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HomeMy WebLinkAboutadditional documentsJohn Paul Maier From: donotreply@sbcity.org Sent: Monday, May 15, 2017 11:24 AM To: donotreply@sbcity.org; Gigi Hanna; John Paul Maier Subject: Speaker Slips Notice Text First Name Deanna Last Name Adams, Ph.D. Telephone 909-884-6105 Email deannahelena.(I earthlink. net Comments Items 9 and 21 on 05/15/2017 Agenda Thank you. HUD and Item not on the Agenda City of San Bernardino Civil Service Department Date: May 15, 2017 To: Honorable Mayor and City Council Members From: Rebekah Kramer, Chief Examiner Subject: Replacement Pages - Charter Implementation Update — Item #13e (Packet Pages 477 — 479) Attached you will find replacement pages for Item #13e (packet pages #477 — 479) scheduled for consideration by the Mayor and City Council on the May 15, 2017. Corrections were made to Section 6 of the Resolution as presented below. SECTION 6: Any act previously performed by the Chief Examiner in the Rules other than the acts related to disciplinary appeals referenced in Rules 513-513.5 and 601 are hereby delegated to a human resources department with approval from the Appointing Power, as such term is used in Rule 103 R eso FGes De aFtm + 1 RESOLUTION NO. RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF S 2 BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES A REGULATIONS THE PERSONNEL RULES RULES 3 AMENDMENTS TO RULES 513-513.5 AND 601 PURSU�A�NT TO CHAPTER 2 501 THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 AI 4 601 TO THE NEW CHARTER BY CHANGING REFERENCES FROM THE CII SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORI 5 FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGNI IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO 6 DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCI DEPARTMENT 7 WHEREAS, the voters of the City of San Bernardino, at an election held s November 8, 2016, approved a new City Charter; and 9 to WHEREAS, the new City Charter went into effect upon filing with the Secreta 11 of State on January 31, 2017; and 12 WHEREAS, prior to the adoption of the new City Charter, responsibility fc 13 hearing appeals of disciplinary action by classified City employees was assigned to th 14 Civil Service Board; and 15 WHEREAS, Section 604 of the new City Charter assigns responsibility fo 16 hearing appeals of disciplinary action by City employees to the Personnel Commission 17 11 and 18 19 20 21 22 23 24 25 WHEREAS, Section 604 of the new City Charter states that the responsibility of the Personnel Commission shall be to hear appeals of discir action by City employees; and WHEREAS, Section 508 of the new City Charter states that the administration employee matters shall be delegated to a personnel or human resources dennorno and 1 1 2 3 4 5 6 7 s 9' 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WHEREAS, section 2.50.010 of the San Bernardino Municipal Code states all amendments to the Civil Service Rules and Regulations shall be adopted Resolution of the Mayor and City Council. NOW, THERERFORE, BE IT RESOLVED BY THE MAYOR AND C COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1: The above Recitals are true and correct and are incorporate herein by this reference. SECTION 2: The City of San Bernardino's Civil Service Rules and Regulatior for the Classified Service shall heretofore be known as the Personnel Rules ("Rules"), SECTION 3: The amendments to Rules 513-513.5 and 601, attached hereto Exhibit "A" and incorporated herein, are hereby approved. SECTION 4: The Personnel Commission shall be responsible for hearing disciplinary appeals referenced in and pursuant to Rules 513-513.5 and 601. SECTION 5: Any act previously performed by the Civil Service Board in th Rules other than the acts related to disciplinary appeals referenced in Rules 513-513. and 601 are hereby delegated to a human resources department with approval from th Appointing Power, as such term is used in Rule 103. SECTION 6: Any act previously performed by the Chief Examiner in the Rule other than the acts related to disciplinary appeals referenced in Rules 513-513.5 an 601 are hereby delegated to a human resources department with approval from th Appointing Power, as such term is used in Rule 103. 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAI BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES AN REGULATIONS THE PERSONNEL RULES ("RULES"); APPROVIN, AMENDMENTS TO RULES 513-513.5 AND 601 PURSUANT TO CHAPTER 2.50 O THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 ANI 601 TO THE NEW CHARTER BY CHANGING REFERENCES FROM THE CIVI SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORIT FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGNEI IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCE DEPARTMENT HEREBY CERTIFY that the foregoing Resolution was duly adopted by th Mayor and City Council of the City of San Bernardino, California, at a meeting thereo held on the day of , 2017, by the following vote, to wit: COUNCILMEMBERS: AYES NAYES ABSTAIN ABSENT MARQUEZ BARRIOS VALDIVIA SHORETT NICKEL RICHARD MULVIHILL Georgeann Hanna, City Clerk The foregoing Resolution is hereby approved this 2017. Approved as to form: Gary D. Saenz, City Attorney 3 of , R. Carey