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Home My WebLink AboutS-5- Finance C11 ' OF SAN BERNARDC-1) - REOUCT FOR COUNCIL AC`70N From: WARREN A. KNUDSON Subject:APPROVAL OF DOCUMENTS FOR ASSOCIATION OF BAY AREA GOVERNMENTS (A.B.A.G.) Dept: FINANCE LEASE AGREEMENT FOR FINANCING OF CITY HALL FURNITURE AND FURNISHINGS AND Date: MARCH 3, 1988 TYPESETTING EQUIPMENT Synopsis of Previous Council action: 10-05-87 - Award of bid for City Hall Furniture and Furnishings. 01-04-88 - Award of bid for Typesetting Equipment. 01-04-88 - Staff directed to determine if there is a viable lease/purchase option available and provide the Mayor and Common Council with best alternative on January 19, 1988. O1-19-88 - Staff authorized to submit an application to ABAG for City Hall furniture and come back with documentation. Recommended motion: 1. Adopt resolution authorizing the acquisition, improvement and installation of certain capital equipment for the City of San Bernardino authorizing the City of San Bernardino to enter into a lease agreement with Association of Bay Area Governments for purposes of financing such capital equipment; and author- izing the execution of other instruments and taking of other actions related to such financing. 2. Authorize the Mayor to execute the related documents. Signature Contact person: WARREN A KNUDSON Phone: 5242 Supporting data attached: YES Ward: N/A $420,000.00 - RENOVATION FUND-3YR FUNDING REQUIREMENTS: Amount: $466,590.42 Source: $ 46/,/590.42 - GENERAL FUND - 5 YR Finance: !/!)a__._email Council Notes: 75-0262 Agenda Item No. CIZ .' OF SAN BERNARD[ D - REQUL ,T FOR COUNCIL AC'. -ON STAFF REPORT On October 5, 1987, the Mayor and Common Council awarded the bid for City Hall furniture and furnishings. On January 4, 1988, the bid was awarded for Type- setting Equipment. Lease-purchase financing was sought for these acquisitions and on January 19, 1988, staff was authorized to submit an applicaiton to ABAG (Association of Bay Area Governments) . The desired end result was to obtain financing to finalize the transactions by mid-March to coincide with the delivery of furniture and furnishings. The furniture and furnishings was to have a lease-purchase period of three years and the typesetting equipment five years. ABAG has approved cooperating membership status for the City of San Bernardino. The dues for such membership is $500 for 1987-88. The rate from ABAG is variable, and is currently 7. 185%. Over the past five years the rate has averaged 7.5%. Should conditions change and the City wish to buy out of this arrangement, we could do so with 40 days notice and no penalty. The attached draft documents have been reviewed by the City Attorney's office. The recommended motions will allow finalization of the arrangements and execution of the necessary documents. URGENCY Approval at the March 7 meeting is neccessary in order to effect payment to coincide with delivery of furniture and furnishings. 75-0264 RESOLUTION NO. RESOLUTION AUTHORIZING THE ACQUISITION, IMPROVEMENT AND INSTALLATION OF CERTAIN CAPITAL EQUIPMENT FOR THE CITY OF SAN BERNARDINO AUTHORIZING THE CITY OF SAN BERNARDINO TO ENTER INTO A LEASE AGREEMENT WITH ASSOCIATION OF BAY AREA GOVERNMENTS FOR PURPOSES OF FINANCING SUCH CAPITAL EQUIPMENT ; AND AUTHORIZING THE EXECUTION OF OTHER INSTRUMENTS AND THE TAKING OF OTHER ACTIONS RELATED TO SUCH FINANCING WHEREAS, Association of Bay Area Governments ("ABAG") is a joint powers agency created and operating under the California Government Code Sections 6500 et seq, and as such, is authorized under the Marks-Roos Local Bond Pooling Act of 1985 commencing with Section 6584 of the California Government Code, as amended (the "Act") , to issue its bonds to finance public capital improvements for local agencies (as such terms are defined in the Act) which are parties to the Agreement creating ABAG or political subdivisions of such parties; and WHEREAS , ABAG is authorized by the Act to enter into lease agreements pursuant to which local agencies lease public capital { improvements from ABAG, and ABAG is authorized by the Act to charge and collect rents under such lease agreements; and WHEREAS, in response to the demand of local agencies to finance public capital improvements and in furtherance of the "significant public benefits" (as defined in Section 6586 of the Act) to be gained by the entry of such local agencies into ABAG's pooled lease financing program (the "Program") , ABAG issued its Association 3 of Bay Area Governments Lease Revenue Bonds (Pooled Projects) Series 1987 (the "Bonds") in the aggregate principal amount of $55,000,000 pursuant to the Act and the hereinafter defined Indenture to finance the cost of public capital improvements to be leased by ABAG to local agencies of ABAG (within the meaning of Section 6585(f) of the Act) (collectively, the "Lessees") ; and WHEREAS, in order to accomplish the foregoing purposes, ABAG proposes to use the proceeds of the Bonds to acquire, construct, install and equip public capital improvements as defined in Section 6585(g) of the Act (collectively, the "Projects") and lease the Projects to the Lessees pursuant to Lease Agreements to be entered into between ABAG and the Lessees and, pursuant to a Trust Indenture (the "Indenture") dated as of April 1, 1987, between ABAG and Seattle- First National Bank, as trustee (the "Trustee") , as supplemented and amended by a First Supplemental Trust Indenture (the "First Supplemental Indenture") dated as of February 1, 1988, between ABAG and the Trustee (the Original Indenture, as supplemented and amended by the First Supplemental Indenture, being hereinafter referred to as i the "Indenture") , ABAG has pledged and assigned the right to receive and enforce the rental payments thereunder to the Trustee to secure the Bonds; and 0 . a WHEREAS, the City of San Bernardino, California, a municipal corporation and a charter city duly organized and existing under the laws of the State of California (the "City") , is a "local agency" (within the meaning of Section 6585(f) of the Act) , and the City intends to cause the acquisition and installation of certain capital equipment as described in more detail in Exhibit C to the proposed form of Lease Agreement (the "Lease Agreement") to be dated as of March 1, 1988, between ABAG, as lessor, and the City, as lessee (such capital equipment, as more particularly described in the Lease Agreement, being herein referred to as the "Project") , and the Project constitutes "public capital improvements" (within the meaning of Section 6585(g) of the Act) ; and WHEREAS, the Mayor and the Common Council of the City (the "Council") find that "significant public benefits" (within the meaning of Section 6586 of the Act) will accrue to the City if the Project is financed with a portion of the proceeds of the Bonds through the City's participation in the Program; and WHEREAS, there have been reviewed by the Mayor and the Council with the aid of its staff and are now before this meeting the following documents entered into in connection with the Program and the issuance of the Bonds: (1) The Original Indenture, including as exhibits thereto the form of Bond and the form of Lease Agreement to be entered into by ABAG, as lessor, and each Lessee as it enters the Program and the First Supplemental Indenture; (2) Reimbursement Agreement dated as of April 1, 1987 (the "Reimbursement Agreement") between ABAG and National Westminster Bank PLC, acting through its New York Branch (the "Bank") , including as Exhibit X thereto the form of Irrevocable Direct Pay Letter of Credit (the "Letter of Credit") issued by the Bank to secure the Bonds, as Exhibit Y thereto the Pledge Agreement (hereinafter defined) and as Exhibit Z thereto the form of Letter of Representation to be delivered by each Lessee to ABAG and the Bank in connection with the execution of its Lease Agreement; (3) TENR Services and Remarketing Agreement dated as of April 1, 1987 (the "Remarketing Agreement") between ABAG and Bankers Trust Company, as remarketing agent (the "Remarketing Agent") ; (4) Pledge and Security Agreement dated as of April 1, 1987 (the "Pledge Agreement") between ABAG and the Bank; (5) Tender Agent Agreement dated as of April 1, 1987 (the "Tender Agent Agreement") among ABAG, IBJ Schroder Bank & Trust Company, as tender agent (the "Tender Agent") , and the Trustee; and (6) Arbitrage Regulation Agreement dated April 21, 1987 (the "Arbitrage Agreement") between ABAG and the Trustee; and WHEREAS, there have been prepared and are now before this meeting the following forms of documents to be entered into in connection with the City's participation in the Program in order to finance the Project and such forms of documents have been reviewed by the Mayor and the Council with the aid of its staff: (7) Lease Agreement, including as exhibits thereto, certain definitions, a description of Lease Payments payable under the Lease Agreement, a description of the Project, addresses for notices pursuant to the Lease Agreement and a description of certain contracts, if any, to be assigned by the City to ABAG in connection with the Project, and a description of certain previously acquired portions of the Project, if any; and (8) Letter of Representation (the "Letter of Representation") to be executed and delivered by the City to ABAG and the Bank as required by the Reimbursement Agreement; NOW THEREFORE, BE IT RESOLVED by the Mayor and the Common Council of the City of San Bernardino, as follows: Sectio 1, The City is hereby authorized to enter into the Lease Agreement in substantially the form presented to this meeting, under which the Projects shall be acquired, installed and leased by ABAG to the City, all upon the terms and conditions as set forth in said form of Lease Agreement, submitted to and reviewed by the Council, on the date hereof, with such changes from the form of Lease Agreement presented to this meeting as shall be approved by the Authorized Representative executing the Lease Agreement on behalf of the City, such Authorized Representative's signature thereon being conclusive evidence of such approval. Section 2. The City is hereby authorized to execute and deliver the Letter of Representation in substantially the form submitted to and reviewed by the Mayor and the Council on the date hereof, with such changes from the form of Letter of Representation presented to this meeting as shall be approved by the Authorized Representative executing the Letter of Representation on behalf of the City , such Authorized Representative' s signature thereon being conclusive evidence of such approval. Section 3. The Mayor and the Council hereby find and determine in accordance with section 6586 of the Act that the financing of the Project through the City's participation in the Program as authorized by this Resolution will result in significant public benefits for the City by demonstrable savings in effective interest rate expenses and financing expenses associated with the Project. The Mayor and the Council hereby find and determine that the Project and the leasing of the Project as provided in this Resolution serves a governmental function and a public purpose of the City and the Project constitute Public Capital Improvements within the meaning of the Indenture. Section 4. The City is hereby authorized to comply, and the Mayor and the Council agree that the City shall comply, with the provisions of the Indenture , the Arbitrage Agreement , the Reimbursement Agreement , the Pledge Agreement, the Remarketing Agreement and the Tender Agent Agreement insofar as the provisions of such instruments shall be applicable to the City. Section 5 The Mayor of the City (the "Authorized Representative") is hereby authorized and directed to execute and deliver the Lease Agreement and the Letter of Representation, for and on behalf of, and as the act and deed of, the City, and the City Clerk of the City is hereby authorized and directed to attest and impress the corporate seal of the City upon each of the foregoing documents on behalf of the City if such attestation is required. Section 6. The City shall, and the officers, employees and agents of the City are hereby authorized and directed to, take such action and execute such other agreements , documents , financing statements, certificates and instruments as may be necessary or desirable to carry out and comply with the intent of this Resolution and to carry out, comply with and perform the duties of the City with respect to the agreements mentioned herein, as executed. All acts and doings of the officers and employees of the City which are in conformity with the purposes and intent of this Resolution and in furtherance of the financing of the Project are hereby in all respects, authorized, ratified, approved and confirmed. Section 7. The provisions of this Resolution are hereby declared to be separable, and if any section, phrase or provision shall for any reason be declared invalid, such declaration shall not affect the validity of the remainder of the sections, phrases and provisions hereof. Section 8. All ordinances, resolutions and orders, or parts thereof, in conflict with the provisions of this Resolution are, to the extent of such conflict, hereby repealed. Section 9 . The provisions of this Resolution shall constitute a contract binding between the City and the owners of the Bonds, and this Resolution shall not be repealed or amended in any respect which would adversely affect the rights of such owners so long as any of the Bonds or the interest thereon remains unpaid. Section 10. This Resolution shall be in full force and effect immediately upon its passage. PASSED AND ADOPTED this day of March, 1988, by the following vote: AYES: NOES: ABSENT: By: Title: Mayor Authorized Representative (SEAL) Attest: City Clerk CERTIFICATE OF EVIDENCE OF INSURANCE The undersigned (Authorized Representative) of the (Lessee) , California does hereby certify that: (a) the self-insurance reserve sub-account of the general fund contains the amount $ ; (b) the amount set forth in paragraph (a) above, together with (description) insurance policies*, provides the minimum coverage set forth in Section(s) 5.3, 5.4 and 5.5* of the Lease Agreement dated between the Association of Bay Area Governments and the (Lessee) , California (the "Lease") ; with respect to the Project* or the portions of the Project identified on Exhibit B attached*; * Strike inapplicable language (c) attached hereto as Exhibit A is the certificate of an Insurance Consultant, as such term is defined in the Lease, stating that the reserves described in paragraph (a) above are actuarially sound; (d) the undersigned will maintain the reserves described in paragraph (a) above until the Termination Date, as defined in the Lease, and will adjust any casualty claims submitted within 14 days. IN WITNESS WHEREOF, the undersigned has hereunto set his/her signature this day of 1988. Title Authorized Representative .now ,..— DRAFT LEASE AGREEMENT dated as of March 1. 1988 by and between ASSOCIATION OF BAY AREA GOVENMENTS, as Lessor and CITY OF MORGAN HILL, CALIFORNIA, as Lessee The rights of the Association of Bay Area Governments (the "Lessor") under this Lease Agreement, including the rights to enforce the covenants , agreements, representations and warranties of the City of San Bernardino hereunder and all other rights and remedies of the Lessor hereunder (except the rights to expenses , fees and indemnification as provided herein) , has been pledged and assigned by the Lessor to Seattle-First National Bank, as trustee, under a Trust Indenture dated as of April 1, 1987, between the Lessor and said trustee. TABLE OF CONTENTS Page RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.2. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.3. Agreement to Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 1.4. Lease Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 1.5. Term of Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1. Representations, Covenants and Warranties of the Lessee. . . . . . . . . . . . . . . . . . . . . . . . SECTION 2.2. Representations, Covenants and Warranties of the Lessor 4 ARTICLE III FUNDING FOR THE PROJECT; ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT SECTION 3.1. Availability of Monies. . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.2. Acquisition, Construction and Installation of the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.3. Payment of Acquisition Costs. . . . . . . . . . . . . . . . 6 ARTICLE IV AGREEMENT TO LEASE, TERMINATION OF LEASE; LEASE PAYMENTS; TITLE TO THE PROJECT SECTION 4. 1. Agreement to Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.2. Termination of Lease. . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.3. Lease Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4.4. Possession and Enjoyment. . . . . . . . . . . . . . . . . . . . 8 SECTION 4.5. Title to the Project. . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4.6. Security Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4. 7. Abatement of Rental in the Event of Failure to Have Use and Possession of the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 -i- ARTICLE V MAINTENANCE, TARES, INSURANCE; AND OTHER MATTERS SECTION 5. 1. Maintenance and Taxes. . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 5.2. Modification of Project. . . . . . . . . . . . . . . . . . . . . 12 SECTION 5.3. Public Liability and Property Damage Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 5.4. Fire and Extended Coverage Insurance. . . . . . . . 13 SECTION 5.5. Rental Interruption Insurance. . . . . . . . . . . . . . . 14 SECTION 5.6. Net Proceeds of Insurance; Form of Policies; Retaining of Insurance Consultant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 5.7. Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 5.8. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 5.9. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 5. 10. Application of Net Proceeds. . . . . . . . . . . . . . . . . 17 SECTION 5.11. Agreement to Pay Program Expenses. . . . . . . . . . . 18 SECTION 5. 12. Pledged Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 5.13 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VI DISCLAIMER OF WARRANTIES; ACCESS SECTION 6. 1. Disclaimer of Warranties. . . . . . . . . . . . . . . . . . . . 19 SECTION 6.2. Lessee's Right to Enforce Warranties. . . . . . . . 19 SECTION 6.3. Lessor and Credit Issuer Access to the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII ASSIGNMENT, SUBLEASING AND INDEMNIFICATION SECTION 7. 1. Assignment by Lessor. . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 7.2. Assignment and Subleasing by the Lessee. . . . . 20 SECTION 7 . 3. Release and Indemnification Covenants. . . . . . . 20 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.1. Events of Default Defined. . . . . . . . . . . . . . . . . . . 21 SECTION 8.2. Remedies on Default. . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 8.3. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 8.4. Agreement to Pay Attorneys' Fees and Expenses. . . . . . 23 . . . . . . . . . . . . . . . . . . SECTION 8. 5. No Additional Waiver Implied by One Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 -ii- Q3 ARTICLE I% OPTION TO PURCHASE; OPTION TO PREPAY SECTION 9.1. Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 9.2. Exercise of Option. . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 9. 3. Transfer of Title and Release of Lessor's Interest. . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 9.4. Option to Prepay. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE R MISCELLANEOUS SECTION 10.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 10.2. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 10.3. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 10.4. Amendments, Changes and Modifications. . . . . . . 26 SECTION 10.5. Net-net-net Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 10.6. Further Assurances and Corrective Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 10.7. Execution in Counterparts. . . . . . . . . . . . . . . . . . . 26 SECTION 10.8. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 10.9. Lessor and Lessee Representatives. . . . . . . . . . . 27 SECTION 10.10. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Exhibit A - Definitions Exhibit B - Description of Lease Payments Exhibit C - Description of Project Exhibit D - Addresses for Notices Exhibit E - Contracts Assigned to Lessor Exhibit F - Description of Previously Acquired Portion of Project -iii- LEASE AGREEMENT THIS LEASE AGREEMENT, dated as of the Dated Date (hereinafter defined) , by and between Association of Bay Area Governments, a joint powers agency duly organized and existing under the laws of the State of California, as lessor (the "Lessor") , and the Lessee (hereinafter defined) , a Political Subdivision (hereinafter defined) duly organized and existing under the laws of the State of California. WITNESSETH: WHEREAS, the Lessor has issued $55,000,000 in aggregate principal amount of its Lease Revenue Bonds (Pooled Projects) Series 1987 (the "Bonds") pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code, as amended (the "Act") , for the purpose of providing funds under a program (the "Program") to finance the "cost" of the various "public capital improvements" (within the respective meanings of such terms in Sections 6585(d) and (g) of the Act) (collectively, the "Projects") to be leased by the Lessor to the Lessees pursuant to lease agreements (collectively, the "Leases") to be entered into between the Lessor, as lessor, and members of the Lessor which are "local agencies" of the Lessor (within the meaning of such term in Section 6585 (f) of the Act) , as lessees (collectively, the "Lessees") ; and WHEREAS, the Bonds have been issued and are secured under a Trust Indenture (the "Indenture") dated as of April 1, 1987, between the Lessor and Seattle-First National Bank, as trustee (together with its successors in said trust, the "Trustee") ; and WHEREAS, National Westminster Bank PLC (the "Initial Credit Issuer") , acting through its New York Branch, has executed and delivered its Transferable Irrevocable Direct Pay Letter of Credit (the "Initial Credit Facility") to provide security for the Bonds, and the Indenture provides that a letter of credit, insurance policy, guaranty, surety bond or other agreement (a "Substitute Credit Facility") satisfying the conditions contained in the Indenture may be delivered in substitution for the Initial Credit Facility or any Substitute Credit Facility, at the time securing the Bonds is herein referred to as the "Credit Facility" and the issuer of such Credit Facility is herein referred to as the "Credit Issuer"; and WHEREAS , the Initial Credit Facility has been issued pursuant to a Reimbursement Agreement (the "Initial Credit Agreement") dated as of April 1, 1987, between the Lessor and the Initial Credit Issuer, and the agreement pursuant to which the Credit Facility at the time securing the Bonds is issued is herein referred to as the "Credit Agreement" ; and WHEREAS, the Lessee is a "local agency" of the Lessor (within the meaning of such term in Section 6585(f) of the Act, a "Local Agency") , and the Governing Body (hereinafter defined) of the Lessee has determined that it desires that certain "public capital improvements" (within the meaning of such term in Section 6585(8) of the Act, "Public Capital Improvements") identified in Exhibit C attached hereto and hereby made a part hereof (the "Project") be financed under the Program and leased by the Lessor to the Lessee pursuant to this Lease Agreement (this "Lease") , and the Lessor and the Lessee are authorized under the laws of the State of California (the "State") to execute, deliver and perform this Lease; and WHEREAS, the Lessor has assigned all of its rights, title and interest under this Lease (except its rights to receive payment of its fees and expenses and indemnification as herein provided) to the Trustee under the Indenture as security for the Bonds and the obligations of the Lessor under the Credit Agreement; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1 Definitions. Unless the context otherwise requires, capitalized terms used herein and in the Exhibits hereto, have the meanings specified in the preambles hereto or in Exhibit A hereto. All capitalized terms not defined herein shall have the meanings ascribed to them in the Indenture. SECTION 1.2 Exhibits. The following Exhibits are attached to, and by reference made a part of, this Lease; Exhibit A: Definitions. Exhibit B: Description of Lease Payments to be paid by the Lessee to the Trustee, as assignee of the Lessor. -2- Exhibit C: Description of the Project. Exhibit D: Addresses for Notices. Exhibit E: Contracts Assigned to Lessor. Exhibit F: Description of Previously Acquired Portion of Project SECTION 1.3 Agreement to Lease. The Lessor leases the Project to the Lessee, and the Lessee hereby leases the Project from the Lessor upon the terms and conditions as herein provided. SECTION 1.4 Lease Payments. As rental for the Project, the Lessee agrees to pay to the Lessor or its assigns, the Lease Payments as described in Exhibit B. SECTION 1.5 Term of Lease. The Term of this Lease shall commence as of the Dated Date and shall end on the Termination Date. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1.Revresentations. Covenants and Warranties of the Lessee. The Lessee represents, covenants and warrants to the Lessor as follows. (a) The Lessee is duly organized and validly existing Political Subdivision of the State and is a Local Agency of the Issuer. (b) The constitution and the laws of the State authorize the Lessee to enter into this Lease and to enter into the transactions contemplated by and to carry out its obligations under this Lease and the Lessee has duly authorized and executed this Lease in accordance with the laws of the State. (c) Neither the execution and delivery of this Lease nor the fulfillment of nor compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any charter, agreement or instrument to which the Lessee is now a party or by which the Lessee 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 the Lessee, or upon the Project, except Permitted Encumbrances. -3- (d) The Project constitutes Public Capital Improvements, and all disbursements from the Program Fund for the Project or to satisfy the obligations of the Lessee under this Lease will be for a Cost of the Project. (e) The Lessee is not in default under any provisions of the laws of the State which would adversely affect its existence or its powers referred to in Subsection (b) of this Section. (f) The Estimated Cost of the Project is as set forth in Exhibit C hereto and has been determined in accordance with generally accepted accounting principles. (g) The Lessee will comply in all respects with the terms of the Arbitrage Agreement and the Indenture ( including particularly, without limitation, Section 4.02 thereof) and will not take any action which will adversely affect, and will not fail to take any action if such failure would adversely affect , the exemption from federal income taxation of the interest on the Bonds. (h) Neither the Lessee nor any related person (as defined in the Regulations, as defined in the Arbitrage Agreement) shall purchase governmental obligations in an amount related to the amount of the Bonds or the Principal Component under this Lease. SECTION 2.2. Representations, Covenants and Warranties of the Lessor. The Lessor represents , covenants and warrants to the Lessee as follows: (a) The Lessor is a joint powers agency duly organized, existing and in good standing under and by virtue of the laws of the State, including, particularly, without limitation, Section 6500 et seq. , of the California Government Code, as amended, has power to enter into this Lease, the Indenture and the Arbitrage Agreement; is possessed of full power to own and hold real and personal property and to lease and sell the same, and has duly authorized the execution and delivery of each of the aforesaid instruments. (b) The Lessor will not pledge the Lease Payments or other amounts derived from the Project and from its other rights under this Lease, and will not encumber the Project, except as provided under the terms of the Indenture. (c) Neither the execution and delivery of this Lease, the Indenture or the Arbitrage Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the -4- 1 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 Lessor is now a party or by which the Lessor is bound, including, particularly, without limitation, the ABAG Agreement and the Bylaws, 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 the Lessor, or upon the Project, except Permitted Encumbrances. (d) Except as provided in this Lease and in the Indenture, the Lessor will not assign this Lease, its right to receive Lease Payments from the Lessee, or its rights, duties and obligations under this Lease to any other person, firm or corporation so as to impair or violate the representations, covenants and warranties contained in this Section 2.2. ARTICLE III FUNDING FOR THE PROJECT; ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT SECTION 3. 1. Availability of Monies. The Lessor hereby agrees to pay for the Costs of the Project as provided herein and in the Indenture. The Lessor has caused an amount equal to the Estimated Cost to be transferred to the Designated Program Account in accordance with the Indenture. The Lessor hereby agrees to cause the Trustee to disburse funds from the Designated Program Account to pay, or to reimburse the payment of, certain Costs of the Project as provided in the Indenture. SECTION 3.2. Acquisition. Construction and Installation of the Project. The Lessee will, as agent of the Lessor, enter into purchase orders and contracts, and will supervise and provide for, or cause to be supervised and provided for, as agent for the Lessor, the complete acquisition, construction and installation of the Project. The Lessee agrees that it will cause the work under said contracts to be diligently performed and that the Project will be acquired, constructed and installed in accordance with the specifications approved by the Lessee on or prior to the Acceptance Deadline. The Lessee may, with the approval of the Credit Issuer, change the specifications of the Project, so long as such change does not reduce the value of the Project or substantially alter the nature of the Project or impair the exemption of interest on the Bonds from federal income taxation, and that any increase in costs of the Project above the Estimated Cost shall not result from such change, unless the Lessee deposits an amount sufficient to pay such increased costs -5- in an account (the "Restricted Account") with a bank acceptable to the Lessor and the Credit Issuer with restrictions acceptable to the Lessor and the Credit Issuer to make certain that amounts on deposit in the Restricted Account may only be used to pay such increased costs of the Project. In addition, in the event that the costs of acquiring, constructing and installing the Project are greater than the amount of the Estimated Cost plus any amounts deposited in or transferred to the Restricted Account, together with investment earnings thereon, the Lessee agrees to deposit into the Restricted Account an amount of money necessary to pay such increased costs, but only from funds arising in the fiscal year in which the Lessee has entered into this Lease. The Lessee agrees that upon substantial acquisition, construction and installation of any discrete portion of the Project, it will take possession of that portion of the Project under the terms and provisions of this Lease. The Lessee does hereby sell, assign and transfer to the Lessor all of its rights under the contracts with respect to any portion of the Project for which the Lessee has contracted prior to the date of the Closing of this Lease, which contracts are attached to this Lease as Exhibit E. Upon completion of acquisition, construction and installation of the Project reasonably satisfactory to the Lessee, but in any event not later than the Acceptance Deadline, the Lessee shall deliver to the Lessor, the Trustee and the Credit Issuer, a Certificate of Completion. The parties agree that this Lease shall be deemed to be effective as to each component of the Project as it is acquired, constructed or installed. Upon