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Item No. 18 LRB to Finance City Hall
City Council Agenda Report City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 www.lake-elsinore.org File Number: ID# 22-192 Agenda Date: 5/10/2022 Status: Approval FinalVersion: 1 File Type: Council Public Hearing In Control: City Council / Successor Agency Agenda Number: 18) Authorize the Issuance of Lease Revenue Bonds by the Lake Elsinore Facilities Financing Authority to Finance New City Hall 1.Adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY BY THE CITY OF A GROUND LEASE, LEASE AGREEMENT, INDENTURE, CONTINUING DISCLOSURE CERTIFICATE AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, APPROVING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS; and 2.Adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE AGREEMENT, AN INDENTURE, AN ASSIGNMENT AGREEMENT AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS. Page 1 City of Lake Elsinore Printed on 5/5/2022 Page 1 of 5 REPORT TO CITY COUNCIL AND LAKE ELSINORE FACILITIES FINANCING AUTHORITY To: Honorable Mayor and Members of the City Council From: Jason Simpson, City Manager Prepared by: Shannon Buckley, Assistant City Manager Date: May 10, 2022 Subject: Authorize the issuance of Lease Revenue Bonds by the Lake Elsinore Facilities Financing Authority to Finance New City Hall Recommendation For the City Council: adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE AUTHORIZING THE EXECUTION AND DELIVERY BY THE CITY OF A GROUND LEASE, LEASE AGREEMENT, INDENTURE, CONTINUING DISCLOSURE CERTIFICATE AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, APPROVING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS For the Facilities Financing Authority: adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE AGREEMENT, AN INDENTURE, AN ASSIGNMENT AGREEMENT, AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS Background To address the current needs and future growth demands of the City, staff has proposed the expansion of the existing City Hall to include the acquisition and reuse of certain properties on Main Street to Graham Street. Staff has investigated various funding options and determined that the best method of financing would be through the issuance of lease revenue bonds (the “2022 Bonds”). Issuance of Lease Revenue Bonds May 10, 2022 Page 2 of 5 Over the past several years, the City has acquired parcels adjacent to City Hall for public facilities expansion necessary to meet the current and expected growth of the City while also meeting the expectation of service excellence to the public. To this end, on March 8, 2022, the City Council acted by approving a contract to engage STK Architecture, Inc. to provide schematic, development, and construction design services related to the City Hall expansion. Staff has developed a conceptual site plan, consisting of a 35,000 square feet public facility, including the amenities listed below designed to dramatically improve the overall service delivery from City Hall staff. Essentially, adding a full-service “one-stop-shop” counter to assist with development activities, the inclusion of the city council chambers, and a variety of amenities will help support creating an opportunity to develop a City asset into a destination within the downtown area of the City. Below is a summary of the 35,000 S.F. 3-story building with the following amenities: Open two-story glass entrance steel moment frame with wood stud walls/roof. Fire engine in the lobby. Sliding glass entrance doors with metal detectors. Interior elevator. Public counters. Council Chambers on the 3rd floor with a view of the lake. Use red thin brick on exterior walls. Conference Room. Connection to existing City Hall. If there are 2022 Bond proceeds available after paying for the costs of the new City Hall, such excess proceeds may be used on other City facilities, including a park, drainage, and road improvements. Discussion California cities commonly use a lease financing structure to pay for capital improvements through the General Fund. Under the “lease revenue bond” structure, the City would lease certain City- owned property to the Lake Elsinore Facilities Financing Authority (“Authority”), and the Authority would then lease the property back to the City for a fixed annual rental payment (rental payments). These rental payments would be pledged by the Authority toward repayment of annual bond payments (in a like amount). The City’s rental payments would be payable from the General Fund. The City utilized similar a structure for the 2016 Lease Revenue Bonds, proceeds of which were used to finance improvements to the Launch Pointe Project. Initially, the City anticipates leasing to the Authority a combination of Swick-Matich Park, Tuscany Hills Park, McVicker Canyon Park, Summerly Community Park, Launch Pointe Park, Fire Station No. 85, and Fire Station No. 94 (“Leased Property”). The documents presented for the proposed lease revenue bond financing allow for the addition, substitution, or release of all or a portion of such Leased Property in the future, including adding or substituting the new City Hall into the pool of Leased Property once it is complete and occupied. The 2022 Bonds are expected to be rated “A+” by Standard & Poor’s, which is the same rating as the 2016 Lease Revenue Bonds. Should they qualify, the 2022 Bonds will be supported with municipal bond insurance and a debt service reserve fund insurance surety policy, both of which would lead to a lower cost of borrowing. The estimated economics of the 2022 Bonds are provided under the following section entitled, “Fiscal Impact.” Issuance of Lease Revenue Bonds May 10, 2022 Page 3 of 5 Approval of the City’s resolution by the City Council and the Authority’s resolution by the Board of Directors of the Authority will authorize the issuance of the 2022 Bonds and the execution and delivery of the documents listed below, in substantially the forms presented. - Ground Lease. Under this agreement, the City leases the Leased Property to the Authority. - Lease Agreement. Under this agreement, the City leases the Leased Property from the Authority. The term of this agreement ends on the date on which the Indenture is discharged (payment of the 2022 Bonds). This agreement requires the City to make lease payments and to insure and maintain the Leased Property throughout the term of the Lease. - Assignment Agreement. Under this agreement, the Authority is assigning certain of its rights under the Lease to the Trustee, including the rental payments under the Lease Agreement, for the benefit of the owners of the 2022 Bonds. - Indenture. This agreement among the City, the Authority, and the Trustee contains terms of the 2022 Bonds including the payment and redemption provisions, pledge of revenues to pay the 2022 Bonds, rights and duties of the Trustee, remedies upon a default in the payment of the 2022 Bonds, and other related matters. - Bond Purchase Agreement. This agreement provides for the purchase of the 2022 Bonds by Stifel, the Underwriter. - Preliminary Official Statement. This is the offering document (similar to a prospectus) that provides a detailed description of the City, the 2022 Bonds, and the sources of payment. This document permits prospective investors to make an informed investment decision regarding the purchase of the 2022 Bonds. The distribution of the Preliminary Official Statement by the City is subject to federal securities laws, including the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. These laws require the Preliminary Official Statement to include all facts that would be “material” to an investor in deciding to purchase the 2022 Bonds. “Material” information is information that a reasonable investor would want to know when deciding whether to buy or sell the 2022 Bonds. The resolution authorizes the Underwriter to distribute the Preliminary Official Statement and authorizes either the City Manager or Assistant City Manager to deem the Preliminary Official Statement final for purposes of Rule 15c2-12 of the Securities and Exchange Commission, with such changes as such officer concludes are appropriate. - Continuing Disclosure Certificate. A certificate executed by the City to provide listed event disclosures and annual financial information continuingly to investors under Rule 15c2-12 of the Securities and Exchange Commission. As previously mentioned, if the resolutions are approved, staff and the City’s finance team will finalize the documents and price the 2022 Bonds sometime in late May or early June. The City will receive bond proceeds approximately 2 weeks after the pricing date. Fiscal Impact During much of 2020 and 2021, interest rates hovered at or near all-time low levels amid unprecedented stimulus and accommodative Federal Reserve policies implemented after the COVID-induced market disruption in March 2020. Since the start of 2022, however, inflationary pressures and Federal Reserve actions to taper market support and raise short-term borrowing rates have pushed interest rates higher. Despite a rapid rise since the start of the year, current interest rates in the municipal bond market remain favorable from a historical perspective. As of April 29, 2022, the 30-year “AAA Municipal Market Data” index yield (benchmark off which all tax- exempt municipal bonds are measured) is 3.05%. Issuance of Lease Revenue Bonds May 10, 2022 Page 4 of 5 The Federal Reserve is widely expected to continue increasing short-term rates to combat a high rate of inflation, starting with an expected 50 basis point (+0.50%) adjustment in early May. Thereafter, policymakers are anticipated to make anywhere from 25 to 50 basis point (+0.25% to 0.50%) adjustments at each of its six remaining meetings in 2022. In addition to the prospect of higher interest rates, construction costs are expected to continue increasing due to supply chain challenges, inflation, and labor shortages, among other issues. While construction costs have grown on average 3.3% per year since 1980 in California, they increased by 7.5% in 2021, and are estimated to continue increasing so long as the aforementioned challenges persist. Due to these factors, the proposed financing is recommended to be undertaken as soon as possible to achieve the lowest possible cost, both in terms of interest rates and construction costs. Stifel Nicolaus, the Underwriter, has provided estimates regarding certain financial aspects of the proposed financing based on market conditions as of April 29, 2022, which estimates have been reviewed by Urban Futures, Inc., the Municipal Advisor. The estimates indicate that the principal amount of the 2022 Bonds will be approximately $23.3 million. The principal and interest payments, together, on the 2022 Bonds will be approximately $1.5 million in the fiscal year 2022-23 and approximately $1.5 million each fiscal year thereafter until final maturity in the fiscal year 2052-53. The term of the Bonds will be 30 years. According to Government Code Section 5852.1, the following good faith estimates (obtained from the Underwriter and the Municipal Advisor) must be disclosed at a public meeting before the Board authorizes the 2022 Bonds. The estimates are based on market estimates as of April 29, 2022: Information Disclosed per Government Code Section 5852.1: Estimates as of April 29, 2022* True interest cost of the 2022 Bonds (the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the new issue of Bonds) 4.79% Finance charge of the 2022 Bonds (the sum of fees paid to third parties): $457,650 Amount of proceeds received by the public body from the sale of the 2022 Bonds, less the finance charge of the bonds and any reserves or capitalized interest paid or funded with proceeds of the 2022 Bonds $21,855,383 The total payment amount (the sum of all debt service payments on the 2022 Bonds, plus the finance charge of the 2022 Bonds not paid from bond proceeds) $44,920,769 * These are good faith estimates only. Results will likely differ based on market conditions as of the actual sale date and other factors. Funding for annual debt service will be allocated from available and projected annual Launch Pointe surplus revenues and year-over-year increases in Bradly Burns Sale Tax and Property tax Issuance of Lease Revenue Bonds May 10, 2022 Page 5 of 5 revenues. Currently, the Launch Pointe facility is generating roughly $800,000 in annual profits. Staff recommends allocating $500,000 of these revenues a pay 1/3 of anticipated debt service. The balance of debt service, equal to $1 million, will be allocated from Bradly Burns Sale Tax and Property Tax revenues which have grown by 20% and 20% respectively on average over the past 5-years. Measure Z revenues are not anticipated to be allocated for annual debt service payments. Exhibits A – City Council Resolution B – Lake Elsinore Facilities Financing Authority Resolution C – Good Faith Estimate D – Bond Purchase Agreement E – Lease Agreement F – Assignment Agreement G – Indenture H – Preliminary Official Statement I – Ground Lease J – Continuing Disclosure Certificate 4882-9820-0861v3/022042-0044 RESOLUTION NO. - ________ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY BY THE CITY OF A GROUND LEASE, LEASE AGREEMENT, INDENTURE, CONTINUING DISCLOSURE CERTIFICATE AND A BOND PURCHASE AG REEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, APPROVING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS Whereas, the City of Lake Elsinore, California (the “City”) is a municipal corporation and general law city duly organized and existing under and pursuant to the Constitution and laws of the State of California (the “State”); and Whereas, the City desires to finance the acquisition, construction and/or installation of various “public capital improvements” within the meaning of the Act (defined below) all of which are or shall be located within the boundaries of the City and collectively constitute the “Project;” Whereas, the Lake Elsinore Facilities Financing Authority (the “Authority”) and the City have determined that it would be in the best interests of the City and residents of the City to authorize the preparation, sale and delivery of the “Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A” (the “Bonds”) for the purpose of financing the Project; Whereas, in order to facilitate the issuance of the Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property (which real property shall consist of all or certain of assets generally described as Swick-Matich Park, Tuscany Hills Park, McVicker Canyon Park, Summerly Community Park, Launch Pointe Park, Fire Station No. 85 and Fire Station No. 94) (together, the “Leased Assets”) to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority, and pay certain Base Rental Payments (as defined in the Lease Agreement), which are pledged to the owners of the Bonds by the Authority pursuant to an Indenture of Trust by and between Wilmington Trust, National Association (the “Trustee”) and the Authority (the “Indenture”); and Whereas, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Project through the offering and sale of the Bonds; Whereas, the Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”); Whereas, the City and the Authority desire to provide for the negotiated sale of the Bonds; 4882-9820-0861v3/022042-0044 Whereas, the City and the Authority have selected Stifel, Nicolaus & Company, Incorporated, to act as underwriter (“Underwriter”) to purchase the Bonds from the Authority pursuant to a Bond Purchase Agreement (the "Bond Purchase Agreement"); Whereas, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2- 12”) requires that, in order to be able to purchase or sell the Bonds, the underwriter thereof must have reasonably determined that the City has undertaken in a written agreement or contract for the benefit of the holders of the Bonds to provide disclosure of certain financial information and certain events on an ongoing basis; Whereas, in order to cause such requirement to be satisfied, the City desires to execute and deliver a Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”); Whereas, a form of the Preliminary Official Statement (the “Preliminary Official Statement”) has been prepared; Whereas, the City is a member of the Authority and the Project is located within the boundaries of the City; Whereas, the City has prior to the consideration of this resolution held a public hearing on the financing of the Project with the proceeds of the issuance of the Bonds in accordance with Section 6586.5 of the Act, which hearing was held at 183 North Main Street, Lake Elsinore, California, on May 10, 2022; Whereas, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in The Press-Enterprise, a newspaper of general circulation in the City; Whereas, the City Council has been presented with the form of each document referred to herein relating to the financing contemplated hereby, and the City Council has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; and Whereas, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Each of the above recitals is true and correct. Following a duly noticed and conducted public hearing, the City Council hereby further finds and determines that there are significant public benefits to the citizens of the City through the use of the Act to assist the City with respect to the subject matter hereof through the approval of the issuance of the Bonds and otherwise hereunder within the meaning of Section 6586(a)-(d), inclusive, of the Act. Section 2. The forms of the Ground Lease and Lease Agreement, on file with the City Clerk, are hereby approved, and the Mayor of the City, or such other member of the City Council as 4882-9820-0861v3/022042-0044 the Mayor may designate, the City Manager of the City and the Assistant City Manager of the City (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Ground Lease and Lease Agreement in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenc ed by the execution and delivery thereof; provided, however, that the term of the Ground Lease and Lease Agreement shall terminate no later than April 1, 2053 (provided that such term may be extended as provided therein) and the true interest cost applicable to the interest components of the Base Rental Payments shall not exceed 5.50% per annum. Section 3. The form of Indenture, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name an d on behalf of the City, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate amount of the Bonds shall not exceed $27,000,000, the final maturity date of the Bonds shall be no later than April 1, 2053 and the true interest cost applicable to the Bonds shall not exceed 5.50% per annum, and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established at negotiated sale pursuant to the Bond Purchase Agreement. Section 4. The Bond Purchase Agreement, on file with the City Clerk, is hereby approved and the Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the City, to execute and deliver the acceptance thereof set forth in the Bond Purchase Agreement, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate underwriter's discount from the principal amount of the Bonds in excess of one percent (1.0%) of the aggregate principal amount of the Bonds. Section 5. The issuance of not to exceed $27,000,000 aggregate principal amount of the Bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby approved. Section 6. The form of Preliminary Official Statement, on file with the City Clerk, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Bonds a reasonable number of copies of the Preliminary Official Statement. Section 7. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval 4882-9820-0861v3/022042-0044 to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the City, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the City. Section 8. The form of Continuing Disclosure Certificate, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Continuing Disclosure Certificate in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced to the execution and delivery thereof. Section 9. Each of the Authorized Officers is authorized to select a municipal bond insurer to insure payments of the principal of and interest on the Bonds so long as such Authorized Officer determines that obtaining the municipal bond insurance policy provided thereby will result in a lower interest rate or yield to maturity with respect to the Bonds. Bon d Counsel is hereby directed to make all changes to the Indenture, the Ground Lease, the Lease Agreement, the Bond Purchase Agreement, the Continuing Disclosure Certificate, the Preliminary Official Statement and the final Official Statement as are necessary to reflect the selection of a municipal bond insurer and the reasonable comments thereof. Section 10. Each of the Authorized Officers is authorized to select a municipal bond insurer to provide a reserve fund surety bond to be deposited into the reserve fund for the Bonds so long as such officer or officers determine that obtaining the reserve fund surety bond will be cost effective to the City. Each of the Authorized Officers or the designee thereof are authorized to execute and deliver any customary agreement with the municipal bond insurer providing the reserve fund surety bond. Bond Counsel is hereby directed to make all changes to the Indenture, the Ground Lease, the Lease Agreement, the Bond Purchase Agreement, the Continuing Disclosure Certificate, the Preliminary Official Statement and the final Official Statement as are necessary to reflect the reserve fund surety bond and the reasonable comments of the municipal bond insurer in connection therewith. Section 11. The officers, employees and agents of the City are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Each of the Authorized Officers is hereby expressly authorized to add or substitute one or more additional City owned properties for any or all of the Leased Assets, should such Authorized Officer determine in his or her sole discretion that it is in the best interests of the City to use such City owned property. All actions heretofore taken by the officers, employees and agents of the City with respect to the transactions set forth above are hereby approved, confirmed and ratified. 4882-9820-0861v3/022042-0044 Section 12. This Resolution shall take effect from and after its date of adoption. Passed and Adopted on this 10th day of May, 2022. _____________________________ Timothy J. Sheridan, Mayor Attest: _____________________________ Candice Alvarez, MMC City Clerk 4882-9820-0861v3/022042-0044 STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Candice Alvarez, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Resolution No. 2022-______ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of May 10, 2022 and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: ________________________________ Candice Alvarez, MMC City Clerk 4886-3191-0173v3/022042-0044 RESOLUTION NO. ___ A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE AGREEMENT, AN INDENTURE, AN ASSIGNMENT AGREEMENT AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A, AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $27,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS Whereas, the City of Lake Elsinore (the “City”) desires to finance the acquisition and/or construction of various “public capital improvements” within the meaning of the Act (defined below) all of which are or shall be located within the boundaries of the City and collectively constitute the “Project;” and Whereas, the Authority and the City have determined that it would be in the best interests of the Authority, the City and residents of the City to authorize the preparation, sale and delivery of the “Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A” (the “Bonds”) for the purpose of financing the Project; and Whereas, in order to facilitate the issuance of the Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property (which real property shall consist of all or certain of assets generally described as Swick-Matich Park, Tuscany Hills Park, McVicker Canyon Park, Summerly Community Park, Launch Pointe Park, Fire Station No. 85 and Fire Station No. 94) (together, the “Leased Assets”) to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority, and pay certain Base Rental Payments (as defined in the Lease Agreement), which are pledged to the owners of the Bonds by the Authority pursuant to an Indenture of Trust by and between Wilmington Trust, National Association (the “Trustee”) and the Authority (the “Indenture”); and Whereas, the Authority and the Trustee desire to enter into an Assignment Agreement in order to provide, among other things, that all rights to receive the Base Rental Payments will be assigned without recourse by the Authority to the Trustee; Whereas, the Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”); Whereas, the City and the Authority desire to provide for the negotiated sale of the Bonds; Whereas, the City and the Authority have selected Stifel, Nicolaus & Company, Incorporated, to act as underwriter (the “Underwriter”) to purchase the Bonds from the Authority pursuant to a Bond Purchase Agreement (the "Bond Purchase Agreement"); 4886-3191-0173v3/022042-0044 Whereas, a form of the Preliminary Official Statement (the “Preliminary Official Statement”) has been prepared; Whereas, the City is a member of the Authority and the Project is located within the boundaries of the City; Whereas, the City has prior to the consideration of this resolution held a public hearing on the financing of the Project with the proceeds of the issuance of the Bonds in accordance with Section 6586.5 of the Act, which hearing was held at 183 North Main Street, Lake Elsinore on May 10, 2022; Whereas, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in The Press-Enterprise, a newspaper of general circulation in the City; Whereas, the Board of Directors of the Authority (the “Board of Directors”) has been presented with the form of each document referred to herein, and the Board of Directors has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; and Whereas, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE LAKE ELSINORE FACILITIES FINANCING AUTHORITY, as follows: Section 1. All of the recitals herein contained are true and correct and the Board of Directors so finds. The Board of Directors has determined and hereby finds that the Authority’s assistance in financing the Project by the issuance and delivery of the Bonds will result in significant public benefits of the type described in Section 6586 (a) through (d), inclusive, of the Act and that all Project elements to be financed with the proceeds of the Bonds have been or will be approved pursuant to all applicable requirements of the California Environmental Quality Act (Public Resources Code Section 2100 et seq.) and applicable guidelines, or are exempt therefrom. Section 2. The forms of the Lease Agreement and the Ground Lease, on file with the Secretary of the Authority, are hereby approved, and the Chair of the Authority, or such other member of the Board of Directors as the Chair may designate, the Executive Director of the Authority and the Treasurer of the Authority (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execut e and deliver the Lease Agreement and the Ground Lease, respectively, in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the term of the Lease Agreement and the Ground Lease shall terminate no later than April 1, 2053 (provided that such term may be extended as provided therein) and the true interest cost applicable to the interest components of the Base Rental Payments shall not exceed 5.50% per annum. 4886-3191-0173v3/022042-0044 Section 3. The form of Indenture, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate amount of the Bonds shall not exceed $27,000,000, the final maturity date of the Bonds shall be no later than April 1, 2053 and the true interest cost applicable to the Bonds shall not exceed 5.50% per annum and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established at negotiated sale pursuant to the Bond Purchase Agreement. Section 4. The issuance of not to exceed $27,000,000 aggregate principal amount of the Bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby authorized and approved. Section 5. The form of Assignment Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment Agreement in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 6. The Bond Purchase Agreement on file with the Secretary of the Authority is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Authority to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate underwriter's discount in excess of one percent (1.0%) of the aggregate principal amount of the Bonds. Section 7. The form of Preliminary Official Statement, on file with the Secretary of th e Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such Rule). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Bonds a reasonable number of copies of the Preliminary Official Statement. Section 8. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the Authority, to 4886-3191-0173v3/022042-0044 execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the Authority. Section 9. Each of the Authorized Officers is authorized to select a municipal bond insurer to insure payments of the principal of and interest on the Bonds so long as such Authorized Officer determines that obtaining the municipal bond insurance policy provided thereby will result in a lower interest rate or yield to maturity with respect to the Bonds. Bond Counsel is hereby directed to make all changes to the Indenture, the Ground Lease, the Lease Agreement, the Assignment Agreement, the Bond Purchase Agreement, the Preliminary Official Statement and the final Official Statement as are necessary to reflect the selection of a municipal bond insurer and the reasonable comments thereof. Section 10. Each of the Authorized Officers is authorized to select a municipal bond insurer to provide a reserve fund surety bond to be deposited into the reserve fund for the Bonds so long as such officer or officers determine that obtaining the reserve fund surety bond will be cost effective to the Authority. Each of the Authorized Officers or the designee thereof are authorized to execute and deliver any customary agreement with the municipal bond insurer providing the reserve fund surety bond. Bond Counsel is hereby directed to make all changes to the Indenture, the Ground Lease, the Lease Agreement, the Assignment Agreement, the Bond Purchase Agreement, the Preliminary Official Statement and the final Official Statement as are necessary to reflect the reserve fund surety bond and the reasonable comments of the municipal bond insurer in connection therewith. Section 11. The officers and agents of the Authority are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give ef fect to and comply with the terms and intent of this Resolution. Each of the Authorized Officers is hereby expressly authorized to add or substitute one or more additional City owned properties for any or all of the Leased Assets, should such Authorized Officer determine in his or her sole discretion that it is in the best interests of the Authority to use such City owned property. All actions heretofore taken by the officers and agents of the Authority with respect to the transactions set forth above are hereby approved, confirmed and ratified. 4886-3191-0173v3/022042-0044 Section 12. This Resolution shall take effect from and after its date of adoption. Passed and Adopted this 10th day of May, 2022. _____________________________ Timothy J. Sheridan, Chair Attest: _____________________________ Candice Alvarez, MMC Secretary EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the 2022 Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by Urban Futures, Inc., the City’s Municipal Advisor (the “Municipal Advisor”) in consultation with Stifel, Nicolaus & Company, Incorporated, the placement agent for the 2022 Bonds. Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the 2022 Bonds to be sold is $23,300,000 (the “Estimated Principal Amount”). True Interest Cost of the 2022 Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the 2022 Bonds is sold, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the 2022 Bonds, is 4.79%. Finance Charge of the 2022 Bonds. The Municipal Advisor has informed the City that its good faith estimate of the finance charge for the 2022 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2022 Bonds), is $457,650. Additionally, there will be an annual Trustee fee of approximately $1,500 for as long as the 2022 Bonds are outstanding. Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming the Estimated Principal Amount of the 2022 Bonds is sold, its good faith estimate of the amount of proceeds expected to be received by the District for sale of the 2022 Bonds, less the finance charge of the 2022 Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the 2022 Bonds, is $21,855,383. Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the 2022 Bonds is sold, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the 2022 Bonds, plus any finance charge for the 2022 Bonds, as described above, not paid with the proceeds of the 2022 Bonds, calculated to the final maturity of the 2022 Bonds, is $44,920,769. Additionally, there will be an annual Trustee fee of $1,500 for as long as the 2022 Bonds are outstanding. The foregoing estimates constitute good faith estimates only and are based on the current market conditions and are subject to change at time of bond pricing. The actual principal amount of the 2022 Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to: (a) the actual settlement date of the 2022 Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of 2022 Bonds being different from the Estimated Principal Amount, (c) the actual amortization of the 2022 Bonds being different than the amortization assumed for purposes of such estimates, (d) alterations in the financing plan, or a combination of such factors. 1 $_______ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A BOND PURCHASE AGREEMENT ________, 2022 Lake Elsinore Facilities Financing Authority 130 S. Main Street Lake Elsinore, California 92530 City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) hereby offers to enter into this Bond Purchase Agreement with you, the City of Lake Elsinore (the “City”) and the Lake Elsinore Facilities Financing Authority (the “Authority”), for the purchase by the Underwriter and the delivery by you of the Bonds specified below. The Bonds are being issued by the Authority to (i) finance the acquisition, construction and installation of certain capital improvements owned by the City, (ii) purchase a municipal bond insurance policy (the “Bond Insurance Policy”) to guarantee payment of the principal of and interest on the Bonds i ssued by ________ (the “Insurer”) (iii) purchase a debt service reserve surety bond for deposit in the reserve fund (the “Reserve Policy”) and (iv) pay the costs incurred in connection with the issuance of the Bonds . This offer is made subject to acceptance by you prior to 11:59 p.m., Pacific time, on the date hereof. Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter. All terms not defined he rein shall have the meanings set forth in the Indenture (defined below). 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less than all) of the $_______ aggregate principal amount of the Authority’s Lease Revenue Bonds, Series 2022A (the “Bonds”). The purchase price for the Bonds shall be $______ (being the principal amount of the Bonds, less an Underwriter’s discount in the amount of $_______, and less net original issue discount of $_______). At the request of the Authority, on the date of Closing (as defined herein) the Underwriter will wire the Reserve Policy premium of $_____ to the Insurer and the Bond Insurance Policy premium of $________ to the Insurer. As a result, the net amount to be wired to the Authority as the purchase price for the Bonds will be $______. 2 The Bonds will be dated the date of delivery thereof, and will have the maturities and bear interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set forth in the Official Statement herein described. The Bonds wi ll be issued in book-entry form only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Bond Purchase Agreement. 2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the provisions of a resolution (the “Resolution”) adopted by the Author ity authorizing the issuance of the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq. of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to a n Indenture, dated as of ______ 1, 2022 (the “Indenture”), by and among the City, the Authority and Wilmington Trust, National Association (the “Trustee”), and shall be as described in the Indenture. The Bonds are limited obligations of the Authority payable primarily from and secured by certain rental revenues (the “Base Rental Payments”) to be paid by the C ity pursuant to a Lease Agreement (the “Lease Agreement”), dated as of _______ 1, 2022, between the City and the Authority, for certain real property and the improvements thereon (the “Property”). The City will lease the Property to the Authority pursuant to a Ground Lease, dated as of ______ 1, 2022 (the “Ground Lease”), between the City and the Authority. 3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the cover pages of the Official Statement of the Authority pertaining to the Bonds, dated ______, 2022 (the Official Statement, together with all appendices thereto, and with such changes therein and supplements thereto as are consented to in writing by the Underwriter, are herein called the “Official Statement”). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. “Public Offering” shall include an offering to a representative number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction between the City, the Authority and the Underwriter, and that the Underwriter has financ ial and other interests that differ from those of the City and the Authority, (ii) in connection with such transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City and the Authority or any other person or entity and has not assumed a fiduciary responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or is currently advising the City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has to the City and the Authority with respect to the transaction contemplated hereby expressly are set forth in this Bond Purchase Agreement, except as otherwise provided by ap plicable rules and regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”) and (iv) the City and the Authority have consulted with their own legal and other professional advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The City and the Authority acknowledge that they have previously provided the Underwriter with an acknowledgement of 3 receipt of the required Underwriter disclosure under Rule G-17 of the MSRB relating to disclosures concerning the Underwriter’s role in the transaction, disclosures concerning the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex municipal securities financing, if any. 4. Delivery of Official Statement. The Authority shall deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf of the Authority and the City by authorized representatives. The Authority shall also deliver copies of the Official Statement in such quantities as the Underwriter may reasonably request in order to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase Agreement and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree that the end of the underwriting period shall be the date of Closing (as defined below) unless the Under writer informs the Authority in writing of a different end of the underwriting period. The Underwriter covenants to file the Official Statement with the MSRB on a timely basis. “End Date” as used herein is that date which is the earlier of: (a) twenty-five (25) days after the end of the underwriting period, as defined in SEC Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989, as amended (“Rule 15c2-12”); or (b) the time when the Official Statement becomes available f rom the MSRB, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2 -12) ends. The Authority and the City have authorized the use of the Official Statement in connection with the public offering of the Bonds. The Authority and the City also have consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement dated __________, 2022, relating to the Bonds in connection with the public offering of the Bonds, (which, together with all appendices thereto, is herein called the “Preliminary Official Statement”). Authorized officers of the City and the Authority have certified to the Unde rwriter that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2 -12, with the exception of certain final pricing and related information referred to in Rule 15c2 -12. The Underwriter has distributed a copy of each Preliminary Official Statement to potential customers on request. 5. The Closing. At 9:00 A.M., California time, on ______, 2022, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority , the City and the Underwriter, the Authority, upon receipt of the purchase price thereof, will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, or another place to be mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase price of the Bonds as set forth in 4 Section 1 hereof by wire transfer of immediately available funds. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Clo sing.” 6. City Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that: (a) The City is a municipal corporation of the State of California (the “State”) organized and operating pursuant to the law of the State with power and authority to enter into and perform its duties under the Lease Agreement, Indenture, the Continuing Disclosure Certificate, dated ______, 2022 (the “Continuing Disclosure Certificate”), the Ground Lease, the Official Statement and this Bond Purchase Agreement (collectively, the “City Documents”). (b) To the best knowledge of the City, neither the approval, execution and delivery of the City Documents, and compliance with the provisions on the City’s part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material breach of or default under nor materially contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolu tion, agreement or other instrument, except as provided by the City Documents. (c) The City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecti ng the enforcement of creditors’ rights generally, and by the application of equitable principles if sought, by the exercise of judicial discretion, and by the limitations on legal remedies imposed on actions against counties in the State . (d) Except as may be required under blue sky or other securities laws of any state, there is no material consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (e) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending (notice of which has been received by the City) or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Lease Agreement , or in any way contesting or affecting the validity of the City Documents or the Bonds or the authority of the City to approve this Bond Purchase Agreement, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Bond Purchase Agreement or to restrain or enjoin the 5 execution, sale and delivery of the Bonds, contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the City Documents to be executed by it or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitte d to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading, or, except as described in the Preliminary Official Statement and the Offi cial Statement, the payment of Base Rental Payments, nor is there any basis for any such action, suit, proceeding or investigation. (f) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the Closing Date, the information relating to the City, the Bonds, the Property and the City Documents contained in the Official Statement was and will be materially complete for its intended purposes. The information relating to the City, the Bonds, the Property and the City Documents contained in the Official Statement as of the date hereof is true and correct in all material respects and such information does not cont ain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (g) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. (h) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement and 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 City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Bond Purchase Agreement. (i) To the best knowledge of the City, it is not in any material respect in breach of or default under any material applicable law or administrative regulation of the State or the United States or any material applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject and in connection with which the City is obligated to make payments from its own funds, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument the consequence of which could materially and adversely affect the performance of the City under the City Documents. (j) If between the date of this Bond Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the Property, or the City’s functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to 6 omit to state a material fact required to be stated therein or necessary to make such in formation therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of the Underwriter, the City or their respective legal counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Property, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pur suant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the C losing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect. (l) The City covenants that it will comply with all tax covenants relating to it in the City Documents, the Tax Certificate of the City and this Bond Purchase Agreement. (m) Substantially all the proceeds from the sale of the Bonds (after deducting the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set forth in the Indenture and as described in the Official Statement, and the City will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Lease Agreement , as amended from time to time. (n) Any certificate signed by a duly authorized official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (o) As of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is payable from the City’s general fund except as disclosed in the Official Statement. (p) Between the date of this Bond Purchase Agreement and the date of Closing, the City will not, and except as disclosed in the Official Statement, offer or issue any certificates, notes or other obligations for borrowed money, or, other than in the normal cou rse of its operations, incur any material liabilities, direct or contingent, secured payable from the City’s general fund. (q) The City, on behalf of itself and the Authority, will undertake, pursuant to the Continuing Disclosure Certificate, to provide or cause to be provided annual financial reports and notices of certain events; a description of this undertaking is set forth in the Official Statement. Based on a review of its prior undertakings with respect to Rule 15c2-12, and except as disclosed in the Preliminary Official Statement and Official Statement, the City has not failed to comply in all material respects with a continuing disclosure undertaking under Rule 15c2 -12 during the previous five years. 7 (r) The financial statements relating to the re ceipts, expenditures and cash balances of the City as of June 30, 2021 as set forth in the Official Statement fairly represent the revenues, expenditures and fund balances of the General Fund. Except as disclosed in the Preliminary Official Statement, the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially adverse change in the financial condition of the General Fund or in its operations since June 30, 2021 and, except as disclosed in the Preliminary Official Statement, the Official Statement or otherwise disclosed in writing to the Underwriter, there has been no occurrence, circumstance or combination thereof which is reasonably expected to result in any such materially adverse change. 7. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the City and the Underwriter that: (a) The Authority is a joint powers authority, duly organized and existing under the Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right, power and authority to enter into, execute and deliver the Authority Documents (defined below) and to perform its obligations hereunder. (b) By all necessary official action, the Authority has duly author ized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Bond Purchase Agreement, the Bonds, the Indenture, the Ground Lease, and the Lease Agreement (collectively, the “Authority Documents”), and has approved the use by the Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties hereto, the Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors rights generally, to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. The Authority has complied, and will at the Closing be in compliance in all respects, with the terms of the Authority Documents. (c) The Bonds, when issued in accordance with the Indenture, will be legally valid and binding special obligations of the Authority, entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or si milar laws or equitable principles relating to or limiting creditors’ rights generally to the exercise of judicial discretion and to the limitations on legal remedies against joint powers authorities in California. (d) As of the time of acceptance hereof a nd as of the time of the Closing, except as otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority is not and will not be in any material respect in breach of or in default under any law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any Indenture, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the Authority’s ability to perform its obligations under the Authority Documents; and, as of 8 such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions there of do not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States or any applicable judgment, decree, license, permit, Indenture, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any such law, regulation or instrument except as provided in the Authority Documents. (e) As of the time of acceptance hereof and the Closing, except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending (notice of which has been received by the Authority), or to the best knowledge of the Authority threatened against the Authority in any material respect: (i) affecting the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or i n any way contesting or affecting the validity of the Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby, or contesting the exclusion of the interest on the Series A Bonds from Federal or State taxation, as applicable, or contesting the powers of the Authority or its authority to enter into the Lease Agreement and to pledge the Base Rental Payments for repayment of the Bonds; (iii) which may result in any material adverse change relating to the fin ancial condition of the Authority; (iv) contesting the completeness or accuracy of the Preliminary Official Statement as of its date or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement as of its date or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of all the circumstances under which they were made, not misleading; or (v) challenging the ability of the Authority to sell the Bonds to the Underwriter. (f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Under writer may reasonably request in order to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided however, that in no event shall the Authority be required to take 9 any action which would subject it to general or unlimited service of process i n any jurisdiction in which it is not now so subject. (g) Any certificate signed by a duly authorized officer of the Authority and delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority to the Underwriter as to the statements made therein. (h) As of the time of acceptance hereof and as of the date of Closing, except as otherwise disclosed in the Official Statement, the Authority has complied with the filing requirements of the JPA Act. (i) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement from the delivery of the Official Statement to the End Date, and will not effect or consent to any such amendment or supplement without prior consultation with the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribu tion of the Bonds. (j) For a period beginning on the date hereof and continuing until the End Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official Statement without prior consultation with the Underwriter and Kutak Rock LLP (“Underwriter’s Counsel”) and (b) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of Underwriter’s Counsel, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s Counsel) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser of the Bonds, not misleading. 8. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Authority and the City of their respective obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations hereunder are and shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. (b) Executed Agreements and Performance Thereunder. At the time of the Closing: (i) the City Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the written consent of the Underwriter; 10 (ii) there shall be in full force and effect such resolutions (the “Authorizing Resolutions”) as, in the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”), shall be necessary in connection with the transactions on the part of the Authority and the City contemplated by this Bond Purchase Agreement, the Official Statement, the City Documents and the Authority Documents; (iii) the Authority shall perform or have performed its obligations required or specified in the Authority Documents to be performed at or prior to Closing; (iv) the City shall perform or have performed its obligations required as specified in the City Documents to be performed at or prior to Closing; and (v) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraph 6(j) or 7(j), or as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Authority Documents or the City Documents and neither the Authority nor the City shall be in default in the payment of principal or interest on any of its bonded indebted ness or other obligations payable from the City’s general fund which default shall adversely impact the ability of the Authority to make payments on the Bonds or the City to make payments pursuant to the Lease Agreement. (d) Termination Events. The Underwriter shall have the right to terminate this Bond Purchase Agreement, without liability therefor, by written notification to the Authority and the City if at any time at or prior to the Closing the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter (evidenced by a written notice to the City and the Authority terminating the obligation of the U nderwriter to accept delivery of and pay for the Bonds) by reason of any of the following: (i) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material adverse respect any stateme nt or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made t herein, in light of the circumstances under which they were made, not misleading; or (ii) an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislatio n pending as of the date of the Authority Documents or the City Documents in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the Preside nt of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congres s of the United 11 States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other Federal or State authority materially adversely affecting the Federal or State tax status of the Authority or the City, or the interest on bonds or notes or obligations of the general character of the Series A Bonds; or (iii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the States or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the mark et price of the Bonds; or (iv) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registr ation under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (v) the New York Stock Exchange or other national securities exchange, or any governmental or regulatory authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase mater ially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of the Underwriter; or (vi) a general banking moratorium shall have been established by federal or State authorities; or (vii) there shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calami ty or crisis; or (viii) the commencement of any action, suit or proceeding described in Paragraphs 6(e) or 7(e) hereof; or (ix) a general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or 12 (x) an event described in paragraph (j) of Section 6 or paragraph (j) of Section 7 hereof shall have occurred which, in the reasonable professional judgment of the Underwriter, requires the preparation and public ation of a supplement or amendment to the Official Statement; or (xi) any rating of the Bonds or other obligations of the City shall have been downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a national rating service, which, in the Underwriter’s reasonable opinion, materially adversely affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (xii) there shall have occurred or any notice shall have been given of any intended downgrade, suspension, withdrawal or negative change in credit watch status by any national credit agency of the Insurer; or (xiii) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any domestic governmental authority or by any domestic national securities exchange, which are material to the marketability of the Bonds ; or (xiv) a material disruption in securities settlement, payment or cle arance services affecting the Bonds shall have occurred; or (xv) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Authority or the City; or (xvi) a decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Bond Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds (unless the context otherwise indicates) the following documents: (1) Bond Opinion. The approving opinion of Bond Counsel dated the date of the Closing and substantially in the form included as APPENDIX C to the Official Statement, together with a letter from such counsel, dated the date of the Closing and addressed to the Underwriter to the effect that the foregoing opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to them. (2) Supplemental Opinion. A supplemental opinion of Bond Counsel addressed to the Underwriter, substantially to the effect that: (i) this Bond Purchase Agreement has been duly authorized, executed and delivered by the Authority and the City and the Continuing Disclosure Certificate has been duly executed by the City, and the Bond Purchase Agreement 13 constitutes the legal, valid and binding agreement of the Authority and the City and the Continuing Disclosure Certificate constitutes the legal, valid and binding agreement of the City, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except as their enforcement may be subject to the app lication of equitable principles and the exercise of judicial discretion in appropriate cases if equitable remedies are sought and by the limitations on legal remedies against public entities in the State of California; (ii) the statements in the Official Statement and under the captions “INTRODUCTION,” “THE SERIES 2022 BONDS,” “SECURITY AND SOURCES OF PAYMENT FOR THE 2022 BONDS,” “TAX MATTERS” and in Appendices B, D and E, to the extent they purport to summarize certain provisions of the Indenture, the Lease Agreement, the Ground Lease, the Continuing Disclosure Certificate, the Bonds and the opinion of Bond Counsel, are accurate in all material respects (provided that no opinion need be expressed with respect to any financial or statistical data contained therein or other information included therein by cross -reference); and (iii) the Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is exempt from qualification as an indenture pursuant to the Trust Ind enture Act of 1939, as amended. (3) City Attorney Opinion. An opinion of the City Attorney, dated as of the Closing and addressed to the Authority and the Underwriter, in substantially the form attached hereto as Exhibit B. (4) Authority Counsel Opinion. An opinion of Counsel to the Authority, dated the date of the Closing and addressed to the City and the Underwriter, in substantially the form attached hereto as Exhibit C. (5) Trustee Counsel Opinion. The opinion of counsel to the Trustee, dated the date of the Closing, addressed to Bond Counsel, the City, the Authority and the Underwriter, in form and substance acceptable to counsel for the Underwriter substantially to the following effect: (i) The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America, with trust powers, and has the corporate power and authority to carry on its business as presently conducted. (ii) The Trustee has full power and authority to serve as Trustee as contemplated in the Indenture. (iii) The Indenture has been duly authorized, executed and delivered by the Trustee, and constitutes the legal, valid and binding obligation of the Trustee, enforceable against it in accordance with the terms thereof, subject to applicable bankruptcy, insolvency, moratorium, reorganization, arrangement and other similar laws affecting the rights of creditors (including creditors of national banks) generally or by the application of general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and the effect of judicial decisions which have held that certain provisions are unenforceable where their enforcement would violate the implied covenant of good faith and fair dealing, or would be commercially unreasonable and the effect of judicial decisions permitting the introduction of extrinsic evidence to modify the terms or the interpretation of the Indenture. 