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HomeMy WebLinkAboutResolution - 3477 STATE OF CALIFORNIA ) RESOLUTION NO. 3477 COUNTY OF RIVERSIDE ) ss CITY OF SAN JACINTO ) A RESOLUTION OF THE CITY OF SAN JACINTO APPROVING AN INSTALLMENT SALE AGREEMENT AND IRREVOCABLE PREPAYMENT INSTRUCTIONS RELATING TO OBLIGATIONS OF THE CITY ISSUED TO IMPROVE THE CITY'S WATER SYSTEM WHEREAS, the City of San Jacinto (the "City") previously entered into a Supplemental Installment Purchase Agreement dated as of July 1 , 1997 (the "1997 Agreement") between the City and San Jacinto Financing Authority (the "Authority") pursuant to which the City obligated itself to make installment payments that secure the Authority's Revenue Bonds, Series 1997 (Water Improvement Project) (the "1997 Bonds"); and WHEREAS, the City has also previously entered into an Amended and Restated Installment Purchase Agreement dated as of March 1, 2002 between the City and the Authority (the "2002 Agreement") pursuant to which the City obligated itself to make installment payments that secure the Authority's Refunding Revenue Bonds, Series 2002 (Water Improvement Project) (the "2002 Bonds"); and WHEREAS, the City Council of the City of San Jacinto has determined that it is in the best interests of the City that the 1997 Agreement and the 2002 Agreement be refinanced to restructure overall debt service of the City's Water Enterprise; and WHEREAS, in order to accomplish such refinancing it is necessary and desirable for the City to secure payment of and prepay the 1997 Agreement and the 2002 Agreement and provide for the redemption of the 1997 Bonds and the 2002 Bonds; and WHEREAS, in order to secure the payment of the 1997 Agreement and the 2002 Agreement, it is necessary and desirable to sell and transfer the Water Enterprise to a commercial lender, bank or other lending institution to be determined by competitive bid (the "Bank") and to immediately reacquire the Water Enterprise by purchasing the Water Enterprise from the Bank pursuant to the Installment Sale Agreement, hereinafter more particularly described; and WHEREAS, the Bank will provide the funds necessary to secure payment of and prepay the 1997 Agreement and the 2002 Agreement by acquiring an Installment Sale Agreement between the Bank and the City (the "Installment Sale Agreement"), under which it will receive Installment Payments; and WHEREAS, the funds necessary to secure payment of and prepay the 1997 Agreement and the 2002 Agreement will be deposited for such purpose in an escrow fund created pursuant to Irrevocable Prepayment Instructions, hereinafter more particularly described; and Page 1 of 3 24438.7001918166914.2 WHEREAS, the City Council has determined that it is in the best interests of the City and desirable that the Installment Sale Agreement and the Irrevocable Prepayment Instructions be approved as hereinafter provided and that the aggregate principal amount represented by the Installment Payments not exceed $3,110,000 for the purposes provided above; NOW, THEREFORE, BE IT RESOLVED, determined and ordered by the City Council of the City of San Jacinto, County of Riverside, State of California, as follows: SECTION 1. Refinancing of 1997 Agreement and the 2002 Agreement. The refinancing of the 1997 Agreement and the 2002 Agreement with the installment payment arrangement as described herein is hereby approved; provided, however, the aggregate principal amount of the installment payment arrangement shall not exceed $3,110,000 and the annual rate of interest associated therewith shall not exceed 3.50%. SECTION 2. Approval of Installment Sale Agreement. The agreement entitled "Installment Sale Agreement" to be entered into by and between the City and the Bank which provides generally for (i) the sale by the City to the Bank of the Water Enterprise, (ii) the purchase by the City from the Bank of the Water Enterprise, and (iii) the payment by the City to the Bank from the Net Revenues of the Water Enterprise (as such terms are defined in the Installment Sale Agreement) of Installment Payments are approved, and the Mayor and the City Manager or his written designee, the Assistant City Manager or the Finance Director, and each of them is, authorized to execute, acknowledge and deliver said agreement on behalf of the City. SECTION 3. Approval of Irrevocable Prepayment Instructions. Wherein the City directs the Bank to create an escrow fund on its behalf and to take all necessary action to prepay the 1997 Agreement and the 2002 Agreement and redeem the 1997 Bonds and the 2002 Bonds is approved, and the Mayor and the City Manager or his written designee, the Assistant City Manager or the Finance Director are, and each of them is, authorized to execute, acknowledge and deliver the Irrevocable Prepayment Instructions on behalf of the City. SECTION 4. Approval of Bank and Professionals for Transaction. Zions First National Bank is hereby approved as the Bank for purposes of the Installment Sale Agreement and all other aspects of the refinancing of the 1997 Agreement and the 2002 Agreement and the redemption of the 1997 Bonds and the 2002 Bonds pursuant to the terms of its bid received on August 16, 2013 and the City Manager, his written designee and the Finance Director are hereby authorized to accept its bid on behalf of the City. Should for any reason upon the determination of the City Manager, his written designee or the Finance Director, Zions First National Bank be unable or unwilling to perform its obligation as Bank in order to provide sufficient funds to redeem the 1997 Bonds and the 2002 Bonds by August 30, 2013, the City Manager, his written designee, the Assistant City Manager or the Finance Director is authorized to terminate negotiation with Zions First National Bank and appoint Capital One Public Funding, LLC as Bank hereunder pursuant to the terms of its bid received on August 16, 2013. The City Council hereby approves the professional service contracts of Best Best & Krieger LLP, Page 2 of 3 24438.7001 9181 6 691 4.2 as special counsel, and C.M. de Crinis and Co., Inc., as financial advisor to the City. The City Manager is hereby authorized to execute and deliver such professional service contracts. SECTION 5. Modifications. The approval of said agreements given by this resolution shall apply to any modification or amendment of any said agreements which is agreed upon and approved by Special Counsel to the City, and the City Manager or his written designee, the Assistant City Manager or the Finance Director, as being necessary or desirable to carry out the provisions thereof and the authorizations and direction provided in this resolution. SECTION 6. Further Action. The Mayor, the City Manager, the Assistant City Manager and the Finance Director, or their written designees, are authorized to take any and all action which is directed by Special Counsel to the City with respect to the execution, acknowledgment and delivery of the aforementioned agreements which in the opinion of said Special Counsel is necessary or desirable in order for the authorizations and direction provided in this resolution to be carried out. PASSED, APPROVED AND ADOPTED this 20th day of August, 2013, by the following vote: AYES: Ledezma, Miller, Ruiz, Bartel NAYS: None ABSENT: Kotyuk ABSTAIN: None City of San Jacinto By Mark Bartel, Mayor ATTEST: i Richard Miller, City Clerk Page 3 of 3 24438.70019%8166914 2 INSTALLMENT SALE AGREEMENT by and between the CITY OF SAN JACINTO and Dated as of August 1, 2013 Relating to CITY OF SAN JACINTO 2013 INSTALLMENT SALE AGREEMENT FINANCING 09960.00000\81 18713.1 INSTALLMENT SALE AGREEMENT THIS INSTALLMENT SALE AGREEMENT, (this "Installment Sale Agreement'), dated for convenience as of August I, 2013, is by and between , a national bank organized and existing under the laws of the United States ("[Bank]"), and the City of San Jacinto, a municipal