Davis, Mayor City of San Bernardino City Council Memorandum Date: May 15, 2016 To: Honorable Mayor and City Council Members From: Mark Scott, City Manager By: Gigi Hanna, City Clerk John Paul Maier, Chief Deputy City Clerk Subject: Amendment to Agenda Items 18 and 19 Attached are Exhibit B to the Resolution for Agenda Item 18 and Attachments 1 and 5 to Agenda Item 19. Please feel free to be in touch with the City Clerk Gigi Hanna (hanna giasbeity.org) or Chief Deputy City Clerk John Maier (maier moa-sbcity.org) should you have any questions. K. The current property tax liability, including penalty and interest through May 1, 2017, is Eighty Thousand Fifty Seven Dollars ($80,057) plus interest accruing after May 1, 2017 (the "Tax Liability"). L. Throughout the term of the lease, ACAA has remained current with respect to the payment to the County of San Bernardino Tax Collector of all possessory interest/unsecured taxes. M. ACAA has requested that the City discharge the Tax Liability. N. The City previously requested the County of San Bernardino ("County") to remove from the tax rolls and cancel the taxes related to all properties included within the LRPMP, inclusive of the Property. The County has removed all properties included within the LRPMP, inclusive of the Property, from the tax rolls. O. The County has advised the City that it will consider the cancellation of the taxes, interest and penalties related to all properties included within the LRPMP, inclusive of the Tax Liability, subject to a Mutual Release and Settlement Agreement provided by the County. The County and City continue to refine the terms of the Mutual Release and Settlement Agreement P. Based on the expectation of the County and City entering into a final Mutual Release and Settlement Agreement, the Parties now desire to resolve any claims, disputes and/or controversies with respect to the Note, Deed of Trust, and Tax Liability. AGREEMENT NOW, THEREFORE, in consideration of the terms, conditions, and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Quitclaim Deed. Concurrently herewith, the City shall execute and deliver to ACAA for recordation that certain Quitclaim Deed with respect to the Property in the form attached hereto as Exhibit. A and incorporated herein by this reference. 2. Tax Liability. In the event the County refuses to cancel the Tax Liability, as described in Recital O, above, the City hereby covenants to discharge the Tax Liability prior to it reaching One Hundred Thousand Dollars ($100,000) through the accrual of interest. 3. Release by the Parties. Except for the obligations imposed upon the City under this Settlement Agreement with respect to the Tax Liability, the Parties and all others claiming by and through them do hereby release and discharge each of them from and for all actions, claims, charges, liabilities, obligations, benefits, compensation, damages, fees, foreclosure, expenses, or suits of any kind whatsoever, known or unknown, which either Party now has, or may ever have had, arising out of, or relating to, the Note, Deed of Trust, Property, and/or Tax Liability. ACAA, on behalf of itself and all others claiming by and through ACAA, does hereby release and discharge the SBEDC, the Successor Agency, and each of them from and for all actions, claims, charges, liabilities, obligations, benefits, compensation, damages, fees, foreclosure, expenses, or suits of any kind whatsoever, known or unknown, which ACAA or anyone claiming by and through ACAA now has, or may ever have had, arising out of, or relating to, the Note, Deed of Trust, Property, and/or Tax Liability. 2 City of San Bernardino City: 300 North "D" Street San Bernardino, CA 92418 Attn: City Manager and City Attorney Ed Haddad, President ACAA: 422 Wier Road, Front Office San Bernardino, CA 92408 With copy via regular U.S. Mail to: Strad]ing Yocca Carlson & Rauth Atm: Thomas P. Clark, Jr. 660 Newport Center Drive, Suite 1600 Newport Beach, CA 92660 5. No Material Reliance. There are no unwritten, oral or verbal understandings, agreements, promises or representations of any kind whatsoever as between the Parties that are not contained in this Agreement. The Parties each represent and acknowledge that, in executing this Agreement, they have not relied upon any representation, statement, omission, agreement or promise made by any other Party except as set forth in this Agreement, nor have they relied upon any representation, statement, agreement, omission or promise made by the other Party's agents, representatives, or attorneys, except as set forth in this Agreement. 6. Final and Binding Agreement. The Parties have each made such investigation of the facts pertaining to this Agreement as they have deemed necessary. This Agreement is intended to be and is the final, binding and fully integrated agreement of the Parties, regardless of any claims of any of the Parties of misrepresentation, concealment of fact, or mistake of law or fact. 7. No Admission of Liability. The Parties stipulate that this Agreement does not constitute an admission of liability, does not constitute any factual or legal precedent whatsoever, and may not be used as evidence in any subsequent proceeding of any kind, except in an action alleging a breach of this Agreement. S. Agreement Not Subject to Government Code §52200 et seq. The Property is fully developed and, therefor, is not being treated as an "economic opportunity", as defined in California Government Code Section 52200.2, nor is it being conveyed for "economic development purposes" as described in Government Code Section 52201(a)(1), because the subsidy, if any, is less than $100,000. 