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Zions First National Bank- Ip i 5 o�� Ip $2, 162,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank $2,162,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank SCHEDULE OF TRANSCRIPT DOCUMENTS 1. List of Financing Participants. 2. City of Grand Terrace (the "City") Resolution No. 2009-20, entitled "A Resolution of the City Council of the City of Grand Terrace Authorizing Proceedings to Refund Outstanding 1997 Certificates of Participation and Approving Related Documents and Actions" 3. City of Grand Terrace (the"City") Resolution No. 2009-01 of the Board of Directors of the City of Grand Terrace Public Financing Authority,Authorizing the Proceedings to Refund Outstanding 1997 Certificates of Particpation and Approving Related Documents and Actions. 4. Termination Agreement, dated as of August 28, 2009 by and among the City of Grand Terrace, (the "City")the City of Grand Terrace Public Financing Authority (the "Authority") and U.S. Bank National Association, as 1997 Trustee (the "1997 Trustee"), relating to termination of documents recorded in connection with 1997 Certificates. (recorded with the San Bernardino CountyRecorder) 5. Lease Agreement dated as of August 28, 2009 (the "Lease"), between the Zion's First National Bank, as lessee and sublessor(the "Bank"), and the City, as lessor and sublessee,together with City's Certificate of Acceptance, (recorded with the San Bernardino County Recorder) 6. Notice of Prepayment (Conditional) sent to 1997 Certificate holders, dated August 1, 2009 7. Conditional Redemption of the City of Grand Terrace Certificates of Participation, Issue of 1997. 8. Irrevocable Refunding Instructions, dated August 28, 2009 given by the City to the 1997 Trustee. 9. Cash Flow and Yield Verification Report of Grant Thornton LLP. 10. Certificate of the City. 11. City's Certificate Regarding Use of Proceeds. 12. Certificate as to Arbitrage. 13. Certificates of Insurance, as required pursuant to Section 5.3 through 5.6 of the Lease Agreement, naming the Bank as Certificate Holder, evidencing: (a) Public Liability Insurance (Bank as insured party and loss payee) (b) Evidence of Property Insurance (c) Lender's Loss Payable Endorsement (d) Certificate of Liability Protection (d) Certificate of Worker's Compensation Protection (e) CLTA Title Insurance Policy, issued by Chicago Title Company. 14. Certificate of Financial Advisor Regarding IRS Form 8038G with Exhibit"A". 15. Certificate Instructions to Trustee Regarding Payment of Closing Costs. 16. City Certificate Regarding Resolution. 17. Authority Certificate Regarding Resolution. 18. Certificate of Acceptance. 19. Report of Proposed Debt Issuance and Final Report. 20. 1997 Trustee's Receipt of Proceeds. 21. Opinion of Harper&Burns LLP, (Special Counsel). 22. Reliance Letter of Special Counsel to Bank. 23. Recordation Instructions given by Harper&Burns LLP to Chicago Title Co. 8/18/09 CITY OF GRAND TERRACE, CA 2009 Refunding of 1997 Refunding COP's LIST OF PARTICIPANTS CITY: CITY OF GRAND TERRACE 22795 Barton Road Grand Terrace, CA 92313 Bernie Simon, Acting City Manager, Finance Director (909) 430-2216 (909)430-2245 E-Mail: bsimongcityofgrandterrace.org FAX: (909) 783-2600 SPECIAL COUNSEL AND CITY ATTORNEY: HARPER&BURNS LLP 453 S. Glassell Street Orange, CA 92866 John R. Harper, Esq. (714) 771-7728 E-Mail:jrharper@harperburns.com FAX: (714) 744-3350 Sherrie Pellegrino, Legal Assistant E-Mail: spellegrino@harperbums.com PLACEMENT AGENT: W. J. FAWELL CO. (760) 942-2442 3235 Avenida La Cima FAX: (760) 942-3096 Suite 100 Carlsbad, CA 92009 William J. Fawell, President E-Mail: wifawellcogyahoo.com TRUSTEE: U.S. BANK, CORPORATE TRUST SERVICES (213) 615-6002 Corporate Trust Administration FAX: (213) 615-6199 633 W. Fifth Street, 24th floor Los Angeles, CA 90071 Ashraf Almurdaah, Vice President E-Mail: ashraf.almurdaah a,usbank.com VERIFICATION AGENT: GRANT THORNTON (612) 332-0001 Accountants and Management Consultants FAX: (612) 332-8984 500 Pillsbury Center North 200 South Sixth Street Minneapolis, MN 55402-1459 M. Joseph Smith, C.P.A., Director, Public Finance Services (612) 677-5237 E-Mail:joe.smith@gt.com LENDER: (info. To follow) TITLE INSURANCE CO: CHICAGO TITLE 700 South Flower, Suite 800 Los Angeles, CA 90017 Karl Daly, Title Officer (213) 612-4157 (DL) E-Mail: karl.dalX(a�ctt.com FAX: (213) 612-4169 Clark McKinnon, Title Officer E-Mail: Clark.McKinnonnae CTT.com (213) 488-4369 (DL) CHICAGO TITLE 560 East Hospitality Lane FAX: (909) 384-7940 San Bernardino, CA 92408 Erin GraeberBougie #173 (909) 3 81-6711 Vice President,National Accounts Cell: (909) 240-3268 E-Mail: GraeberBou ig eE(c,ctt.com FAX: (909) 384-7940 Susie Davis, Ast. to Erin GraberBougie, Vice President (909) 381-6712 E-Mail:daviss@ctt.com y ZIONS FIRST NATIONAL BANK (800) 500-3263 Zions Bank Public Financial Services (888) 280-1617 One South Main Street, Suite 1700 Salt Lake City, Utah 84133 James D. Manning E-Mail: jmanning@zionsbank.com RESOLUTION NO. 2009-01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CITY OF GRAND TERRACE PUBLIC FINANCING AUTHORITY AUTHORIZING PROCEEDINGS TO REFUND OUTSTANDING _ 1997 CERTIFICATES OF PARTICIPATION AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, in order to refinance obligations issued by the City of Grand Terrace (the "City") and the City of Grand Terrace Public Financing Authority (the "Authority") have previously entered into a Lease Agreement dated as of August 1, 1997 (the "1997 Lease"); and WHEREAS, the City's lease payments under the 1997 Lease (the "1997 Lease Payments") are evidenced by City of Grand Terrace Refunding Certificates of Participation, Issue of 1997 which have been executed and delivered in the aggregate principal amount of$3,730,000 (the "1997 Certificates"); and WHEREAS, the Board of Directors wishes at this time to approve proceedings to refinance the 1997 Certificates and thereby realize interest rate savings as well as the reduction or elimination of certain other costs, and to approve related documents and actions; NOW, THEREFORE, IT IS HEREBY RESOLVED by the Board of Directors of the'City of Grand Terrace Public Financing Authority as follows: Section 1. Approval of Refinancing Proceedings. The Board of Directors hereby approves the refinancing of the 1997 Certificates and the related 1997 Lease Payments. To that end, the Board of Directors hereby approves the following agreement in substantially the respective form on file with the Secretary together with any change therein or addition thereto deemed advisable by the Acting Executive Director, and the execution thereof by the Acting Executive Director shall be conclusive evidence of such approval: • Termination Agreement between the City, the Authority and U.S. Bank National Association, as trustee for the 1997 Certificates (the "1997 Trustee"), whereby the City and the Authority agree to terminate the 1997 Lease and the related Assignment Agreement. The Acting Executive Director is authorized and directed for and in the name and on behalf of the Authority to execute and the Secretary is hereby authorized and directed to attest the final form of each of the foregoing documents. Section 2. Material Terms of Lease Agreement. The Lease Agreement shall be for a .term not in excess of the original term of the 1997 Lease, the aggregate principal amount of the lease payments shall not exceed $2,300,000 and the interest components of the lease payments thereunder shall be computed at an interest rate of 4.70% per annum. i � Section 3. Official Actions. The Acting Executive Director, the Secretary and i all other officers of the Authority are each authorized and directed in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution. Whenever in this resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. Section 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED at a regular meeting of the Board of Directors of the City of Grand Terrace Public Financing Authority on the 23rd day of June, 2009, by the following called vote: AYES: Councilmembers Cortes, Miller and Stanckiewitz; Mayor Ferre NOES: None ABSENT: Mayor Pro Tem Garcia ABSTAIN: None ATTEST: Secretary, City of Grand Terrace Public Financing Authority PASSED AND ADOPTED at a regular meeting of the City Council of the City of Grand Terrace on the 23rd day of June, 2009, by the following called vote: Mayor o the City of Grand Terrace i Attest: 1. Brenda Mesa. City the City of Grand Terrace. Countv -iardino, State of Caiifomia. here;ce:i,!, foregoing instrument City Clerk of the City of Grand Terrace to be a 'full. true and co• ect copy of the original, novv on file in my office. `.; 0ATE: G�-07 CITY CLERK -- 2 I, BRENDA MESA, City Clerk of the City of Grand Terrace, do hereby certify that ({L Resolution No. 2009- 01 was introduced and adopted at a regular meeting of the City Council of the City of Grand Terrace held on the 23`d day of June, 2008, by the following vote: AYES: Councilmembers Cortes, Miller and Stanckiewitz; Mayor Ferre NOES: None ABSENT: Mayor Pro Tem Garcia ABSTAIN: None Brenda Mesa, City Clerk Approved to form: City Attorn�j i I i -- 3 RESOLUTION NO. 2009-20 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE AUTHORIZING PROCEEDINGS TO REFUND OUTSTANDING 1997 CERTIFICATES OF PARTICIPATION AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, in order to refinance obligations issued by the City of Grand Terrace (the "City") and the City of Grand Terrace Public Financing Authority (the "Authority") have previously entered into a Lease Agreement dated as of August 1, 1997 (the "1997 Lease"); and WHEREAS, the City's lease payments under the 1997 Lease (the "1997 Lease Payments") are evidenced by City of Grand Terrace Refunding Certificates of Participation, Issue of 1997 which have been executed and delivered in the aggregate principal amount of$3,730,000 (the "1997 Certificates"); and WHEREAS, the City Council wishes at this time to approve proceedings to refinance the 1997 Certificates and thereby realize interest rate savings as well as the reduction or elimination of certain other costs, and to approve related documents and actions; - NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Grand Terrace as follows: Section 1. Approval of Refinancing Proceedings. The City Council hereby approves the refinancing of the 1997 Certificates and the related 1997 Lease Payments. To that end, the City Council hereby approves each of the following agreements in substantially the respective forms on file with the City Clerk together with any changes therein or additions thereto deemed advisable by the Acting City Manager, and the execution thereof by the Acting City Manager shall be conclusive evidence of such approval: • Termination Agreement between the City, the Authority and U.S. Bank National Association, as trustee for the 1997 Certificates (the "1997 Trustee"), whereby the City and the Authority agree to terminate the 1997 Lease and the related Assignment Agreement. • Lease Agreement between the City and Municipal Finance Corporation (the "Corporation"), whereby the City leases to the Corporation the real property which has been leased under the 1997 Lease in consideration of the agreement by the Corporation to provide - sufficient funds to refinance the 1997 Lease and pay related financing costs, and the Corporation leases such real property back to the City in consideration of the payment of semiannual lease payments by the City as rental for such real property. • Irrevocable Refunding Instructions given by the City to the 1997 Trustee, whereby the 1997 Trustee agrees to establish an irrevocable escrow fund to be held and invested for the purpose of paying the principal, interest and prepayment premium represented by the 1997 ~J Certificates, and to prepay the 1997 Certificates in full on the first available prepayment date. The Acting City Manager is authorized and directed for and in the name and on behalf of the City to execute and the City Clerk is hereby authorized and directed to attest the final form of each of the foregoing documents. Section 2. Material Terms of Lease Agreement. The Lease Agreement shall be for a term not in excess of the original term of the 1997 Lease, the aggregate principal amount of the lease payments shall not exceed $2,300,000 and the interest components of the lease payments thereunder shall be computed at an interest rate of 4.70% per annum. Section 3. Official Actions. The Acting City Manager, the Finance Director, the City Clerk and all other officers of the City are each authorized and directed in the name and on behalf of the City to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution. Whenever in this resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or ( unavailable. Section 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Grand Terrace on the 23rd day of June, 2009, by the following called vote: A4oft' > MayCGrand Terrace Attest: City Clerk of the City of Grand Terrace 1. Brenda Mesa. City Clem of the City of Grand Terrace. County of San Bernardino, State of Califomia.hereby certify tr e foregoing instrument to be a full, true and correct copy of the original, now on file in my office. DATE: Gx' ,-- CIT� L ERK 8 YLC%Y� -- 2 I, BRENDA MESA, City Clerk of the City of Grand Terrace, do hereby certify that Resolution No. 2009- 20 was introduced and adopted at a regular meeting of the City Council of the City of Grand Terrace held on the 23`d day of June, 2008, by the following vote: AYES: Councilmembers Cortes, Miller and Stanckiewitz; Mayor Ferre NOES: None ABSENT: Mayor Pro Tem Garcia ABSTAIN: None Brenda Mesa, City Clerk Ap oved a t form: City Attorney i I i r i -- 3 DOC # 2009-0458913 09/02/2009 08:00A Fee:NC Page 1 of s Recorded in Official Records TO BE RECORDED AND WHEN county of Riverside RECORDED RETURN TO: Asse Larry W. ward Assessor, County Clerk a Recorder Harper& Burns LLP I IIIIII IIIIIII IIIII III IIIIII IIIIII IIIII III John R. Harper IIIIIIIIIIIII 453 South Glassell Street Orange, California 92866 (714) 771-7728 S R U PAGE SIZE DA MISC LONG RFD COPY (714) 744-3350 A L 465 426 PCOR NCOR SMF NCH EXAM ( C_— T: CTY UNI THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER . TAX PURSUANT TO SECTION 11928 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES Olr PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. TERMINATION AGREEMENT i&Rn?1A1A-r1b1V A. C kEt:�inur�v , This TERMINATION AGREEMENT (this "Agreement"), dated as of August 28, 2009 is among the CITY OF GRAND TERRACE, a municipal corporation duly organized and existing under the Laws of the State of California (the "City"), the CITY OF GRAND TERRACE PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly ! organized and existing under the laws of the State of California (the "Authority"), and U.S. BANK NATIONAL ASSOCIATION, as trustee for the within-mentioned 1997 Certificates (the "1997 Trustee"). BACKGROUND: 1. The City and Authority have previously entered into a Lease Agreement dated as of August 1, 1997 which is disclosed of record by a Memorandum Agreement dated as of August 1, 1997, between the Authority as lessor and the City, which was recorded on September 18, 1997, as Document Number 1997-0342271 in the Office of the Riverside County Recorder, under which the Authority has sub-leased to the City the real property more particularly described in Appendix A (the "Leased Property"). i l 2. The City's lease payments under the 1997 Lease (the "1997 Lease Payments") are evidenced by the City of Grand Terrace Refunding Certificates of Participation, Issue of 1997 which have been executed and delivered in the aggregate principal amount of $3,730,000 (the "1997 Certificates")-under a Trust Agreement dated as of August -151997; among the City, the' Authority and First Trust of California,National Association, as predecessor to the 1997 Trustee. 1 3. The City has caused to be deposited with the 1997 Trustee, under Irrevocable Refunding Instructions dated as of the date hereof(the "Refunding Instructions"), an amount of funds which sufficient to refund and defease the 1997 Certificates and the 1997 Lease Payments in full without.regard to investment earnings thereto. 4. The deposit made with the 1997 Trustee under the Refunding Instruction constitutes a security deposit for the payment of the 1997 Lease Payments in accordance with the provisions of Section 10.3 of the 1997 Lease. 5. As a result of the deposit and investment of funds under the Refunding Instructions, the 1997 Lease has terminated and title to the real property which is subject to the 1997 Lease has vested in the City. 6. The City has requested the Authority to enter into this Agreement for the purpose of terminating the 1997 Lease and the related Assignment Agreement of record. AGREEMENT: In consideration of the foregoing and the material covenants hereinafter contained, the City and the Authority formally covenant, agree and bind themselves as follows: SECTION 1. Termination of 1997 Lease. The Authority and the City hereby terminate the 1997 Lease. From and after the date of recordation of this Agreement, the 1997 Lease shall be of no force and effect. SECTION 2. Termination of 1997 Assignment. The Authority and the Trustee hereby terminate the Assignment Agreement dated as of August 1, 1997, between the Authority as assignor and the 1997 Trustee. From and after the date of recordation of this Agreement, said Assignment Agreement shall be of no force and effect. SECTION 3. Execution of Counterparts. This Agreement may be. executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. SECTION 4. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above written. I CITY OF GRAND TERRACE i r-, f By: Bernie Simon, Acting City Manager 2 ACKNOWLEDGMENT State of California County ofZ_�jr' before me,�rrA-e. RRA_Icv-h► u',Nblnr� ��-► �I Ci (insert name and title of the officer) personally appeared_ Y1'LI Yam_G i� CL(—'i who proved to me on the basis of satisfactory evidence to be the person.K whose name.(s°f is/W6, subscribed to the within instrument and acknowledged to me that he/ye/th6y executed the same in his/hAr/th0r authorized capacity), and that by his/hV/t it signature` on the instrument the personP4, or the entity upon behalf of which the person(8) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. T1f1M2.MAR1M Conul • 1740706 Nofory Pubuc•Caftff" fan 19MM o CourNlc Si natu Cartr�B � 219 11 9 - �. �' L/� _ (Seal) I i i ATTEST: City Clerk GRAND TERRACE PUBLIC FINANCE AUTHORITY By: Acting Executive Director ATTEST: Secretary U.S. BANK NATIONAL ASSOCIATION as 1997 Trustee By: Authorized Officer I i i 3 ATTEST: City Clerk GRAND TERRACE PUBLIC FINANCE AUTHORITY By: Acting Executive Director ATTEST: Secretary U.S. BANK N AL ASSOCIATION as 1997 T ee By: Authorized fficer i I i i 3 STATE OF CALIFORNIA ) COUNTY OF LOS On 1before me, /VCl ltiC1�. K. '�p rieZ- personally appeared /`C Yn . who proved to me on the basis of satisfactory evidence to be the ( �whose is subscribed to the within instrument and acknowledged to me tha( 4heA-key executed the same in ii'%lam authorized r, i vas), and that b3ohegtheir si i a },pn the instrument the e� rsonts),,acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. /� NANCY R.PEREZ � �' l,L,0G l- Iq , C il� 1693309 Notary Public v _ Not6yPjbk COM91fO Los AhgeM Co1mlY tiCgrrtin 1 201 I I DOC # 2009-0458912 09/02/2009 08:00A Fee:NC Page 1 of 32 Recorded in Official Records TO BE RECORDED AND WHEN RECORDED County of Riverside Larry W. Ward RETURN TO: Assessor, County Clerk & Recorder HARPER & BURNS LLP 453 S. Glassell Street Orange, California Attention: John R. Harper, Esq. S R U PAGE SIZE DA MISC LONG RFD COPY M A L 465 426 PCOR NCOR SMF NCHG EXAM GC.i T: CTY UNI � THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX UNDER SECTION 11922 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES UNDER SECTION 27383 OF THE ,�� CALIFORNIA GOVERNMENT CODE. OS�3 LEASE AGREEMENT This LEASE AGREEMENT (this "Lease"), dated as of August 28, 2009, is between Zions First National Bank, a national bank duly organized and existing under the laws of the United States (the "Bank"), as lessee and sublessor, and the CITY OF GRAND TERRACE, duly organized and existing under the Laws of the State of California (the. "City"), as lessor and sublessee. BACKGROUND : 1. In order to refinance obligations issued to finance city hall and water system improvements, the City and the City of Grand Terrace Joint Powers Financing Authority (the "Authority") have previously entered into a Lease Agreement dated as of August 1, 1997 (the "1997 Lease"). 2. The City's lease payments under the 1997 Lease (the "1997 Lease Payments") are evidenced by City of Grand Terrace Refunding Certificates of Participation, Issue of 1997 which have been executed and delivered in the aggregate principal amount of$3,730,000 (the "1997 Certificates"). j 3. The City has determined to refinance the 199.7 Certificates and the 1997 Lease Payments and thereby terminate the 1997 Lease, and in order to raise funds for that purpose the City has proposed to lease the property which is leased under the 1997 Lease, as such property is more particularly described in Appendix A attached hereto and by this reference incorporated herein (the "Leased Property"), to the Bank for an upfront rental payment which is sufficient for that purpose. a 4. The Bank has proposed to lease the Leased Property back to the City in consideration of the payment by the City of semiannual lease payments which reflect the f interest rate savings which are realized as a result of the refinancing of the 1997 Lease Payments and the 1997 Certificates. 5. The City and the Bank have agreed to enter into this Lease in the principal amount of $2,162,000 for the purpose of implementing the financing transactions described above. AGREEMENT: In consideration of the foregoing and the material covenants hereinafter contained, the City and the Bank formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. All terms defined in this Section 1.1 have the meanings herein specified for all purposes of this Lease. "Authority' means the City of Grand Terrace Public Financing Authority, a joint powers authority organized and existing under the laws of the State of California. "Bank" means Zions First National Bank. "Bond Counsel" means (a) Harper & Burns LLP, or (b) any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to obligations the interest on which is excludable from gross income under Section 103 of the Tax Code. "Business Day" means a day other than a Saturday, Sunday or legal holiday, on which banking institutions are not closed in the State of California. "City" means the City of Grand Terrace, a municipal Bank organized and existing under the Laws of the State of California. "Closing Date" means the date of execution and delivery of this Lease by the parties hereto, being August 28, 2009. "Event of Default" means any of the events of default as defined in Section 8.1. l "Federal Securities" means any direct general non-callable obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or obligations the timely payment of principal of and interest on which are directly guaranteed by the United States of America. - "Fiscal Year" means each twelve-month period during the Term of this Lease commencing on July 1 in any calendar year and ending on June 30 in the next -2- succeeding calendar year, or any other twelve-month period selected by the City as its fiscal year period. "Lease" means this Lease Agreement dated as of August 28, 2009, between the Bank and the City. "Lease Payment" means all payments required to be paid by the City under Section 4.5, including any prepayment thereof under Sections 9.2 or 9.3. "Lease Payment Date" means March 1 and September 1 in each year, commencing March 1, 2010, and continuing to and including the date on which the Lease Payments are paid in full. "Leased Property" means the real property which is more particularly described in Appendix A. In the event of the release of any property under Section 4.7, the description of the Leased Property shall be modified to reflect such release. "Net Proceeds" means any eminent domain award (including any proceeds of sale to a governmental entity under threat of the exercise of eminent domain powers), paid with respect to the Leased Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof. "1997 Certificates" means the City of Grand Terrace Refunding Certificates of Participation, Issue of 1997, executed and delivered in the aggregate principal amount of $3,730,000 under the Trust Agreement dated as of August 1, 1997, among the City, the Authority and the 1997 Trustee. "1997 Lease" means the Amended and Restated Lease Agreement dated as of August 1, 1997, between the Authority as lessor and the City as lessee of the Leased Property. "1997 Lease Payments" means the lease payments which are payable by the City under Section 4.4(a) of the 1997 Lease, including prepayments thereof under Section 9.2 of the 1997 Lease. "1997 Trustee" means U.S. Bank Corporate Trust, as trustee for the 1997 Certificates. "Permitted Encumbrances" means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under Article VI of this Lease; (b) this Lease ; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (d) the exceptions disclosed in the title insurance policy issued with respect to the Leased Property issued as of the Closing Date; and (e) any easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Leased Property for its intended purposes. "Prepayment Date" means September 1, 2009. "Refunding Instructions" means the Irrevocable Refunding Instructions dated as of the Closing Date, given by the District to the 1997 Trustee, relating to the payment -� and prepayment of the 1997 Certificates and 1997 Lease Payments. "Rental Period" means each period during the Term of the Lease commencing each year beginning March 1 and including the succeeding March 1. The first Rental Period begins on the Closing Date and ends on March 1, 2010. "Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. "Term of this Lease" or "Term" means the time during which this Lease is in effect, as provided in Section 4.3. SECTION 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only 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 do not affect the � meaning, construction or effect hereof. (c) All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES SECTION 2.1. Covenants, Representations and Warranties of the City. The City makes the following covenants, representations and warranties to the Bank as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The City is a municipal corporation duly organized and validly existing under the Laws of the State of California, has full legal right, power and authority under the laws of the State of California to enter into this Lease and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery of this Lease. -4- (b). Due Execution. The representatives of the City executing this Lease have been fully authorized to execute the same under a resolution duly adopted. by the City Council of the City. (c) Valid, Bindinq and Enforceable Obligations. This Lease has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreements of the City enforceable against the City in accordance with their respective terms. (d) No Conflicts. The execution and delivery of this Lease, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease or the financial condition, assets, properties or operations of - the City. r✓ (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, or the financial condition, assets, properties or operations of the City. -5- (g) Use of Proceeds. During the term of the Lease, the Leased Property will be used solely by the Lessee, and only for the purpose of performing one or more governmental or proprietary functions of the Lessee consistent with the permissible scope of the Lessee's authority, and the Leased Property will not be subject to any direct or indirect private business. (f) Non-Default. The Lessee has never non-appropriated or defaulted under any of its payment or performance obligations or covenants, either under any municipal lease of the same general nature as this Lease, or under any of its bonds, notes, or other obligations of indebtedness for which its revenues or general credit are pledged. SECTION 2.2. Covenants, Representations and Warranties of the Bank. The Bank makes the following covenants, representations and warranties to the City as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The Bank is a national bank duly organized and existing under the laws of the United States, has full legal right, power and authority to enter into this Lease and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the Bank has duly authorized the execution and delivery of this Lease . (b) Due Execution. The representatives of the Bank executing this c Lease are