substantial acquisition, construction or installation of a discrete portion of the Project, the Lessee agrees to deliver to the Lessor, the Trustee and the Credit Issuer a certificate of acceptance (a "Certificate of Acceptance") . Such Certificate of Acceptance shall indicate the proportionate amount of the Lessee' s Project so accepted and the Lessee agrees that a portion of the Lease Payments shown on Exhibit B to this Lease (in an amount proportionate to the discrete portion of the Project accepted and as indicated in the Certificate of Acceptance) represent valid rental value for such discrete portion of the Project. SECTION 3.3. Payment of Acquisition Costs. Payment to the Contractors of the cost of acquiring, constructing and installing the Project shall be made from the monies deposited in the Designated Program Account as provided in Section 5.02 of the Indenture and from the Restricted Account in accordance with the restrictions applicable thereto. -6- ARTICLE IV AGREEMENT TO LEASE, TERMINATION OF LEASE; LEASE PAYMENTS; TITLE TO THE PROJECT SECTION 4.1. Agreement to Lease. The lease of the Project by the Lessor to the Lessee is made expressly subject to the terms and conditions set forth herein. SECTION 4.2. Termination of Lease. The Term of this Lease will terminate upon the earliest of any of the following events (the "Termination Date") : (a) the payment or prepayment by the Lessee of all Lease Payments due during the Term of this Lease; (b) the occurrence of an event of default under this Lease and the termination of this Lease by the Lessor or its assignee pursuant to Section 8.2(c) hereof, or (c) the Project is taken in whole pursuant to the power of condemnation and termination of this Lease pursuant to Section 5.9 of this Lease. Upon the occurrence of an event which will result in the termination of this Lease, the Trustee will not make any further disbursements for the Project from the Designated Program Account. SECTION 4.3. Lease Payments. The Lessee agrees to pay to the Lessor or its successors and assigns, as rental for the use and possession of the Project, the Lease Payments on the dates when due and in the amounts specified in Exhibit B hereto, provided that the Lessee shall receive credits toward such Lease Payments as provided in the Indenture. Lease Payments for each annual rental period during the Term of this Lease shall constitute the total rental for said rental period and shall be paid by the Lessee in each rental period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Project during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental represents the fair rental value of the Project. In making such determination, consideration has been given to the costs of acquisition, construction, delivery, installation and financing of the Project, other obligations of the parties under this Lease, the uses and purposes which may be served by the Project and the benefits therefrom which will accrue to the Lessee and the general public. -7- Each Lease Payment shall be paid in lawful money of the United States of America to or upon the order of the Lessor at the Principal Office of the Trustee. Any such installment of rental accruing under this Lease which shall not be paid when due shall bear interest at the rate of one percent (1%) per annum in excess of the interest rate per annum then borne by the Bonds related to this Lease (but not in excess of the Maximum Interest Rate) from the date when the same is due under this Lease until the same shall be paid. Lease Payments shall be paid from any source of legally available funds of the Lessee, and so long as the Project is available for the Lessee's use, the Lessee covenants to take such action as may be necessary to include all Lease Payments due under this Lease in its budgets, and to make the necessary appropriations for all such Lease Payments; which covenants of the Lessee shall be deemed to be, and shall be, ministerial duties imposed by law, and it shall be the duty of each and every public official of the Lessee to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the Lessee to carry out and perform the covenants made by the Lessee in this Lease. During the Term of this Lease, the Lessee will furnish to the Trustee, no later than 20 days following adoption of the budget for that fiscal period, a certificate of the Authorized Representative of the Lessee that the Lease Payments due in that fiscal period have been included in the budget approved by the Governing Body of the Lessee for such fiscal period. For purposes of adopting a budget and appropriating funds as provided in this Section, the Lessee will calculate the interest portion of the Lease Payments coming due hereunder in any fiscal period by assuming that the Floating Rate during such fiscal period will equal a rate per annum no less than the greater of (i) TENR in effect on the date of such appropriation plus one percent (1%) per annum or (ii) four percent (4%) per annum but not in excess of the Maximum Rate. To the extent that funds are on deposit in the Designated Reserve Account, the Designated Principal Payment Account, the Designated Interest Payment Account, the Designated Capitalized Interest Account, the Designated Program Account, the Designated Insurance and Condemnation Account and the Excess Funds Redemption Account established with respect to this Lease, the Lessee agrees to pay Lease Payments coming due hereunder from such sources , regardless of whether or not the Project has been completed. -8- SECTION 4.4. Possession and EnioYment. During the Term of this Lease, the Lessor shall provide the Lessee with quiet use and enjoyment of the Project, and the Lessee shall, during such Term, peaceably and quietly have and hold and enjoy the Project, without suit, trouble or hindrance from the Lessor, except as expressly set forth in this Lease. The Lessor will, at the request of the Lessee and at the Lessee's cost, join in any legal action in which the Lessee asserts its right to such possession and enjoyment to the extent the Lessor may lawfully do so. Notwithstanding the foregoing, the Lessor shall have the right to inspect the Project as provided in Section 6.3 hereof. SECTION 4.5. Title to the Project. During the Term of this Lease, title to the Project and any and all additions, replacements or modifications to the Project will be retained by the Lessor, except as provided below and except for those modifications which are added to the Project by the Lessee and which may be removed without damaging the Project. Upon receipt of title to any component of the Project for which a bill of sale is delivered from a Contractor, the Lessee shall deliver to the Lessor a bill of sale to such component of the Project. The Lessee shall not have any right, title or interest in the Project or in any additions, repairs, replacements or modifications thereto except as expressly provided in this Lease. If the Lessee has paid all Lease Payments during the Term of this Lease, or upon deposit of the security deposit as provided in Section 4.6 hereof, all right, title and interest of the Lessor in and to the Project shall be transferred to and vest in the Lessee. Additionally, if necessary, the Lessor shall authorize, execute and deliver to the Lessee a bill of sale in order to release any and all liens created under the provisions of this Lease and the Indenture, and any other documents required to terminate this Lease and consummate such transfer of title and release of liens. The Lessor agrees to defend and eliminate any claims adverse to the title to the Project, and to save and hold the Lessee harmless therefrom; provided that the Lessor's obligations under this sentence shall not extend to claims arising out of actions by the Lessee or persons . asserting claims under it; provided that the Lessee shall reimburse the Lessor for any costs incurred by the Lessor in defending or eliminating such claims, including reasonable attorneys' fees. -9- SECTION 4.6. Security Deposit. Notwithstanding any other provision of this Lease, the Lessee may, on any date, secure the payment of Lease Payments by a deposit with the Trustee of: (a) an amount which, together with amounts on deposit under the Indenture which are to be credited to the Lessee's obligations hereunder to make Lease Payments, is sufficient to pay all unpaid Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit B hereto, or (b) United States Government Obligations, together with Available Moneys, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon, be fully sufficient to pay all unpaid Lease Payments when due. Such deposit may not be made unless, prior to such deposit, the Lessee delivers to the Lessor, the Credit Issuer and the Trustee an opinion of Bond Counsel that such deposit will not adversely affect the exemption of interest on the Bonds from federal and state income taxation. In the event of a deposit pursuant to this Section, all obligations of the Lessee under this Lease and all security provided by this Lease for said obligations, shall cease and terminate, excepting only the obligation of the Lessee to make, or cause to be made, Lease Payments from the deposit made by the Lessee pursuant to this Section, and title to the Project shall vest in the Lessee on the date of said deposit automatically and without further action by the Lessee or the Lessor, provided that title shall be subject to the subsequent payment of Lease Payments from said deposit in accordance with the provisions of this Lease. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. SECTION 4. 7. Abatement of Rental in the Event of Failure to Have Use and Possession of the Project. The Lease Payments shall be abated in whole or in part during any period during which by reason of damage or destruction (other than by condemnation which is provided for in Section 5.9 of this Lease) there is substantial interference with the use and possession of the Project by the Lessee. The extent of such abatement shall be in proportion to the portions of the Project damaged or destroyed; provided, however, that in the event such damage or destruction results in redemption of Bonds, the remaining Lease Payments (including credits to be applied thereto as provided in the Indenture) will be sufficient to pay all of that portion of principal and interest on the remaining Outstanding Bonds which are payable out of the Lessee's Lease Payments. Such abatement shall not result so long as moneys held by the Trustee under the Indenture which are to be credited toward the Lessee's Lease Payments under the terms of the Indenture (including, particularly, without limitation, the Lessee's Designated Reserve Account, Designated Principal Payment Account, Designated Interest -10- i Payment Account and Designated Capitalized Interest Account) and Net Proceeds of insurance and rental interruption insurance are sufficient to make Lease Payments when and as due, it being hereby declared that such moneys and Net Proceeds constitute special funds for the payment of the Lessee's Lease Payments. Such abatement or adjustment, if any, shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction, if any. In the event of any such damage or destruction, this Lease shall continue in full force and effect and the Lessee waives any right to terminate this Lease by virtue of any such damage and destruction. There shall be no abatement of Lease Payments to the extent that moneys derived from any Person as a result of any defect or delay in the acquisition, construction or installation of the Project are available therefor. ARTICLE V MAINTENANCE, TARES, INSURANCE; AND OTHER MATTERS SECTION 5.1. Maintenance and Taxes. Throughout the Term of this Lease, as part of the consideration for the rental of the Project, all improvement, repair and maintenance of the Project shall be the responsibility of the Lessee, and the Lessee shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Project resulting from ordinary wear and tear or want of care on the part of the Lessee thereof. The Lessee shall comply with the manufacturer's and vendor' s requirements with respect to proper maintenance of the Project, if any. In exchange for the Lease Payments herein provided, the Lessor agrees to provide only the Project, as hereinbefore more specifically set forth. The Lessee shall also pay or cause to be paid to the Lessor all taxes of any type or nature charged to the Lessor or affecting the Project or the respective interests or estates therein, including any sales and property taxes, or affecting the amount available to the Trustee from Lease Payments received under this Lease for the payment of the Bonds (including taxes or assessments assessed or levied by any governmental agency or district having power to levy taxes or assessments) ; provided, that with respect to governmental charges that may lawfully be paid in installments over a period of years, the Lessee shall be obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same shall become due. -11- 0 a The Lessee, at the Lessee's expense and in its name, may in good faith contest any such taxes and other charges and, in the event of any such contest, may permit the taxes or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Lessor or the Credit Issuer shall notify the Lessee that, in the opinion of Counsel, by nonpayment of any such items, the interest of the Lessor in the Project will be materially endangered or the Project or any part thereof will be subject to loss or forfeiture, in which event the Lessee shall promptly pay such taxes or charges or provide the Lessor with full security against any loss which may result from nonpayment, in form satisfactory to the Lessor and the Credit Issuer. SECTION 5.2. Modification of Proiect. The Lessee shall, at its own expense, have the right to remodel the Project or to make additions and modifications thereto . All such additions and modifications shall thereafter comprise part of the Project and be subject to the provisions of this Lease. Such additions and modifications shall not adversely affect the exemption of the interest on the Bonds from federal income taxation and shall not in any way damage the Project, substantially alter its nature or cause it to be used for purposes other than those authorized under the Act and the provisions of State and federal law, and the Project, upon completion of any additions and modifications made pursuant to this Section, shall be of a value which is not substantially less than the value of the Project immediately prior to the making of such additions or modifications. The Lessee may, at any time, add or substitute items of equipment listed on Exhibit C to this Lease Agreement for other items of equipment if such addition or substitution does not require an expenditure of amounts in excess of the Estimated Cost plus any amounts on deposit in the Restricted Account, if the items of equipment added or substituted have a useful life equal to or greater than the items of equipment listed on Exhibit C hereto, and if the Lessee files with the Lessor, the Credit Issuer and the Trustee a certificate of an Authorized Representative of the Lessee notifying the Lessor, the Credit Issuer and the Trustee of such addition or substitution, identifying the equipment added or the equipment deleted and the equipment substituted therefor, and certifying that the cost of the Project after such addition, substitution or deletion will not exceed the Estimated Cost plus any amounts on deposit in the Restricted Account, together with interest earnings thereon, will be sufficient to pay all Acquisition Costs including Acquisition Costs relating to such substituted item. -12- If the total costs of equipment identified in Exhibit C hereto exceed the amount estimated therefor, the Lessor and the Lessee acknowledge that the Lessee shall delete items of equipment in Exhibit C hereto (unless the Lessee shall determine to pay costs thereof from its general funds or unless the Trustee shall determine that amounts sufficient to pay such excess costs are available in the Designated Program Account and the Credit Issuer approves such use of funds) and the Lessee shall so notify the Trustee as assignee of the Lessor. The Lessee will not permit any mechanic's or other lien to be established or remain against the Project for labor or materials furnished in connection with any remodeling, additions , modifications, repairs, renewals or replacements made by the Lessee pursuant to this Section, provided that if any such lien is established and the Lessee shall first notify the Lessor and the Credit Issuer of the Lessee' s intention to do so, the Lessee may, in good faith, contest any lien filed or established against the Project and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom, and shall provide the Lessor with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Lessor and the Credit Issuer. The Lessor will cooperate fully in any such contest, upon the request and at the expense of the Lessee. SECTION 5.3. Public Liability and Property Damage Insurance. The Lessee shall maintain or cause to be maintained, throughout the Term of this Lease (but during the period of acquisition, construction and installation of the Project only if and to the extent such insurance is not provided by the Contractors) , a standard comprehensive general insurance policy or policies in protection of the Lessor, the Lessee, the Credit Issuer, the Trustee and their Executive Board members, officers, agents and employees. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the acquisition or operation of the Project. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3 ,000,000 for personal injury or deaths of two or more persons in each accident or event (subject to a deductible clause of not to exceed $500,000) and $500,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of not less than $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried or required to be -13- carried by the Lessee, and may be maintained in the form of self- insurance by the Lessee so long as (a) the Lessee provides evidence to the Trustee, the Lessor and the Credit Issuer that the Lessee has segregated amounts in a special insurance reserve meeting the requirements of this Section 5. 3 and (b) the Trustee, the Lessor and the Credit Issuer receive a certificate of an Insurance Consultant that such reserve is actuarially sound. In such event, the Lessee covenants to maintain such reserve until the Termination Date, and the Lessee covenants to adjust any casualty claims within 14 days. SECTION 5 .4. Fire and Extended Coverage Insurance. The Lessee shall procure , or cause to be procured, and maintain throughout the Term of this Lease (but during the period of acquisition, construction and installation of the Project only if and to the extent such insurance is not provided by the Contractors) , insurance against loss or damage to any part of the Project by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, sprinkler damage, boiler explosion and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to 100% of the replacement cost of the Project or the Principal Component of the Lease Payments of the Lessee then remaining unpaid, whichever is greater (subject to a deductible clause of not to exceed $250,000) . Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried or required to be carried by the Lessee, and may be maintained in the form of self- insurance by the Lessee so long as (a) the Lessee provides evidence to the Trustee, the Lessor and the Credit Issuer that the Lessee has segregated amounts in a special insurance reserve meeting the requirements of this Section 5.4 and (b) the Trustee, the Lessor and the Credit Issuer receive a certificate of an Insurance Consultant that such reserve is actuarially sound. In such event, the Lessee covenants to maintain such reserve until the Termination Date, and the Lessee covenants to adjust any casualty claims within 14 days . SECTION 5.5. Rental Interruption Insurance. The Lessee shall procure, and maintain throughout the Term of this Lease, rental interruption insurance to cover loss, total or partial, of the use of any part of the Project as the result of any of the hazards covered in the insurance required by Section 5.4 hereof and the resulting loss of rental income to the Trustee, as assignee of the Lessor and the Issuer, in an amount sufficient to pay the maximum annual principal and interest portions of Lease Payments due under this Lease in any year plus the Lessee's Allocable Share of the quarterly fees payable to the Credit Issuer. The Net Proceeds of such insurance shall be paid to the Trustee for deposit in the Debt -14- Service Fund and shall be credited towards the payment of the Lease Payments of the Lessee in the order in which such Lease Payments become due and payable. In lieu of obtaining insurance coverage as required by this Section 5.5, such coverage may be maintained by the Lessee in the form of self-insurance so long as (a) the Lessee provides evidence to the Trustee, the Lessor and the Credit Issuer that the Lessee has segregated amounts in a special insurance reserve meeting the requirements of this Section 5.5 and (b) the Trustee, the Lessor and the Credit Issuer receive a certificate of an Insurance Consultant that such reserve is actuarially sound. In such event, the Lessee covenants to maintain such reserve until the Termination Date, and the Lessee covenants to adjust any casualty claims within 14 days. SECTION 5.6. Net Proceeds of Insurance: Form of Policies: Retaining of Insurance Consultant. The policies of insurance required by Sections 5.4 and 5.5 of this Lease shall provide that all proceeds thereunder shall be payable to the Trustee pursuant to a lender's loss payable endorsement substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Corporation. The Net Proceeds of policies of insurance under Section 5.4 hereof shall be paid to the Trustee to be applied as provided in Section 5. 10 hereof. All policies of insurance required by this Lease and any statements of self-insurance, shall be in form satisfactory to the Trustee and the Credit Issuer. The Lessee shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease and shall promptly furnish or cause to be furnished evidence of such payments to the Trustee and the Credit Issuer. All such policies shall provide that the Trustee and the Credit Issuer shall be given thirty (30) days' notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby; provided that if the Lessee shall have delivered to the Trustee and the Credit Issuer a written report of an Insurance Consultant stating that the cost of obtaining an insurance policy or policies containing such 30 day notice provision is prohibitively expensive or that such policy may not be obtained, failure of the Lessee to comply with this covenant shall not constitute a default hereunder. The Trustee shall not be responsible for the sufficiency of any insurance herein required or payment of premium and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee and the Credit Issuer. The Lessee shall promptly notify the Trustee, the Credit Issuer and the Program Administrator of any substantive change in the insurance required to be maintained by the Lessee under this Lease; provided, however, that if the Lessee determines that neither -15- 0 Q 4 maintaining the insurance coverage required by Sections 5.4 and 5.5, including a self insurance program as permitted under said Sections, is in its best interest, then the Lessee shall retain an Insurance Consultant. Such Insurance Consultant shall either (i) furnish to the Trustee and the Credit Issuer a certificate of such Insurance Consultant or other evidence satisfactory to the Trustee and the Credit Issuer that the insurance so provided by the Lessee accords the greatest amount of coverage available for the risk being insured against at rates which in the judgment of the Insurance Consultant are reasonable in connection with reasonable and appropriate risk management, or (ii) make recommendations regarding alternatives to such insurance. If the Insurance Consultant determines that an alternative risk management program is sound and recommends its adoption, the Governing Body may adopt such program which may include, without limitation, the organization of captive insurance companies either solely or in connection with other Members ; participation in programs of the captive insurance companies organized by others; participation in mutual or cooperative insurance or other risk management programs with other Members; participation in or entry into agreements with State and federal governments in order to achieve such insurance; taking advantage of State or federal statutes or law now or hereafter in existence limiting liability; or participation in other alternative risk management programs as shall be recommended by the Insurance Consultant; provided, that such alternative risk management program shall require an annual review by an Insurance Consultant. If the Credit Issuer shall have received notice of a substantive change in the insurance coverage as above provided or if the Credit Issuer shall not be furnished evidence of the payment of the premiums due on the above policies as required in the first paragraph of this Section 5.6, then at the request of the Credit Issuer the Lessee shall retain, or of its own volition the Lessee may retain, an Insurance Consultant reasonably satisfactory to the Credit Issuer to review the adequacy of the insurance coverage maintained by the Lessee as required under this Lease. The Lessee shall, subject to applicable requirements or restrictions imposed by law, and subject to a good faith determination of its Governing Body, that such recommendations, in whole or in part are in the best interest of the Lessee , comply with all of such Insurance Consultant' s recommendations to increase the amounts of such coverage or to expand the risks so covered. The Lessee shall deliver to the Lessor, the Credit Issuer and the Trustee a certificate signed by an Authorized Officer of the Lessee that such recommendations, in whole or in part, are in the best interests of the Lessee and will not materially -16- �M✓ 0 adversely affect the Owners of the Bonds or the Credit Issuer. If the Lessee determines not to comply with such recommendations, it shall file with the Trustee and the Credit Issuer a certified copy of a resolution of the Governing Body determining not to comply with such recommendations and stating in reasonable detail the reasons therefor. SECTION 5.7. Advances. If the Lessee shall fail to perform any of its obligations under this Article, the Lessor may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money to the Lessee, and the Lessee shall be obligated to repay all such advances as soon as possible, with interest at the rate of ten percent (10X) per annum from the date of the advance to the date of repayment, but in no event shall such rate exceed the maximum legal rate of interest. SECTION 5.8. Liens. The Lessee shall not, directly or indirectly, create, incur, assume or suffer to exist any pledge, lien, charge, encumbrance or claim on or with respect to the Project, other than the respective rights of the Lessor, the Trustee, the Credit Issuer and the Lessee as herein provided and Permitted Encumbrances. Except as expressly provided in this Article, the Lessee shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim for which it is responsible, if the same shall arise at any time. The Lessee shall reimburse the Lessor for any expense incurred by it in order to discharge or remove any such pledge, lien, charge, encumbrance or claim. SECTION 5.9. Condemnation. If all or part of the Project is taken under the power of condemnation, the Net Proceeds from any award resulting therefrom shall be deposited with the Trustee pursuant to Section 5. 10(b) hereof. If the Project is taken in whole pursuant to such condemnation proceedings or is taken in part to such extent that the remaining portion of the Project is no longer useful for the purposes originally intended, the remaining Lease Payment obligations of the Lessee will be abated in full and this Lease shall thereupon be terminated. Otherwise, (a) this Lease shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a proportionate abatement of Lease Payments such that the resulting Lease Payments will be sufficient to pay all of that portion of principal and interest with respect to the Outstanding Bonds which represent interests in the Lessee's Lease Payments. -17- SECTION 5.10. Application of Net Proceeds. (a) From Insurance Award . The Net Proceeds of any insurance award resulting from any damage to or destruction of the Project by fire or other casualty shall be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to Section 5. 15 of the Indenture. Upon such deposit, the Authorized Representative of the Lessee shall file a certificate with the Trustee as provided in such Section and such Net Proceeds shall be applied by the Trustee as provided in such Section. (b) From Condemnation or Eminent Domain Award. The Net Proceeds of any condemnation or eminent domain award resulting from any event described in Section 5.9 of this Lease shall be deposited in the Insurance and Condemnation Fund to be held and applied by the Trustee pursuant to Section 5.15 of the Indenture. Upon such deposit, the Authorized Representative of the Lessee shall file a certificate with the Trustee as provided in such Section and such Net Proceeds shall be applied by the Trustee as provided in such Section. SECTION 5.11. Agreement to Pay Program Expenses. The Lessee agrees to pay to the Trustee, as the assignee of the Lessor, the Lessee's Allocable Share of Program fees and expenses charged to the Lessee by the Trustee as provided in the Indenture and the Lessee's Allocable Share of amounts payable to the Credit Issuer under the Credit Agreement. The Lessee shall not be obligated to pay any portion of the fees or expenses of the Program or amounts payable to the Credit Issuer under the Credit Agreement readily attributable to another Lessee. SECTION 5.12. Pledged Bonds. The Lessee acknowledges that Bonds purchased with monies drawn under the Credit Facility as provided in Article III of the Indenture will be registered in the name of the Lessor for the account of the Lessees and will be pledged to the Credit Issuer under the Pledge Agreement. The Lessee hereby agrees to such pledging of Pledged Bonds. The Lessee agrees that it shall not purchase any Bonds being remarketed by the Remarketing Agent unless the Credit Issuer has defaulted under the Credit Facility upon a drawing thereunder to pay the Purchase Price for such Bonds. The Lessee acknowledges that it has received and reviewed a copy of the Reimbursement Agreement and the Pledge Agreement and is familiar with the provisions of such documents regarding Pledged Bonds, including, without limitation, the provisions of Section 3 of the Reimbursement Agreement. -18- 0 0 SECTION 5.13. Books and Records. The Lessee will at all times during the Term of this Lease keep proper books of record and account in which full, true and correct entries in conformity with generally accepted accounting principles shall be made of all dealings and transactions in relation to its activities. The Lessee will permit the Lessor, the Credit Issuer, any authorized representatives of the Lessor or the Credit Issuer and the Lessor's successors and assigns at reasonable times and intervals upon prior written notice to examine and make abstracts, subject to proprietary and confidentiality policies and agreements of or binding upon the Lessee, from the Lessee's books and records and to discuss the Lessee's affairs, finances and accounts with the Lessee's officers and independent accountants. The Lessee will promptly notify the Lessor and the Credit Issuer if at any time the Lessee shall not maintain a positive fund balance in its general fund. ARTICLE VI DISCLAIMER OF WARRANTIES; ACCESS SECTION 6.1. Disclaimer of Warranties. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE LESSEE OF THE PROJECT OR ANY ITEM THEREOF OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT OR ANY ITEM THEREOF. IN NO EVENT SHALL THE LESSOR, THE CREDIT ISSUER OR THE TRUSTEE BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS LEASE OR FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR THE LESSEE'S USE OF THE PROJECT. SECTION 6.2. Lessee's Right to Enforce Warranties. The Lessee shall have all rights with respect to the warranties of the Contractors with respect to the Project, and the right to enforce such warranties against the Contractors. If the Lessor is ever required or requested by the Lessee to enforce any warranty with respect to the Project on behalf of the Lessee, the Lessee shall reimburse the Lessor for any costs incurred by the Lessor in the enforcement of such warranty, including reasonable attorneys' fees. SECTION 6.3. Lessor and Credit Issuer Access to the Pro ect. The Lessee agrees that the Lessor, the Credit Issuer, any authorized representative of the Lessor or the Credit Issuer and the Lessor' s successors or assigns , shall have the right at all reasonable times to examine and inspect the Project. The Lessee -19- IL further agrees that the Lessor, the Credit Issuer, any such representative, and the Lessor's successors or assigns shall have such rights of access to the Project as may be reasonably necessary to cause the proper maintenance of the Project in the event of failure by the Lessee to perform its obligations under this Lease, or to enforce the remedies provided in this Lease. ARTICLE VII ASSIGNMENT, SUBLEASING AND INDEMNIFICATION SECTION 7. 1. Assignment by Lessor. The Lessee and the Lessor acknowledge that this Lease, including the rights to receive the Lease Payments hereunder and the rights to enforce the covenants, agreements, representations and warranties of the Lessee hereunder and all other rights and remedies of the Lessor hereunder (except the rights to expenses, fees and indemnification of the Lessor provided herein) , has been pledged and assigned by the Lessor to the Trustee under the Indenture as security for the Bonds and the obligations of the Lessor under the Credit Agreement. It is expressly agreed that, notwithstanding such pledge and assignment, the Lessor shall retain title to the Project and all duties and obligations of the Lessor hereunder. SECTION 7.2. Assignment and Subleasing by the Lessee. This Lease may be assigned or the Project may be subleased by the Lessee, provided, that any such assignment sublease shall be subject to all of the following conditions: (a) This Lease and the obligation of the Lessee to make Lease Payments under this Lease shall remain obligations of the Lessee; and (b) The sublessee or assignee shall assume the obligations of the Lessee under this Lease to the extent of the interest subleased or assigned; and (c) The Lessee shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Lessor, the Credit Issuer and the Trustee a true and complete copy of such sublease or assignment; and (d) No such sublease or assignment by the Lessee shall cause the Project to be used for a purpose other than a governmental or proprietary function authorized under the provisions of the Act and the Constitution and laws of the State; and -20- 0 (e) The Lessee shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such sublease or assignment shall not cause the interest on the Bonds to become subject to federal or State income taxes. SECTION 7.3. Release and Indemnification Covenants. The Lessee shall and hereby agrees to indemnify and save the Lessor, the Credit Issuer and the Trustee and the Executive Board members, members, officers and employees of each of the foregoing harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Project by the Lessee or at its direction or request, (b) any breach or default on the part of the Lessee in the performance of any of its obligations under this Lease, (c) any act or negligence of the Lessee or of any of its agents, contractors, servants, employees or licensees with respect to the Project, (d) any act or negligence of any assignee or sublessee of the Lessee, or of any agents, contractors, servants, employees or licensees of any assignee or sublessee of the Lessee with respect to the Project, or (e) the acquisition, construction and installation of the Project or the authorization of payment of the Acquisition Costs by the Lessee or authorization of payment of costs of repairs to the Project. No indemnification to the Lessor, the Credit Issuer or the Trustee is required to be made by the Lessee under this Section or elsewhere in this Lease for willful misconduct, negligence, or breach of duty under this Lease by the Lessor, the Credit Issuer, the Trustee, their officers, agents, employees, successors or assigns. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8. 1. Events of Default Defined. The following shall be "events of default" under this Lease and the terms "events of default" and "default" shall mean, whenever they are used in this Lease, any one or more of the following events. (a) Failure by the Lessee to pay any Lease Payment or other payment required to be paid under this Lease at the time specified herein. (b) Failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in clause (a) of this Section, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has -21- Q Q 4 been given to the Lessee by the Lessor, the Trustee, the Credit Issuer or the Owners of not less than twenty-five percent (25X) in aggregate principal amount of Bonds then outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Lessor, the Trustee , the Credit Issuer and such Owners will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the Lessee within the applicable period and diligently pursued until the default is corrected. (c) The filing by the Lessee of a voluntary petition in bankruptcy, or failure by the Lessee promptly to lift any execution, garnishment or attachment, or the filing of an involuntary petition in bankruptcy against the Lessee which petition shall not have been withdrawn within sixty (60) days, or assignment by the Lessee for the benefit of creditors, or the entry by the Lessee into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Lessee in any proceedings instituted under the provisions of the federal bankruptcy law or under any similar acts which may hereafter be enacted. SECTION 8.2. Remedies on Default. So long as the Credit Issuer is not in default under the Credit Facility, upon the occurrence of any event of default specified in Section 8.1 hereof, the Trustee, as assignee of the Lessor, shall exercise any or all of the remedies provided in this Section as directed by the Credit Issuer. If the Credit Issuer is in default under the Credit Facility securing the Bonds, upon the occurrence and continuance of any event of default specified in Section 8.1(a) or 8. 1(c) of this Lease, the Trustee, as assignee of the Lessor and the Lessor, shall proceed, and upon the occurrence of an event of default specified in Section 8.1(b) of this Lease, may proceed, and upon written request of the Owners of not less than a majority in aggregate principal amount of Bonds then outstanding, shall proceed, to: (a) Protect and enforce this Lease by such judicial proceeding as the Credit Issuer or the Trustee, as the case may be, shall deem most effectual, either by suit in equity or by action at law, whether for the specific performance of any covenant or agreement contained in this Lease, or in aid of the exercise of any power granted in this Lease, or to enforce any other legal or equitable right vested in the Lessor or its assignee by this Lease or by law; or -22- (b) Take possession of the Project and exclude the Lessee from using it until the default is cured, holding the Lessee liable for the Lease Payments and other amounts payable by the Lessee prior to such taking of the Project under and pursuant to this Lease and the curing of such default; or (c) Take whatever action at law or in equity may appear necessary or desirable to enforce the Lessor's rights as the owner of the Project including termination of this Lease and the repossession and lease and sale of the Project. SECTION 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Lessor or its assignee is intended to be exclusive, and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease 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 the Lessor or its assignee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 8 . 4. Agreement to Pay Attorneys ' Fees and Expenses. In the event that either party to this Lease should default under any of the provisions hereof, if the nondefaulting party should employ attorneys or incur other expenses for the collection of monies or the enforcement or 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 and such other expenses so incurred by the nondefaulting party. SECTION 8.5. No Additional Waiver Implied by One Waiver. In the event any covenant contained in this Lease 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 under this Lease. -23- D 4 ARTICLE I% OPTION TO PURCHASE; OPTION TO PREPAY SECTION 9. 1. _Purchase Option. The Lessee shall have the option to purchase the Project in the manner provided in this Article. SECTION 9.2. Exercise of Option. (a) The Lessee may exercise its option to purchase the Project by paying a purchase price equal to the amount necessary to prepay the unpaid Principal Component of Lease Payments payable hereunder in whole, plus the accrued interest on the Bonds relating to such Principal Component to the date set for redemption of such Bonds from such prepayment plus the Lessee's Allocable Share or Floating Rate Allocable Share, as the case may be, of expenses of the Program accruing under the Indenture to such redemption date plus the Lessee's Allocable Share or Floating Rate Allocable Share, as the case may be, of amounts payable to the Credit Issuer under the Credit Agreement to such redemption date. Such principal and interest portions of such purchase price shall be deposited by the Trustee in the Designated Principal Payment Account and Designated Interest Payment Account of the Debt Service Fund, respectively, established under the Indenture with respect to this Lease to be applied to reimburse the Credit Issuer for the drawing under the Credit Facility to redeem Bonds as provided in Section 7.01(b) of the Indenture, and the Program expense portions of such purchase price shall be paid by the Trustee to the parties entitled thereto and the portion of such purchase price relating to amounts payable to the Credit Issuer under the Credit Agreement shall be deposited in the Credit Issuer Fund. (b) The Lessee shall give the Lessor, the Credit Issuer and the Trustee notice of its intention to exercise its option not less than forty (40) days in advance of the date of exercise and shall deposit with the Trustee on the date which is 30 days or more prior to the date of the redemption an amount equal to such purchase price. If the Lessee exercises its option to purchase the Project pursuant to this Section, any amount then on hand in the Lessee's Designated Reserve Account and the Lessee ' s Designated Insurance and Condemnation Account shall be applied towards the payment of the applicable purchase price to be paid by the Lessee. If the Lessee shall have given notice to the Trustee of its intention to purchase the Project, but shall not have deposited the purchase price with the Trustee on the date specified in such notice, the Lessee shall continue to pay Lease Payments as if no such notice had been given. -24- Notwithstanding any provision of this Lease or the Indenture to the contrary, if all Bonds relating to this Lease are Pledged Bonds, no advance notice of the exercise by the Lessee of its election to exercise the options granted to the Lessee in this Section shall be required and the Lessee shall be permitted to purchase the Project as provided in this Section without any advance notice. SECTION 9.3. Transfer of Title and Release of Lessor's Interest. Upon exercise by the Lessee of its option to purchase the Project, all right, title and interest of the Lessor in and to the Project shall be transferred to the Lessee. SECTION 9.4. Option to Prepay. The Lessee shall have the option to prepay in whole or in part and, if in part, in integral multiples of $100,000, the Principal Component of Lease Payments hereunder. Said prepayment shall be applied to reimburse the Credit Issuer for the drawing under the Credit Facility to redeem Bonds as provided in Section 7.01(b) of the Indenture. The Lessee shall give the Lessor, the Credit Issuer and the Trustee notice of its intention to exercise its option not less than forty (40) days in advance of the date of exercise and shall deposit with the Trustee on or prior to 30 days prior to the redemption resulting from such prepayment an amount equal to the Principal Component of Lease Payments being prepaid, plus accrued interest to the date of redemption. In the event of the Lessee's exercise of its option to prepay in part the Principal Component of Lease Payments, the amount of Lease Payments to be paid by the Lessee over the remaining Term of this Lease Agreement shall be adjusted so as to reflect such prepayment of the Principal Component of Lease Payments. ARTICLE R MISCELLANEOUS SECTION 10.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in registered or certified form with postage fully prepaid when sent to the addresses shown on Exhibit D hereto. The Trustee, the Lessor, the Credit Issuer, the Program Administrator, the Remarketing Agent, the Tender Agent and the Lessee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. -25- SECTION 10.2. Binding Effect This Lease shall inure to the benefit of and shall be binding upon the Lessor and the Lessee and their respective successors and assigns , and the Trustee shall be deemed a third party beneficiary of this Lease. SECTION 10.3. Severability In the event any provision of this Lease shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 10.4. Amendments. Changes and Modifications. This Lease may be amended or any of its terms modified with the written consent of the Lessee and the Lessor ; provided, that no such amendment shall become effective unless approved by the Trustee and the Credit Issuer. SECTION 10.5. Net-net-net Lease. This Lease shall be deemed and construed to be a "net-net-net lease, " and the Lessee hereby agrees that the Lease Payments shall be an absolute net return to the Lessor or its successors or assigns, free and clear of any expenses, charges or set-offs whatsoever. SECTION 10.6. Further Assurances and Corrective Instru- ments. The Lessor and the Lessee agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project hereby leased or intended so to be or for carrying out the expressed intention of this Lease. SECTION 10.7. Execution in Counterparts. This Lease 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 10.8. Applicable Law. This Lease shall be governed by and construed in accordance with the laws of the State. -26- SECTION 10 . 9 . Lessor and Lessee Representatives . Whenever under the provisions of this Lease the approval of the Lessor or the Lessee is required, or the Lessor or the Lessee is required to take some action at the request of the other, such approval or such request shall be given for the Lessor by an Authorized Representative of the Lessor and for the Lessee by an Authorized Representative of the Lessee, and any party hereto shall be authorized to rely upon any such approval or request. SECTION 10.10. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease. -27- IN WITNESS WHEREOF, the Lessor has caused this Lease to be executed in its name by its duly authorized representative and to be attested by its duly authorized representative; and the Lessee has caused this Lease to be executed in its name by its duly authorized officer and to be attested and its official seal to be impressed hereon by its duly authorized officer, all as of the Dated Date. ASSOCIATION OF BAY AREA GOVERNMENTS, as Lessor By: Deputy Executive Director Attest: By: Financial Services Manager CITY OF MORGAN HILL, CALIFORNIA, as Lessee By: Title: Mayor Authorized Representative (S EA L) Attest: By Title: City Clerk -27 ANN, IOWA EXHIBIT A DEFINITIONS "ABAG Agreement" means the agreement which became effective January 12, 1961, by and among the Members of the Lessor pursuant to which the Lessor was created, as supplemented and amended. "Acceptance Date" means the date on which the Lessee delivers the Certificate of Completion of the Project to the Trustee, the Lessor and the Credit Issuer as provided in Section 3.2 hereof. "Acceptance Deadline" means April 20 . 