corporation duly organized and existing under the Constitution and laws of the State of California (the"City"); WITNESSETH: WHEREAS, the City presently owns and operates certain facilities and property for the collection, treatment, storage and delivery of water for residents and businesses within the service area of the City(the"Enterprise"), and WHEREAS, the City has previously financed the acquisition and construction of the improvements and facilities more particularly described in Exhibit B attached hereto (the "1997 Project') with the proceeds of San Jacinto Financing Authority Revenue Bonds Series 1997 (Water Improvement Project) (the "1997 Bonds") dated, and WHEREAS, the City has also previously financed the acquisition and construction of the improvements and facilities more particularly described in Exhibit B attached hereto under the heading 2002 Project(the "2002 Project,"and together with the 1997 Project, the "Project') with the proceeds of San Jacinto Financing Authority Refunding Revenue Bonds, Series 2002 (Water Improvement Project) (the "2002 Bonds" and together with the 1997 Bonds, the "Prior Bonds"), and WHEREAS, the City desires to refinance its obligations incurred under the Prior Bonds by selling the Enterprise to [Bank] and immediately purchasing the Enterprise from [Bank] thereby obligating itself to make installment payments all as more particularly set forth herein; and WHEREAS, [Bank] has agreed to assist the City in refinancing the Project as set forth herein; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1. Definitions. All capitalized terms used in this Section 1.1 shall for all purposes of this Installment Sale Agreement have the meanings herein specified or as hereinafter defined. "Assignee" means any entity to whom the rights of[Bank] hereunder shall be assigned. 09960.00000\81 18713 1 "Bond Counsel" means any attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to obligations the interest on which is excludable from gross income under Section 103 of the Tax Code. "City" means the City of San Jacinto, a municipal corporation duly organized and existing under the Constitution and laws of the State of California. "Closing Date" means the date [Bank] pays, transfers, or deposits the Installment Sale proceeds as provided in Section 3.2. "Enterprise" means the existing facilities and property owned by the City in connection with the water collection, treatment, storage and delivery services of the City, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by the City. "Event of Default"means any of the events of default as defined in Section 5.1. "Federal Securities" means any direct general non-callable obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or obligations the timely payment of principal of and interest on which are directly guaranteed by the United States of America. "Fiscal Year" means each twelve-month period during the Term of this Installment Sale Agreement commencing on July I in any calendar year and ending on June 30 in the next succeeding calendar year, or any other twelve-month period selected by the City as its fiscal year period. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by the City from, the ownership and operation of the Enterprise or otherwise arising from the Enterprise, including but not limited to connection charges (to the extent legally available to pay any of the amounts described in Section 4.5(a)) and earnings on the investment of any funds held by the City in the Revenue Fund; but excluding (a) the proceeds of any ad valorem property taxes levied for the purpose of paying bonded indebtedness of the City and (b) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City for the purpose of paying special assessment bonds or special tax obligations of the City. "Installment Sale Agreement" means this Installment Sale Agreement, dated as of August I, 2013, between [Bank] and the City. "Installment Payment Date" means the dates on which each Installment Payment is due and payable as set forth on Exhibit A attached hereto. "Installment Payments" means all payments required to be paid by the City on any date pursuant to Section 3.4, including any prepayment thereof pursuant to Section 6.2 or 6.3. "Irrevocable Prepayment Instructions" means the instructions dated August _, 2013, which are given by the City to Union Bank of California in order to pay the Prior Bonds. 09960 00000/81 1 871 3.1 2 "Maintenance and Operation Expenses"means the reasonable and necessary costs paid or incurred by City for maintaining and operating the Enterprise, determined in accordance with generally accepted accounting principles, including all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Enterprise in good repair and working order, and including all administrative costs of City that are charged directly or apportioned to the maintenance and operation of the Enterprise, such as salaries and wages of employees, overhead, insurance, taxes (if any) and insurance premiums, and including all other reasonable and necessary costs of City or charges required to be paid by it to comply with the terms of the Installment Sale Agreement and any relating to Parity Debt, such as compensation, reimbursement and indemnification by Trustee appointed thereunder; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Maximum Annual Debt Service" means, as of the date of any calculation, the maximum sum obtained for the current or any future Fiscal Year during the Term of this Installment Sale Agreement by totaling the aggregate amount of(i) the Installment Payments coming due in such Fiscal Year, and (ii) the principal and interest coming due and payable in such Fiscal Year on any Parity Debt, including the principal amount coming due and payable by operation of mandatory sinking fund redemption. There shall be excluded from such calculation any principal of and interest on the Installment Payments for the payment of which a security deposit has been deposited in accordance with Section 6.1 and any Parity Debt that has been defeased or discharged. In determining the debt service on Parity Debt for which interest is calculated at a variable interest rate, such Parity Debt shall be assumed to bear interest at a fixed interest rate equal to the highest variable rate borne over the preceding 24 months by outstanding variable rate debt of the City, or, if no such variable rate debt is at the time outstanding, by variable rate debt for which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the Parity Debt proposed to be issued. With respect to any Parity Debt that is a tax incentive bond (such as a Build America Bond), such interest shall be equal to the net interest paid by the City after taking into account any anticipated payments to be received by or on behalf of the City from the United States of America. "Net Revenues" means, for any period, an amount equal to all of the Revenues received during such period, minus the amount required to pay all Maintenance and Operation Expenses becoming payable during such period. "1997 Bonds" means the San Jacinto Financing Authority Revenue Bonds Series 1997 (Water Improvement Project). "1997 Project" means project funded with proceeds of the 1997 Bonds and designated as such in Exhibit B attached hereto. "Parity Debt" means any bonds, notes or other obligations of the City payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity with the Installment Payments. "Permitted Investments" means any investments permitted under Section 53601 of the California Government Code and in conformity with the City's current investment policy. 