fully authorized to execute the same under official action taken by the Board of Directors of the Bank. (c) Valid, Binding and Enforceable Obligations. This Lease have been duly authorized, executed and delivered by the Bank and constitute the legal, valid and. binding agreements of the Bank, enforceable against the Bank in accordance with their respective terms. (d) No Conflicts. The execution and delivery of this Lease , the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Bank is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Bank, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease or the financial condition, assets, properties or operations of the Bank. -6- i (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Bank, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease or the Assignment of Lease, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Bank after reasonable investigation, threatened against or affecting the Bank or the assets, properties or operations of the Bank which, if determined adversely to the Bank or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease or the Assignment of Lease, or upon the financial condition, assets, properties or operations of the Bank, and the Bank is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease or the Assignment of Lease or the financial condition, assets, properties or operations of the Bank. ARTICLE III DEPOSIT AND APPLICATION OF FUNDS SECTION 3.1. Deposit of and Application of Funds. On the Closing Date, the Bank shall cause the amount of $2,162,000 to be deposited with the 1997 Trustee to be held and administered under the Refunding Instructions for the purpose of paying and prepaying the 1997 Certificates and the 1997 Lease Payments on the Prepayment Date. In addition, a portion of. the amounts paid by shall be applied by the Trustee to pay financing costs of the transaction in the amount of$62,714.36. SECTION 3.2. Refunding of 1997 Certificates. The City shall cause the amount deposited with the 1997 Trustee under Section 3.1, together with other amounts held by the 1997 Trustee with respect to the 1997 Certificates, to be applied to pay and prepay the 1997 Lease Payments on the Prepayment Date, and thereby pay and prepay the related lease payment obligations of the City under the 1997 Lease, in accordance with the Refunding Instructions. As a result of such payment and prepayment of the 1997 Certificates and the 1997 Lease Payments, the City covenants that the 1997 Certificates have been discharged. SECTION 3.3. Termination of 1997 Lease. As a result of the payment and prepayment of the 1997 Certificates and the 1997 Lease Payments, the 1997 Lease has been discharged and terminated in accordance with its terms. On the Closing Date, the -7- City shall enter into an agreement with the Authority which terminates the 1997 Lease, ( and shall cause an executed copy of said agreement to be recorded in the office of the San Bernardino County Recorder. ARTICLE IV LEASE OF LEASED PROPERTY; LEASE PAYMENTS SECTION 4.1. Lease of Leased Property by City to Bank. The City hereby covenants that it has fee simple merchantable title to the Leased Property, free and clear of all recorded liens, encumbrances, easements, public rights-of-way, assessments, leases, taxes and any or all other interests, excepting only Permitted Encumbrances. For and in consideration of the application by the Bank of funds in accordance with Section 3.1, the City hereby leases the Leased Property to the Bank, and the Bank hereby leases the Leased Property from the City, for a term which is coterminous with the Term of this Lease. No merger shall be effected by the City's lease of the Leased Property to the Bank under this Section 4.1, and the Bank's sublease of the Leased Property back to the City under Section 4.2. SECTION 4.2. Sublease of Leased Property by Bank Back to City. The Bank hereby subleases the Leased Property back to the City, and the City hereby subleases the Leased Property from the Bank. The Leased Property shall be subleased to the City under this Lease upon the terms and provisions hereof. SECTION 4.3. Term. The Term of this Lease commences on the date of recordation of this Lease and ends on the date on which all of the Lease Payments have been paid in full. The provisions of this Section 4.3 are subject to the provisions of Section 6.2 relating to the taking in eminent domain of the Leased Property or any portion thereof. SECTION 4.4. Lease Payments. (a) Obligation to Pay. Subject to the provisions of Section 6.2 and the provisions of Article IX, the City agrees to pay to the Bank, its successors and assigns, the Lease Payments (denominated into components of principal and interest) in the respective amounts specified in Appendix B attached hereto (including any supplements thereto) and by this reference incorporated herein, to be due and payable in immediately available funds on each of the respective Lease Payment Dates specified in Appendix B. The Lease Payments payable in any Rental Period with respect to the Leased Property shall be for the use of the Leased Property during such Rental Period. The interest components of the Lease Payments have been calculated based on an interest rate of 4.76% per annum, on the basis of a 360-day year of twelve 30-day months. (b) Effect of Prepayment. If the City prepays the outstanding principal in full under Sections 9.2 or 9.3, the City's obligations under this Section will thereupon cease and terminate. If the City prepays the outstanding principal Lease Payments in part but not in whole under Section 9.3, the Lease Payments of the remaining Lease Payments will remain the same but the term will shorten. -8- (c) Rate on Overdue Payments. If the City fails to make any of the payments t~ required in this Section 4.4, the payment in default will continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment at the stated interest rate of this Lease. (d) Fair Rental Value. The Lease Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and will be paid by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Leased Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments represent the fair rental value of the Leased Property. In making this determination, consideration has been given to the estimated fair market value of the Leased Property, the costs of financing the deposit required to be made under Section 3.1, other obligations of the City and the Bank under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public. (e) Source of Payments; Budget and Appropriation. The Lease Payments are payable from any source of legally available funds of the City, subject to the provisions of Sections 6.2 and 9.1. The City covenants to take such action as may be necessary to include all Lease Payments in each of its annual budgets during the Term of this Lease and to make the necessary annual appropriations for all such Lease Payments. The covenants on the part of the City herein contained constitute duties imposed by law and it is 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 f enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. SECTION 4.5. Quiet Enjoyment. Throughout the Term of this Lease, the Bank will provide the City with quiet use and enjoyment of the Leased Property and the City will peaceably and quietly have and hold and enjoy the Leased Property, without suit, trouble or hindrance from the Bank, except as expressly set forth in this Lease. The Bank will, at the request of the City and at the City's cost, joins in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Bank may lawfully do so. Notwithstanding the foregoing, the Bank has the right to inspect the Leased Property as provided in Section 7.2. SECTION 4.6. Title. At all times during the Term of this Lease, the City shall hold title to the Leased Property, including all additions which comprise fixtures, repairs, replacements or modifications thereto, subject to Permitted Encumbrances and subject to the provisions of Section 7.2. Upon the termination of this Lease (other than under Section 8.2(b) hereof), all right, title and interest of the Bank in and to the Leased Property shall be transferred to and vested in the City. Upon the payment in full of all Lease Payments allocable to the Leased Property, or upon the deposit by the City of security for such Lease Payments as provided in Section 9.1, all right, title and interest of the Bank in and to the Leased Property shall be transferred to and vested in the City. The Bank 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. i ! SECTION 4.7. Release of Excess Property. The City may any time and from time to time, release any portion the Leased Property (the "Released Property") from the Lease, with the prior written consent of the Bank (which may not unreasonably be withheld) and upon satisfaction of all of the following requirements which are conditions precedent to such release: . (a) The City shall certify to the Bank that no Event of Default has occurred and is continuing; (b) The City shall file with the Bank, and cause to be recorded in the office of the San Bernardino County Recorder an amendment to this Lease which deletes the Released Property from the description of the Leased Property; and (c) The City shall file with the Bank a written certificate of the City stating the City's determination that the estimated value of the real property which will remain leased under this Lease following such release is at least equal to the original principal components of the Lease Payments. Upon the satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Bank and the City shall execute, deliver and cause to be recorded all documents required to discharge this Lease of record against the Released Property. i ARTICLE V MAINTENANCE;. TAXES; INSURANCE; AND OTHER MATTERS SECTION 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease, as part of the consideration for the rental of the Leased Property, all improvement, repair and maintenance of the Leased Property are the sole responsibility of the City, and the City will pay for or otherwise arrange for the payment of all utility services supplied to the Leased Property, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Property resulting from ordinary wear and tear or want of care on the part of the City or any Bank or sublessee thereof. In exchange for the Lease Payments herein provided, the Bank agrees to provide only the Leased Property, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver does not limit any of the rights of the City under the terms of this Lease. I The City will pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Bank or the City affecting the Leased Property or the respective interests or estates therein; provided that with respect to special -10- assessments or other governmental charges that may lawfully be paid in installments l over a period of years, the City is obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same become due. The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom provided that prior to such nonpayment the City shall furnish the Bank with the opinion of an independent counsel acceptable to Bank to the effect that, nonpayment of any such items, the interest of the Bank in such portion of the Leased Property will not be materially endangered and that the Leased Property will not be subject to loss forfeiture. Otherwise, the City will promptly pay such taxes, assessments or charges or provide the Bank with full security against any loss which may result from nonpayment, in form satisfactory to the Bank. SECTION 5.2. Modification of Leased Property. The City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the - provisions of this Lease. Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this Section, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. SECTION 5.3. Public Liability Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease a standard comprehensive general insurance policy or policies in protection of the City, the Bank and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies must provide coverage of at least $1,000,000 and may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City will apply the proceeds of such liability insurance toward extinguishment or satisfaction of the liability with respect to which such proceeds have been paid. SECTION 5.4. Casualty Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property and owned by the City, in an amount at least equal to the replacement value of the insured buildings. Such insurance must, as nearly as practicable, cover loss or damage by all "special form" perils. Such insurance shall be subject to a deductible of not to exceed $250,000. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled -11- _ insurance. The City will apply the Net Proceeds of such insurance as provided in Section 6.1. SECTION 5.5. Rental Interruption Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Property and the improvements situated thereon as a result of any of the hazards covered in the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future 24 month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City will apply the Net Proceeds of such insurance towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. SECTION 5.6. Worker's Compensation Insurance. If required by applicable California law, the City shall carry worker's compensation insurance covering all employees on, in, near or about the Leased Property and, upon request, shall furnish to the Bank certificates evidencing such coverage throughout the Term of this Lease. SECTION'5.7. Recordation Hereof; Title Insurance. On or before the Closing Date, the City shall, at its expense, (a) cause this Lease, or a memorandum hereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the San Bernardino County Recorder with respect to the Leased Property, and (b) obtain a CLTA title insurance policy insuring the Bank's interests in the leasehold estate established hereunder in the Leased Property, subject only to Permitted Encumbrances, - in an amount equal to the original principal components of the Lease Payments. The City will apply the Net Proceeds received under such title insurance policy to prepay the remaining Lease Payments under Section 9.3. SECTION 5.8. Insurance Net Proceeds; Form of Policies. All insurance policies (or riders) required by this Article V shall be taken out and maintained with responsible insurance companies organized under the laws of one of the states of the United States and qualified to do business in the State of California, and shall contain a provision that the insurer shall not cancel or revise coverage thereunder without giving written notice to the insured parties at least ten days before the cancellation or revision becomes effective. Each insurance policy or rider required by Sections 5.3, 5.4 and 5.5 shall name the City as insured parties as loss payee and shall include a lender's loss payable endorsement for the benefit of the Bank. In the case of coverage pursuant to Section 5.3, the Bank shall be added as an additional insured for coverage up to $1,000,000. Prior to the Closing Date, the City will deposit with the Bank policies (and riders and endorsements, if applicable) evidencing any such insurance procured by it, or a certificate or certificates of the respective insurers stating that such insurance is in full force and effect. Before the expiration of any such policy (or rider), the City will furnish to the Bank evidence that the policy has been renewed or replaced by another policy conforming to the provisions of this Article V unless such insurance is no longer obtainable, in which event the City shall notify the Bank of such fact. SECTION 5.9. Installation of City's Personal Property. The City may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be. installed other items of equipment or other personal property in or upon the Leased -12- i Property. All such items shall remain the sole property of the City, in which the Bank has no interest, and may be modified or removed by the City at any time. The City must repair and restore any and all damage to the Leased Property resulting from the installation, modification or removal of any such items. Nothing in this Lease prevents the City from purchasing or leasing items to be installed under this Section under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest may attach to any part of the Leased Property. SECTION 5.10. Liens. The City will not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Leased Property, other than as herein contemplated and except for such encumbrances as the City certifies in writing to the Bank do not materially and adversely affect the leasehold estate in the Leased Property hereunder and for which the Bank approves in writing, which approval may not be unreasonably withheld. Except as expressly provided in this Article V, the City will 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 will reimburse the Bank for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. SECTION 5.11. Advances. If the City fails to perform any of its obligations under this Article V, the Bank may take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as additional rental hereunder, with interest at the rate set forth in Section 4.4(c). ARTICLE VI EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Eminent Domain. If all of the Leased property shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of this Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Leased property shall be taken permanently, or if all of the Leased property or any part thereof shall be 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 eminent domain award to the prepayment of the Lease Payments hereunder, in an amount to be agreed upon by the City and the Bank and communicated to the Bank such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Leased Property. Section 6.2. Application of Net Proceeds. (a) From Insurance Award. -13- (i) Any Net Proceeds of insurance against damage to or destruction of any part of the Leased Property collected by the City in the event of any - such damage or destruction shall be deposited by the City promptly upon receipt thereof in a special fund designated as the "Insurance Condemnation Fund." (ii) Within ninety (90) days following the date of such deposit, the City shall determine and notify the Bank in writing of its determination either (A) that the replacement, repair, restoration, modification or improvement of the Leased Property is not economically feasible or in the best interest of the City, or (B) 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 Leased Property. (iii) In the event the City's determination is as set forth in clause (A) of subparagraph (ii) above, such Net Proceeds shall be promptly applied to the prepayment of the Lease Payments pursuant to Section 9.3 of this Lease Agreement; provided however, that in the event of damage or destruction of the Leased Property in full, such Net Proceeds may be so applied only if sufficient, together with other moneys available therefore, to cause the prepayment of the principal components of all unpaid Lease Payments pursuant to Section 9.3 of this Lease Agreement; provided further, however, that in the event of damage or destruction of the Leased Property in part, such Net Proceeds may be applied to the prepayment of Lease Payments only if the resulting Lease Payments represent fair consideration for the remaining portions of the Leased Property, evidenced by a certificate signed by a City Representative. (iv) In the event the City's determination is as set forth in clause (b) of the subparagraph (ii) above, such Net Proceeds shall be applied to the prompt replacement, repair restoration, modification or improvement of the damaged or destroyed portions of the Leased Property by the City. (b) From Eminent Domain Award. (v) If the City has given written notice to the Bank of its determination that (A) such eminent domain proceedings have not materially affected the operation of the Leased Property or the ability of the City to meet any of its obligations with respect to the Leased Property under this Lease Agreement, and (B) such proceeds are not needed for repair or rehabilitation of the Leased Property, the City shall so certify to the Bank , and the City shall credit such proceeds towards the prepayment of the Lease Payments pursuant-to Section 9.3 of this Lease Agreement. (vi) If the City has given written notice to the Bank of its determination that (A) such eminent domain proceedings have not materially affected the operation of the Leased Property or the ability of the City to meet any of its obligations with respect to the Leased Property under this Lease Agreement, and (B) such proceeds are needed for repair or rehabilitation of the Leased Property, the City shall so certify to the Bank and the City shall apply such amounts for such rehabilitation. (vii) If (A) less than all of the Leased Property shall have been taken in such eminent domain proceedings or sold to a government threatening the use of eminent domain powers, and if the City has given written notice to the Bank of its determination that such eminent domain proceedings have materially affected the -14- operation of the Leased Property or the ability of the City to meet any of its obligations with respect to the Leased Property under the Lease Agreement, or (B)all of the Leased Property shall have been taken in such eminent domain proceedings, then the City shall credit such proceeds towards the prepayment of the Lease Payments pursuant to Section 9.3 of the Lease Agreement. (viii) In making any determination under this Section 6.2(b), the City may, but shall not be required to, obtain at its expense, the report of an independent engineer or other independent professional consultant, a copy of which shall be filed with the Bank. Any such determination by the City shall be final. C. From Title Insurance. The Net Proceeds from the title insurance award shall be deposited by the City in the Insurance and Condemnation fund and credited towards the prepayment of Lease Payments required to be paid pursuant to Section 9.3 of this Lease 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 Leased Property or any portion thereof to the extent to be agreed upon by the City, the Bank. 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 B, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Leased Property not damaged or destroyed, based upon an 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 substantial completion of foregoing, there shall be no abatement of Lease Payments under this Section 6.3 to the extent that (a) proceeds of rental interruption insurance or (b) amounts in the Insurance Condemnation Fund are available to pay Lease Payments which would otherwise be abated under this Section 6.3, it being hereby declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments. I -15- ARTICLE VII OTHER COVENANTS SECTION 7.1. Disclaimer of Warranties. THE BANK MAKES NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE LEASED PROPERTY OR ANY PORTION THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE BANK IS NOT A MANUFACTURER OF ANY PORTION OF THE LEASED PROPERTY OR A DEALER THEREIN, THAT THE CITY LEASES THE LEASED PROPERTY AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. In no event is the Bank liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease for the existence, furnishing, functioning or use of the Leased Property by the City. SECTION 7.2. Access to the Leased Property. The City agrees that the Bank, and the Bank's successors or assigns, has the right at all reasonable times, following at least 48 hours written notice provided to the City, to enter upon and to examine and inspect the Leased Property or any part thereof. The City further agrees that the Bank, and the Bank's successors or assigns shall have such rights of access to the Leased Property or any component thereof, following at least 48 hours written notice provided to the City, as may be reasonably necessary to cause the proper maintenance of the Leased Property if the City fails to perform its obligations hereunder. Neither the Bank _ nor any of its assigns has any obligation to cause such proper maintenance. SECTION 7.3. Release and Indemnification Covenants. The City hereby indemnifies the Bank, and is respective officers, agents, successors and assigns against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Property by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (c) any negligence or willful misconduct of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Property, (d) any intentional misconduct or negligence of any sublessee of the City with respect to the Leased Property, (e) the acquisition, construction, improvement and equipping of the Leased Property, or (f) the clean-up of any hazardous materials or toxic wastes from the Leased Property, or the authorization of payment of the costs thereof. No indemnification is made under this Section or elsewhere in this Lease for willful misconduct or gross negligence under this Lease by the Bank, or its respective officers, agents, employees, successors or assigns. SECTION 7.4. Assignment and Subleasing by the City. This Lease may not be assigned by the City. The City may sublease the Leased Property, or any portion thereof, subject to all of the following conditions: (a) This Lease and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City. -16- (b) The City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Bank a true and complete copy of such sublease. (c) No such sublease by the'City may cause the Leased Property to be used for a purpose other than as may be authorized under the provisions of the laws of the State of California. (d) The City shall furnish the Bank with a written opinion of Bond Counsel stating that such sublease does not cause the interest components of the Lease Payments to become includable in gross income for purposes of federal income taxation or .to become subject to personal income taxation by the State of California. SECTION 7.5. Amendment of Lease Agreement. This Lease may be amended with the prior written consent of the Bank (which may not unreasonably be withheld). Prior to the effective date of any such amendment, and as a condition precedent to the effectiveness thereof, the City at its expense shall obtain an opinion of Bond Counsel . stating that such amendment will not adversely affect the exclusion from gross income of the interest component of the Lease Payments. SECTION 7.6. Tax Covenants. (a) Generally. The City will not take any action or permit to be taken any action within its control which would cause or which, with the passage of time if not cured -- , would cause, the interest components of the Lease Payments to become includable in gross income for federal income tax purposes. (b) Private Activity Bond Limitation. The City will ensure that the proceeds of the Lease Payments are not so used as to cause the City's obligations hereunder to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (c) Federal Guarantee Prohibition. The City will not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Lease Payments to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (d) No Arbitrage. The City will not take, or permit or suffer to be taken, any action with respect to the proceeds of the Lease Payments which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Lease Payments to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (e) Small Issuer Exemption from Bank Nondeductibility Restriction. (i) The City hereby designates the Lease Agreement as a "qualified tax-exempt obligation" for the purposes and within the meaning of section 265(b)(3) of the Code. In support of such designation, the City hereby certifies that (A) the Lease Agreement will be at no time a "private activity bond" (as defined in section 141 of the Code), (B) as of the date hereof in calendar year 2009, other than the Lease Agreement, no tax-exempt obligations of any kind have been issued (1) by or on behalf of the City, (2) by other -17- i issuers, any of the proceeds of which have been or will be used to make any loans to the City, or (3) any portion of which has been allocated to the City for purposes of section 265(b) of the Code, and (C) not more than $30,000,000 of obligations of any kind (including the Lease Agreement) issued (1) by or on behalf of the City, (2) by other City, or (3) any portion of which has been allocated to the City for purposes of section 265(b) of the Code during calendar year 2009 will be designated for purposes of section 265(b)(3) of the Code. (ii) The City is not subject to control by any entity, and there are no entities subject to control by the City. (iii) On the date hereof, the City does not reasonably anticipate that for calendar year 2009 it will issue, borrow the proceeds of or have allocated to it for purposes of section 265(b) of the Code, any Section 265 Tax-Exempt Obligations (other than the Lease Agreement), or that any Section 265 Tax-Exempt Obligations will be issued on behalf of it. "Section 265 Tax-Exempt Obligations are obligations the interest on which is excludable from gross income of the owners thereof under section 103 of the Code, except for private activity bonds, other than qualified 501(c)(3) bonds, both as defined in section 141 of the Code. The City will not, in calendar 2009, issue, permit the issuance on behalf of it or by any entity subject to control by the City (which may hereafter come into existence), borrow the proceeds of or agree to an allocation to it for purposes of section 265(b) of the Code, Section 265 Tax-Exempt Obligations (including the Lease Agreement) that exceeded the aggregate amount of $30,000,000 during calendar year 2009, borrowing or allocation will not adversely affect the treatment of the Lease Agreement as a "qualified tax-exempt obligation" for the purpose and within the meaning of section 265(b)(3) of the Code. v (iv) The Lease Agreement has not been sold in conjunction with any other obligation. By reason of the statements set forth in this subsection (e), the Lease Payments are deemed designated for purposes of Section 265(b)(3) of the Tax Code. (f) Arbitrage Rebate. The City will take any and all actions necessary to assure compliance with Section 148(f) of the Tax. 