1,500 2.40% Foothill/DeAnza Community 1,290 1.30% 1,341 2.20% College District Fremont Union High School District 837 0.80% 735 1.20% Arc Sight Inc. 512 0.50% „ „ Oracle 500 0.50% „ „ Chordiant Software 285 0.30% „ „ Trend Micro Inc. 250 0.30% „ „ Target Stores 220 0.20% 270 0.40% Sears 150 0.20% 294 0.50% Symantec „ „ 400 0.60% Honeywell-Measurex „ „ 220 0.40% Construction Activity The level of construction activity in the City and the County as measured by total building permit valuations and the annual unit total of new residential and nonresidential permits since 2006 are shown below. CITY OF CUPERTINO BUILDING PERMIT ACTIVITY Building Permit Valuations For Years 2006 through 2010 (000s) 2006 2007 2008 2009 2010 Valuation (in thousands) Residential $92,849 $87,899 $62,428 $21,879 $31,174 Non-residential 154,156 76,920 75,202 117,038 49,358 Total Valuation (1) $247,005 $164,819 $137,630 $138,917 $80,532 New Dwelling Units: Single Family 78 84 65 21 24 Multiple Family 48 „ 42 „ „ Total Units 126 84 107 21 24 Source: Construction Industry Research Board (1) Totals may not add up due to independent rounding. Appendix A Page 5 355 Santa Clara County Building Permit Valuations 2005 to 2010 (In millions) New New Year Residential Non-Residential Total (1) 2005 $1,537.3 $1,287.8 $2,825.1 2006 1,652.9 1,534.2 3,187.1 2007 1,378.2 1,986.2 3,361.3 2008 1,052.4 1,915.0 2,967.4 2009 578.7 1,187.8 1,766.5 2010 1,085.9 1,155.6 2,241.5 Source: Construction Industry Research Board. (1) Totals may not add up due to independent rounding. Santa Clara County Number of New Dwelling Units 2005 to 2010 Single Multiple Year Family Family Total 2005 2,577 3,295 5,872 2006 2,257 3,928 6,185 2007 2,063 2,520 4,583 2008 1,259 2,419 3,678 2009 667 450 1,117 2010 826 3,627 4,453 Source: Construction Industry Research Board. Appendix A Page 6 356 Commercial Activity The following table presents retail and total taxable transactions for the City from 2005 through 2010. City of Cupertino Taxable Transactions by Sector (Dollars in Thousands) 2005 2006 2007 2008 Apparel Stores $ 20,290 $ 18,521 $ 18,265 $ 15,811 General Merchandise Stores 149,867 145,657 151,064 140,203 (1) Specialty Stores „ „ „ „ Food Stores 26,150 26,027 29,278 30,555 Eating and Drinking Places 97,818 106,705 112,295 109,737 Home Furnishings and Appliances 14,405 9,499 9,760 9,608 Building Materials „- „- „- „- Automotive 2,902 3,241 3,130 3,145 (2) Service Stations 57,248 58,080 64,172 67,099 Other Retail Stores 65,659 71,488 261,497 210,299 Total Retail Stores $ 434,339 $ 439,218 $ 649,461 $ 586,458 All Other Outlets 606,221 716,273 879,978 876,541 (3) Total All Outlets $1,040,560 $1,155,491 $1,529,439 $1,462,999 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). (1) Starting 2007, Specialty Stores Group is included in Other Retail StoresŽ Group. (2) Starting 2007, Service Stations is reported separately from Au (3) Totals may not add up due to independent rounding. City of Cupertino Taxable Transactions by Sector (Dollars in Thousands) (1)(2) 2009 2010 Retail and Food Services Motor vehicle and parts dealers $ 3,016 $ 2,767 Bldg material and garden equip and supplies 14,096 15,436 Food and beverage stores 31,404 32,875 Gasoline stations 50,972 61,019 Clothing and clothing accessories stores 28,175 30,624 General merchandise stores 118,669 109,671 Food services and drinking places 103,109 112,432 Other retail group 211,525 247,395 Total retail and food services 560,967 612,219 All Other Outlets 734,689 1,046,937 Total All Outlets $1,295,656 $1,659,157 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). (1) Starting in 2009, categories were revised from prior years. (2) Most recent annual data available. Appendix A Page 7 357 Santa Clara County Taxable Transactions By Sector Fiscal Year 2004-05 through 2008-09 (Dollars in Thousands) (1) 2005 2006 2007 2008 2009 Apparel Stores $ 1,169.1 $ 1,264.2 $ 1,334.0 $ 1,422.7 $ 1,690.2 General Merchandise Stores 2,839.9 2,979.4 3,112.5 2,946.5 2,272.2 Specialty Stores 3,377.9 3,674.3 3,201.3 2,387.9 2,315.8 Food Stores 830.5 849.3 890.3 868.6 975.1 Eating and Drinking Places 2,440.4 2,645.8 2,813.5 2,876.8 2,705.1 Home Furnishings and Appliances 850.6 879.9 901.2 1,068.5 427.4 Building Materials 1,577.2 1,659.8 1,581.9 1,356.5 1,165.0 Automotive/Service Stations 5,289.9 5,534.3 5,788.7 5,236.0 4,084.2 Other Retail Stores 528.1 552.9 1,166.8 1,149.8 621.4 Total Retail Stores $18,903.5 $20,039.9 $20,790.3 $19,313.3 $16,385.2 Business and Personal Services 1,214.6 1,265.3 1,244.4 1,111.8 128.9 All Other Outlets 10,075.7 10,968.0 11,628.8 11,849.2 11,042.5 (2) Total All Outlets $30,193.8 $32,273.2 $33,663.4 $32,274.3 $27,427.7 Source: State Board of Equalization, Taxable Sales in California (Sales & Use Tax). (1) Most recent annual data available. (2) Totals may not add up due to independent rounding. Appendix A Page 8 358 APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2011 The Auditor was not requested to consent to the inclusion of its report in this Appendix B and it has not undertaken to update financial statements included in this Appendix B. No opinion is expressed by the Auditor with respect to any event subsequent to its report. Appendix B 359 THIS PAGE INTENTIONALLY LEFT BLANK 360 APPENDIX C INVESTMENT POLICY OF THE CITY Appendix C 361 THIS PAGE INTENTIONALLY LEFT BLANK 362 363 364 365 366 . 