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Home My WebLink AboutR25 EDAECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO FROM: Gary Van Osdel SUBJECT: PROPOSED FINANCING OF THE $100 Executive Director MILLION AGGREGATE PRINCIPAL OR / u Mill / AMOUNT OF HEALTH CARE lo, DATE: December 14, 1998 L CERTIFICATES OF PARTICIPATION (FAMILY CLINICS FOUNDATION PROJECT) - - - - - - - - - - - - - - - - - - - - - - - - - - - - — -------- - ----------- - ------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Synopsis of Previous Commission /Council/Committee Action(s): Recommended Motion(s): (Mayor and Common Council) (San Bernardino Associated Communities Financing Authority) MOTION: RESOLUTION OF THE SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY AUTHORIZING THE SALE AND DELIVERY OF NOT TO EXCEED $100 MILLION AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES OF PARTICIPATION (FAMILY CLINICS FOUNDATION PROJECT) SERIES 1998A, SERIES 1998B AND SERIES 1998C AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH Contact Person(s): Gary Van Osdel Project Area(s) Phone: 5081 Ward(s): Supporting Data Attached: x❑ Staff Report ❑ Resolution(s) ❑ Agreement(s) /Contract(s) ❑ Map(s) ❑ Letter /Memo FUNDING REQUIREMENTS Amount: $ Source: SIGNATURE: - - - - - - - - - - - D,,A - -• n,�thority: --- - - -- - ----- - - - - - - - - - - - - -- - - - ----------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Commission /Council Notes: REW:lag:12- 21- 02.cdc COMMISSION MEETING AGENDA Meeting Date: 12/21/1998 Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT Proposed Financing of the $100 Million Aggregate Principal Amount of Health Care Certificates of Participation BACKGROUND OF SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY On March 18, 1996, the City of San Bernardino (the "City ") and the Redevelopment Agency of the City of San Bernardino (the "Agency ") created the San Bernardino Associated Communities Financing Authority (the "JPA "). The JPA was created to assist in the financing of local facilities for non - profit corporations, including health care and housing projects, and the financing of public capital improvements and working capital costs for projects undertaken by any member of the JPA. The board of the JPA is comprised of the Mayor and Common Council and the JPA Executive Director is the Executive Director of the Agency. In May, 1997, the JPA caused the execution and delivery of the Health Care Refunding and Improvement Certificates of Participation (Granada Hills Community Hospital Project) in the aggregate amount of $20,000,000 (the "Granada Hills COPS "). The Granada Hills COPS are the only outstanding COPS of the JPA. In 1997, representatives of Family Clinics Foundation, a non - profit corporation which does business as Clinica Medica Familiar ( "Family Clinics ") contacted the JPA to determine whether it would be interested in financing the purchase of the Lincoln Hospital and a group of related clinics located throughout Los Angeles County (the "Project "). Specifically, the Project includes Lincoln Hospital, 443 South Soto Street, Los Angeles, California, Medimanager Executive Offices, 600 Wilshire Boulevard, Suite 700, Los Angeles, California, the Vermont Property, 1125 -1127 North Vermont Avenue, Los Angeles, California, Washington Main Clinic, 115 East Washington Boulevard, Los Angeles, California, Olympic Clinic, 5711 East Olympic Boulevard, Commerce, California, Vermont Clinic, 1101 North Vermont Avenue, Los Angeles, California, El Monte Clinic, 11725 East Garvey, El Monte, California, Lincoln Clinic, 443 South Soto Street, Los Angeles, California, Huntington Park Clinic, 6400 Pacific Avenue, Huntington Park, California, Whittier Clinic, 5458 Whittier Boulevard, Los Angeles, California, Baldwin Park Clinic, 4070 Sterling Way, Baldwin Park, California, and Long Beach Clinic, 5190 Atlantic Avenue, Los Angeles, California. These facilities provide health care services to the poor and indigent. - ------------------------------------------------------- REW:lag:12- 21- 02.cdc COMMISSION MEETING AGENDA Meeting Date: 12/21/1998 Agenda Item Number: A Economic Development Agency Staff Report SB Financing Authority December 14, 1998 Page Number -3- ----------------------------------------------------------------------------------------------- In 1997, the JPA staff began to review the proposed terms of the transaction, however, the transaction did not proceed due to several State law changes in the health care industry which caused delay in the negotiations between Family Clinics and the Seller of the Project (the "Seller "). Since the beginning of 1998, Family Clinics has been coordinating with the six jurisdictions within which the facilities comprising the Project are located to obtain approval to finance the Project. Each of the following cities by action of their respective city councils has granted its approval by holding a TEFRA hearing and passing a resolution on the following dates: City of Los Angeles City of Huntington Park City of Baldwin Park City of Long Beach City of Commerce City of El Monte April 15, 1998 November 2, 1998 June 3, 1998 March 17, 1998 June 16, 1998 May 26, 1998 The negotiations between Family Clinics and the Seller have been on going for several months. However, the parties have been unable to agree on the terms of the purchase. Due to certain unrelated deadlines imposed upon the Seller which require the Seller to dispose of the Project prior to the end of the year, the parties agreed to enter into a Purchase Agreement before the end of the year. On December 11, 1998, Family Clinics and the Seller signed a Purchase Agreement assigning a purchase value of $100,000,000 to the Project, contingent on the completion of an appraisal which supports the purchase price and other due diligence matters. Family Clinics now seeks to have the JPA approve the financing in order to meet the Seller's year end deadline. REASON FOR FINANCING BY THE JPA Family Clinics contacted the JPA because it was informed that the JPA's purposes involved transactions of this kind. The JPA staff has reviewed the Project and believes that it is the type of project that was contemplated by the JPA agreement. PROPOSED TERMS OF FINANCING The proposed transaction would result in the delivery of the 1998 COPS in the amount of $100,000,000 on or before December 30, 1998. The 1998 COPS will be privately placed with the Seller of the Project and will be non - transferable until the 1998 COPS are remarketed. At the time of remarketing, the 1998 COPS would be sold publicly. The majority of said 1998 COPS would be sold on a tax exempt basis and the remainder would be taxable to comply with federal tax laws. In the event the 1998 COPS cannot be remarketed or the Seller decides not to proceed with the transaction, the 1998 COPS would be returned to the JPA without any liability to the REW:Iag:12- 21- 02.cdc COMMISSION MEETING AGENDA Meeting Date: 12/21/1998 Agenda Item Number: kA.45'0 Economic Development Agency Staff Report SB Financing Authority December 14, 1998 Page Number -4- JPA. The determination as to whether the 1998 Certificates will be remarketed and at what price will be made upon the following conditions: Delivery of an appraisal prepared by a nationally recognized appraiser which confirms the value of the Project. In the event that the Project is not valued at $100,000,000 the Seller shall be required to return the 1998 COPS in the amount reflecting the difference between the $100,000,000 purchase price and the appraised value of the Project; 2. Delivery of a report by a Certified Public Accountant stating that the current net revenues of the Project (gross revenues less operating expenses) are equal or exceed 130% of the debt service on the Project; and 3. Delivery of a report by a Financial Consultant stating that the five year projections for the Project support future net revenues equal or in excess of 130% of the debt service on the Project. If the foregoing conditions cannot be met, the transaction will be collapsed. If the 1998 COPS are remarketed, they will be 30 year obligations. FAMILY CLINICS AND ITS BOARD MEMBERS A group of community leaders formed Family Clinics in order to purchase and operate the Project. The members of the Family Clinics board are listed below: The Honorable Tricia Hunter Registered Nurse, former Assemblywomen and current Appointee of Gov. Wilson to California Medical Assistance Commission ( "CMAC ") Sam J.W. Romeo Physician and Professor, University of Southern California Medical Center The Honorable Raymond Cardenas Retired Judge of the Los Angeles County Superior Court and current Arbitrator/Mediator Roger Mullendore Health Care Administrator Beatriz Valdez Former Los Angeles County Registrar- Recorder /County Clerk -------------------------------------------------------------------------------------------------------------------------------------------- REWAag:12- 21- 02.cdc COMMISSION MEETING AGENDA Meeting Date: 12/21/1998 Agenda Item Number: 92"Ir Economic Development Agency Staff Report SB Financing Authority December 14, 1998 Page Number -5- ------------------------------------------------------------------------------- JPA FEES AND FINANCING TEAM The JPA will be paid an initial fee of $100,000 and will receive a yearly administrative fee. Upon remarketing of the 1998 COPS, the JPA will receive an additional $100,000 fee. The financing team is comprised of the following: Sabo & Green, PC Miller & Schroeder, Financial, Inc. Kinsell, O'Neil Newcomb & DeDios Trustee CONCLUSION Special Counsel Co- Placement Agent Co- Placement Agent U.S. Bank Trust, National Association If you have any further questions please contact Tim Sabo of Sabo and Green, PC at (909) 393- 9373. ary Vdn Osdel, Executive Director conomic Development Agency REW:lag:l2- 21- 02.cdc COMMISSION MEETING AGENDA Meeting Date: 122//211/1998 Agenda Item Number: I-215 1 2 3 4 5 6 7 8 9 10 11! 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 271 281 RESOLUTION NO. Q0[PV RESOLUTION OF THE SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY AUTHORIZING THE SALE AND DELIVERY OF NOT TO EXCEED $100 MILLION AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES OF PARTICIPATION (FAMILY CLINICS FOUNDATION PROJECT) SERIES 1998A, SERIES 1998B, AND SERIES 1998C AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH WHEREAS, the City of San Bernardino (the "City ") and the Redevelopment Agency of the City of San Bernardino (the "Agency ") have heretofore executed a Joint Exercise of Powers Agreement dated March 18, 1996 (the "Joint Powers Agreement "), which Joint Powers Agreement creates and establishes the San Bernardino Associated Communities Financing Authority (the "Authority "); and WHEREAS, the Authority's Board desires, pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Law "), other applicable laws and the Joint Powers Agreement, to authorize the execution and delivery of taxable health care certificates of participation and certain documents hereinafter mentioned for the purpose of financing the purchase of certain health care facilities, namely fee or leasehold interests in and the personal property located at Lincoln Hospital, 443 South Soto Street, Los Angeles, California, Medimanager Executive Offices, 600 Wilshire Boulevard, Suite 700, Los Angeles, California, the Vermont Property, 1125 -1127 North Vermont Avenue, Los Angeles, California, Washington Main Clinic, 115 East Washington Boulevard, Los Angeles, California, Olympic Clinic, 5711 East Olympic Boulevard, Commerce, California, Vermont Clinic, 1101 North Vermont Avenue, Los Angeles, California, El Monte Clinic, 11725 East - 1 - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15! 16 17 18 19 20 21 22 23 24 25 26 27 28 ii Garvey, El Monte, California, Lincoln Clinic, 443 South Soto Street, Los Angeles, California, Huntington Park Clinic, 6400 Pacific Avenue, Huntington Park, California, Whittier Clinic, 5458 Whittier Boulevard, Los Angeles, California, Baldwin Park Clinic, 4070 Sterling Way, Baldwin Park, California, and Long Beach Clinic, 5190 Atlantic Avenue, Los Angeles, California (the "Project "); and pay a portion of the costs of delivery of said certificates of participation; and WHEREAS, the Authority has determined that significant public benefits will result from the Authority's financing of the Project; and WHEREAS, in accordance with Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code "), the Secretary of the Authority provided for the timely publication of a Notice of Public Hearing, describing the nature and the location of the Project and this resolution constitutes approval of the applicable governmental unit in accordance with the terms of Section 147(f) of the Code; and WHEREAS, the following cities (the "Cities ") conducted T.E.F.R.A. public hearings on the following dates: City of Los Angeles April 15, 1998 City of Huntington Park November 2, 1998 City of Baldwin Park June 3, 1998 City of Long Beach March 17, 1998 City of Commerce June 16, 1998 City of El Monte May 26, 1998 - 2 - 1 2 3 4 5 6 7 8 9 10 11 12! 13 14 15 16 17 18 19 20 21 22 23 24 251 261 27 28 11 and each of the above referenced Cities adopted a resolution on the respective dates granting its consent to the Authority to issue tax - exempt and taxable debt for the proposed financing of the Project; and WHEREAS, the Authority desires to enter into an Installment Purchase Agreement (the "Installment Purchase Agreement ") with Family Clinics Foundation, dba Clinica Medica Familiar, a nonprofit corporation duly organized and existing under and by virtue of the laws of the State of California (the "Purchaser "); and WHEREAS, the Authority desires to enter into a Trust Agreement (the "Trust Agreement ") among U.S. Bank Trust, National Association, as trustee (the "Trustee "), the Purchaser and the Authority for the purpose of authorizing the execution and delivery of the San Bernardino Associated Communities Financing Authority Taxable Certificates of Participation (Family Clinics Foundation Project) Series 1998A, Series 1998B and Series 1998C (the "Certificates ") to finance the Project as herein provided; and WHEREAS, the Authority desires to enter into (i) a Security Agreement between the Purchaser and the Authority, as the secured party, (ii) a Private Placement Agreement among the Authority, the Corporation and the purchaser of the Certificates (the "Purchaser "), relating to the placement of the Certificates by the Placement Agents, Miller & Schroeder Financial, Inc. and Kinsell, O'Neal, Newcomb & DeDios (the "Placement Agents ") and (iii) certain other certifications and documents. - 3 - 1 2 3 4 5 6 7 8 9 10 11 12 13, 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOW, THEREFORE, THE SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Recitals. All of the recitals contained above are true and correct. Section 2. Trust Agreement. The proposed form of Trust Agreement, on file with the Secretary of the Authority, is hereby approved. The Chairperson or the Vice - Chairperson of the Authority and the designees of either are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute, acknowledge and deliver to the Trustee the Trust Agreement in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. The date, maturity dates, interest rate or rates, interest payment dates, denominations, forms, registration privileges, manner of execution, place or places of payment, terms of redemption and other terms of the Certificates shall be as provided in the Trust Agreement, as finally executed. Section 3. Installment Purchase Agreement. The proposed form of Installment Purchase Agreement, on file with the Secretary of the Authority, is hereby approved. The Chairperson or the Vice - Chairperson of the Authority and the designees of either are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute, acknowledge and deliver the Installment Purchase Agreement in substantially said form, with such changes therein as such officers may - 4 - 1 2 3 4 5 6 71 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 4. Security Agreement and Deed of Trust. The proposed forms of Security Agreement from the Purchaser to the Authority, as secured party, and Deed of Trust from the Purchaser to the Trustee as beneficiary (the "Security Documents ") on file with the Secretary of the Authority are hereby approved. The Chairperson or the Vice - Chairperson of the Authority and the designees of either are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute, acknowledge and deliver the Security Documents in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. Private Placement Agreement. The proposed form of Private Placement Agreement ( "Placement Agreement "), by and among the Authority, the Corporation and the Purchaser, on file with the Secretary of the Authority, is hereby approved. The Chairperson or the Vice- Chairperson of the Authority and the designees of either are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute, acknowledge and deliver the Placement Agreement in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 6. T.E.F.R.A.. Pursuant to Section 147(f) of the Code, the Cities of Los Angeles, Huntington Park, Baldwin Park, Long - 5 - 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Beach, Commerce and E1 Monte (the "Cities ") held public hearings on the dates set forth in the Recitals hereto and at said hearings each provided an opportunity to present arguments both for and against the financing and the nature and location of the Project. The Cities considered all testimony and comments and adopted resolutions on said dates which constitute approval by the applicable elected representative in accordance with the terms of Section 147(f) of the Code. Section 7. Approval of Certificates. The Certificates in an aggregate principal amount not to exceed $100 Million shall be in the form set forth in and otherwise in accordance with the Trust Agreement, as finally executed and delivered. The Secretary of the Authority is hereby authorized and directed to attest the signature of the Chairperson or Vice - Chairperson of the Authority and to affix and attest the seal of the Authority, if any, as may be required in connection with the execution and delivery of the Certificates, the Trust Agreement, the Installment Purchase Agreement, the Security Agreement and the Placement Agreement. Section 8. Execution and Delivery of Certificates. The Trustee is hereby authorized and requested to execute and deliver the Certificates in accordance with the Trust Agreement. The Trustee is hereby requested and directed to deliver the Certificates, when duly executed and authenticated, to the Purchaser in accordance with written instructions executed on behalf of the Authority. Such instructions shall provide for the delivery of the Certificates to the Purchaser in accordance with the Trust Agreement upon payment of the purchase price thereof. - 6 - 1 2 3 4 5 6 7 8 9I 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 9. Approval by the Cities. The Cities have conducted T.E.F.R.A. public hearings on the dates listed in the Recitals hereto respectively and adopted resolutions on said dates granting their consent to the Authority to issue tax - exempt and taxable debt for the proposed financing of the Project. Section 10. Authorization and Ratification of Other Acts. The members, officers and agents of the Authority are hereby authorized and directed to take any and all actions and to execute and deliver any and all certificates, agreements or other documents that they deem necessary or desirable to carry out and comply with the provisions of this Resolution and the instruments and documents approved herein, respectively. All of the acts and doings of such members, officers and agents of the Authority which are in conformity with the intent and purposes of this Resolution, whether heretofore or hereafter taken or done, shall be and are hereby ratified, confirmed and approved. Section 11. Approval of Finance Team. The Authority hereby approves the following firms for the financing described herein: Sabo & Green Special Counsel Miller & Schroeder Financial Co- Placement Agent Kinsell, O'Neal, Newcomb & De Dios, Inc. Co- Placement Agent Fulbright & Jaworski, L.L.P. Placement Agent's Counsel - 7 - 1 2 3 4 5 6 7 8 9 10 11 12' 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY AUTHORIZING THE SALE AND DELIVERY OF NOT TO EXCEED $100 MILLION AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES OF PARTICIPATION (FAMILY CLINICS FOUNDATION PROJECT) SERIES 1998A, SERIES 1998B, AND SERIES 1998C AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH Section 12. This Resolution shall take effect immediately upon its adoption. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the San Bernardino Associated Communities Financing Authority at a meeting thereof, held on the day of 1998, by the following vote, to wit: Council: ESTRADA LIEN DEVLIN ANDERSON MILLER AYES NAYS ABSTAIN ABSENT Secretary The foregoing resolution is hereby approved this day of 1998. Approved as to form and legal content: Authority Counsel P;\ APPS \WPDATA \LINC \0001 \DOC \035.WPD - 8 - Judith Valles, Chairperson San Bernardino Associated Communities Financing Authority 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATE OF CALIFORNIA ) COUNTY OF SAN BERNARDINO ) ss CITY OF SAN BERNARDINO ) I, Secretary of the San Bernardino Associated Communities Financing Authority, DO HEREBY CERTIFY that the foregoing and attached copy of San Bernardino Associated Communities Financing Authority Resolution No. is a full, true and correct copy of that now on file in this office. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the San Bernardino Associated Communities Financing Authority this day of , 1998. Secretary TRUST AGREEMENT C On—` [PV AMONG SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY D FAMILY CLINICS FOUNDATION U.S. BANK TRUST, NATIONAL ASSOCIATION As Trustee Dated as of December 1, 1998 TABLE OF CONTENTS ARTICLE I ARTICLE III PREPAYMENT OF CERTIFICATES .................... 28 Section 3.1. DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS ............ 4 Section 1.1. Definitions ...................... ............................... 4 17 Section 1.2. Rules of Construction ............. ............................... ARTICLE II AUTHORIZATION OF THE PROJECT; AUTHORIZATION AND 29 Section 4.1. DETAILS OF THE CERTIFICATES; PARITY OBLIGATIONS ......... 18 Section 2.1. Project Authorized ............... ............................... 18 18 Section 2.2. Certificates Authorized ............ ............................... 31 Section 2.3. Details of the Certificates: Numbering of Certificates: 31 Section 4.5. Sinking Fund Prepayment of Certificates .............................. 18 Section 2.4. Conditions Precedent to Delivery of Certificates ........................ 23 Section 2.5. Additional Certificates ............ ............................... 24 26 Section 2.6. Execution and Delivery ............ ............................... 36 Section 2.7. Registration and Exchange of Certificates ............................. 26 Section 2.8. Certificates Mutilated, Destroyed, Lost or Stolen ....................... 27 Section 2.9. Cancellation and Disposition of Certificates ........................... 28 ARTICLE III PREPAYMENT OF CERTIFICATES .................... 28 Section 3.1. Selection of Certificates to Be Prepaid ............................... 28 Section 3.2. Notice of Prepayment ............. ............................... 28 29 Section 3.3. Prepayment of Portion of Certificate .. ............................... ARTICLE IV REVENUES AND FUNDS ........................ 29 Section 4.1. Creation of Funds and Accounts to Be Held by the Trustee ............... 29 Section 4.2. Project Fund and Delivery Cost Fund: Application of Moneys ............. 30 Section 4.3. Application of Certificate Proceeds ... ............................... 31 Section 4.4. Deposit of Installment Sale Payments - General ........................ 31 Section 4.5. Certificate Fund: Application of Moneys .............................. 33 Section 4.6. Reserve Fund: Application of Moneys ............................... 35 Section 4.7. Insurance and Condemnation Award Fund: Application of Moneys .......... 35 Section 4.8. Prepayment Fund: Application of Moneys ............................. 36 Section 4.9. Investment of Moneys ............ ............................... 36 39 Section 4.10. Deficiencies and Surpluses in the Reserve Fund ........................ Section 4.11. Application of Moneys in Certain Funds for Prepayment of Certificates ....................... .............................39 ARTICLE V PARTICULAR COVENANTS ...................... 39 Section 5.1. Payment of Principal and Interest: No Pecuniary Liability of Authority ....... 39 Section 5.2. Performance of Covenants, Undertakings and Agreements: 52 Section 7.1. Representations as to Authorization and Validity of Certificates: 52 52 Section 7.2. Authority's Further Assurance ....... ............................... 40 41 Section 5.3. Extensions of Payment of Certificates . ............................... 41 Section 5.4. Corporation Payments ............ ............................... 41 Section 5.5. Liens, Encumbrances and Charges ... ............................... 55 Section 7.7. THE TRUSTEE ............................ 44 Section 6.1. Appointment of Paying Agent: Registrar: Acceptance of Trustee • • • • • ...... Section 6.2. Trustee Entitled to Indemnity ...................................... 44 44 Section 6.3. Responsibilities of Trustee ......... ............................... 46 Section 6.4. Property Held in Trust ............ ............................... 46 Section 6.5. Trustee Protected in Relying on Certain Documents ..................... Section 6.6. Compensation and Expenses ........ ............................... 47 47 Section 6.7. Permitted Acts .................. ............................... 48 Section 6.8. Resignation of Trustee ............ ............................... 48 Section 6.9. Removal of Trustee .............. ............................... 48 Section 6.10. Successor Trustee ............... ............................... 49 Section 6.11. Transfer of Rights and Property to Successor Trustee .................... Section 6.12. Merger, Conversion or Consolidation of the Trustee ..................... 49 Section 6.13. Continuation Statements ........... ............................... 49 49 Section 6.14. Trustee May File Proofs of Claims ... ............................... 50 Section 6.15. Appointment of Co- Trustee ........ ............................... 51 Section 6.16. Continuing Disclosure ............ ............................... ARTICLE VII Section 8.1. Modification or Amendment of Trust Agreement Without Consent of Certificateholders Required ..... . .................. 57 -n- EVENTS OF DEFAULT AND REMEDIES ................. 52 Section 7.1. Events of Default ................ ............................... Maturity 52 52 Section 7.2. Acceleration of 53 Section 7.3. Section 7.4. Enforcement ..... ............................... I .............. Priority of Payments Following Default .............................. 54 Section 7.5. Effect of Discontinuance of Proceedings .............................. 55 Section 7.6. Majority of Certificateholders May Control Proceedings .................. 55 Section 7.7. Restrictions Upon Action by Individual Certificateholders ................. 55 Section 7.8. Actions by Trustee ............... ............................... 56 56 Section 7.9. Section 7.10. No Remedy Exclusive ............. ............................... No Delay or Omission Construed as a Waiver: Waiver of Default ........... 56 Section 7.11. Notice of Default ............. ............................... . ARTICLE VIII MODIFICATION OR AMENDMENT OF TRUST AGREEMENT, INSTALLMENT PURCHASE AGREEMENT, DEED OF TRUST OR SECURITY AGREEMENT ...................... 57 Section 8.1. Modification or Amendment of Trust Agreement Without Consent of Certificateholders Required ..... . .................. 57 -n- Section 8.2. Supplemental Trust Agreements Requiring Consent of the Trustee .......... 59 Section 8.3. Supplemental Trust Agreements Requiring Consent of the Certificateholders and the Trustee .... ............................... 59 Section 8.4. Execution of Supplemental Trust Agreements . ......................... 60 Section 8.5. Notation on Certificates ........... ............................... 60 Section 8.6. Authority Consent to Supplemental Trust Agreements .................... 60 Section 8.7. Amendment of Installment Purchase Agreement, Deed of Trust and Security Agreement ........... ............................... 60 ARTICLE IX DEFEASANCE ............................ 61 Section 9.1. Defeasance ..................... ............................... 61 ARTICLE X MISCELLANEOUS ........................... 62 Section 10.1. Assignment of Installment Purchase Payments and Installment Sale Payments ...... ............................... 62 Section 10.2. Third Party Beneficiaries .......... ............................... 63 Section 10.3. Evidence of Signatures of Certifcateholders and Ownership of Certificates ... 63 Section 10.4. Remedies ...................... ............................... 63 Section 10.5. Preservation and Inspection of Documents ............................ 63 Section 10.6. Moneys and Funds Held for Particular Certificates ...................... 63 Section 10.7. No Recourse ..................... .............................64 Section 10.8. Underwriter Exempt from Liability ..................... • • ......... Section 10.9. Severability of Invalid Provision .................................... 64 Section 10.10. Notices ........................ ............................... 64 Section 10.11. Business Days ........... ............................... 65 Section 10.12. Section and Paragraph Headings: Table of Contents .............. 65 Section 10.13. Intention as to Contract .... ............................... 66 Section 10.14. Limitation of Liability ........................ • • • • . • ..... Section 10.15. Governing Law ......................................... 66 EXHIBIT A FORM OF CERTIFICATE ........ ............................... A -1 EXHIBIT B FORM OF PROJECT FUND REQUISITION ......................... B -1 - iii - TRUST AGREEMENT This TRUST AGREEMENT dated as of December 1, 1998 (including any amendments or supplements hereto, the "Trust Agreement ") among SAN BERNARDNO ASSOCIATED COMMUNITIES FINANCING AUTHORITY (including any successor or assign hereunder, the "Authority"), a joint powers authority organized and existing under the laws of the State of California (the "State "), and FAMILY CLINICS FOUNDATION (including any successor or assign, the "Corporation ") and U.S. BANK TRUST, NATIONAL ASSOCIATION, as trustee (including any successor hereunder, the "Trustee "), a national banking association duly organized and existing under the laws of the United States of America. WITNESSETH: WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement dated March 18, 1996 and under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as amended (the "Act ") and is authorized pursuant to Article 1 of the Act to acquire and dispose of property and was established for the purpose of financing capital improvement programs; and WHEREAS, the Corporation desires (i) to acquire that certain healthcare system consisting of Lincoln Hospital Medical Center, a -bed acute care hospital located in the City of Los Angeles, California (the "Hospital ") and eight clinics located in the greater Los Angeles, California metropolitan area (the "Clinics" and collectively with the Hospital, the "Facilities ") and (ii) to rehabilitate existing facilities of the Hospital (together, the "Project "); and WHEREAS, the Corporation is a nonprofit corporation duly organized and validly existing under the laws of the State, and has received a determination from the Internal Revenue Service that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (including the applicable regulations thereunder, the "Code "); and WHEREAS, the Corporation has requested that the Authority assist in financing the acquisition costs of the Project, working capital in connection with the Project, accrued interest, a Reserve Fund and certain costs of issuance, by causing the execution and delivery of Taxable Certificates of Participation (Family Clinics Foundation Project), Issue of 1998 (the "Certificates ") pursuant to this Trust Agreement dated as of December 1, 1998 (the "Trust Agreement ") among the Authority, the Corporation and U.S. Bank Trust, National Association; as Trustee (the "Trustee "); and WHEREAS, simultaneously with the execution and delivery of this Trust Agreement, the Authority and the Corporation are entering into an Installment Purchase Agreement dated as of December 1, 1998 (including any amendments or supplements thereto, the "Installment Purchase Agreement "), pursuant to which the Corporation, in consideration for the transfer to the Trustee of proceeds of the Certificates and for the Installment Sale Payments to be made by the Authority (the "Installment Sale Payments ") agrees to sell the Facilities to the Authority and the Authority agrees to sell the Facilities back to the Corporation (the "Installment Purchase "), in consideration for the -1- V- _ - -, -.- Installment Purchase Payments to be made by the Corporation (the "Installment Purchase Payments ") under the Installment Purchase Agreement in amounts and at times which will be sufficient to pay when due the principal of, premium, if any, and interest with respect to the Certificates; and WHEREAS, the Certificates evidence undivided proportionate interests in the right to receive Installment Sale Payments; and WHEREAS, the rehabilitation of existing facilities at the Hospital will be financed by the proceeds of the Certificates and certain FEMA reimbursement funds; and WHEREAS, the Authority adopted a resolution on December 1998, authorizing the execution and delivery of the Installment Purchase Agreement and sale of the Certificates in the approximate amount of $100,000,000 pursuant to a Private Placement Agreement dated December , 1998 (the "Private Placement Agreement ") between Miller & Schroeder Financial, Inc. and Kinsell, ONeil, Newcomb & De Dios (the "Placement Agents ") and the Authority for the purpose of providing financing for the Project (the "Authority Resolution "); and WHEREAS, if pursuant to an appraisal of the Facilities to be performed by the Corporation prior to February 1, 1999, the appraised value of the Facilities is less than $100,000,000, Certificates in the amount in excess of the appraised value shall be delivered to the Authority for cancellation; and WHEREAS, all things have been done and performed that are necessary to make the Certificates, when executed and delivered by the Trustee as provided in this Trust Agreement, valid, binding obligations, and to make this Trust Agreement a valid contract for security of the Certificates; and the execution and delivery of this Trust Agreement, and the execution and delivery of the Certificates, subject to the terms hereof, have in all respects been duly authorized. NOW THEREFORE, THIS TRUST AGREEMENT WITNESSETH, that in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, and of the purchase and acceptance of the Certificates by the holders thereof to secure the payment of the Certificates and interest with respect thereto according to their tenor and effect and the performance and observance by the Authority of all the covenants expressed or implied herein and in the Certificates, the Authority does hereby grant, convey, assign, transfer in trust and pledge to the Trustee, and to its successors in trust, and to them and their assigns forever, the following: FIRST All of the right, title and interest of the Authority in and to the Revenues (as hereinafter defined),- SECOND All moneys (including Certificate proceeds) and investment earnings in any fund or account created under this Trust Agreement; -2- All of the Authority's right, title and interest in, to and under the Installment Purchase Agreement, the Security Agreement (as hereinafter defined) and the Deed of Trust (as hereinafter defined), including payments thereunder, but excluding all rights of the Authority to (a) inspect books and records, (b) give or receive notices, approvals, consents, requests, and other communications, (c) receive payment or reimbursement for expenses, (d) receive reimbursement for a portion of its annual administrative expenses, (e) enjoy immunity and limitation from liability, (f) receive indemnification from liability by the Corporation, and (g) receive and realize on security for the Corporation's indemnification obligation; FOURTH All property pledged and assigned under the Security Agreement and the Deed of Trust and any and all other property of every name and nature which may from time to time hereafter by delivery or by writing of any kind be subjected to the lien hereof by the Authority or by anyone in its behalf or with its written consent, and the Trustee is hereby authorized to receive any and all such property at any and all times and to hold and apply the same as additional security hereunder subject to the terms hereof, TO HAVE AND TO HOLD all of the same (hereinafter referred to as the "Trust Estate ") with all privileges and appurtenances hereby granted and assigned, or agreed or intended so to be, to the Trustee and its successors in trust and to them and their assigns forever; IN TRUST NEVERTHELESS, upon the terms and trusts set forth herein for the proportionate benefit, security and protection of all of the holders of the Certificates, with a prior lien being hereby established for the benefit, security and protection of the Certificates and for enforcement of the payment of the Certificates in accordance with their terms, and all other sums payable hereunder or on the Certificates and for the performance of and compliance with the obligations, covenants and conditions of this Trust Agreement, as if all the Certificates at any time outstanding had been authenticated, executed and delivered simultaneously with the execution and delivery of this Trust Agreement, all as herein set forth; PROVIDED, HOWEVER, that if the Authority pays, causes to be paid or provides fully for the payment as herein provided of all of the principal, premium, if any, and interest due or to become due with respect to the Certificates, at the times and in the manner specified therein according to the true intent and meaning thereof, or provides for the payment of such principal, premium, if any, and interest as permitted hereby by depositing with the Trustee sums sufficient for the payment of the entire amount due or to become due with respect thereto as provided herein, and keeps, performs and observes all of the covenants and conditions of this Trust Agreement, and pays to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof and of the Installment Purchase Agreement, then this Trust Agreement and the rights hereby granted shall cease, terminate and be void except as otherwise provided herein; otherwise, this Trust Agreement shall remain in full force and effect; -3- THIS TRUST AGREEMENT FURTHER WITNES SETH, and it is expressly declared, that all the Certificates shall be executed and delivered, and the Trust Estate shall be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Authority and the Trustee mutually covenant and agree, to the extent specifically provided herein, for the equal and proportionate benefit of all holders of the Certificates, as follows: ARTICLE I DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1.1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Trust Agreement, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Trust Agreement, refer to this Trust Agreement as a whole. "Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State. "Additional Certificates" means certificates of participation executed and delivered pursuant to Section 2.5 hereof. "Additional Facilities" means any project undertaken by the Corporation which is financed or refinanced (i) pursuant to this Trust Agreement by the execution and delivery of Additional Certificates or (ii) pursuant to the Installment Purchase Agreement by the issuance by the Corporation of Parity Obligations, including (without limitation) land, easements, rights -of -way, leaseholds, other interests in real property and any improvement, addition, betterment or extraordinary repairs to, or any reconstruction, renovation, remodeling or equipping of, the Facilities. "Administrative Expenditures" means any expenditures of the Authority or the Trustee for insurance, fees and expenses of auditing, fees and expenses of the Trustee (whether as Trustee, Paying Agent or Registrar for the Certificates) payable under this Trust Agreement or the Installment Purchase Agreement and not otherwise paid or provided for by the Corporation, and all other expenditures reasonably and necessarily incurred by the Authority or the Trustee by reason of the financing and refinancing of the Costs of the Facilities, including (without limitation) legal, financing and administrative expenses and expenses incurred by the Authority or the Trustee to compel full and punctual performance of the provisions of the Installment Purchase Agreement, the Security Agreement or the Deed of Trust in accordance with the terms thereof. "Advance Rate" means the prime rate of the Trustee or its principal banking affiliate, plus 1% per annum. "Agency Obligations" means direct obligations (including bonds, notes or participation certificates) of, or obligations the timely payment of the principal of and the interest or which are unconditionally guaranteed by, any agency or instrumentality of the United States of America, including (without limitation) (i) Federal Home Loan Banks, Federal Home Loan Mortgage THIS TRUST AGREEMENT FURTHER WITNBSSETH, and it is expressly declared, that all the Certificates shall be executed and delivered, and the Trust Estate shall be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Authority and the Trustee mutually covenant and agree, to the extent specifically provided herein, for the equal and proportionate benefit of all holders of the Certificates, as follows: ARTICLE I DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1.1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Trust Agreement, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Trust Agreement, refer to this Trust Agreement as a whole. "Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State. "Additional Certificates" means certificates of participation executed and delivered pursuant to Section 2.5 hereof. "Additional Facilities" means any project undertaken by the Corporation which is financed or refinanced (i) pursuant to this Trust Agreement by the execution and delivery of Additional Certificates or (ii) pursuant to the Installment Purchase Agreement by the issuance by the Corporation of Parity Obligations, including (without limitation) land, easements, rights -of -way, leaseholds, other interests in real property and any improvement, addition, betterment or extraordinary repairs to, or any reconstruction, renovation, remodeling or equipping of, the Facilities. "Administrative Expenditures" means any expenditures of the Authority or the Trustee for insurance, fees and expenses of auditing, fees and expenses of the Trustee (whether as Trustee, Paying Agent or Registrar for the Certificates) payable under this Trust Agreement or the Installment Purchase Agreement and not otherwise paid or provided for by the Corporation, and all other expenditures reasonably and necessarily incurred by the Authority or the Trustee by reason of the financing and refinancing of the Costs of the Facilities, including (without limitation) legal, financing and administrative expenses and expenses incurred by the Authority or the Trustee to compel full and punctual performance of the provisions of the Installment Purchase Agreement, the Security Agreement or the Deed of Trust in accordance with the terms thereof. "Advance Rate" means the prime rate of the Trustee or its principal banking affiliate, plus 1% per annum. "Agency Obligations" means direct obligations (including bonds, notes or participation certificates) of, or obligations the timely payment of the principal of and the interest or which are unconditionally guaranteed by, any agency or ins LoannBankso Federal United Homet States Mortgage including (without limitation) (1) Federa l Home -4- Corporation, Federal National Mortgage Association, Government National Mortgage Association, the Export-Import Bank of the United States, the Tennessee Valley Authority, the Federal Financing Bank, the United States Postal Service, the Farmers Home Administration, the Small Business Administration, the International Bank for Reconstruction and Development and (ii) either on a consolidated or system -wide basis, Federal Land Banks, Federal Intermediate Credit Banks or Banks for Cooperatives. "Authority" means the San Bernardino Associated Communities Financing Authority. "Authority Documents" means collectively the Installment Purchase Agreement, the Trust Agreement, the Private Placement Agreement and any other agreement, certificate, contract, or instrument to be executed by the Authority in connection associated with the Facand delivery of the Certificates or the financing of a portion of the expense "Authority Resolution" means the resolution adopted by the Authority authorizing the execution and delivery of the Installment Purchase Agreement and sale of the Certificates and any subsequent Authority Resolution adopted in connection with Additional Certificates. "Authority's Annual Fee" means the Authority's annual administrative fee in a maximum amount equal to of one percent (_ %) of the outstanding principal amount of the Certificates, as based upon Authority costs. "Authority's Initial Administration Fee" means the Authority's initial administration fee in a maximum amount equal to of one percent C__%) of the initial aggregate principal amount of the Certificates, as based upon Authority costs. "Authorized Officer" means: (i) In the case of the Authority, the Chairperson, the Secretary or the Executive Director and, when used with reference to any act or document, any other person authorized by resolution of the Authority to perform such act or execute such document, including (without limitation) the execution of any obligations, evidences of indebtedness, certificates, deeds, leases, mortgages, agreements or other documents or instruments; (ii) In the case of the Corporation, the Chairman, the Vice Chairman, the President, any Vice President, the Treasurer or the Secretary of the Corporation and, when used with reference to any act or document, also means any other person such authorized by document; resolution of the Board of Directors of the Corporation to perform such act or execute (iii) In the case of the Trustee, the President, any Vice President, any Assistant Vice President or any Trust Officer of the Trustee with responsibility for matters related to the Certificates zed and, when used with reference to any act or document, h do document by other to a resolut n signatory authorized to perform such act or execute such of the Board of Directors or by -law provision of the Trustee. - 5 - "Business Day" means a day other than a Saturday, Sunday, legal holiday observed as such by the Authority or the Trustee or a day on which the payment system of the Federal Reserve Bank is not operational. "Certificateholder" or "Holder" or "holder" or any similar term, when used with reference to a Certificate, means the registered owner of such Certificate. "Certificates" means the Authority's Taxable Certificates of Participation (Family Clinics Foundation Project) Issue of 1998 and any Additional Certificates. "Certificates Debt Service Coverage Requirement" means (i) for the Yearly Evaluation Date occurring on December 31, 1998, a Debt Service Coverage Ratio for Debt Service for the Fiscal Year then ended of at least 1.15 to 1, and (ii) for any Yearly Evaluation Date occurring after January 1, 1998, a Debt Service Coverage Ratio for the Fiscal Year then ended of at least 1.20 to 1. "Certificate Year" means a period of 12 consecutive months beginning on December 1 in any calendar year in which Certificates