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SR 11-28-2017 3O City Council Public Financing Authority Report City Council Meeting: November 28, 2017 Agenda Item: 3.O 1 of 3 To: Public Financing Authority, Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department, Treasury Subject: Prepayment and Defeasance of Lease Revenue Bonds, Series 2009 Recommended Action Staff recommends that the City Council: 1. Adopt the attached Resolution Authorizing the Defeasance of the Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project) and Authorizing the Execution of Necessary Documents and Certificates and Related Actions (Attachment A) and approve the related documents required for the defeasance and prepayment of the Bonds (Attachments C and D). Staff recommends that the Public Financing Authority: 2. Adopt the attached Resolution Authorizing the Defeasance of the Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project) and Authorizing the Execution of Necessary Documents and Certificates and Related Actions (Attachment B) and approve the related documents required for the defeasance and prepayment of the Bonds (Attachments C and D). Executive Summary Over the years, Santa Monica has financed the construction of some of its most important facilities serving the City and public through lease revenue bonds. Staff recommends prepayment of the four remaining years of lease payments on the Public Financing Authority’s Series 2009 Lease Revenue Refunding Bonds, Series 2009 issued for the construction of the Public Safety Facility. Prepayment of the Series 2009 Bonds at this time will allow the Public Safety Facility to be used as security for a future issuance of future lease revenue bonds, such as to finance the new Fire Station 1 project. Background 2 of 3 The Public Safety Facility, headquarters for both the Santa Monica Police and Fire Departments, was constructed using proceeds from two series of Lease Revenue Bonds issued by the Authority in 1999 and 2002. The Series 1999 and Series 2002 Bonds were refinanced through the Authority’s issuance of Lease Revenue Refunding Bonds Series 2009 and Series 2011B. The Series 2009 Bonds are secured by lease payments made from the General Fund for use and occupancy of the Public Safety Facility. The 2011B Bonds are secured by lease payments made from the General Fund for use and occupancy of Parking Structure 6. Discussion Staff is recommending prepayment of the Series 2009 Bonds to enable the Public Safety Facility to be used as security for a future issuance of Lease Revenue Bonds. The Public Safety Facility has an insured value of $45.5 million, however, the par amount of Series 2009 Bonds currently outstanding is much less at $3.35 million. Four lease payments of approximately $950,000 remain for Fiscal Years 2017-18 through 2020-21. The total amount of General Funds required for the prepayment is estimated to be approximately $2.6 million. The prepayment amount takes into account the principal balance of Series 2009 Bonds, interest payments remaining, interest earnings on the escrow account and the present balance in the Series 2009 Debt Service Reserve Fund of approximately $1.2 million. The City would transfer the prepayment amount to the Authority, which would use the prepayment to establish an escrow account with the Bond Trustee that would make the future payments of debt service on the Series 2009 Bonds. Once the escrow fund is established and other requirements of the Series 2009 Bond Indenture are met, the Public Safety Facility title will transfer back to the City and can be used to secure future issuances of lease revenue bonds for future City projects. The Resolutions also authorize the termination of a Forward Delivery Agreement used for the investment of the Series 2009 Debt Service Reserve Fund that is no longer required once the bonds have been defeased. 3 of 3 While there are no savings or additional costs related to the prepayment other than transaction related costs, the use of the Public Safety Facility to secure a future financing will provide savings at the time of the bond financing. Financial Impacts & Budget Actions There are no savings or costs related to this action other than the legal and financial advisory costs of arranging for the prepayment and establishing escrow. At its October 24, 2017 meeting, Council approved the set-aside of $2.6 million in FY 2016-17 year- end General Fund savings to be appropriated at a future date for the purpose of paying- off these bonds. Budget adjustments to recognize the early payment of the Fiscal Years 2019-20 and 2020-21 lease payments in the current Fiscal Year will be included in the FY 2017-18 Midyear Budget staff report. Prepared By: David Carr, Assistant City Treasurer Approved Forwarded to Council Attachments: A. Resolution Authorizing Defeasance of the Series 2009 Bonds – City Council Series B. Resolution Authorizing Defeasance of the Series 2009 Bonds – Public Financing Authority Series C. Escrow Agreement D. Termination Agreement OHSUSA:767566460.4 ESCROW AGREEMENT by and between SANTA MONICA PUBLIC