09960 00000\8118713 1 3 "Prior Bonds" means the 1997 Bonds and the 2002 Bonds. "Project" means the 1997 Project and the 2002 Project. "Revenue Fund" means the fund by that name established by the City and referenced in Section 3.8(b). "Revenues" means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the City's Enterprise, including, without limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by City from the sale, furnishing and supplying of the water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Enterprise, plus (2) the earnings on and income derived from the investment of such income, rents, rates, fees, charges, or other moneys, including City reserves, plus (3) the proceeds of any stand-by or water availability charges collected by City, but excluding in all cases customer deposits, connection fees or any other deposits or advances subject to refund until such deposits or advances have become the property of City. "Tax Code" means the Internal Revenue Code of 1986. Any reference herein to a provision of the Tax Code shall include all applicable temporary and permanent regulations promulgated under the Tax Code. "Term of this Installment Sale Agreement" or "Term" means the time during which this Installment Sale Agreement is in effect, as provided in Section 3.3. "2002 Bonds" means San Jacinto Financing Authority Refunding Revenue Bonds, Series 2002 (Water Improvement Project). "2002 Project" means the project financed and refinanced with proceeds of the 2002 Bonds and deposited as such in Exhibit B attached hereto. ["[Bank]" means , a national bank organized and existing under the laws of the United States. Whenever in this Installment Sale Agreement any reference is made to [Bank] and such reference concerns rights that have been assigned to an Assignee, such reference shall be deemed to refer to the Assignee.] SECTION 1.2. Exhibits. The following Exhibits are attached to, and by reference made a part of this Installment Sale Agreement: Exhibit A: Schedule of Installment Payments to be paid by the City hereunder, showing the date and amount of each such Installment Payment. Exhibit B: The description of the Project including the 1997 Project and the 2002 Project. Exhibit C: Form of Acknowledgment of Assignment. Exhibit D: Certificate of the purchaser under this Installment Sale Agreement. 09960 00000\81 18713 1 4 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1. Representations, Covenants and Warranties of the City. The City represents, covenants and warrants to [Bank] as follows: (a) Due Organization and Existence. The City is a municipal corporation duly organized and existing under the Constitution and laws of the State of California. (b) Authorization. The laws of the State of California authorize the City to enter into this Installment Sale Agreement and the Irrevocable Prepayment Instructions and to enter into the transactions contemplated hereby and thereby, and to carry out its obligations under this Installment Sale Agreement and the Irrevocable Prepayment Instructions and the Board of Directors has duly authorized the execution and delivery of this Installment Sale Agreement and the Irrevocable Prepayment Instructions. (c) No Violations. Neither the execution and delivery of this Installment Sale Agreement and the Irrevocable Prepayment Instructions nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the City, other than as set forth herein. (d) No Prior Indebtedness. Except as disclosed to [Bank], the City has not issued or incurred any obligations which are currently outstanding having any priority in payment out of the Gross Revenues or the Net Revenues over the payment of the Installment Payments as provided herein. (e) Role of [Bank]. The City acknowledges that: (a) [Bank] is acting hereunder solely for its own account and not as a fiduciary for the City or in the capacity of broker, dealer, municipal securities underwriter or municipal advisor; (b) [Bank] has not provided, and will not provide, financial, legal, tax, accounting or other advice to or on behalf of the City with respect to any of the transactions contemplated by this Installment Sale Agreement; and (c) the City has sought and obtained financial, legal, tax, accounting and other advice (including as it relates to structure, timing, terms and similar matters) with respect to this Installment Sale Agreement from its financial, legal and other advisors (and not [Bank]) to the extent that the City desired to obtain such advice. (f) Facilitation of Assi ng ments. The City hereby agrees that, upon the request of [Bank] or the Assignee, the City shall answer questions from and furnish all documents and information requested by a potential Assignee concerning the City, the Enterprise, this Installment Sale Agreement, and the security for the City's obligations hereunder, and the transactions and documents related to or contemplated by the foregoing and all matters related thereto. 09960Q00000181 18713 1 5 SECTION 2.2. Representations, Covenants and Warranties of [Bank]. [Bank] represents, covenants and warrants to the City as follows: (a) Due Organization and Existence. [Bank] is a duly organized and existing under the laws of (b) Authorization. The laws of the authorize [Bank] to enter into this Installment Sale Agreement and to enter into the transactions contemplated hereby, and to carry out its obligations under this Installment Sale Agreement and [Bank] has duly authorized the execution and delivery of this Installment Sale Agreement by its officers. (c) No Violations. Neither the execution and delivery of this Installment Sale Agreement nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which [Bank] is now a party or by which [Bank] is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of[Bank]. (d) Certificate of[Bank]. [Bank] will deliver to the City a certificate in the form set forth in Exhibit D hereto. ARTICLE III TERMS OF INSTALLMENT SALE SECTION 3.1. Sale and Purchase. Sale. Based upon the consideration of [Bank] entering into this Installment Sale Agreement enabling the City to refinance its obligations with respect to the Prior Bonds, the City hereby sells the Enterprise to [Bank] and [Bank] hereby purchases the Enterprise from the City. Purchase. [Bank] hereby sells the Enterprise to the City, and the City hereby purchases the Enterprise and the from [Bank], upon the terms and conditions set forth in this Installment Sale Agreement. As consideration for this Installment Sale Agreement, [Bank] shall pay, deposit, or transfer as described in 3.2 the total amount of [$ ] in immediately available funds on the Closing Date, which funds will be used to (i) prepay the City's obligations with respect to the 2002 Bonds; (ii) prepay the City's obligations with respect to the 1997 Bonds; and (iii) pay costs of issuance relating to this Installment Sale Agreement. SECTION 3.2. (a) Deposit to Escrow Fund. On the Closing Date, [Bank] shall (1) transfer the sum of $ at the direction of the City with the 1997 Trustee for deposit in the Escrow Fund established pursuant to the Irrevocable Prepayment Instructions, and (2)transfer the sum of$ at the direction of the City with the 2002 Trustee for deposit in the Escrow Fund established with respect to the 2002 Bonds pursuant to the Irrevocable Prepayment Instructions. The City hereby represents that the deposit referenced in (1)and (2) above will discharge the City's obligations with respect to the Prior Bonds. 