are Outstanding and ending on November 30 of the immediately succeeding calendar year, provided that the first Certificate Year shall commence on the date of initial delivery of the Certificates. "Clinics" means the eight out - patient facilities located in the greater Los Angeles metropolitan area which are being acquired by the Corporation. thereof. "Closing Date" means the date of delivery of the 1998 Certificates to the original purchaser "Code" means the Internal Revenue Code of 1986, as amended and any regulations promulgated thereunder. "Corporation" means Family Clinics Foundation. "Cost" or "Costs" means the purchase price of the Facilities or the cost of acquiring all or any portion of the right, title or interest of the Facilities and the amount to be paid to discharge all obligations necessary or desirable to vest title to the Facilities or any part thereof in the Corporation; the cost of rehabilitating existing facilities at the Hospital, administrative expenses, and other expenses as necessary or incident to financing the Facilities and to the acquisition, operation, maintenance and improvement of the Facilities and the operation of the Facilities by the Corporation, including the provision for working capital. "Debt Service Coverage Ratio" means, for any period, the ratio of (a) Funds Available for Debt Service for such period to (b) the Maximum Annual Debt Service on all Long Term Indebtedness. "Debt Service Requirements" means, with reference to a specified period: (a) with respect to any Series of Certificates (i) interest accruing with respect to such Certificates during such period, except to the extent such interest is payable from the proceeds of such Certificates irrevocably held in trust for such purpose, and (ii) amounts required to be deposited in the Certificate Fund during such period to pay the principal amount of such Certificates becoming due at maturity or by mandatory prepayments (including Sinking Fund Installments), as the case may be; and (b) with respect to any other Long Term Indebtedness (i) interest accruing on such Long Term Indebtedness during such period, except to the extent such interest is payable from the proceeds of such Long Term Indebtedness irrevocably held in trust for such purpose, (ii) amounts required to be paid during the period with respect to the principal or sinking fund requirements on such Long Term Indebtedness and (iii) all lease rental payments and payments under conditional purchase agreements during such period pursuant to such leases and conditional purchase agreements which constitute Long Term Indebtedness. For the purpose of determining the interest rate on any Variable Rate Indebtedness, such interest rate shall be assumed to be: (1) for the purpose of determining whether such Certificates may be executed and delivered or such Long Term Indebtedness may be incurred, the rate estimated by a commercial or investment banking institution in accordance with the documents setting forth the provisions of such Variable Rate Indebtedness at the time of such execution and delivery or occurrence, plus one - percent (1 %); (2) for the first year such Certificates or Long Term Indebtedness are Outstanding, the higher of the rate determined pursuant to clause (1) above, or the rate then in effect, and (3) thereafter, the higher of the average rate on such Certificates or Long Term Indebtedness during the last 12 months or the rate then in effect. For the purpose of determining the Debt Service Requirements on Long Term Indebtedness in the form of a guarantee, the outstanding principal amount and the Debt Service Requirements on Long Term Indebtedness which is a guarantee shall be deemed to be equal to 50% of the outstanding principal amount or the debt service requirements, respectively, of the obligation guaranteed by the Corporation; provided, however, that if the Corporation makes any payment under a guarantee, the outstanding principal amount thereof and the debt service requirements thereon for the Fiscal Year in which the payment is made and for the next two succeeding Fiscal Years shall be deemed to be equal to 100% of the outstanding principal amount of or the Debt Service Requirements on the guaranteed obligation or portion thereof being guaranteed. For the purposes of the foregoing, the debt service requirements on any indebtedness being guaranteed shall be calculated in the same manner as specified herein for the calculation of Debt Service Requirements on Long Term Indebtedness directly incurred by the Corporation. "Deed of Trust" means the Deed of Trust with Assignment of Rents and Fixture Filing dated as of December 1, 1998 with respect to the Certificates from the Corporation to , as trustee, for the benefit of the Trustee. "Delivery Cost Fund" means the fund by that name established pursuant to Section 4.1 hereof. "Delivery Costs" means all items of expense directly or indirectly payable by or reimbursable to the Authority or the Corporation relating to the execution and delivery of this Trust Agreement -7- and the Installment Purchase Agreement or the execution and delivery of the Certificates, including but not limited to the filing and recording costs, settlement costs, printing costs, reproduction costs, accountants fees, legal fees and charges, insurance fees, costs of rating agencies for credit ratings, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. "Facilities" means the Hospital and the Clinics, the sites thereof and any Additional Facilities, and all buildings, structures and improvements now or hereafter located or constructed on the Hospital and the Clinics, all fixtures, machinery, equipment, furniture, furnishings and other personal property now or hereafter attached to, or located in, or used in connection with, any such structures, buildings or improvements and all additions thereto, substitutions therefor and replacements thereof, whether now owned or hereafter acquired by the Corporation, "Fair Market Value" as of any date means (i) when used with respect to any property having a value of $50,000 or less, the fair market value of such property as determined by the Corporation in a certificate executed by an Authorized Officer of the Corporation or (ii) when used with respect to any other property, the fair market value of such property as shown in a written appraisal performed by an M.A.I. appraiser (or if the property to be appraised is not of the type which may be appraised by an M.A.I. appraiser, any other independent professional appraiser knowledgeable with respect to the valuation of property of a type similar to the property to be appraised) not more than six months prior to such date and delivered to the Trustee. "Fiscal Year" means the fiscal year of the Corporation, being the period commencing on January 1 of any calendar year and ending on December 31 of such calendar year, or such other 12 -month period as the Corporation shall establish as its fiscal year with notice to the Trustee. "Funds Available For Debt Service" means, in any period, the sum of. (i) the Corporation's Net Income for such period; (ii) all interest expenses of the Corporation for such period with respect to Long Term Indebtedness; and (iii) all depreciation expenses, amortization of financing charges and other non cash expenses deducted from the Corporation's Net Revenues in accordance with generally accepted accounting principles in determining Net Income for such period. "Government Obligations" means direct obligations of, or obligations of the timely payment of the principal of and the interest with respect to which is unconditionally guaranteed by, the United States of America. "Gross Revenues" means all receipts, revenues, rentals, income, chattel paper, accounts, general intangibles, documents, instruments and moneys acquired by or on behalf of the Corporation and all rights to receive the same, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired, and the proceeds thereof, including (without limitation) revenues derived from (1) the ownership, operation or leasing of the Facilities and all rights to receive the same, whether in the form of accounts receivable, contract rights, general intangibles or other rights, and (ii) gifts, grants, bequests, donations and contributions heretofore or hereafter made to the Corporation that are legally available to meet any of the Corporation's obligations incurred in the financing, operation, maintenance and repair of the Facilities; provided, however, that there shall be excluded from Gross Revenues (A) gifts, grants, bequests, donations and contributions, WE heretofore or hereafter made, designated at the time of making thereof by the donor or maker thereof as being for certain specific purposes inconsistent with their use for the financing, operation, maintenance and repair of the Facilities, and the income derived therefrom, in each case to the extent required by such designation, and (B) the proceeds of any borrowing by the Corporation permitted under the Installment Purchase Agreement, to the extent required by the terms of such borrowing. "Hospital" means Lincoln Hospital Medical Center, a -bed general acute care hospital facility located in the City of Los Angeles, California. "Independent Counsel" means any attorney or attorneys, who may be (without limitation) counsel to the Corporation, duly admitted to practice law before the highest court of any state, who have regularly engaged in the practice of law as their primary occupation for at least five years and who are not officers or full-time employees of the Authority or the Corporation. Special Counsel may be deemed Independent Counsel. "Independent Public Accountant" means an individual, partnership or corporation engaged in the accounting profession either entitled to practice, or having members or officers entitled to practice, as a certified public accountant under the laws of the State and in fact independent from the Corporation and any manager involved in the operation of the Facilities, engaged by the Corporation to audit the Corporation's financial statements or to prepare the financial certifications and reports required under the Installment Purchase Agreement. "Installment Payment Date" means the dates set forth in Exhibit B and Exhibit C to the Installment Purchase Agreement. "Installment Purchase" means the purchase of the Facilities by the Corporation pursuant to the Installment Purchase Agreement. "Installment Purchase Agreement" means the Installment Purchase Agreement dated as of December 1, 1998 between the Authority and the Corporation, as amended from time to time in accordance with its terms. "Installment Purchase Payments" means payments with respect to the Certificates made or to be made by the Corporation pursuant to the Installment Purchase Agreement. "Installment Sale Payments" means the payments with respect to the Certificates made or to be made by the Authority pursuant to the Installment Purchase Agreement. "Insurance Consultant" means an independent professional insurance consultant having a favorable reputation for skill and experience in insurance consulting work relating to acute care hospitals or other similar institutions engaged by the Corporation pursuant to the Installment Purchase Agreement. "Interest Component" means that portion of each Installment Sale Payment designated as the interest component thereof pursuant to the Installment Purchase Agreement. "Interest Payment Date" shall mean each June 1 and December 1, commencing June 1, 1999 "Long Term Indebtedness" means the amount of all obligations for the payment of money incurred by the Corporation, including the amount of the Installment Purchase Payments made under the Installment Purchase Agreement and all Additional Certificates and including guarantees, whether due and payable in all events or upon the occurrence of certain contingencies, leases which are required to be capitalized under generally accepted accounting principles and installment purchase contracts having an original term of over one year, except: (a) Short Term Indebtedness; (b) Current obligations, including current payments for the funding of pension plans or other deferred compensation arrangements; (c) Obligations under contracts for supplies, services and pensions, allocable to current operating expenses of future years in which the supplies are to be furnished, the services rendered or the pensions paid; (d) Rentals payable in future years under leases not evidencing the acquisition of capital assets, provided such leases are for a term of sixty (60) months or less; and (e) Obligations under contract or agreement to the extent that moneys are deposited with the Trustee to pay such obligations, other than Certificates under this Trust Agreement. "Management Consultant" means a professional management consultant which is in fact independent from the Corporation and any manager involved in the operation of the Project, having a favorable reputation for skill and experience in consulting work relating to acute care hospitals, who may be (without limitation) an Independent Public Accountant, appointed by the Corporation in accordance with this Trust Agreement and the Installment Purchase Agreement. "Maximum Annual Debt Service" means, when used with reference to any Long Term Indebtedness for any Fiscal Year or Certificate Year (as the case may be), as of any particular date of computation, the greatest amount of Debt Service Requirements required in the then current or any future Fiscal Year or Certificate Year (as the case may be). "Net Income" means for any period, the Net Revenues, less all Operating Expenses and non operating expenses of the Corporation, including depreciation, amortization and interest expenses as determined in accordance with generally accepted accounting principles consistently applied. In calculating Net Income, there shall be excluded extraordinary gains and losses, any gains or losses from the disposition of capital assets, the proceeds received from insurance policies (other than proceeds received from business interruption insurance policies), condemnation awards and any gifts, grants, bequests, donations or contributions and any income therefrom which may not be pledged or applied to the payment of Debt Service Requirements as a result of restrictions or designations imposed by the donor or maker of the gift, grant, bequest or contribution in question at the time of the making thereof. -10- "Net Revenues" means, for any period, the amount determined in accordance with generally accepted accounting principles consistently applied equal to all operating and nonoperating revenues of the Corporation, less bad debt allowances and adjustments, contractual allowances and adjustments with third party payors, allowances and adjustments for free or reduced charge services and allowances and adjustments for discounts for prompt payment by payors, in each case to the extent that such items are not accounted for as expenses. "Operating Expenses" means, for any specified period, the sum of expenses of the Corporation shown on its "Statement of Revenues and Expenses" (or equivalent financial statement) as its operating expenses (or equivalent items of expense) including extraordinary and nonrecurring items but excluding interest expense and depreciation and amortization, all as determined in accordance with generally accepted accounting principles. "Outstanding" or "outstanding" means, when used with reference to Certificates, as of any particular date, all Certificates executed and delivered under this Trust Agreement except: (a) any Certificate canceled by the Trustee (or delivered to the Trustee for cancellation) at or before such date; (b) any Certificate for which provision for the payment of the principal or Prepayment Price of and interest shall have been made as provided in this Trust Agreement; and (c) any Certificate in lieu of or in substitution for which a new Certificate shall have been executed and delivered pursuant to this Trust Agreement. "Parity Debt" means the Certificates and any Additional Certificates, collectively. "Parity Obligations" means any Long Term Indebtedness or other indebtedness executed and delivered by the Corporation and secured by the Gross Revenues on a parity with (i) the Installment Purchase Payments and (ii) the Certificates pursuant to the Installment Purchase Agreement. "Paying Agent" means the Trustee in its capacity as paying agent for the Certificates under this Trust Agreement. "Permitted Encumbrances" means: (i) any lien of any contractor, subcontractor, supplier of goods, materials, equipment or services or any laborer as to which, by a bond or letter of credit or other lawful means, indemnity has been provided or similar steps to secure the interest of the Authority and the Trustee under this Trust Agreement have been taken; (ii) any lien for real property taxes and assessments as to which interest and penalties have not yet accrued and any present or future zoning laws or ordinances, (iii) leases permitted under the Installment Purchase Agreement; (iv) any lien or encumbrance on any property of the Corporation not included as part of the Facilities; - 11 - (v) any lien, encumbrance or security interest (a) created by the Installment Purchase Agreement, the Deed of Trust or the Security Agreement and (b) otherwise permitted by the Installment Purchase Agreement, provided that, except in the case of any lien, encumbrance or security interest securing indebtedness permitted by the Installment Purchase Agreement, the Deed of Trust and the Security Agreement (which lien, encumbrance or security interest shall be on a parity with the lien of the Installment Purchase Agreement, the Deed of Trust and the Security Agreement), such lien, encumbrance or security interest is subordinate to the lien on and security interest in the Gross Revenues created by the Installment Purchase Agreement, the Deed of Trust and the Security Agreement; (vi) any lien placed upon any furniture, equipment or other tangible personal property or any fixture being acquired by the Corporation, to secure all or a portion of the purchase price thereof; (vii) any lien, encumbrance or security interest existing on the date of execution and delivery of the Certificates and disclosed in the Installment Purchase Agreement, provided that such Hen, encumbrance or security interest is not extended, renewed or modified to apply to any additional property of the Corporation; (viii) any lien, encumbrance or security interest with respect to any accounts receivable of the Corporation to secure any Short Term Indebtedness of the Corporation, provided that the aggregate face amount of accounts receivable so encumbered shall not exceed five percent (5 %) of the Net Revenues as shown on the audited financial statements of the Corporation for the most recently completed Fiscal Year; (ix) any judgment lien against the Corporation that does not exceed $250,000, so long as such judgment is being contested and is fully bonded or insured; (x) any lien with respect to money deposited by patients or others with the Corporation as security for, or as prepayment of, the cost of patient or other care and any lien arising under law or by contract with respect to initial deposits made under any continuing care contracts; (xi) any lien arising by reason of good faith deposits by the Corporation in the ordinary course of business (for other than borrowed money), deposits by the Corporation to secure public or statutory obligations, as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Corporation to maintain self - insurance and to participate in any funds established to cover any insurance risks in connection with workers compensation, unemployment insurance, pension or profit- sharing plans or other similar welfare plans, or to share in the privileges or benefits required for companies participating in such arrangements, or deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; (xii) any lien on property received by the Corporation through gift, grant or bequest; (xiii) any lien on property existing at the time such property is acquired by the Corporation provided that no such lien (or the amount of indebtedness secured thereby) may thereafter be -12- increased, extended, renewed or modified to apply to any property not subject to such lien on the date of acquisition; (xiv) any lien in favor of a trustee on the proceeds of indebtedness prior to the application of such proceeds; (xv) any lien arising by reason of any escrow established to pay debt service with respect to indebtedness, (xvi) any lien arising by reason of a factoring arrangement entered into by the Corporation that meets the following parameters: [TO COME] (xvii) statutory rights of the United States of America by reason of federal funds made available under 42 USC 291 gI =., and similar rights under federal or state statutes; or (xviii) easements, rights of way, restrictions and other minor defects, encumbrances and irregularities in the title to the Facilities, which encumbrances do not materially impair the use of the Facilities for their intended purpose or materially and adversely affect the value thereof. "Permitted Investments" means (i) Government Obligations or Agency Obligations, (ii) obligations described in Section 103(a) of the Code (i.e., obligations of a state or a political subdivision thereof), or any successor provision thereto, rated in one of the three highest rating categories by Standard & Poor's Ratings Group ( "S &P ") or Moody's Investors Service ( "Moody's "), respectively, or the equivalent by any other nationally recognized rating agency, which do not constitute "investment property" within the meaning of Section 148(b)(2) of the Code, (iii) certificates of deposit (having a remaining term as of the date of acquisition not greater than two years) and interest bearing deposit accounts which are fully insured by the Federal Deposit Insurance Corporation and are with a bank or other financial institution (A) which has a capital and surplus of not less than $100,000,000 or (B) the long term unsecured indebtedness of which is rated in one of the two highest rating categories by S &P or Moody's, (iv) Repurchase Agreements, (v) investment contracts of general corporate obligations which by their terms are not subordinate to any other obligations and which constitute general obligations of the issuer, issued or guaranteed by (A) any bank or trust company organized under the laws of any state of the United States of America or any national banking association (including the Trustee), or a branch of a foreign bank duly licensed under the laws of the United States of America or any state or territory thereof, or (B) any life or property and casualty insurance company or insurance holding company, in each case having a combined capital stock, surplus and undivided profits of at least $100,000,000, and in either case (A) or (B) whose senior debt or claims paying ability is rated (or in the absence of such debt, which has issued a letter of credit, insurance policy or other credit enhancement device in support of a third party's debt which is rated) in one of the two highest rating categories by either S &P or Moody's, or the equivalent by any other nationally recognized rating agency, and (vi) money market funds registered under the Investment Company Act of 1940, as amended, whose shares are registered under the Securities Act of 1933, as amended, which invests only in Government Obligations or Agency Obligations and having a rating by S &P of "AAA," or "P -1," or the equivalent by any other nationally recognized rating agency including those overseen or managed by the Trustee. The term "Repurchase Agreement" shall mean a written agreement under which a bank or trust company which - 13 - has a capital and surplus of not less than $100,000,000 or a government securities dealer who reports to the Federal Reserve Board sells to, and agrees to repurchase from, the Trustee, Government Obligations or Agency Obligations; provided that the market value of such obligations is at the time of entering into the agreement at least one hundred and three percent (103 %) of the repurchase price specified in the agreement and that such obligations are segregated from the unencumbered assets of such bank or trust company or such government securities dealer. Any such investments may be purchased from or through the Trustee or any of its affiliates. In each case where this definition specifies a minimum rating standard or minimum capital surplus requirement of the issuer or guarantor for a particular type of investment, an investment shall qualify as a Permitted Investment if the rating assigned to such investment or the minimum capital surplus of the issuer or guarantor satisfies the applicable standard at the time of investment therein by the Trustee, notwithstanding any subsequent loss or reduction in the rating assigned to such investment or reduction in the capital surplus of the issuer or guarantor. "Placement Agents" means Miller & Schroeder Financial, Inc. and Kinsell, ONeil, Newcomb & De Dios. "Prepayment Price" means, when used with respect to a Certificate or any portion thereof, the principal amount of such Certificate or such portion thereof plus the applicable premium, if any, payable upon prepayment thereof pursuant to this Trust Agreement. "Principal Component" means that portion of each Installment Sale Payment designated as the principal component thereof pursuant to the Installment Purchase Agreement. "Principal Corporate Trust Office" means the office of the Trustee at the address specified in Section 10.10 hereof. "Private Placement Agreement" means the Private Placement Agreement dated December 1998, between the Placement Agents and the Authority. "Project" means (i) the acquisition of the healthcare system consisting of the Hospital and (ii) the rehabilitation of existing facilities of the Hospital. "Project Fund" means the fund by that name established pursuant to Section 4.1 hereof. "Reserve Fund" means the fund by that name established pursuant to Section 4.1 hereof. "Reserve Fund Requirement" means, as of the date of calculation, the least of (i) maximum annual debt service remaining on the Certificates, (ii) 125% of average annual debt service on the Certificates, and (iii) 10% of the original proceeds of the Certificates. Initially, the Reserve Fund Requirement with respect to the Certificates shall be $ "Revenues" means (i) all payments to the Trustee (as assignee of the Authority and the Corporation) pursuant to the Installment Purchase Agreement and, to the extent payments are derived therefrom, the Deed of Trust and the Security Agreement, and (ii) all other receipts of the Trustee (as assignee of the Authority and the Corporation) attributable to the ownership, leasing or operation -14- of the Facilities, and the financing and refinancing of the Facilities and any Additional Facilities with the proceeds of the Certificates. "Serial Certificates" means the Certificates that are stated to mature in consecutive annual installments. "Series," "Series of Certificates" or "Certificates of a Series" means any series of Certificates authorized by this Trust Agreement or by any Supplemental Trust Agreement. "Short Term Indebtedness" means indebtedness of the Corporation maturing not more than 365 days after it is incurred, but shall not include accounts payable or accrued expenses. "Sinking Fund Installment" means the amount of money specified in this Trust Agreement, and in each Supplemental Trust Agreement authorizing any Series of Additional Certificates, to prepay or pay at maturity Certificates at the times and in the amounts provided in this Trust Agreement or such Supplemental Trust Agreement (as the case may be), less the amount of any credit against such amount arising from the purchase of such Certificates in any prior Certificate Year in excess of the Sinking Fund Installment for such Certificate Year, as provided in this Trust Agreement or such Supplemental Trust Agreement. "Special Counsel" means an attorney at law or a firm of attorneys acceptable to the Authority and the Corporation, with a proven reputation in the field of municipal finance, retained by the Authority, the Corporation or the Underwriter to render an unqualified opinion on the legality of the Certificates and such other matters as are herein set forth and also to draft or be responsible for the drafting of the legal proceedings leading to the execution and delivery of the Certificates. "State" means the State of California. "Supplemental Trust Agreement" means any supplemental trust agreement entered into among the Authority and the Trustee amending, modifying or supplementing this Trust Agreement, any Supplemental Trust Agreement or any Certificate, or authorizing the amendment of the Installment Purchase Agreement, the Deed of Trust or the Security Agreement, becoming effective in accordance with the terms of this Trust Agreement. "Term Certificates" means the Certificates and any Additional Certificates subject to prepayment by Sinking Fund Installments "Total Operating Revenues" means the sum of the Corporation's net resident services revenues and other operating revenues, in each case determined in accordance with generally accepted accounting principles. "Trade Payables" means the Corporation's trade accounts payable with respect to the operation of the Facilities, as determined in accordance with generally accepted accounting principles. "Trust Agreement" means this Trust Agreement among the Authority, the Corporation and the Trustee, as amended from time to time in accordance with its terms. - 15 - "Trust Estate" shall have the meaning attributable to such term in the Granting Clauses hereof. "Trustee" means U.S. Bank Trust, National Association, its successors or assigns, or any successor trustee which may be appointed in its place. "Trustee's Annual Fee" means the annual fee of the Trustee as agreed upon from time to time by the Trustee and the Corporation. "Unrestricted Cash" means the Corporation's unrestricted cash and marketable securities (valued at the lower of amortized cost or fair market value), determined in accordance with generally accepted accounting principles. Unrestricted Cash shall include amounts on deposit in the Installment Sale Payments Fund but shall not include amounts on deposit in any other fund or account created by the Trust Agreement. "Variable Rate Indebtedness" means, as of any particular date, Certificates or Long Term Indebtedness the interest rate with respect to which is not established at a single numerical rate for the remaining term of such obligations. "Yearly Evaluation Date" means the last day of each Fiscal Year of the Corporation. Section 1.2. Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Trust Agreement: (a) Words importing the singular number include the plural number and words importing the plural number include the singular number. (b) Words of the masculine gender include correlative words of the feminine and neuter genders. (c) Words importing persons include any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or agency, instrumentality or political subdivision thereof. (d) Any reference to a particular percentage or proportion of the holders of Certificates shall mean the holders at the particular time of the specified percentage or proportion in aggregate principal amount of all Certificates then Outstanding under this Trust Agreement, except Certificates held by or for the account of the Authority or the Corporation (whether or not theretofore executed and delivered and whether or not held in the treasury of the Authority or the Corporation or pledged to or by the Authority or the Corporation to secure any indebtedness) unless the Corporation shall be the sole registered owner of the Certificates; provided, however, that Certificates so pledged may be regarded as Outstanding for the purposes of this Trust Agreement if the pledge shall establish to the satisfaction of the Trustee the pledgor's right to vote such Certificates. (e) Any reference to the Installment Sale Payments Fund Account, the Certificate Fund, the Interest Account, the Principal Account, the Reserve Fund, the Cost of Issuance Fund, the -16- Insurance and Condemnation Award Fund, the Prepayment Fund or the Project Fund shall be to the fund or account so designated that is created under Section 4.1 of this Trust Agreement. (f) The terms "agree" and "agreement" shall include and mean "covenant," and all agreements contained herein and in the Installment Purchase Agreement are intended to constitute covenants and shall be enforceable as such. ARTICLE II AUTHORIZATION OF THE PROJECT; AUTHORIZATION AND DETAILS OF THE CERTIFICATES; PARITY OBLIGATIONS Section 2.1. Project Authorized. The acquisition of the Facilities and the rehabilitation of existing facilities of the Hospital are hereby authorized. Section 2.2. Certificates Authorized. There is hereby authorized the execution and delivery of $100,000,000 aggregate principal amount of Certificates to be designated "San Bernardino Associated Communities Financing Authority Taxable Certificates of Participation (Family Clinics Foundation Project), Issue of 1998. The aggregate principal amount of Certificates that may be executed, authenticated and delivered is not limited except as provided by this Trust Agreement. The Certificates represent proportionate, undivided interests in the right to receive Installment Sale Payments. In Section 4.6 of the Installment Sale Agreement, the Corporation has covenanted to perform an appraisal of the Facilities prior to February 1, 1999. In the event that the appraised value of the Facilities is less than One Hundred Million Dollars ($100,000,000), the Certificate Holder shall redeliver to the Authority the amount of Certificates outstanding which are in excess of said amount (the "Excess Certificates "). Thereafter, the Excess Certificates shall be cancelled by the Authority. The Authority shall have no obligation to purchase the Excess Certificates from the Certificate Holder. Section 2.3. Details of the Certificates: Numbering of Certificates: Sinking Fund Prepayment of Certificates. (a) Forms and Denominations of the 1998 Certificates. The Certificates shall be executed and delivered as fully registered Certificates without coupons in minimum denominations of $1,000,000 and any integral multiple thereof. The Certificates shall be subject to mandatory and optional prepayment prior to maturity and shall otherwise have such terms, tenor, details and specifications, as set forth in this Article II. The Certificates shall be substantially in the form set forth in Exhibit A attached hereto and made a part hereof, with such insertions, omissions or variations as may be deemed necessary or appropriate by the Authorized Officer of the Authority executing the same and as shall be permitted by the Act. The Certificates may contain, or have endorsed thereon, any notations, legends or endorsements not inconsistent with the provisions of this Trust Agreement that are necessary or desirable to meet any law, stock exchange rule or usage if approved by an Authorized Officer of the Authority prior to the authentication and delivery thereof. The execution and delivery of the -17- Certificates by the Trustee in accordance with this Trust Agreement shall be conclusive evidence of the approval of the form of the Certificates by the Authority, including any insertions, omissions, variations, notations, legends or endorsements authorized by this Trust Agreement. The Certificates shall be numbered in the manner determined by the Trustee. Before executing and delivering any Certificate, the Trustee shall complete the form of such Certificate to show the registered owner, principal amount, number and interest rate thereof. As set forth in Section 3.1 hereof, if fewer than all of the Certificates of any one maturity shall be called for prepayment, that portion of any Certificate to be prepaid shall be in the principal amount of $1,000,000 or an integral multiple thereof, and that, in selecting Certificates for prepayment, the Trustee shall treat each Certificate as representing that number of Certificates that is obtained by dividing the principal amount of such Certificate by $1,000,000. (b) Maturities and Interest Rates Payable With Respect to the Certificates. The Certificates shall mature on the dates and in the amounts, and shall represent interest payable semiannually on each Interest Payment Date at the annual rates, based upon a 360 day year of twelve 30 -day months, as set forth below: Maturity Date Principal Amount Interest Rate ( 1) [TO BE COMPLETED] (c) Prepayment Provisions. (1) Optional Prepayment. The Certificates are subject to optional prepayment prior to maturity, at the written direction of the Corporation, in whole on any date on or after February 1, 1999, or in part on any Interest Payment Date on or after 1, at the prepayment price of 100% of the principal amount to be prepaid, plus accrued interest to the date fixed for prepayment. In the event the Certificates are prepaid from the proceeds of Refunding Certificates ( "Refunding Certificates "), said Refunding Certificates shall not be executed and delivered until receipt by the Authority of a Certificate of the Corporation confirmed by a certified public accountant or firm of accountants approved by the Authority to the effect that (i) the amount of Gross Revenues equals One Hundred Percent (_%) of the aggregate amount of superior and subordinate series of Refunding Certificates; (ii) the subordinate series of Refunding Cetificates is equal to or less than the Delivery Costs of the Refunding Certificates; and the total amount of all series of Certificates does not exceed the appraised value of the Facilities. -18- (ii) Mandatory Sinking Fund Prepayment. The Certificates maturing December 1, are subject to mandatory sinking fund prepayment prior to maturity on each December 1 in the years and in the amounts set forth below from amounts on deposit in the Principal Account at the prepayment price of 100% of the principal amount thereof plus accrued interest to the date fixed for prepayment. The Authority shall cause to be deposited in the Principal Account, in accordance with Section 4.5 hereof, an amount sufficient to pay Sinking Fund Installments for the Term Certificates and the Trustee shall purchase or prepay from the Principal Account on each December 1 the Term Certificates in the following principal amounts in the manner herein provided: Datt'. Sinking Fund Installment [TO BE COMPLETED] The amount of Certificates, required to be prepaid from Sinking Fund Installments in each year shall be reduced by the amount of any Certificates purchased by the Corporation (including purchases made by the Trustee) at the written direction of the Corporation from amounts on deposit in the Principal Account and delivered to the Trustee for cancellation. In the event that the Certificates of any Series and maturity are prepaid in part (other than by mandatory prepayment) in an aggregate principal amount on any one prepayment date exceeding $100,000, the Trustee shall apply the amount of such prepayment to reduce the amounts of subsequent Sinking Fund Installments with respect to Certificates of the same Series and the same maturity so as to provide for the payment of the principal or Prepayment Price of and interest with respect to such Certificates in substantially equal installments of principal and interest as directed in writing by the Corporation. Any prepayment (other than mandatory prepayment) of less than $100,000 shall be applied to reduce succeeding Sinking Fund Installments in direct order of prepayment dates. (iii) Extraordina Prepayment. The Certificates are subject to extraordinary prepayment, in whole or in part, at any time at par plus accrued interest, from any proceeds of casualty insurance or condemnation awards not applied to the repair, reconstruction or replacement of the Facilities which are required to be used to prepay Certificates pursuant to this Trust Agreement. (d) Additional Certificates. At the discretion of the Authority and upon compliance with the procedures of the Authority then in effect for the execution and delivery of its Certificates, Additional Certificates on a parity with the Certificates may be executed and delivered from time to time after initial delivery of the Certificates, provided that if any Series of Certificates is to be refunded prior to such date, payment of the Certificates of such Series shall be provided for in accordance with Section 2.5 hereof. Additional Certificates shall represent interest, be subject to mandatory and optional prepayment and purchase prior to maturity and mature, and shall otherwise - 19- have the terms, tenor, denominations, details and specifications, as shall be provided in the Supplemental Trust Agreement authoring the execution and delivery of such Additional Certificates. (e) Unrelated Bond Issues. The parties hereby acknowledge that, subsequent to the execution and delivery of the 1998 Certificates, the Authority may issue various series of bonds in connection with the financing of other projects (said bonds together with any bonds executed and delivered by the Authority between the date hereof and execution and delivery of the 1998 Certificates shall be referred to herein as the "Other Obligations "). Any pledge, mortgage, or assignment made in connection with any Other Obligations shall be protected, and any funds pledged or assigned for the payment of principal, premium, if any, or interest with respect to the Other Obligations shall not be used for the payment of principal, premium, if any, or interest with respect to the Certificates. Correspondingly, any pledge, mortgage, or assignment made in connection with the Certificates shall be protected, and any funds pledged or assigned for the payment of the Certificates shall not be used for the payment of principal, premium, if any, or interest with respect to the Other Obligations, except for any Additional Certificates. Section 2.4. Conditions Precedent to Delivery of Certificates. The Certificates shall be executed and delivered by the Trustee upon written order of the Authority. Upon payment of the purchase price of the Certificates, the Trustee shall deliver to, or upon the order of, the Authority, the Certificates, but only upon delivery to the Trustee of (a) a copy of the Authority Resolution certified by an Authorized Officer of the Authority; (b) a counterpart of this Trust Agreement executed by the Authority and the Trustee; (c) the written order of the Authority directing the execution and delivery of the Certificates, signed by an Authorized Officer of the Authority, describing the Certificates to be executed and delivered, designating the purchasers to whom the Certificates are to be delivered, stating the purchase price of the Certificates and stating that all items required by this Section are therewith delivered to the Trustee in form and substance satisfactory to the Authority; (d) a counterpart of the Installment Purchase Agreement executed by the Authority and the Corporation; (e) a Deed of Trust executed by the Corporation and the Authority and evidence of the recordation of the Memorandum Deed of Trust satisfactory to the Authority which may be telephonic notice from the title company causing such recordation; (f) an opinion of Special Counsel (who may rely upon the opinion of other counsel, who may be counsel to the Authority, the Corporation or the Trustee) to the effect that, in the opinion of such firm, this Trust Agreement and the Installment Purchase Agreement have been duly authorized, executed and delivered by the parties thereto and constitute valid and binding obligations of the Authority and the Corporation, as the case may be, enforceable in accordance with their respective terms (subject to the customary exceptions for bankruptcy, insolvency and equity); and -20- (g) such other certificates, documents, opinions and information as the Authority may require. Section 2.5. Additional Certificates. (a) The Authority may cause the execution and delivery of Additional Certificates hereunder from time to time on a parity with the Certificates for any of the purposes listed below: (1) To pay the Cost of Additional Facilities or to reimburse expenditures of the Corporation for any such Cost; or (2) To refund any Outstanding Certificates or other Parity Obligations. Each Series of Additional Certificates shall be on a parity with the Certificates and any other Series of Additional Certificates, and shall be entitled to the same benefit and security of this Trust Agreement. All Additional Certificates shall mature on December 1 and all Sinking Fund Installments with respect thereto shall be paid on December 1. In connection with the execution and delivery of any Additional Certificates, the Authority and the Trustee shall require the Corporation to fund the Reserve Fund in an amount equal to the Reserve Fund Requirement taking into account the execution and delivery of such Additional Certificates. (b) In any such event the Trustee shall, at the request of the Authority, execute and deliver the Additional Certificates as specified in the request, but only upon receipt of (1) a Supplemental Trust Agreement: (A) setting forth the terms of the Additional Certificates; (B) for Additional Certificates described in paragraph (a)(1) above, describing the Additional Facilities to become part of the Facilities; (C) providing for a supplement to the Installment Purchase Agreement requiring additional monthly payments to be made by the Corporation sufficient to cover the Debt Service Requirements of the Additional Certificates; (D) for Additional Certificates described in paragraph (a)(1) above, providing for a supplemental deed of trust and security interest relating to the Additional Facilities and any specified increase in other payments to the funds hereunder; and (E) for Additional Certificates described in paragraph (a)(1) above, creating a construction fund or project fund for such Additional Certificates; (2) a certificate of the Corporation stating that all conditions precedent to the incurring of additional Installment Purchase Payment obligations represented by such Additional Certificates have been met; (3) for Additional Certificates described in paragraph (a)(1) above, either: (A) a Management Consultant's report to the effect that (i) based on the audited financial statements of the Corporation, the Debt Service Coverage Ratio for each of the two most recently completed Fiscal Years was at least 1.20 and (ii) the projected Debt Service Coverage Ratio for each of the first two full Fiscal Years following the completion of the Additional Facilities to be financed -21- with the proceeds of the Additional Certificates or, in the case of Additional Certificates for any purpose not involving construction, for each of the first two full Fiscal Years following the date on which such Additional Certificates are executed and delivered will be at least 1.30; or (B) a certificate of an Independent Public Accountant to the effect that, based on the audited financial statements of the Corporation, the Debt Service Coverage Ratio for the two most recently completed Fiscal Years was at least 1.30, assuming that the Additional Certificates proposed to be executed and delivered were outstanding for the entire term of such periods; (4) for any Additional Certificates, certified proceedings of the Authority (A) stating the purpose of the issue, (B) establishing the Series of Certificates to be executed and delivered and providing the terms and form of Certificates thereof and directing the payments to be made into the funds hereunder, (C) authorizing the execution and delivery of the Additional Certificates, (D) for any Additional Certificates described in paragraph (a) (1) above, approving the Additional Facilities to be financed and (E) for any Additional Certificates described in paragraph (a)(2) above, authorizing prepayment of any previously executed and delivered Certificates which are to be prepaid; (5) for any Additional Certificates described in paragraph (a)(2) above, a certificate of an Authorized Officer of the Corporation that notice of prepayment of any Certificates to be prepaid has been given or that provisions have been made therefor, and that the proceeds of the Additional Certificates plus the other amounts, if any, stated to be available