367 368 , ,. , , 369 , 370 APPENDIX D FORM OF SPECIAL COUNSEL OPINION [Letterhead of Quint & Thimmig LLP] [Closing Date] City Council of the City of Cupertino 10300 Torre Avenue Cupertino, California 95014 OPINION: $__________* Certificates of Participation (2012 Refina Direct, Undivided Fractional Interests of the Owners Thereof in be Made by the City of Cupertino, California, as the Rental for Pursuant to a Lease Agreement with the Cupertino Public Faciliti Members of the City Council: We have acted as special counsel in connection with the delivery by the City of Cupertino, California (the CityŽ), of its $_________* Lease Agreement, dated as of May 1, 2012, by and between the Cupertino Public Facilities Corporation (the CorporationŽ) and the City (the Lease AgreementŽ), pursuant to the California Government Code. The Corporation has, pursuant to the Assignment Agreement, dated as of May 1, 2012 (the Assignment AgreementŽ), by and between the Corporatio The Bank of New York Mellon Trust Company, N.A., as trustee (the TrusteeŽ), assigned certain of its rights under the Lease Agreement, including its right to receive a portion of the lease payments made by the City thereunder (the Lease PaymentsŽ), to the Trustee. Pursuant to the Trust Agreement, dated as of May 1, 2012, by and among the Trustee, the Corporation and the City (the Trust AgreementŽ), the Trustee has executed and delivered certificates of participation (the CertificatesŽ) evidencing direct, undivided fractional interests of the owners thereof in the Lease Payments. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Lease Agreement and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The City is duly created and validly existing as a municipal corporation and general law city organized and existing under the laws of the State of California Agreement and the Trust Agreement and to perform the agreements on its part contained therein. 2. The Lease Agreement has been duly authorized, executed and delivered by the City and is an obligation of the City valid, binding and enforceable against the City in accordance with its terms. 3. The Trust Agreement and the Assignment Agreement are valid, b accordance with their terms. 4. Subject to the terms and provisions of the Lease Agreement, the Lease Payments to be made by the City are payable from general funds of the City lawfully available therefor. By virtue of the * Preliminary, subject to change. Appendix D Page 1 371 Assignment Agreement, the owners of the Certificates are entitled to receive their fractional share of the Lease Payments in accordance with the terms and provisions of the Trust Agreement. 5. Subject to the Citys compliance with certain covenants, inte excludable from gross income of the owners thereof for federal i an item of tax preference in computing the alternative minimum t the Internal Revenue Code of 1986, as amended, but is taken into in determining the federal alternative minimum tax for certain c of such covenants could cause interest with respect to the Certi federal income tax purposes retroactively to the date of deliver 6. The portion of the Lease Payments designated as and comprising interest and received by the owners of the Certificates is exempt from personal income taxation imposed by the State of California. Ownership of the Certificates may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Certificates. The rights of the owners of the Certificates and the enforceability of the Lease Agreement, the Assignment Agreement and the Trust Agreement may be subject to the Bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereaft enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the City and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the and the facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, Appendix D Page 2 372 APPENDIX E SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS [TO COME] Appendix E 373 THIS PAGE INTENTIONALLY LEFT BLANK 374 APPENDIX F #/"2.!