9. Parties Shall Bear Their Own Fees And Costs. Each Party shall bear its own attorneys' fees and costs relating to this Agreement. 10. Successors and Assigns. This Agreement shall be binding upon and inure to the Parties hereto and their respective heirs, executors, administrators, successors and assigns. 11. Non -Assignment of Claims. ACAA hereby represents and warrants that there has been no assignment, sale, or transfer, by operation of law or otherwise, of any claim, right, cause of action, demand, obligation, liability or interest released by it under this Settlement Agreement. 12. Further Assurances and Authorizations to Settle. The Parties, acting by themselves or through their respective attorneys, shall promptly prepare and execute any and all documents necessary to effectuate the obligations set forth in this Settlement Agreement and 10 IN WITNESS WHEREOF, this Settlement Agreement has been executed in the name of the City of San Bernardino, and ACAA, as of the dates set forth below. CITY OF SAN BERNARDINO, a California charter city By:-. Mark Scott, City Manager Dated: ATTEST Geogeann Hanna, City Clerk APPROVED AS TO FORM: STRADLING YOCCA CARLSON & RAUTH, P.C. By:_ _ Thomas P. Clark, Jr., Special Counsel ACAA LIMITED PARTNERSHIP, a California limited partnership By: A & A HOLDINGS, INC. Its: General Partner Dated: Ed Haddad, President A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF On personally P y appeared , before me, ss. .... , Notary Public, (Print Name of Notary Public) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature of Notary Public OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) — .. ❑ Guardian/Conservator Number Of Pages ❑ Other: Signer is representing: _ Name Of Person(s) Or Entity(ies) Date Of Documents Signer(s) Other Than Named Above 10 11 12 13 14 15 16 17 1s 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO AUTHORIZING THE AMENDMENT OF DOCUMENTS RELATING TO THE TAXABLE PENSION OBLIGATION BONDS, 2005 SERIES A, APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the City of San Bernardino (the "City"), a municipal corporation and charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California, has previously issued the Taxable Pension Obligation Bonds, 2005 Series A- 1 (the "2005 Series A-1 Bonds") and 2005 Series A-2 (the "2005 Series A-2 Bonds" and, together with the 2005 Series A-1 Bonds, the "Bonds"); and WHEREAS, the Bonds were issued pursuant to a Trust Agreement, dated as of October 1, 2005 (the "Trust Agreement"), by and between the City and Wells Fargo Bank, National Association, as trustee; and WHEREAS, the City, the holder of the Bonds, and the insurer of the 2005 Series A-2 Bonds entered into a settlement agreement dated as of March 28, 2016 (the "Settlement Agreement"); and WHEREAS, the Mayor and the City Council of the City have determined that it is in the best interest of the City to amend the Trust Agreement and to enter into certain other documents in order: (i) to cause the refunding and cancellation of the 2005 Series A-1 Bonds in exchange for a note to be issued by the City that is payable to Commerzbank Finance & Covered Bond S.A., the holder of the 2005 Series A-1 Bonds (the "Commerzbank Note"); and (ii) to amend the 2005 Series A-2 Bonds to provide that such 2005 Series A-2 Bonds shall be non-recourse to the City; and (iii) to issue a note payable to Ambac Assurance Corporation, the bond insurer of the 2005 Series A-2 Bonds (the "Ambac Note" and, together with the Commerzbank Note, the "Notes"); and WHEREAS, the Bankruptcy Court for the Central District of California (the "Bankruptcy Court") in the City's chapter 9 bankruptcy case (the "Bankruptcy Case"), by order entered on February 7, 2017, among other things: (i) authorized the City to enter into, execute and deliver additional documents that the City reasonably deems necessary to implement the Settlement Agreement, and (ii) confirmed the City's Plan of Adjustment in its Bankruptcy Case. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 KPM 23 24 25 26 27 28 Section 5. Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Trust Agreement, as amended by the Supplemental Trust Agreement, unless the context otherwise clearly requires. HI Section 6. This Resolution shall take effect immediately upon its adoption. 3 EXHIBIT A TO RESOLUTION Supplemental Trust Agreement TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY..............................................................................5 SECTION1.01. Definitions............................................................................................................5 SECTION 1.02. First Supplemental Trust A =reement Constitutes Contract ................................. 8 SECTION 1.03. Section Numbers ....................... ARTICLE H REFINANCING OF 2005 SERIES A-1 BONDS; AMENDMENT OF 2005 SERIES A-2 BONDS; GENERAL BOND PROVISIONS ..................................... 