for the purpose, will be sufficient to accomplish the purpose of the refunding and to pay the cost of refunding, which shall be itemized in reasonable detail; (6) for any Additional Certificates, a certificate of the Corporation executed by an Authorized Officer of the Corporation stating (A) that it has no knowledge that an Event of Default hereunder or under the Installment Purchase Agreement has occurred and is continuing and (B) that the proceeds of the Additional Certificates plus other amounts, if any, stated to be available for that purpose will be sufficient to pay the costs for which the Additional Certificates are being executed and delivered, which shall be itemized in reasonable detail; (7) for any Additional Certificates, a certified resolution of the Corporation (A) approving the execution and delivery of the Additional Certificates and the terms thereof, (B) authorizing the execution of any required amendments or supplements to the Installment Purchase Agreement, (C) for Additional Certificates described in paragraph (a)(1) above, approving plans and specifications for Additional Facilities, and (D) for Additional Certificates described in paragraph (a)(2) above, authorizing prepayment of any Certificates to be prepaid; (8) for any Additional Certificates, an opinion or opinions of Special Counsel that (A) the purpose of the Additional Certificates is one for which Additional Certificates may be executed and delivered under this Section, (B) all conditions prescribed herein as -22- precedent to the execution and delivery of the Additional Certificates have been fulfilled, (C) the Additional Certificates have been validly authorized and when executed and delivered pursuant to the request of the Authority will be valid and binding obligations (except to the extent that the rights and remedies of the holders thereof are subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors and secured parties, and that the availability of specific enforcement, injunctive relief or other equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought) and are entitled to the benefit and security of this Trust Agreement, (D) all consents of any regulatory bodies required as a condition to the valid execution and delivery of the Additional Certificates have been obtained and (E) execution and delivery of such Additional Certificates will not adversely affect the excludability from gross income of the interest with respect to any Tax- Exempt Certificates; (9) for any Additional Certificates, if the acquisition of any real property or interest therein is included as security therefore, a policy of title insurance insuring that Corporation has good and marketable title thereto, free of all liens and encumbrances except Permitted Encumbrances, and that the Deed of Trust, as supplemented, constitutes a valid lien on such additional real property, subject only to Permitted Encumbrances; and (10) for any Additional Certificates executed and delivered to acquire land or any interest in land, a report of an independent engineer, as to the presence on the land to be acquired with the proceeds of such Additional Certificates of any "hazardous waste" (defined in the Resource Conservation and Recovery Act of 1976, as amended from time to time), "hazardous substance" (defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time) or any other hazardous material described in the Installment Purchase Agreement. Section 2.6. Execution and Delivery. The Certificates shall be executed and delivered by the Trustee. In case any officer whose manual signature appears on the Certificates shall cease to be such officer before delivery of such Certificates, such signature, nevertheless, shall be valid and sufficient for all purposes as if such officer had remained in office until such delivery, and the Trustee may use for the execution of Certificates the manual signature of any person who shall have been at the time the proper officer to execute such Certificates, notwithstanding the fact that such officer may not have been such officer on the date of such Certificates or that such officer may have ceased to be such officer at the time such Certificates shall be executed and delivered. Section 2.7. Registration and Exchange of Certificates. So long as the Certificates are held by the initial purchasers from the Placement Agents, the Certificates shall not be transferable. Upon a remarketing of the Certificates, if any, the Certificates shall be transferable by delivery, subject only to the provisions for registration and registration of transfer endorsed on the Certificates as hereinafter provided. The Trustee shall cause books for registration and the registration of transfer of the Certificates to be prepared. The registration books shall be kept by the Trustee, which is hereby -23 - * designated "Registrar" for the purpose of registering the Certificates and the transfers o g g p rp g g f the Certificates. The holder of any Certificate may register such Certificate only upon such books. If any Certificate shall be surrendered to the Trustee for transfer or exchange in accordance with the provisions of such Certificate, the Trustee shall execute and deliver in exchange for such Certificate a new Certificate or Certificates of the same Series of Certificates, maturing on the same date, bearing interest at the same rate and of any denomination authorized by this Trust Agreement, in aggregate principal amount equal to the principal amount of the Certificate so surrendered, upon payment of any tax or other governmental charge to which the Authority or the Trustee is entitled in accordance with such Certificate. The Trustee shall not be required to (i) execute and deliver or register the transfer or exchange of any Certificate during any period beginning at the opening of business 15 days before the selection of any Certificate to be prepaid or thereafter until after the close of business on the Business Day preceding the next Interest Payment Date or (ii) transfer any Certificate if selected, called or being called for prepayment in whole or in part or during any period established by the Trustee for the selection of Certificates for prepayment. Section 2.8. Certificates Mutilated Destroyed, Lost or Stolen. If any temporary or definitive Certificate shall become mutilated or be destroyed, lost or stolen, the Authority in its discretion may request the Trustee to execute and deliver, and upon receipt of such request the Trustee shall execute and deliver, a new Certificate in exchange for the mutilated Certificate or in lieu of and substitution for the Certificate so destroyed, lost or stolen. In every case of exchange or substitution, the applicant shall furnish to the Trustee such security or indemnity as may be required by the Trustee to save the Trustee harmless from all reasonable risks, and the applicant shall also furnish to the Trustee evidence to the Trustee's satisfaction of the mutilation, destruction, loss or theft of the applicant's Certificate and of the ownership thereof. Upon the execution and delivery of any Certificate upon such exchange or substitution, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses, including counsel fees, incurred by the Trustee. If any Certificate that has matured or has been prepaid shall become mutilated or be destroyed, lost or stolen, instead of issuing a Certificate in exchange or substitution therefor, the Trustee may pay such Certificate (without surrender thereof except in the case of a mutilated Certificate) if the applicant for such payment shall furnish to the Trustee such security or indemnity as the Trustee may require to save the Trustee harmless, and evidence to the satisfaction of the Trustee of the mutilation, destruction, loss or theft of such Certificate and of the ownership thereof. Every Certificate executed and delivered pursuant to the provisions of this Section in exchange or substitution for any Certificate that is mutilated, destroyed, lost or stolen shall constitute an additional contractual obligation hereunder, whether or not the destroyed, lost or stolen Certificate shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits hereof equally and proportionately with any and all other Certificates duly executed and delivered under this Trust Agreement. All Certificates shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, -24- destroyed, lost or stolen Certificates, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.9. Cancellation and Disposition of Certificates. All mutilated Certificates, all Certificates surrendered for exchange or transfer, all Certificates that have been paid at maturity or upon prior prepayment and all Certificates surrendered to the Trustee by the Corporation for cancellation or purchased by the Trustee at the written direction of an Authorized Officer of the Corporation with amounts on deposit in the Principal Account and the Prepayment Fund shall be canceled by the Trustee and shall be destroyed. The Trustee shall maintain records of any such destruction of any Certificate, identifying the Certificates so canceled and destroyed. ARTICLE III PREPAYMENT OF CERTIFICATES Section 3.1. Selection of Certificates to Be Prepaid. (a) If fewer than all of the Certificates of any one maturity shall be called for prepayment, the particular Certificates or portions of Certificates to be prepaid from such maturity shall be selected by lot by the Trustee in such manner as the Trustee in its discretion may determine; provided, however, that the portion of any Certificate to be prepaid shall be in the principal amount of $1,000,000 or an integral multiple thereof, and that, in selecting Certificates for prepayment, the Trustee shall treat each Certificate as representing that number of Certificates that is obtained by dividing the principal amount of such Certificate by $1,000,000. (b) The Certificates of each Series to be prepaid on any prepayment date shall otherwise be selected for prepayment in accordance with this Trust Agreement and the terms of such Certificates. Section 3.2. Notice of Prepayment. (a) Subject to the prepayment provisions of the Certificates and this Trust Agreement, upon receipt of written notice of the Corporation's election to prepay Certificates, which notice shall be given not less than 60 days before the date fixed for prepayment, the Trustee shall select the Certificates to be prepaid and give notice to the Certificateholders in the manner specified in the Certificates of the Corporation's election to redeem such Certificates. (b) At least 30 days before each date on which a Sinking Fund Installment for any of the Certificates becomes due in accordance with this Trust Agreement, the Trustee shall select the Certificates to be prepaid on such date from such Sinking Fund Installment in accordance with Section 3.1 hereof and shall give notice of the prepayment of such Certificates. (c) Each notice of prepayment shall be given by the Trustee to the Certificateholders in accordance with the provisions of the Certificates to be prepaid and shall set forth: (i) the date fixed for prepayment; (ii) the Prepayment Price to be paid; (iii) that such Prepayment Price will be paid in -25- - ;�.:� .____.: :....,.,.._: ,.. ,.' •:� a.: ^r.:.r` .s,a.:,y,. '.-tip -Y z.- iNk��r?!..:M accordance with the Certificates; (iv) in the case of Certificates to be prepaid in part only, the portion of the principal amount thereof to be prepaid; and (v) that on the date fixed for prepayment, there shall become due and payable upon all Certificates to be prepaid the Prepayment Price thereof, together with interest accrued to the date fixed for prepayment, and that, from and after such date, interest thereon shall cease to accrue. Except for any notice of prepayment given in connection with a Sinking Fund Installment or any extraordinary prepayment, any notice of prepayment may state that such notice of prepayment is conditioned upon the execution and delivery of refunding bonds or other refinancing debt on or before the proposed prepayment date to pay the Prepayment Price (or a portion thereof) of the Certificates being called for prepayment. Section 3.3. Prepayment of Portion of Certificate. In case part but not all of a Certificate shall be selected for prepayment, upon the presentation and surrender of such Certificate to the Trustee for payment of the principal amount thereof so called for prepayment in accordance with such Certificate, the Trustee shall execute and deliver to or upon the order of the owner of such Certificate or his attorney -in -fact or legal representative, without charge therefor, a Certificate or Certificates, of the same Series and maturity, representing interest at the same rate and of any denomination authorized by this Trust Agreement, in aggregate principal amount equal to the unprepaid portion of the principal amount of the Certificate so surrendered. ARTICLE IV REVENUES AND FUNDS Section 4.1. Creation of Funds and Accounts to Be Held by the Trustee. The following funds and separate accounts within the funds are hereby created for the Certificates and shall be held and maintained for the Certificates by the Trustee under this Trust Agreement: (a) Installment Sale Payments Fund (b) Certificate Fund: (i) Interest Account (ii) Principal Account (c) Reserve Fund (d) Delivery Cost Fund (e) Insurance and Condemnation Award Fund (f) Prepayment Fund (g) Project Fund The complete designation of each such fund or account on any statement of account shall consist of the words "San Bernardino Associated Communities Financing Authority - Family Clinics Foundation Project" preceding the name of the fund or account, so that, for example, the Certificate -26- Fund shall bear the full designation "San Bernardino Associated Communities Financing Authority Certificates of Participation, Family Clinics Foundation Project Certificate Fund." "San Bernardino Associated Communities Financing Authority - Family Clinics Foundation Project Certificate Fund" shall be a special fund and, together with all other funds created by this Trust Agreement, to the extent and in the manner provided by this Trust Agreement, is hereby pledged to, and charged with, the payment of the principal or Prepayment Price of and interest with respect to the Certificates, as the same shall become due. Section 4.2. Project Fund and Delivery Cost Fund: Application of Moneys. (a) The Project Fund shall be held by the Trustee in trust and, pending the application of the Project Fund as provided in this Trust Agreement, shall be subject to a lien and charge in favor of the Holders of all Outstanding Certificates. For the purposes of internal accounting, the Project Fund may contain one or more subaccounts, as the Trustee may deem proper. The Trustee shall disburse amounts from the Project Fund in accordance with requisitions submitted by the Corporation substantially in the form of Exhibit B hereto executed by an Authorized Officer of the Corporation stating: (i) the name of the person to whom each such payment is due; (ii) the respective amount to be paid; (iii) the purpose by general classification for which each obligation to be paid was incurred; and (iv) that obligations in the stated amounts have been incurred by the Corporation and are presently due and payable or are properly reimbursable to the Corporation and that each item thereof is a necessary cost of the Project and is a proper charge against the Project Fund and has not been paid from amounts previously disbursed from the Project Fund. Moneys remaining in the Project Fund on the Completion Date and not needed to pay Costs of the Project shall be transferred to the Interest Account of the Certificate Fund upon the written direction of the Corporation. (b) The Delivery Cost Fund shall be held by the Trustee in trust and, pending the application of the Delivery Cost Fund as provided in this Trust Agreement, shall be subject to a lien and charge in favor of the Holders of all Outstanding Certificates. The Trustee shall disburse amounts on deposit in the Delivery Cost Fund to pay the costs of executing and delivering the Certificates and other amounts directed by the Corporation upon the written direction of the Corporation, including the initial administrative fee of the Authority. Amounts remaining on deposit in the Delivery Cost Fund 180 days following the Closing Date of the Certificates shall be paid to the Corporation. Section 4.3. Application of Certificate Proceeds. The proceeds of the Certificates received by the Trustee, including accrued interest with respect thereto, shall be deposited by the -27- Trustee as follows: (i) $ , shall be deposited in the Project Fund, (ii) $ shall be deposited in the Reserve Fund and (iii) $ shall be deposited in the Cost of Issuance Fund Section 4.4 Deposit of Installment Sale Payments - General. Installment Sale Payments or other payments made by or on behalf of the Authority under the Installment Purchase Agreement shall be paid directly to the Trustee and shall, except as otherwise expressly provided in this Trust Agreement, be deposited to the credit of the Installment Sale Payments Fund. (a) Except as otherwise provided in this Trust Agreement, moneys in the Installment Sale Payments Fund shall be paid by the Trustee as follows and in the following order of priority: FIRST: to the Authority, on June 1 and December 1, commencing June 1, 1999, in advance, in payment of one -half of the Authority's Annual Fee, without invoice, and the reasonable Administrative Expenditures of the Authority, upon receipt of an invoice or other request for payment submitted by the Authority and approved by an Authorized Officer of the Corporation in the case of any Administrative Expenditures; SECOND: to the Trustee, on June 1 and December 1, commencing June 1, 1999, in advance, in payment of one -half of the Trustee's Annual Fee, without invoice, and the reasonable Administrative Expenditures of the Trustee, upon receipt of an invoice or other request for payment submitted by the Trustee and approved by an Authorized Officer of the Corporation in the case of any Administrative Expenditures; THIRD: not later than five (5) days prior to each June 1 and December .1 commencing on June 1, 1999 to the Interest Account the amount required to make the amount on deposit in the Interest Account equal to the amount of accrued and unpaid interest with respect to the Certificates due and payable on the next Interest Payment Date, and FOURTH: not later than five (5) days prior to each June 1 and December 1 commencing June 1, 1999 to the Principal Account the lesser of (A) one -half (' /z) of the principal due on the Certificates on the next December 1 or June 1, as applicable and (B) the amount required to cause the amount on deposit in the Principal Account to equal the principal amount (including any Sinking Fund Installments), if any, due on the next December 1 or June 1; and FIFTH: to the Reserve Fund, on the first day of each month, the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to equal the Reserve Fund requirement. After making the payments required above, any balance remaining in the Installment Sale Payments Fund on the last Business Day of any month shall be deposited to the Project Fund until completion of the Project and, following completion of the Project, paid to the Corporation. ME (b) Anything herein contained to the contrary notwithstanding, moneys deposited at any time in the Installment Sale Payments Fund as the result of payments by the Authority, the Trustee or the Corporation of (i) the proceeds of all or any part of the Facilities taken in the exercise of the power of eminent domain (or similar proceedings or related agreements) and related payments, insurance proceeds payable in connection with the loss, damage or destruction of the Facilities and related payments with respect to the Facilities as provided by the Installment Purchase Agreement shall be paid to the Insurance and Condemnation Award Fund by the Trustee on or prior to the fifth Business Day after the deposit thereof and (ii) the proceeds of any business interruption policy in accordance with the Installment Purchase Agreement shall be paid to the Certificate Fund for deposit to the various accounts and subaccounts within the Certificate Fund to be used to pay principal and interest with respect to the Certificates when due. (c) Anything herein contained to the contrary notwithstanding, for purposes of Certificate prepayment moneys deposited at any time in (i) the Installment Sale Payments Fund as the result of payments made by the Corporation or the Authority to the Trustee in accordance with the Installment Purchase Agreement, or (ii) the Insurance and Condemnation Award Fund from payments made to the Trustee pursuant to the Installment Purchase Agreement shall be transferred to the Prepayment Fund by the Trustee as specified in the Installment Purchase Agreement. Notwithstanding any other provision of this Trust Agreement, in the event of the execution and delivery of any Additional Certificates, any payments made by the Corporation pursuant to the Installment Purchase Agreement shall be allocated by the Trustee between the payment of the Certificates and Additional Certificates, proportionately on the basis of the respective aggregate principal amounts of Certificates and Additional Certificates then outstanding as certified to the Trustee by an Authorized Officer of the Corporation. (d) Anything herein contained to the contrary notwithstanding, moneys deposited at any time in the Installment Sale Payments Fund as the result of any sale or other disposition of the Facilities by the Trustee or by any foreclosing trustee (if and to the extent then permitted by applicable law) upon the occurrence of any Event of Default under the Installment Purchase Agreement, the Deed of Trust or the Security Agreement shall be applied in accordance with the provisions of Section 7.4 of this Trust Agreement. Notwithstanding any other provision of this Trust Agreement, in the event of the execution and delivery of any Additional Certificates, any such moneys shall be allocated by the Trustee between the payment of Certificates and Additional Certificates, proportionately on the basis of the respective aggregate principal amounts of Certificates and Additional Certificates then outstanding as certified to the Trustee by an Authorized Officer of the Corporation. (e) Anything herein contained to the contrary notwithstanding, moneys deposited in the Installment Sale Payments Fund from the proceeds of land and real property sold or disposed of by the Corporation shall be transferred to the Prepayment Fund and used to reduce the principal amount of Outstanding Certificates as set forth in Section 4.9 of this Trust Agreement. Section 4.6 Certificate Fund: Application of Moneys. (a) The Trustee shall on each Interest Payment Date pay or cause to be paid out of the Interest Account the accrued and unpaid interest due with respect to the Certificates. The Trustee -29- 3 or the payment of accrued interest upon shall pay out of the Interest Account any amounts required f any prepayment or purchase pursuant to Section 2.3(c)(ii) or Section 4.6(c)(ii) of the Trust Agreement. Amounts on deposit in the Interest Account shall be used exclusively to pay interest with respect to the Certificates. (b) The Trustee shall on each December 1 pay or cause to be paid out of the Principal Account the principal amount due, if any, with respect to the Certificates upon presentation and surrender of the requisite Certificates to the Principal Corporate Trust Office. Amounts on deposit in the Principal Account shall be used exclusively to pay principal and Sinking Fund Installments with respect to the Certificates. (c) The Trustee shall take all action required by Article III of this Trust Agreement to effect the timely prepayment of Term Certificates from the Principal Account in accordance with the Sinking Fund Installments as herein set forth. Moneys in the Principal Account shall be applied to the purchase pursuant to Section 2.3(c)(ii) or Section 4.6(c)(ii) of the Trust Agreement or prepayment of Certificates as follows: (i) The Trustee shall call for prepayment from moneys in the Principal Account such principal amount of Tenn Certificates or portions of Term Certificates subject to prepayment on December 1 of the immediately succeeding Certificate Year as is equal to the Sinking Fund Installment due on such December 1, less the amount credited to the Principal Account in accordance with the provisions of paragraph (iii) below during the then current Certificate Year. (ii) Upon the written direction of an Authorized Officer of the Corporation, the Trustee shall endeavor to purchase on behalf of the Corporation from amounts on deposit in the Principal Account Term Certificates or portions of Term Certificates then Outstanding and subject to prepayment by operation of the Principal Account on December 1 of the immediately succeeding Certificate Year at the most advantageous price then reasonably obtainable with reasonable diligence as determined by the Corporation. The Trustee shall pay the interest accrued with respect to such Term Certificates from the Interest Account and the purchase price from the Principal Account; provided, however, that no such purchase shall be made by the Trustee (A) within a period of 45 days immediately preceding any December 1 on which Term Certificates are subject to call for prepayment from the Principal Account, or (B) at a price, including any brokerage and other charges, greater than the principal amount thereof and accrued interest with respect thereto. If in any Certificate Year the amount deposited in the Principal Account exceeds the aggregate Sinking Fund Installment for all Term Certificates then Outstanding for such Certificate Year, at the written request of an Authorized Office of the Corporation, the Trustee shall endeavor to purchase any Term Certificates then Outstanding with such excess moneys in such manner as the Trustee in its discretion may determine. (iii) If the Trustee purchases Term Certificates during any Certificate Year as provided in paragraph (ii) above or the Corporation delivers to the Trustee for cancellation on or before the 45th day next preceding any December 1 on which a Sinking Fund Installment is due Certificates subject to prepayment on such December 1, an amount equal -30- to 100% of the principal amount of any such Certificates so purchased or delivered,to the Trustee for cancellation shall be credited to the Principal Account and the amount so credited to the Principal Account in any such Certificate Year shall be deemed to have been deposited therein in such Certificate Year for all purposes of this Trust Agreement and credited to the Sinking Fund Installments by such December 1. (iv) If by the application of moneys in the Principal Account pursuant to this paragraph (c) the Trustee shall purchase Term Certificates in any Certificate Year, or the Corporation shall purchase and deliver to the Trustee for cancellation as provided herein and in the Installment Purchase Agreement Term Certificates in any Certificate Year, and if the aggregate principal amount of Term Certificates purchased in such Certificate Year is in excess of the applicable Sinking Fund Installment for such Certificate Year, the amount of such excess shall be applied to reduce future Sinking Fund Installments in the order of the due dates for such Sinking Fund Installments as an Authorized Officer of the Corporation may direct in writing or, if the Corporation provides no direction, in the inverse order of Sinking Fund Installment payment dates if only one Series remains Outstanding. Section 4.7 Reserve Fund Application of Moneys. If, after the transfer of moneys from the Prepayment Fund as provided in Section 4.9 hereof: (i) the amount in the Interest Account on the Business Day immediately preceding any Interest Payment Date shall be less than the amount of interest due with respect to the Certificates on such Interest Payment Date, the Trustee shall transfer from the Reserve Fund to the Interest Account the amount necessary to make the amount on deposit therein and available to pay interest with respect to the Certificates equal to the accrued and unpaid interest with respect to the Certificates on the next Interest Payment Date as of the date of such transfer; and (ii) the amount in the Principal Account shall be less than the amount of the principal and the Sinking Fund Installment (either or both, as the case may be) due on the next maturity date or Sinking Fund Installment Date for the Certificates, the Trustee shall transfer from the Reserve Fund to the Principal Account the amount necessary to make the amount on deposit therein and available to pay the principal of or any Sinking Fund Installment for the Certificates equal to the principal of or the Sinking Fund Installment for such Certificates due on such date. Section 4.8. Insurance and Condemnation Award Fund: Application of Moneys. Moneys in the Insurance and Condemnation Award Fund shall be applied by the Trustee for the following purposes: (a) Disbursement to or at the written direction of an Authorized Officer of the Corporation in accordance with requisitions meeting the requirements of subsection (c) of this Section to pay the costs of repair or replacement of property lost, damaged, destroyed or taken in accordance with the Installment Purchase Agreement. - 31 - (b) Deposit by the Trustee in the Prepayment Fund for the extraordinary prepayment of Certificates in accordance with the Installment Purchase Agreement; provided, however, that in the event of the execution and delivery of any Additional Certificates, such moneys shall be allocated by the Trustee between the payment of Certificates and Additional Certificates, proportionately on the basis of the respective aggregate principal amounts of Certificates and Additional Certificates then Outstanding as certified to the Trustee by an Authorized Officer of the Corporation. (c) Payments and transfers from the Insurance and Condemnation Award Fund shall be made by the Trustee to pay costs of restoring or replacing the Facilities in accordance with the documents delivered by the Corporation pursuant to the Installment Purchase Agreement (the "Restoration Project ") pursuant to requisitions signed by an Authorized Officer of the Corporation describing in reasonable detail the purposes for which such moneys are to be used and the amount thereof and certifying that the amount then being requested constitutes a proper cost of the Restoration Project which is then due or which has been paid by the Corporation and which has not previously been the subject of a requisition from the Insurance and Condemnation Award Fund. Section 4.9. Prepayment Fund: Application of Moneys. (a) If the amount in the Interest Account on the Business Day immediately preceding any Interest Payment Date shall be less than the amount of interest then due with respect to the applicable Certificates or the amount in the Principal Account on the Business Day immediately preceding any December 1 shall be less than the amount of the principal and the Sinking Fund Installment (either or both, as the case may be) then due with respect to the Certificates, the Trustee forthwith shall transfer moneys from the Prepayment Fund (other than amounts required to pay the Prepayment Price or the purchase price of Certificates theretofore called for prepayment or contracted to be purchased), first, to the Interest Account, and second, to the Principal Account, to the extent necessary to cure any such deficiency. (b) Subject to the provisions of paragraph (d) of this Section, amounts in the Prepayment Fund shall be applied by the Trustee to the purchase of Certificates on behalf of the Corporation at a purchase price not exceeding the Prepayment Price applicable to such Certificates on the next date on which such Certificates are prepayable, plus accrued interest with respect thereto, in such manner as an Authorized Officer of the Corporation shall direct in writing. No such purchase shall be made by the Trustee within the period of 45 days immediately preceding any date on which Certificates are subject to prepayment. If 45 days prior to any date on which Certificates are subject to prepayment, amounts in excess of $100,000 shall then remain in the Prepayment Fund (exclusive of amounts set aside to pay the Prepayment Price or the purchase price of Certificates theretofore called for prepayment or contracted to be purchased or scheduled to be called for prepayment pursuant to clause 2.3(c)(iii)), the Trustee, upon the written direction of the Corporation, shall give notice of the optional prepayment of Certificates in an amount equal to such amount on deposit in the Prepayment Fund (to the extent practicable) as provided in Article III hereof, at the Prepayment Price applicable to such prepayment. (c) Amounts in the Prepayment Fund shall be applied by the Trustee in each Certificate Year to the prepayment of Certificates of each Series then subject to prepayment as directed by the Corporation,. or if no direction is given, on a pro rata basis and by lot within a maturity. -32- (d) Notwithstanding the foregoing provisions of this Section, moneys on deposit in the Prepayment Fund from amounts- paid by the Corporation for the extraordinary prepayment of Certificates pursuant to the Installment Purchase Agreement (as such amounts may be transferred from the Insurance and Condemnation Award Fund), shall be allocated and applied to the prepayment of each Series of Certificates in proportion to the aggregate principal amount of Certificates of each Series then Outstanding. Section 4.10. Investment of Moneys. Moneys in any of the funds and accounts established by Section 4.1 shall be invested, as shall be directed by the Corporation in a written order specifying that such direction is consistent with the restrictions imposed by the Tax Certificate signed by an Authorized Officer of the Corporation, but only in Permitted Investments maturing in such amounts and on such dates as may be necessary to provide moneys to meet the payments specified in this Trust Agreement from such funds and accounts; provided, however, that moneys in the Installment Sale Payments Fund may be invested in money - market funds that invest only in obligations described in clause (i), (ii), (iv) or (vi) of the definition of Permitted Investments. In the absence of such written direction the Trustee shall invest in Permitted Investments set forth in clause (vi) of the definition thereof. Interest earned, profits realized and losses suffered by reason of any investment of the Installment Sale Payments Fund, the Insurance and Condemnation Award Fund, the Prepayment Fund, the Project Fund, the Cost of Issuance Fund and the Certificate Fund shall be credited or charged, as the case may be, to the fund or account for which such investment shall have been made. The Reserve Fund shall be valued by the Trustee as of December 1 and June 1 each year for the six -month period then ended and at such other times as shall be requested in writing by an Authorized Officer of the Corporation. If the valuation results for the Reserve Fund for such period are a gain (by virtue of either interest earned or profits realized), the amount of such investment gain shall be credited to the applicable Reserve Fund to the extent that there exists a deficiency therein and the balance of such investment gain, if any, shall be transferred by the Trustee not later than the immediately succeeding December 1 as follows and in the following order of priority: FIRST: to the Project Fund prior to the Completion Date; SECOND: to the Interest Account, the amount, if any, necessary to make the amount on deposit therein equal to the interest becoming due with respect to the Certificates during the immediately succeeding 12 -month period; and THIRD: (i) to the Principal Account, the amount, if any, necessary to make the amount on deposit therein equal to the principal amount, if any, of all Certificates maturing on the immediately succeeding December 1 and (ii) to the Principal Account, the Sinking Fund Installment, if any, payable on the immediately succeeding December 1, less the amount, if any, credited to the Principal Account during such Certificate Year in accordance with Section 4.6(c) hereof. Notwithstanding the above, if provided in the Supplemental Trust Agreement authorizing any Additional Certificates, any investment earnings on investments in the Reserve Fund during the -33 - construction period for any Additional Facilities shall be transferred to the construction fund or project fund created by such Supplemental Trust Agreement. The Trustee may sell or redeem at a price reasonably obtainable, any obligations in which moneys shall have been invested as provided in this Section to the extent necessary to provide cash in the respective funds or accounts, to make any payments required to be made therefrom, to facilitate the transfer of money between various funds and accounts as may be required or permitted from time to time pursuant to the provisions of this Article and otherwise comply with the requirements of this Trust Agreement. The Trustee, at the written direction of the Corporation, may sell or redeem investments held in any fund or account created by this Trust Agreement in order to realize any profit attributable to an increase in the market value of such investment. In computing the value of the assets of any fund or account established hereunder, investments and accrued interest with respect thereto shall be deemed a part thereof. Such investments shall be valued at current market value, or at the prepayment price thereof, if then redeemable at the option of the holder (in any case net of the cost of liquidating such investments). Determination of the market value of Permitted Investments shall be computed as follows: (a) For obligations the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if such prices are not published in The Wall Street Journal but are published on a regular basis in The New York Times, then in The New York Times), at the average of the bid and asked prices for such obligations so published on the date of such valuation (or, if not so published on the date of such valuation, on the most recent date so published prior to the date of such valuation); (b) For obligations the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times, at the average price bid for such obligations on the date of valuation by any two nationally recognized government securities dealers (selected by the Trustee in its sole discretion) who are on the date of such valuation making a market in such obligations or, at the option of the Trustee, at the bid price published by a nationally recognized pricing service; (c) For obligations which are either certificates of deposit or bankers acceptances, at the face amount thereof plus accrued interest to the date of valuation; and (d) For obligations not described in Subsections (a) through (c), the value thereof established by prior agreement between the Trustee and the Corporation; provided, however the Trustee is authorized to utilize computer printing services including the valuation system utilized in its regular accounting system for all purposes of this Section. The Trustee may make any investment permitted by this Trust Agreement through its bond or trust department or through the bond or trust department of any affiliate of the Trustee. Neither the Trustee nor the Authority shall be liable for any depreciation in the value of any obligations in which moneys of the funds or accounts created by this Trust Agreement shall be invested as aforesaid, or for any loss arising from any investment or liquidation of investments -34- permitted hereby. The investments authorized by this Section shall at all times be subject to the provisions of applicable law, as amended from time to time. The Authority and the Corporation by their execution of the Installment Purchase Agreement acknowledge that to the extent regulations of the Comptroller of the Currency or any other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority and the Corporation specifically waive receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority and the Corporation periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. Section 4.11. Deficiencies and Surpluses in the Reserve Fund. For the purposes of this Trust Agreement, (i) a "deficiency" means, in the case of the Reserve Fund, that at any time the amount on deposit therein is less than 95% of the Reserve Fund Requirement, and (ii) a "surplus" means, in the case of the Reserve Fund, that at any time the amount on deposit therein is in excess of 105% of the Reserve Fund Requirement; provided, however, that earnings on the investment of amounts on deposit in the Reserve Fund which are required to be transferred to another fund or account pursuant to Section 4.10 hereof shall not create a surplus but shall stay in the Reserve Fund if the amount on deposit is less than the Reserve Fund Requirement. The Trustee shall compute at such times and in the manner set forth in Section 4.10 hereof the value of the assets of the Reserve Fund and shall as promptly as practicable thereafter transfer the amount of any surplus resulting from such computation to the funds and accounts specified in Section 4.10 hereof, and such transfer and payment of moneys to such funds and accounts shall be deemed to have been made as of December l of each year for the purposes of computing the amount required to be paid by the Corporation pursuant to the Installment Purchase Agreement; provided, however, that the Trustee shall not be required pursuant to this Section to compute the value of the assets in the Reserve Fund more than four times in any Certificate Year, and provided, further, that in the event that any amount shall be paid to the Trustee for deposit in the Reserve Fund by the Corporation or any other party in connection with the execution and delivery of any Additional Certificates, any surplus existing in the Reserve Fund in connection with the payment of such Additional Certificates shall be paid to the Corporation or such other party entitled thereto to the extent provided in the Supplemental Trust Agreement authorizing such Additional Certificates. The provisions of this Section relating to transfers of surpluses shall be subject in all respects to the provisions of Section 4.10 hereof. In the event that any computation of the value of assets of the Reserve Funds as herein provided discloses any deficiency therein, then the Trustee shall give notice of such deficiency to the Corporation. Section 4.12. Application of Moneys in Certain Funds for Prepayment of Certificates. Notwithstanding any other provision of this Trust Agreement, if at any time the amounts held in the Installment Purchase Payment Fund, the Certificate Fund, the Reserve Fund and the Prepayment Fund are sufficient to pay the principal or Prepayment Price of all Outstanding Certificates and the interest accruing with respect to such Certificates to the next date on which such Certificates are prepayable or payable, as the case may be, whichever is earlier, upon the written request of the Corporation, the -35 - Trustee shall transfer all of the amounts on deposit in such funds to the Prepayment Fund and proceed to prepay all outstanding Certificates in the manner provided for prepayment of such Certificates by this Trust Agreement, and in such event all provisions of Article IX hereof shall be operative. ARTICLE V PARTICULAR COVENANTS (a) The Trustee shall pay or cause to be paid the principal or Prepayment Price of and interest with respect to every Certificate on the date, at the place and in the manner provided herein and in the Certificates according to the true intent and meaning thereof; provided, however, that the Certificates represent undivided, proportionate interests in the right to receive Installment Sale Payments and the principal or Prepayment Price of and interest with respect to the Certificates are payable solely from Installment Sale Payments, and to the extent provided in this Trust Agreement, the moneys on deposit in the funds and accounts created by this Trust Agreement, all as provided in this Trust Agreement. (b) No agreements or provisions contained herein, nor any agreement, covenant, or undertaking by the Authority in connection with the Facilities or the execution, delivery and/or sale of the Certificates shall give rise to any pecuniary liability of the Authority or a charge against its general credit, or shall obligate the Authority financially in any way, except from the Installment Sale Payments represented by the Certificates and their application as provided in this Trust Agreement. No failure of the Authority to comply with any term, covenant, or agreement contained in the Certificates, this Trust Agreement or the Installment Purchase Agreement, or in any document executed by the Authority in connection with the Facilities or the execution, delivery and sale of the Certificates, shall subject the Authority to liability for any claim for damages, costs, or other financial or pecuniary charge, except to the extent the same can be paid or recovered from the Installment Sale Payments represented by the Certificates. Nothing herein shall preclude a proper party in interest from seeking and obtaining, to the extent permitted by law, specific performance against the Authority for any failure to comply with any term, condition, covenant, or agreement herein; provided that no costs, expenses, or other monetary relief shall be recoverable from the Authority, except as may be payable from the Installment Sale Payments represented by the Certificates. No provision, covenant, or agreement contained herein, or any obligations imposed upon the Authority, or the breach thereof, shall constitute an indebtedness of the Authority within the meaning of any State constitutional or statutory limitation or shall constitute or give rise to a charge against the Authority's general credit. In making the agreements, provisions, and covenants set forth in this Trust Agreement, the Authority has not obligated itself. Section 5.2. Performance of Covenants. Undertakings and Agreements: Representations as to Authorization and Validity of Certificates: Authority's Further Assurance. (a) Performance of Covenants Undertaking, and Agreements. The Authority shall faithfully perform at all times all of its covenants, undertakings and agreements contained in this Trust Agreement, the Installment Purchase Agreement, the Deed of Trust or the Security Agreement or in each Certificate executed and delivered under this Trust Agreement and in any proceedings of the -36- Authority pertaining thereto; provided, however, that (a) the Authority shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Corporation or the Trustee, and (b) the Authority shall have received the instrument to be executed, and, at the Authority's option, shall have received from the Corporation assurance satisfactory to the Authority that the Authority shall be reimbursed for the reasonable expenses incurred or to be incurred in connection with taking such action or executing such instrument. (b) Representations as to Authorization and Validity. The Authority represents and covenants that: (i) it is duly authorized under the Constitution and laws of the State, to enter into the Installment Purchase Agreement, the Security Agreement and this Trust Agreement and to assign the Installment Purchase Payments to the Trustee pursuant to this Trust Agreement, (ii) all action on its part for the execution and delivery of the Certificates has been duly and effectively taken; and (iii) such Certificates in the hands of the holders thereof represent proportionate, undivided interests thereof in the right to receive Installment Sale Payments. (c) Authority's Further Assurance. The Authority covenants that it will do, execute, acknowledge, and deliver or cause to be done, executed, acknowledged, and delivered by the parties within its control, such instruments supplemental hereto and such further acts, instruments, and transfers as the Trustee may reasonably require for the better assuring, transferring, mortgaging, conveying, pledging, assigning, and confirming unto the Trustee, the Authority's interest in and to all interests, revenues, proceeds, and receipts pledged hereby to the payment of the principal of, premium, if any, and interest with respect to the Certificates in the manner and to the extent contemplated herein. The Authority shall be under no obligation to prepare, record, or file any such instruments or transfers. Section 5.3. Extensions of Payment of Certificates. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Certificates or the time of payment of any of the claims for interest by the purchase or funding of Certificates, claims for interest or by any other arrangement and, if the maturity of any Certificates or the time for payment of claims for interest shall be extended, the Certificates or claims for interest shall not be entitled in case of any default hereunder to the benefit of this Trust Agreement or to any payment out of any assets of the Authority or the funds held by the Trustee (except funds held in trust for the payment of particular Certificates or claims for interest pursuant to this Trust Agreement), except subject to the prior payment of the principal of all Outstanding Certificates the maturity of which has not been extended and of such portion of the interest with respect to the Certificates as shall not be represented by extended claims for interest. Nothing herein shall be deemed to limit the right of the Authority to execute and deliver refunding bonds as permitted hereby, and such execution and delivery shall not be deemed to constitute an extension of the maturity of Certificates. Section 5.4. Ciporation Payments. The Installment Purchase Agreement requires that the Corporation make payments thereunder sufficient at all times (i) to pay the principal or Prepayment Price of and interest (including any interest at a default rate and any penalties for late payment) with respect to the Certificates Outstanding as the same become due and payable, (ii) to make the payments required by this Trust Agreement to the Reserve Fund and (iii) to pay the Administrative Expenditures of the Authority and the Trustee, as such amounts shall become due and payable. -37- Section 5.5. Liens- Encumbrances and Charges. The Authority shall not create and, to the extent Installment Purchase Payments are received from the Corporation for the discharge thereof shall not suffer to remain, any lien, encumbrance or charge upon the Revenues or upon any other moneys receivable by the Authority or pledged under this Trust Agreement, except the pledge, lien and charge created for the security of the Certificates and, to the extent provided herein, any Additional Certificates, except as otherwise provided herein. To the extent Installment Purchase Payments or the Installment Sale Payments or other moneys are received from the Corporation therefor, the Authority will cause to be discharged, or will make adequate provisions to satisfy and discharge, within 60 days after the same shall accrue, all lawful claims and demands that, if unpaid, might by law become alien upon any Installment Purchase Payments or the Installment Sale Payments or such other receipts of the Authority; provided, however, that nothing contained in this Section shall require the Authority to pay or cause to be discharged, or make provision for, any such lien, encumbrance or charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. So long as any Certificates shall be Outstanding, the Trustee and the Authority shall not issue or execute and deliver any bonds, notes or other evidences of indebtedness other than Certificates, payable from or secured by any pledge of or other lien or charge on the Installment Purchase Payments or the Installment Sale Payments or other moneys, securities or funds paid or to be paid or held or set aside or to be held or to be set aside by the Authority or the Trustee under this Trust Agreement. Nothing in this Section is intended to affect the right of the Corporation to secure any permitted indebtedness as provided in the Installment Purchase Agreement. The Authority shall not create or cause to be created any lien or charge on the Installment Purchase Payments or the Installment Sale Payments or such moneys, securities or funds, other than the lien on and pledge of the Installment Purchase Payments or the Installment Sale Payments and such moneys, securities or funds authorized by this Trust Agreement. ARTICLE VI THE TRUSTEE Section 6.1. Appointment of Paying Agent: Registrar: Acceptance of Trustee. At the Corporation's direction, the Authority hereby appoints U.S. Bank Trust, National Association, as Trustee under this Trust Agreement, and as the Paying Agent and the registrar. The Trustee's acceptance of the trusts and the duties of Trustee by executing and delivering this Trust Agreement also shall constitute acceptance of the duties of Paying Agent and Registrar. Section 6.2. Trustee Entitled to Indemnity. The Trustee shall be under no obligation to institute any suit, or to undertake any proceeding under this Trust Agreement, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take possession of or foreclose on the Facilities or the Revenues or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall be indemnified by or on behalf of one or more Certificateholders to its satisfaction against any and all costs and expenses, outlays and counsel fees and other reasonable disbursements, with interest at the Advance Rate, and against all liability, including, without limitation, any liability or potential liability as a result of the presence on the Facilities of any of the substances described in the Installment Purchase Agreement or the violation by the Corporation of any of the covenants set forth in the Installment -38- Purchase Agreement. Nevertheless, the Trustee may begin suit, or appear in and defend suit, or do anything else in its judgment proper to be done by it as the Trustee, without indemnity, and in such case the Corporation shall reimburse the Trustee for all costs and expenses, outlays and counsel fees and other reasonable disbursements properly incurred in connection therewith, with interest at the Advance Rate. If the Corporation shall fail to make such reimbursement, the Trustee may reimburse itself from any moneys in its possession under the provisions of this Trust Agreement (excluding the Rebate Fund) and shall be entitled to a preference therefor over any Certificates Outstanding hereunder. Section 6.3. Responsibilities of Trustee. The recitals contained in this Trust Agreement shall be taken as the statements of the Authority, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Trust Agreement, the Installment Purchase Agreement or of the Certificates or in respect of the security afforded by this Trust Agreement, and the Trustee shall incur no responsibility in respect thereof. Except as otherwise expressly provided in this Trust Agreement, the Trustee shall be under no responsibility or duty with respect to (i) the execution and delivery of the Certificates for value, (ii) the application of the proceeds thereof except for disbursement in accordance with the provisions of this Trust Agreement of such proceeds as are received by it in its capacity as Trustee or Paying Agent, or (iii) the application of any moneys paid to the Authority or others except for disbursement in accordance with the provisions of this Trust Agreement of such moneys paid to it in its capacity as Trustee or Paying Agent. The Trustee shall perform its duties hereunder, and, if an Event of Default hereunder occurs and is continuing, the Trustee shall exercise such rights, powers, duties and obligations vested in it hereunder, using the same degree of care and skill as a prudent and reasonable person would exercise or use under similar circumstances. The Trustee shall use reasonable care and diligence in the exercise of its duties hereunder; provided however that the Trustee shall not in any event be liable in connection with the performance of its duties hereunder except for its own negligence, willful misconduct or breach of trust. The duties and obligations of the Trustee shall be determined by the express provisions of this Trust Agreement, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement. The permissive rights of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty. The Trustee shall not be responsible for effecting any extraordinary prepayment of the Certificates until the Trustee shall have actual knowledge of the occurrence of a Determination of Taxability. The Trustee shall have no liability to any Certificateholder as a result of any delay in such extraordinary prepayment caused by a lack of actual knowledge on the part of the Trustee of the occurrence of any Determination of Taxability. The Trustee shall not be responsible for any recital herein or in the Certificates or for insuring the Facilities or collecting any insurance moneys or for the validity of the execution by the Authority of this Trust Agreement or of any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Certificates executed and delivered hereunder or intended to be secured hereby, or for the value of or title to the Facilities, and the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Authority and the Corporation, except as hereinafter set forth; but the Trustee may -39- require of the Authority or the Corporation full information and advice as to the performance of the covenants, conditions and agreements as to the condition of the Facilities contained herein or in the Installment Purchase Agreement. The Trustee shall have no obligation to perform any of the duties of the Corporation under the Installment Purchase Agreement. The Trustee shall not be accountable for the use of any Certificates executed or delivered hereunder. All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust in the manner and for the purposes for which they were received but need not be segregated from other funds except to the extent required by this Trust Agreement or law. The Trustee shall not be under any liability for interest with respect to any moneys received hereunder except such as may be agreed upon by separate written agreement between the Trustee and the Corporation. The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. Notwithstanding anything in this Trust Agreement contained, the Trustee shall have the right, but shall not be required, to demand in respect of the execution of any Certificates, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Trust Agreement, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required, as a condition of such action by the Trustee deemed desirable for the purpose of establishing the right of the Authority to the authentication of any Certificates, the withdrawal of any cash, the release of any property or the taking of any other action by the Trustee. The Trustee shall not be liable with respect to any action taken or not taken by it in accordance with the direction of the Certificateholders owning a majority (or other percentage provided for herein) in aggregate principal amount of Certificates at the time Outstanding relating to the exercise of any right or remedy available to the Trustee hereunder, or under the Installment Purchase Agreement or Security Agreement or any other trust or power conferred upon the Trustee. Whenever in the administration of its duties under this Trust Agreement, the Trustee shall deem it necessary for a matter to be proved or established, such matter may be deemed to be conclusively proved and established by a written certificate of the Authority or the Corporation, and such certificate shall be full protection to the Trustee for any action taken or not taken by it hereunder in reliance with respect thereto. No provision of this Trust Agreement, the Installment Purchase Agreement, the Security Agreement or any other document related thereto shall require the Trustee to risk or advance its own funds or incur any liability in the performance of its duties and obligations hereunder. The Trustee shall have no responsibility with respect to any information, statement or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Certificates. .M Section 6.4. Property Held in Trust. All moneys and securities held by the Trustee at any time pursuant to the terms of this Trust Agreement shall be and hereby are assigned, transferred and set over unto the Trustee in trust for the purposes and under the terms and conditions of this Trust Agreement. Section 6.5. Trustee Protected in Relying on Certain Documents. The Trustee shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, and in accordance with the terms of this Trust Agreement, upon any notice, resolution, request, consent, order, certificate, report, waiver, statement, affidavit, requisition, opinion, bond or other paper or document that it shall in good faith believe to be genuine, and to have been adopted, signed or presented by the proper party or parties, or upon the written opinion of any attorney, architect, engineer, insurance consultant, management consultant or accountant, and the Trustee shall be under no duty to make any investigation or inquiry into any statements contained or matters referred to in any such instrument. The Trustee may execute any of the trusts hereof or powers hereunder and perform any of its duties by or through attorneys, agents, receivers or employees, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may reasonably be employed in connection with the trusts hereof and shall not be liable for any act or omission of such attorneys, agents, receivers and employees if appointed by it with reasonable care. The Trustee may consult with counsel, who may or may not be counsel to the Authority, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Trustee may act upon an opinion of Independent Counsel and shall not be responsible for any loss or damage resulting from any action or nonaction taken by or omitted to be taken in good faith in reliance upon such opinion of Independent Counsel. Except as otherwise expressly provided herein, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision hereof by the Authority or the Corporation to the Trustee shall be sufficiently executed if executed in the name of the Authority or the Corporation, as applicable, by an Authorized Officer. The Trustee shall not be under any obligation to see to the recording or filing of this Trust Agreement, or otherwise to the giving to any person of notice of the provisions hereof except as expressly required by the provisions of this Trust Agreement or the Installment Purchase Agreement. Section 6.6. Compensation and Expenses. The Corporation shall pay to the Trustee, from time to time, reasonable compensation for all services rendered by it hereunder, including its services as Paying Agent and Registrar, together with all its reasonable expenses, charges, counsel fees and other disbursements and those of its counsel, agents and employees, incurred in and about the administration and execution of the trusts hereby created and the exercise of its powers and the performance of its duties hereunder, and the Trustee shall have a lien therefor on any and all funds at any time held by it hereunder prior to any of the Certificates for which such services have been rendered. Each reference in this Trust Agreement, the Installment Purchase Agreement and the Security Agreement to the fees, costs and /or expenses of the Trustee shall be deemed to include all counsel fees and disbursements incurred by the Trustee in performing its duties hereunder. Whenever the Trustee shall disburse its own funds in the administration of its duties hereunder, the Trustee shall -41 - be entitled to interest with respect to the amount of such disbursement at the Advance Rate from the date that the Trustee bills the Corporation for such disbursement to the date on which the Trustee receives payment from the Corporation therefor. When the Trustee incurs expenses or renders services in connection with an Event of Default under the Trust Agreement, the Installment Purchase Agreement, Deed of Trust or the Security Agreement, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration in any insolvency proceeding involving the Corporation, under any applicable federal or state bankruptcy, insolvency or other similar law. None of the provisions contained in this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or power. If the Corporation shall fail to make any payment required by this section, the Trustee may make such payment from any moneys in its possession under the provisions of this Trust Agreement and shall be entitled to a preference therefor over any of the Certificates Outstanding hereunder. Section 6.7. Permitted Acts. The Trustee (including any of its affiliates) and its directors, officers, employees or agents may become the owner of or may in good faith buy, sell, own, hold and deal in Certificates and may join in any action that any Certificateholder may be entitled to take as fully and with the same fights as if it were not the Trustee. The Trustee may act as depository and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Certificateholders or to effect or aid in any reorganization growing out of the enforcement of the Certificates or this Trust Agreement, whether or not such committee shall represent the holders of a majority in aggregate principal amount of the Certificates Outstanding hereunder. Section 6.8. Resignation of Trustee. The Trustee may at any time resign and be discharged of its duties and obligations hereunder by giving not less than 30 days written notice to the Authority and giving notice thereof by first class mail, postage prepaid, mailed not less than 30 days prior to the effective date of such resignation to each holder of any Certificate at the address appearing in the bond register maintained by the Trustee, specifying the date when such resignation shall take effect; provided, however, such resignation shall take effect only upon the date on which a successor Trustee is appointed as provided in Section 6.10 hereof. Section 6.9. Removal of Trustee. The Trustee may be removed at any time by the Corporation, if no Event of Default (as defined in the Installment Purchase Agreement) shall have occurred and be continuing or by the Holders of a majority in aggregate principal amount of the Outstanding Certificates by an instrument or concurrent instruments in writing signed and acknowledged by the Corporation or such Certificateholders or by its or their attorneys -in -fact, duly authorized and delivered to the Authority with a copy to the Trustee. The Trustee may also be removed at any time for any breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provision of this Trust Agreement with respect to the duties and obligations of the Trustee by any court of competent jurisdiction upon the application of the Authority pursuant to a resolution of the Authority or of not less than ten percent of the Certificateholders; provided, however, such removal shall be effective only upon the date on which a successor Trustee is appointed as provided in Section 6.10 hereof. -42- Section 6.10. Successor Trustee. In case the Trustee shall be removed, be dissolved, become incapable of acting, resign or be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee or of its property shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, or if the position of Trustee shall become vacant for any of the foregoing reasons or for any other reason, a successor Trustee may be appointed within one year after any such vacancy shall have occurred by the Corporation, if no Event of Default (as defined in the Installment Purchase Agreement) shall have occurred and be continuing or the Holders of a majority of the Outstanding Certificates by an instrument or concurrent instruments in writing signed and acknowledged by such Certificateholders or their attorneys -in -fact, duly authorized and delivered to such successor Trustee, with notification thereof being given to the predecessor Trustee, the Authority and the Corporation. Until such successor Trustee shall have been appointed by the Corporation or the Certificateholders, the Authority, at the Corporation's direction, shall forthwith appoint a Trustee to act. Copies of any resolution of the Authority providing for any such appointment shall be delivered by the Authority to the Trustee so appointed, the predecessor Trustee and the Corporation. The Trustee shall give notice to the Certificateholders of such appointment by first class mail, postage prepaid, mailed within 10 days after the effective date of such appointment to each holder of any Certificate at the address appearing on the bond register maintained by the Trustee. Any appointment made by the Authority, immediately and without further act, shall be superseded and revoked by an appointment subsequently made by the Certificateholders. If in a proper case no appointment of a successor shall be made within 45 days after the giving of written notice of resignation in accordance with Section 6.8 or after the occurrence of any other event requiring or authorizing such appointment, the Trustee or any Certificateholder may apply to any court of competent jurisdiction for the appointment of such a successor, and the court may thereupon, after such notice, if any, as the court may deem proper, appoint such successor. Any successor appointed under the provisions of this Section shall be a bank or trust company or national banking association having a capital and surplus aggregating at least $25,000,000 if there be such a bank or trust company or national banking association willing and able to accept the appointment on reasonable and customary terms and authorized by law to perform all the duties required by this Trust Agreement. Section 6.11. Transfer of Riahts and Property to Successor Trustee. Any successor appointed under the provisions of Section 6.10 hereof shall execute, acknowledge and deliver to its predecessor, and also to the Authority, an instrument in writing accepting such appointment, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, immunities, powers, duties, obligations and trusts of its predecessor hereunder, with like effect as if originally appointed as Trustee. Nevertheless, the Trustee then ceasing to act, on request of the Authority or of such successor, shall execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor all the rights, immunities, powers and trusts of such Trustee and all the right, title and interest of such Trustee in and to any property held by it hereunder, and shall pay over, assign and deliver to such successor any moneys or other properties subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the Authority be required by such successor for more fully and certainly vesting in and confirming to it any such moneys, estates, -43 - properties, rights, powers, duties or obligations, any and all such deeds, conveyances and instruments in writing, on request and so far as may be authorized by law, shall be executed, acknowledged and delivered by the Authority. The Trustee then ceasing to act may apply any amounts held under this Trust Agreement (except in the Rebate Fund) to any unpaid fees and expenses (including counsel fees) of such Trustee. Section 6.12. Merger_ Conversion or Consolidation of the Trustee. Any company into which the Trustee may be merged or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business shall be the successor to the Trustee, without any further act, deed or conveyance, provided that such company shall be a bank or trust company or national banking association qualified to be a successor to the Trustee under the provisions of Section 6.10 hereof. Section 6.13. Continuation Statements. The Corporation shall execute and file or cause to be filed such continuation statements as may be required by the California Uniform Commercial Code, as in effect. from time to time, to continue the perfection of the security interest created by the Security Agreement. Section 6.14. Trustee May File Proofs of Claims. In the case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Corporation or the Facilities, the Trustee (irrespective of whether the principal of the Certificates shall then be due and payable and irrespective of whether the Trustee shall have made any demand on the Corporation for the payment of overdue interest or principal) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Certificates and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Certificateholders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Certificateholder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Certificateholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amount due the Trustee under Section 6.6 of this Trust Agreement. Nothing in this Trust Agreement shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Certificateholder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, -44- or to authorize the Trustee to vote in respect of the claim of any Certificateholder in any such proceeding. Section 6.15. Appointment of Co- Trustee. (a) At any time or times, for the purposes of conforming to any legal requirements, restrictions or conditions in any state, or if the Trustee shall be advised by counsel that it is necessary or advisable in the interest of the Certificateholders or the Trustee so to do, the Authority and the Trustee shall have the power to appoint (and upon the request of the Trustee, the Authority, at the Corporation's direction, shall for such purpose join with the Trustee in execution, delivery and recording of all instruments and agreements necessary or proper to appoint) another corporation or one or more persons, approved by the Trustee, either to act as separate Trustee or Trustees or Co- Trustee or Co- Trustees of all or part of the Trust Estate jointly with the Trustee, hereunder. In the event that the Authority shall not have joined in any such appointment within twenty days after the receipt by it of a request so to do, the Trustee alone shall have power to make such appointments. (b) Every separate Trustee, every Co- Trustee and every successor Trustee (other than the Trustee initially acting as Trustee hereunder, hereinafter in this Section 6.15 called the "Initial Trustee," and any Trustee which may be appointed as successor to it) shall, to the extent permitted by law, be appointed subject to the following provisions and conditions, namely: (i) The Certificates secured hereby shall be executed and delivered, and all powers, duties, obligations and rights conferred upon the Trustee in respect of the custody of all funds and any securities pledged hereunder, shall be exercised solely by the Initial Trustee or its successors in the trust hereunder; (ii) No power shall be exercised hereunder by such separate Trustee or Co- Trustee except with the consent in writing of the Initial Trustee or its successors in the trust hereunder; (iii) The Authority and the Initial Trustee or its successors in the trust hereunder, at any time by an instrument in writing executed by them jointly, may accept the resignation or remove any separate Trustee or Co- Trustee appointed under this Section, and may likewise and in like manner appoint a successor to such separate Trustee or Co- Trustee who shall be so removed or who shall have resigned as provided in Section 6.8 or 6.9 hereof, as the case may be, anything herein contained to the contrary notwithstanding; and (iv) Such Co- Trustee shall meet the requirements described in the last paragraph of Section 6.10 hereof. (c) Any notice, request or other writing, by or on behalf of the holders of the Certificates executed and delivered hereunder, delivered solely to the Initial Trustee, or its successors in the trust, shall be deemed to have been delivered to the then Trustee and Co- Trustees as effectually as if delivered to each of them. Every instrument appointing any Trustee or Co- Trustee other than a successor to the Initial Trustee shall refer to this Trust Agreement and the conditions in this Section expressed, and upon the acceptance in writing by such Trustee or Co- Trustee shall be vested with the -45- - -wsft rights, powers, estate and/or property specified in such instrument either jointly with the Initial Trustee, or its successor, or separately, as may be provided therein, subject to all the trusts, conditions and provisions of this Trust Agreement; and every such instrument shall be filed with the Initial Trustee or its successors in the trust. Any separate Trustee or Co- Trustee may at any time by an instrument in writing constitute the Initial Trustee or its successors in the trust hereunder, his, their or its agent or attorney -in -fact, with full power and authority, to the extent which may be authorized by law, to do all acts and things and .exercise all discretion authorized or permitted by him, them or it, for and in behalf of him, them or it, and in his, their or its name. Any Co- Trustee may, as to any action hereunder, whether discretionary or otherwise act by attorney -in -fact. In case any Co- Trustee or a successor to it, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of said Co- Trustee, so far as permitted by law shall vest in and be exercised by the Initial Trustee or its successors in trust until the appointment of a successor to such Co- Trustee. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES Section 7.1. Events of Default. Each of the following events is hereby declared to constitute an event of default hereunder (herein called an "Event of Default "): (a) From and after the date which is (__) months from the date of issuance of the Certificates, the failure to pay principal of or interest with respect to any of the Certificates when the same shall become due and payable, either at maturity or by proceedings for prepayment or otherwise; (b) any event of default shall occur under the Installment Purchase Agreement, the Deed of Trust or the Security Agreement; (c) any lien or encumbrance shall have attached to the Installment Purchase Payments or the Installment Sale Payments, other than a Permitted Encumbrance, unless the Corporation or the Authority is diligently contesting such lien or encumbrance in good faith; (d) an order or decree shall be entered appointing a receiver or receivers of the Installment Purchase Payments or the Installment Sale Payments, other than a receiver or receivers which order shall not have been vacated or discharged or stayed on appeal within 60 days after the entry thereof, or (e) any default shall occur and be continuing under any outstanding Parity Debt, which default shall not have been cured within the applicable grace period, if any. Section 7.2. Acceleration of Maturi ty. Upon the happening and continuance of any Event of Default, then and in every such case the Trustee may declare, and upon written demand of not less than 25% of the Certificateholders, the Trustee shall declare, by a notice in writing to the Corporation, the principal of all of the Outstanding Certificates to be due and payable. Effective immediately upon the giving of notice of such declaration, such principal shall become and be immediately due and payable, anything in the Certificates or in this Trust Agreement to the contrary notwithstanding. At any time after the principal of the Certificates shall have been so declared to be due and payable, and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such Event of Default, or before the completion of the enforcement of any other remedy under this Trust Agreement, the Trustee may (in the event that such declaration has been made upon the written demand of not less than 25% of the Certificateholders, only with the written consent of not less than 25% of the Certificateholders) by written notice to the Corporation, annul such declaration and its consequences if (i) moneys shall have accumulated in the Certificate Fund sufficient to pay all arrears of interest, if any, with respect to all of the Outstanding Certificates (except the interest accrued with respect to such Certificates since the last Interest Payment Date) and the principal with respect to all matured Certificates (except the principal with respect to any Certificates not due and payable by their terms or by reason of such declaration); (ii) moneys shall have accumulated and be available sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Trustee; (iii) all other amounts then payable shall have been deposited with the Trustee; and (iv) every other default known to the Trustee in the observance or performance of any covenant, condition or agreement contained in the Certificates or in this Trust Agreement (other than a default in the payment of the principal of such Certificates then due only because of a declaration under this Section) shall have been remedied or the Corporation shall have commenced and be diligently pursuing a remedy to such defaults, in each case to the satisfaction of the Trustee. No such annulment shall extend to or affect any subsequent default or impair any right consequent thereon. Nothing in this Section shall be construed to prohibit the Corporation from taking any action, to the extent permitted by applicable law, to remedy any Event of Default, and in the event that the Corporation shall remedy any such Event of Default and the conditions in the preceding clauses (i), (ii), (iii) and (iv) shall have been satisfied, the Trustee may (in the event that such declaration has been made upon the written demand of not less than 25% of the 1998A Certificateholders, only with the written consent of not less than 25% of the 1998A Certificateholders) annul any declaration, the effect of which is to cause the principal of the Outstanding Certificates to be immediately due and payable to the same extent as if the Authority had remedied such Event of Default. Section 7.3. Enforcement. Upon the happening and continuance of any Event of Default, then and in every such case, the Trustee may proceed, and upon the written demand of not less than 25% of the 1998A Certificateholders, the Trustee shall proceed (subject to the provisions of Section 6.2 hereof), to protect and enforce its rights and the rights of the Certificateholders under the Installment Purchase Agreement and under this Trust Agreement by such suits, actions or special proceedings in equity or at law, either for the specific performance of any covenant contained therein or herein or in aid or execution of any power therein or herein granted, or for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effective to protect and enforce such rights. In the enforcement of any remedy under this Trust Agreement or the Installment Purchase Agreement, the Trustee shall be entitled to sue for, enforce payment of, and receive, any and all amounts then or during any default becoming, and at any time remaining, due from the Corporation for principal or interest with respect to the Certificates or otherwise under any of the provisions of -47- this Trust Agreement, the Installment Purchase Agreement or of the Certificates, with interest with respect to overdue payments at the rate or rates of interest specified in such Certificates together with any and all costs and expenses of collection and of all proceedings hereunder and under such Certificates without prejudice to any other right or remedy of the Trustee or of the holders of such Certificates, and to recover and enforce any judgment or decree against the Corporation, but solely as provided herein and in such Certificates and from the sources and moneys provided herein and in such Certificates, for any portion of such amounts remaining unpaid, with interest, costs and expenses, and to collect in any manner provided by law the moneys adjudged or decreed to be payable. Section 7.4. Priority of Payments Following Default. If at any time after the occurrence of an Event of Default the moneys held by the Trustee under this Trust Agreement shall not be sufficient to pay the principal and interest with respect to the Certificates as the same become due and payable (either by their terms or by acceleration of maturity under the provisions of Section 7.2 hereof), such moneys, together with any moneys then available or thereafter becoming available for such purpose, whether through exercise of the remedies provided for in this Article or otherwise (after payment of all fees and expenses, including without limitation fees and expenses of the Trustee and of its counsel and advisors and the expenses of the Certificateholders under this Trust Agreement), shall be applied by the Trustee as follows: (a) Unless the principal of all of the Certificates shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST: to the payment to the persons entitled thereto of all installments of interest then due with respect to the Certificates and Additional Certificates in the order in which such installments became due and payable and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment, ratably, according to the amounts due on such installments, to the persons entitled thereto, without any discrimination or preference, except as to any difference in the respective rates of interest specified in the Certificates and Additional Certificates; SECOND: to the payment to the persons entitled thereto of the unpaid principal amount of any of the Certificates and Additional Certificates that shall have become due and payable (either at maturity or pursuant to mandatory prepayment) (other than such Certificates and Additional Certificates called for optional prepayment or contracted to be purchased for the payment of which moneys are held pursuant to the provisions of this Trust Agreement), in the order of their due dates, with interest upon the principal amount of the Certificates and Additional Certificates from the respective dates upon which they shall have become due and payable, and, if the amount available shall not be sufficient to pay in full the principal of such Certificates due and payable on any particular due date, together with such interest, then to the payment first of such interest, ratably, according to the amount of interest due on such date, and then to the payment of such principal, ratably, according to the amount of principal due on such date, to the persons entitled thereto, without any discrimination or preference, except as to any difference in the respective rates of interest specified in the Certificates and Additional Certificates; .; THIItD: to the payment of the interest and principal with respect to the Certificates as the same become due and payable, and (b) If the principal of all of the Certificates shall have become due and payable, either by their terms or by a declaration of acceleration, all such moneys shall be applied to the payment of the principal and interest then due and unpaid with respect to the Certificates and Additional Certificates, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Certificate or Additional Certificate over any other Certificate or Additional Certificate, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Certificates and Additional Certificates. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section, such moneys shall be applied by the Trustee at such times, and from time to time, as the Trustee in its sole discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. The setting aside of such moneys in trust for the benefit of all holders of the Outstanding Certificates shall constitute proper application by the Trustee, and the Trustee shall incur no liability whatsoever to the Authority, any Certificateholder or any other person for any delay in applying any such moneys, so long as the Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of this Trust Agreement as may be applicable at the time of application by the Trustee. Whenever the Trustee shall exercise such discretion in applying such moneys, it shall fix the date (which shall be an Interest Payment Date for the Certificates unless the Trustee shall deem another date more suitable) upon which such application is to be made, and upon such date interest with respect to the amounts of principal with respect to the Certificates paid on such date shall cease to accrue and the Trustee shall give such notice as it may deem appropriate of the fixing of any such date; provided, however, that the provisions of this paragraph shall be subject in all respects to the provisions of Article II hereof with respect to payments of interest with respect to the Certificates. The Trustee shall not be required to make payment to the holder of any Certificate unless such Certificate shall be presented to the Trustee. Section 7.5. Effect of Discontinuance of Proceedings. In case any proceedings taken by the Trustee or the Certificateholders on account of any Event of Default in respect of the Certificates shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Certificateholders, then and in every such case the Authority, the Trustee and the Certificateholders shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Trustee shall continue as though no such proceeding had been taken. Section 7.6. Majority of Certificateholders May Control Proceedings. Anything in this Trust Agreement to the contrary notwithstanding, a majority of the Certificateholders shall have the right (subject to the provisions of Section 6.2 hereof), by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under this Trust Agreement, provided that such direction shall not be otherwise -49- than in accordance with law and the provisions of this Trust Agreement, and that the Trustee shall have the right to decline to follow any such direction that in the opinion of the Trustee would be unjustly prejudicial to Certificateholders not parties to such direction or expose the Trustee to any liability. Section 7.7. Restrictions Upon Action by Individual Certificateholders. No Certificateholder shall have any right to institute any suit, action or proceeding in equity or at law on any Certificate for the execution of any trust hereunder or for any other remedy hereunder unless such Certificateholder previously shall have given to the Trustee written notice of the Event of Default on account of which such suit, action or proceeding is to be instituted, and also unless not less than 25% of the Certificateholders shall have made written request to the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity, not to exceed 30 days, either to proceed to exercise the powers granted by this Trust Agreement or to institute such action, suit or proceeding in its or their name, and further, unless there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time. Such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Trust Agreement or to any other remedy hereunder; provided, however, that notwithstanding the foregoing provisions of this Section and without complying therewith, not less than 25% of the Certificateholders may institute any such suit, action or proceeding in their own names for the benefit of all Certificateholders. It is understood and intended that, except as otherwise provided above, no one or more Certificateholders shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Trust Agreement or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the benefit of all holders of the Outstanding Certificates, and that any individual right of action or other right given by law to one or more of such holders of the Outstanding Certificates is restricted by this Trust Agreement to the rights and remedies herein provided. Section 7.8. Actions by Trustee. All rights of action under this Trust Agreement or under any of the Certificates secured hereby, enforceable by the Trustee, may be enforced by it without the possession of any of such Certificates or the production thereof at the trial or other proceeding relative thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in its name for the benefit of all holders of such Certificates, subject to the provisions of this Trust Agreement. Section 7.9. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Certificateholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter, existing at law or in equity or by statute. Section 7.10. No Delay or Omission Construed as a Waiver: Waiver of Default. No delay or omission of the Trustee or of any Certificateholder to exercise any right or power accruing upon -50- any default shall impair any such right or power, nor shall any such delay or omission be construed to be a waiver of any such default or an acquiescence therein. Every power and remedy given by this Article to the Trustee and the Certificateholders, respectively, may be exercised from time to time and as often as may be deemed expedient. The Trustee shall upon written request of the owners of not less than twenty -five percent (25 %) of the principal amount of Outstanding Certificates waive any default that will be remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of this Trust Agreement or before the completion of the enforcement of any other remedy under this Trust Agreement; but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. Section 7.11. Notice of Default. (a) The Trustee shall give written notice, by first class mail, postage prepaid, to the Underwriter, the Corporation, the Authority and all registered owners of the Certificates (i) of the occurrence of any Event of Default described in Section 7.1 (a) hereof within ten (10) Business Days of the occurrence thereof and (ii) of any other Event of Default hereunder within thirty (30) days after the occurrence of such Event of Default becomes known to the Trustee. The Trustee shall not, however, be subject to any liability to any Certificateholder, the Corporation, the Authority or the Underwriter by reason of its failure to mail any notice required by this Section, except for any such failure arising from the negligence, willful misconduct or breach of trust of the Trustee. (b) The Trustee shall not be required to take notice, or be deemed to have notice, of any default under this Trust Agreement, the Installment Purchase Agreement, the Deed of Trust, the Security Agreement or under any other documents executed in connection with any Additional Certificates unless the Trustee shall be specifically notified in writing of such default by the Corporation, the Underwriter or the owners of at least twenty -five percent (25 %) of the Certificates. All notices or other instruments required or permitted by this Trust Agreement to be delivered to the Trustee must, in order to be effective, be hand delivered, sent by registered mail or sent by means of a reliable over -night delivery service (such as Federal Express), to the Principal Corporate Trust Office of the Trustee. In the absence of a notice sent to the Trustee as provided above, the Trustee may conclusively assume that no default exists under this Trust Agreement, the Installment Purchase Agreement, the Deed of Trust, Security Agreement, or any documents .executed and delivered in connection with the execution and delivery of any Additional Certificates. Notwithstanding the preceding, the Trustee shall be deemed to have actual knowledge of any failure by the Corporation or the Authority to pay any amount to the Trustee under the Installment Purchase Agreement, the Deed of Trust, or the Security Agreement when due, and any failure of the Corporation to file with the Trustee, when due, reports, financial statements and other information required to be filed periodically with the Trustee pursuant to the Installment Purchase Agreement, the Deed of Trust and the Security Agreement. - 51 - ARTICLE VIII MODIFICATION OR AMENDMENT OF TRUST AGREEMENT, INSTALLMENT PURCHASE AGREEMENT, DEED OF TRUST OR SECURITY AGREEMENT Section 8.1. Modification or Amendment of Trust Agreement Without Consent of Certificateholders Required. Notwithstanding any other provision of this Article, the Trustee, at the direction of the Authority or the Corporation, shall enter into with the Authority and the Corporation at any time or from time to time a Supplemental Trust Agreement supplementing this Trust Agreement or any Supplemental Trust Agreement which shall be fully effective in accordance with its terms so as to modify or amend this Trust Agreement, without the consent of the Certificateholders required, for one or more of the following purposes: (a) to grant to or confer upon the Trustee for the benefit of the Certificateholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Trustee for the benefit of the Certificateholders; (b) to add to the covenants and agreements of the Authority contained in this Trust Agreement, other covenants and agreements thereafter to be observed relative to the acquisition, construction, equipping, operation, maintenance, development or administration of the Facilities or relative to the application, custody, use or disposition of the proceeds of the Certificates; (c) to surrender to the Trustee any right, power or privilege reserved to or conferred upon the Authority by this Trust Agreement; (d) to confirm, as further assurance, any pledge under, and the subjection to any lien on, or claim or pledge of (whether created or to be created by this Trust Agreement), the Revenues; (e) to authorize the execution and delivery of Additional Certificates or to approve the execution and delivery of Additional Certificates, including any modifications or amendments required to grant to or otherwise secure for the holders of such Additional Certificates a parity interest in the Installment Sale Payments granted to the Certificateholders in accordance with the Installment Purchase Agreement; (f) to permit the qualification of this Trust Agreement or any Supplemental Trust Agreement under any federal statute now or hereafter in effect or under any state Blue Sky law and, in connection therewith, if the Authority so determines, to add to this Trust Agreement or any Supplemental Trust Agreement such other terms, conditions and provisions as may be permitted or required by such federal statute or state Blue Sky law; (g) to obtain one or more ratings on the Certificates from one or more nationally recognized securities rating agencies; and (h) to effect any other amendment which does not materially adversely effect the holders of any Certificates or otherwise impair the security granted Certificateholders under this Trust Agreement:. -52- Any modification of any rights or obligations of the Trustee pursuant to this Article that adversely affects the Trustee shall not be made without the consent of the Trustee. Notwithstanding any other provisions of this Trust Agreement, the Authority shall not amend this Trust Agreement to decrease the minimum denominations authorized for the 1998 Certificates under the terms of this Trust Agreement. Notwithstanding anything which may be contained to the contrary in this Trust Agreement, in the event the Internal Revenue Service or any other governmental agency issues new regulations or codes governing the terms or conditions of this Trust Agreement, then this Trust Agreement shall be deemed to be in compliance with such new codes or regulations, and the parties may mutually agree to amend this Trust Agreement in compliance with such new codes or regulations. Section 8.2. Supplemental Trust Agreements Requiring Consent of the Trustee. At any time or from time to time but subject to the conditions or restrictions contained in this Trust Agreement, the Authority and the Trustee, with the consent of the Trustee and without the consent of the Certificateholders, may enter into a Supplemental Trust Agreement amending or supplementing this Trust Agreement or any Supplemental Trust Agreement curing any ambiguity or curing, correcting or supplementing any defect or inconsistent provisions contained in this Trust Agreement, the Installment Purchase Agreement, the Deed of Trust or the Security Agreement (or in any related document) or making such provisions in regard to matters or questions arising under this Trust Agreement (or under any related document) as may be necessary or desirable and not contrary to or inconsistent with this Trust Agreement. Section 8.3. Supplemental Trust Agreements Requiring Consent of the Certificateholders and the Trustee. (a) Except as provided in Section 8. 