09960 00000\81 18713.1 6 SECTION 3.3. Term. The Term of this Installment Sale Agreement shall commence on the Closing Date, and shall end on the date on which the City shall have paid all of the Installment Payments and all other amounts due and payable hereunder or provision for such payment shall be made as provided herein. SECTION 3.4. Title. Title to the Project, and each component thereof, shall be deemed conveyed to and vested in the City upon the acquisition thereof. [Bank] shall, execute deliver and cause to be recorded and any all documents reasonably requested by the City to consummate such transfer of title. SECTION 3.5. Disclaimer of Warranties. [BANK] MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OF THE PROJECT OR ANY PART THEREOF, OR AS TO THE FITNESS FOR ANY PARTICULAR USE OF THE PROJECT OR ANY PART THEREOF OR AS TO THE FITNESS OF THE PROJECT FOR THE USE CONTEMPLATED BY CITY OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT THERETO. THE CITY ACKNOWLEDGES THAT [BANK] IS NOT A CONTRACTOR OF THE PROJECT, THAT THE CITY PURCHASES THE PROJECT "AS-IS", 1T BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. IN NO EVENT SHALL [BANK] BE LIABLE FOR AN INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGE IN CONNECTION WITH OR ARISING OUT OF THIS INSTALLMENT SALE AGREEMENT OR THE ACQUISITION, CONSTRUCTION, EXISTENCE, FURNISHING, FUNCTIONING OR CITY'S USE OF ANY ITEM OR PRODUCTS OR SERVICES PROVIDED FOR IN THIS INSTALLMENT SALE AGREEMENT. CITY ACKNOWLEDGES THAT IT IS SOLELY RESPONSIBLE FOR DETERMINING THE SUITABILITY OF THE PROJECT FOR ITS INTENDED USE. SECTION 3.6. Installment Payments. (a) Obligation to Pay. The City hereby agrees to pay to [Bank], as the purchase price of the Project hereunder, the aggregate principal amount of$ together with interest (calculated on the basis of a 360-day year of twelve 30-day months at the rates set forth below) on the unpaid principal balance thereof, payable in Installment Payments in the respective amounts and on the respective Installment Payment Dates specified in Exhibit A attached hereto. The Installment Payments shall represent an annual rate of interest of_% as set forth in Exhibit A attached hereto. (b) Effect of Prepayment. In the event that the City prepays the Installment Payments pursuant to Article VI, the City's obligations under this Installment Sale Agreement with respect to Installment Payments so prepaid shall thereupon cease and terminate, including but not limited to the City's obligation to pay such Installment Payments under this Section 3.6; subject however, to the provisions of Section 6.1 in the case of prepayment by application of a security deposit. In the event that the City prepays the Installment Payments in part but not in whole pursuant to Section 6.3, the principal components of the remaining Installment Payments shall be reduced on a pro rata basis so as to produce equal Installment Payments over the remaining Term of this Installment Sale Agreement. 09960 00000\8118713 1 7 (c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 3.6, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon. SECTION 3.7. Nature of City's Obligations. (a) Special Obligation. The City's obligation to pay the Installment Payments is a special obligation of the City limited solely to the Net Revenues and amounts on deposit in the Revenue Fund. Under no circumstances is the City required to advance moneys derived from any source of income other than the Net Revenues and other sources specifically identified herein for the payment of the Installment Payments, and no other funds or property of the City are liable for the payment of the Installment Payments. Notwithstanding the foregoing provisions of this Section, however, nothing herein prohibits the City voluntarily from making any payment hereunder from any source of available funds of the City. (b) Obligations Absolute. The obligations of the City to pay the Installment Payments from the Net Revenues and other sources specifically identified herein and to perform and observe the other agreements contained herein are absolute and unconditional and are not subject to any defense or any right of setoff, counterclaim or recoupment arising out of any breach of the City or [Bank] of any obligation to the City or otherwise with respect to the Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to the City by [Bank]. Until such time as all of the Installment Payments have been fully paid or prepaid,the City: (i) will not suspend or discontinue payment of any Installment Payments, (ii) will perform and observe all other agreements contained in this Installment Sale Agreement, and (iii) will not terminate this Installment Sale Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Enterprise, sale of the Enterprise, the taking by eminent domain of title to or temporary use of any component of the Enterprise, commercial frustration of purpose, any change in the tax or other laws of the United States of America or the State of California or any political subdivision of either thereof or any failure of[Bank] to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Sale Agreement. (c) Protection of Rights. If[Bank] fails to perform any such agreements on its part, the City may institute such action against [Bank] as the City deems necessary to compel performance so long as such action does not abrogate the obligations of the City contained in the preceding subsection (b). The City may, however, at the City's own cost and expense and in the City's own name or in the name of[Bank] prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to secure or protect the City's rights hereunder, and in such event [Bank] will cooperate fully with 09960.00000\8118713.1 S the City and take such action necessary to effect the substitution of the City for [Bank] in such action or proceeding if the City shall so request. SECTION 3.8. Pledge and Application of Net Revenues. (a) Pledge. All of the Net Revenues and amounts on deposit in the Revenue Fund are hereby irrevocably pledged to the punctual payment of the Installment Payments and any Parity Debt. The Net Revenues and such other funds may not be used for any other purpose so long as any of the Installment Payments and any Parity Debt remain unpaid; except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by this Section 1.8. Such pledge constitutes a first and exclusive lien on the Net Revenues and such other moneys for the payment of the Installment Payments and any Parity Debt in accordance with the terms hereof and the terms of the instruments authorizing the issuance of any Parity Debt. (b) Deposit of Revenues; Transfers to Make Installment Payments. The City has heretofore established the Revenue Fund, which the City agrees to continue to hold and maintain for the purposes and uses set forth herein. The City shall deposit all Revenues in the Revenue Fund promptly upon the receipt thereof. All Net Revenues will be held by the City in the Revenue Fund in trust for the benefit of [Bank] and for the benefit of the owners of any Parity Debt. The City shall withdraw from such fund or funds and transfer to [Bank] an amount of Net Revenues equal to the aggregate amount of each Installment Payment when and as the same becomes due and payable. In addition, the City shall withdraw from such fund or funds such amounts of Net Revenues at such times as required to pay the principal of and interest on any Parity Debt and otherwise comply with the provisions of the instruments authorizing the issuance of any Parity Debt. (c) Other Uses Permitted. The City shall manage, conserve and apply the Net Revenues in such a manner that all deposits required to be made under the preceding paragraph will be made at the times and in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is continuing hereunder, the City may at any time and from time to time use and apply Net Revenues for (i) the acquisition and construction of improvements to the Enterprise; (ii) the prepayment of this Installment Sale Agreement and any Parity Debt, or(iii) any other lawful purpose of the City. (d) Budget and Appropriation of Installment Payments. During the Term of this Installment Sale Agreement, the City shall adopt all necessary budgets and make all necessary appropriations of the Installment Payments from the Net Revenues. In the event any Installment Payment requires the adoption by the City of any supplemental budget or appropriation, the City shall promptly adopt the same. The covenants on the part of the City contained in this subsection (d) shall be deemed to be and shall be construed to be duties imposed by law, and it shall be the duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out the perform the covenants and agreements in this subsection (d). 