14 (iv) To the knowledge of such counsel, the execution, delivery, acceptance and performance of the Indenture by the Trustee and its acceptance and performance of its duties and obligations thereunder will not violate any provisions of any law or regulation governing the banking or trust powers of the Trustee or any order of any governmental authority having jurisdiction over the Trustee. (v) To the knowledge of such counsel, no authorization, approval, consent or other order of any governmental agency or regulatory authority having jurisdiction over the trust powers of the Trustee that has not been obtained is required for the authorization, execution and delivery by the Trustee of the Indenture or its acceptance and performance of the duties and obligations thereunder. (vi) The execution, delivery and performance of the Indenture by the Trustee and the consummation of the transactions contemplated thereby do not and will not (a) to the knowledge of such counsel conflict with or result in a breach or violation of any of t he terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Trustee is a party or by which the Trustee is bound or to which any of the Property or assets of the Trustee or any of its subsidiaries is subject, (b) result in any violation of the provisions of the Articles of Association, By-laws, or applicable resolutions of the Trustee, or (c) to the knowledge of such counsel result in any violation of any statu te, order, rule or regulation of any court or government agency or body having jurisdiction over the Trustee or any of its properties or assets. (6) Disclosure Counsel Opinion. An opinion, dated the date of the Closing addressed to the Authority, the City and the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Disclosure Counsel”), to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel to the Authority and without h aving undertaken to determine independently the accuracy or completeness of the contents in the Official Statement, such counsel has no reason to believe that the Preliminary Official Statement, as of its date and the date hereof, and the Official Statement, as of its date and as of the Closing Date (except for the financial statements and the other financial and statistical data included therein and the information included therein relating to the Insurer, the Bond Insurance Policy, the Reserve Policy, The Depository Trust Company and the book-entry system, and contained in the Appendices thereto as to all of which no opinion or belief need be expressed) contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (7) Underwriter’s Counsel Opinion. An opinion, dated the date of the Closing addressed to the Underwriter, of Nossaman LLP, counsel to the Underwriter, in such form as may be acceptable to the Underwriter. (8) City Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter to the effect that: (a) the representations, warranties and covenants of the City contained in this Bond Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (b) the City has complied with all agreements, covenants and conditions to be complied with by the City at or prior to the Closing under the City Documents; (c) to the best of such official’s knowledge, no event affecting the City has occurred since the date of the Official 15 Statement which either makes untrue or incorrect in any material respect as of the Closing the statements or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the state ments and information therein, in the light of the circumstances under which they were made, not misleading in any material respect. (9) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by the Chairman or other duly authorized officer of the Authority to the effect that (i) the representations, warranties and covenants of the Authority contained herein and in the Authority Documents are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing and the Authority has complied with all of the terms and conditions of the Authority Documents required to be complied with by the Authority at or prior to the date of Closing; and (ii) to the best of such official’s knowledge, no event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (10) Trustee’s Certificate. A Certificate of the Trustee, dated the date of Closing, in form and substance acceptable to counsel for the Underwriter to the effect that (i) the Trustee is duly organized and existing as a national banking association in good standing under the laws of the United States, having the full power and authority to accept and perform its duties under the Indenture; (ii) subject to the provisions of the Indenture, the Trustee will apply the proceeds from the Bonds to the purposes specified in the Indenture; and (iii) the Trustee has duly authorized and executed the Indenture. (11) Title Policy. A copy of a CLTA or ALTA title insurance policy in an amount equal to the principal amount of the Bonds, insuring the City’s leasehold interest in the Property, subject only to Permitted Encumbrances (as defined in the Indenture) or such other acceptable encumbrances. (12) Transcripts. Two CD transcripts of the proceedings prepared by Bond Counsel relating to the authorization and issuance of the Bonds will be delivered in due course. (13) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the Authority by a duly authorized officer of each. (14) Documents. An original executed or certified copy of each of the Authority Documents, the City Documents and the Joint Exercise of Powers Agreement (the “JPA Agreement”), between the City and the Parking Authority of the City of Lake Elsinore. (15) City Resolution. Certified copy by the City Clerk, of each resolution of the City relating to the City Documents, the actions contemplated thereby, provided that such resolutions may be contained in the transcripts. (16) Authority Resolution. Certified copy by the Secretary or Assistant Secretary of the Authority, of each resolution of the Authority relating to the Authority Documents, the Bonds and the transactions contemplated thereby, provided that such resolutions may be contained in the transcripts. 16 (17) IRS Form 8038-G. Evidence that the federal tax information form 8038-G has been prepared for filing. (18) Tax Certificate. A tax certificate in form satisfactory to Bond Counsel. (19) Ratings. Evidence as of the Closing satisfactory to the Underwriter that the Bonds have received the ratings set forth in the Official Statement and that such ratings have not been reduced or withdrawn. (20) CDIAC Statement. A copy of the Notice of Sale required to be delivered to the California Debt and Investment Advisory Commission pursuant to Section 53583 of the Government Code and Section 8855(g) of the Government Code. (21) Insurer Documents. A copy of the Reserve Policy, Bond Insurance Policy and any such supporting opinions and certifications as shall be deemed advisable by Bond Counsel and as may be reasonably requested by the Underwriter. (22) Additional Documents. Such additional certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably deem necessary. If the Authority or the City shall be unable to satisfy the conditions contained in this Bond Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be terminated by the Underwriter, and none of the Underwriter, the Authority or the City shall be under further obligation hereunder. 9. Expenses. Except as otherwise provided in this Section, the Underwriter shall be under no obligation to pay, and the Authority or the City shall pay or cause to be paid, the expenses incident to the performance of the obligations of the Authority and the City hereunder including but not limited to: (a) the costs of the preparation and printing, or other reproduction (for distribution on or prior to the date hereof) of the City Documents and the Authority Documents and the cost of preparing, printing, issuing and delivering the Bonds; (b) the fees and disbursements of any counsel, financial advisors, accountants or other experts or consultants retained by the Authority or the City; (c) the fees and disbursements of Bond Counsel and Disclosure Counsel; (d) the cost of preparation and printing the Preliminary Official Statement and any supplements and amendments thereto and the cost of preparation and printing of the Official Statement, including a reasonable number of copies thereof for d istribution by the Underwriter; and (e) charges of rating agencies for the rating of the Bonds. The Underwriter shall pay all expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds including, but not limit ed to: (i) the fees and disbursements of Underwriter's Counsel; and (ii) all out-of-pocket disbursements and expenses 17 incurred by the Underwriter in connection with the offering and distribution of the Bonds (including other expenses, fees of the California Debt and Investment Advisory Commission, CUSIP Service Bureau fees, and any other fees and expenses), except as otherwise provided in the preceding paragraph or otherwise agreed to by the Underwriter, the Authority and the City in writing. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 10. Establishment of Issue Price of the Bonds. (a) The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar certificate, together with the suppo rting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit E, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit E, the Authority will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligat ion shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obli gation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number w ithin that maturity will be treated as a separate maturity of the Bonds. (c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price ”), or at the corresponding yield or yields, set forth in Exhibit A. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the 10% test has not been satisfied and for which the Authority and t he Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold -the- offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (i) the close of the 5th business day after the sale date; or (ii) the date on which the Underwriter has sold at least 10% of that maturity o f the Bonds to the public at a price that is no higher than the initial offering price to the public. 18 The Underwriter will advise the Authority promptly after the close of the 5th business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that: (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker -dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter, and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by th e dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker -dealer is a sale to the public. (ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Authority acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in 19 the third-party distribution agreement and the related prici ng wires. The Authority further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the-offering- price rule, if applicable to the Bonds. (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (i) “public” means any person other than an underwriter or a related party, (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third -party distribution agreement participating in the initial sale of the Bonds to the public), (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (includi ng direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties. 11. Notice. Any notice or other communication to be given to the Underwriter may be given by delivering the same to Stifel, Nicolaus & Company, Incorporated, 2121 Avenue of the Stars, Suite 2150, Los Angeles, California 90067, Attention: Public Finance . Any notice or other communication to be given to the Authority or the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof. 12. Entire Agreement. This Bond Purchase Agreement, when accepted by the Authority and the City, shall constitute the entire agreement among the Authority, the City and the Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of any Underwriter). Except as provided in Section 17 below, no other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All the Authority’s and the City’s representations, warranties and agreements in this Bond Pur chase Agreement shall remain operative and in full force and effect, regardless of any investigation made 20 by or on behalf of the Underwriter, until the earlier of (a) delivery of and payment for the Bonds hereunder, and (b) any termination of this Bond Purchase Agreement. 13. Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 15. Parties in Interest. This Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or have any right hereunder or by virtue hereof. All representations, warranties and agreements of the Authority and the City in this Purchase Agreement shall remain operative a nd in full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds. 16. State of California Law Governs. The validity, interpretation and performance of the Authority Documents shall be governed by the laws of the State. 21 17. No Assignment. The rights and obligations created by this Bond Purchase Agreement shall not be subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Managing Director Accepted as of the date first stated above: LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Authorized Officer Time of Execution: CITY OF LAKE ELSINORE, CALIFORNIA By: Authorized Officer Time of Execution: A-1 EXHIBIT A MATURITY SCHEDULE $________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A Maturity (April 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering-Price Rule (marked if used) ___________________ (T) Term Bond. (C) Priced to optional call at par on May 1, 2031. * At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement. B-2 EXHIBIT B FORM OF CITY ATTORNEY OPINION ______ __, 2022 Lake Elsinore Facilities Financing Authority Lake Elsinore, California City of Lake Elsinore Lake Elsinore, California Stifel, Nicolaus & Company, Incorporated Los Angeles, California Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A Ladies and Gentlemen: This office has acted as counsel to the City of Lake Elsinore (the “City”) in connection with the issuance, sale and delivery by the Lake Elsinore Facilities Financing Authority (the “Authority”) of the above-captioned bonds (the “Bonds”). I have examined originals (or copies certified or otherwise identified to our satisfaction) of such documents, records and other instruments as we deemed necessary or appropriate for the purposes of this opinion, including, without limi tation: (i) those documents relating to the existence, organization and operation of the City; (ii) Resolution No. _____, adopted by the City Council on ____ __, 2022 (the “Resolution”); (iii) all necessary documentation of the City relating to the authorization, execution and delivery of the Indenture, dated as of ______ 1, 2022 (the “Indenture”), among the Authority, the City, and Wilmington Trust, National Association, as trustee (the “Trustee”); the Lease Agreement, dated as of _____ 1, 2022, between the Authority and the City (the “Lease Agreement ”); the Ground Lease, dated as of ______ 1, 2022, between the City and the Authority (the “Ground Lease”); the Continuing Disclosure Certificate, dated as of _____ __, 2022 (the “Continuing Disclosure Certificate”) executed by the City; the Bond Purchase Agreement, dated _______, 2022, among Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), the Authority and the City (the “Bond Purchase Agreement”); and the Official Statement relating to the Bonds, dated _______, 2022 (the “Official Statement”). The Lease Agreement, Indenture, the Ground Lease and the Continuing Disclosure Certificate are collectively referred to herein as the “C ity Legal Documents.” All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms as set forth in the Indenture. B-2 Based on the foregoing, we are of the opinion that: 1. The City is a municipal corporation, organized and operating under the Constitution and laws of the State of California, and the City has duly and validly adopted the Resolution at a meeting of the City Council of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Resolution has not been modified or amended and is in full force and effect. 2. Each of the City Legal Documents and the Bond Purchase Agreement has been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, each constitutes a legal, valid and binding agreement of the City enforceable against the City in accordance with its respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally, the exercise of judicial discretion, the application of equitable principles if equitable remedies are sought and limitations on remedies against counties in the State of California. 3. To the best knowledge of the undersigned, after reasonable investigation, except as may be described in the Official Statement, no approval, consent or authorization of any governmental or public agency or authority is required for the adoption of the Resolution, the approval of the Official Statement or the valid authorization or execution and delivery of the City Legal Documents or the Bond Purchase Agreement which has not been obtained (provided that no opinion is expressed as to any action required under state securities or blue sky laws in conjunction with the purchase or distribution of the Bonds by the Underwriter). 4. To the best knowledge of the undersigned, after reasonable investigation, the execution and delivery of the City Legal Documents and the Bond Purchase Agreement by the City, the adoption of the Resolution, the approval of the Official Statement, and compli ance with the provisions of the City Legal Documents, the Bond Purchase Agreement, the Official Statement and the Resolution and the performance by the City of its obligations thereunder, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute a breach of, or default under, any instrument relating to the organization, existence or operation of the City, or any commitment, agreement or other instrument to which the City is a party or by which it is bound, or any existing law, regulation, order or decree to which the City is subject. 5. Except as disclosed in the Official Statement, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending as to which service of process has been made or, to the best knowledge of the undersigned, threatened against the City which would materially and adversely impact the City’s ability to complete the transactions described in and contemplated by the Official Statement, seeking to restrain or enjoin the base rental payments under the Lease Agreement , or in any way contesting or affecting the validity of the City Legal Documents, the Bond Purchase Agreement, the Resolution or the Bonds or the transactions relating to the Property as described and defined in the Official Statement. This office expresses no opinion as to any matter other than as expressly set forth above. Without limiting the generality of the foregoing, we specifically express no opin ion as to the status of B-2 the Bonds or the interest thereon or the City Legal Documents under any federal securities laws or any state securities “Blue Sky” law or any federal, state or local tax law. Further, we express no opinion with respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions contained in the City Legal Documents, and we express no opinion on the laws of any jurisdiction other than the State of California and the United States of America. This opinion is delivered to each of the parties address above and is solely for the benefit of each of such parties and is not to be used, circulated, quoted, or otherwise referred to or relied upon by any other person or for any other purpose. A copy of this opinion may be included in the transcript of proceedings relating to the Bonds. Very truly yours, D-1 EXHIBIT C FORM OF AUTHORITY COUNSEL OPINION ________ __, 2022 Lake Elsinore Facilities Financing Authority Lake Elsinore, California City of Lake Elsinore Lake Elsinore , California Stifel, Nicolaus & Company, Incorporated Los Angeles, California Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A Ladies and Gentlemen: This office has acted as counsel to the Lake Elsinore Facilities Financing Authority (the “Authority”) in connection with the issuance, sale and delivery by the Authority of the above - captioned bonds (the “Bonds”). I have examined originals (or copies certified or otherwise identified to our satisfaction) of such documents, records and other instruments as we deemed necessary or appropriate for the purposes of this opinion, including, without limitation: (i) those documents relating to the existence, organization and operation of the Authority; (ii) Resolution No. ______, adopted by the Authority Board of Directors on _______ ___, 2022 (the “Resolution”); (iii) all necessary documentation of the Authority relating to the authorization, execution and delivery of the Indenture, dated as of ______ 1, 2022 (the “Indenture”) among the Authority, the City of Lake Elsinore (the “City”) and Wilmington Trust, National Association, as trustee (the “Trustee”); the Lease Agreement , dated as of _______ 1, 2022 (the “Lease Agreement ”), between the Authority and the City; the Ground Lease, dated as of (the “Lease Agreement ”), between the City and the Authority (the “Ground Lease”); the Bond Purchase Agreement, dated ______, 2022, among Stifel, Nicolaus & Company, Incorporated, as underwriter, the Authority and the City (the “Bond Purchase Agreement”); and the Official Statement relating to the Bonds, dated _______, 2022 (the “Official Statement”). The Indenture, the Lease Agreement, the Ground Lease, and the Bonds are collectively referred to herein as the “Authority Legal Documents.” All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms as set forth in the Indenture. Based on the foregoing, we are of the opinion that: 1. The Authority is a joint exercise of powers agency duly organized and validly existing pursuant to the Constitution and laws of the State of California with the full power and authority to adopt the Resolution, and the Authority has duly and validl y adopted the Resolution at a D-2 meeting of the Board of Directors of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Resolution has not been modified or amended and is in full force and effect. 2. Each of the Authority Legal Documents, the Bond Purchase Agreement and the Official Statement has been duly authorized, executed and delivered by the Authority, and, assuming due authorization, execution and delivery by the other parties thereto, each of the Authority Legal Documents and the Bond Purchase Agreement constitutes a legal, valid and binding agreement of the Authority enforceable against the Authority in accordance with its respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, the exercise of judicial discretion, the application of equitable principles if equitable remedies are sought and limitations on remedies against joint powers agencies in the State of California. 3. Except as disclosed in the Official Statement, there is no action, suit, proceeding or investigation at law or in equity, before or by any court, public board or body, pe nding as to which service of process has been made or, to the best knowledge of the undersigned, threatened against the Authority, seeking to restrain or enjoin any of the transactions referred to herein or contemplated hereby or contesting or affecting the validity of the Authority Legal Documents or the Bond Purchase Agreement, or the issuance, sale or delivery of the Bonds. This office expresses no opinion as to any matter other than as expressly set forth above. Without limiting the generality of the foregoing, we specifically express no opinion as to the status of the Bonds or the interest thereon or the Authority Legal Documents under any federal securities laws or any state securities “Blue Sky” law or any federal, state or local tax law. Further, w e express no opinion with respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions contained in the Authority Legal Documents, and we express no opinion on the laws of any jurisdiction other than the State of California and the United States of America. D-3 This opinion is delivered to each of the parties address above and is solely for the benefit of each of such parties and is not to be used, circulated, quoted, or otherwise referred to or relied upon by any other person or for any other purpose. A copy of this opinion may be included in the transcript of proceedings relating to the Bonds. Very truly yours, D-4 EXHIBIT E FORM OF ISSUE PRICE CERTIFICATE $________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A [TO COME FROM BOND COUNSEL] Stradling Yocca Carlson & Rauth Draft of 5/2/22 LEASE AGREEMENT by and between CITY OF LAKE ELSINORE and LAKE ELSINORE FACILITIES FINANCING AUTHORITY Dated as of June 1, 2022 Relating to $____________ Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A TABLE OF CONTENTS Page i ARTICLE I DEFINITIONS Section 1.01 Definitions ................................................................................................................. 2 ARTICLE II LEASE OF PROPERTY; TERM Section 2.01 Lease of Property ....................................................................................................... 4 Section 2.02 Term; Occupancy ...................................................................................................... 4 ARTICLE III RENTAL PAYMENTS Section 3.01 Base Rental Payments ............................................................................................... 4 Section 3.02 Additional Rental Payments ...................................................................................... 5 Section 3.03 Fair Rental Value ....................................................................................................... 6 Section 3.04 Payment Provisions ................................................................................................... 6 Section 3.05 Appropriations Covenant........................................................................................... 6 Section 3.06 Rental Abatement ...................................................................................................... 6 ARTICLE IV MAINTENANCE, ALTERATIONS AND ADDITIONS Section 4.01 Maintenance and Utilities .......................................................................................... 7 Section 4.02 Additions to Property ................................................................................................ 7 Section 4.03 Installation of City’s Equipment ............................................................................... 7 ARTICLE V INSURANCE Section 5.01 Commercial General Liability and Property Damage Insurance; Workers’ Compensation Insurance ........................................................................................... 8 Section 5.02 Title Insurance ........................................................................................................... 9 Section 5.03 Additional Insurance Provision; Form of Policies .................................................... 9 Section 5.04 Self-Insurance ............................................................................................................ 9 ARTICLE VI DEFAULTS AND REMEDIES Section 6.01 Defaults and Remedies ............................................................................................ 10 Section 6.02 Waiver ..................................................................................................................... 13 ARTICLE VII EMINENT DOMAIN; PREPAYMENT Section 7.01 Eminent Domain ...................................................................................................... 13 Section 7.02 Prepayment .............................................................................................................. 13 TABLE OF CONTENTS (continued) Page ii ARTICLE VIII COVENANTS Section 8.01 Right of Entry .......................................................................................................... 14 Section 8.02 Liens ........................................................................................................................ 14 Section 8.03 Quiet Enjoyment ...................................................................................................... 15 Section 8.04 Authority Not Liable ............................................................................................... 15 Section 8.05 Assignment and Subleasing ..................................................................................... 15 Section 8.06 Title to Property ....................................................................................................... 16 Section 8.07 Authority’s Purpose ................................................................................................. 16 Section 8.08 Representations of the City ..................................................................................... 16 Section 8.09 Representation of the Authority .............................................................................. 16 Section 8.10 Condemnation of Property ...................................................................................... 16 ARTICLE IX NO CONSEQUENTIAL DAMAGES; USE OF THE PROPERTY; SUBSTITUTION OR RELEASE Section 9.01 No Consequential Damages .................................................................................... 17 Section 9.02 Use of the Property .................................................................................................. 17 Section 9.03 Substitution or Release of the Property ................................................................... 17 ARTICLE X MISCELLANEOUS Section 10.01 Law Governing ........................................................................................................ 18 Section 10.02 Notices ..................................................................................................................... 18 Section 10.03 Validity and Severability ......................................................................................... 18 Section 10.04 Net-Net-Net Lease ................................................................................................... 19 Section 10.05 Taxes ....................................................................................................................... 19 Section 10.06 Section Headings ..................................................................................................... 19 Section 10.07 Amendments ............................................................................................................ 19 Section 10.08 Assignment .............................................................................................................. 20 Section 10.09 Execution ................................................................................................................. 20 Section 10.10 [Insurer as Third Party Beneficiary ......................................................................... 20 Signatures ............................................................................................................................... S-1 EXHIBIT A DESCRIPTION OF THE PROPERTY ................................................................. A-1 EXHIBIT B BASE RENTAL PAYMENT SCHEDULE .......................................................... B-1 S-1 LEASE AGREEMENT THIS LEASE AGREEMENT (this “Lease Agreement”) executed and entered into as of June 1, 2022, is by and between the CITY OF LAKE ELS INORE (the “City”), a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee, and the LAKE ELSINORE FACILITIES FINANCING AUTHORITY (the “Authority”), a joint exercise of powers entity duly or ganized and existing under and by virtue of the laws of the State of California, as lessor. RECITALS WHEREAS, the City and the Authority desire to finance a portion of the costs of the acquisition, construction and installation of various public improvements (the “Project”); WHEREAS, in order to finance the Project the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to this Lease Agreement; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Project through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under this Lease Agreement; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City and Wilmington Trust, National Association, as trustee (the “Trustee”); WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Lease Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Lease Agreement; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows: 2 ARTICLE I DEFINITIONS Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease Agreement, have the meani ngs herein specified, which meanings shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. “Additional Bonds” means bonds other than the Series 2022A Bonds issued under the Indenture in accordance with the provisions thereof “Additional Rental Payments” means all amounts payable by the City as Additional Rental Payments pursuant to Section 3.02 hereof. “Authority” means the Lake Elsinore Facilities Financing Authority, a joint exercise of powers authority organized and existing under the laws of the State of California. “Base Rental Deposit Date” means the 15th day of the month next preceding each Interest Payment Date. “Base Rental Payments” means all amounts payable to the Authority from the City as Base Rental Payments pursuant to Section 3.01 hereof. “Base Rental Payment Schedule” means the schedule of Base Rental Payments payable to the Authority from the City pursuant to Section 3.01 hereof and attached hereto as Exhibit B. “Bonds” means the Lake Elsinore Facilities Financing Authority Lease Revenue Bonds Series 2022A issued under the Indenture, and any Additional Bonds. “City” means the City of Lake Elsinore, a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California. “Delivery Date” means June __, 2022. “Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may from time to time be amended in accordance with to the provisions thereof and hereof. “Indenture” means the Indenture, dated as of the date hereof, by and among t he Authority, the City and the Trustee, as originally executed and as i t may from time to time be amended or supplemented in accordance with the provisions thereof. “Joint Powers Agreement” means the Joint Exercise of Powers Agreement, dated as of September 1, 2016, by and between the City and the Parking Authority of the Cit y of Lake Elsinore as originally executed and as it may from time to time be amended in accordance with the provisions thereof. 3 “Lease Agreement” means this Lease Agreement, as originally executed and as it may from time to time be amended in accordance with the provisions hereof. “Net Insurance Proceeds” means any insurance proceeds or condemnation award in excess of $50,000, paid with respect to any of the Property, remaining after pay ment therefrom of all reasonable expenses incurred in the collection thereof. “Permitted Encumbrances” means, with respect to the Property, as of any particular time, (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or w hich the City may, pursuant to provisions of Article V hereof, permit to remain unpaid, (b) the Assignment Agreement, (c) this Lease Agreement, (d) the Ground Lease, (e) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law as normally exist with respect to properties similar to the Property for the purposes for which it was acquired or is held by the City, (f) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date which the City certifies in writing will not affect the intended use of the Property or impair the security granted to the Trustee for the benefit of the Owners of the Bonds by the Indenture and the Assignment Agreement and to which the Authority and the City consent in writing, and (g) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Delivery Date which the City certifie s in writing do not affect the intended use of the Property or impair the security granted to the Trustee for the benefit of the Owners of the Bonds by the Indenture and the Assignment Agreement and to which the Authority and the City consent in writing. “Property” means the real property described in Exhibit A hereto and the improvements located thereon. “Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental Payments. “Rental Period” means the twelve-month period commencing on April 1 of each year during the term of this Lease Agreement. “Series 2022A Bonds” means the Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A issued under the Indenture. “Termination Date” means [April 1, 2052], unless extended or sooner terminated as provided in Section 2.02 hereof. “Trustee” means the trustee appointed under the Indenture and referred to therein as the Trustee. 4 ARTICLE II LEASE OF PROPERTY; TERM Section 2.01 Lease of Property. (a) The Authority hereby leases to the City and the C ity hereby leases from the Authority the Property, all rights appurtenant thereto, including, but not limited to, rights of access, on the terms and conditions hereinafter set forth, subject to all Permitted Encumbrances. (b) The leasing of the Property by the City to the Authority pursuant to the Ground Lease shall not effect or result in a merger of the City’s leasehold estate pursuant to this Lease Agreement and its fee estate as lessor under the Ground Lease, and the Authority shall continue to have a leasehold estate in the Property pursuant to the Ground Lease throughout the term thereof and hereof. The leasehold interest granted by the City to the Authority pursuant to the Ground Lease is and shall be independent of this Lease Agreement; this Lease Agree ment shall not be an assignment or surrender of the leasehold interest granted to the Authority under the Ground Lease. Section 2.02 Term; Occupancy. The term of this Lease Agreement shall commenc e on the Delivery Date and shall end on the Termination Date, unless suc h term is extended or sooner terminated as hereinafter provided. If on the Termination Date the Bonds shall not be fully paid, or provision therefor made in accordance with Article X of the Indenture, or the Indenture shall not be discharged by its terms, or if the Rental Payments shall remain due and payable or s hall have been abated at any time and for any reason, [or amounts are owed to the Insurer pursuant to the terms of the Insurance Policy, the Reserve Surety Policy, this Lease Agreement or the Inde nture], then the term of this Lease Agreement shall be exten ded until the date upon which (i) all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the Indenture, or (ii) the Indenture shall be discharged by its terms and all Rental Payments shall have been paid in full. Notwithstanding the foregoing, the term of this Lease Agreement shall in no event be extended more than ten years beyond such Termination Date. Such extended date being the “Maximum Lease Term.” If prior to the Termination Date, all Bonds shall be fully paid, o r provision therefor made in accordance with Article X of the Indenture, the Indenture shall be discharged by its terms and all Rental Payments shall have been paid in full, the term of this Lease Agreement shall end simultaneously therewith. ARTICLE III RENTAL PAYMENTS Section 3.01 Base Rental Payments. (a) Subject to the provisions hereof relating to a revision of the Base Rental Payment Schedule pursuant to subsection (b) of this Section, the City shall pay to the Authority, as Base Rental Payments (subject to the provisions of Se ction 3.06 and Article VII hereof) the amount at the times specified in the Base Rental Payment Schedule, a portion of which Base Rental Payments shall constitute principal, and a portion of which shall constitute interest. Rental Payments, including Base Rental Payments, shall be paid by the City to the Authority for and in consideration of the right to use and occupy the Property and in consideration of the continued right 5 to the quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid. The Authority and the City understand and intend that the obligation of the City to pay the Base Rental Payments and Additional Rental Payments hereunder shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requireme nt concerning the creation of indebtedness by the City, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the City. Base Rental Payments and Additional Rental Payments due hereunder shall be payable only from current funds which are budgeted and appropriated or otherwise legally available for the purpose of paying Base Rental Payme nts and Additional Rental Payments or other payments due hereunder as consideration for the use of the Property. The City h as not pledged the full faith and credit of the City, the State of California, or any agency or department thereof, to the payment of the Base Rental Payments and Additional Rental Payments or any other payments due hereunder. (b) If the term of this Lease Agreement shall have been extended pursuant to Section 2.02 hereof, the obligation of the City to pay Rental Payments shall continue to and including the Base Rental Deposit Date preceding the date of termination of this Lease Agreement (as so extended pursuant to Section 2.02 hereof). Upon such extension, the Base Rental Payments shall be established so that they will be sufficient to pay all extended and unpaid Base Rental Payments; provided, however, that the Rental Payments payable in any Rental Period shall not exceed the annual fair rental value of the Property. Section 3.02 Additional Rental Payments. The City shall also pay, as Additional Rental Payments, such amounts as shall be required for the payment of the following: (a) all taxes and assessments of any type or nature charged to the Authority or the City or affecting the Property or the respective interests or estates of the Authority or the City therein; (b) all reasonable administrative costs of the Authority relating to the Property including, but without limiting the generality of the foregoing, salaries, wages, fees and expenses, compensation and indemnification of the Trustee payable by th e Authority under the Indenture, fees of auditors, accountants, attorneys or engineers, and all other necessary and reasonab le administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Indenture or this Lease Agreement or to defend the Authority and its members, officers, agents and employees; (c) insurance premiums for all insurance required pursuant to Article V hereof; (d) any amounts with respect to this Lease Agreement or the Bonds required to be rebated to the federal government in accordance with Section 148(f) of the Code; (e) [all amounts payable to the Insurer pursuant to Section 11.22 of the Indenture not payable from Base Rental Payments; and] (f) all other payments required to be paid by the City under the provisions of this Lease Agreement or the Indenture. 6 Amounts constituting Additional Rental Payments payable hereunder shall be paid by the City directly to the person or persons to whom such amounts shall be payable. The City shall pay all such amounts when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days after notice in writing from the Trustee to the City stating the amount of Additional Rental Payments then due and payable and the purpose thereof. Section 3.03 Fair Rental Value. The parties hereto have agreed and determined that the annual fair rental value of the Property is not less than the maximum annual Rental Payments due in any year. In making such determination of fair rental value, consideration has been given to the uses and purposes that may be served by the Property and the benefits therefrom which will accrue to the City and the general public. Payments of the Rental Payments for the Property during each Rental Period shall constitute the total rental for said Rental Period and shall be paid by the City in each Rental Period for and in consideration of the right of use and occupancy of the Property during each such period for which said rental is to be paid. Section 3.04 Payment Provisions. Each installment of Base Rental Payments payable hereunder shall be paid in lawful money of the United Sta tes of America to or upon the order of the Authority at the principal office of the Trustee in Costa Mesa, California, or such other place or entity as the Authority shall designate. Each Base Rental Payment shall be deposited with the Trustee no later than the Base Rental Deposit Date preceding the Interest Payment Date on which such Base Rental Payment is due. Any Base Rental Payme nt which shall not be paid by the City when due and payable under the terms of this Lease Agreement shall bear interest from the date when the same is due hereunder until the same shall be paid at the rate equal to the highest rate of interest on any of the Outstanding Bonds. Notwithstanding any dispute between the Authority and the City, the City shall make all Rental Payment s when due without deduction or offset of any kind and shall not withhold any Rental Payments pending the final resolution of such d ispute. In the event of a determination that the City was not liable for said Rental Payments or any portion thereof, said payments or excess of payments, as the case may be, shall be credited against subsequent Rental Payments due hereunder or refunded at the time of such determination. Amounts required to be deposited by the City with the Trustee pursuant to this Section on any date shall be reduced to the extent of available amounts on deposit in the Base Rental Payment Fund, the Interest Fund or the Principal Fund. Section 3.05 Appropriations Covenant. The City covenants to take such action as may be necessary to include all Rental Payments due hereunder in its annual budgets and to make necessary annual appropriations for all such Rental Payments. The City will deliver to the Authority and the Trustee a Certificate of the City stating that its final annual budget includes all Base Re ntal Payments due in such fiscal year within ten days after the filing or adoption thereof. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each an d every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by the City. Section 3.06 Rental Abatement. Except as otherwise specifically provided in this Section, during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property, Rental Payments shall be abated proportionately, and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 7 1933(4) and any and all other rights to terminate this Lease Agreement by virtue of any such interference, and this Lease Agreement shall continue in full force and effect. The amount of such abatement shall be agreed upon by the City and the Authority; provided, however, that the Rental Payments due for any Rental Period shall not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. The City and the Authority shall calculate such abatement and shall provide the Trustee with a certificate setting forth such calculation and the basis therefor. Such abateme nt shall continue for the period commencing with the date of interference resulting from such damage, destruction, condemnat ion or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed; and the term of this Lease Agreement shall be extended as provided in Section 2.02 hereof, except that the term shall in no event be extended beyond the Maximum Lea se Term. Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental Payments in any of the funds and accounts established under the Indenture, Rental Payments shall not be abated as provided above but, rather, shall be payable by the City as a special obligation payable solely from said funds and accounts. ARTICLE IV MAINTENANCE, ALTERATIONS AND ADDITIONS Section 4.01 Maintenance and Utilities. Throughout the term of this Lease Agreement, as part of the consideration for rental of the Prope rty, all improvement, repair and maintenance of the Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Property, which may include, without limitation, j anitor service, security, power gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee, sublessee, or invitee thereof. In exchange for the Rental Payments, the Authority agrees to provide only the Property. Section 4.02 Additions to Property. Subject to Section 8.02 hereof, the City and any sublessee shall, at its own expense, have the right to make additions, modifications and improvements to the Property. To the extent that the removal of such additions, modifications or improvements would not cause material damage to the Property, such additions, modifications and improvements shall remain the sole property of the City or such sublessee, and neither the Authority nor the Trustee shall have any interest therein. Such additions, modifications and improvements shall not in any way damage the Property or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Property, upon completion of any additions, modifications and improvements made pursuant to this Section, sha ll be of a value which is at least equal to the value of the Property immediately prior to the making of such additions, modifications and improvements. Section 4.03 Installation of City’s Equipment. The City and any sublessee may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon the Property. All such items shall remain the sole property of the City or such sublessee, and neither the Authority no r the Trustee shall have any interest therein. The City or such sublessee may remove or modify such equipment or other 8 personal property at any time, provided that such party shall repair and restore any and all damage to the Property resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City or any suble ssee from purchasing items to be installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Property. ARTICLE V INSURANCE Section 5.01 Commercial General Liability and Property Damage Insurance; Workers’ Compensation Insurance. (a) The City shall maintain or cause to be maintained, throughout the term of this Lease Agreement, a standard commercial general liability insurance policy or policies, in protection of the City, the Authority and their respective members, officers, agents and employees. Said policy or policies shall provide for indemnification of sai d parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasi oned by reason of the use or ownership of the Property. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in a single accident or event, and in a minimum amount of $500,000 for damage to property (subject to a deductible clause of not to exceed $250,000) resulting from a single accident or event. Such commercial general liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried or required to be carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City provided such self-insurance complies with the provisions of Section 5.04 hereof. The Net Insurance Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the Net Insurance Proceeds of such insurance shall have been paid. (b) The City shall maintain or cause to be maintained, throughout the term of this Lease Agreement, workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the California Labor Code, or any act enacted as an amendment or supplement thereto or in lieu thereof, such workers’ compensation insurance to cover all persons employed by the City in connection with the Property and to cover full liability for compensation under any such act; provided, however, that the City’s obligations under this subse ction may be satisfied by self-insurance, provided such self- insurance complies with the provisions of Section 5.04 hereof. (c) The City shall maintain or cause to be maintained, fire, lightning and special extended coverage insurance (which shall include coverage for vandalism and malicious mischief, but need not include coverage for earthquake damage), on all improvements constit uting any part of the Property in an amount equal to the greater of 100% of the replacement cost of such improvements or 100% of the outstanding principal amount of the Bonds. The City has an insurance policy which provides replacement cost coverage. All insurance required to be maintained pursuant to this subsection may be subject to a deductible in an amount not to exceed $500,000. The City’s 9 obligations under this subsection may be satisfied by self -insurance, provided such self-insurance complies with the provisions of Section 5.04 hereof. (d) The City shall maintain rental interruption insurance to cover the Authority’s loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the hazards required to be covered pursuant to subsection (c) of this Section in an amount sufficient at all times to pay an amount not less than the product of two times the maximum amount of Base Rental Payments scheduled to be paid dur ing any Rental Period. The City shall not be permitted to self-insure its obligation under this subsection. (e) The insurance required by this Section shall be provided by reputable insurance companies with claims paying abilities determined, in the reasonable opinion of a professionally certified risk manager or an independent insurance consultant, to be adequate for the purposes hereof. (f) The Authority and the City shall promptly apply for federal disaster aid or State disaster aid in the event that the Property are damaged or destroyed as a result of an earthquake or other disaster occurring at any time. To the extent permitted by law, the proceeds received as a result of such disaster aid shall be applied in accordance with Section 5.03 of the Indenture. Section 5.02 Title Insurance. The City shall provide, at its own expense, one or more CLTA or ALTA title insurance policies for the Property, in the aggregate amount of not less than the initial aggregate principal amount of the Bonds, said policy or policies shall insure (a) the fee interest of the City in the Property, (b) the Authority’s ground leasehold estate in the Property under the Ground Lease, and (c) the City’s leasehold estate hereunder in the Property, subject only to Permitted Encumbrances. All Net Insurance Proceeds received under said policy or policies shall be deposited with the Trustee and applied as provided in Section 5.04 of the Indenture. So long as any of the Bonds remain Outstanding, each policy of title insurance obtained pursuant to the Inden ture or this Lease Agreement or required thereby or hereby shall provide that all proceeds thereunder shall be payable to the Trustee for the benefit of the Bond Owners. Section 5.03 Additional Insurance Provision; Form of Policies. The City shall pay or cause to be paid when due the premiums for all insurance policies required by Section 5.01 hereof. All such policies shall provide that the T rustee shall be given 30 days’ notice of the expiration thereof or any intended cancellation thereof. The Trustee shall be ful ly protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. The City shall cause to be delivered to the Trustee on or before August 30 each year, commencing August 30, 2023, a schedule of the insurance policies being maintained in accordance herewith and a Certificate of the City stating that such po licies are in full force and effect and that the City is in full compliance with the requirements of this Article. The Trust ee shall be entitled to rely upon said Certificate of the City as to the City’s compliance with this Article. The Trustee shall no t be responsible for the sufficiency of coverage or amounts of such policies. Section 5.04 Self-Insurance. Insurance provided through a California joint powers authority of which the City is a member or with which the City contracts for insurance shall be deemed to be self-insurance for purposes hereof. Any self-insurance maintained by the City pursuant to this Article shall comply with the following terms: 10 (a) the self-insurance program shall be approved in writing by a professionally certified risk manager or by an independent insurance consultant; (b) the self-insurance program shall include an actuarially sound claims reserve fund out of which each self-insured claim shall be paid, the adequacy of each such fund shall be evaluated on an annual basis by a professionally cert ified risk manager or by an independent insurance consultant and any deficiencies in any self-insured claims reserve fund shall be remedied in accordance with the recommendation of a professionally certified risk manager or such independent insurance consultant, as applicable; and (c) in the event the self-insurance program shall be discontinued, the actuarial soundness of its claims reserve fund, as determined by a professionally certified risk manager or by an independent insurance consultant, shall be maintained. ARTICLE VI DEFAULTS AND REMEDIES Section 6.01 Defaults and Remedies. (a) (i) If the City shall fail (A) to pay any Rental Payment payable hereunder when the same becomes due and payable, time being expressly declared to be of the essence in this Lease Agreement, or (B) to keep, observe or perform any other term, covenant or condition contained herein or in the Indenture to be kept or performed by the City, or (ii) upon the happening of any of the events specified in this subsection or in subsection (b) of this Section, the City shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement. The City shall in no event be in default in the observance or performance of any covenant, condition or agreement in this Lease Agreement on its part to be observed or performed, other than as referred to in clause (i)(A) or (ii) of the preceding sentence, unless the City shall have failed, for a period of 30 days or [(so long as the Insurer is not in default on any obligation under the Insurance Policy)] such additional time as is reasonably required, [with the written approval of the Insurer,] to correct any such default after notice by the Authority to the City properly specifying wherein the City has failed to perform any such covenant, condition or agreement. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following: (1) To terminate this Lease Agreement in the manner hereinafter provided on account of default by the City, notwithstanding any re -entry or re-letting of the Property as hereinafter provided for in subparagraph (2) hereof, and to re -enter the Property and remove all persons in possession thereof and all personal property whatsoever situated upon the Property and place such personal property in storage in any warehouse or other suitable place, for the account of and at the expense of the City. In the event of such t ermination, the City agrees to surrender immediately possession of the Property, without let or hindrance, and to pay the Au thority all damages recoverable at law that the Authority may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein co ntained. Neither notice to pay Rental Payments or to deliver up possession of the Property given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought 11 by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property nor the appointment of a receiver upon initiative of the Aut hority to protect the Authority’s interest under this Lease Agreement shall of itself operate to terminate this Lease Agreement, and no termination of this Lease Agreement on account of default by the City shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the City of the election on the part of the Authority to terminate this Lease Agreement. The City covenants and agrees that no surrender of the P roperty or of the remainder of the term hereof or any termination of this Lease Agreement shall be valid in any manner or for any purpose whatsoever unless stated by the Authority by such written notice. (2) Without terminating this Lease Agreement, (x) to collect each installment of Rental Payments as the same become due and enforce any other terms or provisions hereof to be kept or performed by the City, regardless of whether or not the City has abandoned the Property, or (y) to exercise any and all rights of entry and re-entry upon the Property. In the event the Authority does not elect to terminate this Lease Agreement in the manner pr ovided for in subparagraph (1) hereof, the City shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the City and, if the Property is not re -let, to pay the full amount of the Rental Payments to the end of the term of this Lease Agreement or, in the event that the Property is re-let, to pay any deficiency in Rental Payments that results therefrom; and further agrees to pay said Rental Payments and/or Rental Payment deficiency punctually a t the same time and in the same manner as hereinabove provided for the payment of Rental Payments hereunder, notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years Rental Payments in ex cess of the Rental Payments herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property. Should the Authority elect to re-enter as herein provided, the City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to re-let the Property, or any part thereof, from time to time, either in the Authority’s name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable and to remove all persons in possession thereof and all personal property whatsoever situated upon the Property and to place such personal property in storage in any warehouse or other suitable place, for the account of and at the expense of the City, and the City hereby i ndemnifies and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re-letting of the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re-let the Property in the event of such re-entry without effecting a surrender of this Lease Agreement, and further agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination of this Lease Agreement irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re -letting, or otherwise, but that, on the contrary, in the event of such de fault by the City the right to terminate this Lease Agreement shall vest in the Authority to be effected in the sole and exc lusive manner provided for in subparagraph (1) hereof. The City further agrees to pay the Authority the cost of any alterations or additions to the Property necessary to place the Property in condition for re -letting immediately upon notice to the City of the completion and installation of such additions or alterations. The City hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Property as herein provided and all claims for damages that may result from the destruction of or injury to the Property and all claims 12 for damages to or loss of any property belonging to the City, or any other person, that may be in or upon the Property. (b) If (i) the City’s interest in this Lease Agreement or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority and, as hereinafter provided for, or (ii) the City or any assignee shall file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any simi lar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or al l of the City’s debts or obligations, or offers to the City’s creditors to elect a composition or extension of time to pay the City’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the City’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the City, or if a receiver of the business or of the property or assets of the Cit y shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the City shall make a general assignment for the benefit of the City’s creditors, or (iii) the City shall abandon or vacate the Property, then the City shall be deemed to be in default hereunder. (c) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default, the Authority and its assignee shall be entitled to proceed to protect and enforce the rights vested in the Authority and its assignee by this Lease Agreement or by law. The provisions of this Lease Agreement and the duties of the City and of its city council, officers or employees shall be enforceable by the Authority or its assignee by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority and its assignee shall have the right to bring the following actions: (i) Accounting. By action or suit in equity to require the City and its city council, officers and employees and its assigns to account as the trustee of an expres s trust. (ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority or its assignee. (iii) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority’s or its assignee’s rights against the City (and its city council, officers and employees) and to compel the City to perform and carry out its duties and obligations under the law and its covenants and agreements with the City as provided here in. Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to the further exercise thereof or the exercise of any or all other rights, powers or privileges. The term “re -let” or “re-letting” as used in this Section shall include, but not be limited to, re -letting by means of the operation by the Authority of the Property. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law. In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Lease Agreement, the City agrees to pay a reasonable amount as and for 13 attorney’s fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder. Notwithstanding anything to the contrary contained in this Lease Agreement, the Authority shall have no right upon a default hereunder by the City to accelerate Rental Payments. (d) Notwithstanding anything to the contrary contained in this Lease Agreeme nt, the termination of this Lease Agreement by the Authority and its assignees on account of a default by the City under this Section shall not effect or result in a termination of the Ground Lease. Section 6.02 Waiver. Failure of the Authority to take advantage of any default on the part of the City shall not be, or be construed as, a waiver thereof, nor shall any custom o r practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of any other default or of the same default subsequently occurring. The acceptance of Rental Payments hereunder shall not be, or be construed to be, a waiver of any term, covenant or condition of this Lease Agreement. ARTICLE VII EMINENT DOMAIN; PREPAYMENT Section 7.01 Eminent Domain. If all of the Property (or portions thereof such that the remainder is not usable for public purposes by the City) shall be taken under the power of eminent domain, the term hereof shall cease as of the day that possession shall be so taken. If less than all of the Property shall be taken under the power of eminent domain and the remainder is usable for public purposes by the City at the time of such taking, then this Lease Agreement shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of the Rental Pa yments in accordance with the provisions of Section 3.06 hereof. So long as any Bonds shall be Outstanding, any award made in eminent domain proceedings for the taking of the Property, or any portion thereof, shall be paid to the Trustee and applied to the redemption of Bonds as provided in subsection (a) of Section 4.01 of the Indenture, in the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued and in Section 5.03 of the Indenture. Any such award made after all of the Bonds, and all other amounts due under the Indenture and hereunder, have been fully paid, or provision therefor made, shall be paid to the Authority and to the City as their respective interests may appear. Section 7.02 Prepayment. (a) The City may prepay all or a portion of the Base Rental Payments attributable to the Series 2022A Bonds which are payable on or after April 1, 20__, from any source of available funds, on any date on or after April 1, 20__, by paying (i) all or a portion, as selected by the City, of the principal components of such Base Rental Payments, and (ii) the accrued but unpaid interest component of such Base Rental Payments to be prepaid to the date of such prepayment. (b) The City may prepay, from any source of available funds, all or any po rtion of the Base Rental Payments attributable to the Series 2022A Bonds by depositing with the Trustee 14 moneys or securities as provided, and subject to the terms and conditions set forth, in Article X of the Indenture sufficient to make such Base Rental Payments when due or to make such Base Rental Payments through a specified date on which the City has a right to prepay such Base Rental Payments pursuant to subsection (a) of this Section, and to prepay such Base Rental Payments on such prepayment date, at a prepayment price determined in accordance with subsection (a) of this Section. (c) If less than all of the Base Rental Payments attributable to the Series 2022A Bonds are prepaid pursuant to this Section then, as of the date of such prepayment pursuant to subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this Section, the principal and interest components of such Base Rental Payments shall be recalculated in order to take such prepayment into account. The City agrees tha t if, following a partial prepayment of such Base Rental Payments, the Property is damaged or destroyed or taken by eminent domain, or a defect in title to the Property is discovered, the City shall not be entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and the City shall not be entitled to any reimbursement of such Base Rental Payments. (d) If all of the Base Rental Payments are prepaid in accordance with the provisions of this Lease Agreement then, as of the date of such prepayment pursuant to subsection (a) of this Section and, if applicable, the corresponding provisions hereof relating to the pre payment of Base Rental Payments attributable to Additional Bonds, or deposit pursuant to subsection (b) of this Section and, if applicable, such corresponding provisions, and payment of all other amounts owed under this Lease Agreement, the term of this Lease Agreement shall be terminated. (e) Prepayments of Base Rental Payments attributable to the Series 2022A Bonds made pursuant to this Section shall be applied to the redemption of the Series 2022A Bonds as directed by the City and as provided in Section 4.01 of the Indenture. (f) Before making any prepayment pursuant to this Article, the City shall give written notice to the Authority and the Trustee specifying the date on which the prepayment will be made, which date shall be not less than 30 nor more than 60 da ys from the date such notice is given to the Authority. ARTICLE VIII COVENANTS Section 8.01 Right of Entry. The Authority and its assignees shall have the right to enter upon and to examine and inspect the Property during reasonable business hours (and in emergencies at all times) for any purpose connected with the Authority’s rights or obligations under this Lease Agreement, and for all other lawful purposes. Section 8.02 Liens. In the event the City shall at any time during the term of this Lease Agreement cause any changes, alterations, a dditions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Property, the City shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies o r equipment furnished or alleged to have been furnished to or for the City in, upon or about the Property and which may be secured by a mechanics’, materialmen’s or other lien against the Property or the Authority’s interest therein, and will cause each such lien to be fully discharged and released at 15 the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien, it may do so as long as such contestment is in good faith. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall forthwith pay and discharge said j udgment. Section 8.03 Quiet Enjoyment. The parties hereto mutually covenant that the City, by keeping and performing the covenants and agreements herein contained, shall at all times during the term of this Lease Agreement peaceably and quietly have, hold and enjoy th e Property without suit, trouble or hindrance from the Authority. Section 8.04 Authority Not Liable. The Authority and its directors, officers, agents and employees, shall not be liable to the City or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Property. To the extent permitted by law, the City shall, at its expense, indemnify and hold the Authority and the Trustee and all directors, members, officers and employees thereof harmless against and from any and all claims by or on behalf of any person, firm, corporation or governmental authority arising from the acquisition, construction, occupation, use, operation, maintenance, possession, conduct or management of or from any work done in or about the Property or from the subletting of any part thereof, including any liability for violation of conditions, agreements, restrictions, laws, ordinances, or regulations affecting the Property or the occupancy or use ther eof, but excepting the negligence or willful misconduct of the persons or entity seeking indemnity. The City also covenants and agrees, at its expense, to pay and indemnify and save the Authority and the Trustee and all directors, officers and employees t hereof harmless against and from any and all claims arising from (a) any condition of the Property and the adjoining sidewalks and passageways, (b) any breach or default on the part of the City in the performance of any covenant or agreement to be performed by the City pursuant to this Lease Agreement, (c) any act or negligence of licensees in connection with their use, occupancy or operation of the Property, or (d) any accident, injury or damage whatsoever caused to any person, firm or corporation in or about the Property or upon or under the sidewalks and passageways and from and against all costs, reasonable counsel fees, expenses and liabilities incurred in any action or proceeding brought by reason of any claim referred to in this Section, but excepting the negligence or willful misconduct of the person or entity seeking indemnity. In the event that any action or proceeding is brought against the Authority or the Trustee or any director, member, officer or employee thereof, by reason of any such claim, the City, upon notice from the Authority or the Trustee or such director, member, officer employee thereof, covenants to resist or defend such action or proceeding by counsel reasonably satisfactory to the Authority or the Trustee or such director, member, officer or employee thereof. Section 8.05 Assignment and Subleasing. Neither this Lease Agreement nor any interest of the City hereunder shall be sold, mortgaged, pledged, assigned, or transferred by the City by voluntary act or by operation by law or otherwise. The Property may not be subleased in whole or in part by the City without the prior written consent of the Authority [and the Insurer]. Any such sublease shall be subject to all of the following conditions: (a) this Lease Agreement and the obligation of the City to make all Rental Payments hereunder shall remain the primary obligation of the City; (b) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Authority, [the Insurer] and the Trustee a true and complete copy of such sublease; 16 (c) no such sublease by the City shall cause the Property to be used for a purpose other than a governmental or proprietary function authorized under the provisions of the Constitution and laws of the State of California; (d) any sublease of the Property by the City shall explicitly provide that such sublease is subject to all rights of the Authority under this Lease Agreement, including, the right to re-enter and re-let the Property or terminate this Lease Agreement upon a default by the City; and (e) the City shall furnish the Authority and the Trustee with an Opinion of Counsel to the effect that such sublease will not, in and of itself, cause the interest on the Bonds to be included in gross income for federal income tax purposes. Section 8.06 Title to Property. Upon the termination or expiration of this Lease Agreement (other than as provided in Section 6.01 and Section 7.01 hereof), and the first date upon which the Bonds are no longer Outstanding, all right, title and interest in and to the Property shall vest in the City. Upon any such termination or expiration, the Authority shall execute such conveyances, deeds and other documents as may be necessary to effect such vesting of record. Section 8.07 Authority’s Purpose. The Authority covenants that, prior to the discharge of this Lease Agreement and the Bonds, it will not engage in any activities inconsistent with the purposes for which the Authority is organized, as set forth in the Joint Powers Agreement. Section 8.08 Representations of the City. The City represents and warrants to the Authority that (a) the City has the full power and authority to enter into, to execute and to deliver this Lease Agreement and the Indenture, and to perform all of its duties and obligations hereunder and thereunder, and has duly authorized the execution and delivery of this Lease Agreement and the Indenture, and (b) the Property will be used in the performance of essential governmental functions. Section 8.09 Representation of the Authority. The Authority represents and warrants to the City that the Authority has the full power and authority to enter into, to execute and to deliver this Lease Agreement, the Assignment Agreement and the Indenture, and to perform all of its duties and obligations hereunder and thereunder, and has duly authorized the execution and deli very of this Lease Agreement, the Assignment Agreement and the Indenture. Section 8.10 Condemnation of Property. The City hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Bonds remain outstanding and unpaid, the City will not exercise the power of condemnation with respect to the Property. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City shall fail or ref use to abide by such covenant and condemns the Property, then the appraised value of the Property shall not be less than the greater of: (i) if the Bonds are then subject to redemption, the principal of and interest on the Bonds outstanding through the date of redemption, or (ii) if such Bonds are not then subject to redemption, the amount necessary to defease such Bonds to the first a vailable redemption date in accordance with the Indenture. 17 ARTICLE IX NO CONSEQUENTIAL DAMAGES; USE OF THE PROPERTY; SUBSTITUTION OR RELEASE Section 9.01 No Consequential Damages. In no event shall the Authority or the Trustee be liable for any incidental, indirect, special o r consequential damage in connection with or arising out of this Lease Agreement or the City’s use of the Property. Section 9.02 Use of the Property. The City will not use, operate or maintain the Property improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Lease Agreement. In addition, the City agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Property) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Property; provided, however, that the City may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to any of the Property or its interest or rights under this Lease Agreement. Section 9.03 Substitution or Release of the Property. The City shall have the right, [with the written consent of the Insurer (so long as the Insurer is not in default on any obligation under the Insurance Policy),] to substitute alternate real property for any portion of the Property or to release a portion of the Property from this Lease Agreement. All costs and expenses incurred in connection with such substitution or release shall be borne by the City. Notwithstanding any substitution or release of Property pursuant to this subsection, there shall be no reduction in or abatement of the Base Rental Payments due from the City hereunder as a re sult of such substitution or release. Any such substitution or release of any portion of the Property shall be subject to the following specific conditions, which are hereby made conditions precedent to such substitution or release: (a) a certificate of the City that the Property, as constituted after such substitution or release, (i) has an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a useful life in excess of the final mat urity of any Outstanding Bonds; (b) the City shall have obtained or caused to be obtained a CLTA or ALTA title insurance policy or policies with respect to any substitute d property in the amount at least equal to the aggregate principal amount of any Outstanding Bonds of the type and with the endorsements described in Section 5.02 hereof; (c) the City shall have provided the Trustee with an Opinion of Counsel to the effect that such substitution or release will not, in and of itself, cause the interest on the Bonds to be included in gross income for federal income tax purposes; (d) the City, the Authority and the Trustee shall have executed, and the City shall have caused to be recorded with the Riverside County Recorder, any document necessary to reconvey to the City the portion of the Property being released and to include any substituted real property in the description of the Property contained herein and in the Ground Lease; an d 18 (e) the City shall have provided notice of such substitution to each rating agency then rating the Bonds. ARTICLE X MISCELLANEOUS Section 10.01 Law Governing. THIS LEASE AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE STATE OF CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST. Section 10.02 Notices. All written notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the City: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: City Manager If to the Authority: Lake Elsinore Facilities Financing Authority c/o City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92350 Attention: Executive Director If to the Trustee: Wilmington Trust, National Association 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attention: Corporate Trust Department Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender’s receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Section 10.03 Validity and Severability. If for any reason this Lease Agreement shall be held by a court of competent jurisdiction to be void, voidable or unenforceable by the Authority or by the City, or if for any reason it is held by such a court that any of the covenants and conditions of the City hereunder, including the covenant to pay Rental Payments, is unenforceable for the full term hereof; then and in such event this Lease Agreement is and shall be deemed to be a Lease Ag reement under which the Rental Payments are to be paid by the City annually in consideration of the right of the City to possess, occupy and use the Property, and all of th e terms, provisions and conditions of 19 this Lease Agreement, except to the extent tha t such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. Section 10.04 Net-Net-Net Lease. This Lease Agreement shall be deemed and construed to be a “net-net-net lease” and the City hereby agrees that the Rental Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set -offs whatsoever and notwithstanding any dispute between the City and the Authority. Section 10.05 Taxes. The City shall pay or cause to be paid all taxes and assessments of any type or nature charged to the Authority or affecting the Property or the respective interests or estates therein; provided, however, that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the term of this Lease Agreement as and when the same become due. The City or any sublessee may, at the City’s or such sublessee’s expense and in its name, [with notice to the Insurer], in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority or the Trustee shall notify the City or such sublessee that, in the opinion of indepe ndent counsel, by nonpayment of any such items, the interest of the Authority in the Property will be materially endangered or the Property, or any part thereof, will be subject to loss or forfeiture, in which event the City or such sublessee shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority, [the Insurer] and the Trustee. Section 10.06 Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Lease Agreement. Section 10.07 Amendments. (a) This Lease Agreement and the Ground Lease may be amended and the rights and obligations of the Authority and the City hereunder and thereunder may be amended at any time by an amendment hereto or thereto which shall become binding upon execution and delivery by the Authority and the City, but only with the prior written consent of the Owners of a majority of the principal amount of the Bonds then Outstanding pursuant to the Indenture [and the Insurer (so long as the Insurer has not defaulted on any obligation under the Insurance Policy)], provided that no such amendment shall (i) extend the payment date of any Base Rental Payments, reduce the interest component or principal component of any Base Rental Payments or change the prepayment terms and provisions, without the prior written consent of the Owner of each Bond so affected, or (ii) reduce the percentage of the principal amount of the Bonds the consent of the Owners of which is required for the execution of any amendment of this Lease Agreement or the Ground Lease. (b) This Lease Agreement and the Ground Lease and the rights and obligations of the Authority and the City hereunder and thereunder may also be amended at any time by an amendment hereto or thereto which shall become binding upon execution by the Authority and the City, with the written consent of the Insurer but without the written consents of any Own ers, but only to the extent permitted by law and only for any one or more of th e following purposes: 20 (i) to add to the agreements, conditions, covenants and terms required by the Authority or the City to be observed or performed herein or therein other agreeme nts, conditions, covenants and temps thereafter to be observed or performed by the Authority or the City, or to surrender any right or power reserved herein or therein to or conferred herein or therein on the Authority or the City, and which in either case shall not materially adversely affect the interests of the Owners, as evidenced by an Opinion of Bond Counsel; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or therein or in regard to questions arising hereunder or thereunder which the Authority or the City may deem desirable or necessary and not inconsistent herewith or therewith, and which shall not materially adversely affect the interests of the Owners, as evidenced by an Opinion of Bond Counsel; (iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (iv) to provide for the substitution or release of a portion of the Property in accordance with the provisions of Section 9.03 hereof; (v) to provide for the issuance of Additional Bonds in accordance with Article III of the Indenture; or (vi) to make such other changes herein or therein or modifications hereto or thereto as the Authority or the City may deem desirable or necessary, and which shall not materially adversely affect the interests of the Owners, as evidenced by an Opinion of Bond Counsel. Section 10.08 Assignment. The City and the Authority hereby acknowledge the assignment of this Lease Agreement (except for the Authority’s obligations and its rights to give consents or approvals hereunder), and the Base Rental Payments payable hereunder, to the Trustee pursuant to the Assignment Agreement. Section 10.09 Execution. This Lease Agreement may be executed in any number of counterparts, each of which shall be deemed to be an origi nal, but all together shall constitute but one and the same Lease Agreement Section 10.10 [Insurer as Third Party Beneficiary. The Insurer is intended as a third party beneficiary to this Lease Agreement.] [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] S-1 IN WITNESS WHEREOF, the Authority and the City have caused this Lease Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF LAKE ELSINORE By: Jason Simpson City Manager ATTEST: Candice Alvarez City Clerk LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Jason Simpson Executive Director ATTEST: Candice Alvarez Secretary CERTIFICATE OF ACCEPTANCE This is to certify that the interest in the Property conveyed under the foregoing to the City of Lake Elsinore, a municipal corporation and a general law city duly organized and existing under the Constitution and laws of the State of California, is hereby accepted by the undersigned officer or agent on behalf of the City Council of the City of Lake Elsinore, pursuant to authority conferred by resolutions of the said City Council adopted on May 10, 2022 and the grantee consents to recordation thereof by its duly authorized officer. Dated: June __, 2022 CITY OF LAKE ELSINORE By: Jason Simpson City Manager A-1 EXHIBIT A DESCRIPTION OF THE PROPERTY [TO COME] B-1 EXHIBIT B BASE RENTAL PAYMENT SCHEDULE Base Rental Deposit Date Principal Component Interest Component Total Base Rental A-2 Stradling Yocca Carlson & Rauth Draft of 5/2/22 4865-7342-4669v3/022042-0044 RECORDING REQUESTED BY: Lake Elsinore Facilities Financing Authority AND WHEN RECORDED RETURN TO: Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Brian Forbath, Esq. [Space above for Recorder’s use.] This Transaction is Exempt from California Documentary Transfer Tax Pursuant to Section 11921 of the California Revenue and Taxation Code. This Document is Exempt From Recording Fees Pursuant to Section 27383 of the California Government Code. ASSIGNMENT AGREEMENT by and between LAKE ELSINORE FACILITIES FINANCING AUTHORITY and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 2022 Relating to $___________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A 1 4865-7342-4669v3/022042-0044 ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT (this “Assignment Agreement”), executed and entered into as of June 1, 2022, is by and between the LAKE ELSINORE FACILITIES FINANCING AUTHORITY, a joint exercise of powers entity organized and existing under and by virtue of the laws of the State of California (the “Authority”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, as Trustee (the “Trustee”). WITNESSETH: WHEREAS, the City of Lake Elsinore (the “City”) and the Authority desire to finance a portion of the costs of the acquisition, construction and installation of various public improvements (the “Project”); WHEREAS, in order to finance the Project the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement; WHEREAS, the Property is more particularly described in Exhibit A hereto; WHEREAS, under the Lease Agreement, the City is obligated to make Base Rental Payments (as defined in the Lease Agreement) to the Authority; WHEREAS, the Authority desires to assign without recourse certain of its rights in the Ground Lease and the Lease Agreement, including its right to receive the Base Rental Payments, to the Trustee for the benefit of the owners of bonds (the “Bonds”) to be issued pursuant to the Indenture, dated as of the date hereof (the “Indenture”), by and among the Authority, the City and the Trustee; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Assignment Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Assignment Agreement; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties hereto do hereby agree as follows: Section 1. Assignment. The Authority, for good and valuable consideration, the receipt of which is hereby acknowledged, does hereby sell, assign and transfer to the Trustee, irrevocably and absolutely, without recourse, for the benefit of the owners of the Bonds, all of its right, title and interest in and to the Ground Lease and the Lease Agreement including, without limitation, its right to receive the Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided, however, that the Authority shall retain its obligations under the Lease Agreement and Ground Lease, the rights to indemnification, to give approvals and consents under the 2 4865-7342-4669v3/022042-0044 Lease Agreement and the Ground Lease and to payment or reimbursement of its reasonable costs and expenses under the Lease Agreement. Section 2. Acceptance. The Trustee hereby accepts the foregoing assignment, subject to the terms and provisions of the Indenture, and all such Base Rental Payments shall be applied and the rights so assigned shall be exercised by the Trustee as provided in the Lease Agreement and the Indenture. Section 3. Conditions. This Assignment Agreement shall impose no obligations upon the Trustee beyond those expressly provided in the Indenture. Section 4. Further Assurances. The Authority shall make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Assignment Agreement, and for the better assuring and confirming to the Trustee, for the benefit of the owners of the Bonds, the rights intended to be conveyed pursuant hereto. Section 5. Governing Law. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE STATE OF CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST. Section 6. Execution. This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Assignment Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 3 4865-7342-4669v3/022042-0044 IN WITNESS WHEREOF, the Authority and the Trustee have caused this Assignment Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first above-written. LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Jason Simpson Executive Director ATTEST: Candice Alvarez City Clerk WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee By: [Name], [Title] 4 4865-7342-4669v3/022042-0044 CONSENT The City of Lake Elsinore hereby consents to the foregoing. CITY OF LAKE ELSINORE, as Lessee By: Jason Simpson City Manager ATTEST: Candice Alvarez City Clerk 4865-7342-4669v3/022042-0044 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss. COUNTY OF RIVERSIDE ) On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they execute d the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 SIGNATURE OF NOTARY PUBLIC 4865-7342-4669v3/022042-0044 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 SIGNATURE OF NOTARY PUBLIC A-1 4865-7342-4669v3/022042-0044 EXHIBIT A DESCRIPTION OF THE PROPERTY [TO COME] A-2 4865-7342-4669v3/022042-0044 Stradling Yocca Carlson & Rauth Draft of 5/3/22 4861-0176-1821v5/022042-0044 INDENTURE by and among LAKE ELSINORE FACILITIES FINANCING AUTHORITY and CITY OF LAKE ELSINORE and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 2022 Relating to $____________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A TABLE OF CONTENTS Page i 4861-0176-1821v5/022042-0044 ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01 Definitions ................................................................................................................. 2 Section 1.02 Equal Security .......................................................................................................... 13 ARTICLE II THE BONDS Section 2.01 Authorization of Bonds ............................................................................................ 13 Section 2.02 Terms of Series 2022 Bonds .................................................................................... 13 Section 2.03 Form of Series 2022 Bonds ..................................................................................... 15 Section 2.04 Transfer and Exchange of Bonds ............................................................................. 15 Section 2.05 Registration Books ................................................................................................... 15 Section 2.06 Execution of Bonds .................................................................................................. 15 Section 2.07 Authentication of Bonds .......................................................................................... 15 Section 2.08 Temporary Bonds .................................................................................................... 16 Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen ............................................................ 16 Section 2.10 Book-Entry Bonds ................................................................................................... 16 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01 Issuance of Series 2022 Bonds ................................................................................ 18 Section 3.02 Application of Proceeds of the Series 2022 Bonds .................................................. 18 Section 3.03 Costs of Issuance Fund ............................................................................................ 18 Section 3.04 Construction Fund .................................................................................................... 19 Section 3.05 Conditions for the Issuance of Additional Bonds .................................................... 19 Section 3.06 Procedure for the Issuance of Additional Bonds ..................................................... 20 Section 3.07 Additional Bonds ..................................................................................................... 21 ARTICLE IV REDEMPTION OF BONDS Section 4.01 Redemption of Series 2022 Bonds ........................................................................... 21 Section 4.02 Notice of Redemption .............................................................................................. 22 Section 4.03 Selection of Bonds for Redemption ......................................................................... 23 Section 4.04 Partial Redemption of Bonds ................................................................................... 23 Section 4.05 Effect of Notice of Redemption ............................................................................... 23 ARTICLE V SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS Section 5.01 Pledge; Special Obligations ..................................................................................... 24 Section 5.02 Flow of Funds .......................................................................................................... 24 Section 5.03 Application of Net Insurance Proceeds.................................................................... 25 Section 5.04 Title Insurance ......................................................................................................... 26 Section 5.05 Reserve Fund ........................................................................................................... 26 Section 5.06 Rebate Fund ............................................................................................................. 29 Section 5.07 Investment of Moneys ............................................................................................. 29 TABLE OF CONTENTS (continued) Page ii 4861-0176-1821v5/022042-0044 Section 5.08 [Claims Upon the Insurance Policy and Payments by and to the Insurer ................ 30 Section 5.09 [Payments by the Insurer as a Result of Nonpayment ............................................. 31 ARTICLE VI COVENANTS Section 6.01 Compliance with Agreements .................................................................................. 32 Section 6.02 Compliance with Ground Lease and Lease Agreement ........................................... 32 Section 6.03 Observance of Laws and Regulations ...................................................................... 32 Section 6.04 Other Liens .............................................................................................................. 32 Section 6.05 Prosecution and Defense of Suits ............................................................................ 32 Section 6.06 Accounting Records and Statements ....................................................................... 33 Section 6.07 Recordation and Filing ............................................................................................. 33 Section 6.08 Tax Covenants ......................................................................................................... 33 Section 6.09 Continuing Disclosure ............................................................................................. 33 Section 6.10 Further Assurances .................................................................................................. 33 ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01 Action on Default ..................................................................................................... 34 Section 7.02 Other Remedies of the Trustee ................................................................................ 34 Section 7.03 Non-Waiver ............................................................................................................. 34 Section 7.04 Remedies Not Exclusive .......................................................................................... 35 Section 7.05 No Liability by the Authority to the Owners ........................................................... 35 Section 7.06 No Liability by the City to the Owners .................................................................... 35 Section 7.07 No Liability of the Trustee to the Owners ............................................................... 35 Section 7.08 Application of Amounts After Default .................................................................... 35 Section 7.09 Trustee May Enforce Claims Without Possession of Bonds ................................... 36 Section 7.10 Limitation on Suits ................................................................................................... 36 Section 7.11 [Insurer Rights ......................................................................................................... 36 ARTICLE VIII THE TRUSTEE Section 8.01 Employment of the Trustee ...................................................................................... 37 Section 8.02 Duties, Removal and Resignation of the Trustee..................................................... 37 Section 8.03 Compensation of the Trustee ................................................................................... 38 Section 8.04 Protection of the Trustee .......................................................................................... 39 Section 8.05 [Notice to Insurer by Trustee ................................................................................... 41 ARTICLE IX MODIFICATION OR AMENDMENTS Section 9.01 Modifications and Amendments Permitted ............................................................. 41 Section 9.02 Effect of Supplemental Indenture ............................................................................ 42 Section 9.03 Endorsement of Bonds; Preparation of New Bonds ................................................ 43 Section 9.04 Amendment of Particular Bonds .............................................................................. 43 Section 9.05 [Effect of Insurance Policy ...................................................................................... 43 TABLE OF CONTENTS (continued) Page iii 4861-0176-1821v5/022042-0044 ARTICLE X DEFEASANCE Section 10.01 Discharge of Indenture ............................................................................................. 43 Section 10.02 Bonds Deemed To Have Been Paid ......................................................................... 44 Section 10.03 Payment of Bonds After Discharge of Indenture ..................................................... 45 ARTICLE XI MISCELLANEOUS Section 11.01 Benefits of Indenture Limited to Parties .................................................................. 45 Section 11.02 Successor Deemed Included in all References to Predecessor ................................ 45 Section 11.03 Execution of Documents by Owners ....................................................................... 45 Section 11.04 Waiver of Personal Liability .................................................................................... 46 Section 11.05 Destruction of Bonds ............................................................................................... 46 Section 11.06 Funds and Accounts ................................................................................................. 46 Section 11.07 Article and Section Headings Gender and References ............................................ 46 Section 11.08 Partial Invalidity ...................................................................................................... 46 Section 11.09 Disqualified Bonds .................................................................................................. 47 Section 11.10 Money Held for Particular Bonds ............................................................................ 47 Section 11.11 Payment on Non-Business Days .............................................................................. 47 Section 11.12 California Law ......................................................................................................... 47 Section 11.13 Notices ..................................................................................................................... 47 Section 11.14 Notice to Rating Agencies ....................................................................................... 48 Section 11.15 Execution in Counterparts ....................................................................................... 48 Section 11.16 [Insurer as Third Party Beneficiary ......................................................................... 48 Section 11.17 [Impairment of Insurer’s Rights............................................................................... 48 Section 11.18 [Insurer Consideration ............................................................................................. 48 Section 11.19 [Amounts Paid by Insurer ........................................................................................ 49 Section 11.20 Covenant to Preserve Priority .................................................................................. 49 Section 11.21 [Subrogation and Survival of Obligations ............................................................... 49 Section 11.22 [Reimbursement of Fees .......................................................................................... 49 Section 11.23 [Provision of Information ........................................................................................ 49 Section 11.24 Additional Information ............................................................................................ 50 Section 11.25 [Discussion of and Access to Information ............................................................... 50 Signatures ............................................................................................................................... S-1 EXHIBIT A FORM OF SERIES 2022A BOND ....................................................................... A-1 1 4861-0176-1821v5/022042-0044 INDENTURE THIS INDENTURE (this “Indenture”), executed and entered into as of June 1, 2022, is by and among the LAKE ELSINORE FACILITIES FINANCING AUTHORITY, a joint exercise of powers entity duly organized and existing under the laws of the State of California (the “Authority”), the CITY OF LAKE ELSINORE, a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the “City”) and Wilmington Trust, National Association, a national banking asso ciation duly organized and existing under and by virtue of the laws of the United States, as Trustee (the “Trustee”); WITNESSETH: WHEREAS, the City desires to finance the construction of various public improvements within the City, and such other projects identified in the City’s capital improvement plan (the “Project”); WHEREAS, in order to finance the Project, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated as of the date hereof (the “Lease Agreement”); WHEREAS, the City and the Authority have determined that it would be in the best inte rests of the City and the Authority to provide the funds necessary to finance the Project through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement; WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof; WHEREAS, the Authority and the City desire to provide for the issuance by the Authority of Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A (the “Series 2022 Bonds”), in the aggregate principal amount of $__________, in order to finance the Project; WHEREAS, the Series 2022 Bonds will be payable equally and ratably from the Base Rental Payments; WHEREAS, the Authority and the City desire to provide for the issuance of additional bonds (the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2022 Bonds (the Series 2022 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”); WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority and the City have authorized the execution and delivery of this Indenture; and WHEREAS, the Authority and the City have determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by 2 4861-0176-1821v5/022042-0044 the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture has been in all respects duly authorized; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Bonds and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitio ns to be equally applicable to both the singular and plural forms of any of the terms defined herein. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Lease Agreement. “Additional Bonds” means Bonds other than the Series 2022 Bonds issued hereunder in accordance with the provisions of Sections 3.06 and 3.07 hereof. “Act” means the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code. “Additional Rental Payments” means all amounts payable by the City as Additional Rental Payments pursuant to Section 3.02 of the Lease Agreement. “Assignment Agreement” means the Assignment Agreement, dated as of the date hereof, by and between the Authority and the Trustee. “Authority” means the Lake Elsinore Facilities Financing Authority, a joint exercise of powers entity organized and existing under and by virtue of the laws of the State of California. “Authorized Authority Representative” means the Chair, the Vice Chair, the Executive Director or the Treasurer of the Authority, or any other person authorized by the Board of Directors of the Authority to act on behalf of the Authority under or with respect to this Indenture. “Authorized City Representative” means the Mayor of the City, the City Manager of the City or the Assistant City Manager of the City, or any other person authorized by the City Council of the City to act on behalf of the City under or with respect to this Indenture. “Authorized Denominations” means $5,000 or any integral multiple thereof. “Base Rental Payment Fund” means the fund by that name established in accordance with Section 5.02 hereof. “Base Rental Payments” means all amounts payable to the Authority by the City as Base Rental Payments pursuant to Section 3.01 of the Lease Agreement. 3 4861-0176-1821v5/022042-0044 “Beneficial Owner” means, whenever used with respect to a Book-Entry Bond, the person whose name is recorded as the beneficial owner of such Book -Entry Bond or a portion of such Book- Entry Bond by a Participant on the records of such Participant or such person’s subrogee. “Bonds” means the Series 2022 Bonds and any Additional Bonds issued hereunder. “Book-Entry Bonds” means the Bonds of a Series registered in the name of the nominee of DTC, or any successor securities depository for such Series of Bonds, as the registered owner thereof pursuant to the terms and provisions of Section 2.10 hereof. “Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday, (b) a day on which banking institutions or trust companies in New York, New York, Wilmington, Delaware or the State of California, or in any state in which the Office of the Trustee is located, are required or authorized by law (including regulation or executive order) to close, or (c) a day on which the New York Stock Exchange is closed. “Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds. “City” means the City of Lake Elsinore, a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California. “Closing Date” means June __, 2022. “Code” means the Internal Revenue Code of 1986. “Construction Fund” means the fund by that name established in accordance with Section 3.04 hereof. “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated as of the date hereof, executed by the City, as originally executed and as it may from t ime to time be amended in accordance with the provisions thereof. “Costs of Issuance” means all the costs of issuing and delivering the Bonds, including, but not limited to, all printing and document preparation expenses in connection with this Indenture, the Lease Agreement, the Ground Lease, the Assignment Agreement, the Bonds and any preliminary official statement and final official statement pertaining to the Bonds, rating agency fees, CUSIP Service Bureau charges, market study fees, legal fees and expenses of counsel with the issuance and delivery of the Bonds, the initial fees and expenses of the Trustee and Escrow Agent and its counsel and other fees and expenses incurred in connection with the issuance and delivery of the Bonds, to the extent such fees and expenses are approved by the City. “Costs of Issuance Fund” means the fund by that name established in accordance with Section 3.04 hereof. “DTC” means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to Section 2.10 hereof. 4 4861-0176-1821v5/022042-0044 “Federal Securities” means (1) cash, (2) non-callable direct obligations of the United States of America (“Treasuries”), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) [subject to the prior written consent of the Insurer (so long as the Insurer is not in default on any obligation under the Insurance Policy or the Reserve Surety Policy), pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody's, respectively,] or (5) [subject to the prior written consent of the Insurer (so long as the Insurer is not in default on any obligation under the Insurance Policy or the Reserve Surety Policy)], securities eligible for “AAA” defeasance under then existing criteria of S&P or any combination thereof, sh all be used to effect defeasance of the Series 2022 Bonds unless the Insurer otherwise approves. “Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may from time t o time be amended in accordance with the provisions thereof and of the Lease Agreement. “Indenture” means this Indenture, as originally executed and as it may be amended or supplemented from time to time by any Supplemental Indenture. “Information Services” means Municipal Securities Rulemaking Board through the Electronic Municipal Marketplace Access (EMMA) website; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. [“Insurance Policy” means the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2022 Bonds when due.] [“Insurer” means _________________, or any successor thereto or assignee thereof.] “Interest Fund” means the fund by that name established in accordance with Section 5.02 hereof. “Interest Payment Date” means April 1 and October 1 of each year, commencing on October 1, 2022. “Lease Agreement” means the Lease Agreement, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may be from time to time amended in accordance with the provisions thereof. “Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Office of the Trustee” means the principal corporate trust office of the Trustee in Cost a Mesa, California, or such other office as may be specified to the Authority and the City by the Trustee in writing, except that with respect to presentation of Bonds for payment or for registration of transfer 5 4861-0176-1821v5/022042-0044 and exchange such term shall mean the office or the agency of the Trustee at which, at any particular time, its corporate trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing. “Opinion of Counsel” means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the Authority or the City and which written opinion is satisfactory to the Trustee. “Outstanding,” when used as of any particular time with reference to Bonds, means (subjec t to the provisions of Section 11.09 hereof) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.01 hereof; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture. “Owner” means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books. “Participant” means any entity which is recognized as a participant by DTC in the book-entry system of maintaining records with respect to Book-Entry Bonds. “Participating Underwriter” means, with respect to the Series 2022 Bonds, Stifel, Nicolaus & Company, Incorporated, and with respect to each issue of Additional Bonds, the institu tion or institutions, if any, with whom the Authority enters into a purchase contract for the sale of such issue. “Permitted Investments” means any of the following to the extent then permitted by the general laws of the State of California: (1) (a) Direct obligations (other than an obligation subject to—Variation in principal repayment) of the United States of America (“United States Treasury Obligations”), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and cre dit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated (collectively “United States Obligations”). These include, but are not necessarily limited to: -U.S. Treasury obligations All direct or fully guaranteed obligations 6 4861-0176-1821v5/022042-0044 -General Services Administration Participation certificates -U.S. Maritime Administration Guaranteed Title XI financing -Small Business Administration Guaranteed participation certificates Guaranteed pool certificates -Government National Mortgage Association (GNMA) GNMA-guaranteed mortgage-backed securities GNMA-guaranteed participation certificates -U.S. Department of Housing & Urban Development Local authority bonds -Washington Metropolitan Area Transit Authority Guaranteed transit bonds (2) Federal Housing Administration debentures. (3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America: -Federal Home Loan Mortgage Corporation (FHLMC) Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) Senior debt obligations -Farm Credit Banks (formerly: Federal Land Banks, Federal intermediate Credit Banks and Banks for Cooperatives) Consolidated systemwide bonds and notes -Federal Home Loan Banks (FHL Banks) Consolidated debt obligations -Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluded are stripped mortgages securities which are purchased at prices exceeding their principal amounts) -Financing Corporation (FICO) Debt obligations -Resolution Funding Corporation (REFCORP) Debt obligations (4) Unsecured certificates of deposit, time deposits, and bankers’ acceptances (having maturities of not more than 180 days) of any bank, including the Trustee and its affiliates, the short-term obligations of which are rated “A-1+” or better by S&P and “P-1” or better by Moody’s. (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks, including the Trustee and its affiliates, which have capital and surplus of at least $5 million. (6) Commercial paper (having original maturities of not more than 270 days) rated “A-1+” by S&P and “Prime-1” by Moody’s. 7 4861-0176-1821v5/022042-0044 (7) Money market funds rated “AAm” or “AAm-G” or better by S&P and “Aa2” or better by Moody’s, including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee provide investment advisory or other management services. (8) Repurchase agreements: (a) With any domestic bank the long term debt of which is rated “AA” or better by S&P and “Aa” by Moody’s (so long as an opinion is rendered that the repurchase agreement is a “repurchase agreement” as defined in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and t hat such bank is subject to FIRREA), or any foreign bank rated at least “AA” by S&P and “Aaa” by Moody’s or “AA” by S & P and at least “Aa2” by Moody’s; provided the term of such repurchase agreement is for one year or less. (b) With (i) any broker-dealer with “retail customers” which has, or the parent company of which has, long-term debt rated at least “AA” by S&P and “Aa2” by Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corp. (SIPC); provided that: A. The market value of the collateral is maintained for United States Treasury Obligations, at the levels shown below under “Collateral Levels for United States Treasury Obligations”; B. Failure to maintain the requisite collateral percentage will require the City or the Trustee to liquidate the collateral; C. The Trustee, the City or a third party acting solely as agent therefor (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the Collate ral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books); D. The repurchase agreement states, and an opinion of counsel is rendered to the effect, that the Trustee has a perfected first priority se curity interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); E. The transferor represents that the collateral is free and clear of any third-party liens or claims; F. An opinion is rendered that the repurchase agreement is a “repurchase agreement” as defined in the United States Bankruptcy Code; G. There is or will be a written agreement governing every repurchase transaction; H. The City represents that it has no knowledge of any fraud involved in the repurchase transaction; and 8 4861-0176-1821v5/022042-0044 I. The City and the Trustee receive an opinion of counsel (which opinion shall be addressed to the City and the Trustee) that such repurchase agreement is legal, valid and binding and enforceable against the provider in accordance with its terms. (9) State Obligations (a) Direct general obligations of any state of the United States or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A2” by Moody’s and “A” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct, general short-term obligations of any state agency or subdivision described in (a) above and rated “A-1+” by S&P and “Prime-1” by Moody’s. (c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (a) above and rated “AA” or better by S&P and “Aa2” or better by Moody’s. (10) Local Agency Investment Fund. (11) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt of the guarantor, or in the case of a monoline financial guaranty insurance company the claims paying ability of the guarantor, is rated at least “AA” by S&P and “Aa2” by Moody’s; provided, that prior written notice of an investment in the investment agreement is provided to S&P and, provided, further, by the terms of the investment agreement: (a) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Bonds; (b) the invested funds are available for withdrawal without penalty or premium, at any time for purposes identified in this Indenture other than acquisition of alternative investment property upon not more than seven days prior notice (which notice may be amended or withdrawn at any time prior to the specified withdrawal date); provided that the Indenture specifically r equires the Trustee or the City to give notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (c) the investment agreement shall state that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof; (d) a guaranteed rate of interest is to be paid on invested funds and all future deposits, if any, required to be made to restore the amount of such funds to the level specified under the Indenture; 9 4861-0176-1821v5/022042-0044 (e) the Trustee and the City receive the opinion of domestic counsel (which opinion shall be addressed to the City) that such investment agreement is legal, valid and binding and enforceable against the provider in accordance w ith its terms and of foreign counsel (if applicable); (f) the investment agreement shall provide that if during its term (A) the provider’s or the guarantor’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “AA” or “Aa2”, respectively, or, with respect to a foreign bank, below the ratings of such provider at the delivery date of the investment agreement, the provider must, at the direction of the City or the Trustee (acting at the direction of the City) within 10 days of receipt of such direction, either (1) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the Trustee, the City or a Holder of the Collateral, United States Treasury Obligations which are free and clear of any third-party liens or claims at the Collateral Levels set forth below; or (2) repay the principal of and accrued but unpaid interest on the investment (the choice of (1) or (2) above shall be that of the City or Trustee (acting at the direction of the City), as appropriate), and (B) the provider’s or the guarantor’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A” or “A2,” or, with respect to a foreign bank, below “AA” or “Aa2” by S&P or Moody’s, as appropriate, the provider must, at the direction of the City or the Trustee (acting at the direction of the City), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the City or Trustee; (g) the investment agreement shall state, and an opinion of counsel shall be rendered to the effect, that the Trustee has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Trustee is in possession); and (h) the investment agreement must provide that if during its term (A) the provider shall default in its payment obligations, the provider’s obligation under the investment agreement shall, at the direction of the City or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Trustee, as appropriate, and (B) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Trustee, as appropriate. (12) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements: (a) the municipal obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; 10 4861-0176-1821v5/022042-0044 (b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; (c) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification”); (d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; and (e) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and (f) the cash or the United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. Collateral Levels For United States Treasury Obligations Remaining Maturity Frequency of Valuation 1 year or less 5 years or less 10 years or less 15 years or less 30 years or less Daily 102 105 106 108 114 Weekly 103 111 112 114 120 Monthly 105 117 120 125 133 Quarterly 107 120 130 133 140 Further Requirements: (a) On each valuation date, the City, or the custodian who shall confirm to the City and the Trustee, shall value the market value (exclusive of accrued interest) of the collateral, which market value will be an amount equal to the requisite collateral percentage times the principal amount of the investment (including unpaid accrued interest there on) that is being secured, (b) in the event the collateral level is below its collateral percentage on a valuation date, such percentage shall be restored within the following restoration periods: one Business Day for daily valuations, two Business Days for weekly and monthly valuations, and one month for quarterly valuations (the use of different restoration periods affect the requisite collateral percentage), (c) the City or the Trustee (acting at the direction of the City) shall terminate the repurchase agreement or the investment agreement, as the case may be, upon a failure to maintain the requisite collateral percentage after the restoration period and, if not paid by the counterparty in federal funds against transfer of the collateral, liquidate the collateral. The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after the initial purchase of such Permitted Investments. 11 4861-0176-1821v5/022042-0044 “Person” means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. “Principal Fund” means the fund by that name established in accordance with Section 5.02 hereof. “Project Costs” means all costs of acquiring, constructing and installing the Project, including, but not limited to: (a) all costs which the Authority or the City shall be required to pay to a seller or any other person under the terms of any contract or contracts for the purchase of the Project; (b) all costs which the Authority or the City shall be required to pay a contractor or any other person for the acquisition, construction and installation of the Project; (c) obligations of the Authority or the City incurred for services (including obligations payable to the Authority or the City for actual out -of-pocket expenses of the Authority or the City) in connection with the acquisition, construction and installation of the Project, including reimbursement to the Authority or the City for all advances and payments made in connection with the Project prior to or after delivery of the Bonds; (d) the actual out-of-pocket costs of the Authority or the City for test borings, surveys, estimates and preliminary investigations therefor, as well as for the performanc e of all other duties required by or consequent to the proper acquisition, construction and installation of the Project, including administrative expenses under the Lease Agreement and hereunder relating to the acquisition, construction and installation of the Project; and (e) any sums required to reimburse the Authority or the City for advances made by the Authority or the City for any of the above items or for any other costs incurred and for work done by the Authority or the City which are properly chargeable to the Project. “Rebate Fund” means the fund by that name established in accordance with Section 5.06 hereof. “Rebate Requirement” has the meaning ascribed thereto in the Tax Certificate. “Record Date” means the fifteenth day of the month next preceding an Interest Payment Date, whether or not such day is a Business Day. “Redemption Fund” means the fund by that name established in accordance with Section 5.02 hereof. “Redemption Price” means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant hereto. “Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05 hereof. 