FINANCING AUTHORITY and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE AND AS ESCROW BANK Dated as of __________, 2017 Santa Monica Public Financing Authority Lease Revenue Bonds, Series 2009 (Public Safety Facility Project) OHSUSA:767566460.4 ESCROW AGREEMENT THIS ESCROW AGREEMENT (this “Escrow Agreement”), dated as of __________, 2017, is by and between the SANTA MONICA PUBLIC FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the “Authority”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, as Trustee (as defined herein) and as escrow bank (the “Escrow Bank”). W I T N E S S E T H: WHEREAS, there are presently outstanding $3,535,000 aggregate principal amount of Santa Monica Public Financing Authority Lease Revenue Refunding Bonds, Series 2009 (Public Safety Facility Project) (the “Series 2009 Bonds”); WHEREAS, the Series 2009 Bonds were issued to refinance the public safety facility of the City of Santa Monica (the “City”); WHEREAS, the Series 2009 Bonds were issued pursuant to the Indenture, dated as of September 1, 1999, by and among the Santa Monica Public Financing Authority (the “Authority”), the City and BNY Western Trust Company, as trustee, as amended and supplemented by the First Supplemental Indenture, dated as of January 1, 2002, by and among the Authority, the City and BNY Western Trust Company, as trustee, and the Second Supplemental Indenture, dated as of December 1, 2009, by and among the Authority, the City and The Bank of New York Mellon Trust Company, N.A., as successor trustee (the “Trustee”) (as so amended and supplemented, the “Indenture”); WHEREAS, the Series 2009 Bonds are payable from base rental payments (the “Base Rental Payments”) to be made by the City pursuant to the Lease Agreement, dated as of September 1, 1999, by and between the City and the Authority, as amended by the First Amendment to Lease Agreement, dated as of January 1, 2002, by and between the City and the Authority, and the Second Amendment to Lease Agreement, dated as of December 1, 2009, by and between the City and the Authority (as so amended, the “Lease Agreement”); WHEREAS, Section 7.02(b) of the Lease Agreement provides that the City may prepay, from any source of available funds, all or any portion of the Base Rental Payments by depositing with the Trustee 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; WHEREAS, the City has prepaid the Base Rental Payments pursuant to Section 7.02(b) of the Lease Agreement; and WHEREAS, in order to provide for the defeasance of the Series 2009 Bonds, the Authority and the Trustee are entering into this Escrow Agreement; NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Authority, the Escrow Bank and the Trustee agree as follows: 2 OHSUSA:767566460.4 Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Indenture. Section 2. The Escrow Fund. (a) There is hereby established a fund (the “Escrow Fund”) to be held as an irrevocably pledged escrow by the Escrow Bank, which the Escrow Bank shall keep separate and apart from all other funds of the Authority and the Escrow Bank and to be applied solely as provided in this Escrow Agreement. Pending application as provided in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged solely to the payment of the principal of and interest on the Series 2009 Bonds, as and when due, which amounts shall be held in trust by the Escrow Bank for the Owners of the Series 2009 Bonds. (b) The Authority has caused the City’s prepayment of the Base Rental Payments, in the amount of $________, to be transferred to the Escrow Bank, which the Escrow Bank has deposited in the Escrow Fund. The Escrow Bank, as Trustee, has informed the Authority that, as of the date hereof, there is no less than $________ on deposit in the funds and accounts established under the Indenture (consisting of $________ in the ________ Fund). The Authority hereby instructs the Escrow Bank, as Trustee, to liquidate the investments held in such funds and accounts and to transfer such amounts to the Escrow Fund, for a total deposit of $________ to the Escrow Fund. (c) Upon the deposit of moneys pursuant to Section 2(b) hereof, the moneys on deposit in the Escrow Fund, as verified by an independent certified public accountant, will be at least equal to purchase the aggregate principal amount of Federal Securities set forth in Exhibit A hereto (the “Exhibit A Securities”), which principal, together with all interest due or to become due on such Exhibit A Securities, and any uninvested cash held by the Escrow Bank in the Escrow Fund, will be sufficient to make the payments required by Section 4 hereof. Section 3. Use and Investment of Moneys. (a) The Escrow Bank hereby acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest $________ of such moneys in the Exhibit A Securities upon receipt of certification by an independent certified public accountant that the Exhibit A Securities will mature in such principal amounts and earn interest in such amounts and, in each case, at such times, so that sufficient moneys will be available from maturing principal and interest on the Exhibit