09960,00000\81 18713 1 9 ARTICLE IV COVENANTS OF THE CITY SECTION 4.1. Release and Indemnification Covenants. The City shall indemnify [Bank] and its officers, agents, successors and assigns and hold them harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of the following: (a) the use, maintenance, condition or management of, or from any work or thing done on or about the Enterprise by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Installment Sale Agreement, (c) any intentional misconduct or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Enterprise, and (d) any intentional misconduct or negligence of any lessee of the City with respect to the Enterprise. No indemnification is made under this Section 4.1 or elsewhere in this Installment Sale Agreement for willful misconduct, negligence, or breach of duty under this Installment Sale Agreement by [Bank], its officers, agents, employees, successors or assigns. SECTION 4.2. Disposition or Condemnation of Enterprise. Except as provided herein, the City covenants that the Enterprise will not be encumbered, sold, leased, pledged, any charge placed thereon, or otherwise disposed of, as a whole or substantially as a whole if such encumbrance, sale, lease, pledge, charge or other disposition would materially impair the ability of the City to pay the Installment Payments or the principal of or interest on any Parity Debt, or would materially adversely affect its ability to comply with the terms of this Installment Sale Agreement or the instruments authorizing the issuance of any Parity Debt. The City shall not enter into any agreement which impairs the operation of the Enterprise or any part of it necessary to secure adequate Net Revenues to pay the Installment Payments and any Parity Debt, or which otherwise would impair the rights of[Bank] with respect to the Net Revenues. If any substantial part of the Enterprise is sold, the payment therefor must either(a) be used for the acquisition or construction of improvements and extensions or replacement facilities or (b) be applied to prepay or redeem the Installment Sale Agreement and any Parity Debt, on a pro rata basis, in the manner provided herein and in the instruments authorizing such Parity Debt. Any amounts received as awards as a result of the taking of all or any part of the Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be exercised against such property of the City, shall either (a) be used for the acquisition or construction of improvements and extension or replacement facilities of the Enterprise, or (b) be applied to prepay the Installment Payments and redeem any Parity Debt, on a pro rata basis, in the manner provided herein and in the instruments authorizing such Parity Debt. 09960 O0000\81 19713 1 10 SECTION 4.3. Insurance. The City shall at all times maintain with responsible insurers all such insurance on the Enterprise as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to the Enterprise. If any useful part of the Enterprise is damaged or destroyed, such part shall be restored to usable condition. All amounts collected from insurance against accident to or destruction of any portion of the Enterprise shall be used to repair or rebuild such damaged or destroyed portion of the Enterprise or if determined not to repair or rebuild such portion and in any event to the extent not so applied, must either (a) be used for the acquisition or construction or improvements and extensions or replacement facilities or (b) be applied on a pro rata basis to prepay Installment Payments and redeem any Parity Debt in the manner provided in this Installment Sale Agreement and in the instruments authorizing such Parity Debt. The City shall also maintain, with responsible insurers, worker's compensation insurance and insurance against public liability and property damage to the extent reasonably necessary to protect the City, [Bank] and the Assignee. Any insurance required to be maintained hereunder may be maintained under and in accordance with a joint exercise of powers agreement, and may be maintained by the City in the form of self-insurance (but only with [Bank]'s prior written consent) or in the form of participation by the City in a program of pooled insurance. SECTION 4.4. Records and Accounts. The City shall keep proper books of records and accounts of the Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Enterprise. Said books shall, upon prior request, be subject to the reasonable inspection of[Bank]. The City shall cause the books and accounts of the Enterprise to be audited annually by an independent certified public accountant or firm of certified public accountants, not more than 180 days after the close of each Fiscal Year, and shall furnish a copy of such report to [Bank] or the Assignee. The audit of the accounts of the Enterprise may be included as part of a general City-wide audit. The City shall cause to be published annually, not more than 180 days after the close of each Fiscal Year, a summary statement showing the amount of Gross Revenues and the disbursements from Gross Revenues and from other funds of the City in reasonable detail. The City shall furnish a copy of the statement to [Bank] or the Assignee. SECTION 4.5. Rates and Charges. (a) Covenant Regarding Revenues. The City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year that are sufficient to yield Revenues that (together with existing unencumbered cash and cash-equivalent balances in the Revenue Fund at the beginning of the Fiscal Year that are lawfully available to the City for payment of any of the following amounts during such Fiscal Year) are at least sufficient, after making allowances for contingencies and error in the estimates, to pay the following amounts: (i) All Maintenance and Operation Expenses estimated by the City to become due and payable with respect to such Fiscal Year; 09960.00000\81 18713.1 11 (ii) The Installment Payments and all principal of and interest and premium (if any) on any Parity Debt as they become due and payable with respect to such Fiscal Year, without preference or priority; (iii) All payments coming due and payable with respect to such Fiscal Year and required for compliance with this Installment Sale Agreement and the instruments authorizing any Parity Debt; and (iv) All payments required to meet any other obligations of the City which are charges, liens, encumbrances upon or payable from the Revenues with respect to such Fiscal Year. (b) Covenant Regarding Net Revenues. In addition to the covenant set forth in the preceding clause (a) of this Section, the City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year that are sufficient to yield Net Revenues that, together with existing unencumbered cash and cash- equivalent balances in the Revenue Fund at the beginning of the Fiscal Year that are lawfully available to the City for the payment of any of the amounts described in the preceding clause (a) of this Section with respect to such Fiscal Year, are at least equal to [120%] of the aggregate amount of Installment Payments and principal of and interest on any Parity Debt coming due and payable with respect to such Fiscal Year. If the amount of such existing unencumbered cash and cash-equivalent balances, excluding Net Revenues, falls below the amount of Maximum Annual Debt Service with respect to such Fiscal Year, the City shall thereupon fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise with respect to such Fiscal Year which are sufficient to yield Net Revenues with respect to such Fiscal Year (excluding connection charges) at least equal to 100% of the aggregate amount of Installment Payments and principal of and interest on any Parity Debt coming due and payable with respect to such Fiscal Year. SECTION 4.6. No Priority for Additional Obligations. The City may not issue or incur any bonds or other obligations having any priority in payment of principal or interest out of the Net Revenues over the Installment Payments. SECTION 4.7. Issuance of Parity Debt. The City further covenants that, except for obligations issued or incurred to prepay the Installment Payments in full pursuant to Section 6.2 hereof, the City shall not issue or incur any Parity Debt unless: (a) The City is not in default under the terms of this Installment Sale Agreement; (b) Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution approving the instrument pursuant to which such Parity Debt is issued or incurred, as shown by the books of the City, plus, at the option of the City, the additional allowance described below, shall have amounted to at least [120]% of the sum of the maximum Installment Payments coming due and payable in any future Fiscal Year and the maximum annual debt service on all Parity Debt outstanding immediately subsequent to the incurring of such additional obligations. 