1988 ; provided, however, the Acceptance Deadline may be extended to any date not later than the last Business Day in February of 1990 with the prior written consent of the Credit Issuer, in which event, the term "Acceptance Date" shall mean such extended date. "Acquisition Costs" means, with respect to the Project, the contract price paid or to be paid to the Contractors therefor upon acquisition, construction, installation or delivery of any portion of the Project and related equipment, in accordance with the purchase order or contract therefor. Acquisition Costs include the costs of site preparation necessary for the installation of the Project, as well as the administrative, engineering, legal, financial and other costs incurred by the Lessee, the Lessor and the Contractors in connection with the acquisition, construction, delivery, installation and financing by the Lessor of the Project. "Authorized Representative of the Lessee" means, the Mayor or the City Administrator or another official designated by the Governing Body of the Lessee to act on behalf of the Lessee under or with respect to this Lease. "Authorized Representative of the Lessor" means the Deputy Executive Director of the Lessor or his designee, or any person authorized to act on behalf of the Lessor with respect to the Lease Agreement. "Bylaws" means the Bylaws of the Lessor, as supplemented and amended. "Certificate of Completion" means a certificate of the Authorized Representative of the Lessee certifying that the Project has been acquired, constructed, installed and accepted by the Lessee, and that all Acquisition Costs have been paid. A-1 "Contractors" means the contractors or vendors from whom the Lessor or the Lessee on behalf of the Lessor has ordered or caused to be ordered or with whom the Lessor or the Lessee on behalf of the Lessor has contracted or caused to be contracted for the acquisition, construction and installation of the Project. "Dated Date" means March 1. 1988. "Designated Program Account" means the Designated Program Account established under the Indenture with respect to this Lease. "Estimated Cost" means the estimated cost of the Project as set forth in Exhibit C hereto. "Governing Body" means the City Council of the Lessee. "Insurance Consultant" means any person or firm knowledgeable with respect to insurance carried by, required for and available to Political Subdivisions. "Lease" means this Lease Agreement, including all Exhibits hereto, and any duly authorized and executed amendment or supplement hereto. "Lease Payment" means any payment due from the Lessee to the Lessor under Sections 1.4 and 4.3 hereof. "Lessee" means the City of San Bernardino, California, a municipal corporation and a charter city, duly organized and existing under the laws of the State, a Political Subdivision of the State, and a Local Agency of the Lessor, its successors and assigns. "Net Proceeds" means any insurance or condemnation proceeds, paid with respect to the Project, remaining after payment therefrom of all expenses incurred in the collection thereof. "Permitted Encumbrances" means, as of any particular time: (i) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the Lessee may, pursuant to provisions of Article V hereof, permit to remain unpaid; (ii) this Lease and (iii) the Indenture. "Political Subdivision" means a public agency deemed to be a "political subdivision" of the State, as that term is used in Section 103(c) (1) of the Code and a "governmental unit" , as that term is used in Section 141 of the Code. A-2 i "Projects" means that certain property to be acquired, constructed and installed from the proceeds of the Bonds, as identified on Exhibit C hereto. "Restricted Account" is defined in Section 3.2 hereof. "Term of this Lease" or "Term" means the time during which this Lease is in effect, as provided for in Section 1.5 of this Lease. "Termination Date" is defined in Section 4.2 hereof. "Trustee" means the Trustee appointed under the terms of the Indenture. A-3 EXHIBIT B DESCRIPTION OF LEASE PAYMENTS The Lease Payments hereunder will consist of the following components: (a) the Principal Component of this Lease; (b) an interest component equal to the interest accruing on the Bonds relating to the Principal Component of this Lease from and after the earlier of the Acceptance Date of the Project or the Acceptance Deadline to the Termination Date; (c) an amount equal to the Lessee's Allocable Share of the Program fees and expenses payable as described in the Indenture; (d) an amount equal to the Lessee's Allocable Share of amounts payable to the Credit Issuer under the Credit Agreement as provided in the Indenture; (e) amounts necessary to bring the amount on deposit in the Lessee's Designated Reserve Account to the Lessee's Designated Reserve Amount following (i) a decrease in the market value of the securities on deposit therein or (ii) following a drawing by the Trustee of amounts on deposit in the Lessee' s Designated Reserve Account resulting from a default by the Lessee hereunder or resulting from an increase in the Floating Rate after the date the Lessee is billed for any Lease Payment; (f) the Lessee's Allocable Share of amounts (other than Common Fixed Rate Costs or Floating Rate Costs) payable to the Credit Issuer under the Credit Agreement; (g) the Lessee's Allocable Share of the fees and expenses (other than Common Fixed Rate Costs or Floating Rate Costs) payable to the Trustee, the Tender Agent, the Program Administrator and any Authenticating Agent; (h) the Lessee' s Allocable Share of the fees and expenses (other than Common Fixed Rate Costs or Floating Rate Costs) of the Issuer, (i) any amounts required to be paid by the Lessee for deposit in the Rebate Fund as provided in the Arbitrage Agreement and (j ) the Lessee's Floating Rate Allocable Share of the Floating Rate Costs. Lease Payments hereunder shall be payable quarterly on each March 20, June 20, September 20 and December 20 from and after the earlier of the Acceptance Date for the Project or the Acceptance Deadline to the Termination Date. The Trustee will bill the Lessee for amounts due pursuant to clauses (b) through (j ) above as provided in the Indenture. The amounts due pursuant to clause (a) above will be payable on the following dates and in the following amounts: June 20, 1988 $35,000 September 20, 1988 $35,000 December 20, 1988 $35,000 March 20, 1989 $40,000 June 20, 1989 $40,000 September 20, 1989 $40,000 December 20, 1989 $40,000 March 20, 1990 $45,000 June 20, 1990 $45,000 September 20, 1990 $45,000 December 20, 1990 $45,000 March 20, 1991 $45,000 June 20, 1991 $ 5,000 September 20, 1991 $ 5,000 December 20, 1991 $ 5,000 March 20, 1992 $ 5,000 June 20, 1992 $ 5,000 September 20, 1992 $ 5,000 December 20, 1993 $ 5,000 March 20, 1993 $ 5,000 Amounts due pursuant to clauses (b) through (j ) above will be payable in a single installment on the Lease Payment Date A immediately succeeding the Lessee being billed for such amounts. To the extent that the Lessor is required to provide indemnification to any party as provided in the Indenture, the Tender Agent Agreement, the Reimbursement Agreement, the Pledge Agreement, the Arbitrage Agreement, the Remarketing Agreement or any other agreement executed in connection with the Program or the Bonds, the Lessee will provide indemnification as provided in such agreement, but only to the extent that the costs or damages for which indemnification is being made result directly or indirectly from the actions or inactions of the Lessee. Notwithstanding any provision of this Lease or the Indenture to the contrary, the obligation of the Lessee to make payments for deposit to the Rebate Fund as provided in the Arbitrage Agreement shall survive the termination of this Lease. In the event that there are no Bonds relating to this Lease outstanding at any time when this Lease is still in effect, the interest component of each Lease Payment shall be calculated using the interest rate applicable to loans under the Reimbursement Agreement, provided, however, that the interest component of each Lease Payment payable under this Lease shall not exceed the Maximum Rate. B-2 DRAFT LETTER OF REPRESENTATION March 1. 1988 National Westminster Bank PLC New York Branch 175 Water Street, 21st Floor New York, New York 10038 Association of Bay Area Governments Metro Center 8th and Oak Streets Oakland, California 94604 Ladies/Gentlemen: The Association of Bay Area Governments (the "Issuer") , and the City of San Bernardino, California (the "Lessee") propose to enter into a Lease Agreement to be dated as of March 1. 1988 (the "Lease") . Pursuant to a Reimbursement Agreement, dated April 1, 1987 (the "Reimbursement Agreement") , with National Westminster Bank PLC, New York Branch (the "Bank") , which the Lessee by execution and delivery of this Letter of Representation does hereby approve and consent to the provisions thereof, the Issuer has issued $55,000,000 aggregate principal amount of its Lease Revenue Bonds (Pooled Projects) Series 1987 (the "Bonds") a portion of the proceeds of which are to be used to provide financing for public capital improvements (the "Project") to be leased by the Issuer. The payments under the Lease are pledged to secure the payment of the Bonds and the interest thereon and to pay the Lessee's allocable share and proportionate share of all fees, costs and expenses associated therewith (including the Lessee's Allocable Share of Bank fees, costs and expenses and any expenses of the Lessee relating to Pledged Bonds) . The Bonds have been issued and are secured pursuant to a Trust Indenture dated as of April 1, 1987 (the "Indenture") by and between the Issuer and Seattle-First National Bank, as trustee (the "Trustee") , pursuant to which certain of the Issuer's rights under the Lease are assigned to the Trustee. In order to induce the Issuer to complete the Project and lease it to the Lessee and to induce the Bank to approve such Lease, the Lessee hereby represents, warrants and agrees with you as follows: (a) The Lessee is duly organized and validly existing as a political subdivision of the State of California (the "State") 0 organized and existing under the laws and Constitution of the State and has, and at the date of the Closing (as defined in the Indenture) will have, full legal right, power and authority (i) to acquire, construct, operate, repair and maintain the Project (as defined in the Lease) , (ii) to execute and deliver this Letter of Representation and the Lease , and ( iii) to carry out and consummate the transactions contemplated by this Letter of Representation, the Lease, the Indenture, and the Reimbursement Agreement; (b) The governing body of the Lessee by official action has made a finding that the Project serves a governmental function and a public purpose of the Lessee and is a Public Capital Improvement within the meaning of the Indenture; (c) The amount of the loan requested for the Project is not less than $250,000; (d) By official action of the governing body of the Lessee prior to or concurrently with the acceptance hereof, the Lessee has duly authorized and approved the execution and delivery of, and the performance by the Lessee of the obligations on its part contained in this Letter of Representation, and the Lease and the consummation by it of all other transactions contemplated by the Lease, the Reimbursement Agreement, and this Letter of Representation; (e) The Lessee is not in any material way in breach of or default under (i) to the best of its knowledge, any applicable law or administrative regulation of the State or the United States or any applicable judgment or decree or (ii) any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Lessee is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute an event of default under any such instrument, and neither the execution and delivery of this Letter of Representation, or the Lease, or the consummation of the transactions contemplated thereby, nor the fulfillment of or compliance with the terms and conditions thereof, of the Indenture, of the Reimbursement Agreement or of the Bonds conflicts with or constitutes a breach of or default under (i) to the best of the Lessee's knowledge, any applicable law, administrative regulation, judgment or decree or (ii) any loan agreement, indenture, bond, note , resolution, agreement or other instrument to which the Lessee is a party or is otherwise subject; nor will any such execution, delivery, adoption, fulfillment or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Lessee (i) to the best of the Lessee' s knowledge, under the terms of any such law, administrative regulation, judgment or decree or (ii) any such loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Indenture or the Lease; -2- (f) The Indenture creates a valid pledge of the Lease Payments of the Lessee (as and to the extent purported in the Lease) , 0 and all financing statements have been duly filed as and in the manner required by law to create, perfect, maintain or protect the security interest granted by the Lessee to the Issuer and the Bank under the Lease and assigned to the Trustee by the Issuer on behalf of the Bondholders and the Bank; (g) The Lessee has not incurred any material liabilities, direct or contingent, nor has there been any material adverse change in the financial position, results of operation or condition, financial or otherwise, of the Lessee since the date of its last audited financial statements, whether or not arising from transactions in the ordinary course of business; (h) All approvals, consents, authorizations, certifications and other orders of any governmental authority, board, agency or commission having jurisdiction, and all filings with any such entities, which would constitute a condition precedent to or would materially adversely affect the performance by the Lessee of its obligations hereunder or under the Lease or the consummation of the transactions contemplated in the Indenture and the Reimbursement Agreement have been duly obtained except for such approvals, consents and orders as may be required under the blue sky or securities law of any state in connection with the offering and sale of the Bonds; (i) All requisite official action has been taken (or will be taken solely with respect to the acquisition, construction and installation of each component of the Project) at meetings of the governing body of the Lessee duly noticed, convened and held to authorize the consummation of transactions contemplated by this Letter of Representation and by each of the Related Documents as defined in the Reimbursement Agreement, to which the Lessee is a party; (j ) This Letter of Representation and the Lease have been duly authorized, executed and delivered by the Lessee and constitute valid, binding and enforceable obligations of the Lessee in accordance with their respective terms except as the same may be limited by bankruptcy, insolvency and other laws affecting creditors', rights generally and except as the enforceability of indemnification provisions of this Letter of Representation may be limited by applicable law; -3- M The Lessee will furnish such information, execute such instruments and take such other action in cooperation with the Remarketing Agent as defined in the Indenture as the Remarketing Agent may reasonably request in order (i) to qualify the Bonds for offer and sale under the blue sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Remarketing Agent may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions , and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; (1) To the best of its knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Lessee affecting the existence of the Lessee or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the collection of revenues by the Lessee from which the Lessee is obligated to make payments under the Lease or in any way contesting or affecting the validity or enforceability of this Letter of Representation or the Lease, or contesting the powers of the Lessee to execute and deliver or to consummate the transactions contemplated in such documents (nor, to the best knowledge of the Lessee, is there