1, Section 8.2 and in this Section, neither this Trust Agreement, any Supplemental Trust Agreement, nor any Certificate shall be modified or amended in any respect. At any time and from time to time but subject to the conditions and restrictions contained in this Trust Agreement, a Supplemental Trust Agreement amending or supplementing this Trust Agreement, any Supplemental Trust Agreement or any Certificate may be entered into modifying any of the provisions of this Trust Agreement, any Supplemental Trust Agreement or any Certificate or releasing the Authority from any of the obligations, covenants, agreements, limitations, conditions or restrictions therein contained. However, no such Supplemental Trust Agreement shall be entered into until after the filing with the Trustee of the written consents of a majority of the Certificateholders affected thereby. (b) Notwithstanding the provisions of paragraph (a) of this Section, no such modification changing any terms of prepayment of the Certificates, the due date of the principal or interest with respect to Certificates or making any reduction in the principal or Prepayment Price of or interest with respect to Certificates shall be made without the consent of the affected Certificateholders, nor shall any modification of any rights or obligations of the Trustee be made without the consent of the Trustee. - 53 - (c) Notwithstanding any other provision of this Section, no Supplemental Trust Agreement shall be entered into, reducing the percentage of the aggregate principal amount of Outstanding Certificates the consent of the Holders of which is required for any modification of this Trust Agreement without the consent of the holders of 100% of the Certificates. (d) Notwithstanding the provisions of paragraph (a) of this Section, no Supplemental Trust Agreement which materially and adversely affects the rights of the holders of any Additional Certificates shall be entered into without the consent of the holders of a majority in aggregate principal amount of the Additional Certificates so affected. (e) The provisions of paragraph (a) of this Section shall not be applicable to Supplemental Trust Agreements adopted in accordance with the provisions of Sections 8.1, 8.2 or 8.6 hereof. Section 8.4. Execution of Supplemental Trust Agreements. Any Supplemental Trust Agreement referred to and permitted or authorized by Sections 8.1, 8.2 or 8.6 hereof may be entered into without the vote or consent of any of the Certificateholders, but shall become effective only on the conditions, to the extent and at the time provided in such Sections, respectively. Every such Supplemental Trust Agreement so becoming effective shall thereupon form a part of this Trust Agreement or the Supplemental Trust Agreement, as the case may be. Any such Supplemental Trust Agreement shall be accompanied by an opinion of Special Counsel to the effect that such Supplemental Trust Agreement has been duly and lawfully entered into by the Authority and the Trustee in accordance with the provisions of this Trust Agreement, is authorized or permitted by this Trust Agreement and will constitute the lawful and binding obligation of the Authority in accordance with its terms upon the filing with the Trustee or the Authority, as the case may be, of the consents (if any) required by this Article. Prior to entering into any Supplemental Trust Agreement, the Trustee may require (at the expense of the Corporation) an opinion of Independent Counsel to the effect that such Supplemental Trust Agreement is authorized under the terms of this Trust Agreement. Section 8.5. Notation on Certificates. Certificates executed and delivered after the effective date of any action taken as provided in this Article may, and if the Trustee so determines shall, bear a notation, by endorsement or otherwise of such action, and in that case, upon demand of any Certificateholder at such effective date and presentation of his Certificate for such purpose to the Trustee, the Trustee shall make suitable notation on such Certificate of any such action. If the Trustee shall so determine, new Certificates so modified as in the opinion of the Trustee to conform to such action shall be prepared, executed and delivered and, upon demand of any Certificateholder, shall be exchanged, without cost to such Certificateholder, for such Outstanding Certificates upon surrender of such Outstanding Certificates. Section 8.6. Authority Consent to Supplemental Trust Agreements. Notwithstanding anything herein to the contrary, the Authority has imposed certain requirements on the Trustee and the Corporation with respect to the ownership or operation of the Facilities and the Certificates which are more restrictive than those required by the Act, the Treasury Regulations or letter rulings, or the Code, and, for that reason, any proposed amendment, modification, or supplement to this Trust Agreement which provides for less restrictive covenants than required by the Authority, but permitted by law, shall require the Authority's consent, which may be withheld for any reason. -54- Section 8.7. Amendment of Installment Purchase Agreement. Deed of Trust an Agreement. Neither the Trustee nor the Authority shall enter into or consent to any amendment, change or modification of the Installment Purchase Agreement, Deed of Trust or Security Agreement without the consent of a majority of the Certificateholders unless such amendment is (a) required by the provisions of the Installment Purchase Agreement, Deed of Trust or Security Agreement, (b) required for the purpose of curing any ambiguity or formal defect or omission, (c) permitted by any Supplemental Trust Agreement with respect to amendments of any Additional Facilities, (d) required in connection with the execution and delivery of any Additional Certificates pursuant to Section 2.5 hereof, (e) required to obtain a rating or ratings on the Certificates from one or more nationally recognized securities rating agencies, (f) necessary or desirable to add to the covenants of the Corporation therein contained or (g) required to effect any other amendment that does not materially adversely affect the holders of any Certificates or otherwise impair the security granted Certificateholders under this Trust Agreement. ARTICLE IX DEFEASANCE Section 9.1. Defeasance. (a) If the Corporation shall pay or cause to be paid to the Certificateholders the principal or Prepayment Price of and interest with respect to the Certificates, at the times and in the manner stipulated in the Certificates and in this Trust Agreement, and all other amounts payable under this Trust Agreement then the lien on Installment Purchase Payments and other moneys and securities and funds hereby granted to the Certificateholders and all other rights granted hereby to the Certificateholders shall be discharged and satisfied. In such event, upon the request of the Corporation, the Trustee shall execute and deliver to the Corporation all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay or deliver to the Corporation all moneys, securities and funds held by it pursuant to this Trust Agreement that are not required for the payment or prepayment of Certificates not theretofore surrendered for such payment or prepayment. (b) Certificates for the payment or prepayment of which money shall then be held by the Trustee (through deposit by the Corporation of moneys for such payment or prepayment or otherwise, regardless of the source of such moneys), whether at or prior to the maturity or the prepayment date of such Certificates, shall be deemed to have been paid within the meaning of and with the effect expressed in this Section, provided, however, that (i) if any such Certificates are to be prepaid prior to the maturity thereof, the Authority and Corporation shall have taken all action necessary to prepay such Certificates and notice of such prepayment shall have been duly given or provisions satisfactory to the Trustee shall have been made for the giving of such notice, and (ii) if the maturity or prepayment date of any such Certificates shall not then have occurred, (A) the Corporation shall have deposited with the Trustee moneys or Government Obligations, the principal of and interest with respect to which when due will provide for the payment of the principal or Prepayment Price of and interest with respect to such Certificates to the date of such maturity or prepayment, (B) the Corporation shall have provided for the fees and expenses of the Trustee to the satisfaction of the Trustee, (C) the Trustee shall have given notice to the Certificateholders by first class mail, postage prepaid, within 5 Business Days after the date of such deposit, that such moneys - 55 - are so available for such payment and (D) the Trustee shall have received (at the expense of the Corporation) a report of an Independent Public Accountant to the effect that the anticipated receipts from the Government Obligations deposited with the Trustee, together with any cash deposited with the Trustee, will be sufficient to pay all amounts payable with respect to such Certificates when due and an opinion of Special Counsel to the effect that all requirements contained in this Trust Agreement for the defeasance of Certificates have been satisfied. (c) Anything in this Trust Agreement to the contrary notwithstanding, at the written request of the Corporation, any moneys held by the Trustee in trust for the payment and discharge of any of the Certificates that remain unclaimed for two (2) years after the date on which such Certificates have become due and payable, either at their stated maturity dates or by call for earlier prepayment shall be repaid by the Trustee to the Corporation or to such officer, board or body as may then be entitled by law to receive such moneys, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged; provided, however, that before being required to make any such payment to the Corporation, the Trustee, at the expense of the Corporation, may give notice, by first class mail, postage prepaid, to the persons appearing on the most recent list of Certificateholders that such moneys remain unclaimed and that, after a date named in such notice, which shall be not less than 40 nor more than 90 days after the date of publication of such notice, the balance of such moneys then unclaimed shall be returned to the Corporation or such officer, board or body entitled thereto. (d) Notwithstanding any other provision of this Trust Agreement, the right of the Trustee to receive reasonable compensation and to be reimbursed for its expenses shall survive the discharge of this Trust Agreement. In addition, notwithstanding the payment in full of the Certificates, the discharge of this Trust Agreement, and the termination of the Installment Purchase Agreement, all provisions in this Trust Agreement concerning (1) the interpretation of this Trust Agreement, (ii) the governing law, (iii) the forum for resolving disputes, (iv) the Authority's right to rely on facts or certificates, (v) the immunity of the Authority's directors, officers, counsel, financial advisors, and agents, (vi) the Authority's lack of pecuniary liability, and (vii) the Placement Agents' exemption from liability after the Closing Date shall survive and remain in full force and effect. ARTICLE X MISCELLANEOUS Section 10.1. Assignment of Installment Purchase Payments and Installment Sale Payments. The Authority hereby assigns to the Trustee all of its rights, title and interest in and to the Installment Purchase Agreement (other than its rights under Section 10.12 of the Installment Purchase Agreement) including its rights to receive Installment Purchase Payments and its right to enforce any and all remedies hereunder, and under the Deed of Trust and the Security Agreement to collect Installment Purchase Payments. Such assignment is to the Trustee solely in its capacity as Trustee under this Trust Agreement and subject to the provisions of this Trust Agreement. The Corporation hereby assigns to the Trustee all of its rights, title and interest in and to the Installment Purchase Agreement (provided that pursuant to Section 3.2 of the Installment Purchase Agreement, all rights, title and interest in and to the Facilities shall vest in the Corporation), including its rights to receive Installment Sale Payments and its right to enforce any and all remedies thereunder -56- to collect Installment Sale Payments. Such assignment is to the Trustee solely in its capacity as Trustee under this Trust Agreement and is subject to the provisions of this Trust Agreement. Section 10.2. Third Party Beneficiaries. Nothing in this Trust Agreement shall confer any right upon any person other than the parties hereto, the Corporation, the holder from time to time of the Certificates and the Placement Agents. Section 10.3. Evidence of Signatures of Certificateholders and Ownership of Certificates. Any request, direction, consent or other instrument that this Trust Agreement may require or permit to be signed and executed by the Certificateholders may be in one or more instruments of similar tenor, and shall be signed or executed by such Certificateholders in person, by their attorneys duly appointed in writing or by their legal representatives. Except as otherwise expressly provided herein, proof of the execution of any such instrument or of an instrument appointing any such attorney, or the holding by any person of such Certificates shall be sufficient for any purpose of this Trust Agreement and shall be conclusive in favor of the Trustee and the Authority with regard to any action taken by either the Trustee or the Authority under such instrument if made in the following manner, but the Trustee may nevertheless in its discretion require further or other proof in cases in which it deems such further or other proof desirable: (a) The fact and date of the execution by any Certificateholder or his attorney or legal representative of such instrument may be proved by the certificate (which need not be acknowledged or verified) of an officer of a bank or trust company satisfactory to the Trustee or of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such instrument 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. (b) The ownership of Certificates and the amount, numbers and other identification and date of holding the same shall be proved by the registration books. Any request, direction, consent or vote of the owner of any Certificates shall bind all future owners of such Certificates in respect of anything done or suffered to be done or omitted to be done by the Authority or the Trustee in accordance therewith. Section 10.4. Remedies. The Certificateholders and the Trustee acting for the Certificateholders shall be entitled to all of the rights and remedies provided in the Act or otherwise provided or permitted by law except as otherwise provided by this Trust Agreement. Section 10.5. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Trust Agreement shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Corporation, any Certificateholder and their agents and representatives, any of whom may make copies thereof. Section 10.6. Moneys and Funds Held for Particular Certificates. Amounts held by the Trustee for the payment of the principal or Prepayment Price of and interest with respect to the Certificates due on any date, pending such payment, shall be set aside and held in trust by it for the -57- Holders of such Certificates entitled thereto, and for the purposes of this Trust Agreement such principal or Prepayment Price of and interest with respect to such Certificates shall no longer be considered to be unpaid. Section 10.7. No Recourse. The Authority shall have no liability or obligation with respect to the payment of the purchase price of the Certificates. None of the provisions of this Trust Agreement shall require the Authority to expend or risk its own funds or to otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers hereunder, unless payable from the Revenues pledged hereunder, or the Authority shall first have been adequately indemnified to its satisfaction against the cost, expense, and liability which may be incurred thereby. The Authority shall not be under any obligation hereunder to perform any record keeping or to provide any legal services, it being understood that such services shall be performed or provided by the Corporation. The Authority covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions expressly contained in this Trust Agreement, in any and every Certificate executed, executed, and delivered hereunder, in the Installment Purchase Agreement and in all of its proceedings pertaining thereto; provided, however, that (a) the Authority shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Corporation or the Trustee, and (b) the Authority shall have received the instrument to be executed, and, at the Authority's option, shall have received from the Corporation assurance satisfactory to the Authority that the Authority shall be reimbursed for its reasonable expenses incurred or to be incurred in connection with taking such action or executing such instrument. The Certificates represent undivided, proportionate interests in the right to receive Installment Purchase Payments, and the faith and credit of the Authority is not pledged to the payment of the principal, interest or the Prepayment Price with respect to the Certificates. Section 10.8. Placement Agents Exempt from Liability. The Placement Agents shall not be under any obligation to any Certificateholder for any action that the Placement Agents may or may not take or in respect of anything that the Placement Agents may or may not do by reason of any information contained in any reports or other documents received by the Placement Agents under the provisions of this Trust Agreement after the Closing Date. The immunities and exemptions from liability of the Placement Agents hereunder shall extend to its shareholders, directors, officers, successors, employees and agents. Section 10.9. Severability of Invalid Provision. If any one or more of the covenants or agreements provided in this Trust Agreement on the part of the Authority or the Trustee to be performed should be contrary to law, then such covenant or covenants, agreement or agreements shall be null and void and shall in no way affect the validity of the other provisions of this Trust Agreement or of the Certificates. Section 10.10. Notices. All notices required to be given or authorized to be given pursuant to this Trust Agreement shall be in writing and shall be delivered personally, sent by registered or certified mail, postage prepaid, or sent by fax or by means of a reliable private delivery service (such as Federal Express). All notices shall be deemed given (i) when delivered if sent by hand delivery or a private delivery service or (ii) within three Business Days of mailing if sent by mail provided no notice to the Trustee shall be effective except upon actual receipt by the Trustee. All notices shall be sent to the following addresses- - 58 - If to the Authority: San Bernardino Associated Communities Financing Authority City of San Bernardino Economic Development Agency 201 North "E" Street, Third Floor San Bernardino, California 92401 Attn: If to the Corporation: Family Clinics Foundation 600 Wilshire Blvd., Ste 700 Los Angeles, California 90017 Attn: John J. Carvelli If to the Trustee: U.S. Bank Trust of California, National Association One California Street, Suite 400 San Francisco, California 94111 Tel :` (909) 384 -5081 Fax: (909) 384 -5135 Tel: (213) 489 -7709 Fax: (213) 489 -1514 And for transfer, exchange, registration and payment of principal of Certificates only: U.S. Bank Trust National Association 180 East Fifth Street St. Paul, Minnesota 55101 Tel: (415) 273 -4514 Fax: (415) 273 -4590 If to the Placement Agents: Miller & Schroeder Financial, Inc. Tel: (619) 481 -5894 505 Lomas Santa Fe, Suite 100 Fax: (619) 481 -9677 Solana Beach, California 92075 Kinsell, O'Neal, Newcomb & De Dios Tel: (619) 793 -5900 462 Stevens Avenue, Suite 308 Fax: (619) 793 -8340 Solana Beach, California 92075 -2066 The Authority, the Corporation, the Trustee, and the Placement Agents may designate any further or different address to which subsequent notices shall be null and void and shall in no way affect the validity of the other provisions of this Trust Agreement or of the Certificates. Section 10.11. Business Days. Except as otherwise expressly provided herein, if any date specified herein for the payment of any Certificate or the performance of any act shall not be a Business Day, such payment or performance shall be made on the next succeeding Business Day with the same effect as if made on such date, and in case any payment of the principal or Prepayment Price of or interest with respect to any Certificate shall be due on a date that is not a Business Day, such payment shall be made on the immediately succeeding Business Day and no interest or late payment fees shall accrue on the amount of such payment during the intervening period. -59- Section 10. 12. Section and Paragraph Headings* Table of Contents. The section and paragraph headings and the Table of Contents have been prepared for convenience only and are not part of this Trust Agreement and shall not be taken as an interpretation of any provision of this Trust Agreement. Section 10.13. Intention as to Contract. It is intended that this Trust Agreement, when signed on behalf of the Authority and the Trustee and duly delivered between them, shall constitute a contractual obligation under the laws of the State with force and effect as an agreement and indenture of trust. Section 10.14. Limitation of Liability. (a) Reliance by Authority on Facts or Certificates. Anything in this Trust Agreement to the contrary notwithstanding, it is expressly understood and agreed by the parties hereto that the Authority may rely conclusively on the truth and accuracy of any certificate, opinion, notice, or other instrument furnished to the Authority by the Trustee or the Corporation as to the existence of any fact or state of affairs required hereunder to be noticed by the Authority. (b) Immunity of Authority's Directors, Officers, Counsel and Financial Advisors. No recourse shall be had for the enforcement of any obligation, covenant, promise, or agreement of the Authority contained in this Trust Agreement, any other Authority Documents, or in any Certificate or for any claim based hereon or otherwise in respect hereof or upon any obligation, covenant, promise or agreement of the Authority contained in any agreement, instrument or certificate executed in connection with the Facilities or the execution, delivery and sale of the Certificates, against the Authority, whether by virtue of any Constitutional provision, statute, or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that no personal liability whatsoever shall attach to, or be incurred by, the Authority, either directly or by reason of any of the obligations, covenants, promises, or agreements entered into by the Authority with the Corporation or the Trustee, or to be implied therefrom as being supplemental hereto or thereto, and that all personal liability of that character against every such director, officer, counsel, financial advisor, or agent, by the execution of the Certificates, this Trust Agreement, and the other Authority Documents, and as a condition of, and as part of the consideration for, the execution of the Certificates, this Trust Agreement, and the other Authority Documents, is expressly waived and released. Section 10.15. Governing Law. This Trust Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the State, except as such laws may be preempted by any federal rules, regulations, and laws applicable to the Authority. The parties hereto expressly acknowledge and agree that any judicial action to interpret or enforce the terms of this Trust Agreement against the Authority shall be brought and maintained in the Superior Court of the State of California in and for the County of San Bernardino, in the United States District Court in and for the District of California or in any United States Bankruptcy Court in any case involving or having jurisdiction over the Corporation or the Facilities. .1 IN WITNESS VaIEREOF, the parties hereto have duty executed and attested this Trust Agreement as of the date first written above. P:,APPS \W PDATA`Llti C \0001 \DOC \031 -2. W PD December 8, 1998 2:26 pm MRM SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY Executive Director U.S. BANK TRUST, NATIONAL ASSOCIATION, as Trustee IVIE Authorized Officer FAMILY CLINICS FOUNDATION Chairman EXHIBIT "A" [FORM OF CERTIFICATE] $100,000,000 SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY TAXABLE CERTIFICATES OF PARTICIPATION (FAMILY CLINICS FOUNDATION PROTECT) ISSUE OF 1998 EVIDENCING PROPORTIONATE, UNDIVIDED INTEREST OF THE OWNERS THEREOF IN THE RIGHT TO RECEIVE INSTALLMENT SALE PAYMENTS TO BE MADE BY THE SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT (AS DEFINED BELOW) RATE OF INTEREST MATURITY DATE DATED DATE CUSIP December 30, 1998 REGISTERED OWNER: PRINCIPAL AMOUNT: THIS IS TO CERTIFY that the registered owner identified above of this San Bernardino Associated Communities Financing Authority Taxable Certificates of Participation (Family Clinics Foundation Project, Issue of 1998 (this "Certificate ") is the owner of a proportionate, undivided interest in the right to receive Installment Sale Payments made by the San Bernardino Associated Communities Financing Authority (the "Authority ") pursuant to that certain Installment Purchase Agreement, dated as of December 1, 1998, (the "Installment Purchase Agreement "), by and between the Authority and Family Clinics Foundation (the "Corporation "). The Authority's obligation to make Installment Sale Payments is payable solely from Installment Purchase Payments made by the Corporation pursuant to the Installment Purchase Agreement. The Installment Sale Payments and the right to enforce the payment thereof have been assigned to U.S. Bank Trust, National Association, as trustee (the "Trustee ") under the Trust Agreement, dated as of December 1, 1998 (the "Trust Agreement "), by and among the Authority, the Corporation and the Trustee. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Trust Agreement. The registered owner of this Certificate is entitled to receive, subject to the terms of the Trust Agreement and the Installment Purchase Agreement, on the maturity date specified above (the "Maturity Date "), unless prepaid prior thereto as provided in the Trust Agreement, the principal amount specified above, representing a proportionate share of the Principal Component of Installment A -1 Sale Payments due on such date, and to receive on June 1 and December 1 in each year, commencing June 1, 1999, to and including the Maturity Date or date of prepayment of this Certificate, whichever is earlier, a proportionate share of the Interest Component of Installment Sale Payments. [REVERSE OF CERTIFICATE] The principal and premium, if any, with respect to this Certificate shall be payable, when due, in lawful money of the United States of America at the Principal Corporate Trust Office of the Trustee upon presentation and surrender of this Certificate. Payment of interest with respect to this Certificate shall be made on each Interest Payment Date to the Owner hereof as of the Record Date (which is the fifteenth day of the calendar month preceding any applicable Interest Payment Date), by check mailed by first class mail by the Trustee to the Owner at its address as it appears on the registration books maintained by the Trustee on behalf of the Authority. Payment of interest with respect to the Certificates may, at the option of the Owner of Certificates in an aggregate principal amount of at least $1,000,000, be transmitted by wire transfer of immediately available funds on the Interest Payment Date to such Owner's bank account number in the United States on file with the Trustee as of the Record Date. Interest accrued with respect to this Certificate shall be paid on each Interest Payment Date and on the date of payment in full of this Certificate (whether by prepayment, acceleration or otherwise). Interest with respect to this Certificate shall be computed on the basis of a 360 -day year of twelve 30 -day months. This Certificate is executed and delivered by the Trustee, pursuant to the Trust Agreement. The Trust Agreement provides a description of the nature and extent of the security, the respective rights thereunder of the Owners of the Certificates, the Trustee and the Authority, the terms upon which the Certificates are executed and delivered and the definitions of certain terms used in this Certificate. The Certificates are executed and delivered in the aggregate principal sum of $100,000,000. The Corporation's obligation to make Installment Purchase Payments is secured by a pledge of Gross Revenues and by a Security Agreement, dated as of December 1, 1998 (the "Security Agreement "), by and between the Corporation and the Authority, pursuant to which the Corporation has granted to the Trustee, as assignee of the Authority, a security interest in the Corporation's inventory, accounts and revenues, subject to Permitted Encumbrances. The Corporation's obligation to make Installment Purchase Payments is further secured by a Deed of Trust with Assignment of Rents and Fixture Filing, dated as of December 1, 1998 (the "Deed of Trust "), pursuant to which the Corporation has granted to the Deed of Trust trustee a first mortgage on the Facilities. Reference is hereby made to the Trust Agreement, the Installment Purchase Agreement, the Deed of Trust and the Security Agreement, copies of which are on file with the Trustee, for a description of the agreements and covenants contained therein and a description of the Facilities. THE CERTIFICATES ARE NOT GENERAL OBLIGATIONS OF THE AUTHORITY. NEITHER THE STATE OF CALIFORNIA NOR ANY POLITICAL SUBDIVISION THEREOF, OTHER THAN THE AUTHORITY, IS OBLIGATED TO PAY THE PRINCIPAL, PREMIUM, IF ANY, OR INTEREST WITH RESPECT TO THE CERTIFICATES AND NEITHER THE A -2 FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO SUCH PAYMENT. THE CERTIFICATES DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR EXCEPTION. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH ON THE FACE HEREOF. It is hereby certified and recited that all conditions, acts and things required to exist, happen and be performed precedent to or in the execution and delivery of this Certificate do exist, have happened and have been performed in regular and due form as required by law. Unless this Certificate has been executed by the Trustee by manual or facsimile signature, this Certificate shall not be entitled to any benefit under the Trust Agreement or be valid or obligatory for any purpose. The Trustee is executing this Certificate solely in its capacity as Trustee under the Trust Agreement and not in its individual or personal capacity and is not responsible for the payment of Installment Sale Payments represented by the Certificates. The Trustee is not responsible for the accuracy of the recitals of fact in this Certificate. The Certificates are subject to prepayment in whole or in part at any time, at a prepayment price equal to 100% of the principal amount thereof plus accrued interest to the prepayment date from proceeds of casualty insurance or condemnation awards not applied to the repair, reconstruction or replacement of the Facilities. The Certificates are subject to optional prepayment by the Authority at the direction of the Corporation in whole on any date on or after February 1, 1999 or in part on any Interest Payment Date on or after 1, , at the prepayment price of 100% of the principal amount to be prepaid, plus accrued interest to the prepayment date: The Certificates maturing December 1, are subject to mandatory sinking fund prepayment prior to maturity on each December 1 in the years and in the principal amounts set forth below: Prepayment Principal Prepayment Dates Amount to be Dates Prepaid [TO BE COMIPLETED] A -3 Principal Amount to be Prepaid In the event any of the Certificates are to be prepaid, the Trustee shall give notice of the prepayment of such Certificates in accordance with Section 3.2 of the Trust Agreement. Such notice shall be given by first class mail at least thirty (30) days but no more than forty -five (45) days prior to the date fixed for prepayment to the Owners of the Certificates to be prepaid. If provision is made for the payment of principal, premium, if any, and interest with respect to this Certificate in accordance with Article IX of the Trust Agreement, this Certificate shall no longer be deemed Outstanding under the Trust Agreement, shall cease to be entitled to the benefits of the Trust Agreement, the Installment Purchase Agreement, the Deed of Trust and the Security Agreement, and shall thereafter be payable solely from the funds provided for such payment. If an Event of Default, as defined in the Trust Agreement, shall occur, the principal with respect to all the Certificates may be declared due and payable in the manner and with the effect provided in the Trust Agreement. The Owner of this Certificate shall have no right to enforce the provisions of the Trust Agreement, the Installment Purchase Agreement, the Deed of Trust or the Security Agreement, to institute action to enforce the covenants therein, to take any action with respect to a default under the Trust Agreement or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Trust Agreement. This Certificates shall not be transferable so long as it is held by the initial purchaser hereof. Upon a remarketing of the Certificates, this Certificate shall be transferable. Upon surrender for transfer of this Certificate at its Principal Corporate Trust Office, the Trustee shall enter the name or names and address of the transferee upon the registration books for the Certificates and shall deliver this Certificate to the transferee, or, upon request of the transferee, shall deliver a new fully executed and registered Certificate or Certificates in the name or names of the transferee, denominations of $1,000,000 or any integral multiple thereof and of the same maturity and for the aggregate principal amount which the Owner is entitled to receive. In addition, this Certificate, upon surrender hereof at the Principal Corporate Trust Office of the Trustee, may at the option of the Owner hereof, be exchanged for a Certificate or Certificates in an equal aggregate principal amount of Authorized Denominations and of the same form and tenor of this Certificate being exchanged. This Certificate, if presented for transfer, exchange, prepayment or payment (if so required by the Authority or the Trustee), shall be accompanied by a written instrument or instruments of transfer, in form and with guaranty of signature as set forth herein or as may be satisfactory to the Trustee, duly executed by the Owner or by his duly authorized attorney. The Trustee also may require payment from the Owner hereof of a sum sufficient to cover any tax, or other governmental fee or charge that may be imposed in relation thereto. Such taxes, fees and charges shall be paid before any such new Certificate shall be delivered. The Trustee shall not be required (1) to execute and deliver or register the transfer or exchange of this Certificate during any period beginning at the opening of business 15 days before the selection of any Certificate to be prepaid or thereafter until after the close of business on the Business Day preceding the next Interest Payment Date or (ii) to transfer this 1998A Certificate if A -4 selected, called or being called for prepayment in whole or in part during the period established by the Trustee for the selection of Certificates for prepayment. The Authority, the Corporation and the Trustee may treat the person in whose name this Certificate is registered on the registration books maintained by the Trustee as the absolute owner hereof for all purposes, whether or not such Certificate shall be overdue, and shall not be bound by any notice to the contrary. A -5 IN WITNESS WHEREOF, this Certificate has been executed by the manual or facsimile signature of an Authorized Officer of the Trustee, as of the date specified above. U.S. BANK TRUST, NATIONAL ASSOCIATION, as Tnistee w Authorized Officer • aU I Eel; as q aM For value received, the undersigned do(es) hereby sell, assign and transfer unto (Name, Address and Tax Identification Number of Assignee) the within registered Certificate and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the Certificate register of the Trustee with full power of substitution in the premises. Dated: Signature Guarantee: Note: Signature(s) must be guaranteed by authorized guarantor. A -7 Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Certificate in every particular, without alteration or enlargement or any change whatsoever. [FORM OF PROJECT FUND REQUISITION] REQUISITION NO. - RE PROJECT FUND DISBURSEMENT The undersigned hereby certifies and declares that he is an Authorized Officer of Family Clinics Foundation (the "Purchaser"). In accordance with Section 4.2 of the Trust Agreement dated as of August 1, 1998 (the "Trust Agreement ") between San Bernardino Associated Communities Financing Authority (the "Authority ") and U.S. Bank Trust, National Association, as trustee (the "Trustee ") pursuant to which the above - captioned bonds (the "Certificates ") were executed and delivered, the Purchaser hereby directs the Trustee to disburse from the Project Fund, as follows: The name and address of the parties to whom payment is due as set forth on the attached. 2. The amount to be disbursed is $ and shall be made pursuant to the invoice as attached. 3. The obligation reflects [describe service]. 4. Such amount is due and owing and has not been the subject of another written request that has been paid. Dated: FAMILY CLINICS FOUNDATION IM Authorized Officer INSTALLMENT PURCHASE AGREEMENT by and between SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY and FAMILY CLINICS FOUNDATION Dated as of December 1, 1998 Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties . 24 Section 10.3. Successor Is Deemed Included in all References to Predecessor . 24 Section 10.4. Waiver of Personal Liability ............................ 24 Section 10.5. Article and Section Headings, Gender and References ........ 24 Section 10.6. Partial Invalidity ..... ............................... 24 Section 10.7. Assignment ......... ............................... 24 Section 10.8. California Law ....... ............................... 25 Section 10.9. Notices ............ ............................... 25 Section 10.10. Effective Date ...... ............................... 26 Section 10.11. Execution in Counterparts ............................ 26 Section 10.12. Indemnification of Authority and Trustee ................. 26 Section 10.13. Amendments Permitted .............................. 26 Section 10.14. Notice to Rating Agencies ............................ 26 EXHIBIT A DESCRIPTION OF THE PROJECT . ............................... A -1 EXHIBIT B INSTALLMENT PURCHASE PAYMENTS .......................... B -1 EXHIBIT C INSTALLMENT SALE PAYMENTS .. ............................... C -1 iii INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT (this "Installment Purchase Agreement ") is made and entered into as of December 1, 1998, by and between SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the "Authority "), and FAMILY CLINICS FOUNDATION, a nonprofit corporation duly organized and existing under and by virtue of the laws of the State of California (including any successor or assign, the "Corporation "). WITNESSETH: WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement dated March 18, 1996 and under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as amended (the "Act ") and is authorized pursuant to Article 1 of the Act to acquire and dispose of property and was established for the purpose of financing capital improvement programs; and WHEREAS, the Corporation desires (i) to acquire that certain healthcare system consisting of Lincoln Hospital Medical Center, a ten -bed acute care hospital located in the City of Los Angeles, California (the "Hospital ") and ten clinics located within the County of Los Angeles, California (the "Clinics" and together with the Hospital, the "Facilities ") and (ii) to rehabilitate existing facilities of the Hospital (collectively, the "Project "); and WHEREAS, the Corporation is a nonprofit corporation duly organized and validly existing under the laws of the State of California, and has received a determination from the Internal Revenue Service that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (including the applicable regulations thereunder, the "Code "); and WHEREAS, the Corporation has requested the Authority to assist in financing the acquisition costs of the Project, working capital in connection with the Project, accrued interest, a Reserve Fund and certain. costs of issuance, by causing the execution and delivery of Taxable Health Care Certificates of Participation (Family Clinics Foundation Project), Issue of 1998 (the "Certificates ") pursuant to a Trust Agreement dated as of December 1, 1998 (the "Trust Agreement ") among the Authority and U.S. Bank Trust, National Association, as Trustee (the "Trustee "); and WHEREAS, the Authority and the Corporation are entering into this Installment Purchase Agreement pursuant to which the Corporation, in consideration for the transfer to the Trustee of proceeds of the Certificates and for the Installment Sale Payments to be made by the Authority (the "Installment Sale Payments ") agrees to sell the Facilities to the Authority and the Authority agrees to sell the Facilities back to the Corporation (the "Installment Purchase "), in consideration for the 3 Installment Purchase Payments to be made by the Corporation (the "Installment Purchase Payments ") under this Installment Purchase Agreement in amounts and at times which will be sufficient to pay when due the principal of, premium, if any, and interest with respect to the Certificates; and WHEREAS, the Certificates evidence undivided proportionate interests in the fight to receive Installment Sale Payments; and WHEREAS, the rehabilitation of existing facilities at the Hospital will be financed by the proceeds of the Certificates and certain FEMA reimbursement funds; and WHEREAS, the Authority adopted a resolution on December 21, 1998, authorizing the execution and delivery of this Installment Purchase Agreement and sale of the Certificates in the approximate amount of $100,000,000, for the purpose of providing financing for the Project (the "Authority Resolution'); 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 delivery of this Installment Purchase 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 Installment Purchase Agreement; NOW, THEREFORE, IN CONSIDERATION OF THESE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:: ARTICLE I DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1.1 Definitions. Unless the context otherwise requires, the terms defined in this Installment Purchase Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined in Section 1.1 of the Trust Agreement. Section 1.2 Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Installment Purchase Agreement: (a) Words importing the singular number include the plural number and words importing the plural number include the singular number. (b) Words of the masculine gender include correlative words of the feminine and neuter genders. 