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 Lease Payments. SECTION 7.8.Financial Statements. During the term of this Lease, the Lessee covenants and agrees to provide the Bank as soon as practicable when they are available; (i) a copy of the Lessee's final annual budget for each fiscal year; (ii) a copy of the Lessee's most recent financial statements; and (iii) any other financial reports the Bank may request from time to time. SECTION 7.9.Binding Arbitration. To the extent permitted by law, any dispute, controversy or .claim arising out of or based upon the terms of this Lease or the transactions contemplated hereby shall be settled exclusively and finally by binding arbitration. Upon written demand for arbitration by any party hereto, the parties to the dispute shall confer and attempt in good faith to agree upon one arbitrator. If the parties have not agreed upon an arbitrator within thirty (30) days after receipt of such written demand, each party to the dispute shall appoint one arbitrator and those two arbitrators shall agree upon a third arbitrator. Any arbitrator or arbitrators appointed as provided in -18- this section shall be selected from panels maintained by, and the binding arbitration shall be conducted in accordance with the commercial arbitration rules of, the American Arbitration Association (or any successor organization), and such arbitration shall be binding upon the parties. The arbitrator or arbitrators shall have no power to add or detract from the agreements of the parties and may not make any ruling or award that does not conform to the terms and conditions of this Lease. The arbitrator or arbitrators shall have no authority_to award punitive damages or any other damages not measured by the prevailing party's actual damages. Judgment upon an arbitration award may be entered in any court having jurisdiction. The prevailing party in the arbitration proceedings shall be awarded reasonable attorney fees and expert witness costs and expenses. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.1. Events of Default Defined. Any one or more of the following events constitutes an Event of Default hereunder: (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 hereunder, other than as referred to in the preceding clause (a) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Bank. However, if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 30- day period, the Bank shall not unreasonably withhold their consent to an extension of such time (for a period not to exceed 60 days) if corrective action is instituted by the City within such 30-day 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 Code, as amended, or under any similar acts which may hereafter be enacted. SECTION 8.2. Remedies on Default. Whenever any Event of Default has happened and is continuing, the Bank may exercise any and all remedies available under law or granted under this Lease; provided, however, that notwithstanding anything herein to the contrary, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and upon the breach thereof the Bank may exercise any and all rights granted hereunder; provided, that no termination of this Lease shall be effected either by operation of law or acts of the parties hereto, -19- except only in the manner herein expressly provided. Upon the occurrence and during the continuance of any Event of Default, the Bank may exercise any one or more of the following remedies: (a) Enforcement of Payments Without Termination. If the Bank does not elect to terminate this Lease in the manner hereinafter provided for in subparagraph (b) hereof, the City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Bank for any deficiency arising out of the re-leasing of the Leased Property, or, if the Bank is unable to re-lease the Leased Property, then for the full amount of all Lease Payments to the end of the Term of this Lease, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Bank or any suit in unlawful detainer, or otherwise, brought by the Bank for the purpose of effecting such re-entry or obtaining possession of the Leased Property or the exercise-of any other remedy by the Bank. The City hereby irrevocably appoints the Bank as the agent and attorney-in-fact of the City to enter upon and re-lease the Leased Property upon the occurrence and continuation of an Event of Default and to remove all personal property whatsoever situated upon the Leased Property, to place such property in storage or other suitable place in the County of San Bernardino for the account of and at the expense of the City, and the City hereby ' exempts and agrees to save harmless the Bank from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Leased Property and the removal and storage of such property by the Bank or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease constitute full and sufficient notice of the right of the Bank to re-lease the Leased Property in the event of such re-entry without effecting a surrender of this Lease, and further agrees that no acts of the Bank in effecting such re-leasing shall constitute a surrender or termination of this Lease 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 shall vest in the Bank to be effected in the sole and exclusive manner hereinafter provided for in subparagraph (b) hereof. The City agrees to .surrender and quit possession of the Leased Property upon demand of the Bank for the purpose of enabling the Leased Property to be re-let under this paragraph, and the City further waives the right to any rental obtained by the Bank in excess of the Lease Payments and hereby conveys and releases such excess to the Bank as compensation to the Bank -for its services in re-leasing the Leased Property. (b) Termination of Lease. If an Event of Default occurs and is continuing hereunder, the Bank at its option may terminate this Lease and re-lease all or any portion of the Leased Property. If the -20- Bank terminates this Lease at its option and in the manner. hereinafter provided due to a default by the City (and notwithstanding any re-entry upon the Leased Property by the Bank in any manner whatsoever or the re-leasing of the Leased Property), the City nevertheless agrees to pay to the Bank all costs, loss or damages howsoever arising or occurring payable at the same time and in the same manner as is herein provided in the case of payment of Lease Payments and Additional Payments. Any surplus received by the Bank from such re-leasing shall be applied by the Bank to Lease Payments due under this Lease. Neither notice to pay rent or to deliver up possession of the premises given under law nor any proceeding in unlawful detainer taken by the Bank shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the City shall be or become effective by operation of law, or otherwise, unless and until the Bank shall have given written notice to the City of the election on the part of the Bank to terminate this Lease. The City covenants and agrees that no surrender of the Leased Property, or of the remainder of the Term hereof or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Bank by such written notice. (c) Proceedings at Law or In Equity. If an Event of Default occurs and continues hereunder, the Bank may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due hereunder or to enforce any other of its rights hereunder. SECTION 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Bank 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 or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Bank to exercise any remedy reserved to it in this Article VIII it shall not be necessary to give any notice, other than such notice as may be required in this Article VIII or by law. SECTION 8.4. Agreement to Pay Attorneys' Fees and Expenses. If either party to this Lease defaults under any of the provisions hereof and the nondefaulting party j should employ attorneys (including in-house legal counsel) or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys (including allocable costs and expenses of in-house legal counsel, if any) and such other expenses so incurred by the nondefaulting party. SECTION 8.5. No Additional Waiver Implied by One Waiver. If any agreement contained in this Lease is breached by either. party and thereafter waived by the other t -21- party, such waiver is limited to the particular breach so waived and will not be deemed to waive any other breach hereunder. ARTICLE IX PREPAYMENT OF LEASE PAYMENTS SECTION 9.1. Security Deposit. Notwithstanding any other provision of this Lease, the City may on any date secure the payment of the Lease Payments in whole or in part by depositing with a fiduciary, in trust, an amount of cash which is either (a) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Appendix B, or (b) invested in whole in non-callable Federal Securities in an amount which is sufficient, in the opinion of an independent certified public accountant, together with interest to accrue thereon and together with any cash which is so deposited, to pay such Lease Payments when due under Section 4.4(a) or when due on any optional prepayment date under Section 9.2, as the City instructs at the time of said deposit. In the event of a security deposit under-this Section with respect to all unpaid Lease Payments, (a) the Term of this Lease shall continue, (b) all obligations of the City under this Lease, and all security provided by this Lease for- said obligations, shall thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made all of the Lease Payments from such security deposit, and (c) under Section 4.6, title to the Leased Property will vest in the City on the date of said deposit automatically and without further action by the City or the Bank. The City hereby grants a first priority security interest in and the lien on said security deposit and all proceeds thereof in favor of the Bank. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. SECTION 9.2. Optional Prepayment. The City may prepay the unpaid principal components of the Lease Payments in whole or in part, on any Date without prepayment penalty, by paying a prepayment price equal to the principal components of the Lease Payments to be prepaid, together with the interest required to be paid on such prepayment date, without a prepayment penalty. The City shall give the Bank notice of its intention to exercise its option not less than 30 days in advance of the date of exercise. SECTION 9.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall be obligated to prepay the unpaid principal components i of the Lease Payments in whole or in part on any date, from and to the extent of any j proceeds of insurance award or condemnation award with respect to the Leased Property to be used for such purpose under Section 6.1. The City and the Bank hereby agree that such proceeds, to the extent remaining after payment of any delinquent Lease Payments, shall be credited towards the City's obligations under this Section 9.3. -22- ARTICLE X MISCELLANEOUS SECTION 10.1. Notices. Any notice, request, complaint, demand or other communication under this Lease shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by facsimile transmission or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Bank, the City may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the City: City of Grand Terrace Acting City Manager 22795 Barton Road Grand Terrace, CA 92324 Fax: (909) 783-7629 If to the Bank: Zions First National Bank One South Main Street, Suite 1700 Salt Lake City, Utah 84133 Atten: James Manning SECTION 10.2. Binding Effect. This Lease inures to the benefit of and is binding upon the Bank, the City and their respective successors and assigns. SECTION 10.3. Severability. If any provision of this Lease is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof. SECTION 10.4. Net-net-net Lease. This Lease is a "net-net-net lease" and the City hereby agrees that the Lease Payments are an absolute net return to the Bank, free and clear of any expenses, charges or set-offs whatsoever. SECTION 10.5. Further Assurances and Corrective Instruments. The Bank and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Property hereby leased or intended so to be or for carrying out the expressed intention of this Lease. SECTION 10.6. Execution in Counterparts. This Lease may be executed in several counterparts, each of which is an original and all of which constitutes one and the same instrument. SECTION 10.7. Applicable Law. This Lease is governed by and construed in accordance with the laws of the State of California. 1 -23- SECTION 10.8. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease. IN WITNESS WHEREOF, the Bank and the City have caused this Lease to be executed in their respective names by their duly authorized officers, all as of the date first above written. CITY OF GRAND TERRACE, as Lessor and Sublessee By Bernie Simon, Acting City Manager Attest: zn City Clerk ZIONS FIRST NATIONAL BANK, as Lessee and Sublessor By Authorized Officer i -24- ACKNOWLEDGMENT State of California County of before me, T'C� _�1 I'fi►�� 1� (7�C V _l l�_i C, (insert name and title of the officer personally appearedr�l who proved tome on the basis of satisfactory evidence to be the person fzrwhose name is/� subscribed to the within instrument and acknowledged to me that he/fie/tV executed the same in his/holrl/tl}Cir authorized capacity), and that by hisIVr/thWir signature(,s'j on the instrument the personK, or the entity upon behalf of which the persoy acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. TRACEY R.MARTINEZ Commlubn 0 1740m • Notary K&ft-ColMomla San so mardlno County " ," Cflrtrn tD i� 21 2011 Signaturewl ���J (Seal) I SECTION 10.8. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease. IN WITNESS WHEREOF, the Bank and the City have caused this Lease to be executed in their respective names by their duly authorized officers, all as of the date first above written. CITY OF GRAND TERRACE, as Lessor and Sublessee By Attest: Bernie Simon, Acting City Manager City Clerk ZIONS FIRST NATIONAL BANK, as Lessee and Sublessor By Authorize cer -24- 1 STATE OF UTAH ) COUNTY OF SALT LAKE ) On August 26,2009,before me,Kirsi P. Hansen,Notary Public,personally appeared Mark I.Tsuyuki,proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument he executed the instrument. f•••_ _ NOTARY PUBLIC 1 WITNESS my hand and'official seal. 1 10M P HANM1 1 Com **=Ne.V5120 1 1 C,on�ne�gon 6�rw 1 SEPTEANIER 24,2012 Signature of Notary _ (Seal) ` STATE OF UT/N 1 I I APPENDIX A DESCRIPTION OF THE LEASED PROPERTY PARCEL NO. 1: PORTION OF LOTS 9 AND 16, R.W.A. GODFREYT SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE Of CALIFORNIA AS PER PLAT RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF THAT CERTAIN PARCEL OF LAND CONVEYED TO RALPH R. BAHL AND WIFE BY DEED RECORDED SEPTEMBER 5, 1950, IN BOOK 2633 PAGE 274, OFFICIAL RECORDS, SAID POINT BEING IN THE NORTH LINE OF PALM AVENUE, 1256.42 FEET EAST OF THE INTERSECTION OF SAID NORTH LINE WITH TEX SOUTHEASTERLY LINE OF THE REDLANDS-RIVERSIDE (BARTON ROAD); THENCE NORTH ALONG THE WEST LINE OF SAID RAHL LAND 275 FEET TO THE POINT OF THE BEGINNING; THENCE CONTINUING NORTH 176.55 FEET TO A POINT IN THE SOUTH LINE OF THAT CERTAIN PARCEL OF LAND CONVEYED TO FRANCIS J. BENEDICT BY DEED RECORDED JULY 7, 1950, IN BOOK 2601 OFFICIAL RECORDS, PAGE 197; THENCE WEST ALONG SAID SOUTH LINE 118.59 FEET TO THE SOUTHWEST CORNER THEREOF; THENCE NORTH ALONG THE WEST LINE OF SAID LAND TO A POINT IN THE SOUTHEASTERLY LINE OF THE REDLANDS-RIVERSIDE ROAD; THENCE SOUTHWESTERLY ALONG SAID LIME 233.24 FEET TO THE NORTHEAST CORNER OF THAT CERTAIN PARCEL CONVEYED TO R. D. MOORE AND WIFE BY DEED RECORDED APRIL 10, 1951, IN BOOK 2745, PAGE 591, OFFICIAL RECORDS; THENCE SOUTH, ALONG THE EAST LIKE OF SAID LAND 316.67 FEET TO THE NORTHWEST CORNER OF THAT LAND CONVEYED TO MARGARET BENEDICT, APRIL 10, 1951, IN BOOK 2745, PAGE 593, OFFICIAL RECORDS; i THENCE EAST ALONG THE NORTH LINE OF SAID LAND 317.17 FEET TO TEN TRUE POINT OF BEGINNING. EXCEPTING THERE FROM THAT PORTION OF LOTS 9 AND 26, R.W.A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, A-1 TOWNSHIP 1 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN, (AS PER PLAT RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF REDLANDS RIVERSIDE ROAD (NOW KNOWN AS BARTON ROAD) AS ESTABLISHED BY DEED FROM THE NATIONAL ORANGE SHOW CO., TO THE COUNTY OF SAN BERNARDINO, RECORDED MAY 18, 1932, IN BOOK 735, PAGE 89, OFFICIAL RECORDS, WITH THE WEST LINE OF A ROAD AS ESTABLISHED BY DEED FROM R.W.A. GODFREY ET. AL., TO San Bernardino COUNTY, RECORDED IN BOOK 270 OF DEED, PAGE 213, RECORDS OF SAID COUNTY THENCE SOUTHWESTERLY ALONG THE SOUTH LINE OF SAID REDLANDS RIVERSIDE ROAD TO THE NORTHWEST CORNER OF THAT CERTAIN PARCEL AS CONVEYED TO LESLIE H. HENSON AND WANDA G. HENSON BY DEED RECORDED JUNE 6, 1958, IN BOOK 4525, PAGE 167, OFFICIAL RECORDS, RECORDS OF SAID COUNTY,SAID POINT ALSO BEING THE TRUE POINT OF BEGINNING OF THE PARCEL TO BE DESCRIBED; THENCE SOUTH 0 02 WEST 259.23 FEET(RECORDED SOUTH 0 12' WEST 259.7 FEET) ALONG THE WEST LINE OF SAID HENSON PROPERTY TO THE SOUTHWEST CORNER THEREOF; THENCE NORTH 89 26' 30' EAST (RECORDED NORTH 89. 36' 30' EAST) ALONG THE SOUTH LINE OF SAID HENSON PROPERTY AND ITS EASTERLY PROLONGATION 118.59 FEET); TO THE NORTHWEST CORNER OF THAT CERTAIN PARCEL AS CONVEYED TO WILLIAM M. RAINBOLT ET. AL., BY DEED RECORDED APRIL 12, 1962, IN BOOK 5680, PAGE 373, OFFICIAL RECORDS; THENCE SOUTH 0° 02' WEST ALONG THE WESTERLY LINE OF SAID RAINBOLT PROPERTY 77; THENCE SOUTH 890 26' 300 WEST A DISTANCE OF 218.59 FEET; THENCE NORTH 00 02' EAST TO A POINT ON THE SOUTHERLY LIME OF THE HEREIN ABOVE MENTIONED REDLANDS-RIVERSIDE ROAD; THENCE NORTHERLY ALONG THE SOUTHERLY LINE OF SAID REDLANDS- RIVERSIDE ROAD TO THE TRUE POINT OF BEGINNING. SAID PROPERTY IS ALSO SHOWN IN BOOK 8 OF RECORDS, OF SURVEY PAGE 48, RECORDS OF SAID COUNTY. PARCEL 2: A-2 i A PORTION OF LOTS 15 AND 16, R.W.A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4 WEST, SAN BERNARDINO SASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT, RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF REDLANDS-RIVERSIDE ROAD (BARTON ROAD) AS CONVEYED TO THE COUNTY OF SAN BERNARDINO BY DEED RECORDED MAY 18, 1932 IN BOOK 795, PAGE 89, OFFICIAL RECORDS WITH THE NORTH LINE OF PALM AVENUE; THENCE EAST ALONG THE NORTH LINE OF PALM AVENUE, 773.25 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 00 02' EAST 459.91 FEET TO THE SOUTHEASTERLY LINE OF REDLANDS-RIVERSIDE ROAD; THENCE IN A NORTHEASTERLY DIRECTION ALONG THE SOUTHEASTERLY LINE OF REDLANDS-RIVERSIDE ROAD, 213.03 FEET; THENCE SOUTH 00 02' WEST 591.67 FEET TO THE NORTH LINE OF PALM t , AVENUE; -- THENCE WEST ALONG THE NORTH LINE OF PALM AVENUE, 166.00 FEET TO THE TRUE POINT OF BEGINNING. EXCEPTING THERE FROM THAT PORTION OF LOT 15, R.W.A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP I SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF REDLANDS-RIVERSIDE ROAD (BARTON ROAD) AS CONVEYED TO THE COUNTY OF SAN BERNARD BY DEED RECORDED MAY 18, 1932, IN BOOK 795, PAGE 89, OFFICIAL RECORDS OF SAID COUNTY, WITH THE NORTH LINE j OF PALM AVENUE; THENCE EAST ALONG THE NORTH LINE OF PALM AVENUE, 773.25 FEET; THENCE NORTH 00 02' EAST, 275 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 890 27' 10' EAST, 75 FEET; A-3 THENCE NORTH 00 02' EAST, 244.76 FEET, MORE OR LESS, TO THE SOUTHEASTERLY LINE OF BARTON ROAD; THENCE SOUTHWESTERLY ALONG THE SOUTHERLY LINE OF BARTON ROAD, 96.45 FEET; THENCE SOUTH 0' 02' WEST 184.91 FEET, MORE OR LESS TO THE POINT OF BEGINNING; ALSO EXCEPTING THERE FROM THAT PORTION OF LOT IS, R.W.A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4, WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY, DESCRIBED A3 FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF PALM AVENUE DISTANT THEREON 773.25 FEET EAST OF THE INTERSECTION OF THE NORTH LINE OF SAID PALM AVENUE AND THE SOUTHEASTERLY LINE OF REDLANDS- RIVERSIDE ROAD (BARTON ROAD) AS CONVEYED TO THE COUNTY OF SAN BERNARDINO BY DEED RECORDED MAY 18, 1932, IN BOOK 795, PAGE 89, OFFICIAL RECORDS OF SAID COUNTY; THENCE NORTH 0' 02' LAST, 275 EAST TO THE SOUTHWEST CORNER OF THAT CERTAIN PARCEL OF LAND CONVEYED TO ANTHONY PETTA AND ENGELINE PETTA, HUSBAND AND WIFE, AS JOINT TENANTS BY DEED RECORDED APRIL 2, 1958 IN BOOK 4,474, PAGE 231, OFFICIAL RECORDS OF SAID COUNTY; THENCE EAST ALONG THE SOUTH LINE OF SAID PETTA LAND 75 FEET TO THE SOUTHEAST CORNER THEREOF; THENCE SOUTH 0' 02' WEST 275 FEET TO THE NORTH LINE OF PALM AVENUE; THENCE WEST ALONG THE NORTH LINE OF PALM AVENUE, 75 FEET TO THE POINT OF BEGINNING. APN: 0276-202-48-0000 0276-202-5 1-0000 i A-4 APPENDIX B Payment Principal Interest Date Outstanding Principal Rate Interest Payment 3/1/2010 2,086,889.41 75,110.59 4.760% 52,313.19 127,423.78 9/1/2010 2,009,133.60 77,755.81 4.760% 49,667.97 127,423.78 3/1/2011 1,929,527.20 79,606.40 4.760% 47,817.38 127,423.78 9/1/2011 1,848,026.17 81,501.03 4.760% 45,922.75 127,423.78 3/1/2012 1,764,585.41 83,440.76 4.760% 43,983.02 127,423.78 9/1/2012 1,679,158.76 85,426.65 4.760% 41,997.13 127,423.78 3/1/2013 1,591,698.96 87,459.80 4.760% 39,963.98 127,423.78 9/1/2013 1,502,157.62 89,541.34 4.760% 37,882.44 127,423.78 3/1/2014 1,410,485.19 91,672.43 4.760% 35,751.35 127,423.78 9/1/2014 1,316,630.96 93,854.23 4.760% 33,569.55 127,423.78 3/1/2015 1,220,542.99 96,087.96 4.760% 31,335.82 127,423.78 9/1/2015 1,122,168.14 98,374.86 4.760% 29,048.92 127,423.78 3/1/2016 1,021,451.96 100,716.18 4.760% 26,707.60 127,423.78 9/1/2016 918,338.74 103,113.22 4.760% 24,310.56 127,42.3.78 3/1/2017 812,771.42 105,567.32 4.760% 21,856.46 127,423.78 9/1/2017 704,691.60 108,079.82 4.760% 19,343.96 127,423.78 3/1/2018 594,039.48 110,652.12 4.760% .16,771.66 127,423.78 9/1/2018 480,753.84 113,285.64 4.760% 14,138.14 127,423.78 3/1/2019 364,772.00 115,981.84 4.760% 11,441.94 127,423.78 9/1/2019 246,029.79 118,742.21 4.760% 8,681.57 127,423.78 3/1/2020 124,461.52 121,568.27 4.760% 5,855.51 127,423.78 9/1/2020 0.00 124,461.52 4.760% 2,962.18 127,423.70 2,162,000.00 641,323.08 2,803,323.08 i I I B-1 CONDITIONAL NOTICE OF FULL PREPAYMENT Of $3,730,000 CITY OF GRAND TERRACE REFUNDING CERTIFICATES OF PARTICIPATION ISSUE OF 1997 CUSIP NO. (Dated August 1, 1997) Notice is hereby given to the holders of the outstanding City of Grand Terrace Refunding Certificates of Participation, Issue of 1997, issued on August 1, 1997, that the City of Grand Terrace(the"City")and the Grand Terrace Financing Authority(the"Authority")have elected to prepay all of the Certificates on September 1,2009(the"Prepayment Date")at a prepayment price equal to the principal amount thereof plus accrued interest to the Prepayment Date(the"Prepayment Price"). On such date,the Prepayment. Price of the Certificates will become due and payable, and if sufficient moneys are available for such Prepayment, then from and after the Prepayment Date interest shall cease to accrue and all such Certificates shall be surrendered at the addresses of the Trustee specified below. i The source of funds to be used for such Prepayment will include proceeds of a private placement Lease financing (the 112009 Lease Financing), scheduled to close on or before August 31, 2009. This Notice will be withdrawn if such 2009 Lease Financing will not be issued on or prior to the Prepayment Date and the Authority will not be able to deposit with the Trustee not later than the opening of business on the Prepayment Date moneys sufficient to prepay the Certificates on the Prepayment Date. If this Notice is withdrawn by the City and the Authority, the Notice shall be of no force or effect, and none of the Certificates shall be prepaid pursuant to this Notice. The place of prepayment of principal will be made upon presentation on and after September 1, 2009 at the following addresses: If by Mail: (Registered Bonds) If by Hand or Overnight Mail: U. S. Bank National Association U. S. Bank National Association Corporate Trust Services Corporate Trust Services P. O. Box 64111 60 Livingston Avenue St. Paul, MN 55164-0111 1st Floor- Bond Drop Window St. Paul, MN .55107 Certificateholders presenting their Certificates in person for the same day payment must surrender their Certificates by 1:00 p.m. on the Prepayment Date and a check will be available for pickup after 2:00 p.m. Checks not picked up by 4:30 p.m. will be mailed to the Certificateholders by first class mail. If payment of the Prepayment Price is to be made to the registered owner of the Certificate you are not required to endorse the Certificate to collect the Prepayment Price. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act'), 28% will be withheld,if tax identification number is not properly certified. The CUSIP numbers have been assigned by Standard & Poor's Corporation and are included solely for the convenience of the Certificateholders. Neither the City, the Authority; nor the Trustee shall be responsible for the selection or use of the CUSIP numbers nor is any representation made as to the correctness of such numbers herein or on the Certificates. Dated: U.S.Bank National Association, As Trustee I( - June 24,2009 (A L I f 0 R H I A U.S. Bank National Association AshrafAlmurdaah,Vice President Attention: Corporate Trust 550 South Hope Street, Suite 500 Los Angeles,California 90071 22795 Barton Road Grand Terrace RE: Conditional Redemption of City of Grand Terrace Certificates of California Participation, Issue of 1997 9?313-i295 Pursuant to Section 5.12 of the Trust Agreement by and among U.S. Bank National Association,.City of Grand Terrace Public Financing Authority(the"Authority")and the City of Grand Terrace,(the"City")dated as of August 1, 1997 and pertaining to the $3,730,000 City of Grand Terrace, Refunding Certificates of Participation, Issue of 1997, Civic Center you are hereby notified that the City and Authority have determined to optionally prepay (909) 824-6621 the outstanding Certificates on September 1,2009, conditioned upon the receipts of Fax (909) 783-7629 proceeds of the 2009 Lease Financing.The proposed prepayment date is September 1, Fax(909) 783-2600 2009 and the expected date of closing of the refunding bonds is August 10,2009. Based thereon,the Trustee is hereby requested to send a Notice of Conditional Optional Prepayment to the Certificateholders not later than forty-five(45)days prior to September Nlaryeaa Ferre 1,2009(July 17, 2009)which states that the Prepayment is conditioned upon the receipt by Mayor the Trustee of sufficient monies to pay the Prepayment Price of the Certificates on or before the Prepayment Date and if sufficient monies are not received by the Trustee to pay' the Prepayment Price in a timely manner,the Prepayment Notice will be rescinded. Lee Ann Garcia i,Iayor Pro Tempore The Authority and City agree to reimburse the Trustee for all-out-of-pocket cost and expenses incurred by the Trustee related to or arising from the sending of and rescission or cancellation of the Notice of Prepayment with respect to the Certificates.The Authority Council Members and City further agree to indemnify and hold the Trustee, its officers, directors,employees Bea Cortes and agents harmless from and against all claims,costs,expenses, losses and liabilities of Jim T. Miller any kind whatsoever, including, without limitation, fees and expenses of legal counsel, Walt Stanckiewitz incurred by the Trustee related to or arising from the cancellation or rescission of the notice of redemption with respect to the Certificates. Thomas J.Schwab If you have any questions regarding this matter,please contact the undersigned. Citv Nvlana-er Very truly yours, City of G .Terrace Public Financing Authority and City of Grand Terrace j By: L , Steve Berry, Acting City Manage and Exe utive Director t IRREVOCABLE REFUNDING INSTRUCTIONS These IRREVOCABLE REFUNDING INSTRUCTIONS (these "Instructions"), are dated August 28, 2009, and are given by the CITY OF GRAND TERRACE, a municipal corporation organized and existing under the Laws of the State of California (the "City"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as trustee for the 1997 Certificates described below(the "1997 Trustee"). BACKGROUND: 1. The City has previously, caused the execution and delivery of City of Grand' Terrace Refunding Certificates of Participation, Issue of 1997 in the aggregate original principal amount of$3,730,000 (the "1997 Certificates") under a Trust Agreement dated as of August 1, 1997 (the "1997 Trust Agreement"), among the City, the City of Grand Terrace Public Financing Authority (the "Authority") and U.S. Bank National Association, as successor trustee to First Trust of California, National Association, as trustee, evidencing lease payments payable by the, City under an Lease Agreement dated as of August 1, 1997 (the "1997 Lease"), between the Authority as lessor and the City as lessee. 