A Securities, together with any uninvested moneys then held by the Escrow Bank in the Escrow Fund, to make all payments required by Section 4 hereof. Except as provided in Section 3(b) hereof or Section 3(c) hereof, the balance of the moneys in the Escrow Fund shall be held uninvested. (b) Upon the Written Request of the Authority, but subject to the conditions and limitations herein set forth, the Escrow Bank shall purchase substitute Federal Securities for the Federal Securities then held in the Escrow Fund with the proceeds derived from the sale, transfer, redemption or other disposition of Federal Securities then on deposit in the Escrow Fund and any uninvested money then held by the Escrow Bank hereunder in accordance with the provisions of this Section. Such sale, transfer, redemption or other disposition of Federal Securities then on deposit in the Escrow Fund and substitution of other Federal Securities shall be effected by the 3 OHSUSA:767566460.4 Escrow Bank upon the Written Request of the Authority but only by a simultaneous transaction and only upon (i) receipt of certification by an independent certified public accountant that the Federal Securities to be substituted, together with the Federal Securities which will continue to be held in the Escrow Fund, will mature in such principal amounts and earn interest in such amounts and, in each case, at such times so that sufficient moneys will be available from maturing principal and interest on such Federal Securities held in the Escrow Fund, together with any uninvested moneys, to make all payments required by Section 4 hereof which have not previously been made, and (ii) receipt by the Escrow Bank of an opinion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that the sale, transfer, redemption or other disposition and substitution of Federal Securities will not adversely affect the exclusion of interest on any Series 2009 Bonds from gross income for purposes of federal income taxation. (c) Upon the Written Request of the Authority, but subject to the conditions and limitations herein set forth, the Escrow Bank shall apply any moneys received from the maturing principal of or interest or other investment income on any Federal Securities held in the Escrow Fund, or the proceeds from any sale, transfer, redemption or other disposition of Federal Securities pursuant to Section 3(b) hereof not required for the purposes of said Section (i) to the extent such moneys will not be required at any time for the purpose of making a payment required by Section 4 hereof, as certified by an independent certified public accountant delivered to the Escrow Bank, such moneys shall be transferred as directed by the Authority upon the Written Request of the Authority as received by the Escrow Bank, free and clear of any trust, lien, pledge or assignment securing the Series 2009 Bonds or otherwise existing hereunder, and (ii) to the extent such moneys will be required for such purpose at a later date, such moneys shall, to the extent practicable, be invested or reinvested in Federal Securities maturing at times and in amounts sufficient, as certified by an independent certified public accountant delivered to the Escrow Bank, to make such payment required by Section 4 hereof. (d) All Federal Securities purchased pursuant to this Escrow Agreement shall be deposited in and held for the credit of the Escrow Fund. Except as provided in this Section, no moneys or Federal Securities deposited with the Escrow Bank pursuant to this Escrow Agreement nor principal of, or interest payments or other investment income on, any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the Series 2009 Bonds as provided in Section 4 hereof. (e) The Owners of the Series 2009 Bonds shall have a first and exclusive lien on the moneys and Federal Securities in the Escrow Fund until such moneys and Federal Securities are used and applied as provided in this Escrow Agreement. (f) The Escrow Bank shall not be held liable for investment losses resulting from compliance with the provisions of this Escrow Agreement. Section 4. Payment of Series 2009 Bonds. From the maturing principal of the Federal Securities held in the Escrow Fund and the investment income and other earnings thereon and any uninvested money then held in the Escrow Fund, the Escrow Bank, as the Trustee, shall apply such amounts as follows: 4 OHSUSA:767566460.4 (a) on each Interest Payment Date through and including July 1, 2021 (the “Final Maturity Date”), the Escrow Bank, as the Trustee, shall pay the accrued interest on the Series 2009 Bonds in accordance with the terms of the Indenture; and (b) on each July 1 through and including the Final Maturity Date, the Escrow Bank, as the Trustee, shall pay the principal of the Series 2009 Bonds in accordance with the terms of the Indenture. To the extent that the amount on deposit in the Escrow Fund on the Final Maturity Date is in excess of the amount necessary to make the required payments with respect to the Series 2009 Bonds, as shown in the then applicable escrow verification of the independent certified