2 (c) Words importing persons include any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or agency, instrumentality or political subdivision thereof. (d) Any reference to a particular percentage or proportion of the holders of Certificates shall mean the holders at the particular time of the specified percentage or proportion in an aggregate principal amount of all Certificates then Outstanding under the Trust Agreement, except Certificates held by or for the account of the Authority or the Corporation (whether or not theretofore executed and delivered and whether or not held in the treasury of the Authority or the Corporation or pledged to or by the Authority or the Corporation to secure any indebtedness) unless the Corporation shall be the sole registered owner of the Certificates; provided, however, that Certificates so pledged may be regarded as Outstanding for the purposes of the Trust Agreement if the pledgee shall establish to the satisfaction of the Trustee the pledgor's right to vote such Certificates. (e) Any reference to the Installment Purchase Payment Fund, the Certificate Fund, the Interest Account, the Principal Account, the Reserve Fund, the Cost of Issuance Fund, the Insurance and Condemnation Award Fund, the Prepayment Fund or the Project Fund shall be to the fund or account so designated that is created under Section 4.1 of the Trust Agreement. (f) The terms "agree" and "agreement" shall include and mean "covenant," and all agreements contained herein and in the Trust Agreement are intended to constitute covenants and shall be enforceable as such. ARTICLE II REPRESENTATIONS AND WARRANTIES; OPINIONS OF COUNSEL Section 2.1 Representations by the Corporation. The Corporation makes the following representations: (a) (i) The Corporation is a nonprofit organization duly incorporated and validly existing under the laws of the State of California, is qualified to do business and is in good standing and is authorized to engage in business in the State, with the corporate power and authority to purchase, develop, construct, rehabilitate, operate, equip and maintain the Facilities; (ii) the Corporation has authority to own, lease as lessor and as lessee, mortgage as mortgagor and operate a general acute care hospital facility , to enter into this Installment Purchase Agreement for the full term hereof and to execute and deliver the Deed of Trust and the Security Agreement; and (iii) the Corporation has duly authorized by all proper action the execution and delivery of the Corporation Documents. The execution, delivery and performance by the Corporation of the Corporation Documents do not and will not conflict with or constitute a breach of or default by the Corporation under any other instrument or agreement to which the Corporation is a party or to which its property is bound, which conflict, breach or default would reasonably be expected to have a material adverse effect on the financial condition of the Corporation. (b) (i) The Corporation is qualified as an organization described in Section 501(c)(3) of the Code and has received a determination letter from the Internal Revenue Service to the effect that it is an organization described in Section 501(c)(3) of the Code; (ii) the determination letter has not been modified, limited or revoked; (iii) the Corporation is in compliance with all terms, limitations and conditions, if any, contained in its determination letter; (iv) the facts and circumstances which form the basis of the determination letter as represented to the Internal Revenue Service continue substantially to exist, and the Corporation is exempt from federal income taxes under Section 501(a) of the Code. (c) The Corporation is a corporation (i) organized and operated exclusively for educational or charitable purposes and not for pecuniary profit; and (ii) no part of the net earnings of the Corporation inures to the benefit of any person or private individual, all within the meaning, respectively, of Section 3(a)(4) of the Securities Act of 1933, as amended, and of Section 12(g)(2)(D) of the Securities Exchange Act of 1934, as amended. (d) Neither the representations of the Corporation contained in the Corporation Documents nor any oral or written statement, furnished by or on behalf of the Corporation to the Authority or the Underwriter in connection with the transactions contemplated thereby, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. There are no facts that the Corporation has not disclosed to the Authority or the Underwriter in writing that materially and adversely affect or in the future may (so far as the Corporation can now reasonably foresee) materially and adversely affect the properties, business, prospects, profits, or condition (financial or otherwise) of the Corporation, or the ability of the Corporation to perform its obligations under the Corporation Documents. (e) During the term of this Installment Purchase Agreement, the Corporation intends to and will utilize or cause the Facilities and any facilities and equipment financed with the proceeds of the Certificates to be utilized as a "public improvement" within the meaning of the Act as in effect on the date of delivery of this Installment Purchase Agreement. (f) The use of the Facilities, as it is proposed to be operated, complies in all material respects with all presently applicable zoning, development, pollution control, water conservation, environmental, and other laws, regulations, rules, and ordinances of the federal and state governments and the respective agencies thereof and the political subdivisions in which the Facilities are located. (g) The Corporation has obtained, or reasonably believes it will obtain, all necessary approvals of and licenses, permits, consents, and franchises from federal, state, county, municipal, or other governmental authorities having jurisdiction over the Project to acquire, construct, improve, equip, rehabilitate, and operate the Project, and to enter into, execute, and 2 perform its obligations under this Installment Purchase Agreement and the other Corporation Documents. (h) The Facilities, as designed and as proposed to be operated or caused to be operated by the Corporation, and when renovated in accordance with such design, will meet all material requirements of law, including requirements of any federal, State, county, city or other governmental authority having jurisdiction over the Facilities or their use and operation. (i) There has been no adverse change in the financial condition, prospects, or business affairs of the Corporation or the feasibility or physical condition of the Facilities subsequent to the date on which the Authority adopted its resolution approving the execution and delivery of the Certificates. 0) The Corporation (i) understands the nature of the structure of the transactions related to the financing of the Facilities; (ii) is familiar with all the provisions of the documents and instruments related to such financing to which the Corporation or the Authority is a party or which the Corporation is a beneficiary; (iii) understands the risk inherent in such transactions, including, without limitation, the risk of loss of the Facilities; and (iv) has not relied on the Authority for any guidance or expertise in analyzing the financial consequences of such financing transactions or otherwise relied on the Authority in any manner. (k) The Corporation hereby acknowledges receipt of the Trust Agreement and agrees to be bound by its terms. (1) All representations of the Corporation contained herein or in any certificate or other instrument delivered by the Corporation pursuant to this Installment Purchase Agreement, the Trust Agreement, or in connection with the transactions contemplated by such documents, shall survive the execution and delivery thereof and the execution, delivery and sale of the Certificates as representations of facts existing as of the date of execution and delivery of the instrument containing such representations. (m) To the best of the Corporation's knowledge, there are no pending or threatened suits or proceedings of any type whatsoever affecting the Corporation's ability to execute and deliver the Corporation Documents. (n) The Corporation will file all required Uniform Commercial Code Financing Statements and Continuation Statements in connection with the execution and delivery of the Certificates and the renovation of the Facilities. Section 2.2 Representations and Warranties by the Authority. The Authority makes the following representations and warranties: 5 (a) The Authority is a joint exercise of powers agency duly organized and in good standing under the laws of the State of California, has full legal right, power and authority to enter into this Installment Purchase Agreement and the Trust Agreement and to carry out and consummate all transactions contemplated by this Installment Purchase Agreement and the Trust Agreement and by proper action has duly authorized the execution and delivery and due performance of this Installment Purchase Agreement and the Trust Agreement. (b) The execution and delivery of this Installment Purchase Agreement and the Trust Agreement and the consummation of the transactions herein and therein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (c) The Authority will not take or permit any action to be taken which results in interest paid for the installment purchase of the Facilities under the terms of this Installment Purchase Agreement being included in the gross income of the owners of the Tax - Exempt Certificates for purposes of federal income taxation. Section 2.3 Opinion of Counsel regarding the CoEporation. Concurrently with the execution and delivery of this Installment Purchase Agreement, the Corporation shall provide the Authority with an opinion of counsel, satisfactory in form and substance to the Authority, to the same effect as the representations of the Corporation set forth in subsections (a), (b) and (c) of Section 2.1 hereof and to the effect that this Installment Purchase Agreement has been duly authorized, executed and delivered by the Corporation and that, assuming this Installment Purchase Agreement constitutes a legal, valid and binding obligation of the Authority, it is a legal, valid and binding obligation of the Corporation enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors remedies generally or the application of equitable principles when equitable remedies are sought, or except as rights of indemnity may be limited by principles of public policy. Section 2.4 Opinion of Counsel regarding the Authority. Concurrently with the execution and delivery of this Installment Purchase Agreement, the Authority shall provide the Corporation with an opinion of counsel, satisfactory in form and substance to the Corporation, to the same effect as the representations of the Authority set forth in subsections (a) and (b) of Section 2.2 hereof and to the effect that this Installment Purchase Agreement has been duly authorized, executed and delivered by the Authority and that assuming this Installment Purchase Agreement constitutes a legal, valid and binding obligation of the Corporation, it is a legal, valid and binding obligation of the Authority enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors remedies generally or the application of 9 equitable principles when equitable remedies are sought, or except as rights of indemnity may be limited by principles of public policy. ARTICLE III ACQUISITION AND CONSTRUCTION OF THE PROJECT Section 3.1 Sale and Purchase of the Facilities. In consideration for the transfer to the Trustee of proceeds of the Certificates pursuant to the Trust Agreement and for the Installment Sale Payments as set forth in Section 4.3 hereof, the Corporation agrees to sell, and hereby sells, the Facilities to the Authority and the Authority agrees to purchase, and hereby purchases, the Facilities from the Corporation at the purchase price specified in Section 4.1(c), (d) and (e) hereof. In consideration for the Installment Purchase Payments as set forth in Section 4.2 hereof, the Authority agrees to sell to the Corporation, and the Corporation agrees to simultaneously purchase from the Authority, the Facilities at the purchase price specified in Section 4.1 (a), (b) and (c) hereof, and otherwise in the manner and in accordance with the provisions of this Installment Purchase Agreement. Section 3.2 Title. All right, title and interest in the Facilities vests automatically in the Corporation upon execution of this Installment Purchase Agreement. Title to the Facilities shall at all times be deemed conveyed to and vested in the Corporation. Section 3.3 Acquisition of the Facilities. The Authority hereby agrees to acquire the Facilities and complete the Project and designates the Corporation as its agent for the purpose of such acquisition and completion. The Corporation shall enter into contracts and provide for, as agent for the Authority, the acquisition of the Facilities and the completion of the Project. It is hereby expressly understood and agreed that the Authority shall be under no liability of any kind or character whatsoever for the payment of any cost of the Project and that all such costs and expenses shall be paid by the Corporation, regardless of whether the funds deposited in the Project Fund are sufficient to cover all such costs and expenses. If there is money in the Project Fund after the completion of the Project, the Corporation may direct the Authority and the Trustee that the money be spent for additional improvements to the Facilities or be transferred to the Certificate Fund pursuant to Section 4.2(a) of the Trust Agreement. ARTICLE IV INSTALLMENT PURCHASE PAYMENTS; NSTALLMENT SALE PAYMENTS; FEES Section 4.1 Purchase Price. (a) The purchase price to be paid by the Corporation hereunder to the Trustee as assignee of the Authority is the sum of the principal components of the Corporation's Installment Purchase Payments plus the interest components to accrue on the unpaid balance of such principal 7 components from the effective date hereof over the term hereof, subject to prepayment as provided in Article VII. (b) The principal components of the Installment Sale Payments to be made by the Corporation hereunder is set forth in Exhibit B hereto. (c) The interest to accrue on the unpaid balance of such principal amount is as specified in Section 4.2 and Exhibit B hereto, and shall be paid by the Corporation as and constitute interest paid on the principal amount of the Corporation's obligations hereunder. (d) The purchase price to be paid by the Authority hereunder to the Trustee as assignee of the Corporation is the sum of the Principal Component of Installment Sale Payments plus the Interest Components to accrue on the unpaid balance of such Principal Components from the effective date hereof over the term hereof, subject to prepayment as provided in Article VII. (e) The Principal Components of the Installment Sale Payments to be made by the Authority hereunder are set forth in Exhibit C hereto. (f) The Interest Components to accrue on the unpaid balance of such Principal Components are specified in Section 4.3 and Exhibit C hereto, and shall be paid by the Authority as and constitute interest paid on the Principal Components. Section 4.2 Installment Purchase Payments. The Corporation shall, subject to any rights of prepayment provided in Article VII, pay the Trustee as assignee of the Authority the Purchase Price in installment payments of interest and principal in the amounts and on the Installment Payment Dates as set forth in Exhibit B hereto. The Authority hereby assigns to the Trustee all of its rights, title and interest in and to this Installment Purchase Agreement (other than its rights under Section 10.12 hereof), including its rights to receive Installment Purchase Payments and its right to enforce any and all remedies hereunder and under the Deed of Trust and the Security Agreement to collect Installment Purchase Payments. Such assignment is to the Trustee solely in its capacity as Trustee under the Trust Agreement and subject to the provisions of the Trust Agreement. Each Installment Purchase Payment shall be paid to the Authority or its assignee in lawful money of the United States of America. In the event the Corporation fails to make any of the payments required to be made by it under this section, such payment shall continue as an obligation of the Corporation until such amount shall have been fully paid; and the Corporation agrees to pay the same with interest accruing thereon at the rate or rates of interest then applicable to the remaining unpaid principal balance of the Installment Purchase Payments if paid in accordance with their terms. The obligation of the Corporation to make the Installment Purchase Payments is absolute and unconditional, and until such time as the Purchase Price shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IX), the Corporation will not discontinue or suspend any Installment Purchase Payments required to be made by it under this M. Section when due, whether or not the Facilities or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments shall not be subject to reduction whether by offset or otherwise and shall not be conditioned upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Section 4.3 Installment Sale Payments. The Authority shall, subject to any rights of prepayment provided in the Article VII, pay the Trustee as assignee of the Corporation, the Installment Sale Payments in the amounts and on the Installment Payment Dates as set forth in Exhibit C hereto. The Corporation assigns to the Trustee all of its rights, title and interest in and to the Installment Purchase Agreement, including its rights to receive Installment Sale Payments and its right to enforce any and all remedies under the Installment Purchase Agreement to collect Installment Sale Payments. Each Installment Sale Payment shall be paid to the Corporation or its assignee in lawful money of the United States of America. In the event the Authority fails to make any of the payments required to be made by it under the Installment Purchase Agreement, such payment shall continue as an obligation of the Authority until such amount shall have been fully paid, and the Authority agrees to pay the same with interest accruing thereon at the rate or rates of interest then applicable to the remaining unpaid principal balance of the Installment Sale Payments if paid in accordance with their terms; provided, however, that the obligation of the Authority to make Installment Sale Payments is a limited obligation payable solely from Installment Purchase Payments made by the Corporation. Section 4.4. Pledge of the Installment Purchase Payments. All Installment Purchase Payments are irrevocably pledged to the payment of the Installment Sale Payments as provided in the Installment Purchase Agreement. With respect to the Certificates, this pledge, together with the pledge created with respect to all Additional Certificates, and subject to Permitted Encumbrances, shall constitute a first and exclusive lien on Installment Purchase Payments and other funds and accounts created under the Installment Purchase Agreement for the payment of the Installment Sale Payments and all other payments with respect to Additional Certificates in accordance with the terms of the Installment Purchase Agreement and the Trust Agreement. Section 4.5. Fees. The Corporation shall pay on the Closing Date the Authority's Initial Administration Fee, and one -half of the Authority's Annual Fee for the first year in advance. Commencing on June 1, 1999 and thereafter, the Corporation shall pay on each June 1 and December 1, in advance, one -half of the Authority's Annual Fee, the Trustee's initial fees and one -half of the Trustee's Annual Fee. The Corporation shall also pay the Administrative Expenditures, as approved by an Authorized Officer of the Corporation, of the Authority and the Trustee upon receipt of invoices from the Authority and the Trustee. The Corporation shall pay all such fees hereunder to the Trustee for remittence to such parties. Section 4.6 Installment Purchase Payments Equal to Appraised Value. PriortoFebruary 1, 1999, the Corporation shall cause the preparation and delivery to the Authority of an appraisal of 0 the Facilities by or a reputable company of appraisers having a M.A.I. license to perform appraisals within the State and approved by the Authority. In the event that the appraised value of the Facilities is less than One Hundred Million Dollars ($100,000,000.00), the aggregate Principal Components of the Installment Purchase Payments shall be reduced to the appraised value of the Facilities and the Exhibits hereto shall be modified to reflect a new schedule of payments. ARTICLE V SECURITY Section 5.1 Pledge of Gross Revenues. All Gross Revenues are hereby irrevocably pledged to the payment of the Installment Purchase Payments as provided herein. The Certificates, together with the pledge created with respect to all other Parity Obligations, and subject to Permitted Encumbrances, shall constitute a first and exclusive lien on Gross Revenues and other funds and accounts created hereunder for the payment of the Installment Purchase Payments and all other Parity Obligations in accordance with the terms hereof and the Trust Agreement. Section 5.2 Allocation of Gross Revenues. In order to carry out and effectuate the pledge and lien contained herein, the Corporation agrees and covenants that all Gross Revenues shall be used to pay all Operating Expenses (including amounts reasonably required to be set aside in contingency reserves for Operating Expenses, the payment of which is not then immediately required) as they become due and payable. Thereafter, all remaining moneys shall be set aside by the Corporation at the following times for the transfer to the following funds in the following order of priority; and all moneys in each of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes set forth in this Section: (a) Installment Purchase Payments. Not later than five (5) days prior to each June 1 and December 1 commencing on June 1, 1999, the Corporation shall transfer to the Trustee as assignee of the Authority the Installment Purchase Payment due and payable on that Installment Payment Date. Such amount to be transferred to the Trustee shall be net of any monies held by the Trustee for such Installment Purchase Payments. (b) Reserve Fund. To the extent there is a deficiency in the Reserve Fund as described in Section 4.11 of the Trust Agreement, the Corporation shall transfer to the Trustee an amount equal to such deficiency. Section 5.3 No Prior Obligations. The Corporation shall incur no evidences of indebtedness or other obligations (other than Operating Expenses) having any priority in payment over the Installment Purchase Payments. Section 5.4 Additional Certificates. The Corporation and the Authority may cause the execution and delivery of Additional Certificates from time to time on a parity with the Certificates as set forth in Section 2.5 of the Trust Agreement relating to the execution and delivery of Additional Certificates. 10 as set forth in Section 2.5 of the Trust Agreement relating to the execution and delivery of Additional Certificates. ARTICLE VI COVENANTS OF THE CORPORATION Section 6.1 Compliance with Installment Purchase Agreement and AncillaryAgreements. The Corporation will punctually pay the Installment Purchase Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Facilities, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of California or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. It is expressly understood and agreed by and among the parties to this Installment Purchase Agreement that, subject to Section 10.6 hereof, each of the agreements, conditions, covenants and terms contained in this Installment Purchase Agreement is an essential and material term of the purchase of and payment for the Facilities by the Corporation pursuant to, and in accordance with, and as authorized under the law. The Corporation will faithfully observe and perform all the agreements, conditions, covenants and terms required to be observed and performed by it pursuant to all outstanding Certificates as such may from time to time be executed and delivered. Section 6.2 Against Encumbrances. The Corporation will not make any pledge of or place any lien on Gross Revenues except as provided herein, subject to Permitted Encumbrances. Section 6.3 Against Sale or Other Disposition of Props. The Corporation will not enter into any agreement or lease which impairs the operation of the Facilities or any part thereof necessary to secure adequate Gross Revenues for the payment of the Installment Purchase Payments, or which would otherwise impair the rights of the Authority hereunder or the operation of the Facilities. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Facilities, or any material or equipment which has become worn out, may be sold if such sale will not impair the ability of the Corporation to pay the Installment Purchase Payments. The Facility or any interest therein shall not be sold (including, without limitation, through 11 sale or transfer of a majority or controlling interest of the Corporation), mortgaged, assigned, further encumbered (unless such encumbrance is a Permitted Encumbrance) or leased, except as provided in this Installment Purchase Agreement, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without the prior written consent of the Authority. Section 6.4 Reserved. Section 6.5 Maintenance and Operation of the Facilities. The Corporation will maintain and preserve the Facilities in good repair and working order in all material respects at all times and will operate the Facilities in an efficient and economical manner and will pay all Operating Expenses as they become due and payable. Section 6.6 Payment of Claims. The Corporation will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Gross Revenues or the funds or accounts created hereunder or on any funds in the hands of the Corporation pledged to pay the Installment Purchase Payments or to the Certificateholders that is not a Permitted Encumbrance and (a) that is prior or superior to the lien of the Installment Purchase Payments or (b) that might impair the security of the Installment Purchase Payments. Notwithstanding the foregoing, the Corporation may pledge, encumber or otherwise secure its obligations with Net Revenues; provided, that in all instances any such pledge, lien or security is wholly subordinate and junior to the obligations of the Corporation contained in this Installment Purchase Agreement or complies with the requirements of Section 5.4 hereof regarding the execution and delivery of Additional Certificates. Section 6.7 Compliance with Contracts. The Corporation will neither take nor omit to take any action under any contract if the effect of such act or failure to act would in any manner impair or adversely affect the ability of the Corporation to pay Installment Purchase Payments; and the Corporation will comply with, keep, observe and perform in all material respects all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all other contracts affecting or involving the Facilities, to the extent that the Corporation is a party thereto. Section 6.8. Insurance. (a) The Corporation will procure and maintain or cause to be procured and maintained insurance on the Facilities with responsible companies at reasonable cost in such amounts and against such risks (including damage to or destruction of the Facilities) as are usually covered in connection with facilities similar to the Facilities, as long as such insurance is available from reputable insurance companies. In the event of any damage to or destruction of the Facilities covered by such insurance, the net proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Facilities. The Corporation shall begin such reconstruction, repair or replacement promptly after such damage or destruction shall occur, and shall continue and 12 properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such net proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Facilities shall be free and clear of all claims and liens. If such net proceeds exceed the costs of such reconstruction, repair or replacement portion of the Facilities, and/or the cost of the construction of additions, betterments, extensions or improvements to the Facilities, then the excess net proceeds shall be applied in part to the prepayment of Installment Purchase Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Certificates in the same proportion which the aggregate unpaid principal balance of Installment Purchase Payments then bears to the aggregate unpaid principal amount of such Certificates. If such net proceeds are sufficient to enable the Corporation to retire the entire obligation evidenced by this Installment Purchase Agreement on or prior to the final due date of the Installment Purchase Payments as well as the entire obligations evidenced by the Certificates then remaining unpaid on or prior to their final respective due dates, the Corporation may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Facilities, and/or not to construct other additions, betterments, extensions or improvements to the Facilities; and thereupon such net proceeds shall be applied to the prepayment of Installment Purchase Payments as provided in Article VII and to the retirement of the Certificates. (b) The Corporation will procure and maintain business interruption insurance with respect to the Hospital and the Clinics and such other insurance as it shall deem advisable or necessary to protect its interests and the interests of the Authority and the Trustee, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with acute care facilities similar to the Facilities. (c) Any insurance required to be maintained by paragraph (a) or (b) above may be maintained under a self - insurance program so long as such self - insurance is maintained in the amounts and manner usually maintained in connection with acute care facilities similar to the Facilities and is actuarially sound, in the opinion of the risk manager of the Corporation or (if requested by the Authority) of an independent accredited actuary. All policies of insurance required to be maintained herein shall provide that the Trustee and the Authority be named as loss payees, and that the Authority and the Trustee shall be given thirty (30) days written notice of any intended cancellation thereof or reduction of coverage provided thereby. Section 6.9. Accounting Records: Financial Statements and Other Reports. (a) The Corporation will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Facilities, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions. 13 (b) The Corporation will prepare and file with the Authority annually within one hundred fifty (150) days after the close of each Fiscal Year (commencing with the Fiscal Year ending December 31, 1999) -- (1) financial statements of the Corporation for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant's Report thereon; and (2) a detailed report as to all insurance policies maintained and self - insurance programs maintained by the Corporation with respect to the Facilities, as of the close of such Fiscal Year, including the names of the insurers which have issued the policies and the amounts thereof and the property or risks covered thereby. (3) The Corporation will file an annual certification with the Trustee that all insurance policies required hereunder are in full force and effect. The Trustee makes no representation as to the sufficiency of any insurance policies or self - insurance programs maintained by the Corporation with respect to the Facilities. (d) The Corporation will prepare annually not more than one hundred fifty (15 0) days after the close of each Fiscal Year a summary report showing in reasonable detail the Gross Revenues and the Operating Expenses for such Fiscal Year and containing a general statement of the physical condition of the Facilities. The Corporation will furnish a copy of such summary report to the Authority and upon request to any others interested in the Installment Purchase Payments. Section 6.10. Protection of Security and Rights of the Trustee. The Corporation will preserve and protect the security hereof and the rights of the Authority and the Trustee to the Installment Purchase Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. Section 6.11. Payment of Taxes and Compliance with Governmental Regulations. The Corporation will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Facilities, or any part thereof or upon the Gross Revenues when the same shall become due but the Corporation shall not be required to pay any such tax, assessment or charge so long as the liability therefor shall be contested in good faith. The Corporation will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Facilities, or any part thereof, but the Corporation shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith. Section 6.12. Eminent Domain Proceeds. If all or any part of the Facilities shall be taken by eminent domain proceedings, the net proceeds thereof shall be applied as follows: 14 (a) If (1) the Corporation files with the Authority and the Trustee a certificate showing (i) the estimated loss of annual Net Revenues, if any, suffered or to be suffered by the Corporation by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements to the Facilities proposed to be acquired and constructed by the Corporation from such net proceeds, and (iii) an estimate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements, and (2) the Corporation, on the basis of such certificate filed with the Authority and the Trustee, determines that the estimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the Corporation to meet its obligations hereunder will not be substantially impaired (which determination shall be final and conclusive), then the Corporation shall promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in accordance with such certificate and such net proceeds shall be applied for the payment of the costs of such acquisition and construction, and any balance of such net proceeds not required by the Corporation for such purpose shall be deposited in the Installment Purchase Payment Fund. (b) If the foregoing conditions are not met, then such net proceeds shall be applied by the Corporation in part to the prepayment of Installment Purchase Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Certificates in the same proportion which the aggregate unpaid principal balance of Installment Purchase Payments then bears to the aggregate unpaid principal amount of such Certificates. Section 6.13. Further Assurances. The Corporation will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Authority and the Trustee of the rights and benefits provided to them herein. Section 6.14. Enforcement of Contracts. So long as any of the Certificates are Outstanding, the Corporation will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or hereafter entered into if such rescission or amendment would in any manner impair or adversely affect the ability of the Corporation to pay Installment Purchase Payments. Section 6.15. Environmental Matters. (a) The Corporation shall carry on the business and operations at the Facilities to comply in all material respects, and will remain in material compliance, with all applicable federal, state, regional, county or local laws, statutes, rules, regulations, or ordinances, concerning the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 gl., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 gl. 5j�q., the Emergency Planning and Community 15 Right -to -Know Act of 1986, 42 U.S.C. § 11001 gi =., and the Clean Air Act of 1975, 42 U.S.C. § 4321, and all rules, regulations and guidance documents promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation, or ordinance relating to the environment relating to (i) releases, discharges, emissions, or disposals to air, water, land, or groundwater, (ii) the withdrawal or use of groundwater, (iii) the use, handling, or disposal of polychlorinated biphenyls (PCBs), asbestos, or urea formaldehyde, (iv) the treatment, storage, disposal, or management of hazardous substances (including, without limitation, petroleum, its derivatives, crude oil, or any fraction thereof, and any other solid, liquid or gaseous substance, exposure to which is prohibited, limited, or regulated, or may or could pose a hazard to the health and safety of the occupants of the Facilities or the property adjacent to or surrounding the Facilities and the site thereof (v) the exposure of persons to toxic, hazardous, or other controlled, prohibited, or regulated substances, or (vi) the transportation, storage, disposal, management, or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. (b) The Corporation shall prevent the imposition of any liens or encumbrances against the Facilities for the costs of any response, removal, or remedial action or clean up of hazardous substances. (c) The Corporation covenants and agrees that, except in the ordinary course of business, it will not conduct or allow to be conducted any business, operations or activity on the Facilities or employ or use the Facilities to manufacture, treat, store, or dispose of any hazardous substance (including, without limitation, petroleum, its derivatives, crude oil, or any fraction thereof), or any other substance which is prohibited, controlled, or regulated under applicable law, or which poses a threat or nuisance to safety, health, or the environment, including, without limitation, any business, operation, or activity which would bring the Corporation, the Facilities, or the site thereof, within the ambit of, or otherwise violate, the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 -QJ 5f'�q., or cause, or allow to be caused, a release or threat of release, of a non -de minimus quantity of hazardous substances on the Facilities as defined by, and within the ambit of, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 5-QQ., or any similar state, county, regional, or local statute providing for financial responsibility for clean up for the release or threatened release of substances provided for thereunder. (d) The Corporation warrants and represents that , to the best of its knowledge, there has not been thereon a release, discharge, or emission, or threat of release, discharge, or emission, of a non -de minimus quantity of any hazardous substance, gas, or liquid (including, without limitation, petroleum, its derivatives, crude oil, or any fraction thereof) as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601, et ems. and the rules, regulations, and guidance documents promulgated or published thereunder, or any other substance, gas or liquid, which is prohibited, controlled, or regulated under applicable law, or which 104 poses a threat or nuisance to safety, health, or the environment, and that the Facilities do not contain any landfills or dumps. (e) The Corporation covenants and agrees that it shall take all appropriate response action, including any removal and remedial action, in the event of a release, emission, discharge, or disposal of hazardous substances in, on, under, or about the Facilities and the site thereof, so as to (i) remain in compliance with (d) above, and (ii) keep the Facilities free from, and unaffected by, hazardous substances in all material respects. (f) The Corporation shall, as soon as practical and in any event within 15 days, notify the Trustee in writing of any notice, letter, citation, order, warning, complaint, inquiry, claim, or demand that: (i) the Corporation or any tenant has violated, or is about to violate, in any material respect, any federal, state, regional, county, or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment, or order; (ii) there has been a release, or there is a threat of release, of hazardous substances (including, without limitation, petroleum, its by- products, crude oil, or any fraction thereof) from the Facilities; (iii) the Corporation or any tenant may be or is liable, in whole or in part, for the costs of cleaning up, remediating, removing, or responding to a release of hazardous substances (including, without limitation, petroleum, its by- products, crude oil, or any fraction thereof); or (iv) any of the Facilities are subject to a lien in favor of any governmental entity for any environmental law, rule, or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including without limitation, petroleum, its by- products, crude oil, or any fraction thereof). (g) The Corporation agrees to protect, defend, hold harmless, and indemnify the Authority, the Trustee and each Holder of a Certificate, for, from, against, and in respect of any and all claims, losses, liabilities, damages (whether special, consequential, or otherwise), settlements, penalties, interest, and expenses (including any professional fees and expenses) which may be suffered or incurred by any of them relating to, arising out of, or resulting from, or by reason of any and all present or future liabilities or obligations under any current federal, state, or local law (including common law), and regulations, orders, and decrees relating to pollution control, environmental protection, health, welfare, public safety, personal injury, property damage, or any other type of claim relating to the Facilities, with respect to: (i) the handling, storage, use, transportation, or disposal of any hazardous substance in or from any of the Facilities; (ii) the handling, storage, use, transportation, or disposal (whether or not known to the Corporation) of any hazardous substance, which hazardous substances were a product, by- product or otherwise resulted from operations conducted on any of the Facilities; or (iii) any intentional or unintentional emission, discharge, or release (whether or not known to the Corporation) of any hazardous substance into or upon the air, surface water, ground water, or land, or any manufacturing, processing, distribution, use, treatment, disposal, transport, or handling of such hazardous substance. Section 6.16. Financial Covenants. The Corporation covenants that it will fix, charge and collect or cause to be fixed, charged and collected (subject to applicable requirements or restrictions imposed by law) rates, fees and charges for the use of and for the services furnished or to be furnished 17 by the Corporation which will be sufficient as of each Yearly Evaluation Date to produce Funds Available for Debt Service sufficient to satisfy the Debt Service Coverage Requirement. The Corporation further covenants that if as of any Yearly Evaluation Date the Funds Available for Debt Service are not sufficient to meet the Debt Service Coverage Requirement, the Corporation will immediately employ a Management Consultant to examine the rates, rentals, fees and charges of the Corporation and make such recommendations as the Management Consultant believes are appropriate to enable the Corporation to produce Funds Available for Debt Service sufficient to meet the Debt Service Coverage Requirement. The Corporation agrees to comply with the recommendations of the Management Consultant, unless such compliance would adversely affect the Corporation's status as an organization described under Section 501(c)(3) of the Code. In such event, the Corporation will not be required to follow the recommendations of the Management Consultant. If the Corporation complies with the recommendations of the Management Consultant, and such compliance does not adversely affect the Corporation's status as an organization described under Section 501(c)(3) of the Code, the failure of the Corporation to produce Funds Available for Debt Service sufficient to satisfy the Debt Service Coverage Requirement shall not constitute an Event of Default hereunder. Section 6.17. Permitted Indebtedness. The Corporation covenants and agrees that it will not hereafter incur or assume any indebtedness related to the Facilities other than as permitted in Section 2.5 of the Trust Agreement or in this section. (a) If no Event of Default shall have occurred and then be continuing, the Corporation may incur or assume additional Long Term Indebtedness for such lawful purposes of the Corporation as shall be specified in reasonable detail in certified resolutions of the governing body of the Corporation; provided that, on or before the date on which any Long Term Indebtedness, whether secured or unsecured, is to be incurred or assumed, and to the extent such Long Term Indebtedness is a Parity Obligation, the Corporation shall deliver to the Trustee the opinions and certificates similar in substance to those required by Section 2.5(b)(3) of the Trust Agreement for the execution and delivery of Additional Certificates. (b) The Corporation may, from time to time, incur, assume or allow to remain outstanding at any time Short Term Indebtedness (including any lien, encumbrance or security interest with respect to accounts receivable of the Corporation); provided, however, that the aggregate amount of such Short Term Indebtedness (including any lien, encumbrance or security interest with respect to accounts receivable of the Corporation) outstanding at any time, together with the Indebtedness incurred pursuant to paragraphs (c) and (d) of this section, shall not exceed fifteen percent (15 %) of Net Revenues for the most recent Fiscal Year of the Corporation for which audited financial statements are available. (c) The Corporation may incur Long Term Indebtedness as lessee under lease agreements for the lease of equipment, tangible personal property and real property used or useful in connection with the Facilities; provided, however, that the aggregate amount of such Long Term Indebtedness (which shall be determined in accordance with generally accepted accounting principles) outstanding at any time, together with the indebtedness incurred pursuant to paragraphs (b) and (d) IN of this section, shall not exceed fifteen percent (15 %) of Net Revenues for the most recent Fiscal Year of the Corporation for which audited financial statements are available. (d) The Corporation may incur Long Term Indebtedness for money borrowed or under instruments evidencing deferred payment plans incurred solely for the purpose of purchasing equipment, tangible personal property and real property used or useful in the conduct of the Facilities; provided, however, that the aggregate principal amount of such Long Term Indebtedness permitted to be outstanding at any time shall not exceed, together with any indebtedness incurred pursuant to paragraphs (b) and (c) of this section, fifteen percent (15 %) of Net Revenues for the most recent Fiscal Year of the Corporation for which audited financial statements are available. ARTICLE VII PREPAYMENT OF INSTALLMENT PURCHASE PAYMENTS AND INSTALLMENT SALE PAYMENTS Section 7.1. Prepayment. (a) Subject to Section 7.2, the Corporation may or shall, as the case may be, prepay from any proceeds of casualty insurance or condemnation awards as provided herein on any date, the principal amount of the unpaid Installment Purchase Payments at a prepayment price equal to the sum of the principal amount prepaid plus accrued interest thereon to the date of prepayment. The Authority shall forthwith apply such amounts to the prepayment of the corresponding Installment Sale Payments. (b) The Corporation may prepay the Installment Purchase Payments among maturities, and by lot within a maturity, as a whole, on any date on and after February 1, 1999 and in part on any Interest Payment Date on or after , from any available funds. The Authority shall forthwith apply such amounts to the prepayment of the corresponding Installment Sale Payments. Notwithstanding any such prepayment, neither the Authority nor the Corporation shall be relieved of its obligations hereunder, including its obligations under Article IV, until the purchase price shall have been fully paid (or provision for payment thereof shall have been provided to the written satisfaction of the Trustee). Section 7.2. Method ofPrepUment. Before making any prepayment pursuant to Section 7.1(a), the Corporation may, within five (5) days following the event permitting the exercise of such right to prepay or creating such obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which such prepayment of the will take place, which date shall be not less than sixty (60) days from the date such notice is given, unless such prepayment must occur on an Interest Payment Date, in which case such date shall be the next Interest Payment Date with respect to which notice of prepayment may be timely given pursuant to 19 3 3 the Trust Agreement; provided, however, in no event shall such date be less than forty -five (45) days from the date of such prepayment. ARTICLE VIII 1 EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.1. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen, that is to say -- (a) if default shall be made by the Corporation in the due and punctual payment of any Installment Purchase Payment with respect to the Certificates or in the due and punctual payment of any 1998 Certificate when and as the same shall become due and payable; (b) if default shall be made by the Corporation in the performance of any of the other agreements or covenants required herein to be performed by it, and such default shall have continued for a period of sixty (60) days after the Corporation shall have been given notice in writing of such default by the Authority; (c) if the Corporation shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Corporation seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Corporation or of the whole of its property; or (d) if payment of the principal of any Certificate is accelerated in accordance with its terms. Then and in each and every such case during the continuance of such Event of Default specified in clauses (a), (c) and (d) above, the Authority shall by notice in writing to the Corporation, declare the entire principal amount of the unpaid Installment Purchase Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided, however, if, at any time after the entire principal amount of the unpaid Installment Purchase Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Corporation shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Installment Purchase Payments or the unpaid payment of any other Certificate referred to in clause (a) above due prior to such declaration and the accrued interest thereon, with interest with respect to such overdue installments, at the rate or rates applicable to the remaining unpaid principal balance of the Installment Purchase Payments or such Certificate if paid in accordance with their terms, and the reasonable expenses of the Authority, and any and all other defaults known to the Authority (other than in the payment of the entire principal amount of 20 the unpaid Installment Purchase Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority, by written notice to the Corporation, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.2. Application of Funds Upon Acceleration. Upon the date of the declaration of acceleration as provided in Section 8. 1, all Gross Revenues thereafter received shall be applied in the following order - it , to the payment, without preference or priority, and in the event of any insufficiency of such Gross Revenues ratably without any discrimination or preference, of the fees, costs and expenses of the Authority and the Trustee, if any, including reasonable compensation to its accountants and counsel (including the allocated costs and disbursements of in -house counsel); Second, to the payment of Operating Expenses; and Third, to the payment of the entire principal amount of the unpaid Installment Purchase Payments with respect to the Certificates and to the payment of the unpaid principal amount of all Certificates and the accrued interest with respect thereto, with interest on the overdue installments at the rate or rates of interest applicable to such Installment Purchase Payments and such Certificates if paid in accordance with their respective terms. Section 8.3. Other Remedies of the Authority. The Authority shall have the right: (a) by mandamus or other suit, action or proceeding or suit at law or in equity to enforce its rights against the Corporation or any director, officer or employee thereof, and to compel the Corporation or any such director, officer or employee to perform and carry out its or his duties under the Act and the agreements and covenants required to be performed by it or him contained herein or to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority hereunder; (b) to commence and maintain an action to appoint a receiver, or to obtain specific enforcement of the covenants of the Purchase under this Installment Purchase Agreement, and the Corporation agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for purposes of any suit brought under this subparagraph, the Corporation waives the defense of laches and any applicable statute of limitations; or (c) to take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Corporation hereunder. 21 Anything contained in this Section 8.3 to the contrary notwithstanding, the Trustee shall not be required to take any action whatsoever with respect to the Facilities unless the Trustee is satisfied that the Trustee will not be subject to any liability under any applicable laws or statutes or from any circumstances at the Facilities relating to any of the acts or substances as set forth in Section 6.15 hereof. Section 8.4. Non - Waiver. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the Corporation, which is absolute and unconditional, to pay the Installment Purchase Payments to the Trustee as assignee of the Authority at the respective due dates or upon prepayment from the Net Revenues and the other funds herein pledged for such payment, or shall affect or impair the right of the Trustee as assignee of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Authority or 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 Authority or 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 duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority or the Trustee by the Act or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority or the Trustee. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority or the Trustee, the Corporation, the Authority and the Trustee shall be restored to their former positions, rights and remedies as if such action., proceeding or suit had not been brought or taken. Section 8.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority or 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 the Act or any other law. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obligations. When the following provisions have been met: (a) all or any portion of the Installment Purchase Payments shall have become due and payable in accordance herewith or a written notice of the Corporation to prepay all or any portion of the Installment Purchase Payments shall have been filed with the Trustee and the Authority; and 22 (b) there shall have been deposited with the Trustee at or prior to the Installment Payment Dates or date (or dates) specified for prepayment, in trust for the benefit of the Trustee and irrevocably appropriated and set aside to the payment of all or any portion of the Installment Sale Payments, sufficient moneys and Government Obligations, the principal of and interest with respect to which when due will provide money sufficient to pay all principal, prepayment premium, if any, and interest of such Installment Sale Payments to their respective Installment Payment Dates or prepayment date or dates as the case may be; and (c) provision shall have been made for paying all fees and expenses of the Trustee, then and in that event, if an opinion of Special Counsel is filed with the Trustee to the effect that the actions authorized by and taken pursuant to this Article IX shall not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Tax- Exempt Certificates, then, the right, title and interest of the Authority and the Corporation herein and the obligations of the Authority and the Corporation hereunder shall, with respect to all or such portion of the Installment Sale Payments as have been so provided for, thereupon cease, terminate, become void and be completely discharged and satisfied (except for the right of the Trustee to be compensated, reimbursed and indemnified and the obligation of the Corporation and the Authority to have such moneys and such Government Obligations applied to the payment of such Installment Purchase Payments and Installment Sale Payments). In such event, upon request of the Corporation the Trustee shall cause an accounting for such period or periods as may be requested by the Corporation to be prepared and filed with the Corporation and shall execute and deliver to the Corporation all such instruments as may be necessary or desirable to evidence such total or partial discharge and satisfaction, as the case may be, and, in the event of a total discharge and satisfaction, the Trustee shall pay over to the Corporation, after payment of all amounts due the Trustee pursuant to the Trust Agreement, all such moneys or such Government Obligations held by it pursuant hereto, if any, other than such moneys and such Government Obligations as are required for the payment or prepayment of the Installment Purchase Payments, which moneys and Government Obligations shall continue to be held by the Trustee in trust for the payment of the Installment Sale Payments and shall be applied by the Trustee to the payment of the Installment Sale Payments of the Authority. No discharge of obligations shall occur under this Section 9.1 until the Certificates are no longer outstanding under the terms of the Trust Agreement. Section 10.1. Reserved. ARTICLE X MISCELLANEOUS 23 Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Corporation, the Authority, the Trustee or the Certificateholders any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the Corporation or the Authority shall be for the sole and exclusive benefit of such parties. Section 10.3. Successor Is Deemed Included in all References to Predecessor. Whenever either the Corporation or the Authority is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the Corporation or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 10.4. Waiver of Personal Liability. No director, officer or employee of the Corporation shall be individually or personally liable for the payment of the Installment Purchase Payments, but nothing contained herein shall relieve any director, officer or employee of the Corporation from the performance of any official duty provided by any applicable provisions of law or hereby. Section 10.5. Article and Section Headings Gender and References. 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, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof, and the words "hereby," "herein," "hereof," "hereto," "herewith" and other words of similar import refer to this Installment Purchase Agreement as a whole and not to any particular article, section, subdivision or clause hereof. Section 10.6. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Corporation or the Authority shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The Corporation and the Authority hereby declare that they would have executed this Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 10.7. Assignment. (a) This Installment Purchase Agreement and any rights hereunder may be assigned by the Authority, as a whole or in part, without the necessity of obtaining the prior consent 24 of the Corporation; provided, however, any assignment of this Installment Purchase Agreement by the Corporation other than to the Trustee as herein provided shall be subject to the written consent of the Authority. (b) The Authority hereby assigns to the Trustee all of its rights, title and interest in and to this Installment Purchase Agreement (other than its rights under Section 10.12 of this Installment Purchase Agreement), including its rights to receive Installment Purchase Payments and its right to enforce any and all remedies hereunder, and under the Deed of Trust and the Security Agreement, to collect Installment Purchase Payments. Such assignment is to the Trustee solely in its capacity as Trustee under the Trust Agreement and is subject to the provisions of the Trust Agreement. (c) The Corporation hereby assigns to the Trustee all of its rights, title and interest in and to the Installment Purchase Agreement (provided that pursuant to Section 3.2 hereof, all rights, title and interest in and to the Facilities shall vest in the Corporation) including its rights to receive Installment Sale Payments and its right to enforce any and all remedies hereunder to collect Installment Sale Payments. Such assignment is to the Trustee solely in its capacity as Trustee under the Trust Agreement and is subject to the provisions of the Trust Agreement. Section 10. S. California Law. THIS INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.9. 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 party in writing from time to time, namely: If to the Corporation: Family Clinics Foundation 600 Wilshire Blvd., Ste. 700 Los Angeles, CA 90017 Attention: John J. Carvelli If to the Authority: San Bernardino Associated Communities Financing Authority City of San Bernardino Economic Development Agency 201 North "E" Street, Third Floor San Bernardino, California 92401 Attn: Executive Director If to the Trustee: U.S. Bank Trust, National Association One California Street, Suite 400 San Francisco, California 94111 Attn: Corporate Trust Department 25 Section 10. 10. Effective Date. This Installment Purchase Agreement shall become effective upon its execution and delivery, and shall terminate when the purchase price for the Facilities shall have been fully paid (or provision for the payment thereof shall have been made to the written satisfaction of the Authority) subject to the provisions of Article IX hereof. Section 10.11. Execution in Counterparts. This Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. Section 10.12. Inderrmnification of Authority and Trustee. The Corporation hereby agrees to indemnify, defend and hold harmless the Authority and the Trustee if and to the extent permitted by law, from and against all claims, advances, damages, liabilities, causes of action, judgments, court costs, attorneys' fees and other legal expenses, cost of evidence of title, cost of evidence of value and other expenses which either may suffer or incur and losses arising out of or in connection with (i) this Installment Purchase Agreement, (ii) the performance by the Authority or the Trustee of any act required or permitted hereunder or under the Trust Agreement, the Deed of Trust or the Security Agreement or by law, (iii) any failure of the Corporation to perform its obligations under this Installment Purchase Agreement, the Trust Agreement, the Deed of Trust or the Security Agreement, or (iv) any alleged obligation or undertaking on the part of the Authority or the Trustee to perform or discharge any of the representations, warranties, conditions, covenants or other obligations contained in any other document related to the Facilities; provided that no indemnification will be made for willful misconduct, negligence or breach of an obligation hereunder or under the Trust Agreement by the Authority or the Trustee. The indemnification provided in this Section 10.12 shall survive the term of this Installment Purchase Agreement. The Corporation shall pay all amounts due under this Section 10.12 immediately upon demand of the Authority or the Trustee. Section 10.13. Amendments Permitted. This Installment Purchase Agreement and the rights and obligations of the Authority, the Corporation, the holders of the Certificates and of the Trustee may be modified or amended at any time in accordance with the provisions of the Trust Agreement. Section 10.14. Notice to Rating Agencies. Any rating agency rating the Certificates shall receive notice from the Corporation of each amendment to this Installment Purchase Agreement and a copy thereof at least 15 days in advance of its execution. 26 IN WITNESS WHEREOF, the parties hereto have duly executed and attested this Installment Purchase Agreement as of the date first written above. P:\APPS\WPDATA\LINC\0001\DOC\036.WPD 12/7/98 2:40 ew SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY Executive Director FAMILY CLINICS FOUNDATION 27 Chairman EXHIBIT A DESCRIPTION OF THE PROJECT The Project means (a) the acquisition of the Lincoln Hospital Medical Center located at 443 South Soto Street, Los Angeles, California (the "Hospital'), a bed acute care hospital, administrative offices and ten regional clinics located throughout the greater metropolitan Los Angeles area, namely, (i)Medimanager Executive Offices, 600 Wilshire Boulevard, Suite 700, Los Angeles, California, (ii) Vermont Property, 1125 -1127 North Vermont Avenue, Los Angeles, California, (iii) Washington Main Clinic, 115 East Washington Boulevard, Los Angeles, California, (iv) Olympic Clinic, 5711 East Olympic Boulevard, Commerce, California, (v) Vermont Clinic, 1101 North Vermont Avenue, Los Angeles, California, (vi) El Monte Clinic, 11725 East Garvey, El Monte, California, (vii) Lincoln Clinic, 443 South Soto Street, Los Angeles, California, (viii) Huntington Park Clinic, 6400 Pacific Avenue, Huntington Park, California, (ix) Whittier Clinic, 5458 Whittier Boulevard, Los Angeles, California, (x) Baldwin Park Clinic, 4070 Sterling Way, Baldwin Park, California, and (xi) Long Beach Clinic, 5190 Atlantic Avenue, Long Beach, California; and (b) the rehabilitation of existing facilities at the Hospital. A -1 11: TOTAL INSTALLMENT PURCHASE PAYMENTS TO BE MADE BY THE CORPORATION TO THE AUTHORITY 1. The aggregate principal amount of Installment Purchase Payments to be made by the Corporation hereunder is S 2. The Installment Purchase Payments of principal and interest are payable in the amounts and on the Installment Payment Dates as follows: 1998A Certificates Installment Payment Date' Principal Interest 1998B Certificates Installment Payment Date" Principal Interest Combined Total Installment Purchase Payments shall be deposited with the Trustee, as assignee of the Authority, at least five days before the corresponding dates specified below. Such deposits shall be credited against the Corporation's payment obligation on such corresponding dates. Installment Purchase Payments shall be deposited with the Trustee, as assignee of the Authority, at least five days before the corresponding dates specified below. Such deposits shall be credited against the Corporation's payment obligation on such corresponding dates. 11 TOTAL INSTALLMENT PURCHASE SALE PAYMENTS TO BE MADE BY THE AUTHORITY TO THE CORPORATION 1. The aggregate Principal Component of Installment Sale Payments to be made by the Authority hereunder is $ 2. The Principal Components and Interest Components of installment Sale Payments are payable in the amounts and on the Installment Payment Dates as follows: 1998A Certificates Installment Payment Date Principal Interest 1998B Certificates Installment Payment Date" Principal Interest Combined Total Installment Purchase Payments shall be deposited with the Trustee, as assignee of the Authority, at least five days before the corresponding dates specified below. such deposits shall be credited against the Corporation's payment obligation on such corresponding dates. rr Installment Purchase Payments shall be deposited with the Trustee, as assignee of the Authority, at least five days before the corresponding dates specified below. such deposits shall be credited against the Corporation's payment obligation on such corresponding dates. C -1 RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) SABO & GREEN, a Professional Corporation ) 23801 Calabasas Road ) Suite 1015 ) Calabasas, California 91302 ) Attn: Alexis Crump, Esq. ) C(D C) 7 DEED OF TRUST WITH ASSIGNMENT OF RENTS AND FIXTURE FILING COFT DEED OF TRUST WITH ASSIGNMENT OF RENTS AND FIXTURE FILING from FAMILY CLINICS FOUNDATION to [To Be Completed] as Deed of Trust Trustee for the benefit of U.S. BANK TRUST, NATIONAL ASSOCIATION, as Trustee Dated as of December 1, 1998 Relating to SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY Health Care Certificates of Participation (Family Clinics Foundation Project) 1998 TAXABLE DEED OF TRUST WITH ASSIGNMENT OF RENTS AND FIXTURE FILING THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND FIXTURE FILING (this "Deed of Trust "), is made as of December 1, 1998, by FAMILY CLINICS FOUNDATION, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California, as trustor ( "Trustor "), to , as deed of trust trustee ( "Deed of Trust Trustee "), for the benefit of U.S. Bank Trust, National Association, as trustee (the "Beneficiary") under that certain Trust Agreement dated as of December 1, 1998 (the "Trust Agreement ") among the San Bernardino Associated Communities Financing Authority (the "Authority"), Trustor and the Beneficiary, acting for the benefit of the holder of the Authority's Health Care Certificates of Participation (Family Clinics Foundation Project), 1998 Taxable (the "Certificates "). I. GRANT IN TRUST Trustor hereby grants, conveys, assigns and transfers to Deed of Trust Trustee, in trust, with power of sale and right of entry and possession, all of Trustor's estate, right, title, interest, property or claim, whether now owned or hereafter acquired or arising, in or to the following property and rights (all of Trustor's right, title and interest as specified in (a) through (i) below, whether now owned or hereafter acquired or arising, is hereinafter collectively referred to as the "Property"): (a) That certain real property located in the City of Los Angeles, County of Los Angeles, State of California as particularly described on Exhibit A attached hereto and by this reference incorporated herein (the "Site "); (b) All buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located on the Site (hereinafter referred to as the "Improvements "); and to the extent permitted by law, the name or names, if any, as may now or hereafter be used for each Improvement, and the goodwill associated therewith; (c) All easements, rights -of -way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Site or the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Site to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both in law and in equity, of Trustor of, in and to the Site and the Improvements and every part and parcel thereof, with the appurtenances thereto; (d) All awards of payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property to the extent actually received by Trustor, whether from the exercise of the right of eminent domain (including but not limited to any transfer of the Property or part thereof made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Property; (e) All leases and other agreements affecting the use, enjoyment or occupancy of the Property now or hereafter entered into (the "Leases ") and all oil and gas or other mineral royalties, bonuses and rents, revenues, security deposits, issues and profits from the Property (the "Rents ") and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the obligations secured by this Deed of Trust; (f) All proceeds of and any unearned premiums on any insurance policies covering the Property including, without limitation, the right to receive and apply the proceeds of any insurance, judgments (including with respect to a casualty thereto or condemnation thereof), or settlements made in lieu thereof, for damage to the Property; (g) The right, in the name and on behalf of Trustor, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interest of Beneficiary in the Property; and (h) All right, title and interest of every nature of Trustor in all receivables and other accounts of Trustor relating to the Property and in all monies deposited or to be deposited in any funds or account maintained or deposited with Beneficiary, or its assigns, in connection herewith, if any. II. ASSIGNMENT OF RENTS Trustor absolutely and irrevocably assigns to Beneficiary the rents, issues and profits of the Property upon the terms and conditions hereinafter set forth. The foregoing assignment shall not impose upon Beneficiary any duty to produce rents from the Property, and said assignment shall not cause Beneficiary to be a "mortgagee in possession" for any purpose. This assignment of the rents, issues and profits of the Property is intended to be an absolute assignment from Trustor to Beneficiary and not merely the passing of a security interest. Beneficiary is hereby authorized to collect and receive the foregoing rents, issues, profits, royalties, production and other payments and proceeds, to give proper receipts and acquittances therefor and to apply the same to the payment of the obligations secured hereby. However, Beneficiary hereby grants Trustor a revocable license to collect and receive, and to use such rents, issues, profits, royalties, production and other payments and proceeds until. (i) an Event of Default (as defined in Paragraph B.1 below) and (ii) Beneficiary delivers to Trustor written notice by Beneficiary to Trustor that the license has been revoked, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a court appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as the same shall become due and payable, including, but not limited to, rents then due and unpaid. All such rents, issues, and profits thereafter collected by Trustor shall be held by Trustor as trustee in a constructive trust for the benefit of Beneficiary only. Trustor agrees that after the occurrence and during the continuance of an Event of Default and commencing upon delivery of such written notice of revocation of license, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant, without any liability on the part of said tenant to inquire further as to the existence of a default or license by Trustor. III. OBLIGATIONS SECURED Trustor makes the foregoing grant for the purpose of securing: 1. Payment to the Beneficiary as assignee of the Authority of all obligations evidenced by and arising under that certain Installment Purchase Agreement dated as of December 1, 1998 (the "Installment Purchase Agreement ") by and between the Authority and Trustor, including without limitation the Installment Purchase Payments thereunder; 2. The observance and performance by Trustor of each covenant and obligation on the part of Trustor to be observed or performed pursuant to the Installment Purchase Agreement, all of which are incorporated herein by this reference; and 3. The observance and performance of each covenant and obligation of Trustor herein contained or incorporated herein by reference and payment of each fee, cost and expense by Trustor as herein set forth. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, THE PARTIES AGREE AS FOLLOWS: A. RIGHTS AND DUTIES OF THE PARTIES. 1. Warranty of Title. Trustor warrants that Trustor has good and marketable title to the Property and that Trustor has the right to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign and hypothecate its interest in the Property pursuant to the terms hereof and to keep and perform all of the terms of this Deed of Trust on Trustor's part to be performed and that Trustor owns the Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Deed of Trust, any unrecorded leases in existence on the date hereof and the encumbrances defined as "Permitted Encumbrances in the Installment Purchase Agreement (collectively, the "Permitted Encumbrances "). Trustor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Deed of Trust and shall forever warrant and defend the same to Beneficiary against the claims of all persons whomsoever. 2. Security Account. Upon the occurrence and continuance of an Event of Default, at Beneficiary's option and upon its demand and except where and to the degree prohibited by law, Trustor shall, until such Event of Default is cured, pay to Beneficiary on the first day of each month an amount reasonably estimated by Beneficiary to be equal to (i) the taxes, assessments, levies, and charges referred to in Paragraph A.2, and (ii) the premiums for fire, other hazard and other insurance referred to in Paragraph A.3 next due. Said tax and insurance estimate shall be calculated by dividing the amount next due by, in each instance, the number of months to lapse preceding the month in which the same, respectively, will become due. All sums so paid shall not bear interest, except to the extent and in the minimum amount required by law, and Beneficiary shall, unless Trustor is otherwise in default hereunder or under any obligation secured hereby, apply said funds to the payment of, or at the sole option of Beneficiary release said funds to Trustor for application to and payment of, such taxes, assessments, levies, charges and insurance premiums. However, upon the occurrence of an Event of Default by Trustor hereunder or under any obligation secured hereby, Beneficiary may, at its sole option, apply all or any part of said sums to any indebtedness secured hereby or to cure such default. 3. Liens and Encumbrances. Trustor shall pay, at or prior to maturity, all obligations secured by or reducible to liens and encumbrances which shall now or hereafter encumber or appear to encumber the Property or any part thereof or interest therein, whether senior or subordinate hereto, all claims for work or labor performed, or materials or suppliers furnished, in connection with any work of demolition, alteration, improvement of or construction upon the Property. Trustor shall have the right to contest in good faith any such obligation or claim provided such contest shall be prosecuted diligently and in a manner not prejudicial to Beneficiary, and if a judgment adverse to Trustor is obtained and such judgment is final and not appealed, such final judgment shall be fully paid or discharged within ten (10) days after the entry of such final judgment. Upon demand by Beneficiary, Trustor shall defend, indemnify and hold Beneficiary harmless against any such obligation or claim, so contested by Trustor, and upon demand by Beneficiary, Trustor shall make suitable provision by payment to Beneficiary or by posting a bond or other security satisfactory to Beneficiary for the possibility that the contest will be unsuccessful, including, if Beneficiary requests, a one - and -one half times bond with respect to mechanics' or materialmens' liens, if available. Such provision shall be made within ten (10) days after demand therefor and, if made by payment of funds to Beneficiary, the amount so deposited shall be disbursed in accordance with the resolution of the contest either to Trustor or the adverse claimant. If Trustor fails to post a suitable bond or other acceptable security as provided, Beneficiary may remove or pay such lien or encumbrance at Trustor's expense. Notwithstanding anything in the foregoing to the contrary, if the lien or encumbrance to be contested is senior to the lien of this Deed of Trust, Trustor shall, within ten (10) days after Beneficiary's demand, remove or pay such lien or encumbrance, and, if Trustor shall fail to do so, Beneficiary may do so at Trustor's expense, and any amount so advanced by Beneficiary will be secured by this Deed of Trust. 4. Application of Payments. Unless the Installment Purchase Agreement, the Trust Agreement, any other document executed in connection with the Certificates or applicable law provides otherwise, or unless otherwise agreed to in writing by Beneficiary, all payments received by Beneficiary from Trustor under this Deed of Trust shall be applied by Beneficiary in any manner and in such order as Beneficiary, at Beneficiary's option, may determine. 5. Maintenance and Preservation of the Property. (a) Except as otherwise provided herein, Trustor covenants at Trustor's sole cost and expense: (i) to keep the Property in good condition and repair; (ii) not to remove or demolish the Property or any part thereof, other than in connection with construction of the Project or otherwise in the ordinary course of business; (iii) to complete or restore promptly and in good and workmanlike manner the Property or any part thereof which may be damaged or destroyed; (iv) to pay when due all claims for work performed and for materials furnished on or to the Property, and to pay any and all liens or encumbrances arising out of or resulting from work performed or materials supplied on or to the Property; provided that Trustor shall have the right to contest in good faith any such claim, lien or encumbrance so long as such contest shall be prosecuted diligently and in a manner not prejudicial to Beneficiary, and if a judgment adverse to Trustor is obtained and such judgment is final and not appealed, such final judgment shall be fully paid or discharged within ten (10) days after the entry of such final judgment; (v) to comply with and not suffer violations of, (A) any and all laws, ordinances, regulations and standards, (B) any and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character, and (C) all requirements of insurance companies and any bureau or agency which establishes standards of insurability, which laws, covenants or requirements affect the Property and pertain to acts committed or conditions existing thereon, including without limitation such work of alteration, improvement or demolition as such laws, covenants or requirements mandate; (vi) not to commit or permit waste of the Property or any part thereof, (vii) to do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value; (viii) to perform all obligations required to be performed in leases, conditional sales contracts or like agreements affecting the Property or the operation, occupation or use thereof (and upon the occurrence and continuance of an Event of Default all right, title and interest of Trustor under any such leases, conditional sales contracts or like agreements shall be automatically assigned to Beneficiary hereunder, together with any deposits made in connection therewith); (ix) not to create any deed of trust or encumbrance upon the Property; (x) to make no further assignment of rents of the Property; and (xi) at the cost of Trustor, and without expense to Beneficiary, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, deeds of trust, assignments, notices of assignments, transfers and assurances as Beneficiary shall, from time to time, require, for the better assuring, conveying, assigning, transferring, and confirming unto Beneficiary the property and rights hereby mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended now or hereafter so to be, or which Trustor may be or may hereafter become bound to convey or assign to Beneficiary, or for carrying out the intention or facilitating the performance of the terms of this Deed of Trust or for filing, registering or recording this Deed of Trust and, on demand, will execute and deliver and hereby authorizes Beneficiary to execute in the name of Trustor or without the signature of Trustor to the extent Beneficiary may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments, to evidence more effectively the lien hereof upon the Property. Trustor grants to Beneficiary an irrevocable power of attorney coupled with an interest for the purpose of exercising (upon the occurrence and during the continuance of an Event of Default) and perfecting any and all rights and remedies available to Beneficiary at law and in equity, including, without limitation, such rights and remedies available to Beneficiary pursuant to this Paragraph A.7. (b) Without the prior written consent of Beneficiary, which consent shall not be unreasonably withheld, Trustor will not seek, make, or consent to any change in the zoning or conditions of use of the Property which would materially impair the ability of Trustor to use the Property. 6. Defense and Notice of Actions. Trustor shall, without liability, cost or expense to Beneficiary or Deed of Trust Trustee, protect, preserve and defend (by counsel reasonably satisfactory to Beneficiary) title to the Property, the security hereof and the rights or powers of Beneficiary or Deed of Trust Trustee hereunder. Said protection, preservation and defense shall include protection, preservation and defense against all adverse claimants to title or any possessory or non - possessory interest therein, whether or not such claimants or encumbrances assert title paramount to that of Trustor or claim their interest on the basis of events or conditions arising subsequent to the date hereof. Trustor shall give Beneficiary and Deed of Trust Trustee prompt notice in writing of the filing of any such action or proceeding. 7. Statement of Indebtedness. Trustor will promptly furnish, within thirty (30) days after Beneficiary's written request, and at the expense of Trustor, a duly acknowledged written statement setting forth all amounts due on the indebtedness secured by this Deed of Trust and stating whether, to the best of Trustor's knowledge, any offsets or defenses exist, that this Deed of Trust and the obligations secured hereby are legal, valid and binding obligations and have not been modified, or if modified, giving the particulars of such modifications, and such other matters as Beneficiary may reasonably require. 8. Collection of Rents. Issues and Profits. Beneficiary confers upon Trustor the authority to enter the Property and collect and retain rents, issues and profits of the Property as they become due and payable; provided, however, that Beneficiary may revoke said authority and collect and retain the rents, issues and profits of the Property assigned herein to Beneficiary upon the occurrence of an Event of Default by Trustor upon giving notice to Trustor, and without regard to the adequacy of any security for the indebtedness hereby secured, and without taking possession of all or any part of the Property or becoming a "mortgagee in possession." The right to collect rents and profits as herein provided shall not grant to Beneficiary or Deed of Trust Trustee the right to possession, except as expressly herein provided; nor shall said right impose upon Beneficiary or Deed of Trust Trustee the duty to produce rents or profits or maintain the Property in whole or in part. Trustor hereby agrees that it will do nothing to impair Beneficiary's ability to collect and retain the rents, issues, profits and interests herein assigned and that any tenant or subtenant occupying the Property or any part thereof may pay any and all rents or other charges directly to Beneficiary upon notice from Beneficiary without the necessity of any notice from Trustor. Beneficiary may apply, in its sole discretion, any rents, issues and profits so collected by Beneficiary against any indebtedness secured hereby or any obligations of Trustor arising hereunder or any other obligations of Trustor to Beneficiary, whether existing on the date hereof or hereafter arising. Collection of any rents, issues and profits by Beneficiary shall not cure or waive any default or notice of default hereunder or invalidate any acts done pursuant to such notice. 5 9. Right of Inspection. Beneficiary, its agents, contractors and employees, may enter the Property at any reasonable time upon reasonable prior written notice to Trustor for the purpose of inspecting the Property and ascertaining Trustor's compliance with the terms hereof. 10. Acceptance of Trust' Notice of Indemnification. Deed of Trust Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, becomes a public record as provided by law. Deed of Trust Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Trustor, Beneficiary or Deed of Trust Trustee shall be a party unless Deed of Trust Trustee brings such action. Deed of Trust Trustee shall not be obligated to perform any act required of it hereunder unless the performance of such act is requested in writing and Deed of Trust Trustee is reasonably indemnified against loss, cost, liability and expense. 11. Powers of Deed of Trust Trustee. From time to time upon the written request of Beneficiary and Trustor and presentation of this Deed of Trust for endorsement, and without affecting the personal liability of any person for payment of any indebtedness or performance of the obligation secured hereby, Deed of Trust Trustee may, without liability therefor and without notice, (1) reconvey all or any part of the Property, (ii) consent to the making of any map or plat thereof, (iii) join in granting any easement thereon, (iv) join in any declaration of covenants and restrictions, or (v) join in any extension agreement or any agreement subordinating the lien or charge hereof. Deed of Trust Trustee or Beneficiary may from time to time apply to any court of competent jurisdiction for aid and direction in the execution of the trusts hereunder and the enforcement of the rights and remedies available hereunder, and Deed of Trust Trustee or Beneficiary may obtain orders or decrees directing or confirming or approving acts in the execution of said trusts and the enforcement of said remedies. Deed of Trust Trustee has no obligation to notify any party of any pending sale or any action or proceeding unless held or commenced and maintained by Deed of Trust Trustee under this Deed of Trust. Trustor shall pay to Deed of Trust Trustee reasonable compensation and reimbursement for services and expenses in the administration of the trusts created hereunder upon the occurrence of an Event of Default, including reasonable attorneys' fees. Trustor indemnifies Deed of Trust Trustee against all losses, claims, demands and liabilities (except losses, claims, demands or liabilities arising from the negligence of Deed of Trust Trustee) which Deed of Trust Trustee may incur, suffer, or sustain in the execution of the trusts created hereunder or in the performance of any act required or permitted hereunder or by law. 12. Substitution of Deed of Trust Trustee. From time to time, by a writing signed and acknowledged by Beneficiary and recorded in the Office of the Recorder of the County in which the Property is situated, Beneficiary may appoint another trustee to act in the place and stead of Deed of Trust Trustee or any successor. Such writing shall refer to this Deed of Trust and set forth the date, book and page of its recordation. The recordation of such instrument of substitution shall discharge Deed of Trust Trustee herein named and shall appoint the new trustee as the trustee hereunder with the same effect as if originally named Deed of Trust Trustee herein. A writing recorded pursuant to the provisions of this Paragraph A.14 shall be conclusive proof of the proper substitution of such new trustee. 13. Performance of Other Agrcements. Trustor shall observe and perform each and every term to be observed or performed by Trustor pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property. 14. Reconveyance. Upon Beneficiary's written request, and upon surrender to Deed of Trust Trustee for cancellation of this Deed of Trust and any note, instrument or instruments, setting forth all obligations secured hereby, Deed of Trust Trustee shall reconvey, without warranty, the Property or that portion thereof then held hereunder. The recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive 0 proof of the truthfulness thereof. To the extent permitted by law, the reconveyance may describe the grantee as "the person or persons legally entitled thereto." Neither Beneficiary nor Deed of Trust Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Property to the person or persons legally entitled thereto, unless such reconveyance expressly provides to the contrary. 15. Certain Taxes. In the event of the passage, after the date of this Deed of Trust, of any law deducting from the value of the Property for the purpose of taxation, any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust or debts secured by deeds of trust or similar instruments, or the manner of the collection of any such taxes, so as to affect this Deed of Trust, or imposing payment of the whole or any portion of any taxes, assessments or other similar charges against the Property upon Beneficiary, Trustor shall pay such tax or increased portion and shall agree with Beneficiary in writing to pay, or reimburse Beneficiary for the payment of, any such tax or increased portion thereof when thereafter levied or assessed against the Property or any portion thereof. The obligations of Trustor under such agreement shall be secured by this Deed of Trust. 16. Right of Entrv. In addition to all rights of entry contained in this Deed of Trust, Beneficiary shall have the right, upon reasonable prior written notice to Trustor, to enter and inspect the condition of the Property at any reasonable time and to conduct, or to designate a representative to conduct such inspection, testing, environmental audit or other procedures that Beneficiary reasonably believes are necessary or desirable to determine current compliance with the covenants and representations contained herein. Following the occurrence of an Event of Default, and without regard as to whether Beneficiary shall have taken possession of the Property or a receiver has been requested or appointed or any other right or remedy of Beneficiary has or may be exercised hereunder, Beneficiary may enter and inspect the condition of the Property at any time and to conduct, or to designate a representative to conduct such inspection, testing, environmental audit or other procedures that Beneficiary reasonably believes are necessary or desirable, and all costs and expenses incurred in connection therewith, including, without limitation, consultant fees and disbursements and laboratory fees, shall be secured by this Deed of Trust, shall be immediately due and payable, and shall bear interest at 12% per annum from the date paid by Beneficiary until reimbursed by Trustor. 17. Beneficiary's Obligations. Nothing contained in this Deed of Trust shall obligate Beneficiary to take any action with respect to the Property or any condition or activity that is in violation of Applicable Law, or to take any action against any person with respect to such substances, condition or activity. 18. Indemnification. Trustor shall protect, indemnify and save harmless Beneficiary from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expense (including without limitation reasonable attorneys' fees and expenses whether incurred within or outside the judicial process), imposed upon or incurred by or asserted against Beneficiary by reason of (a) ownership of this Deed of Trust, the Property or any interest therein or receipt of any rents, except for Beneficiary's business and franchise taxes, federal and state income taxes and other taxes which are measured by and imposed upon Beneficiary's net or gross income or receipts; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) any failure on the part of Trustor to perform or comply with any of the terms of this Deed of Trust; (e) performance, at the direction of Trustor, of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; and (f) Trustor's failure to file timely with the 7 Internal Revenue Service an accurate Form 1099 -B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Deed of Trust, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Deed of Trust is made. Any amounts payable to Beneficiary by reason of the application of this Paragraph A.18 shall be secured by this Deed of Trust and shall become immediately due and payable and shall bear interest at the rate of 12% per annum from the date loss or damage is sustained by Beneficiary until paid. The obligations and liabilities of Trustor under this Paragraph A.18 shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure or delivery of a deed in lieu of foreclosure of this Deed of Trust. Notwithstanding the foregoing, the provisions of this Paragraph A.18 shall not be applicable to any liabilities or obligations imposed upon or incurred by or asserted against Beneficiary to the extent caused by reason of Beneficiary's negligence or willful misconduct. 19. Leases. ss. (a) Trustor shall promptly and fully keep, observe and perform, or cause to be kept, observed and performed, all of the material terms, covenants, provisions and agreements imposed upon or assumed by Trustor under any lease covering all or any portion of the Property, now or hereafter in effect, including any amendments or supplements to such leases, and Trustor will not do or fail to do, or permit or fail to permit to be done, any act or thing, the doing or omission of which will give any party a right to terminate any of such leases or, in the case of any tenant, to abate the rental or other material payment due thereunder. (b) If Trustor shall, in any manner, fail to comply with subparagraph 19(a) above, Trustor agrees that Beneficiary may (but shall not be obligated to) take, upon five (5) days' written notice to Trustor (or upon lesser notice, or without notice, if Beneficiary reasonably deems that the same is required to protect its interest in the Property), any action which Beneficiary shall reasonably deem necessary or desirable to keep, observe and perform or cause to be kept, observed or performed any such terms, covenants, provisions or agreements and to enter upon the Property and take all action thereon as may be necessary therefor, or to prevent or cure any default by Trustor in the performance of or compliance with any of Trustor's covenants or obligations under said leases. Beneficiary may rely on any notice of default received from any tenant unless, in connection with any such default or alleged default Trustor in good faith notifies Beneficiary of Trustor's election to contest such default by appropriate procedures and diligently pursues such contest. Trustor shall promptly deliver to Beneficiary a copy of any notice relating to defaults received from any tenant that is a party, or the trustee, receiver or successor for or to a party, to any of said leases. Beneficiary may expend such sums of money as are reasonable and necessary for any such purposes, and Trustor hereby agrees to pay to Beneficiary, immediately upon demand, all sums so expended by Beneficiary, together with interest thereon from the date of such payment at the rate of 12% per annum, and until so paid by Trustor, all sums so expended by Beneficiary and the interest thereon shall be added to the obligations secured by this Deed of Trust. B. DEFAULT PROVISIONS. 