2. The 1997 Certificates maturing on or after September 1, 2009 are subject to prepayment in full on any payment date upon at least 30 days' written notice to the owners of the 1997 Certificates; 3. On June 23, 2009, the City Council of the City of Grand Terrace approved the refinancing of the 1997 Certificates pursuant to an agreement (the "2009 Agreement") with Zion National Bank(the "Bank.') to raise funds to pay the prepayment price of the 1997 Certificates. 4. The City expects to receive the proceeds of the 2009 Agreement on August 28, 2009, and to prepay the 1997 Certificates on September 1, 2009. 5. The City wishes to give these Instructions to the 1997 Trustee for the purpose of establishing an irrevocable escrow fund to be funded, invested, held and administered for the purpose of providing for the payment in full of the principal, interest and prepayment premium, represented by the 1997 Certificates upon the prepayment thereof on September 1, 2009. INSTRUCTIONS: In order to provide for the payment and prepayment of the 1997 Certificates and to - discharge the 1997 Certificates and the obligations represented_thereby, the City herebyf - irrevocably directs the 1997 Trustee as follows: -SECTION 1. Conditional Notice of Prepayment of 1997 Certificates.- The -City will provide a written request to the 1997 Trustee to send a notice of prepayment to the holders of the, 1 - 1997 Certificates in accordance with Section 5.12 of the 1997 Trust Agreement which states that the redemption is conditioned on the receipt of moneys by the 1997 Trustee for the prepayment of the Certificates on or before the Prepayment Date. The City agrees to reimburse the 1997 Trustee for all out-of--pocket costs and expenses incurred by the 1997 Trustee related to or arising from the rescission or cancellation of the notice of prepayment. The City further agrees to indemnify and hold the 1997 Trustee, its officers, directors, employees and agents harmless from and against all claims, costs, expenses, losses and liabilities of any kind whatsoever, including, without limitation, fees and expenses of legal counsel incurred by the 1997 Trustee related to or arising from the cancellation or rescission of the notice of prepayment. SECTION 2. Deposit into Funds. There is hereby established a Special Fund and a Costs of Issuance Fund. On August 28, 2009 (the "Closing Date"), the City shall cause to be transferred to the 1997 Trustee the amount of$2,740,144.72 in immediately available funds, to be invested as set forth in Section 4, below to be derived as follows: (a) from amounts provided by the Bank in the amount of $2,099,285.64 to be used to refund the 1997 Certificates and $62,714.36 to be used to pay Costs of Issuance. (b) from amounts held in the Lease Payment Fund established and held by the 1997 Trustee under Section 6.07 of the 1997 Trust Agreement (the "1997 Lease Payment Fund") in the amount of$208,895.78. (c) from amounts held in the reserve account established and held by the 1997 Trustee under Section 6.07(d) of the 1997 Trust Agreement (the 1997 Reserve Account") in the amount of$280,714.36. SECTION 3. Disbursement of Funds. Those funds deposited pursuant to Section 2 above and held pursuant to Section 4 below shall be disbursed as follows: (a) $2,099,285.64 to pay principal and interest on the 1997 Certificates as set forth in Section 4 below. (b) $62,714.36 to pay Costs of Issuance. The 1997 Trustee shall apply all cash held to pay the principal and interest represented by the 1997 Certificates coming due and payable upon the payment and prepayment thereof on September 1, 2009, in the following amounts: Prepaid Total Payment Date Interest Principal Payment - September 1, 2009 -0- $2,380,000 $2,380,000 2 Following payment and prepayment in full of all of the 1997 Certificates on September 1, 2009, the 1997 Trustee shall withdraw all amounts remaining on deposit, if any, and transfer those amounts to the City to be applied to pay the lease payments "next coming due under the Lease Agreement dated as of August 28, 2009, between the City and the Bank. SECTION 5. Transfer of Funds. The 1997 Trustee shall make the transfers from the 1997 Lease Payment Fund as set forth in subsections (b) and (c) of Section 2, such transfers to be made on the Closing Date. All other amounts held by the 1997 Trustee in any of the funds and accounts established under the 1997 Trust Agreement shall be withdrawn therefrom and transferred to the City as its property free and clear of the lien of the 1997 Trust Agreement and the 1997 Lease Agreement. SECTION 6. Application of Certain Terms of 1997 Certificate Documents. All of the terms of the 1997 Trust Agreement relating to the payment and prepayment of principal, interest and prepayment premium represented by the 1997 Certificates, and the protections, immunities and limitations from liability afforded the 1997 Trustee as trustee for the 1997 Certificates, are incorporated in these Instructions as if set forth in full herein. These Instructions set forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the 1997 Trustee shall be inferred from the terms of these Instructions or any other agreement. SECTION 7. Compensation to Trustee. The City shall pay the 1997 Trustee full compensation for its services under these Instructions, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto, and, in addition, all fees, costs and expenses relating to the purchase, substitution or withdrawal of any securities after the date hereof. Under no circumstances shall amounts deposited in or credited to the Escrow Fund be deemed to be available for said purposes. The 1997 Trustee has, no lien upon or right of set off against the cash and securities at any time on deposit in the Escrow Fund. SECTION 8. Effect of These Instructions. As a result of the deposit and application of funds in accordance with these..Instructions, the obligations of the City under the 1997 Lease shall be discharged under and with the effect set forth in Section 10.4(a) of the 1997 Lease, and the 1997 Certificates shall be discharged under and with the effect set forth in Section 5.15 of the 1997 Trust Agreement. The deposit made with the 1997 Trustee hereunder constitutes a security deposit for the payment of the 1997 Lease Payments in accordance with the provisions of Section 9.1 of the 1997 Lease. Date: August 28, 2009 CITY OF GRAND TERRACE By: Bernie Simon, Acting City Manager f 3 j Cash Flow and Yield Verification Report City of Grand Terrace, California August 28, 2009 Contents Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Debt Service Payment on the Refunded Certificates and Debt Service Payments to Maturity on the Refunded Certificates Exhibit C Debt Service Payments and Yield on the Lease Exhibit D Gross and Net Present Value Savings Appendix I Applicable schedules provided by W.J. Fawell Co. i i t , GrantThornton Audit•Tax•Advisory Grant Thornton LLP 200 S 6th Street,Suite 500 Report of Independent Certified Public Accountants Minneapolis,MN 55402-1459 On Applying Agreed-Upon Procedures T 612.332.0001 F 612.332.8361 www.GrantThornton.com City of Grand Terrace 22795 Barton Road Grand Terrace, California Harper&Burns LLP 453 South Glassell Street Orange, California U.S. Bank National Association 633 West Fifth Street,24th Floor Los Angeles, California W.J. Fawell Co. Zions First National Bank 3235 Avenida La Cima,Suite 100 One South Main Street,Suite 1700 Carlsbad, California Salt Lake City,Utah $2,162,000 City of Grand Terrace, California Lease Agreement Dated August 28, 2009 We have performed the procedures described in this report,which were agreed to by the City of Grand Terrace, California (the"City") and W.J. Fawell Co. (the"Placement Agent"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Placement Agent. The Placement Agent is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above- captioned issue (the"Lease") for the purpose of current refunding a portion of the City's outstanding Refunding Certificates of Participation, Issue of 1997 (the"Refunded Certificates") as summarized on the next page. This engagement was performed in accordance with Statements on Standards for Attestation En a ements established by the American Institute-of- .. =- --Cettihed-PublirAccountants:--The siiffsciency7o,th-ese c educes is salel the re onsibilt cz - .— Y- - - -the addressees of this report who-are the specified parties. Consequently,we make no representation regarding the sufficiency of the.procedur' described in this report either for the. purpose for which this report has been requested or for any other purpose. _Grant Thornton LLP - ._..-_ U.S.member firm of Grant Thornton International Ltd Page 2 Principal Principal Maturity Redemption Redemption Issue Issued Dated Refunded Refunded Date Price 1997 S3,730,000 September 1,1997 S2,380,000 9-1-21 9-1-09 100% VERIFICATION OF CASH FLOW SUFFICIENCY The Placement Agent provided us with schedules (Appendix I) summarizing the future cash deposit and disbursement. These schedules indicate that there will be sufficient cash available at closing to pay the principal of the Refunded Certificates assuming the Refunded Certificates will be redeemed on September 1, 2009 at 100 percent of par plus. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Placement Agent. As part of our engagement to recalculate the schedules attached as Appendix I we prepared a schedule attached hereto as Exhibit B independently calculating the future disbursement and compared the information used in our calculations to the information listed below contained in applicable pages of the following document: • _ Official Statement for the Refunded-Certificates provided by the Placement Agent insofar as the Refunded Certificates are described as to the maturity and interest payment dates,principal amount and optional redemption date and price. Our procedures, as summarized in Exhibit B,prove the mathematical accuracy of the schedules provided by the Placement Agent summarizing the disbursement on September 1,2009. The schedules provided by the Placement Agent and those prepared by us reflect that the cash available of$2,380,000.00 on August 28, 2009,will be sufficient to pay,when due, the principal related to the Refunded Certificates assuming the Refunded Certificates will be redeemed on September 1, 2009 at 100 percent of par. VERIFICATION OF YIELD The Placement Agent provided us with schedules (Appendix I) which indicate the yield on the Lease. These schedules were prepared based on the assumed settlement date of August 28, 2009 using a 360-day year with interest compounded semi-annually. The term"yield",as used herein,means that yield which,when used in computing the present value of all payments of principal and interest to be paid on an obligation produces an amount equal to, in the case of the Lease, the issue price. As part of our engagement to recalculate the schedules attached as Appendix I we prepared a schedule attached hereto as Exhibit C independently calculating the yield on the Lease using the Lease Agreement provided by the Placement Agent insofar as the Lease is described as to the maturity and interest payment dates, dated date, principal amounts and interest rate. The -- issue_price was provided by the Placement Agent. ;The result of our calculations,based on the- - - -' -aforementioned assumptions,is summarized below - _ - -- Yield Exhibit �, Yield on the Lease 4.759910% C Page 3 Our procedures,as summarized in Exhibit C,prove the mathematical accuracy of the schedules provided by the Placement Agent summarizing the yield. The schedules provided by the Placement Agent and the schedule prepared by us reflect that the yield the Lease is as shown in our report. VERIFICATION OF GROSS AND NET PRESENT VALUE SAVINGS The Placement Agent provided us with schedules (Appendix I) which indicate the gross and net present value savings arising from the refunding of the Refunded Certificates. As part of our engagement to recalculate the schedules attached as Appendix I we prepared a schedule attached hereto as Exhibit D independently calculating the gross and net present value savings using the information contained in the Lease Agreement for the Lease and the Official Statement for the Refunded Certificates and certain information and assumptions provided by the Placement Agent. We express no opinion as to the reasonableness of these assumptions. Our procedures,as summarized in Exhibit D, prove the mathematical accuracy of the schedules provided by the Placement Agent summarizing the gross and net present value savings. The schedules provided by the Placement Agent and the schedule prepared by us reflect that the gross debt service savings arising from the refunding of the Refunded Certificates is $215,650.06 and the net present value savings arising from the refunding of the Refunded Certificates,using as a discount rate the Lease yield of 4.759910% as shown on Exhibit C,is $30,932.11. We were not engaged to,and did not,perform an examination in accordance with Statements on Standards for Attestation Engagements established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion on the items referred to above. Accordingly we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. ,b, 4i Minneapolis, Minnesota August 28,2009 Exhibit A City of Grand Terrace, California SCHEDULE OF SOURCES AND USES OF FUNDS August 28, 2009 SOURCES: Principal amount of the Lease $2,162,000.00 Reserve Fund 280,714.36 $2,442,714.36 USES: Deposit to Escrow Fund $2,380,000.00 Costs of issuance 62,714.36 $2,442,714.36 I i i i Exhibit B -. City of Grand Terrace, California DEBT SERVICE PAYMENT ON THE REFUNDED CERTIFICATES AND DEBT SERVICE PAYMENTS TO MATURITY ON THE REFUNDED CERTIFICATES Interest Debt service Date Principal rate Interest payment 09-01-09 $2,380,000 (1) (2) $2,380,000.00 (1) Actual maturity dates, principal amounts and interest rates are as follows: Debt service Interest payments Date Principal rate Interest to maturity 03-01-10 $64,855.00 $64,855.00 09-01-10 $150,000 5.450% 64,855.00 214,855.00 03-01-11 60,767.50 60,767.50 09-01-11 155,000 5.450% 60,767.50 215,767.50 03-01-12 56,543.75 56,543.75 09-01-12 165,000 5.450% 56,543.75 221,543.75 03-01-13 52,047.50 52,047.50 09-01-13 170,000 5.450% 52,047.50 222,047.50 03-01-14 47,415.00 47,415.00 09-01-14 180,000 5.450% 47,415.00 227,415.00 03-01-15 42,51.0.00 42,510.00 09-01-15 190,000 5.450% 42,510.00 232,510.00 03-01-16 37,332.50 37,332.50' 09-01-16 200,000 5.450% 37,332.50 237,332.50 03-01-17 31,882.50 31,882.50 09-01-17 215,000 5.450% 31,882.50 246,882.50 03-01-18 26,023.75 26,023.75 09-01-18 225,000 5.450% 26,023.75 251,023.75 03-01-19 19,892.50 19,892.50 09-01-19 230,000 5.450% 19,892.50 249,892.50 03-01-20 13,625.00 13,625.00 __- 09-01-20 -._ 245,000.. 5.450% _=13.625.00- -- 258,625.00 _. 6;948 75 = = 09-01-21 255,000 5.450% 6,948.75 261,948.75 $2,380,000 - $919,687.50 - $3,299,687.50 (2) Interest will be paid by the City. Exhibit C City of Grand Terrace, California DEBT SERVICE PAYMENTS AND YIELD ON THE LEASE Present value on $2,162,000 issue dated August 28, 2009 August 28, 2009 Interest Total debt using a yield of Date Principal rate Interest service 4.759910% 03-01-10 $75,110.59 4.760% $52,313.19 $127,423.78 $124,412.87 09-01-10 77,755.81 4.760% 49,667.97 127,423.78 121,520.73 03-01-11 79,606.40 4.760% 47,817.38 127,423.78 118,695.82 09-01-11 81,501.03 4.760% 45,922.75 127,423.78 115,936.58 03=01-12 83,440.76 4.760% 43,983.02 127,423.78 113,241.49 09-01-12 85,426.65 4.760% 41,997.13 127,423.78 110,609.04 03-01-13 87,459.80 4.760% 39,963.98 127,423.78 108,037.79 09-01-13 89,541.34 4.760% 37,882.44 127,423.78 105,526.31 03-01-14 91,672.43 4.760% 35,751.35 127,423.78 103,073.22 09-01-14 93,854.23 4.760% 33,569.55 127,423.78 100,677.15 03-01-15 96,087.96 4.760% 31,335.82 127,423.78 98,336.77 09-01-15 98,374.86 4.760% 29,048.92 127,423.78 96,050.81 03-01-16 100,716.18 4.760% 26,707.60 127,423.78 93,817.98 09-01-16 103,113.22 4.760% 24,310.56 127,423.78 91,637.06 03-01-17 105,567.32 4.760% 21,856.46 127,423.78 89,506.84 09-01-17 108,079.82 4.760% 19,343.96 127,423.78 87,426.14 03-01-18 110,652.12 4.760% 16,771.66 127,423.78 85,393.80 09-01-18 113,285.64 4.760% 14,138.14 127,423.78 83,408.71 03-01-19 115,981.84 4.760% 11,441.94 127,423.78 81,469.77 09-01-19 118,742.21 4.760% 8,681.57 127,423.78 79,575.90 03-01-20 121,568.27 4.760% 5,855.51 127,423.78 77,726.05 09-01-20 124,461.52 4.760% 2,962.18 127,423.70 75,919.17 $2,162,000.00 $641,323.08 $2,803,323.08 $2,162,000.00 The present value of the future payments is equal to: Principal amount of the Lease $2,162,000.00 The sum of the present values of the debt service payments of the Lease on August 28;2009, - using a field of 4.759910%-is equal to the issue rice of the Lease. -- - = __g__v .__ q p Exhibit D City of Grand Terrace, California GROSS AND NET PRESENT VALUE SAVINGS Total debt service to maturity on Total debt Present value on the Refunded service on August 28, 2009 Certificates the Lease using a yield of Date (Exhibit B) .(Exhibit C) Difference 4.759910% 03-01-10 $64,855.00 $127,423.78 ($62,568.78) ($61,090.33) 09-01-10 214,855.00 127,423.78 87,431.22 83,380.87 03-01-11 60,767.50 127,423.78 (66,656.28)1 (62,090.62) 09-01-11 215,767.50 127,423.78 88,343.72 80,379.57 03-01-12 56,543.75 127,423.78 (70,880.03) (62,991.07) 09-01-12 221,543.75 127,423.78 94,119.97 81,699.98 03-01-13 52,047.50 127,423.78 (75,376.28) (63,908.69) 09-01-13 222,047.50 127,423.78 94,623.72 78,362.86 03-01-14 47,415.00 127,423.78 (80,008.78) (64,719.18) 09-01-14 227,415.00 127,423.78 99,991.22 79,002.76 03-01-15 42,510.00 127,423.78 (84,913.78) (65,530.53) 09-01-15 232,510.00 127,423.78 105,086.22 79,212.97 03-01-16 37,332.50 127,423.78 (90,091.28) (66,331.28) 09-01-16 237,332.50 127,423.78 109,908.72 79,041.07 03-01-17 31,882.50 127,423.78 (95,541.28) (67,111.48) 09-01-17 246,882.50 127,423.78 119,458.72 81,961.27 03-01-18 26,023.75 127,423.78 (101,400.03) (67,953.83) 09-01-18 251,023.75 127,423.78 123,599.97 80,905.73 03-01-19 19,892.50 127,423.78 (107,531.28) (68,751.28) 09-01-19 249,892.50 127,423.78 122,468.72 76,481.47 03-01-20 13,625.00 127,423.78 (113,798.78) (69,415.07) 09-01-20 258,625.00 127,423.70 131,201.30 78,169.86 03-01-21 6,948.75 6,948.75 4,043.83 09-01-21 261,948.75 261,948.75 148,897.59 $3,299,687.50 $2,803,323.08 $496,364.42 $311,646.47- Present value of the difference $496;364.42 $311,646.47- - `� - Less Reserve Fund - (280 714 36J`- (280,714.36) Net present value savings $215,650.06 $30,932.11 APPENDIX I Applicable schedules provided by W.J. Fawell Co. i WJ Fawell Co. Schedule 3 Public Finance City of Grand Terrace,California Refunding of 1997 Certificates Sources&Uses of Funds Dated Date 08/28/09 Settlement Date 08/28/09 SOURCES OF FUNDS Principal of Refunding Bonds 2,162,000.00 Reserve Fund 280.714.36 Interest Fund 0.00 TOTAL 2.442.714.36 USES OF FUNDS Escrow Fund Deposit 2,380,000.00 Legal Fees 25,000.00 Placement fees 22,000.00 Lender fees 7,500.00 Verification 5,000.00 Thies Ins/Trustee/CDAIC 3,200.00 Misc.Financing Costs 14.36 TOTAL 2,442,714.36 Principal of Refunding Bonds 2,162,000.00 Principal of Refunded Bonds 2.380.000.00 Difference (218.000.00) G 8/23/2009 8:58 PM 1. WJ Fawell Co. Schedule 2 Public Finance City of Grand Terrace,California Refunding of 1997 Certificates Escrow Fund Debt Service Principal through to be Total Date Call Called Requirements 09/01/09 0.00 2,380.000.00 2,380.000.00 03/01/10 0.00 0.00 09/01/10 0.00 0.00 03/01/11 0.00 0.00 09/01/11 0.00 0.00 03/01/12 0.00 0.00 09/01/12 0.00 0.00 03/01/13 0.00 0.00 09/01/13 0.00 0.00 03/01/14 0.00 0.00 09/01/14 0.00 0.00 03/01/15 0.00 0.00 09/01/15 0.00 0.00 03/01/16 0.00 0.00 09/01/16 0.00 0.00 03/01/17 0.00 0.00 09/01/17 0.00 0.00 03/01/18 0.00 0.00 09/01/18 0.00 0.00 03/01/19 0.00 0.00 09/01/19 0.00 0.00 0.00 2,380,000.00 2,380.000.00 Add:Cash Deposit Total Escrow Cost Bond Payoff Amount: Principal to be Called 2,380,000.00 Redemption Premium(0%) 0.00 2.380.000.00 8/23/2009 8:58 PM WJ Fawell Co. Schedule 1 Public Finance City of Grand Terrace,California Refunding of 1997 Certificates Existing Debt Service Structure Interest Annual Payment Par Debt Debt Date Amount Coupon Interest Service Service 03/01/10 64,855.00 64,855.00 09/01/10 150.000.00 5.450% 64.855.00 214,855.00 279.710.00 03/01/11 60.767.50 60,767.50 09/01/11 155,000.00 5.450% 60,767.50 215,767.50 276,535.00 03/01/12 56.543.75 56,543.75 09/01/12 165.000.00 5.450% 56,543.75 221.543.75 278,087.50 03/01/13 52.047.50 52,047.50 09/01/13 170.000.00 5.450% 52,047.50 222,047.50 274.095.00 03/01/14 47.415.00 47,415.00 09/01/14 180.000.00 5.450% 47,415.00 227,415.00 274.830.00 03/01/15 42,510.00 42.510.00 09/01/15 190,000.00 5.450% 42,510.00 232.510.00 275.020.00 03/01/16 37,332.50 37,332.50 09/01/16 200,000.00 5.450% 37.332.50 237.332.50 274.665.00 03/01/17 31,882.50 31.882.50 09/01/17 215.000.00 5.450% 31.882.50 246.882.50 278.765.00 03/01/18 26.023.75 26.023.75 09/01/18 225.000.00 5.450% 26.023.75 251,023.75 277,047.50 03/01/19 19.892.50 19,892.50 09/01/19 230.000.00 5.450% 19,892.50 249,892.50 269,785.00 03/01/20 13.625.00 13,625.00 09/01/20 245.000.00 5.450% 13.625.00 258,625.00 272,250.00 03/01/21 6,948.75 6.948.75 09/01/21 255,000.00 5.450% 6,948.75 261,948.75 268,897.50 03/01/22 0.00 0.00 09/01/22 0.00 0.00 0.00 03/01/23 0.00 0.00 09/01/23 0.00 0.00 0.00 03/01/24 0.00 0.00 09/01/24 0.00 0.00 0.00 03/01/25 0.00 0.00 09/01/25 0.00 0.00 0.00 03/01/26 0.00 0.00 09/01/26 0.00 0.00 0.00 03/01/27 0.00 0,00 09/01/27 0.00 0.00 0.00 03/01/28 0.00 0.00 09/01/28 0.00 0.00 0.00 03/01/29 0.00 0.00 09/01/29 0.00 0.00 0.00 03/01/30 0.00 0.00 09/01/30 0.00 0.00 000 03/01/31 0.00 0.00 09/01/31 0.00 0.00 0.00 03/01/32 0.00 0.00 09/01/32 0.00 0.00 0.00 03/01/33 0.00 0.00 09/01/33 0.00 0.00 0.00 03/01/34 0.00 0.00 09/01/34 0.00 0.00 0.00 03/01/35 0.00 0.00 09/01/35 0.00 0.00 0.00 03/01/36 0.00 0.00 1 09/01/36. 0.00 0.00 0.00 03/01/37 0.00 0.00 09/01/37 _ OM 0.00 0.00- - -- 03/01/38 _ .-__ _.. . 0.00 - 0.00--. 09/01/38 0.00 `0.00--- -0.00 --- 03/01/39 0.00 0.00 09/01/39 0.00 0.00 0.00 2.380.000.00 919,687.50 3,299,687.50 3.299.687.50 8/23/2009 8:58 PM WJ Fawell Co. Schedule 4 Public Finance ! City of Grand Terrace,California Dated: 08/28/09 Refunding of 1997 Certificates SetUe: 08/28/09 Refunding Debt Service Structure Interest Payment Principal Interest Annual Date Outstanding Principal Rate Interest Payment Payment 08/28/09 2,162,000.00 03/01/10 2,086,889.41 75,110.59 4.76% 52,313.19 127,423.78 09/01/10 2,009,133.60 77,755.81 4.76% 49,667.97 127,423.78 254,847.56 03/01/11 1,929,527.20 79,606.40 4.76% 47,817.38 127,423.78 09/01/11 1,848,026.17 81,501.03 4.76% 45.922.75 127,423.78 254,847.56 03/01/12 1,764,585.41 83,440.76 4.76% 43,983.02 127,423.78 09/01/12 1.679.158.76 85.426.65 4.76% 41,997.13 127,423.78 254,847.56 03/01/13 1,591,698.96 87.459.80 4.76% 39.963.98 127,423.78 09/01/13 1,502,157.62 89,541.34 4.76% 37,882.44 127,423.78 254,847.56 03/01/14 1,410,485.19 91.672.43 4.76% 35,751.35 127,423.78 09/01/14 1,316,630.96 93.854.23 4.76% 33,569.55 127,423.78 254,847.56 03/01/15 1.220.542.99 96,087.96 4.76% 31,335.82 127,423.78 09/01/15 1,122,168.14 98,374.86 4.76% 29,048.92 127,423.78 254,847.56 03/01/16 1,021,451.96 100,716.18 4.76% 26,707.60 127,423.78 09/01/16 918,338.74 103,113.22 4.76% 24.310.56 127,423.78 254.847.56 03/01/17 812.771.42 105.567.32 4.76% 21.856.46 127,423.78 09/01/17 704,691.60 108,079.82 4.76% 19,343.96 127,423.78 254,847.56 03/01/18 594.039.48 110,652.12 4.76% 16,771.66 127,423.78 09/01/18 480,753.84 113,285.64 4.76% 14,138.14 127,423.78 254,847.56 03/01/19 364.772.00 115,981.84 4.76% 11.441.94 127,423.78 09/01/19 246,029.79 118,742.21 4.76% 8,681.57 127,423.78 254.847.56 03/01/20 124.461.52 121,568.27 4.76% 5.855.51 127,423.78 09/01/20 - 124.461.52 4.76% 2,962.18 127,423.78 254,847.56 03/01/21 - 09/01/21 - 0.00 03/01/22 - 09/01/22 - 0.00 03/01/23 09/01/23 0.00 03/01/24 - 09/01/24 - 0.00 03/01/25 09/01/25 0.00 03/01/26 09/01/26 0.00 03101/27 09/01/27 0.00 03/01/28 09/01/28 0.00 03/01/29 09/01/29 0.00 03/01/30 09/01/30 0.00 03/01/31 09/01/31 0.00 03/01/32 09/01/32 0.00 03/01/33 09/01/33 0.00 03/01/34 09/01/34 0.00 03/01/35 09/01/35 0.00 03/01/36 09/01/36 0.00 03101/37 09/01/37 0.00 - 03/01/38 - t 09/01/38 0.00 - 03/01/39 09101/39 0.00 2,162,000.00 641,323.08 2,803,323.16 2,803,323.16 8/23/2009 8:58 PM I _ WJ Fawell Co. Schedule 7 Public Finance City of Grand Terrace,California Refunding of 1997 Certificates Arbitrage Yield 4.760% Refunding Days Present PV Debt From Value Debt Date Service Settlement Factor Service 03/01/10 127,423.78 183 0.976371 124,412.87 09/01/10 127,423.78 363 0.953674 121.520.73 03/01/11 127.423.78 543 0.931504 118,695.82 09/01/11 127.423.78 723 0,909850 115,936.58 03/01/12 127.423.78 903 0.888700 113.241.49 09/01/12 127.423.78 1,083 0.868041 110,609.04 03/01/13 127,423.78 1,263 0.847862 108.037.79 09/01/13 127.423.78 1,443 0.828152 105,526.31 03/01/14 127,423.78 1,623 0.808901 103,073.21 09/01/14 127.423.78 1,803 0.790097 100,677.14 03/01/15 127.423.78 1,983 0.771730 98,336.77 09/01/15 127,423.78 2,163 0.753790 96,050.81 03/01/16 127,423.78 2,343 0.736267 93,817.98 09/01/16 127,423.78 2,523 0.719152 91,637.06 03/01/17 127,423.78 2,703 0.702434 89,506.84 09/01/17 .127,423.78 2,883 0.686105 87,426.13 03/01/18 127,423.78 3,063 0.670156 85,393.80 09/01/18 127,423.78 3,243 0.654577 83,408.71 03/01/19 127,423.78 3,423 0.639361 81.469.77 09/01/19 127,423.78 3,603 0.624498 79,575.90 03/01/20 127.423.78 3,783 0.609981 77.726.05 09/01/20 127,423.78 3,963 0.595801 75,919.21 03/01/21 0.00 4,143 0.581951 0.00 09/01/21 0.00 4,323 0.568423 0.00 03/01/22 0.00 4,503 0.555209 0.00 09/01/22 0.00 4,683 0.542302 0.00 03/01/23 0.00 4,863 0.529696 0.00 09/01/23 0.00 5,043 0.517382 0.00 03/01/24 0.00 5,223 0.505355 0.00 09/01/24 0.00 5,403 0.493607 0.00 03/01/25 0.00 5,583 0.482133 0.00 09/01/25 0.00 5,763 0.470925 0.00 03/01/26 0.00 5,943 0.459978 0.00 09/01/26 0.00 6,123 0.449285 0.00 03/01/27 0.00 6.303 0.438841 0.00 09/01/27 0.00 6,483 0.428639 0.00 03/01/28 0.00 6,663 0.418675 0.00 09/01/28 0.00 6,843 0.408942 0.00 03/01/29 0.00 7,023 0.399436 0.00 09/01/29 0.00 7,203 0.390151 0.00 03/01/30 0.00 7,383 0.381081 0.00 09/01/30 0.00 7,563 0.372222 0.00 03/01/31 0.00 7,743 0.363570 0.00 09/01/31 0.00 7,923 0.355118 0.00 03/01/32 0.00 8,103 0.346863 0.00 09/01/32 0.00 8,283 0.338799 0.00 03/01/33 0.00 8,463 0.330924 0.00 09/01/33 0.00 8,643 0.323231 0.00 03/01/34 0.00 8,823 0.315717 0.00 09/01/34 0.00 9,003 0.308378 0.00 03/01/35 0.00 9,183 0.301209 0.00 09/01/35 0.00 9,363 0.294207 0.00 03/01/36 0.00 9,543 0.287368 0.00 09/01/36 0.00 9,723 0.280688 0.00 03/01/37 0.00 9,903 0.274163 0.00 09/01/37 0.00 10,083 0.267789 0.00 03/01/38 0.00 10,263 0.261564 0.00 09/01/38 0.00 10,443 0.255484 0.00 03/01/39 0.00 10,623 0.249545 0.00 09/01/39 0.00 10,803 0.243744 0.00 2,803,323.16 2,162,000.00 2.162,000.00 8/23/2009 8:58 PM i WJ Fawell Co. Schedule 5 Public Finance City of Grand Terrace,California Savings 496.364.34 Refunding of 1997 Certificates Prior Funds 280,714.36 Annual Savings Report Adjusted Savings 215,649.98 Existing Refunding Existing Refunding Debt Debt Annual Annual Annual Date Service Service D/S D/S Savings 03/01/10 64.855.00 127,423.78 09/01/10 214,855.00 127,423.78 279,710.00 254.847.56 24,862.44 03101/11 60.767.50 127.423.78 09/01/11 215,767.50 127,423.78 276.535.00 254.847.56 21,687.44 03/01/12 56,543.75 127,423.78 09/01/12 221,543.75 127,423.78 278,087.50 254.847.56 23,239.94 03/01/13 52,047.50 127.423.78 09/01/13 222,047.50 