++'$*/-1+*(1.1./$) The information in this Appendix F, concerning The Depository Trust Company, New York, New York J(1'K!"3?6(1'LC4@@<#7?DBICICD7>":3C477?8EB?;C:76by DTC for use in official statements and the City takes no responsibility for the completeness or accuracy thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest or principal with respect to the Certificates, (b) certificates repting ownership interest in or other confirmation of ownership interest in the Certificates, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Certificates, or that they will so do on a timely basis, or that DTC, DTC Partici DTC Indirect Participants will act in the manner described ;?D:;C%AA7?6;H*$1:75EBB7?DJ/E=7CK3AA=;534=7D@ DTC are on file with the Securities and Exchange Commissi@?3?6D:75EBB7?DJ.B@576EB7CK@8(1'D@478@==@G76 in dealing with DTC Participants are on file with DTC. Information Furnished by DTC Regarding its Book-Entry Only System 1. The Depository Trust Company (DTCŽ), New York, NY, will act as securities depository for the Certificates (as used in this Appendix E, the SecuritiesŽ). The Securities will be issued as fully- registered securities registered in the name of Cede & Co. (DTCs partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each maturity of the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the worlds largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organizationŽ within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporationŽ within the meaning of the New York Uniform Commercial Code, and a clearing agencyŽ registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTCs participants (Direct ParticipantsŽ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (DTCCŽ). DTCC is th National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which ar registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect ParticipantsŽ). DTC has Standard & Poors highest rating: AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTCs records. The ownership interest of each actual purchaser of each Security (Beneficial OwnerŽ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, 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 interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing th ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. Appendix F Page 1 375 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTCs partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTCs records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. 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. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit the notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTCs practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will c the Securities unless authorized by a Direct Participant in accordance with DTCs MMI Procedures. 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTCs practice is to credit Direct Participants accounts upon DTCs receipt of funds and corresponding detail information from the City or the paying agent or bond trustee, on payable date in accordance with their respective holdings shown on DTCs records. 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,Ž and will be the responsibility of such Participant and not of DTC nor its nominee, the paying agent or bond trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the paying agent or bond 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. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the City or the paying agent or bond trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTCs book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Appendix F Page 2 376 APPENDIX G FORM OF CONTINUING DISCLOSURE CERTIFICATE This CONTINUING DISCLOSURE CERTIFICATE (the Disclosure CertificateŽ) is executed and delivered by the CITY OF CUPERTINO, CALIFORNIA (the CityŽ) in connection with the execution and delivery of $_________* City of Cupertino Certificates of Participation (2012 Refinancing Project) (the CertificatesŽ). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of May 1, 2012, by and among The Bank of New York Mellon Trust Company, N.A., as trustee (the TrusteeŽ), the City and the Cupertino Public Facilities Corporation (the Trust AgreementŽ). Pursuant to Section 11.08 of the Trust Agreement, the City covenants and agr Section 1. 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 when used in this Disclosure Certificate: Annual Report Ž shall mean any Annual Report provided by the City pursuant to, described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner Ž shall mean any person who (a) has the power, directly or indir consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. Dissemination Agent Ž shall mean The Bank of New York Mellon Trust Company, N.A. or any successor Dissemination Agent designated in writing by the City written acceptance of such designation. In the absence of such a designation, the City shall act as the Dissemination Agent. EMMAElectronic Municipal Market Access Ž or Ž means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. Listed Events Ž shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. MSRB Ž means the Municipal Securities Rulemaking Board, which has bee Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which ma Exchange Commission as such for purposes of the Rule in the future. Participating Underwriter Ž shall mean any original underwriter of the Certificates required to comply with the Rule in