public accountant, such excess shall be transferred as directed by the Authority in writing. Section 5. Notice from City; Irrevocable Instructions to Mail Notice. (a) The Authority and Trustee each acknowledge that it has received written notice from the City under Section 7.02(f) of the Lease Agreement. (b) The Authority hereby irrevocably instructs the Escrow Bank, as the Trustee, to mail, as soon as practicable, a notice to the Owners substantially in the form of Exhibit B attached hereto to the Owners of the Series 2009 Bonds that the deposit required by clause (b) of Section 10.02 of the Indenture has been made with the Trustee and that the Series 2009 Bonds are deemed to have been paid in accordance with Section 10.02 of the Indenture and stating the maturity date upon which money is to be available for the payment of the principal of and premium, if any, on the Series 2009 Bonds. Section 6. Performance of Duties; Acknowledgement with Respect to Irrevocable Instructions. The Escrow Bank agrees to perform the duties set forth herein and agrees that the irrevocable instructions to the Escrow Bank, as the Trustee, herein provided are in a form satisfactory to it. Section 7. Transfer of Amounts Remaining Under Indenture. On the business day next succeeding the date the Escrow Bank transfers amounts to the Escrow Fund pursuant to Section 2 hereof, the Escrow Bank, as the Trustee, shall transfer any amounts remaining in the funds and accounts established under the Indenture as directed by the Authority in writing. Section 8. Authority to Make Investments. The Escrow Bank shall have no power or duty to invest any funds held under this Escrow Agreement except as provided in Section 3 hereof. The Escrow Bank shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Escrow Agreement. Section 9. Indemnity. To the extent permitted by law, the Authority hereby assumes liability for, and hereby agrees to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, agents, employees, officers, directors and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the 5 OHSUSA:767566460.4 acceptance of the funds deposited therein, and any payment, transfer or other application of moneys by the Escrow Bank in accordance with the provisions of this Escrow Agreement; provided, however, that the Authority shall not be required to indemnify the Escrow Bank against the Escrow Bank’s own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Bank’s respective successors, assigns, agents and employees or the material breach by the Escrow Bank of the terms of this Escrow Agreement. The indemnities contained in this Section shall survive the termination of this Escrow Agreement and the resignation or removal of the Escrow Bank. Section 10. Responsibilities of Escrow Bank. The Escrow Bank makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the defeasance of the Series 2009 Bonds pursuant to the Indenture or to the validity of this Escrow Agreement as to the Authority and, except as otherwise provided herein, the Escrow Bank shall incur no liability in respect thereof. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence or willful misconduct, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Escrow Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the Authority but who shall not be in-house counsel to the Escrow Bank, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of an independent certified public accountant or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the Authority. Whenever the Escrow Bank shall deem it necessary or desirable that a matter specifically requiring a certificate of an independent certified public accountant or an opinion of counsel of recognized standing in the field of law relating to municipal bonds be proved or established prior to taking, suffering, or omitting any such action, such matter may be established only by a certificate signed an independent certified public accountant or such opinion of counsel of recognized standing in the field of law relating to municipal bonds. The Escrow Bank undertakes to perform only such duties as are expressly set forth in this Escrow Agreement and no implied duties, covenants or obligations shall be read into this Escrow Agreement against the Escrow Bank. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. Any bank, national banking association or trust company into which the Escrow Bank may be merged or converted or with which it may be consolidated or any bank, national banking association or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, national banking association or trust company to which the Escrow Bank may sell or transfer all or substantially all of its corporate trust business shall be the successor to the Escrow Bank without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. 