127.423.78 274.095.00 254.847.56 19,247.44 03/01/14 47.415.00 127.423.78 09/01/14 227.415.00 127,423.78 274,830.00 254,847.56 19,982.44 03/01/15 42,510.00 127,423.78 09/01/15 232,510.00 127,423.78 275,020.00 254,847.56 20.172.44 03/01/16 37,332.50 127,423.78 09/01/16 237.332.50 127,423.78 274.665.00 254,847.56 19,817.44 03/01/17 31.882.50 127.423.78 09/01/17 246.882.50 127,423.78 278.765.00 254.847.56 23,917.44 03/01/18 26.023.75 127,423.78 09/01/18 251.023.75 127.423.78 277.047.50 254,847.56 22,199.94 03/01/19 19,892.50 127,423.78 09/01/19 249.892.50 127,423.78 269.785.00 254,847.56 14.937.44 03/01/20 13.625.00 127,423.78 09/01/20 258,625.00 127.423.78 272,250.00 254,847.56 17,402.44 03/01/21 6,948.75 0.00 09/01/21 261.948.75 0.00 268.897.50 0.00 268,897.50 03/01/22 0.00 0.00 09/01/22 0.00 0.00 0.00 0.00 0.00 03/01/23 0.00 0.00 09/01/23 0.00 0.00 0.00 0.00 0.00 03/01/24 0.00 0.00 09/01/24 0.00 0.00 0.00 0.00 0.00 03/01/25 0.00 0.00 09/01/25 0,00 0.00 0.00 0.00 0.00 03/01/26 0.00 0.00 09/01/26 0.00 0.00 0.00 0.00 0.00 03/01/27 0.00 0.00 09/01/27 0.00 0.00 0.00 0.00 0.00 03/01/28 0.00 0.00 09/01/28 0.00 0.00 0.00 0.00 0.00 03/01/29 0.00 0.00 09/01/29 0.00 0.00 0.00 0.00 0.00 03/01/30 0.00 0.00 09/01/30 0.00 0.00 0.00 0.00 0.00 03/01/31 0.00 0.00 09/01/31 0.00 0.00 0.00 0.00 0.00 03/01/32 0.00 0.00 09/01/32 0.00 0.00 0.00 0.00 0.00 03/01/33 0.00 0.00 09/01/33 0.00 0.00 0.00 0.00 0.00 03/01/34 0.00 0.00 1 09/01/34 0.00 0.00 0.00 0.00 0.00 03/01/35 0.00 0.00 09/01/35 0.00 0.00 0.00 0.00 0.00 03/01/36 0.00 0.00 09/01/36 0.00 0.00 0.00 0.00 0.00 03/01/37 0.00 0.00 _ 09/01/37 0.00 0.00 0.00 0.00 0.00 03/01/38 0.00 0.00 09/01/38 0.00 0.00 0.00 0.00 0.00 03/01/39 10.00 0.00 I 09/01/39 0.00 0.00 I 0.00 0.00 0.00 3.299,687.50 2.803.323.16 Z,299,687.50 2,803,323.16 496,364.34 8/23/2009 8:58 PM f�- WJ Fawell Co. Schedule 6 Public Finance f City of Grand Terrace,California PV Savings 311,643.78 Refunding of 1997 Certificates Prior Funds 280,714.36 Present Value Savings Report Bond Yield 4.76000000% Adjusted PV Saving: 30,929.42 Existing Days Present PV Refunding Present PV Debt From Value Debt Debt Value Debt Date Service SetUemeni Factor Service Service Factor Service 03/01/10 64.855.00 183 0.976370 63.322.50 127,423.78 0.976370 124.412.81 09/01/10 214,855.00 363 0.953673 204.901.42 127,423.78 0.953673 121.520.62 03/01/11 60.767.50 543 0.931503 56,605.12 127,423.78 0.931503 118.695.66 09/01/11 215,767.50 723 0.909849 196.315.81 127,423.78 0.909849 115,936.38 03/01/12 56,543.75 903 0.888698 50,250.31 127,423.78 0.888698 113,241.24 09/01/12 221,543.75 1.083 0.868039 192.308.51 127,423.78 0.868039 110.608.75 03/01/13 52.047.50 1,263 0.847859 44,128.97 127.423.78 0.847859 108.037.46 09/01/13 222,047.50 1,443 0.828150 183.888.53 127,423.78 0.828150 105,525.94 03/01/14 47,415.00 1,623 0.808898 38.353.89 127,423.78 0.808898 103,072.81 09/01/14 227,415.00 1.803 0.790094 179,679.12 127,423.78 0.790094 100,676.70 03/01/15 42.510.00 1,983 0.771726 32,806.09 127.423.78 0.771726 98.336.30 09/01/15 232.510.00 2.163 0.753786 175.262.85 127,423.78 0.753786 96,050.30 03/01/16 37,332.50 2,343 0.736263 27,486.55 127.423.78 0.736263 93.817.45 09/01/16 237,332.50 2,523 0.719148 170.677.08 127,423.78 0.719148 91,636.50 03/01/17 31,882.50 2.703 0.702430 22.395.22 127,423.78 0.702430 89,506.25 09/01/17 246.882.50 2.883 0.686101 169.386.21 127,423.78 0.686101 87,425.52 03/01/18 26,023.75 3,063 0.670151 17,439.84 127,423.78 0.670151 85,393.16 09/01/18 251.023.75 3,243 0.654572 164,313.14 127,423.78 0.654572 83,408.05 03/01/19 19,892.50 3,423 0.639355 12.718.38 127,423.78 0.639355 81.469.09 09/01/19 249,892.50 3.603 0.624493 156,056.00 127,423.78 0.624493 79.575.20 03/01/20 13.625.00 3.783 0.609975 8.310.91 127.423.78 0.609975 77,725.34 09/01/20 258,625.00 3,963 0.595795 154,087.53 127.423.78 0.595795 75,918.48 03/01/21 6.948.75 4.143 0.581945 4,043.79 0.00 0.581945 0.00 09/01/21 261.948.75 4,323 0.568417 148.896.01 0.00 0.568417 0.00 03/01/22 0.00 4,503 0.555203 0.00 0.00 0.555203 0.00 09/01/22 0.00 4,683 0.542296 0.00 0.00 0.542296 0.00 03/01/23 0.00 4,863 0.529690 0.00 0.00 0.529690 0.00 09/01/23 0.00 5.043 0.517376 0.00 0.00 0.517376 0.00 03/01/24 0.00 5,223 0.505349 0.00 0.00 0.505349 0.00 09/01/24 0.00 5.403 0.493601 0.00 0.00 0.493601 0.00 03/01/25 0.00 5,583 0.482126 0.00 0.00 0.482126 0.00 09/01125 0.00 5,763 0.470918 0.00 0.00 0.470918 0.00 03/01/26 0.00 5,943 0.459971 0.00 0.00 0.459971 0.00 09/01/26 0.00 6,123 0.449278 0.00 0.00 0.449278 0.00 03/01/27 0.00 6,303 0.438834 0.00 0.00 0.438834 0.00 09/01/27 0.00 6.483 0.428633 0.00 0.00 0.428633 0.00 03/01/28 0.00 6.663 0.418668 0.00 0.00 0.418668 0.00 09/01/28 0.00 6.843 0.408936 0.00 0.00 0.408936 0.00 03/01/29 0.00 7,023 0.399429 0.00 0.00 0.399429 0.00 09/01/29 0.00 7,203 0.390144 0.00 0.00 0.390144 0.00 03/01/30 0.00 7,383 0.381074 0.00 0.00 0.381074 0.00 09/01/30 0.00 7,563 0.372216 0.00 0.00 0.372216 0.00 03/01/31 0.00 7,743 0.363563 0.00 0.00 0.363563 0.00 09/01/31 0.00 7,923 0.355111 0.00 0.00 0.355111 0.00 03/01/32 0.00 8,103 0.346856 0.00 0.00 0.346856 0.00 09/01/32 0.00 8,283 0.338793 0.00 0.00 0.338793 0.00 03/01/33 0.00 8,463 0.330917 0.00 0.00 0.330917 0.00 09/01/33 0.00 8,643 0.323224 0.00 0.00 0.323224 0.00 03/01/34 0.00 8,823 0.315710 0.00 0.00 0.315710 0.00 09/01/34 0.00 9.003 0.308371 0.00 0.00 . 0.308371 0.00 03/01/35 0.00 9,183 0.301202 0.00 0.00 0.301202 0.00 09/01/35 0.00 9.363 0.294200 0.00 0.00 0.294200 0.00 03/01/36 0.00 9,543 0.287361 0.00 0.00 0.287361 0.00 09/01/36 0.00 9,723 0.280681 0.00 0.00 0.280681 0.00 03/01/37 0.00 9.903 0.274156 0.00 0.00 0.274156 0.00 09/01/37 0.00 10,083 0.267783 0.00 0.00 0.267783 0.00 03/01/38 0.00 10,263 0.261558 0.00 0.00 0.261558 0.00 09/01/38 0.00 10.443 0.255477 0.00 0.00 0.255477 0.00 03/01/39 0.00 10,623 0.249538 0.00 0.00 0.249538 0.00 09/01/39 0.00 10,803 0243737 0.00 0.00 0.243737 0.00 3,299,687.50 2,473,633.77 2,803,323.16 2,161,989.99 Difference 311,643.78 8/23/2009 8:58 PM i $2,162,000 '. LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank I CERTIFICATE OF THE CITY The undersigned hereby state and certify: (i) that I am the duly appointed, qualified and Acting City Manager of the City of Grand Terrace, a municipal corporation duly organized and existing under the laws of the State of California(the "City"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; (ii) that the signatures set forth opposite the names and titles of the following persons are the true and correct specimens of, or are, their genuine signatures: Name and Title Signature Bernie Simon, Acting City Manager Brenda Mesa, City Clerk Bernie Simon,Finance Director (iii) that, on June 23, 2009, the City Council of the City adopted Resolution No. 09- 20 (the "Resolution"), entitled "A Resolution of the City Council of the City of Grand Terrace Authorizing Proceedings to Refund Outstanding 1997 Certificates of Participation and Approving Related Documents and Actions", at an open public meeting which was called, noticed and conducted in accordance with all applicable requirements of California law, at which a quorum was present and acting throughout; (iv) that the Resolution has not been amended, supplemented, modified, rescinded or repealed and remains in full force and effect as of the date hereof and was duly adopted by the City Council of the City; (v) that, by all necessary action, the City has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in, the following documents (the "Financing Documents"): (a) Lease Agreement dated as of August 2.8, 2009 (the"Lease Agreement"), between Zions First National Bank and the City, and (b) Termination Agreement, dated as of August 28. 2009, by and among the City, the Grand Terrace Public Financing Authority and U.S. Bank National Association, as 1997 Trustee (the "1997 Trustee") (vi) that the representations and warranties of the City contained in the Financing Documents are true and correct in all material respects on and as of the date hereof with the same; effect as if made on the date hereof; (vii) No litigation and no adverse contract is pending or to the best of my knowledge, threatened (either in state or federal courts) to restrain or enjoin the execution or delivery of the Financing Documents, in any way contesting or affecting the authority for the execution and delivery of the Financing Documents or the validity of the Lease, or in any way contesting the existence or powers of the City or the title of the officers thereof to their respective offices; and (viii) that the City's employer identification number for federal tax purposes is 95- 3316135; (ix) that, for the calendar year 2009 and including the Information Return for Tax- Exempt Governmental Obligations Form 8038-G filed with the Internal Revenue Service for the; Lease, the City has filed no Information Return Forms 8038-G with the Internal Revenue Service, Ogden,Utah 84201. Capitalized terms used here and not otherwise defined have the meanings given them in the Lease Agreement. Dated as of August 28, 2009. CITY OF GRAND TE CE By: ,ems----✓' Bernie Simon, Acting City Manager $2,13 5,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank CERTIFICATE REGARDING USE OF PROCEEDS The undersigned is the Acting City Manager of the City of Grand Terrace (the "Issuer"), is authorized to execute this certificate on behalf of the Issuer, is knowledgeable with respect to the matters set forth herein, and hereby states and certifies as follows: (1) Lease Agreement. The Issuer is executing and delivering a Lease Agreement, dated as of August 28, 2009 (the "2009 Lease Agreement"), by and between Zions First National Bank and the Issuer on the date of this Certificate (the "Closing Date"), representing $2,135,000 principal amount of lease payments (the "2009 Lease Payments"). (2) Refunding Purposes. (a) Fund Deposits. Proceeds of the 2009 Lease Agreement received on the Closing Date will be deposited with the 1997 Trusteee. Said deposit together with other funds on deposit therein, will be used to refund on a current basis the following series of certificates (the "1997 Certificates") and pay the Closing Costs related thereto: Original Par Amount Bond Caption $3,730,000 1997 Refnding Certificates of Participation Issue of 1997 Proceeds of the 1997 Certificates were used to refund on an advance basis lease payments due by the City under a Lease Agreement between the City of Grand Terrace Public Financing Authority and the City (the "1991 Lease Payments") and bonds delivered with respect to the Grand Terrace Public Financing Authority 1991 Lease Purchase Revenue Bonds, Series "A" (the "1991 Bonds"). (b) Description of Prior Proiect. The 1991 Certificates were delivered to finance the j capital improvements (the "Prior Project") described in Part I of Exhibit A hereto attached and by . this reference herein incorporated. (c) Private Uses of Prior Proiect. Part IL of Exhibit A describes:- (A) each use previously made (between the date the 1991 Certificates were issued and the Closing'Date of the 2009 Lease) and to be made in the future of the Prior Project by any private - person or entity (that is, any entity other than (i) the Issuer, (ii) other non-federal governmental entities, or (iii) members of the public generally), and (B) All payments (if any) directly or indirectly in respect of any use to be made of the Prior Project by any private person or entity, previously made (between the date the 1991 Certificates were issued and the Closing Date of the 2009 Lease) and to be made after the Closing Date. (3)No Private Lease Payments. No portion of the proceeds of the 2009 Lease Agreement, the 1997 Certificates or the 1991 Bonds will be used, directly or indirectly, to make or finance a Lease Payments to any person (other than a State or local government unit). (4) Expectations Regarding Project Use for Life of Lease Payments. The Issuer reasonably expects to use Prior Project for the purposes referenced in the Exhibit attached hereto or for other governmental purposes of the Issuer during the entire term of the 2009 Lease Agreement. The Issuer acknowledges that, for the purposes hereof,proceeds of the 2009 Lease Agreement used to refund the 1997 Certificates are deemed to be used for the same purposes as the proceeds of the 1991 Bonds (that is, the proceeds of the 2009 Lease Agreement are deemed to have been used to finance the Prior Project). (5) Practices and Procedures for Accounting for and Monitoring of 2009 Lease Agreement Proceeds. The Issuer will, after the Closing Date, institute practices and procedures to assure that the proceeds of the 2009 Lease Agreement are used in such a manner: (A) so as not to violate the provisions of the Internal Revenue Code of 1986, as amended, under which interest on the 2009 Lease Payments is excluded from federal income taxation, and (B)to comply with State and local legal requirements regarding the valid incurrence of debt and permitted uses of the proceeds of the 2009 Lease Agreement. These practices and procedures generally will account for and monitor (i) the expenditure and investment of proceeds of the 2009 Lease Agreement , (ii) the use of the Prior Project refinanced with the proceeds of the 1997 Certificates, and (iii) any changes in the underlying structure of the financing. The Issuer will retain its records of all accounting and monitoring it carries out with respect to the 2009 Lease Agreement for at least 3 years after the final 2009 Lease Payment is made pursuant to the Lease Agreement or the 2009 Lease Agreement is prepaid (whichever is earlier); however, if the 2009 Lease Agreement is prepaid and refunded, the Issuer will retain its records of accounting and monitoring at least 3 years after the earlier of the maturity or _ redemption of the 2009 Lease Agreement or other financing agreement which refunded the 2009 Lease Agreement. - --- - - (6) Certifications. (a) The above statements are made on the basis of the facts, estimates and circumstances in existence on the date hereof and the undersigned has exercised due diligence to assure that all material facts, estimates and circumstances relating to the above statements were made available to the undersigned and reviewed by the undersigned. (b) To the best knowledge of the undersigned the above statements are reasonable and there are no other facts, estimates or circumstances, other than those set forth herein, that would materially affect the statements made herein. (c) The undersigned is aware that Harper&Burns LLP is rendering an opinion on the date hereof substantially to the effect that the interest on the 2009 Lease Payments is excluded from gross income for federal income tax purposes and in rendering such opinion is relying upon the statements made in this Certificates and in the Exhibits attached to this Certificate. IN WITNESS WHEREOF, I have hereunto set my name this 28`h day of August , 2009. 49r n,z .1 Z� Bernie Simon, Acting City Manager i I EXHIBIT A PART 1. Detailed Description of Prior Project Civic Center Improvements. The Civic Center Improvements consisted of the construction of a Civic Center and public library. PART 11. Description of Any Private Use of Prior Project A. Describe each use to be made of the Prior Project by any private person or entity (that is, any entity other than (i)the Issuer, (ii) other non-federal governmental entities, or (iii) members of the public generally). For this purpose, "use" includes, without limitation, sales, leases or other use agreements with respect to the Prior Project with private, nongovernmental entities. "Use" of the Prior Project does not include uses by members of the general public within the meaning of§1.141- 3(c) of the Treasury Regulations (the "Regulations"). . None. B. Payments to be made on or after date hereof in respect of above uses. None. i ' $2,162,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank CERTIFICATE AS TO ARBITRAGE I, the undersigned Bernie Simon, Acting City Manager of the City of Grand Terrace (the "City"), being one of the officers of the City duly charged (by resolution of the City), with others, with the responsibility for the delivery by the City of the Lease Agreement, dated as of August 28, 2009 (the "Agreement"), between Zions First National Bank (the 'Bank"), as lessor, and the City, as lessee, which Agreement is being delivered this date, hereby certify as follows: (1) Purpose of Financing. The Agreement is being delivered by the City in order to provide funds for the refunding on a current basis of the outstanding Lease Agreement (the "Prior Agreement"), dated as of August 1, 1997, between the City of Grand Terrace Public Financing Authority (the "Authority"), as lessor, and the City, as lessee, which Prior Agreement was entered into on September 8, 1997. The Prior Agreement was issued for the purpose of refunding on an advance basis the lease agreement dated as of February 1, 1991 (the "1991 Agreement"), between the Authority and the City and with respect to which Bonds of participation (the "1991 Bonds") were issued. The proceeds of the 1991 Bonds were used to finance the costs of certain public facilities (the "Prior Project") more particularly described in the Certificate Regarding Use of Proceeds, dated the date hereof and included elsewhere in the transcript for the Agreement. The Prior Agreement provided for lease payments (the "Prior Lease Payments") in a principal amount of $3,730,000 (of which $2,380,000 principal amount is outstanding and $2,380,000 principal amount is being refunded on the date hereof) and with respect to which Prior Lease Payments, Bonds of participation (the "Prior Bonds") were executed and delivered on the date of delivery of the Prior Agreement. (2) Structure of Financing. The City will lease the site of the Leased Property described in the Agreement (the "Leased Property") to the Bank in consideration of payment by the Bank. Pursuant to the Agreement, the City will sublease the Leased Property from the Bank and will make lease payments to the Bank having a principal component of $2,162,000 (the "Lease Payments"), which amount is not in excess of the value of the Leased Property. (3) Statement of Expectations. On the basis of the facts and estimates in existence on the date hereof, I reasonably expect the following with respect to the amount and use of gross proceeds of the Agreement: 1 _ (a) --Deposit of-Proceeds of Agreement;-No Aggregated Issues On the date - - - — - e - - hereof, the Bank shall pay for or-for the -benefit—off`lie its y_-an�c _tku oy $2;16 �E7 : principal amount. Of the $2,162,000 paid by the Bank, $62,714.36 will be retained by the Prior Trustee and will be used to pay costs of issuance of the Agreement, and the remaining $2,099,285.64 will be deposited into the Escrow Fund held by U.S. Bank National Association as trustee for the Prior Agreement (the "Prior Trustee"). No tax-exempt debt has been sold within fifteen (15) days before or after the date the execution of the Agreement that will be paid from substantially the same source of funds as the source for payment of the Lease Payments (excluding guarantees from unrelated parties). (b) Escrow Fund; Deposits and Investment. The City has delivered to the Prior Trustee, certain Irrevocable Refunding Instructions pertaining to the Prior Agreement, dated August 28, 2009 (the "Refunding Instructions"). Pursuant to the Refunding Instructions, concurrent with the deposit of proceeds of the Agreement in the amount of$2,162,000 into the Escrow Fund, the City will cause the Trustee to transfer to the Escrow Fund $280,714.36 from the reserve fund created for the Prior Agreement, being a total deposit into the Escrow Fund of $2,442,714.36. Amounts on deposit in the Escrow Fund will be invested at an unrestricted yield for a temporary period not exceeding 90 days after the date hereof. (c) Escrow Fund; Use and Allocation of Amounts Deposited. Amounts deposited in the Escrow Fund will be used to pay the Prior Lease Payments and principal and interest with respect to the Prior Agreement through August 11, 2009, and on said date will be used to prepay the then outstanding principal component of Prior Lease Payments and to redeem the then outstanding principal payable with respect to the Prior Agreement of $2,380,000. Amounts, if any, remaining in the Escrow Fund following prepayment of the Prior Lease Payments and redemption of the Prior Agreement will be used for payment of Lease Payments and payments with respect to the Agreement when and as due. (d) Lease Payments. The City will pay Lease Payments from its general funds. Prior to the Payment of Lease Payments, no amounts in the general funds of the City will be segregated, set aside or pledged to the payment of Lease Payments and no amounts will be reasonably expected to be used directly or indirectly to pay, Lease Payments. There is no assurance that the general funds of the City will be available for the payment of Lease Payments if the City encounters financial difficulties. Amounts in the general funds of the City will be invested without yield restrictions. (e) No Negative Pledges. There are no amounts held under any agreement requiring the maintenance of amounts at a particular level for the direct or indirect benefit City reasonably expected that at least eighty-five percent (85%) of the Net Sale Proceeds of the 1991 Agreement would be used to carry out the governmental purposes of the 1991 Agreement within three (3) years of the date of execution thereof, and not more than fifty percent (50%) of the proceeds of the 1991 Agreement, if any, were invested in investments having a substantially guaranteed yield for four (4) or more years. (3) Allocation and Accounting Procedures. The City will use a consistently applied accounting method to account for investments and expenditures of proceeds of the Agreement; Allocations of Bond-proceeds-to expenditures will be made.only with respect to a-current outlay; of cash for the expenditures. The City will not invest proceeds of the Agreement in a -- _ of section 148 of the Code and applicable regulations. To the best of my knowledge, information and belief, the expectations herein expressed are reasonable and there are no facts or estimates, other than those expressed herein, that would materially affect the expectations herein expressed. IN WITNESS WHEREOF, I have hereunto set my hand this 28`" day of August, 2009. CITY OF G ND TE E Bernie Simon, Acting City Manager I CALIFORNIA LAND TITLE ASSOCIATION STANDARD COVERAGE POLICY 1990 CHICAGO TITLE INSURANCE COMPANY SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, CHICAGO TITLE INSURANCE COMPANY,a Missouri corporation,herein called the Company,insures,as of Date of Policy shown in Schedule A,against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of: 1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the-title;, 4. Lack of a right of acc s=toand<from the land; and in addition, as to an i a �� uretl lender;only: 5. The invalidity or unenforceability of the h ne of the insured mortgage upon the title; 6. The priority of any hen-oFe'WcumbrancWoventhA lien of the insured mortgage, said mortgage being shown in Schedule B in the order of its prionty, 7. The invalidity or unenforceabihty of y ass gnnie t of tti n ured mortgage,provided the assignment is shown in Schedule B,or the failure of the as is g nmenVf shownyin Schedule B to vest title to the insured mortgage in the named insured assignee free and clear of alFliens The Company will also pay the costs;attorneys'fees and expenses u red in d&r1se of a title or the lien of the insured mortgage, as insured, but only to the extent provided in the Conditions rand'Stiions. In Witness Whereof,CHICAGO TITLE INSURANCE COMPANY has caused tt isApo y to be signed and sealed as of Date of Policy shown in Schedule A,the policy to become valid when countersigned by an authorized signatory. Issued by: CHICAGO TITLE COMPANY 700 SOUTH FLOWER STREET,SUITE 800 CHICAGO TITLE INSURANCE COMPANY LOS ANGELES,CA 90017 I - - (213) 488-4300 �y— ,,:: \NSU ((A ba! President . T ' , _.. ATTEST: .W a Secretary Reorder Form No.8223-10(Reprinted 10/00) CLTA Standard Coverage Policy- 1990 EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage,costs,attorneys'fees or expenses which arise by reason of: ' (a) Any law,ordinance or governmental regulation(including but not limited to building and zoning laws,ordinances,or regulations)restrict- ing,regulating,prohibiting or relating to(i)the occupancy,use,or enjoyment of-the land;(ii)the character,dimensions or location of any Improvement now or hereafter erected on the land;(iii)a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part; or(iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations,except to the extent that a notice of the enforcement thereof or a notice of a defect,lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. (b) Any governmental police power not excluded by(a)above,except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy,but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects,liens,encumbrances,adverse claims or other matters: (a) whether or not recorded in the public records at Date of Policy,but created,suffered,assumed or agreed to by the Insured claimant; (b) not known to the Company,not recorded in the public records at Date of Policy,but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy; (c) resulting in no loss or damage to the Insured claimant; (d) attaching or created subsequent to Date of Policy;or (e) resulting In loss or damage which would not have been sustained if the Insured claimant had paid value for the Insured mortgage or the estate or Interest insured by this policy. 4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at Date of Policy,or the inability or failure of any subsequent owner of the indebtedness,to comply with applicable doing business laws of the state in which the land is situated. 5. Invalidity or unenforceability of the lien of the insured mortgage,or claim thereof,which arises out of the transaction evidenced by the Insured mortgage and Is based upon usury or any consumer credit protection or truth in lending law. 6. Any claim,which arises out of the transaction vesting in the insured the estate or Interest insured by this policy or the transaction creating the Interest of the insured lender, by reason of the operation of federal bankruptcy,state Insolvency,or similar creditors'rights laws. CONDITIONS AND STIPULATIONS 1. DEFINITION OF TERMS mortgage to be released from the obligation to purchase by virtue of a contrac- The following terms when used in this policy mean: tual condition requiring the delivery of marketable title. 'insured":the insured named in Schedule A,and,subject to any rights 2. CONTINUATION OF INSURANCE enses the Company would have had against the named insured,those (a)After Acquisition of Title by Insured Lender.If this policy insures the succeed to the interest of the named insured by operation of law as owner of the indebtedness secured by the insured mortgage,the coverage of distinguished from purchase including,but not limited to,heirs,distributees, this policy shall continue in force as of Date of Policy in favor of(i)such insured devisees, survivors, personal representatives, next of kin, or corporate or who acquires all or any part of the estate or interest in the land by foreclosure, fiduciary successors.The term"insured"also includes trustee's sale,conveyance in lieu of foreclosure,or other legal manner which (i)the owner of the indebtedness secured by the insured mortgage and discharges the lien of the insured mortgage;(ii)a transferee of the estate or each successor in ownership of the indebtedness except a successor who is interest so acquired from an insured corporation,provided the transferee is an obligor under the provisions of Section 12(c) of these Conditions and the parent or wholly-owned subsidiary of the insured corporation,and their Stipulations(reserving,however,all rights and defenses as to any successor- corporate successors by operation of law and not by purchase,subject to any that the Company would have had against any-predecessor insured,-unless- rights or defenses the Company may have against any predecessor insureds; the successor acquired the indebtedness as a purchaser for value without;rand (iii) any governmental agency or governmental instrumentality which knowledge of the asserted defect,lien,encumbrance,adverse claim or other acquires all or any part of the estate or interest pursuant to a contract of matter insured against by this policy as affecting title to the estate or interest in._.insurance or guaranty-insuring or guaranteeing the indebtedness secured by the land); the insured mortgage. (H)any governmental agency or governmental instrumentality which is an (b)After Conveyance of Title by an Insured.The coverage of this policy insurer or guarantor under an insurance contract or guaranty insuring or shall continue in force as of Date of Policy in favor of an insured only so long as guaranteeing the indebtedness secured by the insured mortgage,or any part the insured retains an estate or interest in the land,or holds an indebtedness thereof,whether named as an insured herein or not; secured by a purchase money mortgage given by a purchaser from the (iii)the parties designated in Section 2(a)of these Conditions and Stipula- insured,or only so long as the insured shall have liability by reason of cove- tions. nants of warranty made by the insured in any transfer or conveyance of the (b)"insured claimant":an insured claiming loss or damage. estate or interest.This policy shall not continue in force in favor of any pur- (c)"insured lender":the owner of an insured mortgage. chaser from an insured of either(i)an estate or interest in the land,or(ii)an (d)"insured mortgage": a mortgage shown in Schedule B,the owner of indebtedness secured by a purchase money mortgage given to an insured. which is named as an insured in Schedule A. (c)Amount of Insurance.The amount of insurance after the acquisition or (a)"knowledge" or "known": actual knowledge, not constructive knowl- after the conveyance by an insured lender shall in neither event exceed the edge or notice which may be imputed to an insured by reason of the public least of: records as defined in this policy or any other records which impart construc- (i)the amount of insurance stated in Schedule A; five notice of matters affecting the land_- (11)the amount of the principal of the indebtedness secured by the insured -- " -- mortgage as of Date of Policy, interest thereon, ex (f)"land":the land described or referred to in Schedule A,and improve _ Y, expenses of foreclosure, ments affixed thereto which by law constitute real property.