connection with offering of the Certificates. Rule Ž shall mean Rule 15c2-12 adopted by the Securities and Exchange Securities Exchange Act of 1934, as the same may be amended from Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the owners and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). Section 3. Provision of Annual Reports. Delivery of Annual Report (a) . The City shall, or shall cause the Dissemination Agent to, not than nine months after the end of the Citys fiscal year (which * Preliminary, subject to change. Appendix G Page 1 377 the report for the 2011-12 Fiscal Year, which is due not later t readable PDF or other electronic format as prescribed by the MSR with the requirements of Section 4 of this Disclosure Certificat single document or as separate documents comprising a package an information as provided in Section 4 of this Disclosure Certific statements of the City may be submitted separately from the bala the date required above for the filing of the Annual Report if t Change of Fiscal Year (b) . If the Citys fiscal year changes, it shall give notice of suc same manner as for a Listed Event under Section 5(c), and subseq no later than nine months after the end of such new fiscal year Delivery of Annual Report to Dissemination Agent (c) . Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsect Report to EMMA, the City shall provide the Annual Report to the City). If by such date, the Dissemination Agent has not received Dissemination Agent shall notify the City. Report of Non-Compliance (d) . If the City is the Dissemination Agent and is unable to file a Report by the date required in subsection (a) (or, if applicable send a notice to EMMA substantially in the form attached hereto Dissemination Agent and is unable to provide an Annual Report to required in subsection (c) of this Section 3, the Dissemination substantially the form attached hereto as Exhibit A. Annual Compliance Certification (e) . The Dissemination Agent shall, if the Dissemination Agent is other than the City, file a report with the City certifying that pursuant to Section 3 of this Disclosure Certificate, stating th Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: Financial Statements. (a) Audited financial statements of the City for the preceding fiscal year, prepared in accordance generally accepted accounting principles. 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 and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Other Annual Information. (b) To the extent not included in the audited final statements of the City, the Annual Report shall also include financial and operating data with respect to the City fo preceding fiscal year, as follows, substantially similar to that provided in the corresponding tables and charts in the official statement for the Certificates: [TO BE DETERMINED] Cross References. (c) Any or all of the items listed above may be included by specifi other documents, including official statements of debt issues of the City or related public entities, which are available to the public on EMMA. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. Further Information. (d) In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the City shall provide such further 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. Appendix G Page 2 378 Section 5. Reporting of Listed Events. Reportable Events. (a) The City shall, or shall cause the Dissemination Agent (if not the City) to, give notice of the occurrence of any of the following events with respect to the Certificates: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financ (3) Unscheduled draws on credit enhancements reflecting financia (4) Substitution of credit or liquidity providers, or their fail (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the (9) Adverse tax opinions, the issuance by the Internal Revenue S final determinations of taxability, Notices of Proposed Issue (I other material notices or determinations with respect to the tax security, or other material events affecting the tax status of t Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. Material Reportable Events. (b) 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: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repa (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. Time to Disclose. (c) The City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Certificates under the Trust Agreement. Appendix G Page 3 379 Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The Citys obligations under this Disclosure Certificate shall terminate upon the 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 8. Dissemination Agent. Appointment of Dissemination Agent (a) . 