6 OHSUSA:767566460.4 No provision of this Escrow Agreement shall require the Escrow Bank to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. The Escrow Bank may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent or attorney so appointed. The Escrow Bank shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, 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 pursuant to any of the provisions hereof, and the Escrow Bank 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 Escrow Bank shall furnish the Authority periodic cash transaction statements which include detail for all investment transactions effected by the Escrow Bank. Upon the Authority's election, such statements will be delivered via the Escrow Bank's online service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Escrow Bank as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Escrow Bank will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. Section 11. Resignation and Removal. The Escrow Bank may resign by giving written notice to the Authority, and upon receipt of such notice the Authority shall promptly appoint a successor Escrow Bank. If the Authority does not appoint a successor Escrow Bank within thirty days of receipt of such notice, the resigning Escrow Bank may petition a court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, upon such notice as it shall deem proper, appoint a successor Escrow Bank. Upon acceptance of appointment by a successor Escrow Bank, the resigning Escrow Bank shall transfer all moneys held by it in the Escrow Fund to such successor Escrow Bank and be discharged of any further obligation or responsibility hereunder. The Authority may remove the Escrow Bank by giving 30 days’ prior written notice of such removal to the Escrow Bank, and thereupon shall appoint a successor Escrow Bank by an instrument in writing. Upon acceptance of appointment by a successor Escrow Bank, the removed Escrow Bank shall transfer all moneys held by it in the Escrow Fund to such successor Escrow Bank and be discharged of any further obligation or responsibility hereunder. Any successor Escrow Bank appointed under the provisions hereof shall be a trust company or bank having trust powers, having a corporate trust office in California, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination 7 OHSUSA:767566460.4 by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this paragraph 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. Section 12. Amendments. The Authority and the Escrow Bank may (but only with the consent of the Owners of all of the Series 2009 Bonds) amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement. Section 13. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the date upon which the Series 2009 Bonds have been paid in accordance with this Escrow Agreement. Section 14. Compensation. The Authority shall from time to time pay or cause to be paid to the Escrow Bank the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Bank for all of its reasonable expenses (including, without limitation, legal fees and expenses) in the exercise and performance of its duties hereunder; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Bank under this Escrow Agreement or otherwise. Section 15. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the Authority or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 16. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. 8 OHSUSA:767566460.4 Section 17. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. SANTA MONICA PUBLIC FINANCING AUTHORITY By: ATTEST: ____________________________________ Denise Anderson-Warren, Secretary APPROVED AS TO FORM: Lane Dilg, Authority Counsel THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE AND AS ESCROW BANK By: Authorized Officer B-1 OHSUSA:767566460.4 EXHIBIT A FEDERAL SECURITIES Type Maturity Date Par Amount Interest Rate Total Cost B-1 OHSUSA:767566460.4 EXHIBIT B SANTA MONICA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2009 (PUBLIC SAFETY FACILITY PROJECT) To: Owners of the above-captioned bonds (the “Series 2009 Bonds”) Re: Notice of Defeasance of the Series 2009 Bonds The Series 2009 Bonds were issued pursuant to the Indenture, dated as of September 1, 1999, by and among the Santa Monica Public Financing Authority (the “Authority”), the City of Santa Monica (the “City”) and BNY Western Trust Company, as trustee, as amended and supplemented by the First Supplemental Indenture, dated as of January 1, 2002, by and among the Authority, the City and BNY Western Trust Company, as trustee, and the Second Supplemental Indenture, dated as of December 1, 2009 (as so amended and supplemented, the “Indenture”), by and among the Authority, the City and The Bank of New York Mellon Trust Company, N.A., as successor trustee (the “Trustee”). Capitalized undefined terms used herein have the meanings ascribed thereto in the Indenture. Each outstanding maturity of the Series 2009 Bonds is further identified as follows: Maturity Date (July 1) Principal Amount Rate CUSIP No.1 2018 $840,000 3.250% 802437CW1 2019 870,000 3.500 802437CX9 2020 895,000 4.000 802437CY7 2021 930,000 4.000 802437CZ4 On __________, 2017, the Authority deposited with the Trustee Federal Securities that are not subject to redemption other than at the option of the holder thereof, the principal of and interest on which, when paid, will provide money which, together with the money deposited with the Trustee, shall, as verified by an independent certified public accountant, be sufficient to pay when due the interest to become due on the Series 2009 Bonds on and prior to the maturity dates thereof, and the principal of such Series 2009 Bonds. The principal of and interest on the Series 2009 Bonds will be paid as and when due in accordance with the terms of the Indenture. 