any basis therefor) wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds , the Indenture , the Reimbursement Agreement, this Letter of Representation, or the Lease; (m) Between the date of this Letter of Representation and the date of the Closing, the Lessee will not, without the prior written consent of the Bank, incur any material liabilities , direct or contingent, nor will there be any adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise, of the Lessee. Except as otherwise required by law, during the term of the Lease the Lessee will not take any action which would result in the Lessee's obligations to the Bank under the Lease, the Reimbursement Agreement and this Letter of Representation not ranking at least pari ap ssu in right of payment with all unsecured obligations of the Lessee to other creditors; (n) There is no fact known to the Lessee that materially adversely affects or in the future may (so far as the Lessee can now foresee) materially adversely affect the property, assets or financial condition of the Lessee that has not been set forth in this Letter of Representation or in the other documents, certificates and statements furnished to the Bank by or on behalf of the Lessee prior to the date hereof in connection with the transactions contemplated hereby; -4- 0 ... (o) The budget delivered for fiscal year 1988, is a true and correct copy of the budget approved by the governing body of the Lessee and the Lessee will deliver a copy of all future budgets of the Lessee within 60 days of their final approval by the governing body of the Lessee; (p) The Lessee will take such action as may be necessary to include all Lease Payments due under the Lease in its budgets, and to make the necessary appropriations for all such Lease Payments. During the Term of the Lease, the Lessee will furnish to the Trustee, no later than 20 days following adoption of the budget for that fiscal period, a certificate of the Authorized Representative of the Lessee that the Lease Payments due in that fiscal period have been included in the budget approved by the Governing Body of the Lessee for such fiscal period; (q) The Lessee will comply in all respects with the terms of the Arbitrage Agreement, as defined in the Indenture, and will not take any action which will adversely affect, and will not fail to take any action if such failure would adversely affect, the exemption from federal income taxation of the interest on the Bonds; (r) The Lessee has in force or will have in force on the Acceptance Date (as defined in the Indenture) insurance on the Project with responsible and reputable insurance companies and associations or through self-insurance, in such amounts and covering such risks as are required by the Lease; (s) All reports of consultants, if any, prepared for the Lessee in connection with the Project of the Lessee being financed with the proceeds of the Bonds have been furnished to the Bank; (t) In addition to the indemnification provisions of Section 7. 3 of the Lease, the Lessee agrees to indemnify and hold harmless each of you, your directors, Executive Board members, members, officers, agents, representative, employees and each person, if any, who controls (as such term is defined in Section 15 of the Securities Act of 1933, as amended, and Section 20 of the Securities Exchange Act of 1934, as amended - collectively the "Securities Acts") any of you against any and all judgments, losses, claims, damages, liabilities and expenses, including attorneys' fees and cost of defense, whatsoever caused by or arising out of (i) any allegation of an untrue statement or misleading statement of a material fact contained in the Lease, other documents related to the Bonds and the issuance thereof to the extent that such information or omission thereof was provided or omitted by the Lessee in connection with said issue: (ii) the pledge of any of the Bonds related to the Lessee's Lease pursuant to the -5- Pledge Agreement (as defined in the Reimbursement Agreement) ; (iii) the approval of the Lease by the Issuer and the Bank; (iv) any drawing under the Letter of Credit with respect to the Bonds related to the Lease ; (v) any action or proceeding relating to a court order injunction or other process or decree restraining or seeking to restrain the Bank from paying any amount under the Letter of Credit with respect to the Bonds related to the Lease; provided that the Lessee shall not be required to indemnify either of you for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (a) the willful misconduct or gross negligence of the Bank in determining whether a draft or certificate presented under the Letter of Credit complied with the terms of the Letter of Credit or (b) the Bank's willful failure to pay under the Letter of Credit after the presentation to it by the Trustee (or a successor trustee under the Indenture to whom the Letter of Credit has been transferred in accordance with its terms) of a draft and certificate strictly complying with the terms and conditions of the Letter of Credit. In the case any claim shall be made or action brought against any of you or any controlling person (as aforesaid) in respect of which indemnity may be sought against the Lessee, you shall promptly notify the Lessee in writing setting forth the particulars of such claim or action and the Lessee shall assume the defense thereof including the retaining of counsel and the payment of all expenses. You or any such controlling person shall have the right to retain separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at your expense or the expense of such controlling person unless the retaining of such counsel has been specifically authorized by the Lessee; (u) All the representations and warranties contained in the Lease are true and correct as of the date hereof and are made to and for the benefit of the Bank as if the same were set forth at length in this Letter of Representation; (v) The Lessee hereby agrees to pay its Allocable Share or Proportionate Share, as applicable, of the fees, costs and expenses described in Section 2 of the Reimbursement Agreement and to make the Lease Payments (including its Allocable Share or Proportionate Share, as applicable, of Bank fees, costs and expenses and any costs relating to any Pledged Bonds of the Lessee) in the amounts and at the times required by the Lease, the Reimbursement Agreement and this Letter of Representation; and (w) The Lessee does not enjoy any rights of immunity on the grounds of sovereign immunity in respect of its obligations under this Letter of Representation, or any of the Related Documents. -6- The representations, warranties, agreements and indemnities contained herein shall survive the Closing, as defined in the Indenture, and any investigation made by or on behalf of you or any person who controls you (as aforesaid) of any matters described in or related to the transactions contemplated hereby and by the Reimbursement Agreement, the Indenture, and the Lease. This Letter of Representation shall be binding upon and inure solely to the benefit of each of you and, to the extent set forth herein, persons controlling you, and their respective personal representatives, successors and assigns, and no other person or firm shall acquire or have any right under or by virtue of this Letter of Representation. No recourse under or upon any obligation, covenant or agreement contained in this Letter of Representation shall be had against any official of the Lessee as individuals, except as caused by their bad faith. If the foregoing is in accordance with your understanding of the agreement between us, kindly sign and return to the Issuer the enclosed duplicate of this Letter of Representation whereupon this will constitute a binding agreement between us in accordance with the terms hereof. Very truly yours, CITY OF SAN BERNARDINO,CALIFORNIA By Title: Mayor Authorized Representative -7- it Accepted and confirmed as of the date first above written. NATIONAL WESTMINSTER BANK PLC NEW YORK BRANCH By Title: ASSOCIATION OF BAY AREA Attest: GOVERNMENTS By Title: Deputy Executive Financial Services Director Manager -8- err` 0 CERTIFICATE OF CITY OF SAN BERNARDINO, CALIFORNIA DRAFT The undersigned Mayor and City Clerk, respectively, of the City of San Bernardino, California (the "City" ) , a municipal corporation and charter city duly organized and validly existing under the laws and Constitution of the State of California, do hereby certify and covenant, as follows: 1. They are, and were at the time of the execution of the City Documents hereinafter identified, the duly elected or appointed, qualified and acting officers above indicated of the City, and as such are familiar with and have in their possession or have access to the books and records of the City. 2. Attached hereto as Exhibit A is a true, complete and correct copy of Resolution No. duly adopted by the City Council (the "Council") of the City at a regular meeting duly called and held on (the "Resolution") , pursuant to which the Council authorized and provided for the execution and delivery of certain financing documents, together with the proceedings of the Council showing its adoption. Each meeting necessary for the introduction or adoption of the Resolution was duly called in accordance with law and the procedural rules of the Council; notice of each such meeting was given in accordance with law and the procedural rules of the Council; each such meeting was open to the public; at each such meeting a quorum was present and acting throughout; and the Resolution is in full force and effect, and has not been altered, amended or repealed as of the date hereof. 3. The following described instrument, as executed and delivered by the Authorized Representative of the City, and attested by the City Clerk of the City, are in substantially the same form and text as the copies of such instruments which were before and approved by the Council at the meeting referred to in paragraph 2 above: Document Dated as of Other Party or Parties Lease Agreement March 1. 1988 Association of Bay Area (the "Lease Governments ("ABAG") Agreement") 1 V 0 Letter of March 1. 1988 ABAG and National Representation Westminster Bank PLC, (the "Letter of acting through its Representation") New York Branch The Lease Agreement and the Letter of Representation are herein sometimes collectively referred to as the "City Documents" . 4. The undersigned authorized representative and the undersigned City Clerk were on the date or dates of the execution of the City Documents and are on the date hereof the duly elected or appointed and qualified incumbents of said respective offices of the City; each certifies that the signature of the other appearing hereon is the genuine signature of said officer. 5. The undersigned Authorized Representative did manually execute each of the City Documents on behalf of the City and the undersigned City Clerk did manually attest and impress the official seal of the City upon each of the City Documents which required attestation. 6. The persons listed on Exhibit B hereto were on the date of the adoption of the Resolution and are on the date hereof the duly elected or appointed, qualified and acting officers of the City and members of the Council serving the terms of office as indicated on Exhibit B. 7. All meetings of the Council at which action was taken in connection with the authorization of the Project (as defined in the Lease Agreement, the "Project") or the City Documents were duly and legally called and held proper meetings and were public meetings, open to the public at all times, notice of the time and place of each of said meetings was duly given as required by the California Open Meetings Act, Section 54950, et seg. , of the California Government Code, as amended, and the rules of procedure of the Council, and the minutes of each of said meetings have been open to public inspection at all times. 8. No member of the Council and no officer, official or employee of the City is or shall be, either directly or indirectly, a party to or in any manner interested in any contract or agreement of the City with respect to the Project or in any transaction contemplated by any of the City Documents prohibited under the provisions of California law or the procedural rules of the Council. 9. The official corporate seal of the City is impressed hereon. 2 IC 10 . All warranties and representations of the contained in the City Documents are true and correct in all material respects on the date of this certificate with the same effect as though made on and as of the date of this certificate. 11. The City has duly performed all of the City's obligations under the City Documents and has complied with all agreements and has satisfied all conditions on its part to be performed or satisfied pursuant to the City Documents at or prior to the date of this certificate. 12. The Council has duly authorized by all necessary action, the execution, delivery, receipt and due performance by the City of the City Documents and any and all such other agreements and documents as may be required to be executed, delivered and received by the City to carry out, give effect to and consummate the transactions contemplated by the City Documents. 13. No litigation or proceeding against the City is pending or, to the knowledge of the undersigned, threatened in any court or administrative body nor is there any basis for litigation which would contest the right of the officers and officials of the City to hold and exercise their respective positions, contest the due organization and valid existence of the City , contest the validity, due authorization and execution of any of the City Documents, contest the right of the City to lease the Project from ABAG. 14. The City Documents, as executed by the City, are in the form or in substantially the form approved for such execution by the Resolution. 15. Attached as Exhibit C hereto is a true copy of the form of the Agreement with the Association of Bay Area Governments (the "Agreement") , which has been duly authorized, executed and delivered by the City. 16. The execution, delivery, receipt and due performance by the City of the City Documents and all other agreements contemplated by the City Documents to which the City is a party under the circumstances contemplated by the City Documents and the City's compliance with the provisions thereof will not conflict with or constitute on the City's part a breach of or a default under the Agreement, any existing law, court or administrative regulation, decree or order or any ordinance, resolution, agreement, indenture, lease or other instrument to which the City is subject or by which the City is or may be bound. 3 17. There is no default by the City, and there has occurred no event which with the passage of time, or notice, or both would constitute an event of default by the City, under any of the City Documents. No consent, approval, authorization or order in any court or by any governmental body is required for the consummation by the City of the transactions contemplated by the City Documents which has not been obtained. 18. The execution, delivery and performance by the City of the City Documents and the financing of the Project (as defined in the Lease Agreement) as provided in the Indenture (as defined in the Lease Agreement) and the Lease Agreement will comply with the restrictions contained in Section 4.02 of the Indenture. 