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 agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any person, including any Certificate owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the City. Compensation of Dissemination Agent (b) . The Dissemination Agent shall be paid reasonable compensation by the City for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the City from time to time and all reasonable expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the City or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the City. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. Responsibilities of Dissemination Agent (c) . In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the City to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the City under Section 3. The Dissemination Agent shall have no liability of any kind whatsoever to the Corporation, or any other person or entity, arising from or related to the failure of the Dissemination Agent to provide such request to the Corporation. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the City that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of the following conditions are satisfied: Change in Circumstances (a) . If the amendment or waiver relates to the provisions of Sectio 4 or 5(a) or (b), 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 the type of business Compliance as of Issue Date (b) . The undertaking, as amended or taking into account such waiver would, in the opinion of a nationally recognized bond counsel, h Appendix G Page 4 380 Rule at the time of the original issuance of the Certificates, a interpretations of the Rule, as well as any change in circumstan Consent of Holders; Non-impairment Opinion (c) . The amendment or waiver either (i) is approved by the Certificate owners in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Certificate owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Certificate owners or Beneficial Owners. If this Disclosure Certificate is amended or any provision of th City shall describe such amendment or waiver in the next followi applicable, a narrative explanation of the reason for the amendm in the case of a change of accounting principles, on the present data being presented by the City. In addition, if the amendment followed in preparing financial statements, (i) notice of such c for a Listed Event under Section 5(c), and (ii) the Annual Repor should present a comparison (in narrative form and also, if feas financial statements as prepared on the basis of the new account basis of the former accounting principles. Section 10. 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 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 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Certificate owner or Beneficial Owner 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. 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 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agents negligence or willful misconduct. The Dissemination Agent shall have the same rights, privileges and immunities hereunder as are afforded to the Trustee under the Trust Agreement. The obligations of the City under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. Appendix G Page 5 381 Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. Date: [Closing Date] CITY OF CUPERTINO, CALIFORNIA By Authorized Officer ACKNOWLEDGED: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Dissemination Agent By Authorized Officer Appendix G Page 6 382 EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Cupertino, California Name of Issue: Certificates of Participation (2012 Refinancing Undivided Fractional Interests of the Owners Thereof in Lease Pa made by the City of Cupertino, California, as the Rental for Cer Pursuant to a Lease Agreement with the Cupertino Public Faciliti Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that the City has not provided an Annual named Issue as required by the Continuing Disclosure Certificate City in connection with the Issue. The City anticipates that the _________________. Date: ________________ THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., Dissemination Agent By Authorized Officer Appendix G Page 7 383 THIS PAGE INTENTIONALLY LEFT BLANK 384 385 386 RESOLUTION NO. 12-01 RESOLUTION APPOINTING CUPERTINO CITY COUNCIL MEMBERS AS DIRECTORS OF THE CUPERTINO PUBLIC FACILITIES CORPORATION AND DIRECTING THAT ALL FUTURE BOARD DIRECTORS OF THE CORPORATION ARE TO BE CUPERTINO CITY COUNCIL MEMBERS WHEREAS, the Cupertino Public Facilities Corporation executed its Articles of Incorporation on May 30, 1986. WHEREAS, it is the Corporation’s intent that members of the City Council of the City of Cupertino shall comprise the Board of Directors ofthe Corporation; WHEREAS, it is the Corporation’s intent that the Mayor,Vice Mayor, and Secretaryof the City Council serve in similar roles for the Board; NOW, THEREFORE, BE IT RESOLVED, that Board appoints the current members of the Cupertino City Council to the Board of Directors of the Cupertino Public Facilities Corporation; BE IT FURTHER RESOLVED, that all future members of the Corporation’s Board of Directors