-The term"land'--. am purits.advanced pursuant to the insured mortgage to assure compliance does not include any property beyond the lines of the area described-or-._with laws or to protect the Tien of the insured mortgage prior to the time of referred to in Schedule A,nor any right,title,interest,estate-or easement in - acquisition of the estate or interest in the land and secured thereby and abutting streets,roads,avenues,alleys,lanes,ways or waterways,-but,noth--reasonable amounts expended to prevent deterioration of improvements,but ing herein shall modify or limit the extent to which a right of access to.and from.-.-reduced by the amount of all payments made;or id is insured by this policy. _. (iii)the amount paid by any governmental agency or governmental instru- mentality,mortgage": mortgage, deed of-trust.-trust-deed,-or-other-security—it-_ if the agency or instrumentality is the insured claimant,in the acqui- - _ - sdion of the estate or interest m satisfaction of its insurance contractor guar- i_..__, Went. - - (h)"public records": records established understate statutes at Date of -=anty Policy for the purpose of imparting constructive notice of matters relating to 3. NOTICE OF CLAIM TO VBE GIVEN BY INSURED CLAIMANT real property to purchasers for value and without knowledge.-- --An insured shall notify the Company promptly in writing(i)in case of any i)"unmarketability of the title":an alleged or apparent matter affecting the- litigation asset forth in Section 4(a)below,(ii)in case knowledge shall come to title to the land,not excluded or excepted from coverage,which would entitle a an insured herewder of any claim of title or interest which is adverse to the purchaser of the estate or interest described in Schedule A or the insured title to the estate or interest or the lien of the insured mortgage,as insured,and which might cause loss or damage for which the Company may be liable by from third parties as required in this paragraph,.unless prohibited by law or virtue of this policy, or(iii) if title to the estate or interest or the lien of the governmental regulation,shall terminate any liability of the Company under insured mortgage,as insured, is rejected as unmarketable. If prompt notice this policy as to that insured for that claim. shall not be given to the Company,then as to that insured all liability of the 6. OPTIONS TO PAY.OR OTHERWISE SETTLE CLAIMS;TERMINATION Company shall terminate with regard to the matter or matters for which.prompt ___ - _ ,ice is required;provided,however,that failure to notify the Company shall OF LIABILITY--�- :_ case prejudice the rights of any insured under this policy-unless the - In case of a claimunder-this policy,.the Company shall have the following ipany shall be prejudiced by the failure and then only to the extent of the additional options: r,.a;udice. (a) To Pay or Tender,Payment of.the Amount of Insurance or to Purchase the Indebtedness. 4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED (i)to pay or tender payment of the amount of insurance under this policy CLAIMANT TO COOPERATE together with any costs,attorneys'fees and expenses incurred by the insured (a)Upon written request by an insured and subject to the options contained claimant,which were authorized by the Company,up to the time of payment or in Section 6 of these Conditions and Stipulations,the Company, at its own tender of payment and which the Company is obligated to pay;or cost and without unreasonable delay,shall provide for the defense of such (ii)in case loss or damage is claimed under this policy by the owner of the insured in litigation in which any third party asserts a claim adverse to the title indebtedness secured by the insured mortgage, to purchase the indebted- or interest as insured,but only as to those stated causes of action alleging a ness secured by the insured mortgage for the amount owing thereon together defect,lien or encumbrance or other matter insured against by this policy.The with any costs,attorneys'fees and expenses incurred by the insured claimant Company shall have the right to select counsel of its choice(subject to the which were authorized by the Company up to the time of purchase and which right of such insured to object for reasonable cause)to represent the insured the Company is obligated to pay. as to those stated causes of action and shall not be liable for and will not pay If the Company offers to purchase the indebtedness as herein provided,the the fees of any other counsel.The Company will not pay any fees, costs or owner of the indebtedness shall transfer, assign, and convey the indebted- expenses incurred by the insured in the defense of those causes of action ness and the insured mortgage,together with any collateral security,to the which allege matters not insured against by this policy. Company upon payment therefor. (b)The Company shall have the right, at its own cost, to institute and Upon the exercise by the Company of the option provided for in paragraph prosecute any action or proceeding or to do any other act which in its opinion a(i),all liability and obligations to the insured under this policy,other than to may be necessary or desirable to establish the title to the estate or interest or make the payment required in that paragraph,shall terminate,including any the lien of the insured mortgage,as insured,or to prevent or reduce loss or liability or obligation to defend,prosecute,or continue any litigation,and the damage to the insured.The Company may take any appropriate action under policy shall be surrendered to the Company for cancellation. theterms of this policy,whetheror not it shall be liable hereunder,and shall not Upon the exercise by the Company of the option provided for in paragraph thereby concede liability or waive any provision of this policy.If the Company a(ii)the Company's obligation to an insured lender under this policy for the shall exercise its rights under this paragraph,it shall do so diligently. claimed loss or damage,-other than the payment required to be made,shall (c)Whenever the Company shall have brought an action or interposed a terminate,including anyliability or obligation to defend,prosecute or continue defense as required or permitted by the provisions of this policy,the Company any litigation. may pursue any litigation to final determination by a court of competent juris- (b)To Pay or Otherwise Settle With Parties Other than the Insured or diction and expressly reserves the right,in its sole discretion,to appeal from With the Insured Claimant. any adverse judgment or order. (1)to pay or otherwise settle with other parties for or in the name of an (d)In all cases where this policy permits or requires the Company to prose- insured claimant any claim insured against under this policy,together with any cute or provide for the defense of any action or proceeding,an insured shall costs,attorneys'fees and expenses incurred by the insured claimant which secure to the Company the right to so prosecute or provide defense in the were authorized by the Company up to the time of payment and which the (-`-lion or proceeding,and all appeals therein,and permit the Company to use, Company is obligated to pay;or option,the name of such insured for this purpose.Whenever requested (li)to pay or otherwise settle with the insured claimant the loss or damage e Company,an insured,at the Company's expense,shall give the Com- provided for under this policy, together with any costs, attorneys' fees and all reasonable aid (i)in any action or proceeding, securing evidence, expenses incurred by the insured claimant which were authorized by the obtaining witnesses, prosecuting or defending the action or proceeding, or Company up to the time of payment and which the Company is obligated to effecting settlement,and(ii)in any other lawful act which in the opinion of the pay. Company may be necessary or desirable to establish the title to the estate or Upon the exercise by the Company of either of the options provided for in interest or the lien of the insured mortgage, as insured. If the Company is paragraphs(b)(i)or b(ii),the Company's obligations to the insured under this prejudiced by the failure of an insured to furnish the required cooperation,the policy for the claimed loss or damage,other than the payments required to be Company's obligations to the insured under the policy shall terminate,includ- made,shall terminate, including any liability or obligation to defend,prose- ing any liability or obligation to defend,prosecute,or continue any litigation, . cute or continue any litigation. with regard to the matter or matters requiring such cooperation. S. PROOF OF LOSS OR DAMAGE 7. DETERMINATION AND EXTENT OF LIABILITY In addition to and after the notices required under Section 3 of these Condi- This policy is a contract of indemnity against actual monetary loss or dam- age and Stipulations have been provided the Company, a proof of loss or age sustained incurred by the insured claimant who has suffered loss or damage signed and sworn to by the insured claimant shall be furnished to the damage reason of matters insured against by this policy and only to the Company within 90 days after the insured claimant shall ascertain the facts extent herein in described. giving rise to the loss or damage.The proof of loss or damage shall describe (a)The liability of the Company under this policy to an insured lender shall not exceed the least of: the defect in, or lien or encumbrance on the title, or other matter insured against by this policy which constitutes the basis of loss or damage and shall (1)the Amount of Insurance stated in Schedule A, or, if applicable, the state,to the extent possible,the basis of calculating the amount of the loss or amount of insurance as defined in Section 2 (c) of these Conditions and damage.If the Company is prejudiced by the failure of an insured claimant to Stipulations; provide the required proof of loss or damage,the Company's obligations to (ii)the amount of the unpaid principal indebtedness secured by the such insured under the policy shall terminate,including any liability or obliga- insured mortgage as limited or provided under Section 8 of these Conditions tion to defend,prosecute,or continue any litigation,with regard to the matter and Stipulations or as reduced under Section 9 of these Conditions and or matters requiring such proof of loss or damage. Stipulations, at the time the loss or damage insured against by this policy In addition, an insured claimant may reasonably be required to submit to occurs,together with interest thereon;or examination under oath by any authorized representative of the Company (iii)the difference between the value of the insured estate or interest as and shall produce for examination,inspection and copying,at such reason- insured and the value of the insured estate or interest subject to the;defect, able times and places as may be designated by any authorized representative lien or encumbrance insured against by this policy. of the Company, all records, books, ledgers, checks, correspondence and (b)In the event the insured lender has acquired the estate or interest in the memoranda, whether bearing a date before or after Date of Policy, which manner described in Section 2(a)of these Conditions and Stipulation's or has reasonably pertain to the loss or damage.Further,if requested by any author- conveyed the title,then the liability of the Company shall continue as set forth ized representative of the Company,the insured claimant shall grant its per- in Section 7(a)of these Conditions and Stipulations. -ssion,in writing,for any authorized representative of the Company to exam- (c)The liability of the Company under this policy to an insured owner of the - inspect and copy all records, books, ledgers,checks, correspondence estate or interest in the land described in Schedule A shall not exceed the memoranda in the custody or control of a third party,which reasonably least of: ain to the loss or damage.All information designated as confidential by an (i)the Amount of Insurance stated in Schedule A;or, insured claimant provided to the Company pursuant to this Section shall not (ii)the difference between the value of the insured estate or interest as be disclosed to others unless,in the reasonable judgment of the Company,it insured and the value of the insured estate or interest subject to the defect, is necessary in the administration of the claim.Failure of an insured claimant lien or encumbrance insured against by this policy. to submit for examination under oath, produce other reasonably requested (d)The Company will pay only those costs,attorneys'fees and expenses information or grant permission to secure reasonably necessary information incurred in accordance with Section 4 of these Conditions and Stipulations. - - --LIMITATION OF LIABILITY- i (a)If the Company establishes the title,or removes the alleged defect,lien to all e rights andtremed espn_thehproporti proportion wh which th as to e Company's use aomenl I or encumbrance, u cures the lack of a right of access to or from the land;or=bears to the whole amount of loss;and(ii)as to an insured lender,to all right: cures the claim of unmarketability of title,or otherwise establishes the lien of and remedies of the insured claimant after the insured claimant shall havE the insured mortgage,all as insured,in a reasonably diligent manner by any recovered its principal,interest,and costs of collection. I including litigation and the completion of any appeals therefrom, it __ If loss should result from any act of the insured claimant;as stated above.. 1et_ .shall have fully performed its obligations with respect to that matter and shall that act shall not void this policy, but the Company, in-,that event, shall be ex not be liable for any loss or damage caused thereby.-__ - required to pay only that part of any losses insured against by this policy which �(b)In the event of any litigation,including litigatio`fi 6y t ie Company or with shall exceed the amount,if any,lost to the Company by reason of the impair. real Company's consent,the Company shall have no liability for Joss or dam---. ment by the insured claimant of the Company's right of subrogation. age until there has been a final determination by a court of competentjurisdic--=lion,and disposition of all appeals-therefrom, (b).The Insured's Rights and Limitations. ble,to the lien of the insured mortgage,as insured.adverse to the title or,-if_applica=- -Notwithstanding the foregoing,the owner of the indebtedness secured by (c)The Company shall not be liable for loss or damage_to any.in--- .for-__an insured mortgage,provided the priority of the lien of the insured mortgage liability voluntarily assumed by the insured in settling any claim or suit'{vithouF` Ii its enforceability is not affected, may release or substitute the personal the prior written consent of the Company. liability of any debtor or guarantor,or extend or otherwise modify the terms of (d)The Company shall not be liable to an insured lender for: i an in'd'ebt payment,.or release a portion of the estate or interest from the lien of the edness created subsequent to Date of Policy except for advances made to.__ insured mortgage,or release any collateral security for the indebtedness. t. I protect the lien of the insured mortgage and secured thereby and reasonable= - When the permitted acts of the insured claimant occur and the insured has amounts expended to prevent.deterioration of improvements;or(ii)construi:=-- When of any claim of title or interest adverse to the title to the estate or 3 j tion loan advances made subsequent to Date of Policy,except construction interest or the priority or enforceability of the lien of the insured mortgage,as loan advances made subsequent to Date of Policy for the purpose of financing insured,the Company shall be required to pay only that part of any losses in whole or in part the construction of an improvement to the land which at insured against by this policy which shall exceed the amount,if any,lost to the Date of Policy were secured by the insured mortgage and which the insured Company by reason of the impairment by the insured claimant of the'Compa- i was and continued to be obligated to advance at and after Date of Policy. nY s right of subrogation. he 's Rigts Against Non- 9. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION.OF_ T eTCompany's rightt ofhsubrog ton again tunonsren-i slu ed obligors shall LIABILITY exist and shall include,without limitation,the rights of the insured to indem- (a)All payments under this policy,except payments made for costs,attor- nities,guaranties,other policies of insurance or bonds,notwithstanding any neys'fees and expenses,shall reduce the amount of the insurance pro tanto. terms orconditions contained in those instruments which provide for subroga- However,as to an insured lender,any payments made prior to the acquisition tion rights by reason of this policy. 4r of title to the estate_or..interest as provided in Section 2(a)of these Conditions Company's right of subrogation shall not be avoided by acquisition of and-Stipulations shall not reduce pro tanto the amount of the insurance an insured mortgage by an obligor(except an obligor described in Section 5 afforded under this policy as to any such insured except to the.extent that the 1(a)(ii)of these Conditions and Stipulations)who ac wires the insured mort-_ -- --_=payments reduce the amount of the indebtedness secu�ed.b-the insured=:_ E mortgage. - _____._----- - —. Y--_ _ gage as a result of an indemnity,guarantee,other policy of insurance,or bond and the(b)Payment in part-by any person of the principal of the indebtedness,or tion 1(a obligor th see Conditions not and Stipu an insured lations. policy,notwithstanding Sec- any other obligation secured by the insured mortgage,or any voluntary partial O() satisfaction or release of the insured mortgage,to the extent of the payment, 13. ARBITRATION satisfaction or release,shall reduce the amount of insurance pro tanto.The Unlessamount of insurance may thereafter be increased b accruing demand arbitration prohibited ursuant tolthe Title e law, hInsu Insurance Arbitration insured Rules of the Y g interest and 1 advances made to protect the lien of the insured mortgage and secured American Arbitration Association.Arbitrable matters may include,but are not thereby,with interest thereon,provided in no event shall the amount of insur- limited to, any controversy or claim between the Company and the insured ----tce be greater than the Amount of Insurance stated in Schedule A. arising out of or relating to this policy,any service of the Company in connec- is�c)Payment in full b an ..fie insured mortgage shall erml voluntary satisfaction ate all liability of he Company tor release of an insured arbitrable bit able matters when the Amount of Insy provision or other obligation.All ur p lender except as provided in Section 2(a)of these Conditions and Stipula lions. be arbitrated at the option of either the Company or the innsuured.All arrb t ble matters when the Amount of Insurance is in excess of$1,000,000 shall be 10. LIABILITY NONCUMULATIVE arbitrated only when agreed to by both the Company and the insured.Arbitra- It is expressly understood that the amount of insurance under this policy tion pursuant to this policy and under the Rules in effect on the date the shall be reduced any amount the Company may pay under an demand for arbitration is made or, at the option of the insured,the Rules in which ch tihe effect at Date of Policy shall be binding upon the parties. The award may insuring a mortgage to which exception is taken in Schedule B or to include attorneys'fees only if the laws of the state in which the land Judgment located insured has agreed, assumed, or taken subject, or which is hereafter exe- cuted by an insured and which is a charge or lien on the estate or interest permit a court to award attorneys'fees to a prevailin be the award rendered by the Arbitrator(s)may be enteredainyany court having described or referred to in Schedule A, and the amount so paid shall deemed a payment under this policy to the insured owner. jurisdiction thereof. such a proinsured acqusions ires tittlection le to saidaesta e not state interesto an insured sa sfacttiion unless The law of the situs of the land shall apply to an arbitration under the Title indebtedness secured by an insured mortgage. In Arbitrationsurance A copy of e hRules may be obtained from the Company upon request. 11. PAYMENT OF LOSS 14. LIABILITY LIMITED TO THIS POLICY;POLICY ENTIRE CONTRACT ment a)No payment shall be made without producing this policy for endorse- (a)This policy together with all endorsements,if any,attached hereto by the ich case proof of loss or destruction shall I be furnished toost o the sat sfa cion ofhthe Company is the entire policy and contract between the insured and the Com- Company. pany.In interpreting any provision of this policy,this policy shall be construed (b)When liability and the extent of loss or damage has been definitely fixed as a whole. in accordance with these Conditions and Stipulations, the loss or damage (b)Any claim of loss or damage,whether or not based on negligence,and shall be payable within 30 days thereafter. which arises out of the status of the lien of the insured mortgage,or of the title to the estate or intrest 12. SUBROGATION UPON PAYMENT OR SETTLEMENT shall be restricted to th sovered pol cy,hereby,or by any action asserting such claim (a)The Company's Right of Subrogation. (c)No amendment of or endorsement to this policy can be made except by Whenever the Company shall have settled and paid a claim under this a writing endorsed hereon or attached hereto signed by either the President,a Policy,all right of subrogation shall vest in the Company unaffected by any act Vice President,the Secretary,an Assistant Secretary,or validating officer or of the insured claimant. authorized signatory of the Company. The Company shall be subrogated to and be entitled to all rights and remedies which the insured claimant would have had against any person or 15. SEVERABILITY property in respect to the claim had this policy not been issued.If requested by In the event any provision of this policy is held invalid or unenforceable the Company, the insured claimant shall transfer to the Company all rights under applicable law,the policy shall be deemed not to include that provision --'d remedies against any person or property necessary in order to perfect and all other provisions shall remain in full force and effect. 1§right of subrogation.The insured claimant shall permit the Company to �e,compromise or settle in the name of the insured claimant and to use the 16. NOTICES,WHERE SENT name of the insured claimant in any transaction or litigation involving these All notices required to be given the Company and any statement in writing rights or remedies. be furnished the Companyired If a payment on account of a claim does not fully cover the loss of the a dushalltbe addressed to he Company atlthel ssuithe number ng office or to this policy Chicago Title Insurance Company National Claims Administnnion Order No.:910076007-X59 POLICY OF TITLE INSURANCE SCHEDULE A unt of Insurance: $ 2,162,000.00 - Premium: $ 2,053.90 - Date of Policy:-October 6,2009 at 8:00 am 1•---==Name of-Insured:....._ - - _ The City of Grand Terrace, _ - -2. The estate or interest in the land which is covered by this policy is: as created by that certain-lease dated August 8, 2009 executed by Zions First National : -- -=- - - Bank;-as--lessee and sublessor and the City of Grand Terrace, as lessor and-Sublessee-recorded; - -October 6, 2009 as Instrument No. 2009=438566, for the term upon an subject.to all the provisions contained in said document, and in said lease. 1- Title to the estate or interest in the land is vested in: The City of-Grand Terrace --- :The land referred to in this policy is described on the attached exhibit Countersigned by: ------------- _ _ CLTA STANDARD COVERAGE-1990 --.,Pane 1 Order No.: 910076007-X59 SCHEDULE A (continued) EXHIBIT "A" - PARCEL NO. 1: (0276-202-82-0-000) - THE NORTH 140.00 FEET OF THE WEST 79.29 FEET OF THE EAST 158.58 FEET, AND THE NORTH 130.00 FEET OF EAST 79.29 FEET OF SAID EAST 158.00 FEET OF THAT PORTION OF LOT 16, OF_R W. A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, --- TOWNSHIP 1 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN - --. BOOK 13 OF MAPS,PAGE 23,RECORDS OF SAID COUNTY,DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF-=REDLANDS=' RIVERSIDE ROAD(BARTON ROAD)AS CONVEYED TO THE COUNTY OF SAN BERNARDINO BY DEED RECORDED MAY 18, 1932, IN BOOK 795,PAGE 89, OFFICIAL RECORDS,WITH THE NORTH LINE OF PALM AVENUE; THENCE NORTH 89Q27'LO" EAST ALONG THE NORTH LINE OF SAID PALM AVENUE-_939.25 FEET TO THE TRUE POINT OF BEGINNING; THENCE, --NORTH-OOQ02'00" EAST 275.00 FEET; THENCE NORTH 890 27' 10" `EAST PARALLEL=WITH? - -- -- - THE NORTH LINE OF SAID PALM AVENUE 317.17 FEET TO A POINT IN THE WEST-LINE OF - -- - THAT-CERTAIN PARCEL OF LAND CONVEYED TO RALPH R BAHL AND WIFE, BY DEED RECORDED SEPTEMBER 5, 1950, IN BOOK 2633, PAGE 274, OFFICIAL RECORDS OF SAID COUNTY;THENCE SOUTH 00 02' 00"WEST ALONG SAID WEST LINE OF BAHL LAND 275.00 FEET TO-THE NORTH LINE .OF SAID PALM AVENUE; THENCE SOUTH 890 27' 10" WEST ALONG SAID NORTH LINE OF PALM AVENUE TO THE TRUE POINT OF BEGINNING. _ = TOGETHER WITH THAT PORTION OF LOTS 9 AND 16,R W. A. GODFREY'S SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4 .WEST, SAN_ . - " BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE-OF.- - CALIFORNIA AS PER PLAT RECORDED IN BOOK 13 OF MAPS.PAGE 23, RECORDS OF SAID - COUNTY;-DESCRIBED AS FOLLOWS: BEGINNING AT " THE SOUTHWEST CORNER. OF THAT CERTAIN PARCEL OF LAND CONVEYED TO RALPH R. BAHL-AND WIFE BY DEED RECORDED SEPTEMBER 5, 1950, IN BOOK 2633 =PAGE 274, OFFICIAL RECORDS, SAID POINT BEING IN THE NORTH LINE OF PALM AVENUE, 1256.42 FEET EAST OF THE INTERSECTION OF SAID NORTH LINE WITH THE SOUTHEASTERLY LINE OF THE REDLANDS-RIVERSIDE (BARTON ROAD); THENCE NORTH ALONG THE WEST LINE OF SAID RAHL LAND 275 FEET TO., THE POINT OF. BEGINNING;-THENCE CONTINUING NORTH 176.55-FEET TO A POINT INTHE WUTH LINE_OF THAT:CERTAIN PARCEL:-OF LAND CONVEYED TO FRANCIS J. BENEDICT- BY DEED! RECORDED_JULY 7, 1950, IN-BOOK 2601_OFFICIAL RECORDS. PAGE 197; THENCE ALONG SAID SOUTH LINE 118.59 FEET TO THE SOUTHWEST CORNER THEREOF; THENCE, :- NORTH ALONG-THE WEST LINE OF SAID LAND TO A POINT IN THE SOUTHEASTERLY LINE - OF THE A LANDS-RIVERSIDE ROAD; THENCE SOUTHWESTERLY ALONG SAID LINE, 233.24 FEET_TO THE NORTHEAST CORNER OF THAT CERTAIN PARCEL CONVEYED TOR.-D. MOORE. -AND WIFE BY DEED RECORDED APRIL 10, 1951, IN BOOK 2745,"PAGE 5912 _ OFFICIAL_RECORDS; THENCE SOUTH, ALONG THE EAST LINE OF SAID-LAND-3.16.67-.FEET-- TO-THE NORTHWEST CORNER OF THAT LAND CONVEYED TO MARGARET M.BENEDICT; RECORDED APRIL-10,-.-1951, IN BOOK 2745, PAGE?593, OFFICIAL RECORDS,-..THENCE-EAST"- ALONG THE NORTH LINE'OF SAID LAND 317.17 FEET TO THE TRUE POINT OF BEGINNING. ----- = CLTA STANDARD COVERAGE=1990 Order No.: 910076007-X59 SCHEDULE A (continued) EXCEPTING THEREFROM THAT PORTION OF LOTS 9 AND 16, R. W. A. GODFREY'S -_', - -SUBDIVISION -OF-_THE-.SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP -1 SOUTH, RANGE-4- _.