1 CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2017 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. Neither the Authority, the City nor the Trustee assumes responsibility for the accuracy of such numbers. B-2 OHSUSA:767566460.4 The Owners of the Series 2009 Bonds are hereby notified that the deposit required pursuant to Section 10.02(b)(ii) of the Indenture has been made and that the Series 2009 Bonds are deemed to have been paid in accordance with Section 10.02 of the Indenture. Dated: __________, 2017 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE By: ________________________________ Authorized Officer OHSUSA:767566808.4 TO BE RECORDED AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 Attention: Laura Gao THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. TERMINATION AGREEMENT by and among CITY OF SANTA MONICA and SANTA MONICA PUBLIC FINANCING AUTHORITY and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE Dated as of __________, 2017 Santa Monica Public Financing Authority Lease Revenue Bonds, Series 2009 (Public Safety Facility Project) OHSUSA:767566808.4 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT (this “Termination Agreement”), dated as of __________, 2017, is by and among the CITY OF SANTA MONICA, a municipal corporation and charter city organized and existing under the laws of the State of California (the “City”), the SANTA MONICA PUBLIC FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the “Authority”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”). WITNESSETH: WHEREAS, the City and the Authority previously entered into the Ground Lease, dated as of September 1, 1999 (the “Ground Lease”), pursuant to which the City leased to the Authority certain real property, and improvements thereon, described in Exhibit A hereto (the “Property”); WHEREAS, the Ground Lease was recorded on October 12, 1999, as Document No. 99- 1931757, in the Official Records of the County of Los Angeles; WHEREAS, the City and the Authority previously entered into a Lease Agreement, dated as of September 1, 1999 (the “Original Lease Agreement”), pursuant to which the Authority leased the Property back to the City; WHEREAS, the Memorandum of Lease Agreement, dated as of September 1, 1999, by and between the City and the Authority, evidencing the Lease Agreement, was recorded on October 12, 1999, as Document No. 99-1931758, in the Official Records of the County of Los Angeles; WHEREAS, the Original Lease Agreement was amended pursuant to a First Amendment to Lease Agreement, dated as of January 1, 2002 (as so amended, the “First Amended Lease Agreement”), by and between the City and the Authority, recorded on January 29, 2002, as Document No. 02-0218608, in the Official Records of the County of Los Angeles; WHEREAS, the First Amended Lease Agreement was further amended pursuant to a Second Amendment to Lease Agreement, dated as of December 1, 2009 (as so amended, the “Lease Agreement”), by and between the City and the Authority, recorded on December 15, 2009, as Document No. 20091906861, in the Official Records of the County of Los Angeles (capitalized undefined terms used herein shall have the meanings ascribed thereto in the Lease Agreement); WHEREAS, pursuant to the Assignment Agreement, dated as of September 1, 1999 (the “Original Assignment Agreement”), by and between the Authority and BNY Western Trust Company, as trustee, the Authority assigned to the Trustee substantially all of its right, title and interest in and to the Ground Lease and the Lease Agreement; WHEREAS, the Original Assignment Agreement was recorded on October 12, 1999, as Document No. 99-1931759, in the Official Records of the County of Los Angeles; 2 OHSUSA:767566808.4 WHEREAS, the Original Assignment Agreement was amended pursuant to a First Amendment to Assignment Agreement, dated as of January 1, 2002 (as so amended, the “First Amended Assignment Agreement”), by and between the Authority and BNY Western Trust Company, as trustee, recorded on January 29, 2002, as Document No. 02-0218609, in the Official Records of the County of Los Angeles; WHEREAS, the First Amended Assignment Agreement was further amended pursuant to a Second Amendment to Assignment Agreement, dated as of December 1, 2009 (as so amended, the “Assignment Agreement”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as successor trustee, recorded on December 15, 2009, as Document No. 20091906862; WHEREAS, the Base Rental Payments payable by the City under the Lease Agreement constitute the source of payment of, and are pledged to the payment of, the Bonds issued by the Authority pursuant to the Indenture, dated as of