be comprised of members of the Cupertino City Council. BE IT FURTHER RESOLVED, that the Mayor, Vice Mayor, and City Clerk are the President, Vice President, and Secretary, respectively, of the Corporation. BE IT FURTHER RESOLVED, that this Resolution shall take immediate effect upon adoption. PASSED AND ADOPTEDat a special meetingofthe Board of Directors of the Cupertino th Public Facilities Corporationon the 17day of April, 2012by the following vote: AYES: NOES: ABSENT: ABSTAIN: __________________________________ Mark Santoro, President ATTEST: __________________________________ Grace Schmidt, Secretary 1 394\08\1022899.2 387 DRAFT MINUTES CUPERTINO PUBLIC FACILITIES CORPORATION Regular Adjourned Meeting Monday, September 16, 2002 ROLL CALL At 9:07 p.m. President Lowenthal called the meeting to order in the Council Chambers, 10300 Torre Avenue, Cupertino, California. ROLL CALL Public Facilities Corporation members present: President Richard Lowenthal, Vice President Michael Chang, and Corporation members Sandra James, Patrick Kwok, and Dolly Sandoval. Council members absent: None. Staff present: Executive Director, DavidKnapp, Treasurer Carol Atwood, Attorney Charles Kilian, and Secretary Kimberly Smith. NEW BUSINESS A.Adopt a resolution approving, authorizing and directing the preparation and execution of certain lease financing documents and authorizing and directing certain actions with respect thereto, Resolution No. 02-001. (This item is related to No. 24 (c), offering and sale of Certificates of Participation, on the City Council agenda of September 16). James/Chang moved to adopt Public Facilities Corporation Resolution 02-001. Vote: Ayes: Chang, James, Kwok, Lowenthal, Sandoval. Noes: None. ADJOURNMENT At 9:08 p.m. the meeting was adjourned. ____________________________ Kimberly Smith, City Clerk For more information: Staff reports, backup materials, and items distributed at the meeting are available for review at the City Clerk’s Office, 777-3223. Televised Council meetings may be viewed live on Cable Channel 26, and may also be viewed live or on demand at www.cupertino.org. Videotapes of the televised meetings are available at the Cupertino Library, or may be purchased from the Cupertino City Channel, 777-2364. 388 ADMINISTRATIVE SERVICESDEPARTMENT CITY HALL 1010300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3220www.cupertino.org CUPERTINO PUBLIC FACILITIES CORPORATION STAFF REPORT Meeting:April 17, 2012 Subject Approve Refinancing of CityDebt Recommended Action 1) Adopt resolution approving the form and authorizing the execution of certain lease financing documents in connection with the offering and sale ofcertificates of participation relating thereto to refinance the City of Cupertino’s outstanding certificates of participation (2002 Refinancing and Capital Improvement Project), and authorizing and directing certain actions with respect thereto. 2) Amend the Corporation’s 2011-12 budget in order to record the one-time sources and uses of funds needed to accomplish the debt refinancing. Description This is a companion report to the action being considered by the City Council tonight. Theresolution approvesthe refinancing and authorizesthe execution and deliveryof various documents by authorized Corporation officials. Approval of the attached resolutions providefor a refinancing of the Corporation’s outstanding Certificates of Participation, originally issued in 2002, to refinance certain outstanding indebtedness and to fund a portion of the costs of the Cupertino library building. Presently, there are $44.01 million of the 2002 Certificates outstanding, bearing interest rates that range from 4.00% to 5.00%. Staff has been advised that rates in the current market could produce significant savings through a refinancing of the 2002 Certificates. By adoption of the attached resolution, the Corporation isapproving the following documents: (1) Site and Facility Lease; (2) Lease Agreement; (3) Assignment Agreement; (4) Trust Agreement; and (5) Termination Agreement. Theresolution will authorize officers of the Corporationto execute a lease, trust agreement, assignment agreement and take other actions necessary to close the certificate issue in late May 2012. 389 Discussionand Fiscal Impact Based on preliminary analysis, the City’s annual debt payment savings are estimated to be more than $275,000. Total savings, over the debt term,are expected to be about $4.8 million. The refinancing transaction details and its financial impact are further discussed in the companion staff report on the City Council agenda. The estimated sources and uses of the funds coming from the 2012 Certificate issueare as follows: Sources of Funds Par amount of 2012 Certificates$44,160,000 Re-offering premium785,450 Transfers from prior debt service funds2,396,798 Total Sources of Funds$47,342,248 Uses of Funds Underwriter’s discount/fee (1.3% est.)