12 4861-0176-1821v5/022042-0044 “Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental Payments. “Rental Period” means the period from the Closing Date through March 30, 2023 and, thereafter, the twelve-month period commencing on April 1 of each year during the term of the Lease Agreement. “Representation Letter” means the Letter of Representations from the Authority to DTC, or any successor securities depository for any Series of Book-Entry Bonds, in which the Authority makes certain representations with respect to issues of its securities for deposit by DTC or such successor depository. “Reserve Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.05. “Reserve Fund Requirement” means, with respect to the Series 2022 Bonds, an amount equal to $___________ and with respect to any Additional Bonds, such amounts as shall be determined in accordance with the Supplemental Indenture. [“Reserve Surety Policy” means the municipal bond debt service reserve insurance policy No. _________ issued by the Insurer and deposited in the Reserve Fund to satisfy the Reserve Requirement.] “S&P” means S&P Global Ratings, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Series” means the Series 2022 Bonds executed, authenticated and delivered on the Closing Date and identified pursuant to this Indenture and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds. “Series 2022 Bonds” means the Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A issued hereunder. “Supplemental Indenture” means any supplemental indenture amendatory of or supplemental to this Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. “Tax Certificate” means the tax certificate delivered by the Authority and the City at the time of the issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms. “Trustee” means Wilmington Trust, National Association, a national banking association dul y organized and existing under and by virtue of the laws of the United States, or any successor thereto as Trustee hereunder, appointed as provided herein. “Written Certificate of the Authority” and “Written Request of the Authority” mean, respectively, a written certificate or written request signed in the name of the Authority by an Authorized Authority Representative. Any such certificate or request may, but need not, be combined 13 4861-0176-1821v5/022042-0044 in a single instrument with any other instrument, opinion or representatio n, and the two or more so combined shall be read and construed as a single instrument “Written Certificate of the City” and “Written Request of the City” mean, respectively, a written certificate or written request signed in the name of the City by an Auth orized City Representative. Any such certificate or request may, but need, not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. Section 1.02 Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the Authority, the City, the Trustee and the Owners from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the principal of, premium, if any, and interest on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority or the City shall be for the equal and proportionate benefit, protection and security of all Owners of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. ARTICLE II THE BONDS Section 2.01 Authorization of Bonds. The Authority hereby authorizes the issuance of the Bonds under and subject to the terms of this Indenture and applicable laws of the State of California for the purpose of financing the Project. The Bonds may consist of one or more Series of Bonds of varying denominations, dates, maturities, interest rates and other provisions, subject to the provisions and conditions contained herein. Section 2.02 Terms of Series 2022 Bonds. (a) The Series 2022 Bonds shall be designated the “Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A.” Each Series of Additional Bonds shall bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series, of Bonds. (b) The Series 2022 Bonds shall be issued in fully registered form without coupons in Authorized Denominations, so long as no Series 2022 Bond shall have more than one maturity date. The Series 2022 Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal amount of $___________, shall mature on April 1 of each year and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates per annum as follows: 14 4861-0176-1821v5/022042-0044 Maturity Date (April 1) Principal Amount Interest Rate (c) Interest on the Series 2022 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2022 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii) a Series 2022 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the dated date thereof, or (iii) interest on any Series 2022 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid in lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership of the Series 2022 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series 2022 Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. (d) The principal and premium, if any, of the Series 2022 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. So long as the Series 2022 Bonds are registered to Cede & Co., payment of principal and any premiums shall be made without presentment. (e) The Series 2022 Bonds shall be subject to redemption as provided in Article IV. 15 4861-0176-1821v5/022042-0044 Section 2.03 Form of Series 2022 Bonds. The Series 2022 Bonds shall be in substantially the form set forth in Exhibit A hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby. Section 2.04 Transfer and Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred upon the Registration Books by the Person in whose name it i s registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series of other authorized denominations. The Trustee shall require the payment by the Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be obligated to make any transfer or ex change of Bonds of a Series pursuant to this Section during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption. Section 2.05 Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall be open to inspection during regular business hours and upon reasonable notice by the City; and , upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided. Section 2.06 Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Authority with the manual or facsimile signature of an Authorized Officer of the Authority attested by the manual or facsimile signature of the Secretary of the Authority. The Bonds sh all then be delivered to the Trustee for authentication by it. In case any of such officers of the Authority who shall have signed or attested any of the Bonds shall cease to be such officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and also any Bonds may be signed and attested on behalf of the Authority by such Persons as at the actual date of execution of such Bonds shall be the proper officers of the Authority although at the nominal date of such Bonds any such Person shall not have been such officer of the Authority. Section 2.07 Authentication of Bonds. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form as that set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture. 16 4861-0176-1821v5/022042-0044 Section 2.08 Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Authority and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority iss ues temporary Bonds of a Series it will execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series, may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of such Series in Authorized Denominations. Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under this Indenture as definitive Bonds of such Series authenticated and delivered hereunder. Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall ex ecute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or in accordance with the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidenc e and indemnity satisfactory to the Trustee shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in lieu of and in replacement for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued under this Section and of the expenses which may be incurred by the Authority and the Trustee. Any Bond of a Series issued under the provisions of this Section in lieu of any Bond of such Series alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyon e, and shall be entitled to the benefits of this Indenture with all other Bonds of such Series secured by this Indenture. Section 2.10 Book-Entry Bonds. (a) Prior to the issuance of a Series of Bonds, the Authority may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds and, in such event, the Bonds of such Series for each maturity shall be in the form of a separate single fully registered Bond (which may be typewritten). The Series 2022 Bonds shall initially be issued as Book-Entry Bonds. Except as provided in subsection (c) of this Section, the registered Owner of all of the Book-Entry Bonds shall be Cede & Co., as nominee of DTC. Notwithstanding anything to the contrary contained in this Indenture, payment of interest with respect to any Book -Entry Bond registered as of each Record Date in the name of Cede & Co. shall be made by wire transfer of same -day funds to the account of Cede & Co. on the Interest Payment Date at the address indicated on the Record Date for Cede & Co. in the Registration Books or as otherwise provided in the Representation Letter. (b) The Trustee and the Authority may treat DTC (or its nominee) as the sole and exclusive Owner of Book-Entry Bonds registered in its name for the purposes of payment of the 17 4861-0176-1821v5/022042-0044 principal, premium, if any, or interest with respect to Book-Entry Bonds, selecting Book-Entry Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, registering the transfer of Book-Entry Bonds, obtaining any consent or other action to be taken by Owners of Book-Entry Bonds and for all other purposes whatsoever, and neither the Trustee nor the Authority shall be affected by any notice to the contrary. Neither the Trustee nor the Authority shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in Book-Entry Bonds under or through DTC or any Participant, or any other person which is not shown on the Registration Books as being an Owner, with respect to the accuracy of any records maintained by DTC or any Participant, the payment by DTC or any Participant of any amount in respect of the principal, premium, if any, or interest with respect to Book-Entry Bonds, any notice which is permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of Book-Entry Bonds, or any consent given or-other action taken by DTC as Owner of Book-Entry Bonds. The Trustee shall pay all principal, premium, if any and interest with respect to Book-Entry Bonds, only to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the Authority’s obliga tions with respect to the principal, premium, if any, and interest with respect to the Book -Entry Bonds to the extent of the sum or sums so paid. Except under the conditions of subsection (c) of this Section, no person other than DTC shall receive an executed Book-Entry Bond for each separate stated maturity. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to re cord dates, the term “Cede & Co.” in this Indenture shall refer to such new nominee of DTC. (c) In the event (i) DTC, including any successor as securities depository for a Series of Bonds, determines not to continue to act as securities depository for such Series of Bonds, or (ii) the Authority determines that the incumbent securities depository shall no longer so act, and delivers a written certificate to the Trustee to that effect, then the Authority will discontinue the book - entry system with the incumbent securities depository for such Series of Bonds. If the Authority determines to replace the incumbent securities depository for such Series of Bonds with another qualified securities depository, the Authority shall prepare or direct the preparation of a ne w single, separate fully registered Bond of such Series for the aggregate outstanding principal amount of Bonds of such Series of each maturity, registered in the name of such successor or substitute qualified securities depository, or its nominee, or make such other arrangement acceptable to the Authority, the Trustee and the successor securities depository for the Bonds of such Series as are not inconsistent with the terms of this Indenture. If the Authority fails to identify another qualified successor securities depository for such Series of Bonds to replace the incumbent securities depository, then the Bonds of such Series shall no longer be restricted to being registered in the Registration Books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository for such Series of Bonds, or its nominee, shall designate. In such event the Authority shall execute, and deliver to the Trustee, a sufficient quantity of Bo nds of such Series to carry out the transfers and exchanges provided in Sections 2.04, 2.08 and 2.09 hereof. All such Bonds of such Series shall be in fully registered form in Authorized Denominations. (d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Book-Entry Bond is registered in the name of DTC, or its nominee, all payments with respect to the principal, premium, if any, and interest with respect to such Book -Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Representation Letter. 18 4861-0176-1821v5/022042-0044 (e) In connection with any notice or other communication to be provided to Owners of Book-Entry Bonds pursuant to this Indenture by the Authority, the City or the Trustee with respect to any consent or other action to be taken by Owners, the Authority, the City or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01 Issuance of Series 2022 Bonds. The Authority may, at any time, execute the Series 2022 Bonds for issuance hereunder and deliver the same to the Trustee . The Trustee shall authenticate the Series 2022 Bonds and deliver the Series 2022 Bonds to the original purchaser thereof upon receipt of a Written Request of the Authority and upon receipt of the purchase price therefor. Section 3.02 Application of Proceeds of the Series 2022 Bonds. On the Closing Date, the proceeds of the sale of the Series 2022 Bonds received by the Trustee, $___________ (being the principal amount of $__________, less net original issue discount of $__________, less an underwriter’s discount of $__________, [and less $_________ paid by the Participating Underwriter of the Series 2022 Bonds on behalf of the Authority directly to the Insurer)], shall be deposited by the Trustee as follows: (a) The Trustee shall deposit the amount of $____________ in the Costs of Issuance Fund. (b) The Trustee shall deposit the amount of $____________ in the Construction Fund. Section 3.03 Costs of Issuance Fund. The Trustee shall establish and maintain a separate fund designated the “Costs of Issuance Fund.” On the Closing Date, there shall be deposited in the Costs of Issuance Fund the amount specified in Section 3.02 hereof. There shall be additionally be deposited in the Cost of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Authority stating (a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the Costs of Issuance Fund, and (e) that such amounts have not been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder. On March 1, 2023, all amounts, if any, remaining in the Costs of Issua nce Fund shall be withdrawn therefrom by the Trustee and transferred to the Interest Fund. Thereafter, the Costs of Issuance Fund shall be closed. 19 4861-0176-1821v5/022042-0044 Section 3.04 Construction Fund. (a) The Trustee shall establish and maintain a separate fund designated the “Construction Fund.” On the Closing Date there shall be deposited in the Construction Fund the amount specified in Section 3.02(b) hereof. (b) The moneys in the Construction Fund shall be used and withdrawn by the Trustee from time to time to pay the Project Costs upon submiss ion of a Written Request of the City stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that such payment constitutes a Project Cost and is a proper charge against the Construction Fund, and (v) that such amounts have not been the subject of a prior disbursement from the Construction Fund, in each case together with a statement or invoice for each amount requested thereunder. (c) Upon the filing of a Written Certificate of the City stating that the Project has been completed and that all Project Costs have been paid, the Trustee shall transfer and apply the amount, if any, remaining in the Construction Fund (x) if such amount is equal to or greater than $50,000, to the Redemption Fund to be used to optionally redeem Bonds, provided that the amount so transferred shall not exceed the amount required to provide for the redemption of all Outstanding Bonds and (y) if such amount is less than $50,000, to the Base Rental Paymen t Fund to be used for the purposes thereof. Thereafter, the Construction Fund shall be closed. Section 3.05 Conditions for the Issuance of Additional Bonds. The Authority may at any time issue one or more Series of Additional Bonds (in addition to the Series 2022 Bonds) payable from Base Rental Payments as provided herein on a parity with all other Bonds theretofore issued hereunder, but only subject to the following conditions, which are hereby made conditions precedent to the issuance of such Additional Bonds: (a) The issuance of such Additional Bonds shall have been authorized under and pursuant hereto and shall have been provided for by a Supplemental Indenture which shall specify the following: (A) The application of the proceeds of the sale of such Additional Bonds; (B) The principal amount and designation of such Series of Additional Bonds and the denomination or denominations of the Additional Bonds; (C) The date, the maturity date or dates, the interest payment dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, however, that (i) the serial Bonds of such Series of Additional Bonds shall be payable as to principal annually on April 1 of each year in which principal falls due, and the term Bonds of such Series of Additional Bonds shall have annual mandatory sinking fund redemptions on April 1, (ii) the Additional Bonds shall be payable as to interest semiannually on April 1 and October 1 of each year, except that the first installment of interest may be paya ble on either April 1 or October 1 and shall be for a period of not longer than twelve months and the interest shall be payable thereafter semiannually on April 1 and October 1, (iii) all Additional Bonds of a Series of like maturity shall be identical in all respects, except as to number or denomination, and (iv) serial maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be 20 4861-0176-1821v5/022042-0044 established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates; (D) The redemption premiums and terms, if any, for such Additional Bonds; (E) The form of such Additional Bonds; (F) if necessary; that from such proceeds or other sources an amount shall be deposited in the Reserve Fund so that following such deposit there shall be on deposit in the Reserve Fund an amount at least equal to the Reserve Fund Requirement, as may be reduced after issuance of the Additional Bonds; and (G) Such other provisions that are appropriate or necessary and are not inconsistent with the provisions hereof; (b) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; (c) The City shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; and (d) The Ground Lease shall have been amended, to the extent ne cessary, and the Lease Agreement shall have been amended so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times and in such manner as may be necessary to provide for the payment of the principal of and interest on such Additional Bonds; provided, however, that no such amendment shall be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith (evidence of the satisfaction of such condition shall be made by a Written Certificate of the City) (e) [The City shall have provided the Insurer written notice of the proposed issuance of such Additional Bonds and shall have received prior written consent of the Insurer with respect to such Additional Bonds.] Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in this Section 3.05, no such issuance may occur if (1) an event of default (within the meaning of Article VI of the Lease Agreement) (or any event which, once all notice or grace periods have passed, would constitute such event of default) exists unless such event of default shall be cured upon such execution or issuance or (2) the Reserve Fund is not fully funded at the Reserve Fund Requirement. Section 3.06 Procedure for the Issuance of Additional Bonds. At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Authority for issuance hereunder and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following: 21 4861-0176-1821v5/022042-0044 (a) Certified copies of the Supplemental Indenture authorizing the issuance of such Additional Bonds, the amendment to the Lease Agreement required by Section 3.05 hereof and the amendment to the Ground Lease, if any, required by Section 3.05 hereof, together with satisfactory evidence that such amendment to the Lease Agreement and such amendment to the Gro und Lease, if any, have been duly recorded; (b) A Written Request of the Authority as to the delivery of such Additional Bonds; (c) An opinion of Bond Counsel substantially to the effect that (i) the Indenture (including all Supplemental Indentures), the Lease Agreement (including the amendment thereto required by Section 3.05 hereof) and the Ground Lease (including any amendment thereto required by Section 3.05 hereof) have been duly authorized, executed and delivered by, and constitute the valid and binding obligations of, the Authority and the City, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by the application of equita ble principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), (ii) such Additional Bonds constitute valid and binding special obligations of the Authority payable solely from Base Rental Payments as provided herein and are enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affec ting creditors rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on the Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes; (d) a Written Certificate of the Authority that the requirements of Section 3.05 hereof have been met; (e) a Written Certificate of the City that the requirements of Sections 3.05 and 3.06 hereof and Sections 5.01 and 5.02 of the Lease Agreement have been met, and a Written Certificate of the City as to the fair rental value of the Property, after giving effect to the execution and delivery of the Additional Bonds, and to the use of proceeds received therefrom; and (f) Such further documents as are required by the provisions hereof or by the provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds. Section 3.07 Additional Bonds. So long as any of the Bonds remain Outstanding, the Authority shall not issue any Additional Bonds or obligations payable from the Base Rental Paymen ts, except pursuant to Sections 3.05 and 3.06 hereof. ARTICLE IV REDEMPTION OF BONDS Section 4.01 Redemption of Series 2022 Bonds. (a) Extraordinary Redemption. The Series 2022 Bonds shall be subject to redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of 22 4861-0176-1821v5/022042-0044 any Net Insurance Proceeds received with respect to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to Sections 5.03 and 5.04 hereof, at a Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. (b) Optional Redemption. The Series 2022 Bonds maturing on or after April 1, 20__, shall be subject to optional redemption, in whole or in part, on any date on or after April 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to subsection (a) of Section 7.02 of the Lease Agreement, at a Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. (c) Sinking Fund Redemption. The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed In the event of a redemption of any Series 2022 Bonds maturing on April 1, 20__ or on April 1, 20__ pursuant to Section 4.01(a) or (b), the City shall provide the Trustee with a revised mandatory sinking fund schedule giving effect to the redemption so completed. Section 4.02 Notice of Redemption. At least 20 but not more than 60 days prior to the date fixed for redemption the Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, provided, however, so long as the Bonds are registered in the name of the Nominee, notice shall be given in such manner as complies 23 4861-0176-1821v5/022042-0044 with the requirements of DTC. Such notice shall state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Such notice may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption date to redeem the Bonds so called for redemption. Such notice of redemption may also state that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds. Neither the failure to receive any notice so given, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. Section 4.03 Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for re demption (a) with respect to any optional redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Authority, (b) with respect to any redemption pursuant to Section 4.01(a) hereof and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable , [approved in writing by the Insurer (so long as the Insurer is not in default on any obligation under the Insurance Policy),] and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series within a maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds which may be separately redeemed. Section 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same Series in authorized denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered. Section 4.05 Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the Redemption Fund, the Bonds shall become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds shall be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date. If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been given as aforesaid and not canceled, then, from and after said date, interest on said Bonds shall cease to a ccrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. 24 4861-0176-1821v5/022042-0044 All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof shall be canceled upon surrender thereof and destroyed. ARTICLE V SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS Section 5.01 Pledge; Special Obligations. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the Redemption Fund are hereby pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act. Said pledge shal l constitute a first lien on such assets. All obligations of the Authority under this Indenture shall be special obligations of the Authority, payable solely from Rental Payments and the other assets pledged therefor hereunder; provided, however, that all obligations of the Authority under the Bonds shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor hereunder. Neither the faith and credit nor the taxing power of the Authority, the C ity or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds. Section 5.02 Flow of Funds. (a) The Trustee shall establish and maintain separate funds designated the “Base Rental Payment Fund,” the “Interest Fund,” the “Princi pal Fund,” the “Reserve Fund” and the “Redemption Fund.” All Base Rental Payments shall be paid directly by the City to the Trustee, and if received by the Authority at any time shall be transferred by the Authority with the Trustee within one Business Day after the receipt thereof. All Base Rental Payments received by the Trustee shall be deposited by the Trustee in the Base Rental Payment Fund. (b) The Trustee shall transfer the amounts on deposit in the Base Rental Payment Fund, at the times and in the manner hereinafter provided, to the following respective funds: (i) Interest Fund. On the Business Day immediately preceding each Interest Payment Date, the Trustee shall transfer from the Base Rental Payment Fund to the Interest Fund the amount, if any, necessary to cause the amount on deposit in the Interest Fund to be equal to the interest due on the Bonds on such Interest Payment Date. (ii) Principal Fund. On the Business Day immediately preceding each April 1, commencing April 1, 2023, the Trustee shall transfer from the Base Rental Payment Fund to the Principal Fund the amount, if any, necessary to cause the amount on deposit in the Principal Fund to be equal to the principal amount of the Bonds due on such April 1, either as a result of the maturity thereof or mandatory sinking fund redemption payments required to be made with respect thereto. Moneys in the Principal Fund shall be used by the Trustee for the purpose of paying the principal of the Bonds when due and payable at their maturity dates or upon earli er mandatory sinking fund redemption. 25 4861-0176-1821v5/022042-0044 (iii) Redemption Fund. The Trustee, on the redemption date specified in the Written Request of the City filed with the Trustee at the time that any prepaid Base Rental Payment is paid to the Trustee pursuant to the Lease Agreement, shall deposit in the Redemption Fund that amount of moneys representing the portion of the Base Rental Payments designated as prepaid Base Rental Payments. Additionally, the Trustee shall deposit in the Redemption Fund any amounts required to be deposited therein pursuant to Section 5.03 or Section 5.04 hereof. Moneys in the Redemption Fund shall be used by the Trustee for the purpose of paying the principal of and interest and premium, if any, on Series 2022 Bonds redeemed pursuant to the provisions of subsections (a) and (b) of Section 4.01 hereof and Additional Bonds redeemed pursuant to the corresponding provisions of the Supplemental Indenture pursuant to which such Additional Bonds are issued. (c) Reserve Fund. All amounts on deposit in the Base Rental Payment Fund on April 2, to the extent not required to pay the principal of any Outstanding Bonds then having come due and payable, shall be transferred to the Reserve Fund, to the extent necessary to satisfy the Reserve Fund Requirement [or to pay Policy Costs to the Insurer (as such terms are defined herein)], to the extent such amounts are due and payable. (d) [Insurer Reimbursement Amounts. The Authority shall from the remaining moneys in the Base Rental Payment Fund pay Insurer Reimbursement Amounts to the Insurer (as such terms are defined herein) not payable from the Interest Fund or Principal Fund, to the extent such amounts are due and payable.] (e) Surplus. Any amounts remaining in the Base Rental Payment Fund shall be withdrawn therefrom and transferred to the City to be used for any lawful purposes of the City. Section 5.03 Application of Net Insurance Proceeds. If the Property or any portion thereof shall be damaged or destroyed, subject to the further requirements of this Section, the City shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or replacement thereof, unless the City elects not to repair or replace the Property or the affected portion thereof in accordance with the provisions hereof. The Net Insurance Proceeds (other than Net Insurance Proceeds of rental interruption insurance), including the proceeds of any self-insurance, received on account of any damage or destruction of the Property or a portion thereof shall as soon as possibl e be deposited with the Trustee and be held by the Trustee in a special account and made available for and, to the extent necessary, shall be applied to the cost of repair or replacement of the Property or the affected portion thereof upon receipt of a Written Request of the City, together with invoices therefor. Pending such application, such proceeds may be invested by the Trustee as directed by the City in Permitted Investments that mature not later than such times moneys are expected to be needed to pa y such costs of repair or replacement. Notwithstanding the foregoing, the City shall, within 60 days of the occurrence of the event of damage or destruction, notify the Trustee in writing as to whether the City intends to replace or repair the Property or the portions of the Property which were damaged or destroyed. If the City does intend to replace or repair the Property or portions thereof, the City shall deposit with the Trustee the full amount of any insurance deductible to be credited to the special account. If the damage, destruction or loss was such that there resulted a substantial interference with the City’s right to the use or occupancy of the Property and an abatement of Rental Payments results 26 4861-0176-1821v5/022042-0044 from such damage or destruction pursuant to Section 3.06 of the Lease Agreement, then the City shall be required either to (a) apply sufficient funds from the insurance proceeds and other legally available funds to the replacement or repair of the Property or the portions thereof which have been damaged to the condition which existed prior to such damage or destruction, or (b) apply sufficient funds from the insurance proceeds and other legally available funds to the redemption, as set forth in subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued, in full of all the Outstanding Bonds or all of those Outstanding Bonds which would have been payable from that portion of the Base Rental Payments which are abated as a result of the damage or destruction. Funds to be applied to the redemption of Bonds in accordance with clause (b) above shall be deposited in the Redemption Fund. If the City is not required to replace or repair the Property, or the affected portion thereof, as set forth in clause (a) above or to use such amounts to redeem Bonds as set forth in clause (b) above, then such proceeds shall, if there is first delivered to the Trustee a Written Certificate of the City to the effect that the annual fair rental v alue of the Property after such damage or destruction, and after any repairs or replacements made as a result of such damage or destruction, is at least equal to 100% of the maximum amount of Base Rental Payments becoming due under the Lease Agreement in t he then current Rental Period or any subsequent Rental Period and the fair replacement value of the Property after such damage or destruction is at least equal to the principal amount of the Outstanding Bonds, be paid to the City to be used for any lawful purpose. Proceeds of rental interruption insurance shall be applied to the payment of Base Rental Payments to the extent of any abatement thereof pursuant to the Lease Agreement, and otherwise as directed in writing by the City. The proceeds of any award in eminent domain received in respect to the Property shall be deposited by the Trustee in the Redemption Fund and applied to the redemption of Bonds pursuant to subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued. Section 5.04 Title Insurance. Proceeds of any policy of title insurance received by the Trustee in respect of the Property shall be applied and disbursed by the Trustee as follows: (a) if the City determines that the title defect giving rise to such proceeds has not substantially interfered with its use and occupancy of the Property and will not result in an abatement of Rental Payments payable by the City under the Lease Agreement, such proceeds shall be remitted to the City and used for any lawful purpose thereof; or (b) if the City determines that the title defect giving rise to such proceeds has substantially interfered with its use and occupancy of the Property and will result in an abatement of Rental Payments payable b y the City under the Lease Agreement, then the Trustee shall immediately deposit such proceeds in the Redemption Fund and such proceeds shall be applied to the redemption of Bonds in the manner provided in subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued. Section 5.05 Reserve Fund. The Authority hereby agrees to establish a separate fund titled the “Reserve Fund” and within the Reserve Fund, the “Series 2022 Bonds Account,” which shall be held and maintained by the Trustee. The Trustee shall deposit into the Reserve Fund or accounts therein, any amounts transferred from the Base Rental Fund pursuant to Section 5.02(c) above. The Trustee may establish additional accounts in the Reserve Fund in connection with the issuance of 27 4861-0176-1821v5/022042-0044 Additional Bonds, if any. All moneys in the Reserve Fund and accounts therein shall be used and withdrawn by the Trustee solely for the purpose of funding the Interest Fund or the Principal Fund, in that order, in the event of any deficiency in either of such accounts on an Interest Payment Date. [The Trustee shall deposit the Reserve Surety Policy into the Series 2022 Bonds Account.] (a) [As long as the Reserve Surety Policy shall be in full force and effect the Authority, the City and the Trustee agree to comply with the following provisions: (i) In the event and to the extent that moneys on deposit in the Base Rental Payment Fund, plus all amounts on deposit in and credited to the Reserve Fund in excess o f the amount of the Reserve Surety Policy, are insufficient to pay the amount of principal and interest coming due on the Series 2022 Bonds, then upon the later of: (i) one (1) Business Day after receipt by the Insurer of a Notice of Nonpayment (as such terms are defined in the Reserve Surety Policy), duly executed by the Trustee certifying that payment due under this Indenture has not been made to the Trustee; or (ii) the Interest Payment Date, the Insurer will make a deposit of funds in an account with th e Trustee or its successor sufficient for the payment to the Trustee of amounts which are then due to the Trustee under this Indenture up to but not in excess of the Policy Limit, as defined in the Reserve Surety Policy; provided, however, that in the event that the amount on deposit in, or credited to, the Reserve Fund, in addition to the amount available under the Reserve Surety Policy, includes amounts available under a letter of credit, insurance policy, reserve surety policy or other such funding instr ument (the “Additional Funding Instrument”), draws on the Reserve Surety Policy and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. (ii) The Authority shall repay from Base Rental Payments any draws under the Reserve Surety Policy and pay all related reasonable expenses incurred by the Insurer. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Insurer at the Late Payment Rate. For purposes of this Section 5.05, “Late Payment Rate” means (as calculated by the Authority and certified to the Trustee in writing) the lesser of: (i) the greater of: (A) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate (“Prime Rate”) (any change in such Prime Rate to be effective on the date such change is announced by JP Morgan Chase Bank) plus 3%; and (B) the then applicable highest rate of interest on the Series 2022 Bonds; and (ii) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event that JP Morgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Insurer shall specify. If the interest provisions of this Section 5.05(a)(ii) shall result in an effective rate of interest which, for any period, exceeds the limit of the usury or any other laws applicable to the indebtedness created herein, then all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied as additional interest for any later periods of time when amounts are outstanding hereunder to the extent that interest otherwise due hereunder for such periods plus such additional interest would not exceed the limit of the usury or such other laws, and any excess shall be applied upon principal immediately upon receipt of such moneys by the Insurer, with the same force and effect as if the Authority had specifically designated such extra sums to be so applied and the Insurer had agreed to accept such extra payment(s) as additional interest for such later periods. In no event shall any agreed -to or actual exaction as consideration for the indebtedness created herein exceed the limits imposed or provided by the law 28 4861-0176-1821v5/022042-0044 applicable to this transaction for the use or detention of money or for forbearance in seeking its collection.] (iii) Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, “Policy Costs”) shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs (as calculated by the Authority and certified to the Trustee in writing) related to such draw. (iv) Amounts in respect of Policy Costs paid to the Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Insurer on account of principal due, the coverage under the Reserve Surety Policy will be increased by a like amount, subject to the terms of the Reserve Surety Policy. (v) All cash and investments in the Series 2022 Bonds Account shall be transferred to the Base Rental Payment Fund for payment of the principal of and interest on the Series 2022 Bonds before any drawing may be made on the Reserve Surety Policy or any other credit facility credited to the Reserve Fund in lieu of cash (“Credit Facility”). Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Surety Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Series 2022 Bonds Account. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro-rata basis prior to replenishment of any cash drawn from the Series 2022 Bonds Account. For the avoidance of doubt, “available coverage” means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or financial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw. (vi) If the Authority or the City shall fail to pay any Policy Costs in accordance with the requirements of Section 5.05(a)(ii) hereof, the Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided und er this Indenture other than: (A) acceleration of the maturity of the payments of principal of and interest on the Series 2022 Bonds; or (B) remedies which would adversely affect Owners of the Series 2022 Bonds. (vii) The Trustee shall ascertain the necessity for a claim upon the Reserve Surety Policy in accordance with the provisions of Section 5.05(a)(i) hereof and provide notice to the Insurer in accordance with the terms of the Reserve Surety Policy at least five (5) Business Days prior to an Interest Payment Date. Where deposits are required to be made by the Authority with the Trustee to the Base Rental Payment Fund for the payment of principal of and interest on the Series 2022 Bonds more often than semi-annually, the Trustee shall be instructed to give notice to the Insurer of any failure of the Authority to make timely payment in full of such deposits within two Business Days of the date due. (viii) The obligation to pay Policy Costs shall be secured by a valid lien on the Base Rental Payments, subject to the priority of payments set forth in this Indenture. (ix) So long as the Reserve Surety Policy is in full force and effect, futur e deposits of a Credit Facility in the Reserve Fund shall require the prior written consent of the Insurer. 29 4861-0176-1821v5/022042-0044 Notwithstanding anything in this Indenture to the contrary, amounts on deposit in the Series 2022 Bonds Account shall be applied solely to the payment of principal of and interest on the Series 2022 Bonds. Neither this Indenture nor the Lease Agreement shall be discharged until all Policy Costs owing to the Insurer as issuer of the Reserve Surety Policy have been paid in full.] (b) On the final maturity date for the Bonds, amounts in the Reserve Fund shall be transferred to the Interest Fund and the Principal Fund to make the final payment on the Bonds, and the amount transferred shall be deemed to be a credit against the remaining Base Rental Payments t o be made by the City under the Lease Agreement. Section 5.06 Rebate Fund. (a) The Trustee shall establish and maintain a special fund designated the “Rebate Fund.” There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Written Request of the Authority. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to Article X hereof or anything to the contrary contained herein, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Authority, and shall have no liability or responsibility to enforc e compliance by the Authority with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Authority’s determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the Authority’s calculations. (b) Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and after payment of any amounts described in this Section, shall be withdrawn by the Trustee and remitted to the Authority. Section 5.07 Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Indenture and held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in writing by the Authority. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Indenture; provided, however, that such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Date. Absent timely written direction from the Authority, the Trustee shall hold any funds held by it uninvested. Subject to the provisions of Section 5.07 hereof, all interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Indenture shall be retained therein. Permitted Investments acquired as an investment of moneys in any fund established under this Indenture shall be credited to such fund. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the fa ir market value 30 4861-0176-1821v5/022042-0044 thereof, such valuation to be performed not less frequently than semiannually on or before each March 15 and September 15. In determining fair market value, the Trustee may use and rely conclusively on any generally recognized securities p ricing service available to it (including brokers and dealers in securities). The parties hereto acknowledge that the Trustee is not providing investment supervision, recommendations, or advice. The Trustee may act as principal or agent in the making or disposing of any investment. Upon the Written Request of the Authority, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. The Trustee may make any investments hereunder through the bond or investment department or trust investment department of the entity acting as Trustee hereunder, or those of suc h entity’s parent or any affiliate, and such entity, or its parent or affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services. The entity acting as Trustee hereunder, or any of its affiliates, may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder and such entity, or its affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services. The Authority and the City acknowledge that, to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority and the City the right to receive brokerage confirmations of security transactions as they occur, at no addi tional cost, the Authority and the City specifically waive receipt of such confirmations to the extent permitted by law. Section 5.08 [Claims Upon the Insurance Policy and Payments by and to the Insurer . If, on the third Business Day prior to the related scheduled interest payment date or principal payment date (“Payment Date”) there is not on deposit with the Trustee, after making all transfers and deposits required under this Indenture, moneys sufficient to pay the principal of and interest on the Series 2022 Bonds due on such Payment Date, the Trustee shall give notice to the Insurer and to its designated agent (if any) (the “Insurer's Fiscal Agent”) by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2022 Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2022 Bonds and the amount required to pay principal of the Series 2022 Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. The Trustee shall designate any portion of payment of principal on the Series 2022 Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of the Series 2022 Bonds registered to the then current Owner of the Series 2022 Bonds, whether DTC or its nominee or 31 4861-0176-1821v5/022042-0044 otherwise, and shall issue a replacement Series 2022 Bond to the Insurer, registered in the name of _______________, in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Series 2022 Bond shall have no effect on the amount o f principal or interest payable by the Authority on any Series 2022 Bond or the subrogation rights of the Insurer. The Trustee shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Series 2022 Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. Upon payment of a claim under the Insurance Policy, the Trustee shall establish a separate special purpose trust account for the benefit of Owners of the Series 2022 Bonds referred to herein as the “Policy Payments Account” and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the Insurance Policy in trust on behalf of Owners of the Series 2022 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Owners of the Series 2022 Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2022 Bonds under the sections hereof regarding payment of the Series 2022 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay the principal of and interest on the Series 2022 Bonds with other funds ava ilable to make such payments. Notwithstanding anything herein to the contrary, the Authority and the City agree to pay to the Insurer (i) a sum equal to the total of all amounts paid by the Insurer under the Insurance Policy (the “Insurer Advances”); and (ii) interest on such Insurer Advances from the date paid by the Insurer until payment thereof in full, payable to the Insurer at the Late Payment Rate per annum (collectively, the “Insurer Reimbursement Amounts”). “Late Payment Rate” means the lesser of (a ) the greater of (i) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JP Morgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2022 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Pa yment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The Authority and the City hereby covenant and agree that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Base Rental Payments and such Insurer Reimbursement Amounts shall be payable from such Base Rental Payments on a parity with the payments of principal of and interest on the Series 2022 Bonds. Funds held in the Policy Payments Account shall not be invested by the Trustee a nd may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following an Interest Payment Date shall promptly be remitted to the Insurer.] Section 5.09 [Payments by the Insurer as a Result of Nonpayment. The Insurer shall be entitled to pay principal or interest on the Series 2022 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Authority (as such terms are defined in the Insurance Policy) and any amounts due on the Series 2022 Bonds as a result of acceleration of the maturity thereof in accordance with this Indenture, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Ins urance Policy.] 32 4861-0176-1821v5/022042-0044 ARTICLE VI COVENANTS Section 6.01 Compliance with Agreements. The Trustee will not authenticate or deliver any Bonds in any manner other than in accordance with the provisions hereof, and the Authority and the City will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them. Section 6.02 Compliance with Ground Lease and Lease Agreement. The Authority and the City will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Ground Lease and the Lease Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Ground Lease and the Lease Agreement against the other party thereto in accordance with their respective terms. Section 6.03 Observance of Laws and Regulations. The Authority, the City and the Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commissio n having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that su ch franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired. Section 6.04 Other Liens. The City will keep the Property and all parts thereof free from judgments and materialmen’s and mechanics’ liens and free from all claims, demands, encumbrances and other liens of whatever nature or character, and free from any claim or liability which materially impairs the City in conducting its business or utilizing the Property, and the Trustee at its option (after first giving the City ten days’ written notice to comply therewith and failure of the City to so comply within such ten-day period) may, but is in no event obligated to, defend against any and all actions or proceedings, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that, in defending against any such actions or proceedings or in paying or compromising any such claims or demands, the Trustee shall not in any event be deemed t o have waived or released the City from liability for or on account of any of its agreements and covenants contained herein, or from its liability hereunder and to perform such agreements and covenants. So long as any Bonds are Outstanding, none of the Trustee, the Authority or the City shall create or suffer to be created any pledge of or lien the amounts on deposit in any of the funds or accounts created hereunder, other than the pledge and lien hereof. The Authority, the City and the Trustee shall not encumber the Property other than in accordance with the Ground Lease, the Lease Agreement, the Indenture and the Assignment Agreement. Section 6.05 Prosecution and Defense of Suits. The City will promptly, upon request of the Trustee (which request the Trustee is not required to make), take such action from time to time as may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Property or 33 4861-0176-1821v5/022042-0044 any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits o r other proceedings as may be appropriate for such purpose and will indemnify and save the Trustee harmless from all cost, damage, expense or loss, including attorneys’ fees and expenses, which it or the Owners may incur by reason of any such cloud, defect, action, suit or other proceeding. Section 6.06 Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions relating to the receipt, deposit and disbursement of the Base Rental Payments, and such accounting records shall be available for inspection by the Authority and the City at reasonable hours and under reasonable conditions. Section 6.07 Recordation and Filing. The City will record, or cause to be recorded, with the appropriate county recorder, the Lease Agreement, the Ground Lease and the Assignment Agreement, or memoranda thereof. Section 6.08 Tax Covenants. (a) Neither the Authority nor the City will take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on any tax-exempt Bonds under Section 103 of the Code. Without limiting the generality of the foregoing, the Authority and the City will comply with the requirements of the Tax Certificate, which is incorporated herein as if fully set forth herein, This covenant shall survive payment in full or defeasance of the Bonds. (b) In the event that at any time the Authority is of the opinion that for purposes of this Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee in any of the funds or accounts established hereunder, the Authority shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions. (c) Notwithstanding any provisions of this Section, if the Authority shall provide to the Trustee an Opinion of Counsel to the effect that any specified action required under this Section is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Bonds, the Trustee may conclusively rely on such opinion in complying with the requirements of this Section and of the Tax Certificate, and the covenants hereunder shall be deemed to be modified to that extent. Section 6.09 Continuing Disclosure. The City will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the City to comply with the Continuing Disclosure Certificate shall not constitute an event of default hereunder; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggre gate principal amount of Outstanding Series 2022 Bonds, and upon being indemnified to its reasonable satisfaction therefor, shall) or any holder or beneficial owner of the Series 2022 Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. Section 6.10 Further Assurances. Whenever and so often as requested to do so by the Trustee, the Authority and the City will promptly execute and deliver or cause to be executed and 34 4861-0176-1821v5/022042-0044 delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Trustee all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon it hereby or by the Assignment Agreement, the Ground Lease or the Lease Agreement. ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01 Action on Default. If an event of default (within the meaning of Article VI of the Lease Agreement) shall happen, then such event of default shall constitute an event of default hereunder. The Trustee shall give notice, as assignee of the Authority, of an event of default under the Lease Agreement to the City. In each and every case during the continuance of an event of default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal amount of Bonds then Outstanding, and upon being indemnified to its reasonable satisfaction therefor, shall, upon notice in writing to the City and the Authority, exercise any of the remedies granted to the Authority under the Lease Agreement and, in addition, take whatever action at law or in equity may appear necessary or desirable to enforce its rights as assignee pursuant to the Assignment Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Indenture or by the Bonds, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 7.02 hereof. Section 7.02 Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof, the Trustee shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Authority or the City or any member, director, officer or employee thereof, and to compel the Authority or the City or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or (c) by suit in equity upon the happening of any event of default hereunder to require the Authority and the City to account as the trustee of an express trust. Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Owners so affected. Section 7.03 Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of 35 4861-0176-1821v5/022042-0044 duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by this Article may be enforced and exercised from time to time and as often the Trustee shall deem expedient. If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the Trustee, such Owner, the Authority and the City shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 7.04 Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 7.05 No Liability by the Authority to the Owners. Except as expressly provided herein, the Authority shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of the other agreements and covenants required to be performed by it contained in the Lease Agreement or herein, or with respect to the performance by the Trustee of any right or obliga tion required to be performed by it contained herein. Section 7.06 No Liability by the City to the Owners. Except for the payment when due of the Base Rental Payments and the performance of the other agreements and covenants required to be performed by it contained in the Lease Agreement, the Ground Lease or herein, the City shall not have any obligation or liability to the Owners with respect to this Indenture or the preparation, execution, delivery or transfer of the Bonds or the disbursement of the Base Rental Payme nts by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.07 No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the Authority or the City of the other agreements and covenants required to be perform ed by them contained in the Lease Agreement, the Ground Lease or herein. Section 7.08 Application of Amounts After Default. All payments received by the Trustee with respect to the rental of the Property after a default by the City pursuant to Article VI of the Lease Agreement (including, without limitation, any proceeds received in connection with the sale, assignment or sublease of the Authority’s right, title and interest in the Ground Lease), and all damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under Article VI of the Lease Agreement, shall be deposited into the Base Rental Payment Fund and as soon as practicable thereafter applied, together with all other funds held hereunder (except funds in the Rebate Fund): (a) to the payment of all amounts due the Trustee under Article VIII hereof; 36 4861-0176-1821v5/022042-0044 (b) to the payment of all amounts then due for interest on the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have bec ome payable-prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest on such Bonds due and payable; (c) to the payment of all amounts then due for principal of the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have become payable prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal of such Bonds due and payable; and (d) [to the extent Policy Costs or Insurer Reimbursement Amounts are due and payable to the Insurer, to the payment of such amounts.] Section 7.09 Trustee May Enforce Claims Without Possession of Bonds. All rights of action and claims under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating the reto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners in respect of which such judgment has been recovered. Section 7.10 Limitation on Suits. No Owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or Trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing event of default, (b) the Owners of not less than 25% of the aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e) no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by the Owners of a majority of the aggregate principal amount of Bonds then Outstandi ng; it being understood and intended that no one or more Owners shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Owner, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Owners. Section 7.11 [Insurer Rights. The Insurer shall be deemed to be the sole holder of the Series 2022 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Series 2022 Bond Owners are entitled to take pursuant to the Indenture pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee. In furtherance thereof and as a term of the Indenture and each Series 2022 Bond, the Trustee (solely with respect to the Series 2022 Bonds) and each Series 2022 Bond Owner appoint the Insurer as their agent and attorney-in-fact and agree that the Insurer may at any time during the continuation of any proceeding by or against the Authority under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an “Insolvency 37 4861-0176-1821v5/022042-0044 Proceeding”) direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a “Claim”), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedeas or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, t he Trustee (solely with respect to the Series 2022 Bonds) and each Series 2022 Bond Owner delegate and assign to the Insurer, to the fullest extent permitted by law, the rights of the Trustee and each Series 2022 Bond Owner in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. Remedies granted to the Owners shall expressly include mandamus.] ARTICLE VIII THE TRUSTEE Section 8.01 Employment of the Trustee. The Authority hereby appoints and employs the Trustee to receive, deposit and disburse the Base Rental Payments, to authenticate, deliver and transfer the Bonds and to perform the other functions contained h erein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Indenture, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an event of default has occurred and is continuing, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. These duties shall be deemed purely ministerial in nature, and the Trustee shall not be liable except for the performance of such duties, and no implied covenants or obligations shall be read into this Agreement against the Trustee. In case an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. The Trustee hereby covenants and agrees that it will not encumber the Property. Section 8.02 Duties, Removal and Resignation of the Trustee. The Authority may, by an instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an event of default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a) requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal amount of Bonds at the time Outstanding (or their attorneys duly authorized in writing), or (b) the Trustee shall cease to be eligible in accordance with the following sentence, and shall appoint a successor Trustee. The Trustee and any successor Trustee shall be a banking corporation or association or trust company having (or if such banking corporation or association or trust company is a member of a bank holding company, its bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities. If such banking corporation or association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. 38 4861-0176-1821v5/022042-0044 The Trustee may at any time resign and be discharged from its duties and obligations hereunder at any time by giving written notice of such resignation to the Authority and the City and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the Authority does not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the Authority, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or trans fer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipso facto, shall be and become successor trustee under this Indenture and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, withou t the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 8.03 Compensation of the Trustee. The City shall from time to time, subject to any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include “overhead expenses” excep t as such expenses are included as a component of the Trustee’s stated annual fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder. The Trustee may take whatever legal actions are lawfully available to it directly against the Authority or the City. The City shall, to the extent permitted by law, indemnify and save the Trustee harmless against any liabilities, costs, claims or expenses, including those of its attorneys, which it may incur in the exercise and performance of its powers and duties hereunder, under the Lease Agreement, or in connection with any document or transaction contemplated hereunder or thereunder, including the enforcement of any remedies and the defense of any suit, and which are not due to its negligence or its misconduct. The duty of the City to indemnify the Trustee shall survive the termination and discharge of this Indenture and the earlier removal or resignation of the Trustee. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. Upon an Event of Default, and only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of and premium, if any, and interest on any Bond, upon the trust estate for the foregoing fees, charges and expenses incurred by it. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration 39 4861-0176-1821v5/022042-0044 under any federal or state bankruptcy, insolvency, arrangement, moratoriu m, reorganization or other debtor relief law. Section 8.04 Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, order, judgment, decree, bond, certificate, consent, notice, request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereo f, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Owners of the Bonds pursuant to this Indenture, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Authority or the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith. The Trustee shall not be responsible for the sufficiency of the Bonds or the Lease Agreement, or of the assignment made to it by the Assignment Agreement, or for statements made in any preliminary or final official statement relating to the Bonds, or of the title to the Property. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the City or a Written Certificate of the Authority, and such certificate shall be full warrant to the Truste e for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable. The Trustee may buy, sell, own, hold and deal in any of the Bonds and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto, The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Authority or the City, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Authority or the City as freely as if it were not the Trustee hereunder. The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Trustee in accordance with the advice of counsel or other professionals retained or consulted by the Trustee concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the T rustee shall in a commercially reasonable manner pursue all remedies of the Trustee against such agent, attorney or receiver. The Trustee shall 40 4861-0176-1821v5/022042-0044 not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own negligence or willful misconduct hereunder. The Trustee shall not be deemed to have knowledge of an event of default unless a responsible officer of the Trustee shall have received actual knowledge thereof. The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Authority or the City is a party and which, in the opinion of the Trustee and its counsel, affects the Bonds or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal amount of Bonds then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action. The Trustee’s rights to immunities and protection from liability hereunder and its rights to payment of its fees and expenses shall survive its resignation or removal and final payment or defeasance of the Bonds. All indemnifications and releases from liability granted herein to the Trustee shall extend to the directors, officers, employees and agents of the Trustee (including its counsel). The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful default. The Trustee shall have no responsibility or liability with respect to any information, statements or recitals in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. The Trustee shall not be accountable for the use or application by the Authority of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any paying agent. Neither the Trustee nor any of its directors, officers, employees, agents or affiliates shall be responsible for nor have any duty to monitor the performance or any action of the City, the Authority, or any of their directors, members, officers, agents, affiliates or employee, nor shall it have any liability in connection with the malfeasance or nonfeasance by such party. The Trustee may assume performance by all such Persons of their respective obligations. The Trustee shall have no enforcement or notification obligations relating to breaches of representations or warranties of any other person. In no event shall the Trustee be responsible or liable for special, indirect, pun itive, incidental or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include but not limited to acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics, quarantine restrictions, or other similar occurrences. 41 4861-0176-1821v5/022042-0044 The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that the Trustee shall have received an incum bency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority or the City elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Authority and the City agree to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including, without limitation, t he risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. In acting or omitting to act pursuant to the Lease Agreement or Ground Lease, the Trustee shall be entitled to all of the rights, immuniti es and indemnities accorded to it under this Indenture and the Lease Agreement, including, but not limited to, this Article VIII. Section 8.05 [Notice to Insurer by Trustee. The Trustee shall notify the Insurer of any failure of the Authority to provide notices, certificates and other information under the transaction documents of which the Trustee has actual or deemed knowledge pursuant to Section 8.04 hereof.] ARTICLE IX MODIFICATION OR AMENDMENTS Section 9.01 Modifications and Amendments Permitted. (a) This Indenture and the rights and obligations of the Authority, the City, the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into with the written consent of the Owners of a majority of the Owners of the Bonds then Outstanding [and the written consent of the Insurer, so long as the Insurer is not in default on any obligation under the Insurance Policy,] which shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment, without the consent of the Owner of each Bond so affected, [or (ii) eliminate the aforesaid consent of the Insurer or reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment,] or (iii) permit the creation of any lien on the Base Rental Payments and other ass ets pledged under this Indenture prior to or on a parity with the lien created by this Indenture or deprive the Owners of the Bonds of the lien created by this Indenture on such Base Rental Payments and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall a pprove the substance thereof. (b) This Indenture and the rights and obligations of the Authority, the City, the Trustee, and the Owners of the Bonds may also be modified or amended from time to time and at any 42 4861-0176-1821v5/022042-0044 time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into without the consent of any Bond Owners but with the prior written consent of the Insurer for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority or the City in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority or the City; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in this Indenture; (iii) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of Article III hereof; (iv) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; (v) to modify, amend or supplement this Indenture in such manner as to cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation by the United States of America; and (vi) in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners hereunder, in the opinion of Bond Counsel filed with the Authority, the City and the Trustee. (c) Promptly after the execution by the Authority, the City and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Authority), by first class mail postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Suppl emental Indenture. (d) No Supplemental Indenture shall modify any of the rights or obligations of the Trustee without its prior written consent. Section 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the City, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. 43 4861-0176-1821v5/022042-0044 Section 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand of the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same interest rate and maturity. Section 9.04 Amendment of Particular Bonds. The provisions of this Article shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner. Section 9.05 [Effect of Insurance Policy. In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Indenture would adversely affect the security for the Series 2022 Bonds or the rights of the Owners, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Insurance Policy.] ARTICLE X DEFEASANCE Section 10.01 Discharge of Indenture. If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated herein and therein, then the Owners of such Bonds shall cease to be entitled to the pledge of the Base Rental Payments and the other assets as provided herein, and all agreements, covenants and other obligations of the Authority and the City to the Owners of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority and the City all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the City all money or securities held by it pursuant hereto which are not required for the payment of the principal of and interest and premium, if any, on such Bonds, Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid and if, at the time of such payment, the Authority and the City shall have kept, performed and observed all of the covenants and promises in such Bonds and in this Indenture required or contemplated to be kept, performed and observed by them on or prior to that time, then this Indenture shall be considered to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien of this Indenture and such lien and all covenants, agreements and other obligations of the Authority and the City hereunder shall cease, terminate become void and be completely discharged as to such Bonds. 44 4861-0176-1821v5/022042-0044 Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of and interest and premium, if any, on the Bonds, to pay to the Owners of Bonds the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the sat isfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture relating to the compensation and indemnity of the Trustee shall remain in effect and shall be binding upon the Trustee, the City and the Authority. Section 10.02 Bonds Deemed To Have Been Paid. If moneys shall have been set aside and held by the Trustee for the payment or redemption of any Bonds and the interest thereon at the maturity or redemption date thereof, such Bonds shall be deemed to have been paid within the meaning and with the effect provided in Section 10.01 hereof. Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in Section 10.01 hereof if (a) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to give, on a date in accordance with the provisions of Section 4.02 hereof, notice of redemption of such Bonds on said redemption date, said notice to be given in accordance with Section 4.02 hereof, (b) there shall have been deposited with the Trustee either (i) money in an amount which shall be sufficient, or (ii) Federal Securities that are not subject to redemption other than at the option of the holder thereof, the interest on and principal of which when paid will provide money which, together with the money, if any deposited with the Tr ustee at the same time, shall, as verified by an independent certified public accountant in a report [(acceptable to the Insurer)] filed with the Authority, the City, [the Insurer] and the Trustee, be sufficient to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Bonds, (c) the Authority shall have delivered or cause to be delivered an (i) escrow agreement [(which shall be acceptable in form and substance to the Insurer, so long as the Insurer is not in default on any obligation under the Insurance Policy)]; and (ii) an opinion of Bond Counsel addressed to the Authority, the City, the Trustee [and the Insurer] to the effect that such Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the independent certified public accountant report referred to above) and (d) in the event such Bonds are not by their terms subj ect to redemption within the next succeeding 60 days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the owners of such Bonds that the deposit required by clause (b) above has been made with the Trustee and that such Bonds, are deemed to have been paid in accordance with this Section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and premium, if any, on such Bonds. [The Insurer shall be provided with final drafts of the documents set forth in Section 10.02(c) hereof not less than five Business Days prior to the funding of the escrow.] [This Indenture shall not be discharged with respect to the Series 2022 Bonds until all Policy Costs and Insurer Reimbursement Amounts and any other amounts due to the Insurer payable pursuant to Section 11.22 hereof have been paid. The obligation to pay such amounts shall expressly survive the payment in full of the Series 2022 Bonds.] 45 4861-0176-1821v5/022042-0044 The Series 2022 Bonds shall be deemed Outstanding under this Indenture unless and until they are in fact paid and retired or the above criteria are met. Section 10.03 Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of this Indenture, to the extent permitted by law, any moneys held by the Trustee in trust for the payment of the principal of, or premium or interest on, any Bonds and remaining unclaimed for two years after the date of deposit of such moneys, shall be repaid to the Authority (without liability for interest) free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee may (at the cost of the Authority) first mail, by first class mail postage prepaid, to the Owners of Bonds which have not yet been paid, at the respective addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. ARTICLE XI MISCELLANEOUS Section 11.01 Benefits of Indenture Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the City, the Trustee, [the Insurer] and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Authority or the City shall be for the sole and exclusive benefit of the Trustee, [the Insurer and] the Owners. Section 11.02 Successor Deemed Included in all References to Predecessor. Whenever the Authority, the City or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are prese ntly vested in the Authority, the City or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Authority, the City or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 11.03 Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Bonds and the amount, payment date, number and date of owning the same may be proved by the Registration Books. 46 4861-0176-1821v5/022042-0044 Any declaration, request or other instrument in writing of the Owner of any Bond shall bind all future Owners of such Bond with respect to anything done or suffered to be done by the Authority, the City or the Trustee in good faith and in accordance therewith. Section 11.04 Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the Authority or the City shall be individually or personally liable for the payment of any moneys, including without limitation, the principal of or interest on the Bonds, but nothing contained herein shall relieve any member, officer or emplo yee of the City or the Authority from the performance of any official duty provided by any applicable provisions of law, by the Lease Agreement or hereby. Section 11.05 Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee may, in lieu of such cancellation and delivery, destroy such Bonds. Section 11.06 Funds and Accounts. Any fund or account required to be established and maintained herein by the Trustee may be established a nd maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund, b ut all such records with respect to all such funds and accounts shall at an times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Bonds and the rights of the Owners. The Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided, however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Indenture. The Trustee may establish such funds and accounts as it deems necessary or appropriate to perform its obligations hereunder. Section 11.07 Article and Section Headings Gender and References. The singular form of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall include correlative words of the other genders. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,” “Sections,” subsections or clauses are to the corresponding Articles, Sections, subsections or c lauses hereof, and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section, subsection or clause thereof. Section 11.08 Entire Agreement; Partial Invalidity. This Indenture and the exhibits hereto set forth the entire agreement and understanding of the parties related to this transaction and supersedes all prior agreements and understandings, oral or written. If any one or more of the agreements, conditions, covenants or terms required herein to be observed or performed by or on the part of the Authority, the City or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void to the extent contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants and terms hereof and shall in no way affect the validity hereof or of the Bonds, and the Owners shall retain all the benefit, protection and security afforded to them under any applicable provisions of law. The Authority, the City and the Trustee hereby declare that they would have 47 4861-0176-1821v5/022042-0044 executed this Indenture, and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Bonds pursuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 11.09 Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; except that, in determining whether the Trustee shall be protected in relying upon any such demand, request, direction, consent or waiver of an Owner, only Bonds which the Trustee actually knows to be owned or held by or for the account of the Authority or the City, or by any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City, shall be disregarded unless all Bonds are so owned or held, in which case such Bonds shall be considered Outstanding for the purpose of such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Section 11.10 Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.03 hereof but without any liability for interest thereon. Section 11.11 Payment on Non-Business Days. In the event any payment is required to be made hereunder on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day with the same effect as if made on such non-Business Day. Section 11.12 California Law. This Indenture shall be construed and governed in accordance with the laws of the State of California. The parties hereby (i) irrevocably submit to the exclusive jurisdiction of any federal or state court sitting in California (ii) waive any objection to laying of venue in any such action or proceeding in such courts, and (iii) waive any objection that such courts are an inconvenient forum or do not have jurisdiction over any party. Section 11.13 Notices. All written notices to be given hereunder shall be given by mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the City: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: City Manager 48 4861-0176-1821v5/022042-0044 If to the Authority: Lake Elsinore Facilities Financing Authority c/o City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Executive Director If to the Trustee: Wilmington Trust, National Association, 650 Town Center Drive, Suite 800 Costa Mesa, California 92626 Attention: Corporate Trust Services [Notices to the Insurer shall be provided to _________________. In each case in which a notice or other communication to the Insurer refers to an event of defau lt, then a copy of such notice or other communication shall also be sent to the attention of the Insurer’s [Deputy General Counsel, Public Finance], and shall be marked to indicate “URGENT MATERIAL ENCLOSED.”] Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender’s receipt of an appropriate answer back or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (d) if given by any other means, upon delivery at the address specified in this Section. Section 11.14 Notice to Rating Agencies. The Trustee shall provide S&P, if the Bonds are then rated by S&P, and Moody’s, if the Bonds are then rated by Moody’s, with prompt notice of any substitution or release of property of which are responsible officer of the Trustee receives actual notice pursuant to Section 9.03 of the Lease Agreement. Section 11.15 Execution in Counterparts. This Indenture may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitut e but one and the same instrument. Section 11.16 [Insurer as Third Party Beneficiary. The Insurer is intended as a third party beneficiary to this Indenture.] Section 11.17 [Impairment of Insurer’s Rights. No contract shall be entered into or any action taken by which the rights of the Insurer to reimbursement from Rental Payments or the Property may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer.] Section 11.18 [Insurer Consideration. The rights granted to the Insurer under the Indenture to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Series 2022 Bonds Owners and such action does not evidence any position of the Insurer, 49 4861-0176-1821v5/022042-0044 affirmative or negative, as to whether the consent of the Series 2022 Bonds Owners or any other person is required in addition to the consent of the Insurer.] Section 11.19 [Amounts Paid by Insurer. Amounts paid by the Insurer under the Insurance Policy and the Reserve Surety Policy shall not be deemed paid for purposes of this Indenture and the Series 2022 Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the City and the Authority in accordance with this Indenture. This Indenture shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for.] Section 11.20 Covenant to Preserve Priority. The Authority covenants and agrees to take such action (including, as applicable, filing of Uniform Commercial Code financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the Base Rental Payments set forth in Section 5.01 under applicable law. Section 11.21 [Subrogation and Survival of Obligations. The Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2022 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy (which subrogation rights shall also include the rights of any such recipients in connection with any Insolvency Proceeding). Each obligation of the Authority and/or the City to the Insurer under this Indenture or any supplement thereto or amendment thereof shall survive discharge or termination of this Indenture or any supplement thereto or amendment thereof.] Section 11.22 [Reimbursement of Fees. The Authority and/or the City shall pay or reimburse the Insurer any and all charges, fees, costs and expenses that the Insurer may reasonably pay or incur in connection with (a) the administration, enforcement, defense or p reservation of any rights or security in this Indenture, the Lease, the Ground Lease or any supplement thereto or amendment thereof, (b) the pursuit of any remedies under this Indenture, the Lease, the Ground Lease or any supplement thereto or amendment thereof or otherwise afforded by law or equity, (c) any amendment, waiver or other action with respect to, or related to, this Indenture, the Lease, the Ground Lease or any supplement thereto or amendment thereof whether or not executed or completed, or (d) any litigation or other dispute in connection with this Indenture, the Lease, the Ground Lease or any supplement thereto or amendment thereof or the transactions contemplated thereby, other than costs resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this Indenture, the Lease, the Ground Lease or any supplement thereto or a mendment thereof.] Section 11.23 [Provision of Information. So long as the Insurer is not in default on any obligation under the Insurance Policy and such default is not continuing, the Insurer shall be provided with the following information by the Authority, the City or Trustee, as the case may be: (a) Annual audited financial statements no later than the February 15 after the end of the City’s Fiscal Year (together with a certification of the City that it is not aware of any default or event of default under this Indenture), and the City’s annual budget within 30 days after the approval thereof together with such other information, data or reports as the Insurer shall reasonably request from time to time; 50 4861-0176-1821v5/022042-0044 (b) Notice of any draw upon the Reserve Fund within two Business Days a fter knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of the Series 2022 Bonds; (c) Notice of any event of default known to the Trustee, the Authority or City within five Business Days after knowledge thereof; (d) Prior notice of the advance refunding or redemption of any of the Series 2022 Bonds, including the principal amount, maturities and CUSIP numbers thereof; (e) Notice of the resignation or removal of the Trustee and the appointment of, and acceptance of duties by, any successor thereto; (f) Notice of the commencement of any Insolvency Proceeding by or against the Authority or the City; (g) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2022 Bonds; (h) A full original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to this Indenture or any supplement thereto or amendment thereof; and (i) All reports, notices and correspondence to be delivered to Owners under the terms of this Indenture and any supplement thereto or amendment thereof.] Section 11.24 Additional Information. [The Insurer shall have the right to receive such additional information as it may reasonably request.] Section 11.25 [Discussion of and Access to Information. The Authority and the City will permit the Insurer to discuss the affairs, finances and accounts of the Authority and the City or any information the Insurer may reasonably request regarding the security for the 2022 Bonds with appropriate officers of the Authority and the City and will use commercially reasonable efforts to enable the Insurer to have access to the facilities, books and records of t he Authority and the City on any Business Day upon reasonable prior notice.] S-1 4861-0176-1821v5/022042-0044 IN WITNESS WHEREOF, the Authority and the City have caused this Indenture to be signed in their respective names by their representative thereunto duly authorized, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and yea r first above written, LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Executive Director ATTEST: Secretary CITY OF LAKE ELSINORE By: City Manager ATTEST: City Clerk S-2 4861-0176-1821v5/022042-0044 WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-1 4861-0176-1821v5/022042-0044 EXHIBIT A FORM OF SERIES 2022A BOND No. ____ $___________ UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BOND SERIES 2022A INTEREST RATE MATURITY DATE DATED DATE CUSIP ______% April 1, 20__ _________, 2022 ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: _________________________ DOLLARS The Lake Elsinore Facilities Financing Authority (the “Authority”), for value received, hereby promises to pay, solely from the Base Rental Payments (as hereinafter defined) or amounts in certain funds and accounts held under the Indenture (as hereinafter defined), to the Registered Owner identified above or registered assigns (the “Registered Owner”); on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the United States of America; and to pay interest thereon at the Rate of Interest identified above in like lawful money from the date hereof payable semiannually on April 1 and October 1 in each year, commencing October 1, 2022 (the “Interest Payment Dates”), until payment of such Principal Amount in full. This Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth calendar day of the month next preceding such Interest Payment Date, whether or not such day is a Business Day, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior to September 15, 2022, in which event it shall bear interest from the Dated Date identified above; provided, however, that if, at the time of authentication of this Bond, interest is in default on this Bond, interest on this Bond shall be payable from the date to which interest hereon has been paid in full, payable on each Interest Payment Date). The Principal Amount hereof is payable upon surrender hereof upon maturity or earlier redemption at the Office of the Trustee (as hereinafter defined). Interest hereon is payabl e by wire or check of Wilmington Trust, National Association, as Trustee (the “Trustee”), mailed by first class mail, postage prepaid, on each Interest Payment Date to the Registered Owner hereof at the address of the Registered A-2 4861-0176-1821v5/022042-0044 Owner shown on the Registration Books at the close of business on the fifteenth calendar day of the month next preceding such Interest Payment Date. “Office of the Trustee” means the principal corporate trust office of the Trustee in Costa Mesa, California, or such other office as may be specified to the Authority and the City of Lake Elsinore (the “City”) by the Trustee in writing, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or the agency of the Trustee at which, at any particular time, its corporate trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing. This Bond is one of a series of a duly authorized issue of bonds issued for the purpose of financing the acquisition, construction and installation of certain public improvements within the City (the “Project”), and is one of the series of bonds designated “Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A” (the “Series 2022 Bonds”) in the aggregate principal amount of $__________. The Series 2022 Bonds are issued pursuant to the Indenture, dated as of June 1, 2022 (the “Indenture”), by and among the Authority, the City and the Trustee, and this reference incorporates the Indenture herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Indenture, additional bonds (“Additional Bonds”), may be issued by the Authority secured by a lien on a parity with the lien under the Indenture securing the Series 2022 Bonds. The Series 2022 Bonds and any Additional Bonds are collectively referred to as the “Bonds.” The Indenture is entered into, and this Bond is issued under, the Marks-Roos Local Bond Pooling Act of 1985 (the “Act”) and the laws of the State of California. Capitalized terms used herein and not defined herein have the meaning assigned thereto in the Indenture. Pursuant to the Indenture, the principal of and interest on the Bonds are payable solely from certain base rental payments (the “Base Rental Payments”) under and pursuant to that certain Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”), by and between the City, as lessee, and the Authority, as lessor, all of which rights to receive such Base Rental Payments have been assigned without recourse by the Authority to the Trustee. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditio ns set forth therein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the Redemption Fund established under the Indenture are pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets. The Series 2022 Bonds are authorized to be issued in the form of fully registered bonds without coupons in denominations of $5,000 or any integral multiple thereof (“Authorized Denominations”). The Series 2022 Bonds shall be subject to redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of any Net Insurance Proceeds received with respect to all or a portion of the Property leased under the Lease Agreement, remaining after payment therefrom of all reasonable expenses incurred in the collecti on thereof, deposited by the Trustee in the Redemption Fund established under the Indenture, at a Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. The Series 2022 Bonds maturing on or after April 1, 20__, shall be subject to optional redemption, in whole or in part, on any date on or after April 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease Agreement, at a A-3 4861-0176-1821v5/022042-0044 Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective owners of any Series 2022 Bonds designated for redemption, at their respective addresses appearing on the Registration Books, at least 20 but not more than 60 days prior to the date fixed for redemption; provided, however, so long as the Bonds are registered in the name of the Nominee, notice shall be given in such manner as complies with the requirements of DTC. Neither the failure to receive any such notice so given, nor any defect therein, shall affect the validity of the proceedings for the redemption of such Series 2022 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. The Redemption Price of the Series 2022 Bonds to be redeemed shall be paid only upon presentation and surrender thereof at the Office of the Trustee. From and after the date fixed for redemption of any Series 2022 Bonds, interest on such Series 2022 Bonds will cease to accrue and become payable. Subject to the limitations and upon payment of the charges, if any, provided in the Indenture, fully registered Series 2022 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount and maturity of fully registered Series 2022 Bonds of other authorized denominations. This Bond is transferable by the Registered Owner hereof, in person or by his duly authorized attorney, but only in the manner, subject to the limitations and upon payment of the charges provided A-4 4861-0176-1821v5/022042-0044 in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully registered Series 2022 Bond or Series 2022 Bonds, in Authorized Denominations, for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Authority, the City and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority, the City and the Trustee shall not be affected by any notice to the contrary. The Indenture and the rights and obligations of the Authority, the City, the owners of the Bonds, [the Insurer] and the Trustee may be modified or amended from time to time and at any time in the manner, to the extent, and upon the terms provided in the Indenture; provided that no such modification or amendment shall (a) extend the fixed maturity of any Bonds, or reduce the principal thereof or the rate of interest thereon, or extend the time of payment, without the consent of the owner of each Bond so affected, [or, (b) eliminate the consent of the Insurer] as set forth in the Indenture or reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or (c) permit the creation of any lien on the Base Rental Payments and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture or deprive the owners of the Bonds of the lien created by the Indenture on such the Base Rental Payments and such other assets (except as expressly provided in the Indenture), without the consent of the Owners of all Bonds then outstanding. The Indenture contains provisions permitting the Authority to make provision for the payment of interest on, and the principal and premium, if any, of any of the Bond so that such Bond s shall no longer be deemed to be outstanding under the terms of the Indenture. All obligations of the Authority under the Indenture shall be special obligations of the Authority, payable solely from Rental Payments and the other assets pledged therefor un der the Indenture; provided, however, that all obligations of the Authority under the Bonds shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor under the Indenture. Neither the fait h and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds. IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name and on its behalf by the facsimile signatures of its Chair and Secretary, all as of the Dated Date identified above. LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Chair Attest: Secretary A-5 4861-0176-1821v5/022042-0044 [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION] This is one of the Series 2022 Bonds described in the within-mentioned Indenture and registered on the Registration Books. Date: _____________________ WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory A-6 4861-0176-1821v5/022042-0044 [STATEMENT OF INFORMATION] . A-7 4861-0176-1821v5/022042-0044 [FORM OF ASSIGNMENT] For value, received the undersigned hereby sells, assigns and transfers unto ____________________________________________ whose address and social security or other tax identifying number is ______________________, the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) ____________________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: ____________________ Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within pond in every particular without alteration or enlargement or any change whatsoever. Stradling Yocca Carlson & Rauth Draft of 5/3/22 4893-2442-9341v3/022042-0044 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. PRELIMINARY OFFICIAL STATEMENT DATED JUNE __, 2022 Ratings: Standard & Poor’s: “__” (insured) “__” (underlying) See “RATINGS” herein NEW ISSUE – BOOK-ENTRY ONLY In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain coven ants and requirements described in this Official Statement, interest (and original issue discount) on the Series 2022 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series 2022 Bonds is exempt from State of California personal income taxes . See the caption “TAX MATTERS.” $___________* LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A Dated: Date of Delivery Due: April 1, as shown on inside cover The Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A (the “Series 2022 Bonds”) are payable from base rental payments (the “Base Rental Payments”) to be made by the City of Lake Elsinore (the “City”) for the right to use certain real property consisting of the certain City-owned property as further described herein (the “Property”), pursuant to a Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”), by and between the City, as lessee, and the Lake Elsinore Facilities Financing Authority (the “Authority”), as lessor. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS.” The Series 2022 Bonds are being issued to provide funds to (i) finance the acquisition, construction and installation of certain capital improvements owned by the City, (ii) [purchase a municipal bond insurance policy to guarantee payment of the principal of and interest on the Series 2022 Bonds, (iii) purchase a debt service reserve insurance policy for deposit in the Reserve Fund] and (iv) pay the costs incurred in connection with the issuance of the Series 2022 Bonds. The City has covenanted under the Lease Agreement to make all Base Rental Payments provid ed for therein, to include all such payments in its annual budgets, and to make all the necessary annual appropriations for such Base Rental Payments. The City’s obligation to make Base Rental Payments is subject to abatement during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defects in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property. See “RISK FACTORS — Abatements.” The Series 2022 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Interest on the Series 2022 Bonds is payable semiannually on April 1 and October 1 of each year, commencing October 1, 2022. Purchasers will not receive certificates representing their interest in the Series 2022 Bonds. Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and interest and premium, if any, on the Series 2022 Bonds will be paid by Wilmington Trust, National Association, as trustee (the “Trustee”) to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the Beneficial Owners of the Series 2022 Bonds. See “THE SERIES 2022 BONDS—Book-Entry Only System” herein. The Series 2022 Bonds will be issued pursuant to an Indenture, dated as of June 1, 2022 (the “Indenture”) by and among the City, the Authority and Wilmington Trust, National Association, as trustee. The Series 2022 Bonds and any additional bonds issued pursuant to the Indenture (“Additional Bonds”) are collectively referred to as the “Bonds.” The Series 2022 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity, as described herein. See “THE SERIES 2022 BONDS—Redemption” herein. The scheduled payment of the principal of and interest on the Series 2022 Bonds when due will be guaranteed under an insurance policy to be issu ed concurrently with the delivery of the Series 2022 Bonds by [_____________________]. [INSURER LOGO] The Series 2022 Bonds are special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any po litical subdivision thereof, is pledged to the payment of the Series 2022 Bonds. The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restri ction, and does not constitute an obligation for which the City or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any form of taxation. The Authority has no power to tax. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Series 2022 Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval as to their validity by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain other conditions. The Underwriter is being represented by its counsel, Kutak Rock LLP, Irvine, California. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel to the City, for the Trustee by its counsel and for the Insurer by its counsel. It is anticipated that the Series 2022 Bonds will be available for delivery through the facilities of The Depository Trust Company on or about June __, 2022. [STIFEL LOGO] Dated: June __, 2022 * Preliminary, subject to change. 4893-2442-9341v3/022042-0044 $____________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A MATURITY SCHEDULE BASE CUSIP†: 509627 Maturity Date (April 1) Principal Amount Interest Rate Yield Price CUSIP† $_________ ______% Term Bond due April 1, 20__, Yield _____ %, Price _____% CUSIP: 509627 ___ $_________ ______% Term Bond due April 1, 20__, Yield _____ %, Price _____% CUSIP: 509627 ___ c Priced to the optional redemption date of April 1, 20__, at par. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright © 2022 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the City, Authority and the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Series 2022 Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authorit y. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall ther e be any sale of the Series 2022 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Series 2022 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expr essly so described herein, are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or co mpleteness of such information. This Official Statement and the information contained herein are subject to completion or amendment without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implicatio n that there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof. The Series 2022 Bonds may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Thi s Official Statement is being submitted in connection with the sale of the Series 2022 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents an d laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements a re generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” “intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption and “RI SK FACTORS” and in Appendix A. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. IN CONNECTION WITH THE OFFERING OF THE SERIES 2022 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2022 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2022 BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THE SERIES 2022 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. [___makes no representation regarding the Series 2022 Bonds or the advisability of investing in the Series 2022 Bonds. In addition, ___ has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding ___ supplied by ___ and presented under the heading “BOND INSURANCE.”] The City maintains a website; however, information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Series 2022 Bonds. 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 CITY OF LAKE ELSINORE COUNTY OF RIVERSIDE, CALIFORNIA CITY COUNCIL Timothy J. Sheridan, Mayor Natasha Johnson, Mayor Pro-Tem Robert E. Magee, Councilmember Steve Manos, Councilmember Brian Tisdale, Councilmember LAKE ELSINORE FACILITIES FINANCING AUTHORITY Timothy J. Sheridan, Chair Natasha Johnson, Vice Chair Robert E. Magee, Board Member Steve Manos, Board Member Brian Tisdale, Board Member CITY ADMINISTRATORS Jason Simpson, City Manager and Authority Executive Director Shannon Buckley, Assistant City Manager and Authority Treasurer CITY ATTORNEY AND AUTHORITY COUNSEL Leibold, McClendon, & Mann Irvine, California BOND AND DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California MUNICIPAL ADVISOR Urban Futures, Inc. Tustin, California TRUSTEE Wilmington Trust, National Association Costa Mesa, California TABLE OF CONTENTS Page i 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 INTRODUCTION ................................................................................................................................................ 1 THE SERIES 2022 BONDS ................................................................................................................................. 3 General .............................................................................................................................................................. 3 Registration, Transfers and Exchanges ............................................................................................................. 4 Redemption ....................................................................................................................................................... 4 Book-Entry Only System .................................................................................................................................. 6 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS ............................................. 6 Pledge of Revenues ........................................................................................................................................... 6 Base Rental Payments ....................................................................................................................................... 7 Additional Rental Payments ............................................................................................................................. 8 Abatement ......................................................................................................................................................... 8 Additional Bonds .............................................................................................................................................. 9 Substitution, Addition and Removal of Property .............................................................................................. 9 Action on Default............................................................................................................................................ 10 Reserve Fund .................................................................................................................................................. 10 Insurance ......................................................................................................................................................... 11 BOND INSURANCE ......................................................................................................................................... 11 SOURCES AND USES OF FUNDS .................................................................................................................. 12 BASE RENTAL PAYMENT SCHEDULE ....................................................................................................... 13 THE 2022 PROJECT .......................................................................................................................................... 14 THE PROPERTY ............................................................................................................................................... 14 THE AUTHORITY ............................................................................................................................................ 15 Organization and Membership ........................................................................................................................ 15 Powers............................................................................................................................................................. 15 THE CITY .......................................................................................................................................................... 15 RISK FACTORS ................................................................................................................................................ 16 General Considerations – Security for the Series 2022 Bonds ....................................................................... 16 Abatements ..................................................................................................................................................... 16 Natural Disasters ............................................................................................................................................. 17 Hazardous Substances ..................................................................................................................................... 18 Cybersecurity .................................................................................................................................................. 18 Impacts of Coronavirus on City ...................................................................................................................... 18 Substitution, Addition and Removal of Property; Additional Bonds .............................................................. 19 No Limitation on Incurring Additional Obligations ....................................................................................... 19 Limited Recourse on Default; No Acceleration of Base Rental ..................................................................... 19 Possible Insufficiency of Insurance Proceeds ................................................................................................. 20 Limitations on Remedies Available; Bankruptcy ........................................................................................... 20 Loss of Tax Exemption ................................................................................................................................... 21 No Liability of Authority to the Owners ......................................................................................................... 21 Risks Associated with Bond Insurance ........................................................................................................... 21 Dependence on State for Certain Revenues .................................................................................................... 22 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ............ 23 Article XIIIA of the State Constitution ........................................................................................................... 23 Legislation Implementing Article XIIIA ........................................................................................................ 23 Article XIIIB of the State Constitution ........................................................................................................... 24 Articles XIIIC and XIIID of the State Constitution ........................................................................................ 24 Proposition 62 ................................................................................................................................................. 25 ii 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 Proposition 1A ................................................................................................................................................ 26 Proposition 22 ................................................................................................................................................. 26 Proposition 26 ................................................................................................................................................. 26 Possible Future Initiatives ............................................................................................................................... 27 TAX MATTERS................................................................................................................................................. 27 CERTAIN LEGAL MATTERS ......................................................................................................................... 29 ABSENCE OF LITIGATION ............................................................................................................................ 29 UNDERWRITING ............................................................................................................................................. 29 RATINGS ........................................................................................................................................................... 30 MUNICIPAL ADVISOR ................................................................................................................................... 30 CONTINUING DISCLOSURE .......................................................................................................................... 30 FINANCIAL STATEMENTS OF THE CITY ................................................................................................... 31 MISCELLANEOUS ........................................................................................................................................... 31 General .............................................................................................................................................................. 1 Government and Administration ....................................................................................................................... 1 Risk Management ............................................................................................................................................. 2 CITY FINANCIAL INFORMATION .................................................................................................................. 3 General .............................................................................................................................................................. 3 Accounting and Financial Reporting ................................................................................................................ 3 Budget Procedure, Current Budget and Historical Budget Information ........................................................... 4 Impacts of COVID-19 ...................................................................................................................................... 6 Comparative Change in Fund Balance of the City General Fund ..................................................................... 8 Comparative General Fund Balance Sheets of the City .................................................................................... 9 Property Taxes .................................................................................................................................................. 9 Sales Taxes ..................................................................................................................................................... 12 Services ........................................................................................................................................................... 13 Tax Revenues by Source ................................................................................................................................. 13 Indebtedness ................................................................................................................................................... 13 Lake Management Expenses........................................................................................................................... 15 Launch Pointe ................................................................................................................................................. 16 Retirement Contributions ................................................................................................................................ 17 Other Post-Employment Benefits ................................................................................................................... 24 City Investment Policy .................................................................................................................................... 27 APPENDIX A THE CITY ......................................................................................................................... A-1 APPENDIX B SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS ........................................... B-1 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021 .................................................................................................... C-1 APPENDIX D PROPOSED FORM OF BOND COUNSEL OPINION .................................................... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ............................................ E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM .....................................................................................F-1 APPENDIX G SUPPLEMENTAL INFORMATION – THE CITY OF LAKE ELSINORE .................... G-1 APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY ............................................. H-1 1 4893-2442-9341v3/022042-0044 OFFICIAL STATEMENT $_________* LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A INTRODUCTION This Official Statement (which includes the cover page and the appendices hereto) (the “Official Statement”), provides certain information concerning the sale and delivery of $________* aggregate principal amount of Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A (the “Series 2022 Bonds”). The net proceeds of the sale of the Series 2022 Bonds will be used to (i) finance the acquisition, construction and installation of certain capital improvements owned by the City, (ii) [purchase a municipal bond insurance policy to guarantee payment of the principal of and interest on the Series 2022 Bonds as further described under the caption “BOND INSURANCE,” (iii) purchase a debt service reserve insurance policy (the “Reserve Surety Policy”) for deposit in the Reserve Fund, as further described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS—Reserve Fund”] and (iv) pay the costs incurred in connection with the issuance of the Series 2022 Bonds. The Series 2022 Bonds are equally and ratably payable from base rental payments (the “Base Rental Payments”) to be made by the City of Lake Elsinore (the “City”) for the right to use certain City-owned property, as further described herein (collectively, the “Property”), pursuant to a Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”), between the City, as lessee, and the Lake Elsinore Facilities Financing Authority (the “Authority”), as lessor. See “THE PROPERTY.” The Series 2022 Bonds will be issued pursuant to an Indenture, dated as of June 1, 2022 (the “Indenture”), by and among the Authority, the City and the Trustee. Pursuant to the Indenture, the Authority may issue additional bonds (the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2022 Bonds (the Series 2022 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”). Pursuant to a Ground Lease, dated as of June 1, 2022 (the “Ground Lease”), by and between the City and the Authority, the City has leased the Property to the Authority. The Authority has subleased the Property to the City under the Lease Agreement. The Lease Agreement obligates the City to make Base Rental Payments to the Authority. The Trustee and the Authority have entered into an Assignment Agreement, dated as of June 1, 2022, pursuant to which the Authority has assigned to the Trustee for the benefit of the Bond Owners substantially all of the Authority’s right, title and interest in and to the Ground Lease and the Lease Agreement, including its right to receive the Base Rental Payments due under the Lease Agreement and to enforce any remedies in the event of a default by the City. The City will covenant under the Lease Agreement to take such action as may be necessary to include all Rental Payments, which are comprised of Base Rental Payments and Additional Rental Payments (which include taxes and assessments affecting the Property, administrative costs of the Authority relating to the Property, fees and expenses of the Trustee, amounts payable to the Insurer (as defined herein) pursuant to the Indenture that are not payable from Base Rental Payments, and other amounts payable under the Lease * Preliminary, subject to change. 2 4893-2442-9341v3/022042-0044 Agreement), due under the Lease Agreement in its annual budgets and to make the necessary annual appropriations therefor, subject to abatement as described herein. Base Rental Payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City’s right to use and occupy the Property or any portion thereof. See “RISK FACTORS—Abatements.” Abatement of Base Rental Payments under the Lease Agreement, to the extent that payment is not made from alternative sources as set forth below, would result in all Bond Owners receiving less than the full amount of principal of and interest on the Bonds. To the extent that proceeds of insurance are available, Base Rental Payments (or a portion thereof) may be made during periods of abatement. See “RISK FACTORS—Abatements” and Appendix B — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” [Payment of the principal of and interest on the Series 2022 Bonds will be insured by a municipal bond insurance policy (the “Policy”) to be issued by __________ (“___” or the “Insurer”) concurrently with the issuance of the Series 2022 Bonds. See the caption “BOND INSURANCE.” A specimen of the Policy is set forth in Appendix H.] THE SERIES 2022 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA (THE “STATE”), OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2022 BONDS. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY, THE STATE OR ANY POLITICAL S UBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. The City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission certain annual financial information and operating data and, in a timely manner, notice of certain listed events. These covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5). See “CONTINUING DISCLOSURE” herein for a description of the specific nature of the annual report and notices of listed events and a summary description of the terms of the disclosure agreement pursuant to which such reports are to be made. The Series 2022 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Interest on the Series 2022 Bonds is payable semiannually on April 1 and October 1 of each year, commencing October 1, 2022. Purchasers will not receive certificates representing their interest in the Series 2022 Bonds. Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and interest on the Series 2022 Bonds will be paid by Wilmington Trust, National Association, as trustee (the “Trustee”) to DTC for subsequent disbursement to DTC Participants which are obligated to remit such payments to the Beneficial Owners of the Series 2022 Bonds. See “THE SERIES 2022 BONDS—Book-Entry Only System” herein. The Series 2022 Bonds are subject to redemption prior to maturity as described herein. See “THE SERIES 2022 BONDS—Redemption.” Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee with respect to the Series 2022 Bonds. The Series 2022 Bonds will be issued subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and 3 4893-2442-9341v3/022042-0044 certain other conditions. The Underwriter is being represented by its counsel, Kutak Rock LLP, Irvine, California. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel to the City, and for the Trustee by its counsel. The City’s audited financial statements for the fiscal year ended June 30, 2021 included as Appendix C hereto have been audited by Lance, Soll & Lunghard, LLP, certified public accountants, Brea, California (the “Auditor”). See Appendix C — “AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021” herein. The Auditor has not undertaken to update the audited financial statements of the City or its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated December 29, 2021. Certain events could affect the ability of the City to make the Base Rental Payments when due. See “RISK FACTORS” for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Series 2022 Bonds. The presentation of information, including tables of receipt of revenues, is intended to show recent historical information and, except for the projected results for Fiscal Year 2022 and the budget discussion for Fiscal Year 2023, is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. The summaries or references to the Indenture, the Lease Agreement, the Ground Lease, the Assignment Agreement and other documents, agreements and statutes referred to herein, and the description of the Series 2022 Bonds included in this Official Statement, do not purport to be comprehensive or definitive, and such summaries, references and descriptions are qualified in their entireties by reference to each such document or statute. All capitalized terms used in this Official Statement (unless otherwise defined herein) which are defined in the Indenture or the Lease Agreement shall have the meanings set forth therein, some of which are summarized in Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS.” THE SERIES 2022 BONDS General The Series 2022 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Series 2022 Bonds will be dated as of and bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the dated date thereof at the rates set forth on the inside cover page hereof. Interest on the Series 2022 Bonds will be paid semiannually on April 1 and October 1 (each, an “Interest Payment Date”) of each year, commencing October 1, 2022. Interest on the Series 2022 Bonds will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2022 Bond is authenticated on or before an Interest Payment Date and after the close of business the fifteenth day of the month next preceding such Interest Payment Date (the “Record Date”), in which event it will bear interest from such Interest Payment Date, (ii) a Series 2022 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the dated date thereof, or (iii) interest on any Series 2022 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest will be paid in lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership of the Series 2022 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series 2022 Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. 4 4893-2442-9341v3/022042-0044 The principal and premium, if any, of the Series 2022 Bonds will be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee. The Series 2022 Bonds will be subject to optional, mandatory sinking fund and extraordinary redemption as set forth herein. Registration, Transfers and Exchanges The Series 2022 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. as nominee of DTC, and will be available to actual purchasers of the Series 2022 Bonds (the “Beneficial Owners”) in the denominations set forth above, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants (as defined in Appendix F) as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Series 2022 Bonds. See “THE SERIES 2022 BONDS—Book-Entry Only System.” Redemption Optional Redemption. The Series 2022 Bonds maturing on or after April 1, 20__ shall be subject to optional redemption, in whole or in part, on any date on or after April 1, 20__, in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease Agreement, at a Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Extraordinary Redemption from Net Insurance Proceeds. The Series 2022 Bonds are subject to redemption, in whole or in part, on any date, in denominations of $5,000 or any integral multiple thereof, from and to the extent of any Net Insurance Proceeds received with respect to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to the Indenture, at a Redemption Price equal to the principal amount of the Series 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Mandatory Sinking Fund Redemption. The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed The Series 2022 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: 5 4893-2442-9341v3/022042-0044 Sinking Fund Redemption Date (April 1) Principal Amount To Be Redeemed Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Authority, (b) with respect to any redemption from and to the extent of any Net Insurance Proceeds and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable [approved in writing by the Insurer (so long as the Insurer has not defaulted on any obligation under the Policy)], and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series within a maturity in any manner which the Trustee in its sole discretion deems appropriate and fair. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Bonds which may be separately redeemed. Notice of Redemption. At least 20 but not more than 60 days prior to the date fixed for redemption, the Trustee on behalf and at the expense of the Authority will mail (by first class mail) notice of any redemption to the respective Owners of any Series 2022 Bonds designated for redemption at their respective addresses appearing on the Registration Books, provided, however, so long as the Series 2022 Bonds are registered in the name of the Nominee, notice shall be given in such manner as complies with the requirements of DTC. Such notice will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, the Series 2022 Bond numbers and the maturity or maturities (except in the event of redemption of all of the Series 2022 Bonds of such maturity or maturities in whole) of the Series 2022 Bonds to be redeemed, and will require that such Series 2022 Bonds be then surrendered at the principal corporate trust office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Series 2022 Bonds will not accrue from and after the date fixed for redemption. Such notice may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption date to redeem the Series 2022 Bonds so called for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Series 2022 Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. Partial Redemption of Series 2022 Bonds. Upon surrender of any Series 2022 Bonds redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Series 2022 Bond or Series 2022 Bonds in authorized denominations equal in aggregate principal amount representing the unredeemed portion of the Series 2022 Bonds surrendered. Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the Redemption Fund, the Series 2022 Bonds will become due and payable on said date, and, upon presentation and surrender thereof at the principal corporate trust office of the Trustee, said Series 2022 Bonds will be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date. If, on said date fixed for redemption, moneys for the Redemption Price of all the Series 2022 Bonds to be redeemed, together with interest to said date, will be held by the Trustee so as to be available therefor on 6 4893-2442-9341v3/022042-0044 such date, and, if notice of redemption thereof has been mailed as aforesaid and not canceled, then, from and after said date, interest on said Series 2022 Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Series 2022 Bonds will be held in trust for the account of the Owners of the Series 2022 Bonds so to be redeemed without liability to such Owners for interest thereon. All Series 2022 Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of the Indenture will be canceled upon surrender thereof and destroyed. Book-Entry Only System General. DTC will act as securities depository for the Series 2022 Bonds. The Series 2022 Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Series 2022 Bond will be issued for each maturity of the Series 2022 Bonds, each in the initial aggregate principal amount of such maturity, and will be deposited with DTC. See Appendix F — “BOOK-ENTRY ONLY SYSTEM.” Transfer and Exchange of Series 2022 Bonds. The following provisions regarding the exchange and transfer of the Series 2022 Bonds apply only during any period in which the Series 2022 Bonds are not subject to DTC’s book- entry system. While the Series 2022 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. Any Series 2022 Bond may, in accordance with its terms, be transferred upon the books required to be kept by the Trustee pursuant to the provisions of the Indenture by the Person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Series 2022 Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Series 2022 Bond or Series 2022 Bonds will be surrendered for transfer, the Authority will execute and the Trustee will authenticate and will deliver a new Series 2022 Bond or Series 2022 Bonds in a like aggregate principal amount, in any Authorized Denomination. The Trustee will require the Series 2022 Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The Series 2022 Bonds may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Series 2022 Bonds of other authorized denominations. The Trustee will require the payment by the Series 2022 Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee is not obligated to make any transfer or exchange of Series 2022 Bonds during the period established by the Trustee for the selection of Series 2022 Bonds for redemption, or with respect to any Series 2022 Bonds selected for redemption. SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS Pledge of Revenues The Series 2022 Bonds are equally and ratably payable from and secured by Base Rental Payments and certain amounts on deposit in the funds and accounts established under the Indenture. Base Rental Payments will be paid by the City from any and all legally available funds. See, “THE CITY,” “FINANCIAL INFORMATION” and “RISK FACTORS.” The City has covenanted in the Lease Agreement to take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease Agreement in its annual budgets and to make the necessary annual appropriations therefor. The Authority, pursuant to the Assignment Agreement, will assign to the Trustee for the benefit of the Series 2022 Bond Owners all of the Authority’s right, title and interest in and to the Ground Lease and the 7 4893-2442-9341v3/022042-0044 Lease Agreement, including, without limitation, its right to receive Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided that, the Authority will retain the rights to indemnification and to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City will pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See “—Base Rental Payments” below. Pursuant to the Indenture, the Authority may issue Additional Bonds payable from the Base Rental Payments on a parity with the Series 2022 Bonds. See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—Additional Bonds.” Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the Redemption Fund are pledged by the Authority pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets. THE SERIES 2022 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2022 BONDS. THE AUTHORITY HAS NO TAXING POWER. Base Rental Payments Rental Payments, including Base Rental Payments, will be paid by the City to the Authority for and in consideration of the right to use and occupy the Property and in consideration of the continued right to the quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid. Each Base Rental Payment will be deposited with the Trustee no later than the 15th day of the month next preceding each Interest Payment Date (the “Base Rental Deposit Date”) on which such Base Rental Payment is due. All Base Rental Payments will be paid directly by the City to the Trustee, and if received by the Authority at any time will be transferred by the Authority to the Trustee within one Business Day after the receipt thereof. All Base Rental Payments received by the Trustee will be deposited by the Trustee in the Base Rental Payment Fund. Pursuant to the Indenture, on the Business Day immediately preceding each Interest Payment Date and on the Business Day immediately preceding each Principal Payment Date, the Trustee will transfer amounts in the Base Rental Payment Fund as are necessary to the Interest Fund and the Principal Fund to provide for the payment of the interest on and principal of the Series 2022 Bonds. Scheduled Base Rental Payments relating to the Series 2022 Bonds are set forth below under the heading “BASE RENTAL PAYMENT SCHEDULE.” THE OBLIGATION OF THE CITY TO MAKE THE BASE REN TAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. 8 4893-2442-9341v3/022042-0044 Additional Rental Payments For the right to use and occupy the Property, the Lease Agreement requires the City to pay, as Additional Rental Payments thereunder, in addition to the Base Rental Payments, such amounts as shall be required for the payment of the following: (i) All taxes and assessments of any type or nature charged to the Authority or the City or affecting the Property or the respective interests or estates of the Authority or the City therein. (ii) All reasonable administrative costs of the Authority relating to the Property including, but without limiting the generality of the foregoing, salaries, wages, fees and expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture, fees of auditors, accountants, attorneys or engineers, and all other necessary and reasonable administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Indenture or the Lease Agreement or to defend the Authority and its members, officers, agents and employees. (iii) Insurance premiums for all insurance required pursuant to the Lease Agreement. (iv) Any amounts with respect to the Lease Agreement or the Bonds required to be rebated to the federal government in accordance with section 148(f) of the Internal Revenue Code of 1986, as amended. (v) [All amounts payable to the Insurer pursuant to the Indenture not payable from Base Rental Payments;] and (vi) All other payments required to be paid by the City under the provisions of the Lease Agreement or the Indenture. Amounts constituting Additional Rental Payments payable under the Lease Agreement will be paid by the City directly to the person or persons to whom such amounts are payable. The City will pay all such amounts when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days after notice in writing from the Trustee to the City stating the amount of Additional Rental Payments then due and payable and the purpose thereof. Abatement Base Rental Payments and Additional Rental Payments are paid by the City in each Rental Period for and in consideration of the right to use and occupy the Property. Except as otherwise specifically provided in the Lease Agreement, during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property, Rental Payments are subject to abatement proportionately, and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other rights to terminate the Lease Agreement by virtue of any such interference, and the Lease Agreement will continue in full force and effect. The amount of such abatement will be agreed upon by the City and the Authority; provided, however, that the Rental Payments due for any Rental Period may not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. Any such abatement will continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed; and the term of the Lease Agreement will be extended as provided in the Lease Agreement, except that the term will in no event be extended ten years beyond the stated termination date of the Lease Agreement. The Trustee cannot terminate the Lease 9 4893-2442-9341v3/022042-0044 Agreement in the event of such substantial interference. Abatement of Base Rental Payments and Additional Rental Payments is not an event of default under the Lease Agreement and does not permit the Trustee to take any action or avail itself of any remedy against the City. See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Rental Abatement.” Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental Payments due under the Lease Agreement in any of the funds and accounts established under the Indenture (including as a result of the availability of insurance proceeds), such Rental Payments will not be abated as provided above but, rather, will be payable by the City as a special obligation payable solely from said funds and accounts. See “RISK FACTORS—Abatements” and Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS.” Additional Bonds The Authority may at any time issue one or more Series of Additional Bonds payable from Base Rental Payments on a parity with all other Bonds issued under the Indenture, subject to, among others, the following conditions: (a) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; (b) The City shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; and (c) The Ground Lease shall have been amended, to the extent necessary, and the Lease Agreement shall have been amended so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times and in such manner as may be necessary to provide for the payment of the principal of and interest on such Additional Bonds; provided, however, that no such amendment shall be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith (evidence of the satisfaction of such condition shall be made by a Written Certificate of the City). Notwithstanding satisfaction of the other conditions to the issuance of Additional Bonds set forth in the Indenture, no such issuance may occur if (1) an event of default (within the meaning of the Lease Agreement) (or any event which, once all notice or grace periods have passed, would constitute such event of default) exists unless such event of default shall be cured upon such execution or issuance or (2) the Reserve Fund is not fully funded at the Reserve Requirement. See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—Additional Bonds.” Substitution, Addition and Removal of Property The Authority and the City may amend the Lease Agreement to substitute alternate real property for any portion of the Property to add additional real property or to release a portion of the Property from the Lease Agreement, [with the written consent of the Insurer (so long as the Insurer is not in default on any obligation under the Policy) and] upon compliance with all of the conditions set forth in the Lease Agreement and described below. After a substitution or release, the portion of the Property for which the substitution or release has been effected will be released from the leasehold encumbrance of the Lease Agreement. 10 4893-2442-9341v3/022042-0044 The Lease Agreement provides that there will be no reduction in or abatement of the Base Rental Payments due from the City thereunder as a result of such substitution or release. Any such substitution or release is subject to the following specific conditions precedent to such substitution or release: (a) a certificate of the City that the Property, as constituted after such substitution or release, (i) has an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a useful life in excess of the final maturity of any Outstanding Bonds. (b) the City obtains or causes to be obtained a CLTA or ALTA title insurance policy or policies with respect to any substituted property in an amount at least equal to the aggregate principal amount of any Outstanding Bonds of the type and with the endorsements described in the Lease Agreement; (c) the City provides the Trustee with an opinion of counsel to the effect that such substitution or release will not, in and of itself, cause the interest on the Bonds issued on a tax-exempt basis to be included in gross income for federal income tax purposes; (d) the City, the Authority and the Trustee execute, and the City causes to be recorded with the Riverside County Recorder, any document necessary to reconvey to the City the portion of the Property being released and to include any substituted real property in the description of the Property contained in the Lease Agreement and in the Ground Lease; and (e) the City provides notice of such substitution to each rating agency then rating the Bonds. See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Substitution or Release of the Property.” Action on Default Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis, and will have the right to re-enter and re-let the Property. In the event such re-letting occurs, the City would be liable for any resulting deficiency in Base Rental Payments. Base Rental Payments may not be accelerated upon a default under the Lease Agreement. See “RISK FACTORS—Limited Recourse on Default; No Acceleration of Base Rental.” For purposes of certain actions of Bond Owners under the Indenture and the Lease Agreement, such as certain consents and amendments and the direction of remedies following default, Series 2022 Bond Owners do not act alone and may not control such matters to the extent such matters are not supported by the requisite number of the Owners of all Bonds and Additional Bonds, if any. For a description of the events of default and permitted remedies of the Trustee (as assignee of the Authority) contained in the Lease Agreement and the Indenture, see Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Default” and “—THE INDENTURE—Events of Default,” “—Other Remedies of the Trustee,” and “—Limitation on Suits.” Reserve Fund The Indenture establishes a Reserve Fund and a Series 2022 Bonds Account therein, which is required to be maintained in an amount equal to $________ (the “Reserve Fund Requirement”). Moneys in the Series 2022 Bonds Account of the Reserve Fund will be held in trust as a reserve for the payment when due of all debt service payments on the Series 2022 Bonds. [The City will acquire the Reserve Surety Policy from [___] 11 4893-2442-9341v3/022042-0044 in the amount of the Reserve Fund Requirement for deposit into the Series 2022 Bonds Account of the Reserve Fund.] [See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE INDENTURE—Reserve Fund” for further information with respect to the Reserve Surety Policy.] Insurance The Lease Agreement requires the City to maintain or cause to be maintained fire, lightning and special extended coverage insurance (which includes coverage for vandalism and malicious mischief, but need not include coverage for earthquake damage) on all improvements constituting any part of the Property in an amount equal to the greater of 100% of the replacement cost of such improvements or 100% of the outstanding principal amount of the Bonds. The City has an insurance policy which provides replacement cost coverage. All insurance required to be maintained pursuant to the Lease Agreement may be subject to a deductible in an amount not to exceed $500,000. The City’s obligation to maintain the insurance described above (except for rental interruption insurance) may be satisfied by self-insurance, provided such self-insurance complies with the requirements of the Lease Agreement. See Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Insurance.” The Lease Agreement requires the City to maintain rental interruption insurance to cover the Authority’s loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the hazards covered by the casualty insurance described in the preceding paragraph, in an amount sufficient at all times to pay an amount not less than the product of two times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period. The City’s insurance obligations under the Lease Agreement may be satisfied by self-insurance, provided such self- insurance complies with the Lease Agreement. The City is also required to maintain or cause to be maintained, throughout the term of the Lease Agreement, a standard commercial general liability insurance policy or policies in protection of the City, the Authority and their respective members, officers, agents and employees, and workers’ compensation insurance as described in Appendix B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Insurance.” The City is required under the Lease Agreement to provide, at its own expense, one or more CLTA or ALTA title insurance policies for the Property, in the aggregate amount of not less than the initial aggregate principal amount of the Series 2022 Bonds, insuring the fee interest of the City in the Property, the Authority’s leasehold estate in the Property under the Ground Lease, and the City’s subleasehold estate in the Property under the Lease Agreement, subject only to Permitted Encumbrances, and providing that all proceeds thereunder are payable to the Trustee for the benefit of the Bond Owners. BOND INSURANCE [TO COME FROM INSURER] 12 4893-2442-9341v3/022042-0044 SOURCES AND USES OF FUNDS The sources and uses of funds with respect to the Series 2022 Bonds are shown below. Series 2022 Bonds Sources Principal Amount of Series 2022 Bonds $ Net Original Issue Discount Total Sources $ Uses Construction Fund $ 10,000,000.00 Cost of Issuance Fund(1) Total Uses $ (1) Includes legal, municipal advisory, rating agency, Underwriter’s Discount, [premiums for the Policy and the Reserve Surety Policy], printing fees and other miscellaneous costs of issuance. 13 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 BASE RENTAL PAYMENT SCHEDULE Following is the annual schedule of Base Rental Payments due with respect to the Series 2022 Bonds: Year Ending June 30 Series 2022 Bond Principal Series 2022 Bond Interest Total Series 2022 Bond Payments Total 14 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 THE 2022 PROJECT The City expects to apply a portion of the proceeds of the Series 2022 Bonds to finance the construction of new city hall facility for the City is currently planned to be adjacent to the existing city hall office located at 130 South Main Street in the City. The new city hall facility is planned to be a three-story structure of approximately 35,000 square feet to house the City Council chambers, administrative office space, multi-purpose and retail space, outdoor amenities and a connection to the existing city hall building. The City has entered into a contract for architectural work for the new city hall facility. The City has entered into a contract for architectural work for the new city hall facility. The City currently expects to receive construction bids in October 2022, to commence construction in January 2023 and for construction to be complete in June 2024. To the extent any proceeds of the Series 2022 Bonds deposited in the Construction Fund under the Indenture are not applied to the costs of the new city hall facility, the City expects to apply such proceeds to other eligible City projects, which may include park, street and drainage facilities. The Series 2022 Bonds are secured by and payable from Base Rental Payments and certain amounts on deposit in the funds and accounts established under the Indenture and there is no special or direct pledge of revenues generated by the Project to pay debt service on the Series 2022 Bonds. THE PROPERTY The Property consists of the following City-owned properties (the estimated values below do not include any value attributable to the land with respect to each property): Launch Pointe Recreation Destination & RV Park. Launch Pointe Recreation Destination & RV Park (“Launch Pointe Park”) is located at 32040 Riverside Drive, Lake Elsinore, and consists of a campground site of approximately 47 acres. In 2019, the City completed extensive renovations and improvements to Launch Point Park. The costs of such renovations and improvements were financed from approximately $10 million of proceeds of the Authority’s Lease Revenue Bonds, Series 2016A. Completed amenities at Launch Pointe include 205 RV camping spaces, 6 yurts, 8 vintage trailers, a general store, an eatery, pontoon, jet ski and fishing boat rentals, fishing, Community Hall venue with a 5,000 square foot main hall, professional catering kitchen, 45,000 square foot lawn and patio reception areas. The City estimates the value of Launch Pointe Park to be approximately $15.6 million. Swick-Matich Park. Swick-Matich Park is located at 402 Limited Street, Lake Elsinore, and consists of a park facility of approximately 7 acres. Completed amenities located on the park include two baseball fields, bleachers, lighted fields, a concessions stand, a children’s playground, restroom facilities, family and group picnic areas and a parking lot. Swick-Matich Park was completed in 2000. The City estimates the value of Swick-Matich Park to be approximately $1.4 million. Tuscany Hills Park. Tuscany Hills Park is located at 30 Summerhill Drive, Lake Elsinore, and consists of a park facility of approximately 5.7 acres. Completed amenities located on the park include two baseball fields, lighted fields, a children’s playground, restroom facilities, concession stand and shaded family and group picnic areas. Tuscany Hills Park was completed in 2000. The City estimates the value Tuscany Hills Park to be approximately $1.3 million. McVicker Canyon Park. McVicker Canyon Park is located at 29355 McVicker Canyon Road, Lake Elsinore, and consists of a park facility of approximately 26 acres. Completed amenities located on the park include two baseball fields, a skate park, lighted fields , restroom facilities, concession area, shaded family and group picnic areas, barbeques, and separate dog play grass areas for small and large dogs. McVicker Canyon Park was originally completed in 1990 with certain improvements thereon completed in 2000. The City estimates the value of McVicker Canyon Park to be approximately $1.4 million. 15 4893-2442-9341v3/022042-0044 Summerly Community Park. Summerly Community Park is located at 18505 Malaga Road, Lake Elsinore, and consists of a park facility of approximately 8.3 acres. Completed amenities located on the park include two baseball fields, a 10,000 square foot skate park, a basketball court and a mini-multipurpose field and restroom facilities. Summerly Community Park was completed in 2018. The City estimates the value of Summerly Community Park to be approximately $2.2 million. McVicker Park Fire Station No. 85. McVicker Park Fire Station No. 85 (“Fire Station No. 85”) is located at 29405 Grand Avenue, Lake Elsinore and is located adjacent to McVicker Canyon Park. Fire Station No. 85 includes a masonry constructed building of approximately 3,280 square feet and includes apparatus bays for two engines. Fire Station No. 85 was constructed in 2001. The City estimates the value of Fire Station No. 85 to be approximately $1.3 million. Canyon Hills Fire Station No. 94. Canyon Hills Fire Station No. 94 (“Fire Station No. 94”) is located at 22770 Railroad Canyon Road, Lake Elsinore. Fire Station No. 94 is a wood frame two-bay, apparatus building of approximately 6,348 square feet and was constructed in 2004. The City estimates the value of Fire Station No. 94 to be approximately $2.2 million. The City has the right to substitute or release all or portion of the Property subject to certain conditions precedent. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDSSubstitution and Removal of Property.” After the completion of the new city hall facility expected to be financed from proceeds of the Series 2022 Bonds, the City may, but is not obligated to, add the new city hall facility as part of the Property and may release certain of the Property from the Ground Lease and the Lease Agreement. THE AUTHORITY Organization and Membership The Authority was formed pursuant to the provisions of Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”) and the Joint Exercise of Powers Agreement, dated as of September 1, 2016 (the “JPA Agreement”), by and between the City and the Parking Authority of the City of Lake Elsinore (the “Parking Authority”). The Authority was formed by and between the City and the Parking Authority to assist in financing the acquisition, construction, installation and improvement of public facilities and other public capital improvements. The Authority functions as a public entity, separate and apart from the City and the Parking Authority, and is administered by a five-member governing board consisting of the members of the City Council. The City Attorney serves as counsel to the Authority. The Authority has no employees and all staff work is performed by the City or consultants. Powers Under the JPA Agreement, the Authority is empowered to assist in financing the acquisition, construction, installation and improvement of public facilities and other public capital improvements through the issuance of bonds in accordance with the Act. To exercise its powers, the Authority is authorized, in its own name, to do all necessary acts, including but not limited to making and entering into contracts; employing agents and employees; and to sue or be sued in its own name. THE CITY Information with respect to the City, including financial information and certain economic and demographic information is provided in Appendix C — “THE CITY” attached hereto. A copy of the financial statements of the City for the fiscal year ended June 30, 2021 is attached hereto as Appendix C which should 16 4893-2442-9341v3/022042-0044 be read in its entirety. See Appendix C “AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021.” RISK FACTORS The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating the purchase of the Series 2022 Bonds. However, they do not purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in the Series 2022 Bonds. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks. General Considerations – Security for the Series 2022 Bonds The Series 2022 Bonds are special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the Series 2022 Bonds. The Authority has no taxing power. The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation. Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement to pay the Base Rental Payments and Additional Rental Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that it will take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease Agreement in its annual budgets and to make necessary annual appropriations for all such Rental Payments, subject to abatement. The City is currently liable and may become liable on other obligations payable from general revenues. See “CITY FINANCIAL INFORMATION—Indebtedness” in APPENDIX A hereto. The City has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to make Base Rental Payments may be decreased. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other activities before making Base Rental Payments and other payments due under the Lease Agreement. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. However, the City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of the State Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Article XIIIB of the State Constitution.” Abatements In the event of substantial interference with the City’s right to use and occupy any portion of the Property by reason of damage to, or destruction or condemnation of the Property, or any defects in title to the Property, Base Rental Payments will be subject to abatement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS—Abatement.” In the event that all or a portion of the Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the City’s rental interruption insurance will be available in lieu of Base Rental Payments, plus the period for which funds are available from the funds and accounts established under the Indenture, or in the event that casualty insurance proceeds are insufficient to provide for complete repair or replacement of such 17 4893-2442-9341v3/022042-0044 portion of the Property or redemption of the Series 2022 Bonds, there could be insufficient funds to make payments to Owners in full. It is not always possible to predict the circumstances under which abatement of rental may occur. In addition, there is no statute, case or other law specifying how such an abatement of rental should be measured. For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter, it may be that the value of the Property is substantially higher or lower than its value at the time of issuance of the Series 2022 Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the Series 2022 Bonds. If damage, destruction, title defect or eminent domain proceedings with respect to the Property results in abatement of the Base Rental Payments related to such Property and if such abated Base Rental Payments, if any, together with moneys from rental interruption or use and occupancy insurance (in the event of any insured loss due to damage or destruction), and eminent domain proceeds, if any, are insufficient to make all payments of principal and interest with respect to the Series 2022 Bonds during the period that the Property is being replaced, repaired or reconstructed, then all or a portion of such payments of principal and interest may not be made. Under the Lease Agreement and the Indenture, no remedy is available to the Series 2022 Bond Owners for nonpayment under such circumstances. Natural Disasters The occurrence of any natural disaster in the City, including, without limitation, fire, windstorm, drought, earthquake, landslide, mudslide, flood or a rise in sea levels as result of climate change, could have an adverse material impact on the economy within the City, its General Fund and the revenues available for the payment of Base Rental Payments. All jurisdictions in California are subject to the effects of damaging earthquakes. Earthquakes are considered a threat to the City due to the highly active seismic region and the proximity of fault zones, which could influence the entire southern coastal portion of the State. However, no major earthquake has caused substantial damage to the community. An earthquake along one of the faults in the vicinity, either known or unknown, could cause a number of casualties and extensive property damage. The effects of such a quake could be aggravated by aftershocks and secondary effects such as fires, landslides, dam failure, liquefaction and other threats to public health, safety and welfare. The potential direct and indirect consequences of a major earthquake could easily exceed the resources of the City and could require a high level of self-help, coordination and cooperation. No active faults are known to pass through the City. The closest active faults are the Elsinore-Glen Ivy fault (10.1 miles away), the Chino fault (11.1 miles away), and the Newport Inglewood fault (14.4 miles away). The occurrence of surface rupture on these segments would not be expected to produce fault surface rupture within the City. The two known local faults, Aliso and the Cristianitos, are thought to be inactive. An earthquake on either of these two faults would be particularly damaging to residential buildings, especially to those of older wooden or unreinforced masonry construction, or to mobile homes, although the City currently has no mobile homes. In recent years, wildfires have caused extensive damage throughout the State. In some instances, entire neighborhoods have been destroyed. Several of the fires that occurred in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events. Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. Additionally, wildfires increase the risk of mudslides in areas that are surrounded by hillsides because, when wildfires scorch land, they destroy all vegetation on mountains and hillsides. As a result, when heavy rain falls in the winter, there is nothing to stop the rain from penetrating directly into the soil. In addition, waxy compounds in plants and soil that are released during fires create a natural barrier in the soil that prevents 18 4893-2442-9341v3/022042-0044 rain water from seeping deep into the ground. The result is erosion, mudslides and excess water running off the hillsides often causing flash flooding. In general, property damage due to wildfire or mudslides could result in a significant decrease property tax and other revenues received by the City. The occurrence of natural disasters in the City could result in substantial damage to the City and the Property which, in turn, could substantially reduce General Fund revenues and affect the ability of the City to make Base Rental Payments or cause an abatement in Base Rental Payments if the City is unable to use and occupy the Property. The City maintains liability insurance, rental interruption insurance and property casualty insurance for the Property. See the caption “APPENDIX A — THE CITY—Risk Management.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Hazardous Substances The City knows of no existing hazardous substances which require remedial action on or near the Property. However, it is possible such substances do currently or potentially exist and that the City is not aware of them. Owners and operators of real property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect the operations and finances of the City, may result in the reduction in the assessed value of property, and therefor property tax revenue. The City is not aware of any hazardous substances located on the Property. Cybersecurity The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal, private, or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity systems that are in place. However, no assurances can be given that the City’s efforts to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City. Additionally, the City carries cybersecurity insurance. Impacts of Coronavirus on City The COVID-19 pandemic significantly impacted state and local economies. Although the impacts of the pandemic are abating, any resurgence of the pandemic could materially adversely impact the City’s financial condition. See “CITY FINANCIAL INFORMATION―Impacts of COVID-19” in Appendix A hereto. 19 4893-2442-9341v3/022042-0044 Substitution, Addition and Removal of Property; Additional Bonds The Authority and the City may amend the Lease Agreement to substitute alternate real property for any portion of or add additional real property to the Property or to release a portion of the Property from the Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement and summarized below. After a substitution or release, the portion of the Property for which the substitution or release has been effected will be released from the leasehold encumbrance of the Lease Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS―Substitution, Addition and Removal of Property.” Moreover, the Authority may issue Additional Bonds secured by Base Rental Payments which are increased from current levels. Although the Lease Agreement requires, among other things, that the Property, as constituted after such substitution or release, have an annual fair rental value at least equal to the maximum Base Rental Payments payable by the City in any Rental Period, it does not require that such Property have an annual fair rental value equal to the annual fair rental value of the Property at the time of substitution or release. Thus, a portion of the Property could be replaced with less valuable real property, or could be released altogether. Such a replacement or release could have an adverse impact on the security for the Series 2022 Bonds, particularly if an event requiring abatement of Base Rental Payments were to occur subsequent to such substitution or release. See APPENDIX B — “SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS— THE LEASE AGREEMENT—Substitution or Release of the Property.” The Indenture requires, among other things, that upon the issuance of Additional Bonds, the Ground Lease and the Lease Agreement will be amended, to the extent necessary, so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds; provided, however, that no such amendment will be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period is in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith. No Limitation on Incurring Additional Obligations Neither the Lease Agreement nor the Indenture contains any limitations on the ability of the City to enter into other obligations, without the consent of the Owners of the Outstanding Bonds, which may constitute additional obligations payable from its General Fund. To the extent that the City incurs such additional obligations, the City’s funds available to make Base Rental Payments may be decreased. The City is currently liable on other obligations payable from General Fund revenues. See “THE CITY—Indebtedness” above and Appendix C — “AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021.” Limited Recourse on Default; No Acceleration of Base Rental Failure by the City to make Base Rental Payments or other payments required to be made under the Lease Agreement, or failure to observe and perform any other terms, covenants or conditions contained in the Lease Agreement or in the Indenture for a period of 30 days after written notice of such failure and request that it be remedied has been given to the City by the Authority or the Trustee, constitute events of default under the Lease Agreement and permit the Trustee or the Authority to pursue any and all remedies available. In the event of a default, notwithstanding anything in the Lease Agreement or in the Indenture to the contrary, there is no right under any circumstances to accelerate the Base Rental Payments or otherwise declare any Base Rental Payments not then in default to be immediately due and payable, nor do the Authority or the Trustee have any right to re-enter or re-let the Property except as described in the Lease Agreement. The enforcement of any remedies provided in the Lease Agreement and the Indenture could prove both expensive and time consuming. If the City defaults on its obligation to make Base Rental Payments with 20 4893-2442-9341v3/022042-0044 respect to the Property, the Trustee, as assignee of the Authority, may retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis and enforce any other terms or provisions of the Lease Agreement to be kept or performed by the City. Alternatively, the Authority or the Trustee may terminate the Lease Agreement, retake possession of the Property and proceed against the City to recover damages pursuant to the Lease Agreement. Due to the specialized nature of the Property or any property substituted therefor pursuant to the Lease Agreement and the restrictions on its use, no assurance can be given that the Trustee will be able to re-let the Property so as to provide rental income sufficient to make all payments of principal of, interest and premium, if any, on the Series 2022 Bonds when due, and the Trustee is not empowered to sell the Property for the benefit of the Owners of the Series 2022 Bonds. Any suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS” and APPENDIX B — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—THE LEASE AGREEMENT—Defaults.” Possible Insufficiency of Insurance Proceeds The Lease Agreement obligates the City to keep in force various forms of insurance, subject to deductibles, for repair or replacement of the Property in the event of damage, destruction or title defects, subject to certain exceptions. The Authority and the City make no representation as to the ability of any insurer to fulfill its obligations under any insurance policy obtained pursuant to the Lease Agreement, and no assurance can be given as to the adequacy of any such insurance to fund necessary repair or replacement or to pay principal of and interest on the Series 2022 Bonds when due. In addition, certain risks, such as earthquakes and floods, are not required to be insured under the Lease Agreement, and therefore, are not carried by the City. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS— Insurance.” Limitations on Remedies Available; Bankruptcy The enforceability of the rights and remedies of the Owners and the obligations of the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Under Chapter 9 of the United States Bankruptcy Code (Title 11, United States Code) (the “Bankruptcy Code”), which governs bankruptcy proceedings of public entities such as the City, no involuntary bankruptcy petition may be filed against a public entity. However, upon satisfaction of certain prerequisite conditions, a voluntary bankruptcy petition may be filed by the City. The filing of a bankruptcy petition results in a stay against enforcement of remedies under agreements to which the bankrupt entity is a party. A bankruptcy filing by the City could thus limit remedies under the Lease Agreement. A bankruptcy debtor may choose to assume or reject executory contracts and leases, such as the Lease Agreement. In the event of rejection of a lease by debtor lessee, the leased property is returned to the lessor and the lessor has a claim for a limited amount of the resulting damages. Under the Indenture, the Trustee holds a security interest in the Base Rental Payments for the benefit of the Owners of the Bonds, but such security interest arises only when the Base Rental Payments are actually received by the Trustee following payment by the City. The Property is not subject to a security interest, mortgage or any other lien in favor of the Trustee for the benefit of Owners. In the event of a bankruptcy filed 21 4893-2442-9341v3/022042-0044 by the City and the subsequent rejection of the Lease Agreement by the City, the Authority would recover possession of the Property and the Trustee, as assignee of the Authority, would have a claim for damages against the City. The Trustee’s claim would constitute a secured claim only to the extent of Revenues in the possession of the Trustee; the balance of such claim would be unsecured. Bankruptcy proceedings would subject the Owners of the Series 2022 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently entail risks of delay, limitation, or modification of their rights with respect to the Series 2022 Bonds. In a bankruptcy case, the amount recovered by Owners of the Series 2022 Bonds could be affected by whether the Lease Agreement is determined to be a “true lease” or a loan or other financing arrangement (a “financing lease”), and the Owners’ recovery could be reduced in either case. If the Lease Agreement is determined by the bankruptcy court to constitute a “true lease” (rather than a financing lease), the City could choose not to perform under the Lease Agreement by rejecting it and the claim of the Owners could be substantially limited pursuant to Section 365 of the Bankruptcy Code to a fraction of the scheduled amount of Base Rental Payments, and that reduced claim amount could be impaired as an unsecured claim under a plan of adjustment. If a bankruptcy court were to treat the Lease Agreement as a financing lease then, under a plan of adjustment, the priority, payment terms, collateral, payment dates, payment sources, covenants and other terms or provisions of the Lease Agreement and the Series 2022 Bonds may be altered. Such a plan could be confirmed even over the objections of the Trustee and the Owners, and without their consent. For example, the amount of the Base Rental Payments from the City might be substantially reduced because of the power of the bankruptcy court under the Bankruptcy Code to adjust secured claims to the value of their collateral, which, as described above, could be limited to the Base Rental Payments held by the Trustee. In addition there can be a substantial disparity in treatment based on the nature of the Property. Whether the Lease Agreement is characterized by the bankruptcy court as a true lease or a financing lease, either scenario could result in the Owners not receiving the full amount of the principal and interest due on the Series 2022 Bonds. The opinions of counsel, including Bond Counsel, delivered in connection with the issuance of the Series 2022 Bonds will be so qualified. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. Loss of Tax Exemption As discussed under the heading “TAX MATTERS,” the interest on the Series 2022 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of delivery of the Series 2022 Bonds, as a result of acts or omissions of the Authority or the City in violation of their covenants in the Indenture and the Lease Agreement. Should such an event of taxability occur, the Series 2022 Bonds would not be subject to a special redemption and would remain Outstanding until maturity or until redeemed under the redemption provisions contained in the Indenture. No Liability of Authority to the Owners Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the Owners of the Series 2022 Bonds with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease Agreement or the Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture. Risks Associated with Bond Insurance In the event that the Authority defaults in the payment of principal of or interest on the Series 2022 Bonds as a result of the failure of the City to pay the Base Rental Payments when due, the Owners of the 22 4893-2442-9341v3/022042-0044 Series 2022 Bonds will have a claim under the Policy for such payments. See the caption “BOND INSURANCE.” In the event that the Insurer becomes obligated to make payments with respect to the Series 2022 Bonds, no assurance can be given that such event will not adversely affect the market for the Series 2022 Bonds. In the event that the Insurer is unable to make payment of principal of and interest on the Series 2022 Bonds when due under the Policy, the Series 2022 Bonds will be payable solely from Base Rental Payments and amounts held in certain funds and accounts established under the Indenture, as described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS.” The long-term rating on the Series 2022 Bonds is dependent in part on the financial strength of the Insurer and its claims-paying ability. The Insurer’s financial strength and claims-paying ability are predicated upon a number of factors which could change over time. If the long-term ratings of the Insurer are lowered, such event could adversely affect the market for the Series 2022 Bonds. See the caption “RATINGS.” None of the City, the Authority or the Underwriter have made an independent investigation of the claims-paying ability of the Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Insurer is being made by the City, the Authority or the Underwriter in this Official Statement. Therefore, when making an investment decision with respect to the Series 2022 Bonds, potential investors should carefully consider the ability of the City to pay Base Rental Payments, which secure the Series 2022 Bonds, assuming that the Policy is not available for that purpose, and the claims-paying ability of the Insurer through final maturity of the Series 2022 Bonds. So long as the Policy remains in effect and the Insurer is not in default of its obligations thereunder, the Insurer has certain notice, consent and other rights under the Indenture and will have the right to control all remedies for default under the Indenture. The Insurer is not required to obtain the consent of the Owners with respect to the exercise of remedies. Dependence on State for Certain Revenues On January 10, 2022, the Governor released his proposed budget for fiscal year 2022-23. In the Governor’s proposed budget, General Fund revenues and transfers for fiscal year 2022-23 were projected at $195.7 billion; a decrease of $1.0 billion, or 0.5 percent, compared with a revised estimate of $196.7 billion for fiscal year 2021-22. General Fund expenditures for fiscal year 2022-23 are projected at $213.1 billion, an increase of $3.1 billion compared with a revised estimate of $210.0 billion for fiscal year 2021-22. The State acknowledges that risks to the State’s general fund include ongoing challenges related to the COVID-19 pandemic and significant unfunded liabilities of the two main retirement systems managed by state entities, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. The State’s revenues (particularly the personal income tax) can be volatile and correlate to overall economic conditions. There can be no assurances that the State will not face fiscal stress and cash pressures again, or that other changes in the State or national economies will not materially adversely affect the financial condition of the State. The City cannot predict the extent of any budgetary problems the State will encounter in future fiscal years, and it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the impact that State budgets will have on the City’s finances and operations, or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affected by international, national and State economic conditions and other factors over which the City has no control. While the City is not substantially reliant on the State’s finances, a number of the City’s revenues are collected and dispersed by the State (such as sales tax and motor-vehicle license fees) or allocated in accordance with State law (most importantly, property taxes). Therefore, State budget decisions can have an impact on City finances. In the event of a material economic downturn in the State, there can be no assurance 23 4893-2442-9341v3/022042-0044 that any resulting revenue shortfalls to the State will not reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of the State’s efforts to address any such related State financial difficulties. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Proposition 1A” and “—Proposition 22” below. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Principal of and interest on the Series 2022 Bonds are payable from Base Rental Payments made from the City’s General Fund. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS.” Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111, 218, 1A and 22, and certain other provisions of law discussed below are included in this Official Statement to describe the potential effect of these Constitutional and statutory measures on the ability of the City to levy taxes and spend tax proceeds for operating and other purposes. Article XIIIA of the State Constitution On June 6, 1978, State voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service: (i) on indebtedness approved by the voters prior to December 1, 1978; (ii) on bonded indebtedness approved by a two-thirds vote on or after December 1, 1978, for the acquisition or improvement of real property; or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters voting on the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, including a general economic downturn, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by counties and distributed according to a formula among taxing agencies. Increases in assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. All taxable property is shown at full cash value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. 24 4893-2442-9341v3/022042-0044 Article XIIIB of the State Constitution In addition to the limits that Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues that such entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues and the investment proceeds thereof, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized as of October 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each local government’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. The City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB. Articles XIIIC and XIIID of the State Constitution On November 5, 1996, State voters approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the State Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments and property-related fees and charges. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City require a majority vote, and taxes for specific purposes, even if deposited in the City’s General Fund, require a two-thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs, such as hearings and stricter and more individualized benefit requirements and findings. These provisions include, among other things: (i) a prohibition against assessments which exceed the reasonable cost of the proportional 25 4893-2442-9341v3/022042-0044 special benefit conferred on a parcel; (ii) a requirement that assessments must confer a “special benefit,” as defined in Article XIIID, over and above any general benefits conferred; (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party; and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. If the City is unable to continue to collect revenues of this nature, the services and programs funded with these revenues would have to be curtailed and/or the City’s General Fund might have to be used to support them. The City is unable to predict whether or not in the future it will be able to continue all existing services and programs funded by fees, charges and assessments in light of Proposition 218 or, if these services and programs are continued, which amounts (if any) would be used from the City’s General Fund to continue to support such activities. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. This extension of the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional principles relating to the impairments of contracts. Legislation implementing Proposition 218 provides that the initiative power provided for in Proposition 218 “shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights” protected by the United States Constitution. However, no assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City’s General Fund. Although a portion of the City’s General Fund revenues are derived from taxes purported to be governed by Proposition 218, all of such taxes were imposed in accordance with the requirements of Proposition 218. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges which support the City’s General Fund. Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election and: (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax; (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax; (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed; (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA; (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities; and (f) requires that any tax imposed by a local governmental entity on or after July 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988. On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court held that a countywide sales tax of one-half of one percent was a special tax that, under Section 53722 of the Government Code, required a two-thirds voter approval. Because the tax received an affirmative vote of only 54.1%, this special tax was found to be invalid. The decision did not address the question of whether or not it should be applied retroactively. 26 4893-2442-9341v3/022042-0044 Following the California Supreme Court’s decision upholding Proposition 62, several actions were filed challenging taxes imposed by public agencies since the adoption of Proposition 62, which was passed in November 1986. On June 4, 2001, the California Supreme Court released its decision in one of these cases, Howard Jarvis Taxpayers Association v. City of La Habra, et al. In this case, the court held that a public agency’s continued imposition and collection of a tax is an ongoing violation, upon which the statute of limitations period begins anew with each collection. The court also held that, unless another statute or constitutional rule provided differently, the statute of limitations for challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only be made for those taxes received within three years of the date the action is brought. The City has not experienced any substantive adverse financial impact as a result of the passage of Proposition 62. Proposition 1A Proposition 1A was approved by the voters at the November 2, 2004 election. Proposition 1A amended the State Constitution to, among other things, reduce the Legislature’s authority over local government revenue sources by placing restrictions on the State’s access to local governments’ property, sales, and vehicle license fee revenues as of November 3, 2004. Beginning with Fiscal Year 2008-09, the State may borrow up to eight percent of local property tax revenues, but only if the Governor proclaims such action is necessary due to a severe State fiscal hardship, and two–thirds of both houses of the Legislature approves the borrowing. The amount borrowed is required to be paid back within three years. The State also will not be able to borrow from local property tax revenues for more than two fiscal years within a period of 10 fiscal years. In addition, the State cannot reduce the local sales tax rate or restrict the authority of local governments to impose or change the distribution of the statewide local sales tax. Many of the provisions of Proposition 1A have been superseded by Proposition 22 enacted in November 2010 and described below. Proposition 22 On November 2, 2010, the voters of the State approved Proposition 22, known as “The Local Taxpayer, Public Safety, and Transportation Protection Act” (“Proposition 22”). Proposition 22, among other things, broadens the restrictions established by Proposition 1A. While Proposition 1A permits the State to appropriate or borrow local property tax revenues on a temporary basis during times of severe financial hardship, Proposition 22 amends Article XIII of the State Constitution to prohibit the State from appropriating or borrowing local property tax revenues under any circumstances. The State can no longer borrow local property tax revenues on a temporary basis even during times of severe financial hardship. Proposition 22 also prohibits the State from appropriating or borrowing proceeds derived from any tax levied by a local government solely for the local government’s purposes. Furthermore, Proposition 22 restricts the State’s ability to redirect redevelopment agency property tax revenues to school districts and other local governments and limits uses of certain other funds although this provision no longer has any meaningful impact given the statewide dissolution of redevelopment agencies. Proposition 22 is intended to stabilize local government revenue sources by restricting the State government’s control over local revenues. The City cannot predict whether Proposition 22 will have a beneficial effect on the City’s financial condition. Proposition 26 On November 2, 2010, State voters also approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; 27 4893-2442-9341v3/022042-0044 (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City does not believe that Proposition 26 will adversely affect its General Fund revenues. Possible Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 218, 111, 62, 1A, 22 and 26 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City. TAX MATTERS In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Series 2022 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series 2022 Bonds is exempt from State of California personal income tax. The difference between the issue price of a Series 2022 Bond (the first price at which a substantial amount of the Series 2022 Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Series 2022 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to the Beneficial Owner of the Series 2022 Bond before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Beneficial Owner of a Series 2022 Bond will increase the Beneficial Owner’s basis in the applicable Series 2022 Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the Beneficial Owner of a Series 2022 Bond is excluded from the gross income of such Beneficial Owner for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the Beneficial Owner of a Series 2022 Bond is exempt from State of California personal income tax. Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Series 2022 Bonds is based upon certain representations of fact and certifications made by the Authority, the City and others and is subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Series 2022 Bonds to assure that interest (and original issue discount) on the Series 2022 Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue 28 4893-2442-9341v3/022042-0044 discount) on the Series 2022 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2022 Bonds. The Authority and the City will covenant to comply with all such requirements. The amount by which a Beneficial Owner’s original basis for determining loss on sale or exchange in the applicable Series 2022 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner’s basis in the applicable Series 2022 Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a Series 2022 Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series 2022 Bond to the Beneficial Owner. Purchasers of the Series 2022 Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture, the Lease Agreement and the Tax Certificate relating to the Series 2022 Bonds permit certain actions to be taken or to be omitted if a favorable opinion of a bond counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (or original issue discount) on any Series 2022 Bond if any such action is taken or omitted based upon the advice of counsel other than Bond Counsel. Although Bond Counsel will render an opinion that interest (and original issue discount) on the Series 2022 Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the City continue to comply with certain requirements of the Code, the ownership of the Series 2022 Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Series 2022 Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Series 2022 Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Series 2022 Bonds. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Series 2022 Bonds will be selected for audit by the IRS. It is also possible that the market value of the Series 2022 Bonds might be affected as a result of such an audit of the Series 2022 Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Series 2022 Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Series 2022 Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE SERIES 2022 BONDS THERE MIGHT BE FEDERAL, STATE, OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE, OR LOCAL TAX TREATMENT OF THE SERIES 2022 BONDS INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE SERIES 2022 BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE SERIES 2022 BONDS. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE SERIES 2022 BONDS STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE SERIES 2022 BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY 29 4893-2442-9341v3/022042-0044 CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE SERIES 2022 BONDS. The form of Bond Counsel’s proposed opinion with respect to the Series 2022 Bonds is attached hereto in Appendix D. CERTAIN LEGAL MATTERS The validity of the Series 2022 Bonds and certain other legal matters are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel. Stradling Yocca Carlson & Rauth, a Professional Corporation, is also acting as Disclosure Counsel for the City. A complete copy of the proposed form of Bond Counsel opinion is contained in Appendix D hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Bond Counsel and Disclosure Counsel will receive compensation from the City contingent upon the sale and delivery of the Series 2022 Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter on matters unrelated to the Series 2022 Bonds. Certain legal matters will be passed upon for the City and the Authority by Leibold, McClendon & Mann, a Professional Corporation, Irvine, California, for the Underwriter by Kutak Rock LLP, Irvine, California, for the Trustee by its counsel and for the Insurer by its counsel. Counsel to the Underwriter will receive compensation contingent upon that issuance of the Series 2022 Bonds. ABSENCE OF LITIGATION To the best knowledge of the City and the Authority, there is no action, suit or proceeding pending or threatened either restraining or enjoining the execution or delivery of the Series 2022 Bonds, the Lease Agreement or the Indenture, or in any way contesting or affecting the validity of the foregoing or any proceedings of the Authority or the City taken with respect to any of the foregoing. There are a number of lawsuits and claims from time to time pending against the City. In the opinion of the City, and taking into account likely insurance coverage and litigation reserves, there are no lawsuits or claims pending against the City which will materially affect the City’s finances so as to impair its ability to pay Base Rental Payments when due. UNDERWRITING The Series 2022 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”). The Underwriter has agreed to purchase the Series 2022 Bonds at a price of $__________ (being the $__________ aggregate principal amount of the Series 2022 Bonds, less an Underwriter’s discount of $__________, plus/less original issue premium/discount of $_________). The Bond Purchase Agreement relating to the Series 2022 Bonds provides that the Underwriter will purchase all of the Series 2022 Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the successful issuance of the Series 2022 Bonds. The Underwriter has entered into an agreement with its affiliate, Vining-Sparks IBG, LLC for the distribution of certain municipal securities offerings at the original issue price. Pursuant to that distribution agreement, Vining-Sparks may purchase Series 2022 Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Series 2022 Bonds that Vining-Sparks sells. Under certain circumstances, the Underwriter may offer and sell the Series 2022 Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. 30 4893-2442-9341v3/022042-0044 RATINGS S&P Global Ratings (“S&P”) has assigned the Series 2022 Bonds the rating of “__” [based upon the delivery of the Policy by ___ at the time of issuance of the Series 2022 Bonds. S&P has assigned the Series 2022 Bonds the rating of “__” without regard to the delivery of the Policy]. Certain information was supplied by the City to S&P to be considered in evaluating the Series 2022 Bonds (which may include information and material which is not included in this Official Statement). In addition, rating agencies may base their ratings on investigations, studies and assumptions by the rating agencies. The ratings issued reflect only the views of S&P, and any explanation of the significance of such ratings should be obtained from S&P. There is no assurance that any rating will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Other than as provided in the Continuing Disclosure Certificate, the City undertakes no responsibility either to bring to the attention of the owners of any Series 2022 Bonds any downward revision or withdrawal of any ratings obtained or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the ratings obtained may have an adverse effect on the market price of and the ability to trade the Series 2022 Bonds. MUNICIPAL ADVISOR The City has retained Urban Futures, Inc., Tustin, California (the “Municipal Advisor”) as municipal advisor in connection with the sale of the Series 2022 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. CONTINUING DISCLOSURE The City has covenanted for the benefit of the Owners of the Series 2022 Bonds to provide annually certain financial information and operating data relating to the Series 2022 Bonds and the City (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events. For a complete listing of items of information which will be provided in each Annual Report and further description of the City’s undertaking with respect to the Annual Report and certain enumerated events, see Appendix E — “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” The Annual Report is to be provided by the City not later than February 15 after the end of the City’s fiscal year, commencing with the report for Fiscal Year 2022. The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The City Council of the City serves as the governing board of the Authority and all of the City’s community facilities districts. Although the City and certain of its affiliated entities (such as the Lake Elsinore Public Financing Authority, the City’s former redevelopment agency and its successor agency (the “Agency”), and community facilities districts formed by the City) are not obligated persons pursuant to Rule 15c2-12 with respect to the Bonds, during the last five years the City and such affiliated entities failed to comply in certain respects with continuing disclosure obligations related to outstanding bonded indebtedness. The failures to comply include late filings with respect to several annual reports, and failure to provide notice of late annual financial information, more specifically: (1) Updated tabular and other operating information relating to the City, the Agency and community facilities districts for Fiscal Years 2016-17, 2017-18, 2018-19 and 2019-20 were filed late. (2) Failure to provide notices of the late filing of certain of the annual financial information that is described in item (1) above. 31 4893-2442-9341v3/022042-0044 (3) Several of the annual reports included incomplete information relating to community facilities districts, including tax prepayment information, improvement fund balances and special tax delinquency information. The City and its affiliated entities have made additional filings to provide certain of the previously omitted information. The has adopted policies and procedures with respect to its continuing disclosure practices. FINANCIAL STATEMENTS OF THE CITY Included herein as Appendix C are the audited financial statements of the City as of and for the year ended June 30, 2021, together with the report thereon dated December 29, 2021 of Lance, Soll & Lunghard, LLP, Brea, California, certified public accountants (the “Auditor”). Such audited financial statements have been included herein in reliance upon the report of the Auditor. The Auditor has not undertaken to update the audited financial statements of the City or its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated December 29, 2021. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of the Indenture, the Lease Agreement, the Ground Lease and other documents are available, upon request, and upon payment to the City of a charge for copying, mailing and handling, from the City Clerk at the City of Lake Elsinore, 130 South Main Street, Lake Elsinore, California 92530. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority or the City and the purchasers or Owners of any of the Series 2022 Bonds. The execution and delivery of this Official Statement have been duly authorized by the Authority and the City. LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Executive Director CITY OF LAKE ELSINORE By: City Manager A-1 4893-2442-9341v3/022042-0044 APPENDIX A THE CITY General The City is located in the western portion of the County of Riverside, California and encompasses approximately 39 square miles and approximately 10 miles of lakeshore surrounding Lake Elsinore. The City was incorporated on April 23, 1888 as a general law city. In 2021, the City has a population of approximately 64,762. Government and Administration City Council. The City operates under a Council/Manager form of government. The City Council appoints the City Manager, who is responsible for the day-to-day administration of City business and the coordination of City departments. The City Council is composed of five members elected by district to four- year alternating terms. The Mayor is selected by the City Council from among its members. As of April 28, 2022, the City had a staff of 102 full-time equivalent employees and 21 part-time employees. The current members of the City Council and their term expiration are as follows: Director Expiration of Term Timothy J. Sheridan, Mayor December 2022 Natasha Johnson, Mayor Pro Tem December 2024 Robert E. Magee December 2024 Steve Manos December 2024 Brian Tisdale December 2022 City Manager. Mr. Jason Simpson is the current City Manager. Mr. Simpson was appointed City Manager on January 12, 2021. Prior to becoming City Manager, Mr. Simpson served as the City’s Assistant City Manager and Director of Administrative Services. Mr. Simpson spent approximately 4 years as the Director of Administrative Services and Assistant City Manager at the City of Desert Hot Springs, 5 years as the Assistant Director of Finance at the City of Temecula, 1 year as Director of Finance at the City of San Bernardino and as worked in local government for over 20 years at various agencies such as, City of Vallejo, Costa Mesa, Indio, and South Orange County Wastewater Authority. Mr. Simpson holds a Bachelor’s Degree in Accounting. Assistant City Manager. Ms. Shannon Buckley is the current Assistant City Manager. Ms. Buckley was appointed Assistant City Manager on April 19, 2022. Prior to becoming Assistant City Manager, Ms. Buckley served as the City’s Director of Administrative Services, Assistant Administrative Services Director, Finance/Risk Manager, and Fiscal Officer and has worked in local government for over 20 years at various agencies including the City of Desert Hot Springs, City of Temecula, and City of Hemet. Ms. Buckley holds a Bachelor’s Degree in Accounting. City Services. The City provides a number of services within its boundaries including the following: police protection, fire services (which are provided through contract with the County of Riverside and the Department of Forestry and Fire Protection of the State of California, respectively), parks, community services, planning and development, public works, street lights, street maintenance, landscaping, capital improvements and general administration. The City is also responsible for the maintenance and operation of Lake Elsinore and of several recreational facilities which are located along the shoreline of Lake Elsinore. See the caption “CITY FINANCIAL INFORMATION — Lake Management Expenses” below. A-2 4893-2442-9341v3/022042-0044 Risk Management Self-insurance Programs of the California Joint Powers Insurance Authority. The City is a member of the California Joint Powers Insurance Authority (the “Insurance Authority”), which is composed of approximately 123 public entities within the State of California. The Insurance Authority arranges and administers programs for the pooling of self-insured losses, purchases excess insurance or reinsurance, and arranges for group-purchased insurance coverage. The Insurance Authority evaluates each member relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses with the formula. The City self-insures for general liability insurance and workers’ compensation insurance through the Insurance Authority. In the general liability program, claims are pooled separately between police and non-police exposures. The first layer of losses includes incurred costs up to $100,000 per occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. The second layer of losses includes incurred costs from $100,000 to $500,000 per occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. Incurred costs from $500,000 to $50 million are distributed based on the outcome of cost allocation within the first and second layers. The coverage limit for each member, including all layers of coverage, is $50 million per occurrence. Costs of covered claims for subsidence losses have a sub-limit of $50 million per occurrence. Employer’s liability losses are pooled among members to $1 million. Coverage from $1 million to $5 million is purchased as part of a reinsurance policy, and employer’s liability losses from $5 million to $10 million are pooled among members. In the workers’ compensation program, claims are pooled separately between public safety (police and fire) and non-public safety exposures. The first layer of losses includes incurred costs up to $75,000 per occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. The second layer of losses includes incurred costs from $75,000 to $200,000 per occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. Incurred costs from $200,000 to statutory limits are distributed based on the outcome of cost allocation within the first and second loss layers. For Fiscal Year 2021, the Insurance Authority’s pooled retention was $1 million per occurrence, with reinsurance to statutory limits under California Workers’ Compensation Law. Purchased Insurance. The City participates in the all-risk property protection program of the Insurance Authority, which is underwritten by several insurance companies. As of June 30, 2021, City’s all- risk property coverage was in the amount of $114,690,344. The all-risk property protection program is subject to a $10,000 per occurrence deductible, except for non-emergency vehicle insurance, which is subject to a $2,500 per occurrence deductible. Premiums for the all-risk property protection program are paid annually and are not subject to retroactive adjustments. The City purchases crime insurance coverage through the Insurance Authority in the amount of $1,000,000, subject to a $2,500 deductible. Premiums for crime insurance coverage are paid annually and are not subject to retroactive adjustments. During the past three Fiscal Years the City did not experience any claims, settlements or judgments that exceeded pooled or insured coverages described above. There are no significant reductions in pooled or insured liability coverage in Fiscal Year 2023 from the amounts described above. For additional information relating to the City’s insurance coverages and the Insurance Authority, see Note 16 to the City’s audited financial statements for Fiscal Year 2021 attached to the Official Statement as Appendix C. A-3 4893-2442-9341v3/022042-0044 CITY FINANCIAL INFORMATION General In Fiscal Year 2021, sales taxes, motor vehicle license fees, property taxes and in-lieu taxes made up approximately __ percent of the City’s general fund revenues. Such amounts exclude Measure Z (as described under the caption “—Sales Taxes” below under revenues, which totaled approximately $3,468,153 for Fiscal Year 2021. Accounting and Financial Reporting The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (GAAP) and the standards established by the Governmental Accounting Standards Board (GASB). On a semi-annual basis, a report is prepared for the City Council and City staff which reviews fiscal performance to date against the budget. Combined financial statements are produced following the close of each Fiscal Year. The City Council employs an independent certified public accountant, who, at such time or times as specified by the City Council, at least annually, and at such other times as they determine, examines the financial statements of the City in accordance with generally accepted auditing standards, including tests of the accounting records and other auditing procedures as such accountant considers necessary. As soon as practicable, after the end of the Fiscal Year, a final audit and report is submitted by the independent accountant to the City Council. The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various governmental funds are grouped, in the City’s annual financial statements, into generic fund types, which include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. It is expected that the Rental Payments will be paid for from amounts in the General Fund. Tables 1 through 4 below set forth certain historical and current Fiscal Year budget information for the General Fund. Information on the remaining governmental funds of the City as of June 30, 2021 is set forth in Appendix C to the Official Statement. At the November 3, 2020 General Election, the requisite majority of voters approved an ordinance imposing a one percent (1%) transactions and use (sales) tax on retail sales, as a “general tax” to offset state budget cuts and provide funding for general municipal services, including maintaining and improving police, fire and emergency response times, improving local streets, parks, other public facilities, addressing homelessness and other City programs and services. Because Measure Z imposes a general tax, the list is non- exclusive and the proceeds of the tax may be used for any valid municipal purpose. Measure Z does not have a sunset date. The City’s General Fund, as shown in its audited financial statements, does not include revenues from the Measure Z transactions and use tax, which are deposited into a separate Measure Z Fund. However, such Measure Z Fund revenues are available for and applied to General Fund expenditures. For more information regarding Measure Z see “—Sales Tax.” Under the terms of the Measure Z authorizing ordinance, an annual audit is required to be completed by an independent auditor. An oversight committee made up of City residents has been established to monitor and report on the expenditure of the tax revenues to the City Council for use of the Measure Z revenues. The committee’s reports will be considered by the City Council at a public meeting. A-4 4893-2442-9341v3/022042-0044 Budget Procedure, Current Budget and Historical Budget Information The City currently uses a one-year budget cycle. The Fiscal Year of the City begins on the first day of July of each year and ends on the thirtieth day of June the following year. In May of every year, the City Manager submits to the City Council the proposed budget during a special budget study session. At the conclusion of the special budget study session, the City Council reviews and considers the proposed budget and makes any revisions thereof that it deems advisable and on or before June 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council during a public meeting. At any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative vote of at least a majority of the total members of the City Council. While the City Manager can approve amendments that do not change the bottom-line of the adopted budget, the City Council must approve any supplements to the budget. The budget for Fiscal Year 2023 is expected to be approved on or about June 14, 2022. From the effective date of the budget, the amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Manager may transfer appropriations of a fund from one object or purpose to another within the same fund as appropriate. All appropriations lapse at the end of the Fiscal Year to the extent that they have not been expended, lawfully encumbered or affirmatively reappropriated by the City Council during the adoption of the next year’s budget. A-5 4893-2442-9341v3/022042-0044 Set forth in Table 1A are the final General Fund budget and actual results for Fiscal Year 2021. Table 1B shows the adopted budget for Fiscal Year 2022 and the preliminary budget for Fiscal Year 2023. During the course of each Fiscal Year, the budgets are amended and revised as necessary by the City Council. The increase in the sale and use tax rate in the City pursuant to Measure Z went to effect on April 1, 2021. The General Fund tax revenues shown below does not include Measure Z Fund revenues, which totaled approximately $3,468,153 for Fiscal Year 2021 and which the City has budgeted to total $14,614,000 for Fiscal Year 2022 and preliminarily budgeted to total $15,507,000 for Fiscal Year 2023. See “—Sales Tax.” TABLE 1A CITY OF LAKE ELSINORE GENERAL FUND BUDGET AND ACTUALS – FISCAL YEAR 2021 Final Fiscal Year 2021 Budget Fiscal Year 2021 Results Revenues Taxes $ 24,819,640(1) $ 27,591,090(1) Licenses and Permits 2,663,596 2,466,569 Intergovernmental 5,896,430 4,645,676 Charges for Services 3,526,325 3,395,047 Use of Money and Property 49,123 63,426 Fines and Forfeitures 288,454 250,930 Contributions 442,295 172,486 Miscellaneous 8,170,261 8,288,753 Transfers In 268,363 1,008,207 Proceeds from Sale of Capital Asset 8,263 8,262 Total Revenues $ 58,191,621 $ 59,949,317 Expenditures Current General Government $ 4,649,480 $ 4,589,859 Public Safety 23,004,460 21,819,012 Community Development 5,534,068 4,592,719 Community Services 2,922,100 2,005,140 Public Services 10,240,272 8,559,939 Non-Departmental 392,720 280,729 Debt Service: Principal Retirement 675,000 675,000 Interest and Fiscal Charges 454,400 454,400 Transfers Out 643,690 3,354,994 Total Expenditures $ 48,123,470 $ 45,202,392 (1) Does not include Measure Z Fund revenues, which totaled approximately $3.5 million for Fiscal Year 2021. See “—Sales Tax.” Source: Audited Financial Statements for Fiscal Year 2021. A-6 4893-2442-9341v3/022042-0044 TABLE 1B CITY OF LAKE ELSINORE GENERAL FUND BUDGET – FISCAL YEARS 2022 AND 2023 Adopted Fiscal Year 2022 Budget Preliminary(1) Fiscal Year 2023 Budget Revenues Taxes $ 27,387,760(2) $ 31,586,650(2) Licenses and Permits 2,413,680 2,919,730 Intergovernmental 1,341,230 995,650 Fees 5,340,370 5,669,890 Fines and Forfeitures 454,400 698,020 Tax Credit 3,702,050 3,813,120 Investment Earnings 413,460 207,700 Special Assessments 5,251,810 5,666,210 Reimbursements 4,909,350 11,438,130 Total Revenues $ 51,214,110 $ 62,995,100 Expenditures General Government $ 5,003,290 $ 5,579,690 Public Safety 26,666,890 28,814,510 Community Development 7,017,490 7,424,380 Community Services 3,569,350 4,255,640 Public Services 12,716,200 13,939,970 Non-Departmental 2,794,120 3,480,910 Total Expenditures $ 57,767,340 $63,495,100 (1) Based on preliminary budget. The City’s Fiscal Year 2023 Budget is expected to be approved on or about June 14, 2022. (2) Does not include Measure Z Fund revenues. Source: Adopted Budget of the City for Fiscal Year 2022 and preliminarily budgeted amounts for Fiscal Year 2023. Impacts of COVID-19 General. Efforts to respond to and mitigate the spread of COVID-19 had a severe impact on the State and local economy and triggered a recession in 2020. The outbreak resulted in the temporary closing of businesses, universities, and schools throughout California. The County of Riverside (the “County”), issued a Shelter-in-Place order in the second quarter of 2020 and the Governor issued a similar Stay-at-Home, which required closures of certain businesses including restaurants, bars, and gyms. Since March 2020, the State and the County have issued a variety of reopening plans and additional stay-at-home orders which have been revised over time as metrics related to COVID-19 have changed. The temporary closures in response to COVID-19 led to a stark increase in unemployment across the County and the nation in 2020. The Riverside-San Bernardino-Ontario Metropolitan Statistical Area unemployment rate increased from 4.3% in 2019 to 10.0% in 2020. Employment has since recovered. According to a report released by State Employment Development Department, the City’s unemployment rate was 4.4% as of March 2022. As described below, the City’s General Fund has not been materially adversely affected by the onset of the COVID-19 pandemic and the related public health orders. However, many variables will continue to contribute to the economic impact of the COVID-19 pandemic, including inflationary pressure and the response thereto, supply chain issues, new coronavirus strains, and vaccination efforts. The City cannot predict the extent or duration of such impacts. A-7 4893-2442-9341v3/022042-0044 Financial Impacts. Fiscal Year 2019-20. Fiscal Year 2020, the City experienced an overall increase in General Fund revenues of approximately $1.1 million (approximately 2.8%) as compared to the Fiscal Year 2019. Sales tax revenues decreased slightly (approximately ($160,000) as compared to the Fiscal Year 2019 as a result of the closures of various businesses and restrictions on travel due to the COVID-19 pandemic. Property tax revenues increased by approximately $1 million as compared to the Fiscal Year 2019 and franchise tax revenues held steady. General Fund expenses increased by approximately $1 million in Fiscal Year 2020 as compared to the Fiscal Year 2019, primarily driven by increases in public safety expenditures. Fiscal Year 2020-21. Fiscal Year 2021 was the first full fiscal year during which the impact of the COVID-19 was experienced. Similar to the Fiscal Year 2020, the City’s General Fund experienced increases in revenues over the prior Fiscal Year. In Fiscal Year 2021, the City’s General Fund revenues increased by approximately $4.8 million (approximately 11.4%) as compared to the Fiscal Year 2020. In Fiscal Year 2021, sales tax revenues increased by approximately $7.2 million, of which approximately $3.5 million was attributable to the Measure Z sales tax measure (as described below). Property tax revenues increased by approximately $0.7 million and franchise tax revenues increased by approximately $175,000. General Fund expenditures were generally in line with the Fiscal Year 2020 amounts. Federal Assistance. On March 11, 2021, President Biden signed the American Rescue Plan Act (the “Rescue Act”) which includes $1.9 trillion of funding for individuals, businesses, and state and local governments to mitigate the impacts of the COVID-19 pandemic. The City has been allocated approximately $15 million in Rescue Act funding, approximately $7.5 million of which was received in July 2021. The balance is expected to be received in July 2022. Of the $7.5 million that the City has received, approximately $200 thousand has been appropriated toward (1) reimbursement of the General Fund for COVID-19 related costs such as public safety and public health efforts; and (2) youth and community programs and restaurant grants. The City currently expects to appropriate the balance of the funds that it has received and expects to receive under the Rescue Act on infrastructure improvements designed to promote tourism, including roadways and park improvements, broadband improvements as well as funding for educational opportunity center and transitional housing for the unhoused population. Service Impacts. The City continued to provide core services, including public safety (police and fire), without disruption during the COVID-19 pandemic. However, the COVID-19 pandemic has impacted certain other services that the City provides. While the stay-at-home order was in effect, recreation centers were closed, and libraries were open for public use on a limited basis. Parks were also open for limited use. The City’s development plan permitting function transitioned to virtual hearings, inspections, and appointments. The City has also established an electronic option for development plan submittals. A-8 4893-2442-9341v3/022042-0044 Comparative Change in Fund Balance of the City General Fund Table 2 below presents the City’s audited General Fund Statement of Revenues, Expenditures and Change in Fund Balance for Fiscal Years 2017 through 2021. The increase in the sale and use tax rate in the City pursuant to Measure Z went to effect on April 1, 2021. The General Fund tax revenues shown below do not include Measure Z Fund revenues, which totaled approximately $3,468,153 for Fiscal Year 2021 and which the City has budgeted to total $14,614,000 for Fiscal Year 2022 and preliminarily budgeted to total $15,507,000 for Fiscal Year 2023. See “—Sales Tax.” TABLE 2 CITY OF LAKE ELSINORE GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE FIVE YEAR COMPARISON Fiscal Year Ending June 30 2017 2018 2019 2020 2021 Revenues: Taxes $ 20,077,953 $ 21,139,847 $ 22,174,361 $23,128,710 $ 27,591,090(1) Special Assessments 10,648 11,512 -- -- -- Licenses and Permits 4,045,758 3,086,486 2,111,680 2,488,773 2,466,569 Intergovernmental 4,960,104 5,374,408 5,134,993 4,114,716 4,645,676 Charges for Services 2,826,491 3,818,856 2,956,160 3,655,507 3,395,047 Investment Earnings 7,712 46,916 538,375 537,830 63,426 Fines and Forfeitures 653,023 577,441 552,426 495,914 250,930 Contributions -- 96,956 175,030 131,699 172,486 Miscellaneous 6,375,569 6,172,991 7,302,978 7,525,825 8,288,753 Total Revenues $ 38,957,258 $ 40,325,413 $ 40,946,003 $42,078,974 $ 46,873,977 Expenditures: Current: General government $ 5,510,745 $ 5,188,725 $ 4,916,561 $ 4,763,000 $ 4,870,588 Public Safety 20,751,331 19,989,432 20,230,447 21,230,314 21,819,012 Community Development 3,832,944 4,647,633 4,639,021 4,699,837 4,592,719 Community Services 3,233,169 2,526,651 2,200,826 2,395,017 2,005,140 Public Services 6,221,890 8,198,259 8,692,033 8,614,382 8,559,939 Capital Outlay 95,824 -- 104,400 -- -- Total Expenditures $ 39,645,903 $ 40,550,700 $ 40,783,288 $41,702,550 $ 41,847,398 Excess (Deficiency) of Revenues Over (Under) Expenditures $ (688,645) $ (225,287) $ 162,715 $ 376,424 $ 5,026,579 Other Financing Sources (Uses): Transfers In $ 3,346,147 $ 1,523,125 $ 390,321 $ 146,808 $ 1,008,207 Transfers Out (2,443,258) (2,082,254) (271,567) (609,270) (3,354,994) Sale of Capital Assets -- 14,502 24,201 -- 8,262 Total Other Financing Sources (Uses) $ 902,889 $ (544,627) $ 142,955 $ (462,462) $ (2,338,525) Net change in fund balances $ 214,244 $ (769,914) $ 305,670 $ (86,038) $ 2,688,054 Fund balances, beginning of year $ 12,394,909 $ 12,609,153 $ 11,839,239 $12,144,909 $ 12,058,871 Fund balances, end of year $ 12,609,153 $ 11,839,239 $ 12,144,909 $12,058,871 $ 14,746,925 (1) Does not include Measure Z Fund revenues, which totaled approximately $3.5 million for Fiscal Year. See “—Sales Tax.” Source: Audited Financial Statements for Fiscal Years 2017 through 2021. A-9 4893-2442-9341v3/022042-0044 Comparative General Fund Balance Sheets of the City Table 3 below presents the City’s audited General Fund Balance Sheets for Fiscal Years 2017-2021. The amounts below exclude amounts in the Measure Z Fund, which had a balance of $3,468,153 as of June 30, 2021. See “—Sales Tax.” TABLE 3 CITY OF LAKE ELSINORE GENERAL FUND BALANCE SHEETS FIVE YEAR COMPARISON Fiscal Year Ending June 30, 2017 2018 2019 2020 2021 Assets Cash and Investments $ 13,698,531 $ 11,898,140 $ 12,201,222 $ 11,337,114 $ 14,766,655 Receivables: Accounts 872,895 988,532 822,143 1,382,950 1,207,370 Notes and Loans 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Accrued Interest 263,151 297,363 329,771 322,171 349,300 Prepaid Costs 96,846 31,385 77,168 23,165 31,847 Due from Other Governments 1,845,341 1,947,356 2,230,717 2,901,982 3,171,466 Due from Other Funds 319,325 230,606 813,599 976,749 210,091 Total Assets $ 18,096,089 $ 16,393,382 $ 17,474,620 $ 17,944,131 $ 20,736,729 Liabilities Accounts payable $ 4,106,568 $ 3,216,488 $ 3,931,128 $ 4,408,950 $ 4,595,376 Accrued liabilities 917,199 947,204 1,021,960 983,431 1,016,435 Unearned Revenues 15,046 15,645 1,990 15,698 15,870 Deposits Payable -- -- -- -- -- Due to Other Governments 5,810 -- -- 16,454 -- Due to Other Funds 62,561 -- -- 34,234 -- Total Liabilities $ 5,107,184 $ 4,179,337 $ 4,955,078 $ 5,458,767 $ 5,627,681 Deferred Inflows of Resources Unavailable Revenues $ 379,752 $ 374,806 $ 374,633 $ 426,493 $ 362,123 Total Deferred Inflows of Resources $ 379,752 $ 374,806 $ 374,633 $ 426,493 $ 362,123 Fund Balance Nonspendable $ 1,096,846 $ 1,031,385 $ 1,077,168 $ 1,023,165 $ 1,031,847 Restricted -- -- -- -- -- Assigned -- -- -- -- -- Unassigned 11,512,307 10,807,854 11,067,741 11,035,706 13,715,078 Total Fund Balances $ 12,609,153 $ 11,839,239 $ 12,144,909 $ 12,058,871 $ 14,746,925 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 18,096,089 $ 16,393,382 $ 17,474,620 $ 17,944,131 $ 20,736,729 Source: Audited Financial Statements for Fiscal Years 2017-2021. Property Taxes Property tax receipts of $9,677,646 provided the second largest tax revenue source of the City, contributing approximately 20.7% of total General Fund revenues during Fiscal Year 2021. The City estimates property tax receipts of $9,989,740 in Fiscal Year 2022, which is approximately 15.9% of total General Fund revenues during Fiscal Year 2022. In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens, arising A-10 4893-2442-9341v3/022042-0044 pursuant to State Law, on the secured property, regardless of the time of the creation of other liens. The valuation of property is determined as of January 1 each year, and installments of taxes levied upon secured property become delinquent on the following December 10th and April 10th of the subsequent calendar year. Taxes on unsecured property are due July 1, and become delinquent August 31. Secured and unsecured properties are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The exclusive means of forcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent. The taxing authority has four methods of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s Office in order to obtain a lien on certain property of the taxpayer, and (4) seizure and sale of personal property, improvement or possessory interest belonging or taxable to the assessee. A ten percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1 1/2% per month on the amount delinquent. Such property may thereafter be redeemed by the payment of the delinquent taxes and the ten percent penalty, plus interest at the rate of 1 1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A ten percent penalty also applies to the delinquent taxes or property on the unsecured roll, and further, an additional penalty of 1 1/2% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date. Legislation enacted in 1984 (Section 25 et seq. of the Revenue and Taxation Code of the State of California), provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change and thus delayed the realization of increased property taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year, with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the remainder of the current fiscal year and the full 12 months of the next fiscal year. For a number of years, the State Legislature has shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund. The term “ERAF” is often used as a shorthand reference for this shift of property taxes. In 1992-93 and 1993-94, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts. The 2004-05 California State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including the City, to occur in Fiscal Years 2004-05 and 2005-06. On November 2, 2004, California voters approved Proposition 1A, which amended the State Constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State may not (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-third approval of both houses of the State Legislature, or (iv) decrease Vehicle License Fees revenues without providing local governments with equal replacement funding. Beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (b) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with A-11 4893-2442-9341v3/022042-0044 interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. The City also received a portion of Department of Motor Vehicles license fees (“VLF”) collected statewide. Several years ago, the State-wide VLF was reduced by approximately two-thirds. However, the State continued to remit to cities and counties the same amount that those local agencies would have received if the VLF had not been reduced, known as the “VLF backfill.” The State VLF backfill was phased out and as of Fiscal Year 2012 all of the VLF is now received through an in-lieu payment from State property tax revenues. Table 4 below sets forth the secured and unsecured assessed valuations for property in the City for the Fiscal Years 2018 through 2022. The information in Table 4 has been obtained directly from the California Municipal Statistics, Inc. Neither the City nor the Underwriter has independently verified the information in Table 4 and do not guarantee its accuracy. TABLE 4 CITY OF LAKE ELSINORE ASSESSED VALUATION FISCAL YEARS 2017 TO 2021 Fiscal Year Local Secured Utility Unsecured Total 2018 $5,521,863,921 $2,400 126,478,852 5,648,345,173 2019 6,075,282,165 0 123,339,125 6,198,621,290 2020 6,483,328,848 0 116,736,755 6,600,065,603 2021 6,839,226,093 0 127,585,267 6,966,811,360 2022 7,266,616,435 0 131,256,658 7,397,873,093 Source: California Municipal Statistics, Inc. Table 5 below sets forth property tax collections and delinquencies in the City as of June 30 for Fiscal Years 2017 through 2021. The County operates under a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the County. The City is included in the Teeter Plan; accordingly, the City’s receipt of its property tax revenues is not impacted by delinquencies in payment. However, the County may choose to discontinue to the Teeter Plan at any time. TABLE 5 CITY OF LAKE ELSINORE PROPERTY TAX LEVIES AND COLLECTIONS FISCAL YEARS 2017 THROUGH 2021 Fiscal Year Total Tax Levy Current Tax Collections as of June 30 Percent of Levy Collected as of June 30 Outstanding Delinquent Taxes as of June 30 2017 $2,434,193 $2,334,855 95.9% $99,338 2018 2,553,532 2,465,681 96.6 87,851 2019 2,719,663 2,638,238 97.0 81,425 2020 3,032,233 2,910,460 96.0 121,773 2021 3,088,305 2,948,611 95.5 139,694 Source: Audited Financial Statements for Fiscal Year 2021. A-12 4893-2442-9341v3/022042-0044 The 10 largest taxpayers in the City as shown on the Fiscal Year 2022 secured tax roll, the land use, the assessed valuation and the percentage of the City’s total property tax revenues attributable to each are shown on Table 6 below. The information in Table 6 has been provided by California Municipal Statistics, Inc. Neither the City nor the Underwriter has independently verified the information in Table 6 and do not guarantee its accuracy. TABLE 6 CITY OF LAKE ELSINORE TEN PRINCIPAL TAXPAYERS Property Owner Land Use 2021-22 Assessed Valuation % of Total(1) 1. Ridgestone Partners LP Apartments $52,309,415 0.72% 2. Wal Mart Real Estate Business Trust Commercial 37,542,492 0.52 3. Pacific Castle Lake Elsinore Partners Commercial 28,387,658 0.39 4. Helf Canyon Hills Market Place I Commercial 28,207,036 0.39 5. Alberhill Development LLC Homes 28,127,685 0.39 6. Rivers Edge Apartments Apartments 27,198,929 0.37 7. HGEF Holding Co. Apartments 25,732,847 0.35 8. Mohr Affinity Outlet Store 25,640,833 0.35 9. Prism Lake Apartments 23,500,000 0.32 10. HCP Blue Canary Commercial 18,787,875 0.26 Total $295,434,770 4.06% (1) 2021-22 Local Secured Assessed Valuation: $7,266,616,435. Source: California Municipal Statistics, Inc. Sales Taxes A sales tax is imposed on retail sales or consumption of personal property. The basic sales tax rate is established by the State Legislature, and local overrides may be approved by voters. The current basic sales tax rate in the City is 8.75%. At the November 3, 2020 general election, the requisite majority of voters in the City approved an ordinance imposing a one percent (1%) transactions and use (sales) tax on retail sales, as a “general tax” to offset state budget cuts and provide funding for general municipal services, including maintaining and improving police, fire and emergency response times, improving local streets, parks, other public facilities, addressing homelessness and other City programs and services. The tax became effective April 1, 2021. The tax revenue generated as a result of Measure Z is deposited in the City’s Measure Z Fund. In Fiscal Year 2021, sales tax receipts of $18,068,364, provided the largest tax revenue source for the City, contributing approximately 35.9% of total General Fund revenues during Fiscal Year 2021. This amount includes revenues from the Measure Z sales and use tax which totaled $3,468,153 in Fiscal Year 2021. The City estimates sales tax receipts of $12,912,150 in Fiscal Year 2022, which is approximately 25.21% of total General Fund revenues during Fiscal Year 2022, not including Measure Z Fund receipts. The City estimates Measure Z Fund receipts of $14,614,000 in Fiscal Year 2022, for total sales tax receipts of $27,526,150, which is approximately 53.75% of total General Fund revenues during Fiscal Year 2022. Based on the preliminary budget, the City estimates sales tax receipts of $16,311,800 in Fiscal Year 2023, which is approximately 25.89% of total General Fund revenues during Fiscal Year 2023, not including Measure Z Fund receipts. The City estimates Measure Z Fund receipts of $15,507,000 in Fiscal Year 2023, for total sales tax receipts of $31,818,800, which is approximately 50.51% of total General Fund revenues during Fiscal Year 2023. Under the terms of the Measure Z authorizing ordinance, an annual audit is required to be completed by an independent auditor. An oversight committee made up of City residents has been established to monitor A-13 4893-2442-9341v3/022042-0044 and report on the expenditure of the tax revenues to the City Council for use of the Measure Z revenues. The committee’s reports will be considered by the City Council at a public meeting. Services Fees of $3,200,084 collected for services provided by the City, including, but not limited to, fees for plan checks, issuing of building permits, public works projects and for parks and recreations programs, provided approximately 6.67% of General Fund revenues during Fiscal Year 2021. The City budgeted such receipts to be approximately $5,340,370 for Fiscal Year 2022, representing approximately 10.43% of budgeted General Fund revenues. Tax Revenues by Source The following table sets forth the audited tax revenues by source for Fiscal Years 2017 through 2021. Sales tax revenues below include Measure Z revenues. See “—Sales Tax.” Table 2 above does not include Measure Z Fund revenues. TABLE 7 CITY OF LAKE ELSINORE TAX REVENUES BY SOURCE Fiscal Year Ending June 30 2017 2018 2019 2020 2021 Revenues: Property Taxes(1) $ 7,380,594 $ 8,030,862 $ 7,986,053 $ 8,990,543 $ 9,677,646 Sales Taxes 9,745,714 10,071,435 11,057,497 10,896,955 18,068,365(2) Franchise Taxes 2,297,401 2,477,400 2,553,006 2,587,128 2,762,724 Other Taxes 598,126 560,150 577,805 654,044 550,508 Total Revenues $ 20,021,835 $ 21,139,847 $ 22,174,361 $ 23,128,670 $ 31,059,243 (1) Includes Property Transfer Tax. (2) Includes Measure Z Fund revenues of $3,468,153. Source: Audited Financial Statements for Fiscal Years 2017 through 2021. Indebtedness Long-Term Debt. As of June 30, 2021, the City had $184,420,000 of total bonds outstanding. These amounts are comprised as follows: (a) $141,770,000 of outstanding revenue bonds, none of which are payable from the City’s General Fund; (B) $23,505,000 of outstanding lease revenue bonds, all which are payable from the City’s General Fund, (c) $12,875,000 of outstanding tax allocation revenue bonds, all of which are redevelopment tax revenue bonds and are not payable from the City’s General Fund; and, (d) $6,270,000 of certificates of participation, which are payable from a retail transactions and use tax (Measure A) and not payable from the City’s General Fund. As of May 1, 2022, the only long-term obligation payable from the City’s General Fund are lease payments payable to the Lake Elsinore Facilities Financing Authority (the “Financing Authority”) under: (1) a Lease Agreement (the “2016 Lease”), dated as of November 1, 2016, entered into connection with the Financing Authority’s Lease Revenue Bonds Series 2016A (the “Series 2016 Bonds”) and (2) a Lease Agreement, dated as of December 1, 2021 (the 2021 Lease”), entered into connection with the Financing Authority’s Lease Revenue Refunding Bonds Series 2021A. As of May 1, 2022, the total principal amount payable under such leases was $18,715,000. The final payment under the 2016 Lease is due in 2046 and the final payment under the 2021 Lease is due in 2032. See “—Launch Pointe” below for a description of the project that was financed from proceeds of the Series 2016 Bonds. A-14 4893-2442-9341v3/022042-0044 For a description of the City and its related entities’ outstanding indebtedness, which are not payable from the City’s General Fund, see Note 7 to the City’s audited financial statements for Fiscal Year 2015 attached to the Official Statement as Appendix C. Short-Term Debt. The City currently has no short-term debt outstanding. For additional information relating to the City and its related entities’ outstanding indebtedness, see Note 8 to the City’s audited financial statements for Fiscal Year 2021 attached to the Official Statement as Appendix C. Estimated Direct and Overlapping Debt. The estimated direct and overlapping bonded debt of the City as of May 1, 2022 is shown in Table 8 below. The information in Table 8 has been derived from data assembled and reported to the City by California Municipal Statistics, Inc. Neither the City nor the Underwriter has independently verified the information in Table 8 and do not guarantee its accuracy. A-15 4893-2442-9341v3/022042-0044 TABLE 8 CITY OF LAKE ELSINORE ESTIMATED DIRECT AND OVERLAPPING BONDED DEBT AS OF MAY 1, 2022 2021-22 Assessed Valuation: $7,397,873,093 OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 5/1/22 Riverside County Flood Control District, Zone No. 4 0.823% $ 64,852 Metropolitan Water District 0.218 43,982 Mount San Jacinto Community College District 6.829 17,290,687 Perris Union High School District 2.638 8,146,361 Menifee Union School District 4.175 5,216,442 Perris School District 0.063 21,997 Lake Elsinore Unified School District 45.668 22,199,215 Lake Elsinore Unified School District Community Facilities Districts 100.000 70,012,395 Perris Union High School District Community Facilities District No. 92-1 6.149 1,962,146 City of Lake Elsinore Community Facilities District No. 90-2 100.000 3,060,000 City of Lake Elsinore Community Facilities District No. 95-1 100.000 460,000 City of Lake Elsinore Community Facilities District No. 98-1 100.000 10,930,000 City of Lake Elsinore Community Facilities District No. 2003-2, I.A. A, B, C, D, & E 100.000 57,755,000 City of Lake Elsinore Community Facilities District No. 2004-3 I.A. No. 1 & 2 100.000 38,275,000 City of Lake Elsinore Community Facilities District No. 2005-1 100.000 6,445,000 City of Lake Elsinore Community Facilities District No. 2005-2 100.000 18,325,000 City of Lake Elsinore Community Facilities District No. 2005-5 100.000 3,330,000 City of Lake Elsinore Community Facilities District No. 2005-6 100.000 2,425,000 City of Lake Elsinore Community Facilities District No. 2006-1 Improvement Areas 100.000 41,565,000 City of Lake Elsinore Community Facilities District No. 2006-2 100.000 5,065,000 City of Lake Elsinore Community Facilities District No. 2007-4 100.000 2,390,000 City of Lake Elsinore Community Facilities District No. 2007-5 100.000 1,650,000 City of Lake Elsinore Community Facilities District No. 2015-5 100.000 1,905,000 City of Lake Elsinore Community Facilities District No. 2016-2 100.000 19,485,000 City of Lake Elsinore Community Facilities District No. 2019-1 100.000 6,610,000 Elsinore Valley Municipal Water District Community Facilities District No. 2003-1 100.000 2,614,000 City of Lake Elsinore 1915 Act Bonds 100.000 9,310,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $356,557,077 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations 2.236% $16,201,929 Riverside County Pension Obligations 2.236 18,336,542 Perris Union High School District General Fund Obligations 2.638 1,076,126 Menifee and Perris School District Certificates of Participation 4.175-0.063 1,918,131 Western Municipal Water District 4.860 265,814 City of Lake Elsinore General Fund Obligations 100.000 18,715,000(1) TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $56,513,542 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100.000 $44,640,000 COMBINED TOTAL DEBT $457,710,619(2) Ratios to 2021-22 Assessed Valuation: Total Overlapping Tax and Assessment Debt ........................................................ 4.82% Total Direct Debt ($18,715,000) ......................................................................... 0.25% Combined Total Debt ............................................................................................ 6.19% Ratios to Redevelopment Incremental Valuation ($3,414,028,742): Total Overlapping Tax Increment Debt ................................................................. 1.31% (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Qualified Zone Academy Bonds are included based on principal due at maturity. Source: California Municipal Statistics, Inc. Lake Management Expenses To reduce the severity and frequency of increases and decreases in the lake level of Lake Elsinore, the United States Bureau of Reclamation (the “Bureau”) implemented the Lake Elsinore Management Plan (the “LEMP”) in 1988. A major component of the LEMP was the construction of a levee which split the original A-16 4893-2442-9341v3/022042-0044 Lake Elsinore in half, reducing the amount of evaporation of lake water. In a cooperative effort to manage the lake level of Lake Elsinore, the City, the Former Agency and the Elsinore Valley Municipal Water District (“EVMWD”) entered into the 2003 Comprehensive Water Management Agreement (the “Water Management Agreement”), which among other provisions, sets forth how the parties to the Water Management Agreement will maintain the lake at a certain level. Pursuant to the Water Management Agreement, EVMWD is required to provide recycled water and, if available, other sources of water to replenish Lake Elsinore, and the City is responsible for certain obligations to maintain and operate the lake. Under the Water Management Agreement, each party thereto is required to deposit $750,000 annually into a Lake Maintenance Fund until the amount in such fund reaches $20 million. The City has been contributing to the Lake Maintenance Fund in accordance with the Water Management Agreement. The City can make no assurances that costs to maintain and operate Lake Elsinore will not increase in future years or that there will not be significant one-time or multi-year expenses in future years. However, the City does not expect the obligation to make contributions to the Lake Maintenance Fund pursuant to the Water Management Agreement to have a material adverse impact on its ability to make the Base Rental Payments. Launch Pointe In 2012, the City completed construction of the La Laguna Resort and Boat Launch (the “Launch Pointe”), a recreational boat launch on the shore of Lake Elsinore. In 2016, the City issued the Series 2016 Bonds to finance the acquisition, construction and installation of certain capital improvements for the Launch Pointe, including: (1) a new main entry, gate house and check-in building; (2) construction of office space, laundry facilities, a concession stand, a bait and tackle shop, a dump station and a clubhouse; (3) construction of RV and boat parking areas; (4) improvements to accommodate 236 campsites including sewer and water main improvements, restrooms and shower facilities; (5) construction of yurts and permanent vintage trailers and (6) construction of recreational areas which include, a gazebo, dog park, basketball courts, putting green and share structures covering picnic/barbeque areas. In its audited financial statements, the City accounts for the activities of the Launch Point as an enterprise fund, into which revenues collected from sales and services generated from the Launch Pointe are deposited. Such revenues are budgeted to cover costs of providing services related to the Launch Pointe. Table 9 below presents the City’s audited Statement of Revenues, Expenditures and Change in Fund Balance of the Launch Pointe enterprise fund for Fiscal Years 2019 through 2021. The improvements and facilities at the Launch Pointe financed from proceeds of the Series 2016 Bonds were completed in 2019. At the time the Series 2016 Bonds were issued, the City anticipated the additional revenues to be generated by the new improvements and facilities to exceed the costs of operating the Launch Pointe. Due to the COVID-19 pandemic and the associated public health orders, the Launch Pointe’s expenses have exceeded revenues in Fiscal Years 2020 and 2021. The City has experienced high demand for the accommodations and recreational facilities at the Launch Pointe in Fiscal Year 2022 and expects revenues to exceed expenditures in Fiscal Year 2022 and 2023. However, no assurances can be made as to such revenues and expenses. To the extent that the revenues generated by the Launch Pointe exceed expenses, the City expects to transfer funds from the General Fund to pay such expenses (including debt service on the Series 2016 Bonds). A-17 4893-2442-9341v3/022042-0044 TABLE 9 CITY OF LAKE ELSINORE LAUNCH POINTE ENTERPRISE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE THREE YEAR COMPARISON Fiscal Year Ending June 30 2019 2020 2021 Operating Revenues: Sales and Service Charges $ 249,194 $ 2,105,505 $ 3,728,501 Miscellaneous 636 6,107 14,559 Total Operating Revenues $ 249,830 $ 2,111,612 $ 3,743,060 Operating Expenses: Personnel Services $ -- $ 625,539 $ 845,513 Contractual Services 684,713 1,253,443 431,835 Utilities 135,319 342,962 607,969 Maintenance and Operation 293,739 778,853 921,685 Cost of Sales and Services 152,731 339,186 343,520 Depreciation Expense 8,252 493,899 511,685 Insurance -- -- -- Total Operating Expenses $ 1,274,754 $ 3,833,882 $ 3,662,207 Operating Income (Loss) $ (1,024,924) $ (1,722,270) $ 80,853 Nonoperating Revenues (Expenses): Interest Revenue $ 160 $ 255 $ 967 Interest Expenses (314,238) (385,890) (305,256) Contributions -- $ 272,980 -- Total Nonoperating Revenues (Expenses) $ (314,078) $ (112,655) $ (304,289) Source: Audited Financial Statements for Fiscal Years 2019 through 2021. The City’s revenues generated from Launch Pointe are dependent, in part, on the attraction of the recreational activities available at Lake Elsinore. Such recreational facilities include, boating, fishing and other water sports. From time-to-time, Lake Elsinore experiences blue-green algae blooms, which can result in elevated levels of toxins in the lake water posing health risks to humans. In recent years, decreasing lake levels as a result of the ongoing drought in California has led has led to rising lake water temperature. Such conditions have resulted in more common occurrences of the algae bloom. The lake level is measured based on surface water elevation above mean sea level (MSL). The optimal operating range of the lake is between 1,240-feet and 1,249-feet above MSL. The current lake level is at approximately 1,232-feet above MSL. The City conducts ongoing monitoring of the lake level and the concentration of toxins in the lake water. When the concentration of the resulting toxins in the water increases to a degree that is harmful to humans, the City has issued health warnings to and public safety information to residents and visitors and has closed the lake to swimming. The presence of toxins in the lake as a result of blue-green algae bloom could lead to reduced usage of the facilities associated with the Launch Pointe and reduced tourism to the City as a whole. The City can make no assurance as to the amounts of revenues actually generated or as to the ultimate financial success of the Launch Pointe. Retirement Contributions Summary of Plans. All qualified permanent and probationary employees of the City are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (the “Plan”) administered by the California Public Employees’ Retirement System (“CalPERS”). The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all A-18 4893-2442-9341v3/022042-0044 other). Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors four rate plans (three miscellaneous and one safety). Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding provisions, assumptions and membership information that can be found on the CalPERS website. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of fulltime employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. Employees hired on or after January 1, 2013 who meet the definition of a “New CalPERS Member” are subject to the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier (2% at 62 formula) with a maximum benefit formula of 2.5% at age 67. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36 month period. Employees are required to pay at least 50% of the total normal cost rate. Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from paying employer-paid member contributions to such retirement systems for employees hired after January 1, 2013 who were not already enrolled in CalPERS through their previous employers; (iii) establishes a compulsory maximum non-safety benefit formula of 2.5% at age 67; (iv) defines final compensation as the highest average annual pensionable compensation earned during a 36 month period; and (v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to Consumer Price Index increases. Provisions in AB 340 will not likely have a material effect on City’s contributions in the short term. However, additional employee contributions, limits on pensionable compensation and higher retirement ages for new members will reduce the City’s total pension liability and potentially reduce City contribution levels in the long term. The City Council adopted a resolution creating an additional tier of CalPERS pension benefits for employees hired after January 1, 2013 to comply with AB 340’s compulsory reduced formula. Participants hired on or after January 1, 2013 who were not already enrolled in CalPERS through their previous employers are required to contribute the percentage of their annual covered salary under the City’s CalPERS Plans required by CalPERS, which will not exceed 50% of the normal cost rate, as determined by CalPERS. The City does not make any portion of such contributions for such participants. The City’s CalPERS Plan provisions and benefits in effect at June 30, 2021 are summarized as follows: A-19 4893-2442-9341v3/022042-0044 CITY OF LAKE ELSINORE SUMMARY OF CALPERS PLAN PROVISIONS AS OF JUNE 30, 2021 Miscellaneous Plan Tier 1 Miscellaneous Plan Tier 2 PERPA Plan Safety Plan(2) Hire Date Prior to 1/1/2013 Prior to 1/1/2013 On or after 1/1/2013(1) Prior to 1/1/2013 On or after 1/1/2013(1) Benefit Formula 2.5% at 55 2.0% at 60 2.0% at 62 0.5% at 55 N/A Benefit Vesting Schedule 5 years 5 years 5 years 5 years N/A Lifetime Benefit Payments Monthly Monthly Monthly Monthly N/A Retirement Age 50-55+ 55-60 52-67+ 50 N/A Monthly Benefits, as a % of Eligible Compensation 1.46% to 2.418% 1.092% to 2.418% 1.0% to 2.5% 0.5% N/A Required Employee Contribution Rate 8.00% 7.00% 6.75% N/A N/A Required Normal Employer Contribution Rate 13.146% 8.794% 7.732% N/A N/A Required Employer Payment of Unfunded Liability $781,582 $37,395 $23,322 N/A N/A (1) For employees hired on or after January 1, 2013, they are included in their respective PEPRA (California Public Employees’ Pension Reform Act) Plans with the above provisions and benefits. (2) The City currently does not have any safety employees. The Safety Plan represents former safety employees. Source: Audited Financial Statement for Fiscal Year 2021. City Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1, following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30, by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Beginning in Fiscal Year 2018, CalPERS began collecting employer contributions toward a pension plan’s unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only. Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts. For the year ended June 30, 2021, the employer contributions recognized as a reduction to the net pension liability for the Plan was $1,762,390. As of June 30, 2021, the City reported a net pension liability for its proportionate share of the net pension liability of the Plan of $13,038,918. In Fiscal Years 2021 and 2022, the City has paid $1,534,461 and $1,663,042 respectively, to CalPERS for its Plans. In Fiscal Year 2023, the City has preliminarily budgeted $2,164,240 to be paid to CalPERS for its Plans. Required employer and employee contributions are determined from rates established by CalPERS based upon various actuarial assumptions which are revised annually. The City currently funds the normal pension costs, which are determined by CalPERS using the Entry Age Normal Actuarial Cost Method, as well as an amortization of the City’s unfunded actuarial liability. A-20 4893-2442-9341v3/022042-0044 The following table summarizes the City’s required contributions for Fiscal Year 2023, as set forth in CalPERS actuarial reports dated July 2021. Plan Employer Normal Cost Rate Employer Amount for Unfunded Accrued Liability Miscellaneous Tier 1 13.02% $1,086,654 Miscellaneous Tier 2 8.63 42,055 PEPRA 7.47 25,669 Safety 0.00 7,212 Source: CalPERS Actuarial Reports as of July 2021. Pension Liabilities, Pension Expenses and Deferred Outflow/Inflows of Resources. The City net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2020, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for the Plan measured as of June 30, 2019 and 2020 were as follows: Proportion Change Increase (Decrease) June 30, 2020 June 30, 2019 0.11984% 0.12082% (0.00098)% For the year ended June 30, 2021, the City recognized a pension expense of $2,297,717. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Current year contributions that occurred after the measurement date of June 30, 2020 $ 1,631,890 $ -- Change of Assumption -- 92,880 Difference between Expected and Actual Experiences 672,747 -- Net Difference between Projected and Actual Earnings on Plan Investments 387,093 -- Adjustment due to differences in proportions 1,044 111,805 Difference in proportionate share Total $ 2,765,844 $ 204,685 The $1,631,890 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflow of resources related to pensions will be recognized as a reduction of the net pension liability in the subsequent fiscal period as follows: A-21 4893-2442-9341v3/022042-0044 Year Ending June 30 2022 $ 84,793 2023 367,427 2024 291,374 2025 185,675 2026 -- Thereafter -- Total 929,269 For the measurement period ended June 30, 2020, the total pension liability was determined by rolling forward the June 30, 2019 total pension liability. The June 30, 2019 and the June 30, 2020 total pension liabilities were based on the following actuarial methods and assumptions: Valuation Date June 30, 2019 Measurement Date June 30, 2020 Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68. Actuarial Assumptions: Discount Rate 7.15% Inflation 2.50% Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.00% Net of Plan Investment and Administrative Expenses; includes inflation Mortality Rate Table Derived using CalPERS’ Membership Data for all Funds Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Powers Protection Allowance Floor on Purchasing Power applies. (1) The mortality table used was developed based on CalPERS’s specific data. The table includes 15 years of mortality improvements for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under Forms and Publications. Source: Audited Financial Statement for Fiscal Year 2021. Funding Status. The following table sets forth the schedule of funding for the City’s Miscellaneous Tier 1 Plan. Valuation Date (June 30) Accrued Liability Share of Pool’s Market Value of Assets Share of Pool’s Unfunded Liability Funded Ratio Annual Covered Payroll 2016 $38,660,889 $27,128,733 $11,532,156 70.2% $2,160,573 2017 40,682,389 29,458,614 11,223,775 72.4 2,096,590 2018 44,039,573 31,521,496 12,518,077 71.6 2,196,769 2019 45,247,516 32,473,790 12,773,726 71.8 2,293,035 2020 46,226,041 32,748,833 13,477,208 70.8 2,237,223 Source: CalPERS Actuarial Report dated July 2021. The following table sets forth the schedule of funding for the City’s Miscellaneous Second Tier Plan. A-22 4893-2442-9341v3/022042-0044 Valuation Date (June 30) Accrued Liability Share of Pool’s Market Value of Assets Share of Pool’s Unfunded Liability Funded Ratio Annual Covered Payroll 2016 $853,174 $771,984 $81,190 90.5% $1,690,824 2017 1,319,909 1,247,719 72,190 94.5 1,909,941 2018 1,929,254 1,776,636 152,618 92.1 1,906,749 2019 2,382,059 2,194,102 187,957 92.1 1,710,205 2020 2,930,272 2,664,152 266,120 90.9 1,941,744 Source: CalPERS Actuarial Report dated July 2021. The following table sets forth the schedule of funding for the City’s PEPRA Plan. Valuation Date (June 30) Accrued Liability Share of Pool’s Market Value of Assets Share of Pool’s Unfunded Liability Funded Ratio Annual Covered Payroll 2016 $243,285 $219,193 $24,092 90.1% $1,277,497 2017 531,487 509,153 22,334 95.8 1,788,617 2018 941,803 871,929 69,874 92.6 2,114,858 2019 1,278,550 1,171,765 106,785 91.6 2,000,713 2020 1,733,679 1,572,005 161,674 90.7 2,478,095 Source: CalPERS Actuarial Report dated July 2021. The following table sets forth the schedule of funding for the City’s Safety Plan. Valuation Date (June 30) Accrued Liability Share of Pool’s Market Value of Assets Share of Pool’s Unfunded Liability Funded Ratio Annual Covered Payroll 2016 $41,050 $13,424 $27,626 32.7% $0 2017 40,365 11,889 28,476 29.5 0 2018 40,637 11,102 29,535 27.3 0 2019 40,205 10,877 29,328 27.1 0 2020 38,283 13,261 25,022 34.6 0 Source: CalPERS Actuarial Report dated July 2021. CalPERS Plan Actuarial Methods. The staff actuaries at CalPERS prepare annually an actuarial valuation which is typically delivered in the time period from July through October of each year (thus, the actuarial valuation dated July 2021 covered CalPERS’ fiscal year ended June 30, 2020). The actuarial valuations express the City’s required contribution which the City must contribute in the fiscal year immediately following the fiscal year in which the actuarial valuation is prepared (thus, the City’s contribution requirement derived from the actuarial valuation as of June 30, 2020 and shown in the report delivered in July 2021 affects the City’s fiscal year 2022-23 required contribution). CalPERS rules require the City to implement the actuary’s recommended rates. A-23 4893-2442-9341v3/022042-0044 The CalPERS Chief Actuary considers various factors in determining the assumptions to be used in preparing the actuarial report. Demographic assumptions are based on a study of the actual history of retirement, rates of termination/separation of employment, years of life expectancy after retirement, disability, and other factors. This experience study is generally done once every four years. The most recent experience study was completed in 2017 in connection with the preparation of actuarial recommendations by the CalPERS Chief Actuary as described below. In December 2016, the CalPERS Board approved lowering the funding discount rate to be phased in over three years: for fiscal year 2018-19 to a rate of 7.375 percent; for fiscal year 2019-20 to a rate of 7.25 percent; and for fiscal year 2020-21 to a rate of 7.0 percent. The funding discount rate includes a 15 basis- point reduction for administrative expenses, and the remaining decrease is consistent with the change in the financial reporting discount rate. As noted above, there is an approximately fifteen month lag between the time that CalPERS provides its annual actuarial valuation and the fiscal year in which the required contribution therein impacts the City. On November 18, 2015, the CalPERS Board adopted a Funding Risk Mitigation Policy that seeks to reduce funding risk over time. It establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return, and strategic asset allocation targets. Reducing the volatility of investment returns is expected to increase the long-term sustainability of CalPERS pension benefits for members. In February 2017, the CalPERS Board revised the Funding Risk Mitigation Policy. The revisions include suspension of the policy until fiscal year 2020-21, and a decrease of the required first excess investment return threshold from 4% to 2%. On July 12, 2021, CalPERS reported a preliminary 21.3 percent net return on investment for the fiscal year ending June 30, 2021. The return exceeds the system’s actuarially assumed 7 percent rate of return for the fiscal year. Using a 7 percent discount rate and these preliminary fiscal year returns, the funded status of the overall Public Employees Retirement Fund was estimated at 82 percent on a preliminary basis. Since the returns outperformed the discount rate, the Funding Risk Mitigation Policy described above was triggered. Approximately half of the excess return was used for rate relief and half of the excess return was used to lower the discount rate to 6.8 percent. CalPERS notes that for a given risk mitigation event, it is estimated that employer rates will decrease by about half of what they would have with no risk mitigation. The Funding Risk Mitigation Policy requires staff to implement a new strategic asset allocation that will take effect on October 1 of the fiscal year immediately following the year the policy was triggered—in this case, 2020-21 is the trigger year. CalPERS completed its Asset Liability Management Process in November 2021 and this effort resulted in a new strategic asset allocation that keeps the discount rate at 6.8 percent, and incorporates a 5 percent leverage allocation. An implementation plan for the strategic asset allocation, including benchmarks, ranges, and timeline, is anticipated at a future CalPERS Board meeting. The discount rate is lowered to 6.8 percent for all future years in accordance with thresholds established in the Funding Risk Mitigation Policy. The resulting impact to the required employer contribution rate changes are effective in fiscal year 2023-24 for public agencies. The discount rate reduction will be in effect until either the CalPERS Board makes the decision to change it, or another risk-mitigation event is triggered in a later year. Using this lower discount rate, CalPERS estimates on a preliminary basis the funded status of the overall Public Employees Retirement Fund at 80 percent. On February 14, 2018, the CalPERS Board of Administration adopted revisions to its actuarial amortization policy. Major revisions that affect state plans were made to the amortization of investment gains and losses, as well as to actuarial surplus. For the amortization of investment gains and losses, the amortization period was reduced from 30 years to 20 years, and the 5-year direct smoothing process was removed from the end of the amortization period. Amortization of actuarial surplus was eliminated. These A-24 4893-2442-9341v3/022042-0044 policy revisions will be applied to the amortization of investment gains and losses, and actuarial surplus, experienced on or after June 30, 2019. These revisions affect contributions starting in fiscal year 2020-21. Changes in Pension Accounting Standards. In June 2012, the Governmental Accounting Standards Board (“GASB”) adopted new standards (GASB Statement No. 68, or “GASB 68”) with respect to accounting and financial reporting by state and local government employers for defined benefit pension plans. The new standards revise the accounting treatment of defined benefit pension plans, changing the way expenses and liabilities are calculated and how state and local government employers report those expenses and liabilities in their financial statements. Major changes include: (i) the inclusion of unfunded pension liabilities on the government’s balance sheet (previously, such unfunded liabilities were typically included as notes to the government’s financial statements); (ii) pension expense incorporates more rapid recognition of actuarial experience and investment returns and is no longer based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates that are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities that are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. The reporting requirements took effect in the Fiscal Year 2015. For additional information relating to the City’s plan, see Note 13 to the City’s audited financial statements for Fiscal Year 2021 attached to the Official Statement as Appendix C. The above information is primarily derived from information produced by CalPERS, its independent accountants and its actuaries. The City has not independently verified the information provided and makes no representations nor expresses any opinion as to the accuracy of the information provided by CalPERS. The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future. Other Pension Benefits. The City offers its employees a deferred compensation plan created pursuant to Section 457 of the Internal Revenue Code whereby they can voluntarily contribute a portion of their earnings into a tax-deferred fund held in trust for the exclusive benefit of participants and their beneficiaries. Once the assets and income are placed in trust the City no longer owns the amounts deferred by employees and related income. For additional information relating to the City’s deferred compensation plan, see Note 15 to the City’s audited financial statements for Fiscal Year 2021 attached to the Official Statement as Appendix C. Other Post-Employment Benefits General. In accordance with City Resolution 89-42 dated September 1989, the City provides health insurance premiums costs to qualifying employees. Employees who began employment with the City prior to July 1, 2011 and who retire from the City on or after attaining age 55, with at least 5 years of service with the City, qualify to receive the post-employment benefit. The City pays 100% of the retirees’ and authorized dependents monthly medical premiums. As of June 30, 2019 actuarial valuation, the following current and former employees were covered by the benefit terms of the City’s OPEB Plan (the “OPEB Plan”): A-25 4893-2442-9341v3/022042-0044 Active 64 Inactive employees or beneficiaries currently receiving benefits 55 Inactive employees entitled to, but not yet receiving benefits 9 Total 128 Source: Audited Financial Statement for Fiscal Year 2021. Contributions. The OPEB Plan and its contribution requirements are established by Memoranda of Understanding with the applicable employee bargaining units and may be amended by agreements between the City and the bargaining units. The annual contribution is based on the actuarially determined contribution. For the measurement date ended June 30, 2020, the City’s cash contributions were $721,083 in total payments, which were recognized as a reduction to the City’s OPEB liability. Total OPEB Liability. The City’s total OPEB liability was measured as of June 30, 2020, and the total OPEB liability used to calculate the total OPEB liability was determined by an actuarial valuation dated as of June 30, 2019, based on the following actuarial methods and assumptions: City of Lake Elsinore Actuarial Assumptions for OPEB Benefit Plan Actuarial Cost Method Entry Age Normal Discount Rate 2.45% Inflation 2.50% Salary Increases 3.00% per annum, in aggregate Investment Rate of Return N/A Mortality Rate Based on assumptions for Public Agency Miscellaneous Plan members published in the December 2017 CalPERS Experience Study Pre-Retirement Turnover Rate Derived using CalPERS’ Membership Data for all funds Healthcare Trend Rate 6.4% for Fiscal Year 2020, gradually decreasing over several decades to an ultimate rate of 4.0% in Fiscal Year 2076 and later years. Source: Audited Financial Statement for Fiscal Year 2021. The discount rate used to measure the total OPEB liability was 2.45%. The projection of cash flows used to determine the discount rate assumed the City contributions will be made at rate equal the actuarially determined contribution rates. The discount rate was changed from 3.13% to 2.45% based on updated 20-year municipal bond rates. The changes in the total OPEB liability for the OPEB Plan are as follows: A-26 4893-2442-9341v3/022042-0044 Increase (Decrease) Total OPEB Liability Balance at June 30, 2019 (Measurement Date) $ 22,922,250 Changes Recognized for the Measurement Period: Service Cost $ 728,572 Interest on the total OPEB liability 726,138 Differences between expected and actual experience (43,169) Changes of Assumptions 2,563,159 Benefit Payments (903,028) Net Changes during July 1, 2019 to June 30, 2020 $ 3,071,672 Balance at June 30, 2020 (Measurement Date) $ 25,993,922 Source: Audited Financial Statement for Fiscal Year 2021. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the City if it were calculated using a discount rate that is 1-percentage-point lower (1.45 percent) or 1-percentage- point higher (3.45 percent) than the current discount rate: City of Lake Elsinore Sensitivity of the OPEB Benefit Plan Net Liability to Changes in the Discount Rate Current Discount Rate - 1% (1.45%) Current Discount Rate (2.45%) Current Discount Rate + 1% (3.45%) $30,572,009 $25,993,922 $22,352,585 Source: Audited Financial Statement for Fiscal Year 2021. Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates. The following presents the total OPEB liability of the City if it were calculated using a discount rate that is 1- percentage-point lower (1.45 percent) or 1-percentage- point higher (3.45 percent) than the current discount rate: City of Lake Elsinore Sensitivity of the OPEB Benefit Plan Net Liability to Changes in the Healthcare Cost Trend Rate 1% Decrease Current Healthcare Cost Trend Rate 1% Increase $21,774,324 $25,993,922 $31,438,579 Source: Audited Financial Statement for Fiscal Year 2021. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB. For the fiscal year ended June 30, 2021, the City recognized OPEB expense of $1,477,435. As of fiscal year ended June 30, 2021, the City reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Contributions subsequent to the measurement date $ 691,505 $ -- Changes in assumptions 3,173,288 1,069,015 Difference between projected and actual liability -- 954,451 Total $ 3,864,793 $ 2,023,466 Source: Audited Financial Statement for Fiscal Year 2021. A-27 4893-2442-9341v3/022042-0044 The $691,505 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability during the fiscal year ending June 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflow of resources related to pensions will be recognized as a reduction of the net pension liability in the subsequent fiscal period as follows: Year Ending June 30 2022 $22,725 2023 22,725 2024 80,083 2025 365,200 2026 385,751 Thereafter 273,338 Total $1,149,822 Source: Audited Financial Statement for Fiscal Year 2021. Labor Relations The City recognizes one employee organization, the United Public Employees of California, LIUNA Local 777 (“LIUNA”), which collectively represents 62 City employees in a variety of classifications. The contract with LIUNA is in effect until June 30, 2026. The City has not experienced a major work stoppage by City employees in the last five years. City Investment Policy The City maintains an Investment Policy, which, pursuant to the provisions of Section 53646 of the California Government Code, is annually submitted to and reviewed by the City Council. Any change in the Investment Policy in reviewed and approved by the City Council. Monthly reports are submitted by the Assistant City Manager (formerly the Director of Administrative Services) to the City Council, the City Manager and the City Treasurer, setting forth investment transactions. Additionally, quarterly reports are submitted by Assistant City Manager (formerly the Director of Administrative Services) to the City Council, the City Manager and the City Treasurer, which provides, for each individual investment, the type of investment, the issuer name, purchase date, maturity date, par value, purchase price, current market value and source of valuation and the overall portfolio yield based on cost. The goal of the Investment Policy is to set out the policies and procedures that enhance opportunities for a prudent and systematic investment program and to organize and formalize investment-related activities. The objectives of the Investment Policy are, in the following order of priority: FIRST, Safety of Principal – investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The City shall seek to preserve capital by mitigating credit risk and interest rate risk. Credit risk is to be mitigated through limiting investments to the types of securities authorized by the Investment Policy and portfolio diversification. Interest rate risk is to be mitigated by structuring the investment portfolio with marketable securities so that securities can be liquidated to meet cash flow needs or structuring the portfolio to mature to meet cash requirements for ongoing operations. SECOND, Liquidity, to ensure that the City’s investment portfolio will remain sufficiently liquid to enable the City to meet all reasonably anticipated operating requirements. Historical cash flow trends are compared to current cash flow requirements on an ongoing basis in an effort to ensure that the City’s investment portfolio will remain sufficiently liquid to enable the City to meet all reasonably anticipated operating requirements. A-28 4893-2442-9341v3/022042-0044 THIRD, Yield, to attain a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and the cash flow characteristics of the portfolio. The City’s investment alternatives are specified in California Government Code Sections 53600 et seq. Within this framework, the Investment Policy specifies authorized investments, subject to certain limitations. According to the City Treasurer’s Quarterly Report for the quarter ending March 31, 2022, the market value of the City’s funds was $30,936,529.47. The investment portfolio includes a variety of fixed income securities that vary in maturity from one day to five years. On March 31, 2022, 2.78% of the City’s total portfolio was invested in investments with a maturity of less than a year, 54.16% in investments with a maturity between 1 to 3 years, 33.44% in investments with a maturity of 3 to 4 years and 9.62% in investments with a maturity of up to 5 years. As of March 31, 2022, the portfolio of invested City funds had an average maturity of 2.76 years. For additional information relating to the City’s investments, see Note 3 to the City’s audited financial statements for Fiscal Year 2021 attached to the Official Statement as Appendix C. B-1 4893-2442-9341v3/022042-0044 APPENDIX B SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS [TO BE INSERTED BY BOND COUNSEL] C-1 4893-2442-9341v3/022042-0044 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021 D-1 4893-2442-9341v3/022042-0044 APPENDIX D PROPOSED FORM OF BOND COUNSEL OPINION ________ __, 2022 Lake Elsinore Facilities Financing Authority 130 South Main Street Lake Elsinore, California 92530 Re: $____________ Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A We have acted as bond counsel to the Lake Elsinore Facilities Financing Authority (the “Authority”) in connection with the issuance by the Authority of $__________ Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A (the “Bonds”), pursuant to the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Bond Law”), and pursuant to an Indenture, dated as of June 1, 2022, (the “Indenture”) by and among the Authority, the City of Lake Elsinore (the “City”) and Wilmington Trust, National Association, as Trustee. The Bonds will be principally secured by lease payments to be made by the City pursuant to a Lease Agreement, dated as of June 1, 2022 (the “Lease”), by and between the Authority and the City. We have examined the law and such certified proceedings and other documents, agreements, opinions and matters as we deem necessary to render this opinion. This opinion is based on current statutory and constitutional law and published court decisions as of the date hereof. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Indenture. As to questions of fact material to our opinion, we have relied upon representations of the Authority contained in the Indenture and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. We have assumed the genuineness of all documents and signatures presented to us, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions referred to in the preceding paragraphs of this opinion. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Lease and the Ground Lease. We call attention to the fact that the rights and obligations under the Bonds, the Indenture, the Lease, the Ground Lease, the Assignment Agreement and the Tax Certificate may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, by the application of equitable principles and the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities and public agencies in the State of California. We express no opinion herein with respect to any indemnification, contribution, choice of law, choice of forum, penalty or waiver provisions contained in the Bonds, the Indenture, the Lease, the Ground Lease or the Assignment Agreement; nor do we express any opinion with respect to the state or quality of title to any of the real or personal property described in the Lease or the Ground Lease, or the accuracy or sufficiency of the description contained therein, or the remedies available to enforce liens on, any such property contained therein. D-2 4893-2442-9341v3/022042-0044 Based upon the foregoing we are of the opinion, under existing law, as follows: 1. The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California with the full power to enter into the Indenture and the Lease, to perform the agreements on its part contained therein and to issue the Bonds. 2. The Indenture and the Lease have each been duly authorized, executed and delivered by the Authority and the Indenture and the Lease constitute the valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms. The Indenture creates a valid pledge of the Base Rental Payments and other moneys pledged under the Indenture, subject to the provisions of the Indenture. 3. The Indenture and the Lease have each been duly authorized, executed and delivered by the City and the Indenture and the Lease constitute the valid and binding obligations of the City enforceable against the City in accordance with their respective terms. 4. The Bonds have been duly and validly authorized by the Authority and are legal, valid and binding limited obligations of the Authority, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are limited obligations of the Authority payable solely from the Base Rental Payments and other moneys pledged under the Indenture as provided in the Indenture, but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. The Authority has no taxing power. 5. Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. 6. Interest (and original issue discount) on the Bonds is exempt from personal income taxes imposed in the State of California. 7. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond Owner will increase the Bond Owner’s basis in the applicable Bond. Original issue discount that accrues to the Bond Owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals (as described in paragraph 5 above) and is exempt from State of California personal income tax. 8. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. The opinions expressed in paragraphs (5) and (7) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as D-3 4893-2442-9341v3/022042-0044 amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority and the City have covenanted to comply with all such requirements. Except as set forth in paragraphs (5), (6), (7) and (8) above, we express no opinion as to any tax consequences related to the Bonds. Certain requirements and procedures contained or referred to in the Indenture, the Lease and Tax Certificate may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in the Indenture, the Lease and Tax Certificate, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. We express no opinion as to the effect on the exclusion of interest on the Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds, nor do we express any opinion with respect to the state or quality of title to any of the real or personal property described in the Indenture or the Lease, or the accuracy or sufficiency of the description of any such property contained therein. We expressly disclaim any duty to advise the Owners of the Bonds with respect to the matters contained in the Official Statement and any other offering material relating to the Bonds. We have not made or undertaken to make an investigation of the state of title to any of the real property described in the Lease or of the accuracy or sufficiency of the description of such property contained therein, and we express no opinion with respect to such matters. Respectfully submitted, E-1 4893-2442-9341v3/022042-00444893-2442-9341v2/022042-0044 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE F-1 4893-2442-9341v3/022042-0044 APPENDIX F BOOK-ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Series 2022 Bonds, payment of principal, premium, if any, accreted value and interest on the Series 2022 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Series 2022 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. 1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Series 2022 Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each maturity of the Securities in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world’s largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corp oration” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and mo ney market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is al so available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Par ticipants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction , as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owner s. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an F-2 4893-2442-9341v3/022042-0044 authorized representative of DTC. The deposit of Securities with DTC and their registration in the name o f Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf o f their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and tr ansmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Principal, redemption price and interest payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “str eet name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursemen t of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. If applicable, a Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to tender/remarketing agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s re cords, to tender/remarketing agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participan ts on DTC’s records and followed by a book-entry credit of tendered Securities to tender/remarketing agent’s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. G-1 4893-2442-9341v3/022042-0044 APPENDIX G SUPPLEMENTAL INFORMATION—THE CITY OF LAKE ELSINORE The following information relating to the City of Lake Elsinore (the “City”) and the County of Riverside, California (the “County”) is supplied solely for purposes of information. The County is not obligated in any manner to pay principal of or interest on the Series 2022 Bonds or to cure any delinquency or default on the Series 2022 Bonds. The Series 2022 Bonds are payable solely from the sources described in the Official Statement. General The City was founded in 1883 and incorporated as a general law city effective April 23, 1888 in San Diego County. In 1893, the Elsinore Valley, previously located in San Diego County, became part of the new County of Riverside. The City encompasses approximately 43 square miles, with over 10 miles of lakeshore, and is located at the southwestern end of the County, 73 miles southeast of downtown Los Angeles and 74 miles north of downtown San Diego. Population The following table offers population figures for the City, the County and the State for 2017 through 2021. Area 2017 2018 2019 2020 2021 City of Lake Elsinore 61,574 62,536 63,154 63,453 64,762 County of Riverside 2,376,580 2,400,762 2,422,146 2,442,304 2,454,453 State of California 39,398,702 39,586,646 39,695,376 39,782,870 39,466,855 Source: California State Department of Finance, Demographic Research Unit. 2010 Census Benchmark. Building Activity The following tables provide summaries of the building permit valuations and the number of new dwelling units authorized in the City and County from 2016 through 2020. BUILDING PERMIT VALUATIONS City of Lake Elsinore 2016-2020 (Dollars in Thousands) 2016 2017 2018 2019 2020 Valuation ($000): Residential $121,212 $ 165,978 $ 102,858 $ 94,437 $ 101,321 Non-residential 18,588 13,739 13,307 26,442 4,248 Total* $139,800 $ 179,717 $ 116,165 $ 120,879 $ 105,569 Residential Units: Single family 457 569 345 327 410 Multiple family 0 0 0 83 0 Total 457 569 345 410 410 * Totals may not add to sums because of rounding. Source: Construction Industry Research Board. G-2 4893-2442-9341v3/022042-0044 BUILDING PERMIT VALUATIONS County of Riverside 2016-2020 (Dollars in Thousands) 2016 2017 2018 2019 2020 Valuation ($000): Residential $1,759,535 $1,903,417 $2,558,081 $2,275,405 $2,519,303 Non-residential 1,346,019 1,433,691 1,959,680 1,285,856 1,153,778 Total* $3,105,554 $3,337,108 $4,517,761 $3,561,261 $3,673,081 Residential Units: Single family 5,662 6,265 7,540 6,563 8,443 Multiple family 1,039 1,070 1,628 1,798 723 Total 6,701 7,335 9,168 8,361 9,166 * Totals may not add to sums because of rounding. Source: Construction Industry Research Board. Employment The following tables show the largest employers located in the City and County as of June 30, 2021. LARGEST EMPLOYERS City of Lake Elsinore (as of June 30, 2021) Rank Name of Business Employees Type of Business 1. Lake Elsinore Unified School District 2,524 School District 2. M & M Framing 450 Construction 3. Stater Bros 328 Supermarkets 4. Costco 312 Retail Stores 5. Walmart 295 Retail Stores 6. Lake Elsinore Hotel & Casino 230 Casino & Resort 7. Riverside County – Dept. of Social Services 179 Government 8. Elsinore Valley Municipal Water District 167 Water District 9. Home Depot 143 Building Supplies 10. City of Lake Elsinore 118 Government Source: City of Lake Elsinore Comprehensive Annual Financial Report for the year ending June 30, 2021. G-3 4893-2442-9341v3/022042-0044 LARGEST EMPLOYERS County of Riverside (as of June 30, 2021) Rank Name of Business Employees Type of Business 1. County of Riverside 22,952 County Government 2. Amazon 10,500 Online Retail 3. March Air Reserve Base 9,600 Military Reserve Base 4. University of California-Riverside 8,909 University 5. Stater Brothers Markets 8,304 Supermarkets 6. Moreno Valley Unified School District 6,250 School District 7. Kaiser Permanente Riverside Medical Center 5,780 Medical Center 8. Corona-Norco Unified School District 5,478 School District 9. Hemet Unified School District 4,460 School District 10. Ross Dress for Less 4,313 Retail Stores Source: County of Riverside Comprehensive Annual Financial Report for the year ending June 30, 2021. Employment and Industry Employment data by industry is not separately reported on an annual basis for the City but is compiled for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”), which includes all of Riverside and San Bernardino Counties. In addition to varied manufacturing employment, the MSA has large and growing commercial and service sector employment, as reflected in the table below. G-4 4893-2442-9341v3/022042-0044 The following table represents the Annual Average Labor Force and Industry Employment for the period from 2017 through 2021. RIVERSIDE-SAN BERNARDINO-ONTARIO METROPOLITAN STATISTICAL AREA INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE 2017 2018 2019 2020 2021 Civilian Labor Force 2,012,900 2,045,000 2,074,500 2,088,600 2,118,200 Civilian Employment 1,909,500 1,956,800 1,989,700 1,880,500 1,961,800 Civilian Unemployment 103,400 88,200 84,800 208,100 156,400 Civilian Unemployment Rate 5.1% 4.3% 4.1% 10.0% 7.4% Total Farm 14,500 14,500 15,400 14,100 13,900 Total Nonfarm 1,453,300 1,506,600 1,552,800 1,495,200 1,569,100 Total Private 1,202,300 1,249,400 1,291,600 1,247,200 1,325,400 Goods Producing 196,400 206,100 208,900 201,300 205,400 Mining & Logging 1,000 1,200 1,200 1,300 1,400 Construction 97,400 105,200 107,200 104,900 109,200 Manufacturing 98,000 99,800 100,600 95,100 94,800 Service Providing 1,256,900 1,300,500 1,343,800 1,293,900 1,363,700 Trade, Transportation & Utilities 363,900 379,400 395,100 406,900 443,100 Wholesale Trade 63,100 66,100 67,700 65,600 67,000 Retail Trade 180,900 181,200 180,700 168,800 177,600 Transportation, Warehousing & Utilities 119,900 132,100 146,600 172,500 198,600 Information 11,600 11,400 11,500 9,400 9,600 Financial Activities 44,700 44,600 45,000 44,100 44,900 Professional & Business Services 147,300 152,000 158,700 155,400 167,300 Educational & Health Services 226,700 239,500 250,300 248,700 253,300 Leisure & Hospitality 166,300 170,600 175,900 141,300 158,900 Other Services 45,400 45,800 46,200 40,200 43,000 Government 251,000 257,200 261,200 248,000 243,600 Total, All Industries 1,467,800 1,521,100 1,568,100 1,509,300 1,583,000 Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The “Total, All Industries” data is not directly comparable to the empl oyment data found in this Appendix D. Source: State of California, Employment Development Department, March 2021 Benchmark. G-5 4893-2442-9341v3/022042-0044 The following table summarizes the labor force, employment and unemployment figures for the period from 2016 through 2020 for the City, the County, the State and the nation as a whole. CITY OF LAKE ELSINORE, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA AND UNITED STATES Average Annual Civilian Labor Force, Employment and Unemployment Year and Area Labor Force Employment(1) Unemployment(2) Unemployment Rate (%)(3) 2017 City of Lake Elsinore 29,400 28,000 1,400 4.8% County of Riverside 1,073,400 1,017,100 56,300 5.2 State of California 19,205,300 18,285,500 919,800 4.8 United States 160,320,000 153,337,000 6,982,000 4.4 2018 City of Lake Elsinore 30,000 28,800 1,200 4.0% County of Riverside 1,092,400 1,044,600 47,800 4.4 State of California 19,398,200 18,582,800 815,400 4.2 United States 162,075,000 155,761,000 6,314,000 3.9 2019 City of Lake Elsinore 30,800 29,600 1,200 3.9% County of Riverside 1,104,000 1,057,900 46,100 4.2 State of California 19,411,600 18,627,400 784,200 4.0 United States 163,539,000 157,538,000 6,001,000 3.7 2020 City of Lake Elsinore 31,300 28,100 3,100 10.1% County of Riverside 1,107,700 997,700 110,000 9.9 State of California 18,821,200 16,913,100 1,908,100 10.1 United States 160,472,000 147,795,000 12,947,000 8.1 2021 City of Lake Elsinore 30,100 27,800 2,300 7.6% County of Riverside 1,129,600 1,046,700 82,800 7.3 State of California 18,923,200 17,541,900 1,381,200 7.3 United States 161,204,000 152,581,000 8,623,000 5.3 Note: Data is not seasonally adjusted. (1) Annual averages, unless otherwise specified. (2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table. Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. 2021 Benchmark. G-6 4893-2442-9341v3/022042-0044 Personal Income Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance. The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients. Total personal income in Riverside County increased by 71.0% between 2008 and 2020. The following tables summarize personal income for Riverside County for 2008 through 2020. PERSONAL INCOME Riverside County 2008-2020 (Dollars in Thousands) Year Riverside County Annual Percent Change 2008 $66,718,107 --% 2009 65,363,159 (2.0) 2010 67,585,240 3.4 2011 71,936,625 6.4 2012 74,050,799 2.9 2013 76,519,738 3.3 2014 80,776,153 5.6 2015 86,196,663 6.7 2016 90,713,807 5.2 2017 94,542,096 4.2 2018 99,266,122 5.0 2019 104,794,676 5.6 2020 114,090,413 8.8 Source: U.S. Department of Commerce, Bureau of Economic Analysis. The following table summarizes per capita personal income for Riverside County, California and the United States for 2008-2020. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area. G-7 4893-2442-9341v3/022042-0044 PER CAPITA PERSONAL INCOME Riverside County, State of California and the United States 2008-2020 Year Riverside County California United States 2008 $31,624 $43,890 $40,904 2009 30,448 42,044 39,284 2010 30,699 43,636 40,547 2011 32,200 46,175 42,739 2012 32,748 48,813 44,605 2013 33,462 49,303 44,860 2014 34,875 52,363 47,071 2015 36,745 55,833 49,019 2016 38,114 58,048 50,015 2017 39,148 60,549 52,118 2018 40,587 63,720 54,606 2019 42,418 66,619 56,490 2020 45,834 70,192 59,510 Source: U.S. Department of Commerce, Bureau of Economic Analysis. Taxable Sales The table below presents taxable sales for the years 2017 through 2021 for the City. TAXABLE SALES City of Lake Elsinore 2017-2021 (Dollars in Thousands) Year Permits Taxable Transactions 2017 1,529 $ 854,947 2018 1,626 869,151 2019 1,692 905,476 2020 1,843 1,015,341 2021 1,907 1,294,278 Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2017-2021. The table below presents taxable sales for the years 2017 through 2021 for the County. TAXABLE SALES County of Riverside 2017-2021 (Dollars in Thousands) Year Permits Taxable Transactions 2017 58,969 $34,132,814 2018 61,433 38,919,497 2019 64,063 40,557,844 2020 69,284 42,313,474 2021 64,335 43,414,533 Source: Taxable Sales in California, California Department of Tax and Fee Administration for 201 7-2021 H-1 4893-2442-9341v3/022042-0044 APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY Stradling Yocca Carlson & Rauth Draft of 5/2/22 4854-9725-7757v3/022042-0044 RECORDING REQUESTED BY: Lake Elsinore Facilities Financing Authority AND WHEN RECORDED RETURN TO: Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Brian Forbath, Esq. [Space above for Recorder’s use.] This Transaction is Exempt from California Documentary Transfer Tax Pursuant to Section 11921 of the California Revenue and Taxation Code. This Document is Exempt from Recording Fees Pursuant to Section 27383 of the California Government Code. Lease term is less than 35 years. GROUND LEASE by and between CITY OF LAKE ELSINORE and LAKE ELSINORE FACILITIES FINANCING AUTHORITY Dated as of June 1, 2022 Relating to $__________ LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2022A 4854-9725-7757v3/022042-0044 GROUND LEASE THIS GROUND LEASE (this “Ground Lease”), executed and entered into as of June 1, 2022, is by and between the CITY OF LAKE ELSINORE (the “City”), a municipal corporation and general law city duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessor, and the LAKE ELSINORE FACILITIES FINANCING AUTHORITY (the “Authority”), a joint exercise of powers entity duly organized and existing under the laws of the State of California, as lessee. WITNESSETH: WHEREAS, the City and the Authority desire to finance a portion of the costs of the acquisition, construction and installation of various public improvements (the “Project”); WHEREAS, in order to finance the Project the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to this Ground Lease, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated the date hereof; WHEREAS, the Property is more particularly described in Exhibit A hereto; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance the Project through the issuance by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement; WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City and Wilmington Trust, National Association, as trustee (the “Trustee”); WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof (the “Assignment Agreement”); WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Ground Lease do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Ground Lease; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows: 2 4854-9725-7757v3/022042-0044 ARTICLE I DEFINITIONS Except as otherwise defined herein, or unless the context clearly otherwise requires, words and phrases defined in Article I of the Lease Agreement shall have the same meaning in this Ground Lease. ARTICLE II LEASE OF THE PROPERTY; RENTAL Section 2.01 Lease of Property. The City hereby leases to the Authority, and the Authority hereby leases from the City, for the benefit of the Owners of the Bonds, the Property, and all rights appurtenant thereto, including, but not limited to, rights of access, subject only to Permitted Encumbrances, to have and to hold for the term of this Ground Lease. Section 2.02 Rental. The Authority shall pay to the City as and for rental of the Property hereunder, the sum of $1.00, the receipt of which is hereby acknowledged. ARTICLE III QUIET ENJOYMENT Section 3.01 The parties intend that the Property will be leased back to the City pursuant to the Lease Agreement for the term thereof. It is further intended that, to the extent provided herein and in the Lease Agreement, if an event of default occurs under the Lease Agreement, the Authority, or its assignee, will have the right, for the then remaining term of this Ground Lease to (a) take possession of the Property, (b) if it deems it appropriate, cause an appraisal of the Property and a study of the then reasonable use thereof to be undertaken, and (c) relet the Property. Subject to any rights the City may have under the Lease Agreement (in the absence of an event of default) to possession and enjoyment of the Property, the City hereby covenants and agrees that it will not take any action to prevent the Authority from having quiet and peaceable possession and enjoyment of the Property during the term hereof and will, at the request of the Authority and at the City’s cost, to the extent that it may lawfully do so, join in any legal action in which the Authority asserts its right to such possession and enjoyment. ARTICLE IV SPECIAL COVENANTS AND PROVISIONS Section 4.01 Waste. The Authority agrees that at all times that it is in possession of the Property, it will not commit, suffer or permit any waste on the Property, and that it will not willfully or knowingly use or permit the use of the Property for any ille gal purpose or act. Section 4.02 Further Assurances and Corrective Instruments. The City and the Authority agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Property hereby 3 4854-9725-7757v3/022042-0044 leased or intended so to be or for carrying out the expressed intention of this Ground Lease, the Indenture and the Lease Agreement. Section 4.03 Waiver of Personal Liability. All liabilities under this Ground Lease on the part of the Authority shall be solely liabilities of the Authority as a joint exercise of powers entity, and the City hereby releases each and every director, officer and em ployee of the Authority of and from any personal or individual liability under this Ground Lease. No director, officer or employee of the Authority shall at any time or under any circumstances be individually or personally liable under this Ground Lease to the City or to any other party whomsoever for anything done or omitted to be done by the Authority hereunder. All liabilities under this Ground Lease on the part of the City sha ll be solely liabilities of the City as a public corporation, and the Authority hereby releases each and every member, officer and employee of the City of and from any personal or individual liability under this Ground Lease. No member, officer or employee of the City shall at any time or under any circumstances be individually or personally liable under this Ground Lease to the Authority or to any other party whomsoever for anything done or omitted to be done by the City hereunder. Section 4.04 Taxes. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Property or the Authority’s interest under this Ground Lease. Section 4.05 Right of Entry. The City reserves the right for any of its duly authorized representatives to enter upon the Property at any reasonable time to inspect the same. Section 4.06 Representations of the City. The City represents and warrants to the Authority and the Trustee as follows: (a) the City is the owner in fee of the Property; (b) the City has the full power and authority to enter into, to execute and to deliver this Ground Lease, and to perform all of its duties and obligations h ereunder, and has duly authorized the execution of this Ground Lease; (c) except for Permitted Encumbrances, the Property is not subject to any dedication, easement, right of way, reservation in patent, covenant, condition, restriction, lien or encumbrance which would prohibit or materially interfere with the use of the Property for governmental purposes as contemplated by the City; (d) all taxes, assessments or impositions of any kind with respect to the Property, except current taxes, have been paid in full; and (e) the Property is necessary to the City in order for the City to perform its governmental functions. Section 4.07 Representations of the Authority. The Authority represents and warrants to the City and the Trustee that the Authority has the full power and authority to enter into, to execute and to deliver this Ground Lease, and to perform all of its duties and obligations hereunder, and has duly authorized the execution and delivery of this Ground Lease. 4 4854-9725-7757v3/022042-0044 Section 4.08 Eminent Domain. If the whole or any part of the Property, or any improvements thereon, are taken by eminent domain proceedings, the interest of the Authority will be 100% of the aggregate amount of the then unpaid principal components of all of the Base Rental Payments and any Additional Rental Payments payable under the Lease Agreement. The award of such eminent domain proceedings shall be applied in accordance with Section 7.01 of the Lease Agreement. ARTICLE V ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING Section 5.01 Assignment and Subleasing. This Ground Lease may be sold or assigned and the Property subleased, as a whole or in part, by the Authority without the necessity of obtaining the consent of the City, if an event of default occurs under the Lease Agreement. The Authority shall, within 30 days after such an assignment, sale or sublease, furnish or cause to be furnished to the City a true and correct copy of such assignment, sale or sublease, as the case may be. Section 5.02 Restrictions on City. The City agrees that, except with respect to Permitted Encumbrances, it will not mortgage, sell, encumber, assign, transfer or convey the Property or any portion thereof during the term of this Ground Lease. ARTICLE VI TERM; TERMINATION Section 6.01 Term. The term of this Ground Lease shall commence as of the date of commencement of the term of the Lease Agreement and shall remain in full force and effect from such date to and including [April 1, 2052], unless such term is extended or sooner terminated as hereinafter provided. Section 6.02 Extension; Early Termination. If, on [April 1, 2052], the Bonds shall not be fully paid, or provision therefor made in accordance with Article X of the Indenture, or the Indenture shall not be discharged by its terms, or if the Rental Payments payable under the Lease Agreement shall have been abated at any time, [or amounts are owed to the Insurer pursuant to the terms of the Insurance Policy, the Reserve Surety Policy, the Lease Agreement or the Indenture], then the term of this Ground Lease shall be automatically extended until the date upon which all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the Indenture, and the Indenture shall be discharged by its terms, except that the term of this Ground Lease shall in no event be extended more than ten years. If, prior to [April 1, 2052], all Bonds shall be fully paid, or provisions therefor made in accordance with Article X of the Indenture, and the Indenture shall be discharged by its terms, the term of this Ground Lease shall end simultaneously therewith. Section 6.03 Action on Default. In each and every case upon the occurrence and during the continuance of a default by the Authority hereunder, the City shall have all rights and remedies permitted by law, except that no merger of this Ground Lease and the Lease Agreement shall be deemed to occur as a result thereof, and the City, to the extent permitted by law, waives any and all rights to terminate this Ground Lease by reason of any default on the part of the Authority if such termination would affect or impair any assignment of the Lease Agreement then in effect between the Authority and the Trustee. 5 4854-9725-7757v3/022042-0044 ARTICLE VII MISCELLANEOUS Section 7.01 Binding Effect. This Ground Lease shall inure to the benefit of and shall be binding upon the City, the Authority and their respective successors and assigns. Section 7.02 Severability. In the event any provision of this Ground Lease shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 7.03 Amendments, Changes and Modifications. This Ground Lease may be amended, changed, modified, altered or terminated only in accordance with the provisions of the Lease Agreement. Section 7.04 Assignment to Trustee. The Authority and City acknowledge that the Authority has assigned its right, title and interest in and to this Ground Lease (but none of its obligations and none of its rights to provide consents or approvals hereunder) to the Trustee pursuant to certain provisions of the Assignment Agreement. The City consents to such assignment. Section 7.05 Execution In Counterparts. This Ground Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.06 Applicable Law. This Ground Lease shall be governed by and construed in accordance with the laws of the State of California. Section 7.07 [Insurer as Third Party Beneficiary. The Insurer is intended as a third party beneficiary to this Ground Lease.] Section 7.08 Captions. The captions or headings in this Ground Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Ground Lease. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] S-1 4854-9725-7757v3/022042-0044 IN WITNESS WHEREOF, the Authority and the City have caused this Ground Lease to be executed by their respective officers hereunto duly authorized, all as of the day and year first ab ove written. CITY OF LAKE ELSINORE By: Jason Simpson City Manager ATTEST: Candice Alvarez City Clerk LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Jason Simpson Executive Director ATTEST: Candice Alvarez Secretary 4854-9725-7757v3/022042-0044 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the Lake Elsinore Facilities Financing Authority (the “Authority”), a body corporate and politic, is hereby accepted by the undersigned officer or agent on behalf of the Board of Directors of the Authority (the “Board”), pursuant to authority conferred by resolutions of said Board adopted on May 10, 2022, and the grantee consents to recordation thereof by its duly authorized officer. Dated: __________, 2022 LAKE ELSINORE FACILITIES FINANCING AUTHORITY By: Jason Simpson Executive Director 4854-9725-7757v3/022042-0044 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss. COUNTY OF RIVERSIDE ) On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 SIGNATURE OF NOTARY PUBLIC 4854-9725-7757v3/022042-0044 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss. COUNTY OF RIVERSIDE ) On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that t he foregoing paragraph is true and correct. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 4854-9725-7757v3/022042-0044 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) ss. COUNTY OF RIVERSIDE ) On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/he r/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 SIGNATURE OF NOTARY PUBLIC A-1 4854-9725-7757v3/022042-0044 EXHIBIT A DESCRIPTION OF THE PROPERTY [TO COME] Stradling Yocca Carlson & Rauth Draft of 5/2/22 1 4871-0747-7277v3/022042-0044 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate, dated as of June 1, 2022 (the “Disclosure Certificate”) is executed and delivered by the City of Lake Elsinore (the “City”) in connection with the execution and delivery of the Lake Elsinore Facilities Financing Authority’s (the “Authority”) $________ Lease Revenue Bonds, Series 2022A (the “Bonds”). WHEREAS, the Bonds are being issued pursuant to an Indenture, dated as of June 1, 2022 (the “Indenture”), by and among the Authority, the City and Wilmington Trust, National Association, as trustee (the “Trustee”). WHEREAS, the Bonds are payable from the base rental payments to be made by the City under the Lease Agreement, dated as of June 1, 2022 (the “Lease Agreement”), between the City, as lessee, and the Authority, as lessor; and WHEREAS, this Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below). NOW, THEREFORE, the City covenants as follows: SECTION 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unl ess otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” shall mean any Comprehensive Annual Financial Report provided by the City pursuant to, and as described in, Sections 2 and 3 of this Disclosure Certificate. “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. “Disclosure Representative” shall mean the City Manager of the City, the Assistant City Manager of the City or their designee, or such other officer or emp loyee as the City shall designate in writing from time to time. “Dissemination Agent” shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. “Financial Obligation” shall mean a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. 2 4871-0747-7277v3/022042-0044 “Listed Events” shall mean any of the events listed in Section 4(a) and (b) of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designed by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” shall mean the Official Statement relating to the Bonds, dated _______, 2022. “Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated, the original Underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California. SECTION 2. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than February 15 of each year (the “Annual Report Date”), commencing February 15, 2023, with the report for the 2021-22 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 3 of this Disclosure Certificate, with a copy to the Trustee. Not later than five (5) Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent, if other than the City. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Certificate. If the City’s fiscal year changes, the City, upon becoming aware of such change, shall give notice of such change in the same manner as for a Listed Event under Section 4(c). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report. (b) If by five (5) Business Days prior to the Annual Report Date, the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall notify the City of such non-receipt. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the Annual Report Date, the Dissemination Agent shall provide a notice in substantially the form attached hereto as Exhibit A, in a timely manner to the MSRB (with a copy to the Trustee and the Participating Underwriter). (d) Unless the City has done so pursuant to Section 3(a) above, the Dissemination Agent (if other than the City) shall: 3 4871-0747-7277v3/022042-0044 (i) determine each year prior to the Annual Report Date the then -applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports ; and (ii) if the Dissemination Agent is other than the City, file a certificate with the City to the effect that the Annual Report has been provided pursuant to this Disclosu re Certificate, stating, to the extent it can confirm such filing of the Annual Report, the date it was provided. SECTION 3. Content of Annual Reports. The City’s Annual Report shall contain or include by reference the following: (a) The City’s audited financial statements, prepared in accordance with generally accepted auditing standards for municipalities in the State of California. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuan t to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) To the extent not included in the City’s audited financial statements required pursuant to Section 3(a) hereof, the following information: (i) The principal amount of the Bonds outstanding; (ii) The balance in the Reserve Fund; (iii) The City’s adopted general fund budget for the fiscal year then ended; (iv) Total property assessed values within the City, which may be in the form of Table 4 in the Official Statement; (v) Property tax levies and collections, which may be in the form of Table 5 in the Official Statement; and (vi) Top ten principal taxpayers within the City, which may be in the form of Table 6 in the Official Statement. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or rela ted public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference. SECTION 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 4, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) business days after the event: 1. principal and interest payment delinquencies; 4 4871-0747-7277v3/022042-0044 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. issuance by the Internal Revenue Service of proposed or final d etermination of taxability or of a Notice of Proposal Issue (IRS Form 5701-TEB); 6. tender Offers; 7. defeasances; 8. rating changes; 9. bankruptcy, insolvency, receivership or similar proceedings; and Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. 10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 4, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material in a timely manner not more than ten (10) business days after occurrence: 1. unless described in Section 4(a)(5), adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. modifications to the rights of Bondholders; 3. bond calls; 4. release, substitution or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 5 4871-0747-7277v3/022042-0044 6. the consummation of a merger, consolidati on, or acquisition involving the City or the Authority or the sale of all or substantially all of the assets of the City or the Authority, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; 7. appointment of a successor or additional trustee or the change of the name of a trustee; and 8. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders. (c) If the City determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. (d) The City hereby agrees that the undertaking se t forth in this Disclosure Agreement is the responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall not be responsible for determining whether the City’s in structions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 5. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. SECTION 6. Termination of Reporting Obligation. The obligations of the City, the Trustee and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 4(c). SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion o f nationally recognized bond counsel, such amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first 6 4871-0747-7277v3/022042-0044 consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (o r in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 4(c), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantita tive form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence o f a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to c omply with this Disclosure Agreement shall be an action to compel performance. No Bond holder or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written ev idence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent . The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders, or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. 7 4871-0747-7277v3/022042-0044 SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, if any, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. CITY OF LAKE ELSINORE By: City Manager A-1 4871-0747-7277v3/022042-0044 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Lake Elsinore Facilities Financing Authority Name of Issue: Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2022A Date of Issuance: _________, 2022 NOTICE IS HEREBY GIVEN that the City of Lake Elsinore (the “City”) has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated _________ , 2022, executed by the City. [The City anticipates that the Annual Report will be filed by __________.] Dated: __________ CITY OF LAKE ELSINORE By: