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<br />SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES <br /> <br />Neither the Certificates nor the obligation of the City to make Lease Payments constitute <br />an obligation of the City for which the City is obligated to levy or pledge, or for which the City <br />has levied or pledged, any form of taxation. Neither the Certificates nor the obligation of the <br />City to make Lease Payments constitute an indebtedness of the Authority, the City, the State of <br />California or any of its political subdivisions within the meaning of any constitutional limitation or <br />violates any statutory debt limitation or restriction. <br /> <br />Delivery of the Certificates <br /> <br />Each Certificate evidences and represents a direct, undivided fractional interest in the <br />principal component of the Lease Payments due under the Lease Agreement on the payment <br />date or prepayment date of such Certificate, and the interest component of all Lease Payments <br />(based on the stated interest rate with respect to such Certificate) to accrue from the date of <br />original delivery of the Certificates to its payment date or prepayment date, as the case may be. <br /> <br />The Authority, under the Assignment Agreement, will assign to the Trustee for the <br />benefit of the Certificate Owners substantially all of the Authority's right, title and interest in and <br />to the Lease Agreement, including, without limitation, its right to receive Lease Payments to be <br />paid by the City; except that the Authority will retain the rights to indemnification and to payment <br />of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City <br />will pay Lease Payments directly to the Trustee, as assignee of the Authority. See "Lease <br />Payments" below. <br /> <br />Lease Payments <br /> <br />For the right to the use and occupancy of the Leased Premises, the Lease Agreement <br />requires the City to make Lease Payments. Lease Payments are due and payable in <br />immediately available funds on the Interest Payment Dates immediately following each of the <br />respective Lease Payment Dates specified in the Lease Agreement, and to be deposited by the <br />City with the Trustee on each of the Lease Payment Dates during the term of the Lease <br />Agreement. The Lease Payments are 'payable from any source of legally available funds of the <br />City, which includes the General Fund. The Certificates are not secured by a pledge of or lien <br />on any funds or properties of the City. <br /> <br />Scheduled Lease Payments relating to the Certificates are set forth above under the <br />heading "LEASE PAYMENT SCHEDULE." <br /> <br />THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS DOES NOT <br />CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION <br />THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT <br />LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH <br />THE CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION <br />OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF <br />TAXATION. <br /> <br />Additional Rental Payments <br /> <br />In addition to the Lease Payments, the Lease Agreement requires the City to pay all <br />costs and expenses incurred by the Authority to comply with the provisions of the Trust <br /> <br />-10- <br />