$574,080 Costs of issuance258,650 Debt Service Reserve Fund1,634,322 Deposit to refunding escrow44,870,228 Rounding amount4,968 Total Uses of Funds$47,342,248 The Corporation’s current 2011-12 budget consists of the current debt service and trust costs. Staff recommends amending the budget to incorporate theseone-time transactions from the refinancing. _____________________________________ Prepared by: David Woo, Finance Director Reviewed by: Carol A. Atwood, Director of Administrative Services Approved for Submission by:David W. Knapp, City Manager Attachments: A.Draft Corporate Resolution, approving the form and authorizing the execution of certain lease financing documents. Note: The resolution refers to documents that are attached in the companion report on the City Council agenda. 390 Quint & Thimmig LLP02/10/12 02/24/12 CUPERTINOPUBLIC FACILITIESCORPORATION RESOLUTION NO. _____ RESOLUTION APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF CERTAIN LEASE FINANCING DOCUMENTS IN CONNECTION WITH THE OFFERING AND SALE OF CERTIFICATES OF PARTICIPATION RELATING THERETO TO REFINANCE THE CITY OF CUPERTINOS OUTSTANDING CERTIFICATES OF PARTICIPATION (2002 REFINANCING AND CAPITAL IMPROVEMENT PROJECT), AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS WITH RESPECT THERETO RESOLVED, by the Boardof Directors(the Board) of the CupertinoPublic Facilities Corporation(the Corporation): WHEREAS, the City of Cupertino, California(the City), working with the Corporation, has heretofore caused the execution and delivery of the Certif Participation (2002 Refinancing and Capital Improvement Project)(the 2002Certificates), representing undivided fractional interests of the owners thereo by the City as the rental for certain property pursuant to a leathe Corporation, to refinance various public capital improvements throughout the geograp boundaries of the City; WHEREAS, the 2002Certificates are currently outstanding in the principal amount o $44,010,000; WHEREAS, the City, with the assistance of the Corporation, has determined at this time, due to prevailing interest rates in the municipal bond market an the 2002Certificates and to implement a lease financing for such purpose WHEREAS, it is in the public interest and for the public benefit that the Corporation authorize and direct execution of certain financing documents inand WHEREAS, the documents below specified shall be filed with the Corporationand the members of the Board, with the aid of its staff, shall review said documents; NOW, THEREFORE, it is hereby DECLARED and ORDERED, as follows: Certificates of Participation (2012 Refinancing Project) (the Certificates) are Section 1. hereby authorized to be executed and delivered pursuant to the povisions of the Trust Agreement, as hereinafter defined. 03028.03 391 The below-enumerated documents, in the forms on file with the Acting Section 2. Secretary, be and are hereby approved, and the President,the Executive Director or the Treasurer, or the designee thereof(each, a Designated Officer),ishereby authorized and directed to execute said documents, with such changes, insertion approved by such officials, and the Acting Secretaryis hereby authorized and directed to attest to suchofficials signature: (a) a site and facility lease, by and between the City, as lessothe Corporation, as lessee, pursuant to which the City will lease certain existing pProperty) to the Corporation, for the purpose of leasing the Property back to the City pursuant to the Lease Agreement; (b) a lease agreement relating to the Property, between the Corporation, as lessor, and the City, as lessee (the Lease Agreement); (c) an assignment agreement, by and between the CorporationandThe Bank of New York Mellon Trust Company, N.A.,as trustee (the Trustee), pursuant to which the Corporationwill assign certain of its rights under the Lease Agreement, inc receive lease payments thereunder, to the Trustee; (d) a trust agreement, by and among the Corporation, the City and the Trustee,relating to the execution and delivery of the Certificates(the Trust Agreement);and (e) a termination agreement, by andamongthe City,the Corporationand The Bank of New York Mellon Trust Company, N.A.,assuccessor trustee for the 2002Certificates (the 2002 Trustee), whereby the City, the Corporationand the 2002Trustee agree to terminate the documents relating to the 2002Certificates. The President,the Executive Director, the Treasurer, the Acting Secretaryand Section 3. other officials of the Corporationare hereby authorized and directed to execute such other agreements, documents and certificates as may be necessary to ef resolution and the lease financing herein authorized. This Resolution shall take effect upon its adoption by the Board Section 4. * * * * * * * * * * * * -2- 392 ADOPTEDApril 17, 2012, by the Board of Directors of the CupertinoPublic Facilities Corporationby the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: President ATTEST: Acting Secretary -3- 393