8 SECTION 2.01. Refmancin2 of the 2005 Series A-1 Bonds: Issuance of Commerzbank Note.....................................................................................................................8 SECTION 2.02. Amendment of the 2005 Series A-2 Bonds......................................................... 8 SECTION 2.03. Exchanize Agreement ...........................................................................................9 SECTION 2.04. Costs and Fees for Transfers................................................................................ 9 ARTICLE III CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION.............................................................................................. 9 SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse ............................... 9 SECTION 3.02. Implementation Procedures...............................................................................10 ARTICLE IV PROVISIONS REGARDING AMBAC POLICY.......................................................10 SECTION 4.01. Ambac Polic.......................................................................................................10 SECTION 4.02. Claims Under Ambac Polic..............................................................................10 ARTICLE V COVENANTS OF THE LOCAL AGENCY.................................................................12. SECTION5.01. Performance.......................................................................................................12 SECTION 5.02. Power to Enter Into Agreement .........................................................................12 SECTION 5.03. Accounting Records and Reports.......................................................................12 SECTION 5.04. Prosecution and Defense of Suits ....................... SECTION 5.05. Waiver of Laws ...................... ARTICLEVI THE TRUSTEE............................................................................................................13 1 THIS FIRST SUPPLEMENTAL TRUST AGREEMENT, made and entered into as of , 2017 (the "First Supplemental Trust Agreement") and effective as of the Effective Date (as defined herein), supplements the Trust Agreement dated as of October 1, 2005 (the "Original Trust Agreement", as supplemented by this First Supplemental Trust Agreement, the "Trust Agreement") by and between WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as Trustee (the "Trustee"), and the CITY OF SAN BERNARDINO (the "Local Agency"), a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Government Code), under the laws of the State of California. WITNESSETH: WHEREAS, the Local Agency is obligated by the Public Employees' Retirement Law, commencing with Section 20000 of the Government Code of the State of California, as amended, to make payments to the California Public Employees' Retirement System (the "System") relating to pension benefits accruing to the System's members; and WHEREAS, the Local Agency entered into a contract with the System dated March 1, 1945, as heretofore and hereafter amended from time to time (the "PERS Contract"), evidencing the Local Agency's obligation to pay the Local Agency's unfunded accrued actuarial liability; and WHEREAS, the Local Agency is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California (the "Act") to issue bonds for the purpose of refunding any evidence of indebtedness of the Local Agency; and WHEREAS, for the purpose of refunding the Local Agency's obligations to the System evidenced by the PERS Contract, the Local Agency issued its City of San Bernardino Taxable Pension Obligation Bonds, 2005 Series A-1 Bonds (the "2005 Series A-1 Bonds"), in the aggregate principal amount of $36,050,000 and 2005 Series A-2 Bonds (the "2005 Series A-2 Bonds"), in the initial aggregate principal amount of $14,351,582.90 (collectively, the "2005 Series A Bonds"), all pursuant to the Original Trust Agreement and in the manner provided therein; and WHEREAS, the 2005 Series A-1 Bonds and the 2005 Series A-2 Bonds, together with any Additional Bonds (as defined in the Original Trust Agreement), were validated pursuant to the Default Judgment in Validation Proceeding dated 7/11/2005 in San Bernardino County Superior Court Case No. SCVSS 125783; and 3 WHEREAS, all acts and proceedings required by law necessary to make this First Supplemental Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this First Supplemental Trust Agreement have been in all respects duly authorized; and NOW, THEREFORE, THIS FIRST SUPPLEMENTAL TRUST AGREEMENT WITNESSETH, that in order to implement the matters described above with respect to the 2005 Series A Bonds, to satisfy certain terms of the Exchange Agreement, and to make certain changes to the payment procedures related to the Ambac Policy, and consideration of the premises and of the mutual covenants herein contained and in the Exchange Agreement, the Local Agency does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds (as defined in the Original Trust Agreement), as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01. Definitions. Unless otherwise defined in this First Supplemental Trust Agreement, capitalized terms defined