1. Events of Default. The occurrence of any of the following events shall be deemed an event of default ( "Event of Default ") hereunder and shall entitle Beneficiary and Trustor to exercise their remedies hereunder or as otherwise provided by law: (a) The failure of Trustor to make payments to the Beneficiary as assignee of the Authority as and when due as set forth in the Installment Purchase Agreement or the breach of any covenant or condition contained in the Installment Purchase Agreement or the occurrence of any default under the Installment Purchase Agreement beyond any applicable cure period; or (b) The default by Trustor of any term or condition of this Deed of Trust which is not cured by Trustor within sixty (60) days after notice thereof from Deed of Trust Trustee or Beneficiary. 2. Rights and Remedies. At any time after the occurrence and during the continuance of an Event of Default, Beneficiary and Deed of Trust Trustee shall each have the following rights and remedies: (a) To declare all obligations secured hereby immediately due and payable; (b) With or without notice, and without releasing Trustor from any obligation hereunder, to cure any default of Trustor and, in connection therewith, to enter upon the Property and to perform such acts and things as Beneficiary or Deed of Trust Trustee reasonably deem necessary or desirable to inspect, investigate, assess and protect the security hereof, including without limitation of any of its other rights: to appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Deed of Trust Trustee hereunder; to pay, purchase, contest or compromise any encumbrance, charge, lien or claim of lien which, in the judgment of either Beneficiary or Deed of Trust Trustee, is prior or superior hereto, the judgment of Beneficiary or Deed of Trust Trustee being conclusive as between the parties hereto; to pay any premiums or charges with respect to insurance required to be carried hereunder; and to employ counsel, accountants, contractors and other appropriate persons to assist them; (c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Trustor hereunder, and Trustor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Trustor waives the defense of laches and any applicable statute of limitations; (d) Beneficiary or its employees, acting by themselves or through a court- appointed receiver may enter upon, possess, manage, operate, dispose of and contract to dispose of the Property or any part thereof, take custody of all accounts; negotiate with governmental authorities with respect to the Property's environmental compliance and remedial measures; make, terminate, enforce or modify leases of the Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees and counsel, make repairs, alterations and improvements to the Property necessary, in Deed of Trust Trustee's or Beneficiary's judgment, to protect or enhance the security hereof, to incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or to take any and all other actions which may be necessary or desirable to comply with Trustor's obligations hereunder. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine. Neither application of said sums to said indebtedness nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder or nullify the effect of any such notice of default. Beneficiary or Deed of Trust Trustee, or any employee or agent of Beneficiary or Deed of Trust Trustee, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (i) the adequacy of the security for the indebtedness secured hereunder, (ii) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (iii) the filing of a notice of default; (e) To execute a written notice of such Event of Default and of its election to cause the Property to be sold to satisfy the obligations secured hereby. Deed of Trust Trustee shall give and record such notice as the law then requires as a condition precedent to a Deed of Trust Trustee's sale. When the minimum 0 period of time required by law after such notice has elapsed, Deed of Trust Trustee, without notice to or demand upon Trustor except as otherwise required by law, shall sell the Property at the time and place of sale fixed by it in the notice of sale and in such order as it or Beneficiary may determine, at public auction to the highest bidder for cash, in lawful money of the United States, payable at time of sale (the obligations hereby secured being the equivalent of cash for purposes of said sale). If the Property consists of several lots, parcels, or items of property, Beneficiary may: (i) designate the order in which such lots, parcels, or items shall be offered for sale or sold, or (ii) elect to sell such lots, parcels or items through a single sale, through two or more successive sales, or in any other manner Beneficiary deems in its best interest. Trustor shall have no right to direct the order in which the Property is sold. Deed of Trust Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at such time fixed by the preceding postponement. Deed of Trust Trustee shall deliver to the purchaser at such sale a deed conveying the Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Deed of Trust Trustee, Trustor or Beneficiary, may purchase at such sale. In connection with any sale or sales hereunder, Beneficiary may elect to treat any of the Property which consists of a right in action or which is property that can be severed from the real property covered hereby or any improvements thereon without causing structural damage thereto as if the same were personal property or a fixture, as the case may be, and dispose of the same accordance with applicable law, separate and apart from the sale of real property. Any sale of any personal property or fixtures hereunder shall be conducted in any manner permitted by the Uniform Commercial Code currently in effect in the State of California (the "Uniform Commercial Code "). After deducting all costs, fees and expenses of Deed of Trust Trustee and of this trust, including all costs of evidence of title and attorneys' fees in connection with sale, Deed of Trust Trustee shall apply the proceeds of sale to payment of all sums so expended under the terms hereof not then repaid, the payment of all other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto; (f) To resort to and realize upon the security hereunder and any other security now or hereafter held by Beneficiary in such order and manner as Deed of Trust Trustee and Beneficiary or either of them may, in their sole discretion, determine; and resort to any or all such security may be taken concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non judicial proceedings, or both; (g) To seek a judgment that Trustor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in Section b.15 of the Installment Purchase Agreement by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to foreclosure of the Property or after foreclosure of the Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out -of- pocket costs or expenses actually incurred by Beneficiary (collectively, the "Environmental Costs ") incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action required by Applicable Law or to which Beneficiary believes necessary to protect the Property, it being conclusively presumed between Beneficiary and Trustor that all such Environmental Costs incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action of or to the Property were made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary pursuant to this subparagraph (including without limitation court costs, consultants' fees and attorneys' fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the rate of 12% per annum from the 10 date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Property held pursuant to subparagraph (e) above, the amount of said costs, expenses and interest in addition to the amount Of the other obligations hereby secured as a credit bid, the equivalent of cash. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein, the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision and Trustor shall be fully and personally liable for the Environmental Costs hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance or any other transfer of the Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations; and (h) To waive its lien against the Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order. Trustor acknowledges and agrees that all judgments and awards entered against Trustor shall be exceptions to any non - recourse or exculpatory provision and Trustor shall be fully and personally liable for all judgments and awards entered against Trustor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance or any other transfer of the Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations. 3. PUment of Cost "x crises and Attorneys' Fees. All costs and expenses incurred by Deed of Trust Trustee and Beneficiary pursuant to subparagraphs (a) through (h) inclusive of Paragraph B.2 (including without limitation court costs, consultants' fees and attorneys' fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the rate of 12% per annum, from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Property held pursuant to subparagraph (e) above, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash. 4. Remedies Cumulative. All rights and remedies of Beneficiary and Deed of Trust Trustee hereunder are cumulative and in addition to all rights and remedies provided by law. 5. Releases Extensions Modifications and Additional Security. Without affecting the liability of any person for payment of any indebtedness secured hereby, or the lien or priority of this Deed of Trust upon the Property, Beneficiary may, from time to time, with or without notice, do one or more of the following: release any person's liability for the payment of an indebtedness secured hereby, make any agreement or take any action extending the maturity or otherwise altering the terms or increasing the amount of any indebtedness secured hereby, and accept additional security or release all or a portion of the Property and/or other security held to secure the indebtedness secured hereby. 6. Marshaling and Other Matters. Trustor hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshaling in the event of any sale hereunder of the Property or any part thereof or any interest therein. 11 C. FIXTURE FILING. 1. Fixture Filing. Pursuant to Uniform Commercial Code Sections 9313 and 9402 as amended and recodified from time to time this Deed of Trust shall constitute a Fixture Filing recorded in the real estate records. Trustor is sometimes referred to herein as "Debtor" and Beneficiary is sometimes referred to herein as "Secured Party." 2. Description of Collateral. The Collateral includes, without limitation, the following items and types of Collateral as well as certain other items and types of Collateral: (a) All equipment of Debtor now owned and hereafter acquired on the Property (including, without limitation, all tools, machinery, equipment, engines, appliances, heating, ventilating and air conditioning systems, plumbing, mechanical and electrical systems, elevators, lighting, alarm systems, fire control systems, carpets and carpeting, furnishings, furniture, shelving, storage containers, motor vehicles, trailers, mobile homes, service equipment, building or maintenance equipment), together with all additions and accessions thereto and replacements therefor; (b) All accounts, instruments and chattel paper of Debtor now owned and hereafter acquired relating to the Property (including without limitation all accounts receivable and goods repossessed or returned in connection therewith), and all goods repossessed or returned in connection therewith; (c) All goods, fixtures, contract rights, leases of real and/or personal property, documents, deposit accounts, money, certificates of deposit, general intangibles, certificated securities, uncertificated securities, and other property of Debtor now owned and hereafter acquired relating to the Property (including, without limitation, customer and vendor lists; books and records; loans from Debtor to other persons; insurance policies; royalty contracts; copyrights; trademarks, trade names and patents; contracts for the purchase of real property; and all right of Debtor to the payment of money no matter how evidenced); (d) All general intangibles relating to the Property, including, without limitation, (i) customer and supplier lists and contracts, books and records, insurance policies, tax refunds, contracts for the purchase of real or personal property; (ii) all patents, copyrights, trademarks, trade names and service marks, (iii) all licenses to use, applications for, and other rights to, such patents, copyrights, trademarks, trade names and service marks, and (iv) all goodwill of Debtor; and (e) All proceeds of the foregoing (including, without limitation, whatever is receivable or received when collateral or proceeds is sold, collected, exchanged or otherwise disposed, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any collateral, and all rights to payment with respect to any cause of action affecting or relating to the collateral). 3. Relation of Fixture Filing To Deed of Trust. However, nothing in this Article C shall be deemed to create any lien or interest in favor of Deed of Trust Trustee under this Deed of Trust in any such Collateral which is not a fixture, and the purpose of this Article C is to create a fixture filing under Uniform Commercial Code Sections 9313 and 9402. 4. Limitations. Beneficiary has not consented to any other security interest of any other person in any fixtures and has not disclaimed any interest in any fixtures; and Beneficiary has not agreed or consented to the removal of any fixtures from the Property, and any such consent by Trustor shall not be binding on Beneficiary. 12 5. Removal. Notwithstanding any other provision of this Deed of Trust or any other agreement or contract between Trustor and Beneficiary to the contrary, Trustor shall not, without the prior written consent of Beneficiary, remove or permit the removal of any fixture from the Property with a replacement cost in excess of Five Hundred Thousand Dollars ($500,000.00), except for fixtures removed and replaced in the ordinary course of business. Beneficiary further reserves the right to prohibit the removal of any such fixture by any person with the legal right to remove any fixture from the Property unless and until such person makes arrangements with (and satisfactory to) Beneficiary for the payment to Beneficiary of all costs of repairing any physical injury to the Property which may be caused by the removal of that fixture. Any such payment shall be made directly to Beneficiary, and Beneficiary may hold such payment as additional collateral under this Deed of Trust. Failure by Trustor to cause the delivery to Beneficiary of any such payment shall constitute waste under (and a breach of) this Deed of Trust. D. MISCELLANEOUS PROVISIONS. 1. Non - Waiver. By accepting payment of any sum secured hereby after its due date or late performance of any obligation secured hereby, Beneficiary shall not waive its right against any person obligated directly or indirectly hereunder or on any obligation hereby secured, either to require prompt payment or performance when due of all other sums and obligations so secured or to declare default for failure to make such prompt payment or performance. No exercise of any right or remedy by Beneficiary or Deed of Trust Trustee hereunder shall constitute a waiver of any other right or remedy herein contained or provided by law. 2. Further Assurances. Trustor shall, upon demand by Beneficiary or Deed of Trust Trustee, execute, acknowledge (if appropriate) and deliver any and all documents and instruments and do or cause to be done all further acts reasonably necessary or appropriate to effectuate the provisions hereof. 3. Statements of Condition. From time to time as required by law, Beneficiary shall furnish to Trustor such statement as may be required concerning the condition of the obligations secured hereby. Upon demand by Beneficiary, Trustor covenants and agrees to pay Beneficiary's reasonable costs incurred in furnishing such statement, but not in excess of the maximum amount allowed by law. 4. Usur Savings Clause. Nothing contained herein shall be deemed to require the payment of interest or other charges by Trustor in excess of the amount Beneficiary may lawfully charge under the applicable usury laws. In the event Beneficiary shall collect monies which are deemed to constitute interest which would increase the effective interest rate to a rate in excess of that permitted to be charged by applicable law, all such sums deemed to constitute interest in excess of the legal rate shall, upon such determination, at the option of Beneficiary, be returned to Trustor or credited against the principal balance of any obligation secured hereby then outstanding. 5. Attorneys' Fees. In the event legal action, suit or any proceeding is commenced between Trustor and Beneficiary regarding their respective rights and obligations under this Deed of Trust, the prevailing party shall be entitled to recover, in addition to damages or other relief, costs and expenses, attorneys' fees and court costs. As used herein the term "prevailing party" shall mean the party which obtains the principal relief it has sought, whether by compromise settlement or judgment. If the party which shall have commenced or instituted the action, suit or proceeding shall dismiss or discontinue it without the concurrence of the other party, such other party shall be deemed the prevailing party. 6. Obligations of Trustor Joint and Several. If more than one person has executed this Deed of Trust as " Trustor," the obligations of all such persons hereunder shall be joint and several. 13 7. Trustor and Beneficiary Defined. The term " Trustor" herein includes both the original Trustor and any subsequent owner or owners of any of the Property, and the term "Beneficiary" includes the original Beneficiary and its successors and assigns. 8. No Joint Venture. Beneficiary neither undertakes nor assumes any responsibility or duty to Trustor or to any third party with respect to the Property. Notwithstanding any other provisions of this Deed of Trust: (a) Beneficiary is not, and shall not be construed as, a partner, joint venturer, alter -ego, manager, controlling person or other business associate or participant of any kind of Trustor and Beneficiary does not intend to ever assume such status; (b) Beneficiary does not intend to ever assume any responsibility to any person for the quality, suitability, safety or condition of the Property; and (c) Beneficiary shall not be deemed responsible for or a participant in any acts, omissions or decisions of Trustor. Beneficiary shall not be directly or indirectly liable or responsible for any loss, claim, cause of action, liability, indebtedness, damage or injury of any kind or character to any person or property arising from any construction on, or occupancy or use of, any of the Property, whether caused by or arising from: (i) any defect in any building, structure, grading, fill, landscaping or other improvements thereon or in any on -site or off -site improvement or other facility therein or thereon; (ii) any act or omission of Trustor or any of Trustor's agents, employees, independent contractors, licensees or invitees; (iii) any accident in or on any of the Property or any fire, flood or other casualty or hazard thereon; (iv) the failure of Trustor, any of Trustor's licensees, employees, invitees, agents, independent contractors or other representatives to maintain the Property in a safe condition; and (v) any nuisance made or suffered on any part of the Property. 9, Riles of Construction. When the identity of the parties hereto or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. Specific enumeration of rights, powers and remedies of Deed of Trust Trustee and Beneficiary and of acts which they may do and acts Trustor must or must not do shall not exclude or limit the general. The headings of each paragraph are for information and convenience and do not limit or construe the contents of any provision hereof. 10. Severabili . If any term of this Deed of Trust, or the application thereof to any person or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Deed of Trust, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Deed of Trust shall be valid and enforceable to the fullest extent permitted by law. 11. Successors in Interest. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto. 14 12. Notices. All notices, demands or documents which are required or permitted to be given or served hereunder shall be in writing and sent by hand delivery, recognized overnight courier, registered or certified mail addressed as follows: To TRUSTOR at: FAMILY CLINICS FOUNDATION 600 Wilshire Blvd., Ste. 700 Los Angeles, California 90017 Tel: (213) 489 -7709 Fax: (213) 489 -1514 Attention: John J. Carvelli To BENEFICIARY at: U.S. BANK TRUST, NATIONAL ASSOCIATION 4th Floor, Suite 400 One California Street San Francisco, California 94111 Tel: (415) 273 -4514 Fax: (415) 273 -4590 Attention: The addresses may be changed from time to time by either party by serving notice as heretofore provided. Service of such notice or demand shall be deemed complete on the date of actual delivery as shown by the addressee's registry or certification receipt or at the expiration of the second day after the date of mailing, whichever is earlier in time. Trustor requests that a copy of any notice of default and of any notice of sale hereunder be mailed to it at its notice address. 13. Waiver of Notice. Trustor shall not be entitled to any notices of any nature whatsoever from Beneficiary or Deed of Trust Trustee except with respect to matters for which this Deed of Trust specifically and expressly provides for the giving of notice by Beneficiary or Deed of Trust Trustee to Trustor and except with respect to matters for which Beneficiary is required by applicable law to give notice, and Trustor hereby expressly waives the right to receive any notice from Beneficiary or Deed of Trust Trustee with respect to any matter for which this Deed of Trust does not specifically and expressly provide for the giving of notice by Beneficiary or Deed of Trust Trustee to Trustor unless Beneficiary or Deed of Trust Trustee is required by applicable law to give notice. 14. No Mercer. It is the intention of the parties hereto that if Beneficiary shall at any time hereafter acquire title to all or any portion of the Property, then, and until the indebtedness secured hereby has been paid in full, the interest of Beneficiary hereunder and the lien of this Deed of Trust shall not merge or become merged in or with the estate and interest of Beneficiary as the holder and owner of title to all or any portion of the Property and that, until, such payment, the estate of Beneficiary in the Property and the lien of this Deed of Trust and the interest of Beneficiary hereunder shall continue in full force and effect to the same extent as if Beneficiary had not acquired title to all or any portion of the Property. 15 15. Offsets Counterclaims and Defenses. Any assignee of this Deed of Trust shall take the same free and clear of all offsets, counterclaims or defenses which Trustor may otherwise have against any assignor of this Deed of Trust and no such counterclaim or defense shall be interposed or asserted by Trustor in any action or proceeding brought by any such assignee upon this Deed of Trust and any such right to interpose or assert any such offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Trustor. 16. Documentw3ti Stamps. If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to this Deed of Trust, or impose any other tax or charge on the same, Trustor will pay for the same, with interest and penalties thereon, if any. 17. Actions and Proceeding. Beneficiary or Deed of Trust Trustee has the right to appear in and defend any action or proceeding brought with respect to the Property and to bring any action or proceedings, in the name and on behalf of Trustor, which Beneficiary, in its reasonable discretion, decides is necessary to protect and preserve its security and rights under this Deed of Trust. 18. Non - Recourse. The covenants, promises, agreements and obligations of Trustor shall be deemed to be the covenants, promises, agreements and obligations of Trustor and not any partner, officer, employee or agent of Trustor in an individual capacity, and no recourse shall be had for the payments of the sums due hereunder or for any claim thereon against any partner, officer, employee or agent of Trustor. 19. Concerning the Beneficiary. To the extent Beneficiary hereunder is U.S. Bank Trust, National Association, as trustee (the "Certificate Trustee ") under the Trust Agreement, or any successor thereto, all provisions of the Trust Agreement and Installment Purchase Agreement relating to the rights, powers, privileges and protections of the Certificate Trustee thereunder shall apply with equal force and effect to all actions taken by the Certificate Trustee as Beneficiary in connection with this Deed of Trust. No duties or obligations shall be imposed upon Beneficiary beyond those contained in the Trust Agreement. It is understood and acknowledged that the Certificate Trustee as Beneficiary is not required to exercise any rights or discretion granted to it hereunder and all rights to consent, direct and approve matters granted herein to Beneficiary are subject to the provisions of the Trust Agreement and the rights afforded to the Certificate Trustee thereunder. 16 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first set forth above. TRUSTOR: FAMILY CLINICS FOUNDATION, a California non - profit corporation By _ Title: P:\APPS \W PDATA\LINC \0001\DOC \033. W PD 17 EXHIBIT A DESCRIPTION OF REAL PROPERTY ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) On December 1998 before me, the undersigned Notary Public in and for such county and state, personally appeared . personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his/her /their authorized capacity(ies), and that the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (SEAL) colpv SECURITY AGREEMENT THIS SECURITY AGREEMENT (the "Security Agreement") is made and entered into this day of December, 1998 by and between Family Clinics Foundation ( "Debtor "), and SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY, a joint powers authority duly organized under the laws of the State of California (the "Secured Party "). RECITALS 1. Pursuant to that certain Installment Purchase Agreement dated as of December 1, 1998 by and between Debtor and Secured Party (the "Installment Purchase Agreement "), Debtor has agreed to sell and simultaneously repurchase the Family Clinics Foundation (the "Hospital ") and to finance a portion of a new hospital building as part of the Facilities (the "Project" and collectively with the Hospital, the "Facilities ") from the Secured Party. Capitalized terms used in this Security Agreement and not otherwise defined shall have the meanings set forth in the Installment Purchase Agreement. 2. As an inducement to the Secured Party to sell the Facilities, Debtor has agreed to grant for the benefit of the Secured Party a security interest as set forth herein. NOW, THEREFORE, the parties agree as follows: 1. Security Interest. Pursuant to the Uniform Commercial Code, Debtor hereby grants to the Secured Party a security interest in the Collateral, as more fully described at Paragraph 2 below, to secure payment and performance of the obligations of Debtor, as defined and described at Paragraph 3 below. The Secured Party hereby assigns to the Trustee all of its rights, title and interest in and to the Security Agreement including its rights to enforce any and all remedies hereunder. 2. Collateral. 2.1 Collateral. The Collateral of Debtor is described as follows: (a) receipts, revenues, rentals, income, chattel paper, accounts, general intangibles, documents, instruments and moneys acquired by or on behalf of Debtor and all rights to receive the same, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired, and the proceeds thereof, including (without limitation) revenues derived from (i) the ownership, operation or leasing of the Facilities and all rights to receive the same, whether in the form of accounts receivable, contract rights, general intangibles or other rights, and (ii) gifts, grants, bequests, donations and contributions heretofore or hereafter made to Debtor that are legally available to meet any of Debtor's obligations incurred in the financing, operation, maintenance and repair of the Facilities; provided, however, that there shall be excluded (A) gifts, grants, bequests, donations and contributions, heretofore or hereafter made, designated at the time of making thereof by the donor or maker thereof as being for certain specific purposes inconsistent with their use for the financing, operation, maintenance and repair of the Facilities, and the income derived therefrom, in each case to the extent required by such designation, and (B) the proceeds of any borrowing by Debtor permitted under that certain Installment Purchase Agreement dated as of August 1, 1998, between Debtor and the Secured Party, to the extent required by the terms of such borrowing; (b) all materials, now owned or hereafter acquired by Debtor, and intended for construction, reconstruction, alteration and repair of any building, structure or improvement now or hereafter erected or placed on the property described in Exhibit A (the "Property ") and of which materials shall be deemed to be included within the Facilities immediately upon the delivery thereof to the Facilities; (c) all of the machinery, apparatus, equipment, fittings and other goods and other personal property of every kind and description whatsoever, now owned or hereafter acquired by it and contained in and used in connection with any present or future operation of the Facilities, including, by way of example rather than of limitation, all lighting, laundry, incinerating and power equipment; all engines, boilers, machines, motors, furnaces, compressors and transformers; all generating equipment; all pumps, tanks, ducts, conduits, wire, switches, electrical equipment, fans and switchboards, all telephone equipment (except that leased from telephone company); all piping, tubing, plumbing equipment; all heating, refrigeration, air conditioning, cooling, ventilating, sprinkling, water, power and communications equipment, systems and apparatus; all water coolers and water heaters; all fire prevention, alarm and extinguishing systems and apparatus; all cleaning equipment; all lift, elevator and escalator equipment and apparatus; all partitions, shades, blinds, awnings, screens, screen doors, storm doors, exterior and interior signs, stoves, ovens, refrigerators, garbage disposals, dishwashers, cabinets, mirrors, mantles, floor coverings, carpets, rugs, draperies and other furnishings and furniture used or usable in the operation of any part of the Facilities; and every renewal or replacement thereof or articles in substitution therefor; all except for any right, title or interest therein owned by any tenant (it being agreed by the parties to this Security Agreement that all personal property owned by it and placed by it on the Property shall, so far as permitted by law, be deemed to be covered by this Security Agreement), (d) all of Debtor's right, title and interest in and to any and all awards heretofore or hereafter made with respect to the Property as a result of (i) the exercise of the power of condemnation or eminent domain, or the police power, (ii) the alteration of the grade of any street, or (iii) any other injury or decrease in the value of the Property (including, but not limited to, destruction or decrease in value by fire or other casualty), all of which awards, rights thereto and shares therein are hereby assigned to the Secured Party, who is hereby authorized to collect and receive the proceeds thereof and to give property receipts and acquittances therefor and to apply, at its option, the net proceeds thereof, after deducting expenses of collections, as a credit upon any portion, as selected by the Secured Party, of the Obligations secured hereby; 2 (e) land surveys, plans and specifications, drawings, briefs and other work product of Debtor or its employees in connection with the construction, reconstruction, alteration, repair or operation of the Facilities; (f) all inventory, including raw materials, components, work -in- process, finished merchandise and packing and shipping materials; of the above; (g) products, returns, additions, accessions and substitutions of and to any or all (h) any of the above arising or acquired by Debtor in the future; (i) all other property of Debtor now or hereafter in the possession, custody or control of Secured Party and all property of Debtor in which Secured Party now has or hereafter acquires a security interest; 0) all proceeds of the foregoing Collateral for purposes of this Security Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds is sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including return premiums, with respect to any insurance relating thereto. 2.1 Exclusions from Collateral. Notwithstanding any provision of this Security Agreement to the contrary, Collateral shall not include (i) any "fixture" as such term is defined in Article 9- 313(1)(a) of the Uniform Commercial Code now or hereafter acquired by Debtor, or (ii) any property or rights described as "Property" or "Collateral" in the Deed of Trust. 3. Obligations Secured. The obligations ( "Obligations ") secured by this Security Agreement shall include (a) the performance by Debtor of its obligations set forth in (i) the Installment Purchase Agreement and (ii) this Security Agreement; (b) all payments made or expenses incurred by the Trustee or the Secured Party, including, but not limited to, reasonable attorneys' fees and legal expenses in the exercise, preservation or enforcement of any of the rights, powers or remedies of the Trustee or the Secured Party or in the enforcement of the obligations of Debtor to the Trustee or the Secured Party under the Installment Purchase Agreement or this Security Agreement; and (c) any obligations of Debtor to the Trustee or the Secured Party arising from amendments, modifications, renewals or extensions of any of the foregoing obligations. 4. Collateral Encumbrances: Covenants of Debtor. (a) Subject to the Permitted Encumbrances, as defined in the Indenture, Debtor owns the Collateral free and clear of any lien except for the lien created by this Security Agreement, and no effective financing statement or other instrument similar in effect, which covers all or any part of the Collateral, is on file in any recording office. (b) As to the Collateral, Debtor covenants with the Secured Party as follows: 3 (i) Debtor will keep the Collateral free of all levies, liens, encumbrances and other security interests, other than Permitted Encumbrances. (ii) Debtor will comply in all material aspects with all laws, statutes and regulations pertaining to the Collateral. (iii) Debtor will pay when due all taxes, licenses, charges and other impositions on or for the Collateral except for those taxes, licenses, charges and impositions being contested in good faith.. (iv) Debtor, at its own expense, will execute and file such assignments, statements, notices and agreements, take such action and obtain such certificates and documents, in accordance with the California Commercial Code, as necessary to perfect, evidence and continue Secured Party's security interest in the Collateral. (v) Debtor will deliver to Secured Party all instruments and other items of Collateral for which possession is required for perfection under the California Commercial Code. (vi) Debtor will, upon demand, give Secured Party such information as reasonably requested concerning the Collateral. (vii) Debtor will not, without Secured Party's written consent, exchange, lease, lend, sell or dispose of the Collateral or Debtor's rights therein other than in the ordinary course of business. (viii) Debtor will not, without Secured Party's written consent, remove the Collateral from the Facilities other than in the ordinary course of business. (ix) Debtor will not, without Secured Party's written consent, permit anything to be done that may impair, or fail to do anything necessary or advisable to preserve, the Collateral's value and the security and insurance coverage. (x) Debtor will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any lien or encumbrance on the Collateral except the Permitted Encumbrances and will defend the right, title and interest of Secured Party in and to the Collateral and in and to the proceeds thereof against the claims and demands of all persons whomsoever subject to the Permitted Encumbrances. (xi) Debtor will advise Secured Party promptly, in reasonable detail, (A) of any material lien, security interest, encumbrance or claim made or asserted against any of the Collateral other than Permitted Encumbrances, (B) of any material change in the composition of the Collateral, and (C) of the occurrence of any other event that would have rd a material adverse effect on the aggregate value of the Collateral or on the security interests created hereunder. 5. Default. Upon the occurrence of an Event of Default as defined in the Installment Purchase Agreement, Secured Party, in addition to all other rights, powers and privileges enumerated in Section 6 below or provided by law, may (1) declare the unpaid balance, in whole or in part, of Debtor's Obligations immediately due and payable, without demand or notice and proceed to collect same; (2) waive or remedy any default without waiving such default or any prior or subsequent default; and (3) terminate any agreement for financial accommodation. 6. Remedies. (a) Upon the occurrence of an Event of Default, Secured Party, in its own or in Debtor's name, without notice and at Debtor's expense, may, but is not obligated to: (i) exercise remedies available to a secured party under the California Commercial Code in respect of the Collateral; (ii) to the extent permitted by law, notify any obligor or account debtor on the Collateral to make payment to Secured Party; (iii) collect, by legal proceedings or otherwise, and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of Collateral; (iv) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for, the Collateral; (v) insure, process and preserve the Collateral; (vi) transfer the Collateral to its own or its nominee's name; and (vii) make any compromise or settlement, and take any action it deems advisable, and upon demand Debtor will pay the same to Secured Party together with any deficiency or balance on Debtor's Obligations remaining after any sale or other disposition of the Collateral by Secured Party. (b) Debtor also agrees to pay all costs of Secured Party, including, without limitation, reasonable attorneys' fees, incurred in connection with the enforcement of any of Secured Party's rights and remedies hereunder. 5 7. Secured Party's Anointment as Attorney -in -Fact. (a) Debtor hereby irrevocably constitutes and appoints Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney -in -fact with full irrevocable power and authority in the place and stead of Debtor and in the name of Debtor or in its own name, from time to time in Secured Party's discretion, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute and deliver any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Security Agreement and, without limiting the generality of the foregoing, hereby gives Secured Party the power and right, on behalf of Debtor, without notice to or assent by Debtor to do the following: (i) to ask; demand; collect; receive and give acquittances and receipts for any and all moneys due and to become due under any Collateral and, in the name of Debtor to its own name or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Secured Party for the purpose of collecting any and all such moneys due under any Collateral whenever payable and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Secured Parry for the purpose of collecting any and all such moneys due under any Collateral whenever payable; (ii) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral, to effect any repairs or any insurance called for by the terms of this Security Agreement and to pay all or any part of the premiums therefor and the costs thereof, and (iii) (A) to direct any party liable for any payment under the Collateral to make payment of any and all moneys due, and to become due thereunder, directly to Secured Party or as Secured Party shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due, and to become due at any time, in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents constituting or relating to the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against Debtor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above an, in connection therewith, to give such discharges or releases as Secured Party may deem appropriate; and (G) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and to do, at Secured Party's option and at Debtor's expense, at any time, or from time to time, all acts and things that Secured Party reasonably deems necessary to G protect, preserve or realize upon the Collateral and Secured Party's lien therein, in order to effect the intent of this Security Agreement, all as fully and effectively as Debtor might do. (b) Secured Party agrees that, except as upon the occurrence and during the continuation of an Event of Default, it will forebear from exercising the power of attorney or any rights granted to Secured Party pursuant to this Section 7. Debtor hereby ratifies, to the extent permitted by law, all that said attorneys shall lawfully do or cause to be done by virtue hereof. The power of attorney granted pursuant to this Section 7 is a power coupled with an interest and shall be irrevocable until the Obligations are indefeasibly paid in full. (c) Debtor also authorizes Secured Party, at any time and from time to time upon the occurrence and during the continuation of any Event of Default, to the extent permitted by applicable law, (i) to communicate in its own name with any party to any contract or agreement which is part of the Collateral hereunder with regard to the assignment of the right, title and interest of Debtor in and under such contracts and agreements and other matters relating thereto and (ii) to execute, in connection with the sale provided for in Section 6 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. Termination. (a) This Security Agreement and the security interest granted to Secured Party by Debtor hereunder shall terminate upon satisfaction in full of all of the Debtor's Obligations to Secured Party by payment or otherwise. (b) If applicable, and promptly upon termination of this Security Agreement, the Secured Party agrees to execute and file with the California Secretary of State a termination statement on Form UCC -2. 9. General. (a) Such care as Secured Party gives to the safekeeping of its own property of like kinds shall constitute reasonable care of the Collateral when in Secured Party's possession, but Secured Party is not required to make presentment, demand or protest, or give notice and need not take action to preserve any rights against prior parties in connection with any obligation or evidence of indebtedness held as Collateral. (b) Debtor shall give the Secured Party prior written notice of (i) any change of place of business and address thereof, and (ii) any change in policies or certificates of insurance required for the Collateral. (c) This Security Agreement is a continuing agreement and shall apply to all past, present and future Obligations of Debtor to Secured Party, whether or not such Obligations continue, increase, decrease or create new indebtedness after or before payment of any prior indebtedness, notwithstanding the bankruptcy of, or other event or proceedings affecting Debtor. 7 (d) Time is of the essence. Acceptance of partial or delinquent payments or failure to exercise any right, power or remedy shall not waive any Obligation of Debtor or modify this Security Agreement. Secured Party, and its successors and assigns, have all rights, powers and remedies herein and as provided by law, including the rights, powers and remedies of a secured party under the Uniform Commercial Code, and may exercise the same and effect any set -off and proceed against the Collateral or other security for Debtor's Obligations at any time. 10. Cumulative Rights. The rights, powers and remedies of Secured Party under this Security Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of any statute or rule of law, or any other agreement between Debtor and Secured Party or otherwise, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party's security interest in the Collateral. 11. Waive r. Any forbearance or failure or delay by Secured Party in exercising any right, power or remedy shall not preclude the further exercise thereof, and every right, power or remedy of Secured Party shall continue in full force and effect until such right, power or remedy is specifically waived in a writing executed by Secured Party. Debtor waives any right to require Secured Party to proceed against any person or to exhaust any of the Collateral or to pursue any remedy in Secured Party's power. 12. Binding Upon Successors. All rights of Secured Party under this Security Agreement shall inure to the benefit of its successors and assigns, and all obligations of Debtor shall bind its successors and assigns. 13. Entire Agreement: Severability. This Security Agreement contains the entire agreement between Secured Party and Debtor with respect to the subject matter hereof. If any of the provisions of this Security Agreement shall be held invalid or unenforceable, this Security Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 14. Choice of Law. This Security Agreement shall be construed in accordance with and governed by the internal laws of the State of California, and where applicable and except as otherwise defined herein, terms used herein shall have the meanings given them in the California Uniform Commercial Code. 15. Place of Business- Trade Name, Collateral Location. Records. Debtor represents that its chief place of business is 600 Wilshire Blvd., Ste. 700, Los Angeles, CA 90017 16. Notice. Any written notice, consent or other communication provided for in this Security Agreement shall be deemed given if delivered by hand, by courier against receipt, by certified or registered mail, return receipt requested, or by overnight delivery service providing evidence of receipt, at the following addresses, or to such other address with respect to any party as such party shall notify the other in writing: If to Secured Party: San Bernardino Associated Communities Financing Authority 201 North "E ", 3rd Floor San Bernardino, CA 92401 -1507 Attention: Executive Director If to Debtor: Family Clinics Foundation 600 Wilshire Blvd., Ste. 700 Los Angeles, CA 90017 Attention: John J. Carvelli 17. Attorneys' Fees. In the event of any controversy, claim or dispute between Debtor and the Secured Party arising out of or relating to this Security Agreement, or the breach hereof, the prevailing party shall be entitled to recover from the losing party reasonable attorneys' fees, expenses and costs. C IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as of the date first above written. Debtor: FAMILY CLINICS FOUNDATION I� Chairman Secured Party: SAN BERNARDINO ASSOCIATED COMMUNITIES FINANCING AUTHORITY Un P:\ APPS \WPDATA\LWC\0001\DOC \034. WPD Executive Director 10 EXHIBIT A DESCRIPTION OF PROPERTY [TO BE INSERTED] A -1