09960.00000\81 18713.1 12 Either or both of the following items may be added to such Net Revenues for the purpose of applying the restriction contained in this subsection 4.7(b): (i) An allowance for revenues from any additions to or improvements or extensions of the Enterprise to be constructed with the proceeds of such additional obligations, and also for net revenues from any such additions, improvements or extensions which have been from moneys from any source but which, during all or any part of such Fiscal Year, were not in service, all in an amount equal to 70% of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first 36-month period following closing of the proposed Parity Debt, all as shown by the certificate or opinion of a qualified independent consultant employed by the City, may be added to such Net Revenues for the purpose of applying the restriction contained in this subsection 4.7(b). (ii) An allowance for earnings arising from any increase in the charges made for service from the Enterprise which has become effective prior to the incurring of such additional obligations but which, during all or any part of such Fiscal Year, was not in effect, in an amount equal to 100% of the amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City. (c) Subordinate Debt. The City further covenants that the City shall not issue or incur any Subordinate Debt unless Net Revenues, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent twelve (12) month period selected by the City ending not more than sixty (60) days prior to the adoption of the resolution approving the instrument pursuant to which such Subordinate Debt is issued or incurred, as shown by the books of the City shall, after deducting all amounts required for the payment of Installment Payments and any Parity Debt, have amounted to at least 1.00 times the sum of the maximum annual debt service on all Subordinate Debt outstanding immediately subsequent to the incurring of such additional obligations. An allowance for earnings arising from any increase in the charges made for service from the Enterprise which has become effective prior to the incurring of such additional obligations but which, during all or any part of such Fiscal Year, was not in effect, may be added in an amount equal to 100% of the amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year and any period prior to the incurring of such additional obligations, as shown by the certificate or opinion of a qualified independent engineer employed by the City. (d) Calculating Debi Service on Variable Rate Debt. In determining the debt service on Parity Debt or Subordinate Debt for which interest is calculated at a variable interest rate, such Parity Debt or Subordinate Debt shall be assumed to bear interest at a fixed interest rate equal to the highest variable rate borne over the preceding 24 months by outstanding variable rate debt of the City or, if no such variable rate debt is at the time outstanding, by variable rate debt for which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the Parity Debt or Subordinate Debt the proposed to be issued. 09960.00000\81 18713 1 13 SECTION 4.8. Additional Payments. In addition to the Installment Payments, the City shall pay, from Net Revenues, when due all costs and expenses incurred by [Bank] to comply with the provisions of this Installment Sale Agreement, including, without limitation all costs of issuance (to the extent not paid on the Closing Date), and all costs and expenses of attorneys, auditors, engineers and accountants. SECTION 4.9. Assignment. The rights of [Bank] and any Assignee under this Installment Sale Agreement, including the right to receive and enforce payment of the Installment Payments to be made by the City under this Installment Sale Agreement, may be assigned to an Assignee. No such assignment will be effective as against the City unless and until [Bank] or the Assignee files with the City a copy of such assignment or written notice thereof. Prior to the effective date of any assignment permitted pursuant to this Installment Sale Agreement, the Assignee shall execute and deliver a certificate in the form set forth in Exhibit D hereto to the City. Upon such assignment, then, whenever in this Installment Sale Agreement any reference is made to [Bank] and such reference concerns rights which [Bank] has assigned to the Assignee, such reference shall be deemed to refer to the Assignee. The City shall pay all Installment Payments hereunder under the written direction of [Bank] or the Assignee named in the most recent assignment or notice of assignment filed with the City. During the Term of this Installment Sale Agreement, the City shall keep a complete and accurate record of all such assignments or notices of assignment. Regardless of the number of Assignees, the City shall not be required to pay more than a single payee. SECTION 4.10. Assignment by the City. This Installment Sale Agreement may not be assigned by the City, other than to a public agency which shall succeed to the interests of the City in and to the Enterprise and which (by operation of law, by contract or otherwise) becomes legally bound to all of the terms and provisions hereof. SECTION 4.11. Amendment of this Installment Sale Agreement. This Installment Sale Agreement may be amended by the City, but only with the prior written consent of[Bank] (which consent may not be unreasonably withheld). SECTION 4.12. Tax Covenants. (a) Generally. The City shall not take any action or permit to be taken any action within its control which would cause or which, with the passage of time if not cured would cause, the interest components of the Installment Payments to become includable in gross income for federal income tax purposes. (b) Private Activity Bond Limitation. The City shall assure that the proceeds of the Installment Sale are not so used as to cause the Installment Sale to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Tax Code. (c) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Installment Payments to be"federally guaranteed"within the meaning of Section 149(b) of the Tax Code. 09960.00000181 18713 1 14 (d) No Arbitrage. The City shall not take, or permit or suffer to be taken, any action with respect to the proceeds of the Installment Payments which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Installment Payments to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (e) Small Issuer Exemption from Bank Nondeductibility Restriction. The City hereby designates this Installment Sale Agreement for purposes of paragraph (3) of Section 265(b) of the Tax Code and represents that not more than $10,000,000 aggregate principal amount of obligations the interest on which is excludable (under Section 103(a) of the Tax Code) from gross income for federal income tax purposes (excluding (i) private activity bonds, as defined in Section 141 of the Tax Code, except qualified 501(c)(3) bonds as defined in Section 145 of the Tax Code and (ii) current refunding obligations to the extent the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation), including this Installment Sale Agreement, has been or will be issued by the City, including all subordinate entities of the City, during the calendar year 2013. (0 Arbitrage Rebate. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Installment Sale. (g) Acquisition Disposition and Valuation of Investments. Except as otherwise provided in the following sentence, the City covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Installment Sale Agreement, or otherwise containing gross proceeds of the Installment Sale (within the meaning of section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Installment Sale Agreement or the Tax Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code shall be valued at their present value (within the meaning of section 148 of the Tax Code). For purposes of this subsection (g), the term "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security — State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a 10% beneficial interest therein if the return paid by the fund is without regard to the source of the investment. 0060.00000\81187111 15 ARTICLE V EVENTS OF DEFAULT AND REMEDIES SECTION 5.1. Events of Default Defined. The following shall be Events of Default under this Installment Sale Agreement. (a) Failure by the City to pay any Installment Payment on the Installment Payment Date on which it is due. (b) failure to pay other amounts required to be paid hereunder within fifteen (15) days of the time specified herein, and such failure is not cured within ten (10) days after written notice thereof by[Bank]. (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder other than as referred to in the preceding clauses (a) and (b) of this Section, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by [Bank] provided, however, if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such thirty (30) day period, [Bank] shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within such thirty (30) day period and diligently pursued until the default is corrected. (d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted. (e) An event of default as defined under any contracts or agreements relating to any Parity Debt. SECTION 5.2. Remedies on Default. Whenever any Event of Default shall have happened and be continuing, [Bank] shall have the rights, at its option and without any further demand or notice to: (a) declare all principal components of the unpaid Installment Payments, together with accrued interest thereon at the rate of interest per annum represented by the Installment Sale from the immediately preceding Installment Payment Date on which payment was made, to be immediately due and payable, whereupon the same shall immediately become due and payable; and, (b) take whatever action at law or in equity may appear necessary or desirable to collect the Installment Payments then due or thereafter to become due during the Term of this Installment Sale Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Installment Sale Agreement. 09960.00000W 18713.1 16 The provisions of the preceding clause (a) are subject to the condition that if, at any time after the principal components of the unpaid Installment Payments shall have been so declared due and payable pursuant to the preceding clause (a), and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the City shall deposit with [Bank] a sum sufficient to pay all principal components of the Installment Payments coming due prior to such declaration and all matured interest components (if any) of the Installment Payments, with interest on such overdue principal and interest components calculated at the rate set forth in Section 3.6(c) and the reasonable expenses of [Bank] (including any fees and expenses of its attorneys), and any and all other defaults known to [Bank] (other than in the payment of the principal and interest components of the Installment Payments due and payable solely by reason of such declaration) shall have been made good, then, and in every such case, [Bank] may, by written notice to the City rescind and annul such declaration and its consequences. However, 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 5.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to [Bank] is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Installment Sale Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle [Bank] to exercise any remedy reserved to it in this Article V it shall not be necessary to give any notice, other than such notice as may be required in this Article V or by law. SECTION 5.4. Agreement to Pay Attorneys' Fees and Expenses. In the event either party of this Installment Sale Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys (including in-house counsel) or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys (including the allocable cost of in-house counsel) and such other expenses so incurred by the nondefaulting party. SECTION 5.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Installment Sale Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. ARTICLE VI PREPAYMENT OF INSTALLMENT PAYMENTS SECTION 6.1. Security Deposit. Notwithstanding any other provision of this Installment Sale Agreement, the City may on any date secure the payment of Installment Payments, in whole, by irrevocably depositing with a fiduciary an amount of cash which, together with other available amounts, is either (a) sufficient to pay all such Installment Payments, including the principal and interest components thereof, when due pursuant to 09960.00000\81 I8713 1 17 Section 3.4(a), or (b) invested in whole or in part in Federal Securities in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay all such Installment Payments when due pursuant to Section 3.4(a) or when due on any optional prepayment date pursuant to Section 6.2, as the City shall instruct at the time of said deposit. In the event of a security deposit pursuant to this Section for the payment of all remaining Installment Payments, all obligations of the City under this Installment Sale Agreement, and the pledge of Net Revenues and all other security provided by this Installment Sale Agreement for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all of Installment Payments from such security deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of such Installment Payments in accordance with the provisions of this Installment Sale Agreement. SECTION 6.2. Optional Prepayment. The City shall have the option to prepay the principal component of the Installment Payments in whole or in part, on any date by paying Installment Payments required to be paid on such date plus accrued interest to the date set for prepayment, with no prepayment premium. The City shall give [Bank] written notice of its intention to exercise its option not less than thirty (30) days in advance of the date of such prepayment. SECTION 6.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall prepay the unpaid principal component of the Installment Payments in whole on any date or in part, on any Installment Payment Date, from and to the extent the City determines to apply any Net Proceeds of insurance award or condemnation award with respect to the Enterprise for such purpose pursuant to Sections 4.2 or 4.3 at a price equal to the principal amount to be prepaid plus accrued interest to the date set for such prepayment. The City and [Bank] hereby agree that such proceeds, to the extent remaining after payment of any delinquent Installment Payments, shall be credited towards the City's obligations under this Section 6.3. ARTICLE VII MISCELLANEOUS SECTION 7.1. Notices. All written notices to be given under this Installment Sale Agreement shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by telecopier or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by facsimile, e-mail or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. [Bank], the City or the Assignee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. 