in the Original Trust Agreement shall have the meanings given such terms in the Original Trust Agreement; and unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any First Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified: 2005 Series A-1 Bonds The term "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac The term "Ambac" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac Police Insurance Pa, ment Account The term "Insurance Payment Account" means the account by that name established by the Trustee pursuant to Section 4.02(c) of this First Supplemental Trust Agreement. Insured Holders The term "Insured Holder" means a Holder (as defined in the Ambac Policy) of the 2005 Series A-2 Bonds. Note Paying Agent The term "Note Paying Agent" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Notes The term "Notes" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Orisizinal Ambac Policy The term "Original Ambac Policy" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ori«inal Trust Agreement The term "Original Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. Trust A-zreement The term "Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. 2005 Series A-1 Bonds The terin "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 7 Supplemental Trust Agreement shall not constitute a novation. After the Effective Date, the 2005 Series A-2 Bonds shall continue to be insured by the Original Ambac Policy, endorsed as provided in this First Supplemental Trust Agreement. The Ambac Note shall be issued as an Additional Bond under the Trust Agreement in exchange for rendering the 2005 Series A-2 Bonds non-recourse to the Local Agency. The conditions and procedure for issuance of the Ambac Note set forth in the Exchange Agreement shall supersede and replace the requirements of Sections 3.01 and 3.02 of Original Trust Agreement with respect to conditions precedent to issuance of the Ambac Note. The terms of the Ambac Note shall be set forth in the Exchange Agreement and in the Ambac Note. SECTION 2.03. Exchange A:.,reement. The Trustee shall serve as Note Paying Agent under the Exchange Agreement. The Exchange Agreement shall govern all terms and provisions of the Notes, including principal, interest (if any) and repayment, as well as all conditions precedent to issuance. SECTION 2.04. Costs and Fees for Transfers. Section 2.06(a) of the Original Trust Agreement shall be amended to delete the following sentence: "The cost of printing of Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Local Agency." CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse. Upon satisfaction of the following specific conditions, the 2005 Series A-1 Bonds shall be cancelled and the 2005 Series A-2 Bonds shall be rendered non-recourse to the Local Agency: (a) the Exchange Agreement and this First Supplemental Trust Agreement shall have been executed and delivered by all parties thereto; (b) the Original Ambac Policy shall be endorsed to incorporate the amendments set forth in Exhibit B attached hereto; and (c) all conditions for closing under the Exchange Agreement, as set forth in Section 3.2 thereof, shall have been satisfied, including (i) issuance and delivery to Commerzbank of the Commerzbank Note in exchange for the 2005 Series A-1 Bonds, and (ii) issuance and delivery to Ambac of the Ambac Note in exchange for any subrogation, reimbursement, or other rights to payment from the Local Agency to Ambac in connection with amounts paid by Ambac under the Ambac Policy with respect to the 2005 Series A-2 Bonds. E (b) The Trustee shall, after giving notice to Ambac and the Insured Holders of the 2005 Series A-2 Bonds as provided in (a) above, make available to Ambac the registration books of the Local Agency maintained by the Trustee and all records relating to the funds and accounts maintained under this First Supplemental Trust Agreement. (c) The Trustee shall establish an account for the benefit of the Insured Holders and Ambac referred to herein as the "Insurance Payment Account." The Trustee shall deposit upon receipt any amount paid under the Ambac Policy in the Insurance Payment Account and distribute such amount solely for purposes of payment to the Insured Holders for which a claim was made. For the sake of clarity, amounts paid under the Ambac Policy may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Amounts held in the Insurance Payment Account shall not be invested and any amounts remaining in the Insurance Payment Account on the first Business Day following a Principal Payment Date shall be returned to Ambac by the end of such Business Day. (d) The amount of any payment of principal of or interest on the 2005 Series A-2 Bonds from the Insurance Payment Account shall be recorded by the Trustee. Ambac shall have the right to inspect such records upon one (1) Business Day's prior written notice to the Trustee. (e) In the event that the Trustee has notice that any payment of principal of or interest on a 2005 Series A-2 Bond which has become due for payment and which is made to an Insured Holder by or on behalf of the Local Agency has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, non -appealable order of a court having competent jurisdiction, the Trustee shall, at the time Ambac