September 1, 1999, by and among the Authority, the City and BNY Western Trust Company, as trustee, as amended and supplemented by the First Supplemental Indenture, dated as of January 1, 2002, by and among the Authority, the City and BNY Western Trust Company, as trustee, and the Second Supplemental Indenture, dated as of December 1, 2009, by and among the Authority, the City and The Bank of New York Mellon Trust Company, N.A., as successor trustee (as so amended and supplemented, the “Indenture”); WHEREAS, the City has prepaid all Base Rental Payments payable under the Lease Agreement and has paid all Additional Rental Payments payable thereunder; WHEREAS, all Bonds have been fully paid, or provision therefor has been made in accordance with Article X of the Indenture; WHEREAS, upon defeasance of the Bonds and the discharge of the Indenture resulting therefrom, the term of the Ground Lease and the Lease Agreement will, pursuant to the terms thereof, end simultaneously therewith; WHEREAS, subject to the provisions hereof, the City, the Authority and the Trustee desire to reflect the termination of the Ground Lease, the Lease Agreement and the Assignment Agreement, and the Authority and the Trustee desire that any right, title or interest that either may have in the Property revert to the City; 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 Termination 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 Termination Agreement; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 3 OHSUSA:767566808.4 ARTICLE I TERMINATION The City has paid all of the Rental Payments pursuant to, and in accordance with the terms of, the Lease Agreement and all Bonds have been fully paid, or provision therefor has been made in accordance with Article X of the Indenture and, therefore, the Ground Lease, the Lease Agreement and the Assignment Agreement are terminated and all of the obligations of the City, the Authority and the Trustee thereunder have ceased. ARTICLE II REVERSION All right, title and interest of the Authority and the Trustee in the Property under the Ground Lease, the Lease Agreement and the Assignment Agreement shall hereupon revert to the City free and clear of any interest of the Authority and the Trustee, without recourse, representation or warranty. ARTICLE III MISCELLANEOUS Section 3.01. Binding Effect. This Termination Agreement shall inure to the benefit of and shall be binding upon the City, the Authority and the Trustee and their respective successors and assigns. Section 3.02. Severability. In the event any provision of this Termination Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 3.03. Execution in Counterparts. This Termination Agreement 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. 4 OHSUSA:767566808.4 Section 3.04. Applicable Law. This Termination Agreement shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Termination Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF SANTA MONICA By: ________________________________ SANTA MONICA PUBLIC FINANCING AUTHORITY By: ________________________________ THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE By: ________________________________ Authorized Officer OHSUSA:767566808.4 STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) On _____________, 2017, before me, , Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 [SEAL] 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 LOS ANGELES ) On _____________, 2017, before me, , Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 [SEAL] 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. OHSUSA:767566808.4 STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) On _____________, 2017, before me, , Notary Public, personally appeared _________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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 [SEAL] 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. A-1 OHSUSA:767566808.4 EXHIBIT A LEGAL DESCRIPTION All that real property situated in the County of Los Angeles, State of California, described as follows, and any improvements thereto: [to be inserted] OHSUSA:767566808.4 CERTIFICATE OF ACCEPTANCE In accordance with Section 27281 of the California Government Code, this is to certify that the interest in real property conveyed by the Termination Agreement, dated as of __________, 2017, by and among the City of Santa Monica, a municipal corporation and chartered city organized and existing under and by virtue of the laws of the State of California (the “City”), the Santa Monica Public Financing Authority, a joint powers authority organized and existing under the laws of the State of California, and The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee, for the benefit of the City, is hereby accepted by the undersigned on behalf of the City pursuant to authority conferred by resolution of the City Council of the City adopted on __________, 2017, and the City consents to recordation thereof by its duly authorized officer. Dated: ___________, 2017 CITY OF SANTA MONICA By: REFERENCE – RESOLUTION NO. 11092 (CCS); RESOLUTION NO. 14 (PFAS)