-- WEST, SAN BERNARDINO BASE AND MERIDIAN, AS PER PLAT RECORDED IN BOOK 13 OF MAPS,PAGE 23,RECORDS OF SAID COUNTY,DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF REDLANDS RIVERSIDE ROAD (NOW KNOWN.AS BARTON ROAD) AS ESTABLISHED BY DEED FROM NATIONAL ORANGE-,SHOW CO.,TO THE COUNTY OF SAN_BERNARDINO,RECORDED MAY=18,.1932,-IN - - BOOK -735, -PAGE ,89, OFFICIAL RECORDS, WITH THE WEST LINE OF A ROAD A:S.,-,. ESTABLISHED BY DEED FROM R. W. A. GODFREY ET.-AL.,TO SAN BERNARDINO COUNTY;;, ;- RECORDED IN BOOK 270 OF-:DEEDS, PAGE 213, RECORDS OF_SAID COUNTY; THENCE:' SOUTHWESTERLY_---ALONG THE SOUTH LINE OF SAID REDLANDS RIVERSIDE ROAD TO:",-,THE NORTHWEST CORNER OF THAT CERTAIN PARCEL AS CONVEYED TO LESLIE H. - HENSON AND WANDA G. HENSON BY DEED RECORDED JUKE 611958, IN BOOK 4525,PAGE,: -167,`OFFICIAL RECORDS,_RECORDS OF.SAID COUNTY, SAID POINT ALSO BEING THE TRUE _ POINT-OF BEGINNING.OF THE PARCEL TO BE DESCRIBED; THENCE.SOUTH 00 02':-WEST.r - 259123 FEET-(RECORDED.SOUTH 0° 12' WEST-259.7 FEET)'ALONG THE-WEST-LINE OF SAID HENSON PROPERTY TO THE SOUTHWEST CORNER THEREOF;THENCENORTH-89° 26' 30" EAST (RECORDED NORTH 89° 36' 30" EAST) ALONG THE SOUTH LINE OF SAID_HENSQN;.. _ PROPERTY AND ITS EASTERLY PROLONGATION 118.59 FEET; TO THE NORTHWEST CORNER OF THAT CERTAIN PARCEL AS CONVEYED TO WILLIAM M: RAINBOLT ET. AL.; - _ BY DEED RECORDED APRIL .12, 1962, IN BOOK 5680, PAGE 373, OFFICIAL RECORDS; THENCE SOUTH 00 02' WEST ALONG THE WESTERLY LINE OF SAID RAINBOLT PROPERTY_;; 77-FEET;THENCE SOUTH 89°`26' 30"WEST A DISTANCE OF 218:59 FEET;THENCE NORTH 0__:_j 02' .EAST_TO A POINT ON THE SOUTHERLY LINE OF THE HEREIN..ABOVE MENTIONED:i _REDLANDS-RIVERSIDE ROAD; THENCE NORTHERLY ALONG THE SOUTHERLY LINE .-SAID REDLANDS RIVERSIDE ROAD TO THE TRUE POINT OF BEGINNING. SAID PROPERTY ISALSO SHOWN IN BOOK 8 OF RECORDS OF SURVEY PAGE 48, RECORDS _ - -0E SAID COUNTY:'-. _ ABOVE LEGAL DESCRIPTION IS MADE PURSUANT TO THAT CERTAIN CERTIFICATE OF _COMPLIANCE OF LOT LINE ADJUSTMENT RECORDED MARCH .18, .1998 AS:INSTRUMENT;;=--- NO. 19980096492 AND MAY 18, 1999 AS INSTRUMENT NO. 19990211990, BOTH OF OFFICIAL _RECORDS. -PARCEL 2: (0276-202-48-0-000 - A PORTION OF LOTS 15,.AND ,16, R. W. A. GODFREY'S SUBDIVISION OF THE SOUTHWEST k_.__ T = 1/4"OF-SECTION 33;TOWNSHIP 1 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN; W`FHE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA,AS PER PLAT, , -—_ - -- -. RECORDED IN BOOK 13 OF MAPS PAGE_23, RECORDS OF SAID COUNTY, DESCRIBED..AS FOLLOWS :. BEGINNING=AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF REDLANDS.: - RIVERSIDE ROAD'(BARTON.ROAD)AS CONVEYED TO THE COUNTY OF SAN-BERNARDINO- BY DEM RECORDED MAY 18 -1932 IN BOOK. 795, PAGE 89, OFFICIAL.RECORDS WITH-THE - :- NORTH LINE.'OF--PALM AVENUE; THENCE EAST ALONG THE NORTH LINE OF PALM- __ _CLTA STANDARD COVERAGE-1990 i Order No.: 910076007-X59 SCHEDULE A (continued) I AVENUE, 773.25 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 00 02'_-EAST_ 459.91 FEET TO THE SOUTHEASTERLY LINE OF REDLANDS-RIVERSIDE ROAD; THENCE IN -A -NORTHEASTERLY DIRECTION ALONG THE SOUTHEASTERLY LINE OF REDLANDS_---_ RIVERSIDE ROAD, 213.03 FEET; THENCE SOUTH 00 02' WEST 591.67 FEET TO THE NORTH. LINE OF PALM AVENUE; THENCE WEST ALONG THE NORTH LINE OF PALM AVENUE, 166.00 FEET TO THE TRUE POINT OF BEGINNING. EXCEPTING THEREFROM THAT PORTION OF LOT 15,R_ W.A. GODFREY'S SUBDIVISION OF =- - THE SOUTHWEST, 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4 WEST, -SAN r _ BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA,AS PER PLAT RECORDED IN BOOK 13 OF MAPS,PAGE 23,RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: ___ BEGINNING AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF REDLANDS - - RIVERSIDE ROAD(BARTON ROAD)AS CONVEYED TO THE COUNTY OF SAN BERNARDINO BY.DEED RECORDED MAY 18, 1932, IN BOOK 795, PAGE 89, OFFICIAL RECORDS OF_SAID,; - -_ COUNTY, WITH THE NORTH LINE OF PALM AVENUE; THENCE EAST ALONG THE NORTH_',,, LINE OF PALM AVENUE, 773.25 FEET;THENCE NORTH 0 02 EAST 275 FEET.TO-THE TRUE = = POINT OF BEGINNING,-'-'THENCE NORTH.-890 27' 10" EAST, 75 FEET; THENCE NORTH 00. 02'',= EAST, 244.76 FEET, MORE OR LESS, TO THE SOUTHEASTERLY LINE OF'BARTON ROAD;`: THENCE SOUTHWESTERLY ALONG THE SOUTHERLY LINE OF BARTON ROAD, 96.45 FEET; _ THENCE SOUTH 00 02' WEST 184.91 FEET,MORE OR LESS TO THE POINT OF BEGINNING. ALSO -EXCEPTING THEREFROM THAT PORTION OF LOT 15, R. W. •A. GODFREY'S. SUBDIVISION OF THE SOUTHWEST 1/4 OF SECTION 33, TOWNSHIP 1 SOUTH, RANGE 4, - WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE COUNTY OF SAN BERNARDINO,Pj'_ -_ _ STATE OF CALIFORNIA,--AS PER PLAT RECORDED IN BOOK 13 OF MAPS, PAGE 23, RECORDS OF SAID COUNTY;:DESCRIBED AS FOLLOWS: _ - BEGINNING AT A POINT ON THE NORTH LINE OF PALM AVENUE DISTANT THEREON" _. w 773.2.5 FEET==EAST:OF'_THE-INTERSECTION OF THE NORTH LINE OF--SAID'PALM AND THE SOUTHEASTERLY-LINE OF REDLANDS-RIVERSIDE ROAD (BARTON ROAD(�-AS- CONVEYED TO THE COUNTY OF SAN BERNARDINO BY DEED RECORDED MAY 18, 1932) IN BOOK-795. PAGE 89, OFFICIAL RECORDS OF SAID COUNTY; THENCE NORTH 0° 02' EAST; - 275 FEET TO THE SOUTHWEST CORNER OF THAT CERTAIN PARCEL OF LAND CONVEYED, TO ANTHONY PETTA AND ENGELINE PETTA, HUSBAND AND WIFE, AS JOINT TENANTS . BY DEED RECORDED APRIL 2, 1958 IN BOOK 4474, PAGE 231, OFFICIAL RECORDS OF SAID t COUNTY; THENCE EAST ALONG.THE SOUTH LINE OF SAID PETTA LAND 7.5 FEET-TO.THE�.:_.: SOUTHEAST CORNER THEREOF; THENCE SOUTH 00 02' WEST 275 FEET TO THE NORTH' LINE OF PALM AVENUE,_THENCE WEST ALONG THE NORTH LINE OF PALM AVENUE, 75 FEET TO THE POINT-OF BEGINNING: -- -Assessor's Parcel Nuinber:0276_202-48-0-000 : 0276 202-R2-0-000 - _ —_ 00 CLTA STANDARD COVERAGE-1990 - -- -. - Page 4 Order No.:910076007-X59 SCHEDULE B EXCEPTIONS FROM COVERAGE This policy does not insure against loss or damage(and the Company will not pay costs, attorneys' fees or expenses)which arise by reason of: PART I 1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records. Proceedings by -a public agency which may result in taxes or assessments, or notices of such proceedings,-whether.or not shown by the records of such agency or,by the public records. = 2. Any facts, rights, interests or claims which are not shown by the public records but which could be. ascertained by an inspection of the land or which may be asserted by persons in possession thereof. 3. Easements, liens or encumbrances,or claims thereof,'which are not shown by the public records.- 4. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records. 5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts-authorizing the issuance thereof;(c)water-rights,claims or title to water,whether or not the matters excepted under,!- (a), (b) or(c) are shown by the public records. 1 PART II - A. Property taxes, including any assessments collected with taxes, for the fiscal year 2009 - 2010 that are a lien not yet due. _ B. Said land is shown as exempt on the San Bernardino County Tax Roll for the fiscal year 2008-2009 = Assessors Parcel Number: 0276-202-48-0-000 Affects: _. . Parce12 C. Said-land is shown as exempt-on the San Bernardino County Tax Roll for the fiscal year 2008-2009 Assessors Parcel Number 0276-202-82-0-000 Affects: _- _ - 'Parcell 1. . A right of way for an-ifrigation pipe, as shown on Licensed Land Surveyor's IMap recorded in Book' 8 page 48, Records of Su rvey.° =CLTA STANDARD COVERAGE-1990 - - - �.- Order No.: 910076007-X59 SCHEDULE B (continued) 2. An easement for the purpose shown below and rights incidental thereto as set forth in a document. Purpose: pipe lines, and ingress,egress -=-' Recorded: - April 10, 1951 in Book 2745 page 593 of Official Records Affects: That portion of said land as described in the document attached hereto. 3. An easement for the purpose shown below and rights incidental thereto asset forth in a document. Purpose._ - utilities Recorded: - December 30, 1953 in Book 33.02 page 395,of Official Records Affects: _ __ 1 hat portion of said land as described in the document attached -hereto. 4. An easement for-the purpose shown below and rights incidental thereto as set forth in a document. Purpose - -- ;pipe lines _ Recorded: �_ .__ _ April 2, 1964 in Book�5120 page 228, of Official Records Affects That portion of said land as described in the document attached hereto. 5. An easement for the purpose shownbelow and rights'incidental thereto as set forth in a document Purpose ..highway and road Recorded ` :November 25, 1974 in Book 8564 page 507,of Official Records Affects :That portion of.said land as described in the_document. attached hereto. _ . 6. An easement for the purpose shown below and rights,incidental thereto as set forth in a document Purpose -._,..highway and road Recorded January..8, 1975 in Book 8590 page 425,of Official Records Affects 'That portion of said land as described in the document attached hereto. 7. An easement for the purpose shown below and rightsincidental thereto as set forth in a document Purpose. sewers - Recorded: s Apri12, 1975 in-Book 8648 page 443 of Official-Records Affects __: 2That portion of said_4and- as.described in the document attached _ -- --hereto. _ - - CLTA STANDARD 1990 COVERAGE - - _ - .. Pane 6 .. Order No.:910076007-X59 SCHEDULE B (continued) 1 ' i 8. An easement for the purpose shown below and rights incidental thereto as set forth in a document. Purpose: 'ingress, egress Recorded: -- December 21, 1983 as Instrument No. 83-300503 of Official Records Affects: That portion of said land as described in the document,attached hereto. 9. An easement for the purpose shown below and rights incidental thereto as set forth in a document. Purpose: - _:public utilities Recorded: _:'=November 20, 1984 as Instrument No., 84-279249 -of Official _ Records Affects: _ _- =That portion of said land as described in the document attached _ .hereto. - 10. The effect of any failure to comply with the terms,covenants-conditions and provisions of the lease•- - described or referred to in Schedule A. :--END OF SCHEDULE 1 ' _T._- I 'G CLTA STANDARD COVERAGE 1990 _ O �. THIS YAP I6 r0A DIE PURPOSE Ph. R.W.A. Godfrey's Sub., M.B.. 13/23 ....City of Grand Terrace OA76— Z U Q (n Of AD YAIOREM TAXATION ONE'. Tax Rate Area CD 16001 —' 34� CD r O --------------------------------------------- Par.Ell CID 1 cn a / Ile.e7 ,I; 31 Par. 2 IN) _ I 213-37 N — r II O Nli/ 1 I ,� `.�6% B2 13 COMMON AREA 171.73 CQ o3r`� 2 2 (10 AC.) 1 64 5 66 9 73 1 A. 317.17 1.14 AC. .2 65 6 69 10 13 63 f8 16 3 66 7 70 11 71 m Pin. Par. 1 (18A AC.) k% 4 67 g n 12 T5 1 1.11:AC. 1 S (1D Ac.) ey e7 Te 66 9oI:' s` / Ise Par. 2 I .I 10 24 S9 , O 0 /9 )8 a fit 17 35 36 78 0 33 el _ 110 116.0, 75 '1 79 71.79 T9.19 85 70 e'7 9e I oOV, —a*O REYISEO Tract No. 11450, N.B. 193/3-4 [IlIl4111 1A 78 Parcel Nap No. 336, P.N. 3/88 > >78 Assessor's Map Pin. Assessor's Nap No. 1, Unrecorded. Book 0276 Page 20 December 20o Parc,ei Nap No. 10439, P.U. 123/1-2 02 San Bernardino County 1 i t - CALIFORNIA P • I - A August 26,2009 Kirsi Hansen Zions First National Bank One South Main Street, 17th Floor Salt Lake City,UT 84133 Re: City of Grand Terrace Activity: Refinancing Insurance Coverage Period: From 12:01 AM on 8/26/2009 to 11:59 PM on 6/30/2010 This Evidence of Coverage is issued on an annual basis and will be automatically reissued every June until expiration of the written contract. The City of Grand Terrace(Member)along.with other California public agencies,is a member of the California Joint Powers Insurance Authority(California JPIA),and participates in the following self-insurance and commercial insurance programs that are administered by the California JPIA for its members: General Liability Program,Including Automobile Liability Coverage Limit: $1,000,000 per occurrence Annual Aggregate Limit: $1,000,000 Workers'Compensation Program Employers Liability $1,000,000 On behalf of the Member,the California JPIA agrees to include Zions First National Bank as an additional Protected Party under the general liability program but solely as to the activity and coverage period shown above. The California JPIA will provide defense and payment for claims of Bodily Injury and Property Damage by individuals and entities,in accord with the terms of its Memorandum of Coverage. This coverage applies only to negligence of the Member arising out of the Member's participation in the covered activity at the covered location. This coverage does not include liability attributable to the sole negligence of the additional protected party. This letter does not mi any way alter the coverage provided by the Memorandum of Coverage nor by the California JPIA's insurance policies in effect during the coverage period. The California JPIA will endeavor to provide at least thirty(30) days notice of any change in the foregoing information. Sincerely, Im Thyden Insurance Programs Manager -- cc:Bernie Simon,Finance Director, City of Grand Terrace CALIFORNIA JOINT POWERS INSURANCE AUTHORITY 8081 MOODY STREET, LA;PALMA. CA 90623 TEL (562) 467-8700 FAX (562) 860-4992 CALIFORNIA JPIA 8081 Moody Street, La Palma, California 90623 July 1,2009 P 09 (Supersedes P 08a) PROGRAM: Property Insurance Scheduled buildings,contents,garaged vehicles,contractor's equipment,fine arts,rental income and other miscellaneous extensions of coverage(excluding earthquake&flood, except where provided). S PROTECTION PERIOD: July 1,2009 to July 1,2010 at 12:01 a.m. Pacific Time COVERAGE All Risk LIMITS: $500 Million per occurrence U $10 Million annual aggregate for flood DEDUCTIBLE: $5,000 PER OCCURRENCE PREMIUM: $0.019/per$100 of Insured Values COVERAGE IS WRITTEN AT REPLACEMENT COST COVERAGE: Licensed Non-Emergency Vehicles Physical Damage(optional) M (comprehensive and collision) DEDUCTIBLE: $1,000 PER OCCURRENCE PREMIUM: $0.548/per$100 of Insured Values COVERAGE IS WRITTEN AT STATED VALUE COVERAGE: Licensed Emergency Vehicles Physical Damage(optional) M (comprehensive and collision) Fire trucks,paramedic vans and ambulances DEDUCTIBLE: $5,000 PER OCCURRENCE ' PREMIUM: $0.243/per$100 of Insured Values COVERAGE IS WRITTEN AT STATED VALUE COVERAGE: Earthquake And Flood Insurance(optional) A LIMITS: $150 Million per occurrence DEDUCTIBLES: EARTHQUAKE(per unit of value)5%($100,000 min.) FLOOD(per unit of value)$100,000 PREMIUM:, $0.410/per$100 of Insured Values COVERAGE IS WRITTEN AT REPLACEMENT COST R COVERAGE: Boiler And Machinery Insurance(optional) Objects and equipment as defined by the policy. LIMITS: $100 Million per occurrence DEDUCTIBLE: $5,000 PER OCCURRENCE PREMIUM: $0.006/per$100 of Insured Values COVERAGE IS WRITTEN AT REPLACEMENT COST YNOTE: An administrative fee is included in the invoice. REMEMBER TO REPORT ACQUISITIONS OF NEW REAL AND PERSONAL PROPERTY. THE ABOVE IS A SUMMARY ONLY AND DOES NOT MODIFY THE INSURANCE POLICY. - THERE ARE ADDITIONAL SUB-LIMITS. FOR FULL COVERAGE DETAILS SEE COPY OF POLICY ON FILE AT THE CALIFORNIA JPIA OFFICE. 1 EFFECTIVE JULY 1,2009 Rev: 7/14/09 Fi NStJ I.Ai . � S5JE DAT E(M IM DRYY) �\ :. 08/25/09 1 THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN FORCE,AND CONVEYS AL \� I--- THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY. PRODUCER--------------------- — — -----, COMPANY ALLIANT INSURANCE SERVICES, INC. j P.O. Box 6450 Lexington Insurance Company—Primary Company Newport Beach, CA 92658 6450 Excess Carriers on Schedule on File with California JPIA (949) 756-0271 CODE SUB-CODE I INSURED — LOAN NUMBER — T California JPIA and its Member: ' _ 09P POLICY NUMBER MBER 3 City of Grand Terrace;City of Grand Terrace Joint ---�--— ' i EFFECTIVE DATE(MM DD;YY) EXPIRATION DATE(MMDDNY) CONT.UNTIL Powers Financing Authority 07/01109 . ( 07/01/10 TERMINATED 22795 Barton Road 4 i I IF CHECKED Grand Terrace, CA 92324-5295 7THIS REPLACES PRIOR EVIDENCE DATED- --" Attn: Risk Manager t ' PERY it1 >?tQjt _ LOCATION/DESCRIPTION(AS RESPECTS,WHEN APPLICABLE,REPLACEMENT COST APPLIES TO ALL REAL AND PERSONAL PROPERTY,AND STATED VALUE APPUES TO ALL VEHICLES OR EMERGENCY VEHICLES.) As respects Lease Agreement dated as of August 28,2009 issued to finance the City Hall and Water System Improvements terminating the previously entered into Lease Agreement dated as of August 1, 1997(the 1997 Lease")at the Civic Center Complex situated 22795 Barton Road, Grand Terrace,CA, Loc.#6 on property schedule on file with the company. Rental Interruption is included for 24 months. i 1t6RAG1 #dE 3E; ATt _ Nr 2t S COVERAGE/PERIL /FORMS � ' -t ----- AMOUNT OF INSURANCE ! DEDUCIBLE All Risk Property Insurance-Limits Per Occurrence-Replacement Cost Subject to Policy Exclusions I $500,000,000 (Earthquake and Flood are Excluded*) j Sub-Limits apply as follows(but not limited to): $50,000,000 Course of Construction i $ 2,500,000 Newly Acquired Property(not reported in 120 days)unnamed locations $ 250.000 Newly Acquired Fine Arts € $ 500,000 Animals 11 $ 10,000 Limited Mold-$100,000 Limited Mold Aggregate Limit i EARTHQUAKE AND FLOOD ARE COVERED ONLY IF INDICATED ABOVE,AND APPLIES PER PROPERTY SCHEDULE ON FILE WITH INSURANCE COMPANY. I : �Ifi�i ;(frrdt.+�ng 5af�ittoas)c Earthquake-5%of combined total values per covered location subject to a minimum deductible of$100,000 Flood-$100,000 per Occurrence-$250,000 Flood Zones A&V Vehicle Comprehensive and Collision-$1,000 Per Occurrence Emergency Vehicle Comprehensive and Collision-$5,000 Per Occurrences All Other Perlis-$5,000 Per Occurrence NOTE: SUBJECT TO POLICY TERMS,CONDITIONS AND EXCLUSIONS. THE POLICY IS SUBJECT TO THE PREMIUMS',FORMS,AND RULES IN EFFECT FOR EACH POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW 90 DAYS WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST,IN ACCORDANCE WITH THE POLICY PROVISIONS OR 90 DAYS WRiTFEN NOTICE AS REQUIRED BY LAW.SUBJECT TO 10 DAYS NOTICE OF CANCELLATION FOR NON-PAYMENT OF PREMIUM. ADfSF#i3{itAt.fN1fEE NAAAE AND ADDRESS -- -- - _ �-NATURE OF INTEREST MORTGAGEE ^� ADDITIONAL INSURED Zioes First National Bank X i LOSS PAYEE 43BEFU X (OTHER)Trustee Attn: James Manning SIGNATURE OF AUTHORIZED AGENT OF COMPANY_ One South Main Street,Suite 1700 Salt Lake City, Utah 84133 GPJPUoiRCJPIA`Propeny:-CERTS' Cen-pn.doc S.F.FORA Form 438BFLT\S (Rev.May 1. 1942)X LENDER'S LOSS PAYABLE:ENDORSEMENT 1. Loss or damage, if any, under this policy,shall be paid to the Payee named on the first page of this policy, its successors and assigns, hereinafter referred to as"the Lender", in whatever form or capacity its interests may appear and whether said interest be vested in said Lender in its individual or in its disclosed or undisclosed fiduciary or representative capacity, or otherwise,or vested in a nominee or trustee of said Lender. 2. The insurance under this policy,or any rider or endorsement attached thereto, as to the interest only of the Lender, its successors and assigns,shall not be invalidated nor suspended:(a)by any error.omission,or change respecting the ownership,description,possession,or location of the subject of the insurance or the interest therein,or the title thereto; (b) by the commencement of foreclosure proceedings or the giving of notice of sale of any of the property covered by this policy by virtue of any mortgage or trust deed;(c)by any breach of warranty,act,omission,neglect,or non-compliance with any of the provisions of this policy,including any and all riders now or hereafter attached thereto,by the named insured,the borrower,mortgagor,trustor,vendee,owner,tenant,warehouseman,custodian,occupant,or by the agents of either or any of them or by the happening of any event permitted by them or either of them,or their agents,or which they failed to prevent,whether occurring before or after the attachment of this endorsement,or whether before or after a loss,which under the provisions of this policy of insurance"or of any rider or endorsement attached thereto would invalidate or suspend the insurance as to the named insured,excluding herefiom,however,any acts or omissions of the Lender while exercising active control and management of the property. 3. In the event of failure of the insured to pay any premium or additional premium which shall be or become due under the tenets of this. policy or on account of any change in occupancy or increase in hazard rot permitted by this policy,this Company agrees to give written notice to the Lender of such non-payment of premium after sixty(60)days from and within one hundred and twenty(120)days after due date of such premium and it is a condition of the continuance of the rights of the Lender hereunder that the Lender when.so notified in writing by this Company of the failure of the insured to pay such premium shall pay or cause to be paid the premium due within ten(10) days following receipt of the Company's demand in writing therefor. If the Lender shall decline to pay said premium or additional premium,the rights of the Lender under this Lender's Loss Payable Endorsement shall not be terminated before ten(10)days after receipt of said written notice by the Lender, 4. Whenever this Company shall pay to the Lender any sum for loss or damage under this policy and shall claim that as to the insured no liability therefor exists,this Company,at its option,may pay to the Lender the whole principal sum and interest and other indebtedness due or to become due from the insured,whether secured or unsecured,(with refund of all interest not accrued),and this Company,to the extent r of such payment,shall thereupon receive a full assignment and transfer,without rrcourse,of the debt and all rights and securities heed as collateral thereto. 5. if there be any other insurance upon the within described property,this Company shall be liable tinder this policy as to the Lender for the proportion of such loss or damage that the sum hereby insured bears to the entire insurance of similar character on said property under policies held by,payable to and expressly consented to by the Lender. Any Contribution Clause included in any Fallen Building Clause Waiver or any Extended Coverage Endorsement attached to this contract of insurance is hereby nullified,and also any Contribution Clause in any other endorsement or rider attached to this contract of insurance is hereby nullified except Contribution Clauses for the compliance with which the insured has received reduction in the rate charged or has received extension of the coverage to include hazards other than fire and compliance with such Contribution Clause is made a part of the consideration for insuring such other hazards. The Lender upon the payment to it of the full amount of its claim,will subrogate this Company(pro rata with all other insurers contributing to said payment) to all of the Lender's rights of contribution under said other insurance. 6. This Company reserves the right to cancel this policy at any time,as provided by its terms,but in such case this policy shall continue in force for the benefit of the Lender for ten(10)days after written notice of such cancellation is received by the Lender and shall thine cease. 7. This policy shall remain in full force and effect as to the interest of the Lender for a period of ten(10)days after its expiration unless an acceptable policy in renewal thereof with loss thereunder payable to the Lender in accordance with the terms of this Lenders Loss Payable Endorsement,shall'have been issued by some insurance company and accepted by the Lender. 8. Should legal title to and beneficial ownership of any of the property covered under this policy become vested in the Lender or its agents, insurance under this policy shall continue for the term thereof for the benefit of the Lender but,in such event,any privileges granted by this Lenders Loss Payable Endorsement which are not also granted the insured under the terms and conditions of this policy and/or under other riders or endorsements attached thereto shall not apply to the insurance hereunder as respects such property. 9. All notices herein provided to be give by the Company to the Lender in connection with this policy and this Lender's Loss Payable Endorsement shall be mailed to or delivered to the Lender at its office or branch described on the first page of the policy. Approved: Board of Fire Underwriters of the Pacific, California Banters'Association Committee on insurance. C:JPChu:Y'1PIA\P pertyl.CER"rct_43Nbft&.dx, i Calitomia JPIA - Coverage Page 2 of 3 CALIFORNIA JOINT POWERS INSURANCE AUTHORITY j CERTIFICATE OF LIABILITY PROTECTION In accordance with the provisions of Article 11(a)of the Joint Powers Agreement creating the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY, the Executive Committee has designated a Joint Liability Protection Program for the Members. I City of Grand Terrace including its City Council,along with all its commissions,agencies and employees thereof,is protected in accordance with the terms and provisions of the CALIFORNIA JPIA Liability Protection Program.This Certificate is evidence of the Member's participation in the Liability Protection j Program during the period of July 1,2009 to July 1,2010. 1. I The CALIFORNIA JOINT POWERS INSURANCE AUTHORITY will investigate,defend and/or pay all claims, settlements and final judgements which come within the provisions of the CALIFORNIA JPIA Memorandum of Coverage of the Liability Protection Program as defined therein. CALIFORNIA JOINT POWERS INSURANCE AUTHORITY Jonathan R.Shull,Chief Executive Officer ! - Workers'Compensation 12/1/2002= current Select Certificate version: July, 2009 to June, 2010 Refresh Select a format 7 Export http://members.cjpia.org/Resources/Coverage.aspx 8/25/2009 i: . , l amomia jnA - —overage Yage S oT J \ CALIFORNIA JOINT POWERS INSURANCE AUTHORITY CERTIFICATE OF WORKERS' COMPENSATION PROTECTION CALIFORNIA JOINT POWERS INSURANCE AUTHORITY has complied with the requirements of the Director of Industrial Relations under the provisions of Section 3700 of the Labor Code of the State of California City of Grand Terrace its employees,City Council,and other legally authorized or appointed committees or commissions,are covered in accordance with California Labor Law for the period of July 1,2009 to July 1,2010. CALIFORNIA JOINT POWERS INSURANCE AUTHORrrY r/ Jonathan R.Shull,Chief Executive Officer CALIFORNIA JOINT POWERS INSURANCE AUTHORITY 8081 Moody Street, La Palma, CA 90623 Phone: (800) 229-2343 Email: info@cjpia.org Copyright© 2001-2008 1 Terms&Conditions. I Privacy Policy Fraud Policy_ I i http://members.cjpia.org/Resources/Coverage.aspx 8/25/2009 $2,162,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank CERTIFICATE OF FINANCIAL ADVISOR REGARDING IRS FORM 8038G I hereby state and certify that the computation of the yield of the Lease Agreement for purposes of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), the net interest cost of the Lease Agreement for purposes of federal tax Form 8038G, and the weighted average maturity and weighted average maturity date of the Lease Agreement for purposes of federal tax Form 8038G, are all set forth in Exhibit A. The undersigned acknowledges that it is intended that interest on the Lease Payments be exempt from Federal.income tax and that the firm of Harper &Burns LLP, is rendering an opinion on the date hereof to said effect and that in rendering said opinion said firm is relying, among other things, upon the statements made herein. Dated as of August 28, 2009 W.J. FAWELL CO., Fina is Advisor By: William J. awell I EXHIBIT"A" Net Interest Cost: 4.760001 Weighted Average Matrity (years): 6.23 18 10 Arbitrage Yield: 4.759911% 8038-G Information Return for Tax-Exempt Governmental Obligations Form ► Under Internal Revenue Code section 149(e) ONAB No. 1545-0720 (Rev. November 2000) ► See separate Instructions. Department of the Treasury Caution:If the issue price is under S100,000, use Form 8038-GC. Internal Revenue Service Reporting Authority If Amended Return, check here ► ❑ 2 Issuer's employer identification number 1 Issuer's name 95 ; 3316135 City of Grand Terrace 3 Number and street (or P.O. box if mail is not delivered to street address) Room/suite 4 Report number 22795 Barton Road 3 2009-1 5 City,town, or post office, state, and ZIP code 6 Date of issue Grand Terrace, California 8/28/09 8 CUSIP number 7 Name of issue None City of Grand Terrace Refunding Lease Agreement e of officer or legal representative whom the IRS may call for more information 10 Telephone number of officer or legal representative 9 Name and titl Bernie Simon,Acting City Manager ( 909 )430 2216 Type of Issue (check applicable box(es) and enter the issue.price) See instructions and attach schedule 11 11 ❑ Education . . . . . . . • • • • • • • • • . • • • • . . . . . . 12 12 ❑ Health and hospital . . . . . . . . . . . . . . . • • • • • ' • . 13 13 ❑ Transportation . . . . . . . . . . . • • • • • • . • • • • . . . . 14 14 ❑ Public safety. . . . . . . . . . . . • • • • • • • • ' • ' ' . . 15 15 ❑ Environment (including sewage bonds) . . . . . . . . . . . . . . • . • • • 16 16 ❑ Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 17 ❑ Utilities . . . . . . . . . . . . . . . . . . . . . . . . 18 18 W1 Other. Describe 0- Public Facilities 19 If obligations are TANS or RANs, check box OP- ElIf obligations are BANS, check box El 20 If obligations are in the form of a lease or installment sale, check box . . . . IN- Description of Obligations. Com lete for the entire issue for which this form is bein filed. (c)Stated redemption (d)Weighted (e)Yield (a)Final maturity date (b)Issue price price at maturity average maturity 21 9/1121 $ 21162,000 $ NIA 6.231810 years 4:760 Uses of Proceeds of Bond Issue (includingunderwriters' discount 22 ""' 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . • 23 2,162,000 23 Issue price of entire issue (enter amount from line 21, column (b)) . . . • • • 62,714 24 Proceeds used for bond issuance costs(including underwriters' discount) 24 25 Proceeds used for credit enhancement . . . . . . . . . . . 25 --------- 26 Proceeds allocated to reasonably required reserve or replacement fund . 27 2,162,000 27 Proceeds used to currently refund prior issues . . . . . . . . 28 --- 28 Proceeds used to advance refund prior issues . . . . . . . . . 29 2,162,000 29 Total (add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . --- -- --- 30 Nonrefundin proceeds of the issue subtract line 29 from line 23 and enter amount here . . . 30 Description of Refunded Bonds (Complete this part only for refunding bonds. 5.5o years 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . 0- years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . • • : 9/1/2009 33 Enter the last date on which the refunded bonds will be called . . . . . . . . • • 9/1/1997 34 Enter the date(s) the refunded bonds were issued ► 101 iscellaneous ------- 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35 -- 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract(see instructions) 36a -'---------- b Enter the final maturity date of the guaranteed investment contract ► 37a ---------- 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units ------ b If this issue a loan made from the. proceeds of another tax-exempt issue, check box_.► _❑_and enter the name of the issuer OP- and the date of the issue ► El( )( )( ► 38 If the issuer has designated the issue under section 265 b 3 B I)(i)( )III (small issuer exception), check box _ ► ❑ 39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . . . _ .. . ► ❑ 40 If the issuer has identified a hedge, check box . . • • • • • . • ' Under penalties of perjury,I declare that I have examined this return and accompanying schedules and statements,and to the best of my knowledge and belief,they are true,corr ct,and complete. Sign ' 'I John R. Harper, Bond Counsel Here Date 'Type or print name and idle Signature of issuer's auth rize representative For Paperwork Reduction Act Notice, see page 2 of the Instructions. cat.No. 63773s Form 8038-G (Rev. 11-2000) $2,135,000 LEASE AGREEMENT Dated as of August_, 2009 between the City of Grand Terrace and Zions First National Bank CERTIFCATE INSTRUCTIONS TO TRUSTEE REGARDING PAYMENT OF CLOSING COSTS The undersigned hereby state and certifies: (i) that I am the duly appointed, qualified and Acting City Manager for the City of Grand Terrace (the "City") and in that capacity, do hereby direct the Trustee to pay those certain Closing Costs realted to the above referenced financing, as set forth in the attached Exhibit"A". (ii) any Closing Costs not paid on or before January 1, 2010 shall be transferred to the Lease Payment Fund to be utilized to pay lease payments. Dated: August 28, 2009 CITY OF GRAND TERRACE By. Its: Bernie Simon, Acting City Manager I $2,162,000 *_ LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank EXHIBIT "A" Harper&Burns $25,000.00 Bond Counsel W.J. Fawell Co. Financial Advisor $22,000.00 Chicago Title $2,100.00 Title Insurer U.S. Bank National Association $750.00 Trustee CDIAC $350.00 Grant Thornton $5,000.00 Verification Agent Lender Origination Fee $7,500.00 Zions First National Bank Miscellaneous $14.36 TOTAL $62,714.36 i I 1 $2,135,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank CITY CERTIFICATE REGARDING RESOLUTION The undersigned hereby states and certifies: (i) that I am the duly appointed, qualified and acting City Clerk of the City of Grand Terrace, a municipal corporation and political subdivision of the State of California, duly organized and existing under the laws of the State of California(the "City"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and (ii) that attached hereto is a true, correct and complete copy of Resolution No. 09-20 (the "Resolution"), entitled "A Resolution of the City of Grand Terrace Authorizing Proceedings to Refund Outstanding 1997 Certificates of Participation and Approving Related Documents and Actions", adopted by the City Council of the City on June 23, 2009 (the "Resolution"),which Resolution has not been amended, supplemented, modified, rescinded or repealed and remains in full force and effect as of the date hereof. Dated as of August 28, 2009 CITY OF GRAND TERRACE By: Brenda Mesa, City Clerk $2,135,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank AUTHORITY CERTIFICATE REGARDING RESOLUTION The undersigned hereby states and certifies: (i) that I am the duly appointed, qualified and acting Clerk of the Grand Terrace Public Financing Authority, a California Joint Powers Authority, duly organized and existing under the laws of the State of California(the "City"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and (ii) that attached hereto is a true, correct and complete copy of Resolution No. 09-01 (the "Resolution"), entitled "A Resolution of the Grand Terrace Public Financing Authority Authorizing Proceedings to Refund Outstanding 1997 Certificates of Participation and Approving Related Documents and Actions", adopted by the City Council of the City on June 23, 2009 (the "Resolution"),which Resolution has not been amended, supplemented, modified, rescinded or repealed and remains in full force and effect as of the date hereof. t ' Dated as of August 28, 2009 CITY OF GRAND TERRACE By: Brenda Mesa, City Clerk i $2,13 5,000 r LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Lease Agreement, dated as of August 28, 2009, from the Zions First National Bank, as lessee and sublessor, to the City of Grand Terrace, as lessor and sublessee (the "City'), is hereby accepted by the undersigned officer on behalf of the City pursuant to authority conferred by resolution of the City Council of the City adopted on June 23, 2009, and the sublessee consents to recordation thereof by its duly authorized officer. Dated as of August 28, 2009 CITY OF GRAND TER CE By: Bernie Simon, Acting City Manager i ,'[•ORT OF PROPOSED DEBT ISSUANCE California Debt and Investment Advisory Commission 915 Capitol Mall,Room 400,Sacramento,CA 95814 P.O. Box 942809,Sacramento,CA 94209-0001 Tel.:(916)653-3269 Fax: (916)654-7440 [legion and timely submittal of this form to the California Debt and Investment Advisory Commission(CDIAC)at the above address will assure your compliance with existing Califopiia State law -rill assist in the maintenance of a complete database of public debt in California.Thank you for your cooperation.t ISSUER NAME City of Grand Terrace (If pool bond,list participants) ISSUE NAME City of Grand Terrace$2,162,000 2009 Refunding Lease Please specify type/name of project: Refnding Lease PROPOSED SALE DATE 8/28/09 PRINCIPAL TO BE SOLD S 2,162,000.00 IS ANY PORTION OF THE DEBT FOR REFUNDING?Z No Yes,proposed amount for refunding $ 2,162,000.00 Issuer Contact First Name Bernie Middle Name Last Name Simon Title Acting City Manager E-mail BSIMON@cityofgrandterrace.org Address 22795 Barton Road Addr.Cont. Addr.Cont. Addr.Cont. City Grand Terrace State . CA Zip Code 92324 Phone 909 430-2240 Extension ISSUER LOCATED IN San Bernardino COUNTY Filing Contact:Name of Individual(representing rW Bond Counsel (" Financial Advisor f Lead Underwriter ) completed this form and may be contacted for information. `Name John Middle Name R. Last Name Harper Firm/Agency Harper&Burns LLP Address 453 South Glassell Street Addr.cost. Addr.cont. Addr.cont. City Orange State CA Zip Code 92866 Phone 714 771-7728 Extension E-mail jrharper@harperburns.com Send acknowledgement to: S. Pellegrino E-mail SPellegrino@harperburns.com FINANCING PARTICIPANTS: ! BOND COUNSEL John R. Harper, Harper&Burns LLP FINANCIAL ADVISOR William Fawell, Co. UNDERWRITER\PURCHASER ZionsFirst National Bank IS THE INTEREST ON THE DEBT TAXABLE? Under State law: �ti No(tax-exempt) : Yes(taxable) - :_ -- - _ - -----Under -Under No(tax-exempt Yes(taxable) -" -- - -�� �_� ••---- --•----- ' If the issue is federally-tax-exempt,is interes_t_a specific.preference item for the purpose of alternative Yes,preference item No,not a preference item i'PE OF-SALE: {' Competitive Negotiated t Section 8855(k)of the Califomia Government Code requires the issuer ofany proposed new public debt issue to give written notice of the proposed sate to the CDIAC no later than 30 dais prior to the sale.Under California Government Code,Section 8855(i),"7he issuer of any new public debt issue shall,not later than 45 days after the signing of the bond purchase contract in a negotiated or private financing,or after the acceptance ofa bid in a competitive offering,submit a report of final sale and official statement to the Commission.Tire Commission may require information to he sithmiiieti in the report offrnal sale that it considered appropriate. ---- '-Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis shall send a written statement,within two weeks after the bonds are sold,to the CDIAC explaining the reasons why the local agency determined to sell the bonds at private sale or on a negotiated basis instead of at public sale. Y�OF DEBT INSTRUMENT NOTE BOND Bond anticipation (BAN) Conduit revenue (Private obligor) (CRB) - Other note(Please specify below.) (OTHN) General obligation (GOB) Grant anticipation(GAN) Limited tax obligation(LTOB) Revenue anticipation (RAN) Other bond (Please specify below.) (OTHB) Tax allocation (TALN) Public lease revenue(PLRB) Tax and revenue anticipation (TRAN) Revenue (Pool) (RB) Tax anticipation(TAN) Revenue (Public enterprise) (PERB) Sales tax revenue (STRB) Commercial paper(CP) Special assessment(SAB) Certificates of participation/leases(COP/L) Tax allocation (TAB) Other(Please specify below.) (OTH) Please specify if"Other note/Other bond/Other"was checked Lease SOURCE(S)OF REPAYMENT F- Bond proceeds (BDPR) Property tax revenues(PRTX) X General fund of issuing jurisdiction(GNFD) F- Public enterprise revenues(PER) F- Grants(GRNT) F- Sales tax revenues (SATR) F- Intergovernmental transfers other than grants(ITGV) F- Special ssessments(SA) Local obligations (LOB) F- Special tax revenues(SPTR) Other(Please specify.) (OTHS) F- Tax-increment(TI) F- Private obligor payments(POP) Please specify if"Other"was checked Refunding +�JRPOSE(S)OF FINANCING F- Airport(APRT) F- Cash flow, interim financing (CFIF) r- Bridges and highways(BRHI) (— Project, interim financing (PIF) F- Convention center(CCTR) F-" Equipment(EQUP) F" College/university housing (CUH) F- Flood control/storm drainage(FLDS) r Multifamily housing(MFH) F- Multiple capital improvements and public works(MCAP) r Single-family housing (SFH) F- Other capital improvements and public works(OCAP) F- Parking (PRKG) F- Health care facilities(HCF) F- Parks/Open space (PRKG) F- Hospital(HOSP) F- Ports.and marinas (PRTS) Other/multiple health care purposes(equipment; etc.)(OMHC) Power generations/transmission (PWR) F- Prisons/jails/correctional facilities(PRSN) College/university facility(CUF) F- Public building (PB) F- K-12 school facility(KSCH) Public transit(PTR) F- Other/multiple educational uses (equipment, etc.) (OMED) F- Recreation and sports facilities(RCSP) �— Student Loans (SLC) F- Seismic safety improvments/repair(SSI) F- Solid waste recovery facilities(SWST) F- Redevelopment, multiple uses (RD) F- Street construction and improvements (SCI) --- Wastewater collection and treatment(WSTW) F- Commercial development(CMDV) r Water supply/storage/distribution(WTR) Industrial development(INDV) -_ F-__insurance/pension fund§�PF) .-�-- --F-`Pollution control{PC)_ - =_ _ .- _ _ —- X Other than listed above(OTH) -as e specify type/name of project if different from above propozed.pdf 03-05 - REPORT OF FINAL SALE California Debt and Investment Advisory Commission 915 Capitol Mall,Room 400,Sacramento,CA 95814 P.O. Box 942809,Sacramento,CA 942009-0001 CDIAC# : 2009-1006 Tel.: (916)653-3269 Fax: (916)654-7440 SUER NAME: Grand Terrace ISSUE NAME: 2009 Ref Lease IF THIS IS A POOLED FINANCING,WHICH ISSUANCE STATUTE IS IT AUTHORIZED UNDER? I)Nlarks-Roos Local Bond Pooling Act 2)JPA Law 3)Installment Sales Agreement,Lease... 4)Housing Revenue Bond Law&Industrial Development Bond Law 5)Other WILL A VALIDATION ACTION BE PURSUED: i No Yes Unknown ACTUAL SALE DATE: 08-28-2009 PRINCIPAL SOLD: S 2,162,000.00 IS ANY PORTION OF THE DEBT FOR REFUNDING?1 No Yes,refunding amount(including cost) 5 2,162,000.00 REASON FOR NEGOTIATED REFUNDING: If the issue is a negotiated refunding, indicate the reason(s)why the bonds were issued at a private or negotiated versus a competitive sale. F_ (1)Timing of the sale provided more flexibility than a public sale F_ (2)More cost savings were expected to be realized than a public sale F_ (3)More flexibility in debt structure was available than a public sale (4)Issuer able to work with participants familiar with issue/r than a public sale r (5)All of the above (6)Other(please specify) Refunding Issuer Contact: First Name: Bernie Middle Name: Last Name: Simon Title: Finance Director Address: 22795 Barton Rd Address: Address: Address: City: Grand Terrace State: CA Zip Code: 92313-5295 Email: bsimon@cityofgrandterrace.org Phone: 909 6846621 Extension: Issuer Located in San Bernardino County Filing Contact: Name of Individual(representing i4 Bond Counsel (" Financial Advisor ( Lead Underwriter ) who completed this form and may be contacted for information. First Name: John Middle Name: R Last Name: Harper Firm/Agency: Harper& Burns LLP Address: 453 South Glassell Street Address: Address: Address: City: Orange State: CA Zip Code: 92866 Phone: 714 771-7728 Extension: Email:jrharper@harperburns.com Send acknowledgement/copies to:S.Pellegrino Email: SPellegrino@harperburns.com Name of individual to whom an invoice for the CDIAC issue fee should be sent-2 First Name:Ash Middle Name: Last Name:Almurdaah Firm: . U.S. Bank, Corporate Trust Services - - Address: 633 W. Fifth Street, 24th Floor Address: Address: Address: - - City: Los Angeles State: CA Zip Code: 90071 Phone: 213 615-6002 Extension: 1';ecttiml i35e3(e)(2)(8)of7he California Government Code requires that any local age my selling refunding hondc at private sole or on a negotiated basis shall send a written sratewent,wioutt nr weeks after the honor are sold,to the CDMC explaining the reasons wiry the local agetlL t determined io sell the hondr at a private sole or on a ne�orared'nicer instead of at pit^hc s 2"flits fee is authorized by Section 8856 of the California Govenmtent Code and is charged to the lead undenvoler or purchaser of the issue.The fee is administratively ser by the 'omnii,:Nun.The c•nrreni fte schedule pray he ohtained from CD1.4C. - . FINANCING PARTICIPANTS(Firm name) OFFICE LOCATION (City/State) Financial Advisor: William J Fawell Lead Underwriter/Purchaser: Zions First National Bank Salt Lake City UT `;Bond Counsel: Harper & Burns Orange CA Trustee/Paying Agent: U.S. Bank, Corporate Trust Services Los Angeles, CA MATURITY SCHEDULE: IS THE INTEREST ON THE DEBT TAXABLE? .j Attached Under State Law: i No(tax-exempt) Yes(Ihrxablel Included in Official Statement Under Federal Lai%: i No(tax-exempt) Yes(taxable) If the issue is federally tax-exempt,is interest a specific preference MATURITY STRUCTURE: item for the purpose of alternative minimum tax? ;i Serial(S) i' Term(T) Yes,preference item i" No,not a preference item Serial and term bonds or two or more terms(B) INTEREST TYPE: 4� NIC TIC Variable NA FINAL MATURITY DATE: 9/1/2020 INTEREST COST: 4.76 % FIRST OPTIONAL CALL DATE: 9/1/2010 CAPITAL APPRECIATION BOND: Yes 'i No SENIOR STRUCTURE: ( Yes ji No ISSUANCE COSTS AND FEES: SUBORDINATE STRUCTURE: Yes (i No A) Management Fee 0.00 OFFICIAL STATEMENT(OS)/OFFERING MEMORANDUM: B)Total Takedown 2,162,000.00 (' OS Enclosed C Other bond documents enclosed C)Underwriter Expenses 0.00 WAS THE ISSUE INSURED OR GUARANTEED? ii No Underwriter Spread or Discount 0.00 Bond Issuance(I) D)Bond Counsel 25,000.00 Letter of Credit(L) E)Disclosure Counsel 0.00 State Intercept Program(T) F)Financial Advisor 22,000.00, i Other(0) G)Rating Agency 0.00 GUARANTOR: H)Credit Enhancement 0.00 ENHANCEMENT EXPIRATION DATE: I)Trustee Fee 7,500.00 INDICATE CREDIT RATING: J)Other Expenses 8,214.36 (For example,"AAA"or"Aaa) f Total Issuance Costs 62,714.36 ;i Not Rated (— Rated Standard&Poor's K)Original Issue Premium 0.00 Fitch L)Original Issue Discount 0.00 M)Net Original Premium/Discount 0.00 Moody's Other - Report of Final Sale Vau: I I I REPORT OF FINAL SALE Can;-�l' CDIAC#: 2009-1006 `indicates required field Please confirm the information you entered: Issue Information Financing Participants Financial Advisor: William J Fawell Issuer Name: Grand Terrace Issue Name: 2009 Ref Lease Financial Advisor City:, Which Issuance Statute : Lead Underwriter: Zions First National Bank Which Issuance Statute Other. Lead Underwriter City/State: Salt Lake City,UT Validation Action: No Bond Counsel: Harper&Bums Actual Sale Date:08-28-2009 Bond Counsel City: Orange,CA Principal to be sold: $2,162,000.00 Trustee/Paying Agent: U.S.Bank,Corporate Trust Services Any portion for refunding:Yes,refunding amount(induding Trustee/Paying Agent City: Los Angeles,,CA cow) Maturity Amount for refunding: $2,162,000.00 Maturity Schedule: Attached Negotiated Refunding: Maturity Structure: Serial (S) Negotiated Refunding Other: Refunding Final Maturity Date: 9/1/2020 Issuer Information First Optional Call Date: 9/1/2010 Name: Bernie Simon Senior Structure: No Title: Finance Director Subordinate Structure: No Address: 22795 Barton Rd Official Statement/Offedng Memorandum: Other Mond City: Grand Terrace State: CA Zip: 92313-5295 documents enclosed County:San Bemardino Issue Insured Guaranteed: No Guarantor: Phone: (909)6846621 Email: bsimon@cityofgrandterrace.org Enhancement Expiration Date: Filing Contact Credit Rating: Not Rated Standard&Poor's: Name of Individual representing: Bond Counsel Fitch: Name:John R Harper May: Firm/Agency: Harper&Bums LLP Other Credit Rating: Address:453 South Glassell Street Interest/Costs and Fees City: Orange State: CA Zip:92866 Phone: (714)771-7728 Taxable Under State Law: No(tax-exempt) Email:j(714)771-77erbums.00m Taxable Under Federal Law: No(tax-exempt) Alternative Minimum Tax: No,not a preference item Acknowledgement: S.Pellegrino Acknowledgement Email:.SPellegrino@harperbums.com Interest Type: NIC Interest Cost: Filing Contact Invoicee Capital Appreciation Bond: No Name:Ash Almurdaah Management Fee: $0.00 Firm/Agency: U.S. Bank,Corporate Trust Services Total Takedown: $2,162,000.00 . Address: 633 W.Fifth Street,24th Floor Underwriter Expenses: $0.00 City: Los Angeles State: CA Zip: 90071 Underwriter Spread or Discount: $0.00 Phone: (213)615-6002 Bond Counsel Fee: $25,000.00 ! Disclosure Counsel: $0.00 Financial Advisor Fee: $22,000.00 Rating Agency: $0.00 Credit Enhancement: $0.00 Trustee Fee: $7,500.00 Other Expenses: $8,214.36 Total Issuance Costs: $62,714.36 Original Issue Premium: S 0.00 Original Issue Discount: S 0.00 Net Original Issue Discount: $0.00 Confirm Submission Make Changes 9. httr)://cdiaeforms.treasurer.ca.gov/final.aspx?id=2501711 6 i I $2,162,000 LEASE AGREEMENT Dated as of August 28, 2009 between the City of Grand Terrace and Zions First National Bank 1997 TRUSTEE'S RECEIPT OF PROCEEDS The undersigned hereby states and certifies: (i) that I am an authorized officer of U.S. Bank National Association, trustee (the 1997 Trustee")in connection with the 1997 City of Grand Terrace Refunding Certificates of Participation, Issue of 1997 (the "1997 Certificates") and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and (ii) that, on the date hereof, the 1997 Trustee received the amount of the$2,162,000 from the Zions First National Bank to be deposited with the 1997 Trustee to be held and administered under the Refunding Instructions for the purpose of paying and prepaying the 1997 Certificates and the 1997 Lease Payments on the September 1, 2009 and the Closing Costs related thereto. Capitalized terms used here and not otherwise defined have the meanings given thern in the Lease Agreement. Dated as August 28,2009 U.S. BANI N 1. ONAL ASSOCIATON as 19) �I Trustee Authoriz Offic LAW OFFICES OF HARPER & BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL BANK 453 S.GLASSELL STREET JOHN R.HARPER' ORANGE,CALIFORNIA 92866 RIVERSIDE!SAN BERNARDINO CO. ALAN R.BURNS (951) 674-0698 COLIN R.BURNS (714) 771-7728 OF COUNSEL FAX(714) 744-3350 JUDI A.CURTIN* MICHAELMONTGOMERY* THOMAS W.ALLEN 'A PROFESSIONAL BANK August 28, 2009 City of Grand Terrace Members of the City Council 22795 Barton Road Grand Terrace, California 92405 OPINION. $2,162,000 aggregate principal amount of Lease Payment obligations of the City of Grand Terrace under that certain Lease Agreement dated August 28, 2009, between.the City of Grand Terrace and the Zions First National Bank Members of the City Council: We have acted as bond counsel to the City of Grand Terrace (the "City") in connection with the delivery by the City of the Lease Agreement dated August 28, 2009 (the "Lease"), between the City, as lessor and sublessee and Zions First National Bank (the."Bank"),as lessee and sublessor. _ We have examined the executed Lease and such other-documents and matters of law as we have deemed necessary in connection with the following opinions.As to questions of fact material to our opinion, we have relied upon representations of the City and the Bank contained in the Lease, and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1 _ thelaws ofk The City is duly established and validly existing as a municipal Bank under — _ _��-the�tate o�Caltfoa,-�ttli the-power=tio enter #h�,: Ani�e�ffo�r�h� obligatrons��-r - _. part to be performed contained therein -- -- City of Grand Terrace Members of the City Council August 28, 2009 Page Two 2. The Lease has been duly authorized, executed and delivered by the City and is a valid and binding obligation of the City, enforceable against the City in accordance with its terms. 3. Subject to the terms and provisions of the Lease, the Lease Payments are payable from general funds of the City lawfully available therefor. 4. The portion of the Lease Payments designated as and comprising interest and received by the Assignee is excluded from gross income for federal income tax purposes and is not an item -f tax preference for purposes of the federal alternative-minimum tax-imposed-on _..- - individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on such Corporations (as defined for federal income tax - t purposes), such interest is taken into account in determining certain income and earnings. The Lease is a"qualified tax-.exempt obligation" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986 (the "Tax Code") and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Tax Code), a deduction is allowed for eighty percent (80%) of that portion of such financial institutions' interest expense allocable to interest payable with respect to the Lease. The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Tax Code that must be satisfied subsequent to.the delivery of the Lease in order that such interest be, or continue to be, excluded - from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the ! inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the Lease. We express no opinion regarding other federal tax consequences arising with respect to the Lease. 5. The portion of the Lease Payments designated as and comprising interest is exempt from personal income taxation imposed by the State of California. The rights of the Bank and the enforceability ofthe Lease may be subject to bankruptcy, - - insolvency, reorganization, moratorium and other similar laws affecting creditors_' rights - _ _ - - City of Grand Terrace Members of the City Council August 28, 2009 Page Three heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. 6. No litigation is pending or to the best of my knowledge, threatened (either in state or federal courts)to restrain or enjoin the execution or delivery of the Financing Documents, in any way contesting or affecting the authority for the execution and delivery of the Financing Documents or the validity of the Lease, or in any way contesting the existence or powers of the City or the title of the officers thereof to their respective offices 7. The adoption, execution and/or delivery of the Lease and the proceedings, and the compliance by the City with:their provisions, will not conflict with or constitute a reach of default under any court decree or order or any agreement, indenture, lease or other instrument or any existing law or administrative regulation, decree or order to which the City is subject or by which the City is or may be bound. Respectfully submitted, HARPER& BURNS LLP John R. Harper i i LAW OFFICES OF HARPER & BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION 453 S.GLASSELL STREET JOHN R.HARPER' ORANGE,CALIFORNIA 92866 RIVERSIDE/SAN BERNARDINO CO. ALAN R.BURNS (951) 674-0698 COLIN R.BURNS (714) 771-7728 OF COUNSEL FAX(714) 744-3350 JUDI A.CURTIN* MICHAEL MONTGOMERY* THOMAS W.ALLEN 'A PROFESSIONAL CORPORATION August 18, 2009 Zions First National Bank One South Main Street, Suite 1700 Salt Lake City, Utah 84133 RELIANCE LETTER Regarding Final Approving Legal Opinion: RE: $2,162,000 aggregate principal amount of Lease Payment obligations of the City of Grand Terrace under that certain Lease Agreement dated as of August 28, 1 2009, between the City of Grand Terrace and the Zions First National Bank. Ladies and Gentlemen: We have this day released to the City of Grand Terrace our final approving legal opinion with respect to the captioned financing. The foregoing opinion may be relied upon by Zions First National Bank, as lessee and sublessor under the captioned Lease Agreement to the same extent as if such opinion were addressed to each of them individually. i I Respectfully submitted, HARPER& BURNS LLP John R.;Harper -- i, . is LAW OFFICES OF HARPER & BURNS LLP A LIMITED LIABILITY PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION 453 S.GLASSELL STREET JOHN R.HARPER' ORANGE,CALIFORNIA 92866 RIVERSIDE/SAN BERNARDINO CO. ALAN R.BURNS (951) 674-0698 COLIN R.BURNS (714) 771-7728 OF COUNSEL FAX(714) 744-3350 JUDI A.CURTIN* MICHAEL MONTGOMERY` THOMAS W.ALLEN 'A PROFESSIONAL CORPORATION August 28, 2009 Erin Graeber Bougie Vice President National Accounts Chicago Title Company 560 E. Hospitality Lane San Bernardino, California 92408 _ Re:- City of Grand Terrace - Order No. 910076007PI-X59 j Dear Ms. Graeber Bougie i Harper &Burns LLP will act to have the following Agreements recorded in the Office of San Bernardino County Recorder: (a) Lease Agreement dated as of August 28, 2009 (the "Lease"), between the Zions First National Bank (the "Bank"), as lessee and sublessor, and the City of Grand Terrace (the "City"), as lessor and sublessee, and I . (b) Termination Agreement dated as of August 28, 2009, between the City, and U.S. Bank National Association (the "1997 Trustee"), as 1997 Trustee. I Following recordation, the recordation data regarding the aforementioned documents will be inserted into a CLTA leasehold title insurance policy in the amount of$2,135,000 insuring City's Subleasehold estate created under the Lease, to be issued in the form of the attached Proforma Policy of Title Insurance attached hereto and subject to all exceptions contained therein. Please deliver the original and-five (5) copies each of_the title insurance policies to_our - - ee-as soon_as _ssil�le_afterecordationourr.( c�fo��tlensuance and an3`ecQrdinQ p°-- _. - - _`� `Y costs should be addressedI Trustee-U"S: T Corporate-Trust Services; Corporate Trust-`' - th --.. _ AdministrationT633_W Fifth treet .24_-Floo .os An eles.CA 90071.,-Atten Ashraf =< -- �I_murdaah'Vice President: -- _-- - - Erin Graeber Bougie Vice President National Accounts Chicago Title Company August 28, 2009 Page Two j i Please also send us conformed copies of the above captioned documents. Should you have any questions regarding the enclosed,please do not hesitate to contact me. Very truly'yours, HARPER& BURNS LLP By: `l� John R. Harper