is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to Ambac its records evidencing the payment of principal of and interest on the Ambac Insured Bond which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted Ambac under this First Supplemental Trust Agreement, and anything herein to the contrary notwithstanding, the Local Agency, the Trustee and each Insured Holder acknowledge and agree, that without the need for any further action on the part of Ambac, Ambac shall, to the extent it makes payment of principal of or interest on 2005 Series A-2 Bonds, become subrogated to all rights of the Holders of such 2005 Series A-2 Bonds, including all rights to payment. To evidence such subrogation, the Trustee shall note Ambac's rights as subrogee on the registration books of the Local Agency maintained by the Trustee upon payment of amounts from the Insurance Payment Account to the Insured Holders of the 2005 Series A-2 Bonds. The Trustee shall simultaneously assign in writing to Ambac, to 11 Section shall survive the discharge of the Bonds and this Agreement and the resignation or removal of the Trustee. SECTION 5.05. Waiver of Laws. The Local Agency shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this First Supplemental Trust Agreement or in the 2005 Series A-2 Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Local Agency to the extent permitted by law. ARTICLE VI THE TRUSTEE SECTION 6.01. The Trustee. Section 6.01 of the Original Trust Agreement is hereby amended (a) to provide that if at any time the Trustee exercises its right to resign thereunder, the Trustee shall simultaneously resign as Note Paying Agent under the Exchange Agreement, (b) to provide that, subject to the provisions of Section 10.6 of the Exchange Agreement, the consent of each of Commerzbank and Ambac shall be required for the appointment of any successor Trustee so long as Commerzbank and Ambac remain Holders, and (c) to delete the requirement that the Trustee and any successor Trustee have a corporate trust office in Los Angeles or San Francisco, California. SECTION 6.02. Trustee's Fees and Ex }enses. Indemnification. Section 6.03 of the Original Trust Agreement is hereby amended as follows with respect to obligations of the Local Agency to pay fees and expenses of, and to indemnify, the Trustee: (a) The obligation of the Local Agency to pay fees and expenses of the Trustee, including, for the avoidance of doubt, the fees and expenses provided for under Article II of this Trust Agreement, shall be limited to the amounts required to be paid by the Local Agency pursuant to Section 2.4 of the Exchange Agreement. (b) The provisions of Local Agency under Section 6.03 of the Original Trust Agreement regarding indemnification of the Trustee are hereby amended to read as follows: (i) To the extent permitted by law, the Local Agency shall indemnify, defend and hold harmless the Trustee against any loss, damages, liability or expense incurred by the Trustee to the extent arising out of or in connection with a breach by the Local Agency under the Exchange Agreement, the Notes or the Trust Agreement, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder, except to the extent that any loss, damages, liability or expense results from 13 If to the Local Agency: City of San Bernardino 300 North "D" Street San Bernardino, CA 92418-0001 Attention: City Attorney's Office If to the Trustee: Attention: Corporate Trust Services Wells Fargo Bank, National Association 555 Montgomery Street, 10th Floor MAC # A0167-102 San Francisco, CA 94111 If to Ambac: Attention: Portfolio Risk Management Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com If to the Holders: [Commerzbank: TO BE PROVIDED] Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com SECTION 8.04. Article and Section Headimus and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles," "Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof, and the words "hereby," "herein," "hereof," "hereto," "herewith," "hereunder" and other words of similar import refer to the Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 8.05. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Local Agency or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed 15 [Signature Page to First Supplemental Trust Agreement] IN WITNESS WHEREOF, the CITY OF SAN BERNARDINO has caused this First Supplemental Trust Agreement to be signed in its name by the Authorized Representative and WELLS FARGO BANK, NATIONAL ASSOCIATION, in token of its acceptance of the trusts created hereunder, has caused this First Supplemental Trust Agreement to be signed by the officer thereunder duly authorized, all as of the day and year first above written. CITY OF SAN BERNARDINO I:A ATTEST: Georgeann Hanna, City Clerk WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee LM Approved as to form and legal content: GARY D. SAENZ City Attorney By: DMEAST #28194828 03 Theresa Hempeck, Vice President, Corporate Trust Services, Authorized Officer Ambac Financial Guaranty Insurance Policy Obligor: SAN. BERNARDINO, CALIFORNIA $14,351,583 Taxable Pension Obligation Capital Obligations: Appreciation. Bonds, Series 2005, dated October 28, 2005 and maturing October 1 in the years 2007 through 2024, both inclusive. Ambac Assurance