19. The City has received copies of the Indenture and the Arbitrage Agreement (as defined in the Indenture) and will comply with the terms of each of such documents insofar as they may be applicable to the City. IN WITNESS WHEREOF, the undersigned have hereunto set their signatures this 18th day of March, 1988. CITY OF SAN BERNARDINO, CALIFORNIA By: Title: Mayor Authorized Representative By City Clerk (SEAL) 4 V EXHIBITS TO CERTIFICATE OF CITY OF SAN BERNARDINO, CALIFORNIA Exhibit A: Resolution No. , Authorizing certain purchases of Capital Equipment; authorizing the City to enter into a Lease Agreement with Association of Bay Area Governments for purposes of financing such purchases and authorizing the execution of other instruments and the taking of other actions related to such financing; and Proceedings of the Council showing its Adoption. Exhibit B: List of Duly Elected or Appointed, Qualified and Acting Officers of the City and Members of the Council as of the date of adoption of the Resolution and on the Date hereof Exhibit C: Form of Agreement with the Association of Bay Area Governments which as been duly authorized executed and delivered by the City 5 0 EXHIBIT A TO CERTIFICATE OF CITY OF SAN BERNARDNIO, CALIFORNIA RESOLUTION NO. II I 6 RESOLUTION NO. RESOLUTION AUTHORIZING THE ACQUISITION, IMPROVEMENT AND INSTALLATION OF CERTAIN CAPITAL EQUIPMENT FOR THE CITY OF SAN BERNARDINO AUTHORIZING THE CITY OF SAN BERNARDINO TO ENTER INTO A LEASE AGREEMENT WITH ASSOCIATION OF BAY AREA GOVERNMENTS FOR PURPOSES OF FINANCING SUCH CAPITAL EQUIPMENT: AND AUTHORIZING THE EXECUTION OF OTHER INSTRUMENTS AND THE TAKING OF OTHER ACTIONS RELATED TO SUCH FINANCING WHEREAS, Association of Bay Area Governments ("ABAG") is a joint powers agency created and operating under the California Government Code Sections 6500 et seq, and as such, is authorized under the Marks-Roos Local Bond Pooling Act of 1985 commencing with Section 6584 of the California Government Code, as amended (the "Act") , to issue its bonds to finance public capital improvements for local agencies (as such terms are defined in the Act) which are parties to the Agreement creating ABAG or political subdivisions of such parties; and WHEREAS, ABAG is authorized by the Act to enter into lease agreements pursuant to which local agencies lease public capital improvements from ABAG, and ABAG is authorized by the Act to charge and collect rents under such lease agreements; and WHEREAS, in response to the demand of local agencies to finance public capital improvements and in furtherance of the "significant public benefits" (as defined in Section 6586 of the Act) to be gained by the entry of such local agencies into ABAG's pooled lease financing program (the "Program") , ABAG issued its Association of Bay Area Governments Lease Revenue Bonds (Pooled Projects) Series 1987 (the "Bonds") in the aggregate principal amount of $55,000,000 pursuant to the Act and the hereinafter defined Indenture to finance the cost of public capital improvements to be leased by ABAG to local agencies of ABAG (within the meaning of Section 6585(f) of the Act) (collectively, the "Lessees") ; and WHEREAS, in order to accomplish the foregoing purposes, ABAG proposes to use the proceeds of the Bonds to acquire, construct, install and equip public capital improvements as defined in Section 6585(8) of the Act (collectively, the "Projects") and lease the Projects to the Lessees pursuant to Lease Agreements to be entered into between ABAG and the Lessees and, pursuant to a Trust Indenture (the "Indenture") dated as of April 1, 1987, between ABAG and Seattle- First National Bank, as trustee (the "Trustee") , as supplemented and amended by a First Supplemental Trust Indenture (the "First Supplemental Indenture") dated as of February 1, 1988, between ABAG and the Trustee (the Original Indenture, as supplemented and amended by the First Supplemental Indenture, being hereinafter referred to as the "Indenture") , ABAG has pledged and assigned the right to receive and enforce the rental payments thereunder to the Trustee to secure the Bonds; and 7 WHEREAS, the City of San Bernardino, California, a municipal corporation and a charter city duly organized and existing under the laws of the State of California (the "City") , is a "local agency" (within the meaning of Section 6585(f) of the Act) , and the City intends to cause the acquisition and installation of certain capital equipment as described in more detail in Exhibit C to the proposed form of Lease Agreement (the "Lease Agreement") to be dated as of March 1. 1988, between ABAG, as lessor, and the City, as lessee (such capital equipment, as more particularly described in the Lease Agreement, being herein referred to as the "Project") , and the Project constitutes "public capital improvements" (within the meaning of Section 6585(8) of the Act) ; and WHEREAS , the Mayor and the Common Council of the City (the "Council") find that "significant public benefits" (within the meaning of Section 6586 of the Act) will accrue to the City if the Project is financed with a portion of the proceeds of the Bonds through the City's participation in the Program; and WHEREAS, there have been reviewed by the Mayor and the Council with the aid of its staff and are now before this meeting the following documents entered into in connection with the Program and the issuance of the Bonds: (1) The Orirzinal Indenture, including as exhibits thereto the form of Bond and the form of Lease Agreement to be entered into by ABAG, as lessor, and each Lessee as it enters the Program and the First Supplemental Indenture; (2) Reimbursement Agreement dated as of April 1, 1987 (the "Reimbursement Agreement") between ABAG and National Westminster Bank PLC, acting through its New York Branch (the "Bank") , including as Exhibit X thereto the form of Irrevocable Direct Pay Letter of Credit (the "Letter of Credit") issued by the Bank to secure the Bonds, as Exhibit Y thereto the Pledge Agreement (hereinafter defined) and as Exhibit Z thereto the form of Letter of Representation to be delivered by each Lessee to ABAG and the Bank in connection with the execution of its Lease Agreement; (3) TENR Services and Remarketing Agreement dated as of April 1, 1987 (the "Remarketing Agreement") between ABAG and Bankers Trust Company, as remarketing agent (the "Remarketing Agent") ; 8 (4) Pledge and Security Agreement dated as of April 1, 1987 (the "Pledge Agreement") between ABAG and the Bank; (5) Tender Agent Agreement dated as of April 1, 1987 (the "Tender Agent Agreement") among ABAG, IBJ Schroder Bank & Trust Company, as tender agent (the "Tender Agent") , and the Trustee; and (6) Arbitrage Regulation Agreement dated April 21, 1987 (the "Arbitrage Agreement") between ABAG and the Trustee; and WHEREAS, there have been prepared and are now before this meeting the following forms of documents to be entered into in connection with the City's participation in the Program in order to finance the Project and such forms of documents have been reviewed by the Mayor and the Council with the aid of its staff: (7) Lease Agreement, including as exhibits thereto, certain definitions, a description of Lease Payments payable under the Lease Agreement, a description of the Project, addresses for notices pursuant to the Lease Agreement and a description of certain contracts, if any, to be assigned by the City to ABAG in connection with the Project, and a description of certain Previously acquired portions of the Project, if anv; and (8) Letter of Representation (the "Letter of Representation") to be executed and delivered by the City to ABAG and the Bank as required by the Reimbursement Agreement; NOW THEREFORE, BE IT RESOLVED by the Mayor and the Common Council of the City of San Bernardino, as follows: 9 Section 1. The City is hereby authorized to enter into the Lease Agreement in substantially the form presented to this meeting, under which the Projects shall be acquired, installed and leased by ABAG to the City, all upon the terms and conditions as set forth in said form of Lease Agreement, submitted to and reviewed by the Council, on the date hereof, with such changes from the form of Lease Agreement presented to this meeting as shall be approved by the Authorized Representative executing the Lease Agreement on behalf of the City, such Authorized Representative's signature thereon being conclusive evidence of such approval. Section 2. The City is hereby authorized to execute and deliver the Letter of Representation in substantially the form submitted to and reviewed by the Mayor and the Council on the date hereof, with such changes from the form of Letter of Representation presented to this meeting as shall be approved by the Authorized Representative executing the Letter of Representation on behalf of the City, such Authorized Representative' s signature thereon being conclusive evidence of such approval. Section 3. The Mayor and the Council hereby find and determine in accordance with section 6586 of the Act that the financing of the Project through the City's participation in the Program as authorized by this Resolution will result in significant public benefits for the City by demonstrable savings in effective interest rate expenses and financing expenses associated with the Project. The Mayor and the Council hereby find and determine that the Project and the leasing of the Project as provided in this Resolution serves a governmental function and a public purpose of the City and the Project constitute Public Capital Improvements within the meaning of the Indenture. Section 4. The City is hereby authorized to comply, and the Mayor and the Council agree that the City shall comply, with the provisions of the Indenture , the Arbitrage Agreement , the Reimbursement Agreement , the Pledge Agreement, the Remarketing Agreement and the Tender Agent Agreement insofar as the provisions of such instruments shall be applicable to the City. Section 5 . The Mayor of the City ( the "Authorized Representative") is hereby authorized and directed to execute and deliver the Lease Agreement and the Letter of Representation, for and on behalf of, and as the act and deed of, the City, and the City Clerk of the City is hereby authorized and directed to attest and impress the corporate seal of the City upon each of the foregoing documents on behalf of the City if such attestation is required. 10 fir✓ Section 6. The City shall, and the officers, employees and agents of the City are hereby authorized and directed to, take such action and execute such other agreements , documents , financing statements, certificates and instruments as may be necessary or desirable to carry out and comply with the intent of this Resolution and to carry out, comply with and perform the duties of the City with respect to the agreements mentioned herein, as executed. All acts and doings of the officers and employees of the City which are in conformity with the purposes and intent of this Resolution and in furtherance of the financing of the Project are hereby in all respects, authorized, ratified, approved and confirmed. Section 7, The provisions of this Resolution are hereby declared to be separable, and if any section, phrase or provision shall for any reason be declared invalid, such declaration shall not affect the validity of the remainder of the sections, phrases and provisions hereof. Section 8. All ordinances , resolutions and orders, or parts thereof, in conflict with the provisions of this Resolution are, to the extent of such conflict, hereby repealed. Section 9 . The provisions of this Resolution shall constitute a contract binding between the City and the owners of the Bonds, and this Resolution shall not be repealed or amended in any respect which would adversely affect the rights of such owners so long as any of the Bonds or the interest thereon remains unpaid. Section 10. This Resolution shall be in full force and effect immediately upon its passage. 11 0 PASSED AND ADOPTED this day of March, 1988 , by the following vote: AYES: NOES: ABSENT: By: Title: Mayor Authorized Representative (SEAL) Attest: City Clerk 12 Exhibit A, Continued PROCEEDINGS OF CITY COUNCIL OF SAN BERNARDINO SHOWING ADOPTION OF RESOLUTION NO. 13 i Q EXHIBIT B To Certificate of City of San Bernardino, California Members of City Council Name Title Term of Office 14 r Form 8038-G Information Return for Tax-Exempt (December 1986) Governmental Bond Issues 48 1545-0720 Department of the Treasury ►Under Section 149(e) Expires 12-31-89 Internal Revenue Service (Use Form 8038-GC if issue price is under$100,000.) Reporting Authority Check box if Amended Return ► LJ 1 Issuer s name 2 Issuer's employer identification number C' -y o n ae r n a rc�i/t p 16--600077 a 3 Number and street � 4 Report number 3 0 0 N O i n+ .J S flex G 19 8 $_— -.L_ 5 City or town.state. d ZIP code 6 Date of issue SCIA Aard•+no) C 92y18 r1a��h �, X988 Type of Issue(check box(es)that applies) 7 Check box if bonds are tax or other revenue anticipation bonds P. ❑ Issue Price 8 Check box if bonds are in the form of a lease or installment sale No- 9 ❑ Education . . . . . . . . . 10 ❑ Health and hospital . . . . . . . . . . . . I . . 11 ❑ Transportation . . . . . . . . . . . . . . 12 ❑ Public safety . . . . . . . . . . . . . . 13 ❑ Environment(including sewage bonds) . . . . . . . . . . . . . . . . . . . 14 ❑ Housing . . . . . . . . . . . . . . . . . 15 ❑ Utilities . . 16 lR Other. Describe(see instructions)► 1bliC (-c( fP � �)Mp(DJ>°Mll/f C Description of Bonds (a) (b) (c) (d) (e) (`) Stated redemption Weighted (n Net interest Maturity date Interest rate Issue price price at maturity avers a maturit Yield cost 17 Final maturity 2O V 0/0 5 000 S 0C,1Q 18 Entire issue . 530 oo0 6301 000 3 years VR V Uses of Original Proceeds of Issue(including underwriters'discount) 19 Proceeds used for accrued Interest . . . . . . . . . . . . . . . 19 1 # 51 20 Proceeds used for bond issuance costs(including underwriters'discount) . . . . . . . . . . 20 ! S 9 73 21 Proceeds used for credit enhancement . . . . . . . . . . . . . 21 1 22 Proceeds allocated to reasonably required reserve or replacement fund . . . . . . . . 22 1>! S -7 23 Proceeds used to refund prior Issues . . . . . . . . . . . . 23 1 24 Nonrefunding proceeds of the issue(subtract lines 20,21.22,and 23 from line 18,column(c)) 24 N 69. 18 q Description of Refunded Bonds(complete this part only for refunding bonds) 25 Enter the remaining weighted average maturity of the bonds to be refunded ► years 26 Enter the last date on which the refunded bonds will be called . . . . . . . ► 27 Enter the dates the refunded bonds were issued ► Miscellaneous 28 Enter the amount(if any)of the state volume cap allocated to this issue . . . . . . ► 29 Arbitrage rebate: a Check box if the small governmental unit exception to the arbitrage rebate requirement applies . . . . . . . . . . . . ❑ b Check box If the 6-month temporary Investment exception to the arbitrage rebate requirement Is expected to apply . . . ❑ c Check box if you expect to earn and rebate arbitrage profits to the U.S. . . X 30 Enter the amount of the bonds designated by the Issuer under section 265(b)(3)(13)(11) . . . . . ► 31 Pooled financings: a Check box If any of the proceeds of this issue are to be used to make loans to other governmental units ► ❑ and enter the amount ► b Check box if this Issue is a loan made from the proceeds of another tax-exempt issue ►N and enter the name of the issuer ► ft50 C)CA.11 p^ 0 , (We/Axttj& and the date of the Issue ► 1+P(11 ,`1.1114 8-7 under penalties of perjury.I declare triat I nave examined this return and accompanying scneduies and statements.and!oe oest or^'y hrow ecge arc cei,et Please they are true,correct.and complete Sign Here �, 18 1 8� ' Mcwo r 'Signature of officer Date 71, For Paperwork Reduction Act Notice,see page 1 of the Instructions. dorm 8038-G :86; QU.i government hinting omoe: 1987-111-447/40095 PROJECT CERTIFICATE DRAFT The undersigned Mayor of the City of San Bernardino, California (the "City") hereby certifies in connection with the financing of the Project described on Exhibit A attached hereto and hereby made a part hereof that the estimated cost of the Project as listed on Exhibit A represents the City's current best estimate of the cost of the Project. Such estimate of the cost of the Project is based upon architectural, engineering and accounting data of such detail, accuracy and completeness as is generally required by City practice for budgetary purposes. The financing of the Project will comply with the requirements and restrictions contained in Section 4.02 of the Trust Indenture dated as of April 1, 1987, between the Association of Bay Area Governments and Seattle-First National Bank, as trustee, pursuant to which the Project is being financed. IN WITNESS WHEREOF, the City of San Bernardino, California has caused this certificate to be executed and delivered on its behalf by its duly authorized officer this 18th day of March. 1988. CITY OF SAN BERNARDINO, CALIFORNIA By: Title: Mayor Authorized Representative