09960 00000181 18713.1 18 If to the City: City of San Jacinto 312 East Main Street San Jacinto, CA 92583 Attention: City Manager If to [Bank]: Attention: SECTION 7.2. Binding Effect. This Installment Sale Agreement shall inure to the benefit of and shall be binding upon [Bank] and the City and their respective successors and assigns. SECTION 7.3. Severability. In the event any provision of this Installment Sale Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 7.4. Net-net-net Contract. This Installment Sale Agreement shall be deemed and construed to be a "net-net-net' contract, and the City hereby agrees that the Installment Payments shall be an absolute net return to [Bank], free and clear of any expenses, charges or set-offs whatsoever. SECTION 7.5. Further Assurances and Corrective Instruments. [Bank] and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the expressed intention of this Installment Sale Agreement. SECTION 7.6. Execution in Counterparts. This Installment Sale Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 7.7. Applicable Law. This Installment Sale Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 7.8. Captions. The captions or headings in this Installment Sale Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Installment Sale Agreement. 09960.00000\8118713.1 19 IN WITNESS WHEREOF, [Bank] has caused this Installment Sale Agreement to be executed in its corporate name by its duly authorized officer, and the City has caused this Installment Sale Agreement to be executed in its name by its duly authorized officer, as of the date first above written. CITY OF SAN JACINTO By City Manager By 09960,00000\81 18713.1 20 EXHIBIT A SCHEDULE OF INSTALLMENT PAYMENTS Installment Payments (Interest Rate_%) Period Annual Ending Principal Coupon Interest Debt Service Debt Service [to come] 09960.00000\81 18713 1 A-I EXHIBIT B DESCRIPTION OF THE PROJECT [to come] 09960.00000181 18713 1 B-1 EXHIBIT C ACKNOWLEDGEMENT OF ASSIGNMENT The undersigned hereby acknowledges the assignment by [BANK] over to (the "Assignee") of that certain Installment Sale Agreement dated as of August I, 2013 (the "Installment Sale Agreement'), entered into between [BANK], as seller and the undersigned as purchaser. With respect to the Installment Sale Agreement, the undersigned agrees to pay, commencing with the Installment Payment, scheduled for [date] all Installment Payments and moneys due or to become due under the Installment Sale Agreement to the Assignee and further agrees it shall have no counterclaim or offset against Installment Payments due thereunder as to the Assignee and expressly further agrees that the Assignee shall not (except for the obligations specifically set forth in the assignment agreement between [Bank] and the Assignee) be liable for any of the obligations or burdens of[Bank] under the Installment Sale Agreement. IN WITNESS WHEREOF, the City has caused this Acknowledgment of Assignment to be executed by its authorized agent on the date specified below. CITY OF SAN JACINTO By Title Date 09960.00000\81 18713 1 C-1 INCUMBENCY AND SIGNATURE CERTIFICATE I do hereby certify that I am the duly appointed and acting City Clerk of the City of San Jacinto, a municipal corporation validly existing under the Constitution and laws of the State of California (the "City"), and that, as of the date hereof, the individual named below is the duly appointed officer of the City holding the office set forth opposite his/her respective name. I further certify that (i) the signature set forth opposite his/her respective name and title is true and authentic and (ii) such officer has the authority on behalf of the City to enter into that certain Installment Sale Agreement dated as of August 1, 2013, by and between the City and [Bank] and all documents related thereto. Name Title Sianature IN WITNESS WHEREOF, I have duly executed this certificate this day of August, 2043. City Clerk 09960.00000\8118713.1 C-2 EXHIBIT D FORM OF CERTIFICATE OF PURCHASER To: City of San Jacinto 312 East Main Street San Jacinto, CA 92583 Attention: City Manager Re: Installment Sale Agreement dated as of August 1, 2013 (the "Installment Sale Agreement') by and between [Bank] and the City of San Jacinto (the"City") Capitalized terms used herein not otherwise defined have the meanings ascribed to such terms in the Installment Sale Agreement. The undersigned (the"Purchaser") hereby certifies to the City: I. The Purchaser has requested from the City all legal and financial information with respect to the City as it deems necessary to make its decision to purchase the interest in the Installment Sale Agreement; and the City has provided all such requested information. The Purchaser acknowledges that it has read and understands the matters and terms stated in the documents and materials or other information as provided by the City. 2. The Purchaser(MARK OR INDICATE APPROPRIATELY): �] is a "qualified institutional buyer" (a "Qualified Institutional Buyer") within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended (the"Securities Act'), �] is an "accredited investor" (an "Accredited Investor") as described in Section 501(a) of Regulation D promulgated under the Securities Act. 3. The Purchaser has sufficient knowledge and experience in financial and business matters to understand and evaluate the merits and risks of purchasing and holding the interest in the Installment Sale Agreement. 4. The Purchaser is acquiring the interest in the Installment Sale Agreement purchased by it for its account or for one or more accounts (each of which is a Qualified Institutional Buyer or an Accredited Investor). The Purchaser is purchasing the interest in the Installment Sale Agreement not in the capacity of an underwriter, nor with a view to the public distribution thereof. 5. The Purchaser has made an independent investigation and evaluation of the financial condition and prospects of, and the risks associated with, the interest in the Installment Sale Agreement, the City, and the Enterprise, or has caused such investigation and evaluation to be made by persons it deems competent to do so, and it has not relied upon the City in making its decision to purchase the interest in the Installment Sale Agreement. 09960M000\8 1 18713 1 D-1 6. The Purchaser understands that neither the members of the City Council, the officers or the agents of the City, nor any person executing the Installment Sale Agreement, shall be subject to any personal liability or accountability by reason of or in connection with the Installment Sale Agreement. 7. The Purchaser understands and agrees that the sale of the interests in the Installment Sale Agreement is exempt from Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Rule") and that the City is not obligated, except as set forth in the Installment Sale Agreement, to provide other or further information to the Purchaser after the date hereof; provided, however, that the City shall have a duty to correct (i) any untrue statement of a material fact or (ii) any omission of a material fact necessary to make a statement made therein not misleading in light of the circumstances under which it was made, in the Installment Sale Agreement or in any financial statements of the City provided to the Purchaser, or in any of the other information provided to the Purchaser by or on behalf of the City. IN WITNESS WHERE, the Purchaser has caused this Certificate to be executed by its authorized representative as of the day of August, 2013. Firm Name: By: Name: Title: 09960.00000%81 18713 1 D-2