Corporation One State Street Plaza, 15th Floor New York, New York 10004 Telephone: (212) 668-0340 Policy Number: S24928BE Premium: $234,405.00 Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the "Insurance Trustee"), for the benefit of the Holders, that portion of the principal of and interest on the above-described obligations (the "Obligations") which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. Ambac will make such payments to the Insurance Trustee within one (1) business day following written notification to Ambac of Nonpayment. Upon a Holder's presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons, uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder's rights to payment thereon. In cases where the Obligations are issued in registered form, the Insurance Trustee shall disburse principal to a Holder only upon presentation and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation -to the Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery to the Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the Holder or such Holder's duly authorized representative, transferring to Ambac all rights under such Obligation to receive the interest in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights co payment on registered Obligations co the extent of any insurance disbursements so made. In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest -on an Obligation which has become Due for Payment and which is made to a Holder'by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extenr of such recovery if sufficient funds are not otherwise available. As used herein, the term "Holder" means any person other than (i) the Obligor or (ii) any person whose obligations constitute the underlying security or source of payment for the Obligations who, at rhe time of Nonpayment, is the owner of an Obligation or of a coupon relating to an Obligation. As used herein, "Due for Payment", when referring to the principal of Obligations, is when the scheduled maturity date or mandatory redemption date for the application of a required sinking fund installment has been reached and does not refer to any earlier dace on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or other advancement of maturity; and, when referring 'to interest on the Obligations, is when the scheduled date for payment of interest has been reached. As used herein, "Nonpayment" means the failure of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest on the Obligations which are Due for Payment. 'This Policy is noncancelable. The ptemium on'this Policy is not -refundable for any reason, including payment of the Obligations prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time. may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment. In witness whereof, Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignatute of its. duly authorized representative. , 5 President December 23, 2005 Effective Date: -ft `__ems THE BANK OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form No.: 2B-0612 (1/01) A- 9067 Secretary Authorizi Representative "_�A Authorized Offecer of Insurance Trustee Ambac Endorsement Policy for. SAN BERNARDINO, CALIFORNIA Ambac Assurance Corporation One State Street Plaza, 15th Floor New York, New York 10004 Telephone: (212) 668-0340 Attached to and forming part of Polity No.: S2492SEE Effective Date of Endorsement: December 23, 2005 In the event that Ambac Assurance Corporation were to become insolvent, any claims arising under the Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements or limitations of the above mentioned Policy other than as above stated. In Witness Whereof, Ambac has caused this Endorsement to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative. Ambac Assurance Corporation isJr sJa�"•"•�E `o i ! V, 0 JIPresident i�\ +.,tiyj% �d Secretary Authorized Representative Form No.: 28-0015 (7/97) EXHIBIT B FORM OF ENDORSEMENT TO AMBAC POLICY Effective date: , 2016 Policy No. S24928BE is hereby amended as follows: 1. The first paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to Wells Fargo Bank, National Association or its successor (the "Trustee"), as trustee under that certain Trust Agreement dated October 1, 2005 relating to the issuance of the above-described obligations (the "Obligations"), for the benefit of the Holders, that portion of the principal of and interest on the Obligations which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. 2. The second paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac will make such payments to the Trustee on the later of (a) one (1) business day following written notification to Ambac of Nonpayment or (b) the business day on which the Obligations are Due for Payment. 3. The thud paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: The Trustee shall disburse such payments of principal to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee and transferring to Ambac all rights under such Obligations to receive the principal of and interest on the Obligations. The Trustee shall disburse such payments of interest to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, transferring to Ambac all rights under such Obligations to receive the interest on the Obligations in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights to payment on the Obligations to the extent of any insurance disbursements so made. 4. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements or limitations of the Policy other than as above stated. Ambac Assurance Corporation Attention: Claims Processing One State Street Plaza New York, New York 10004 An electronic copy should be sent to: claimsprocessing@ambac.com CONVEYANCE: SUBROGATION The Trustee hereby transfers, delivers and assigns to Ambac all rights to the payment of the Principal Amount Currently Due for Payment and the Interest Amount Currently Due for Payment (collectively referred to as the "Amount Currently Due for Payment"), together with any rights related to such Amount Currently Due for Payment, with respect to the bonds identified above which bonds are now "Due for Payment" as defined in the Policy, but only to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy. The Trustee agrees that Ambac shall also be subrogated to all of the rights of the "Holders" as defined in the Policy, including all rights to payment, to the extent of such payments made by or on behalf of Ambac. The Trustee represents and warrants that it has full corporate power and authority to execute and deliver this Claim and Assignment Form and this Claim and Assignment Fonn has been duly authorized, executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee enforceable in accordance with its terns. The Trustee agrees that Ambac may exercise any option, vote, right, power or the like (including, but not limited to any such rights arising in context of a bankruptcy, insolvency, liquidation or other reorganization of the Bond Issuer), it may have to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy with respect to the bonds identified above. The Trustee agrees to make a notation on the insured bonds and in the bond register or other document of record that Ainbac is subrogated to and assigned all of the rights of the Holder as described hereinabove and to hold those bonds for which payment of principal at final maturity has been made in an uncanceled form and manner acceptable to Ambac and the Trustee. [TRUSTEE] LIM C-2 EXHIBIT D FORM OF TRUSTEE'S NOTICE TO AMBAC OF INSUFFICIENT FUNDS [DATE] Ambac Assurance Corporation Attn.: Surveillance Department and General Counsel One State Street Plaza New York, New York 10004 claimsprocessing@ambac.com Re: Notice Regarding Insufficient Funds for Payment of [DATE] Debt Service for San Bernardino Taxable Pension Obligation Bond, Cusip: (the "Bonds"): Reference is made to that certain (i) Trust Agreement, dated as of October 1, 2005, as supplemented by a First Supplemental Trust Agreement, dated as of _, 2017 (collectively, the "Trust Agreement"), by and between the City of San Bernardino (the "City") and Wells Fargo Bank, National Association ("Wells Fargo"), as Trustee, pursuant to which the Bonds were issued. Wells Fargo hereby certifies that: 1. The undersigned is an authorized officer of the Trustee. 2. Pursuant to the terms of the Bonds and the Trust Agreement, payment is due to the holders of the Bonds on [DATE] (the "Payment Due Date"). 3. Pursuant to Section 4.02 of the Trust Agreement, the Trustee is currently holding [$_1 in the Bond Fund, which is not sufficient to make the [$] in debt service due on [DATE] for the Bonds. The total amount of deficiency due on the Bonds is $- 4. Wiring instructions for payment of the deficiency amount to the Trustee are as follows: Bank: Wells Fargo Bank, N.A. ABA 121000248 Beneficiary Name: Corporate Trust Beneficiary Account No. 0001038377 For further credit: 18613300 Attn: T.Hempeck re: San Bernardino Ref: CITY OF SAN BERNARDINO, CALIFORNIA In Witness Whereof, the Trustee has executed and delivered this Notice as of [DATE]. [Trustee] D-1 EXHIBIT B TO RESOLUTION Exchange Agreement TABLE OF CONTENTS Page ARTICLE1 DEFINITIONS........................................................................................................... 2 1.1 Definitions.......................................................................................................... 2 1.2 Rules of Interpretation.......................................................................................................2 Acknowledgement of Certain ARTICLE2 THE NOTES.............................................................................................................. 2 2.1 Note Terms........................................................................................................................2 2.2 Register..............................................................................................................................3 5.6 2.3 Prepayments......................................................................................................................3 2.4 Fees....................................................................................................................................4 2.5 Other Payment Terms........................................................................................................4 6 AFFIRMATIVE COVEN 2.6 Payment of Obligations.....................................................................................................5 ARTICLE 3 CLOSING DATE OBLIGATIONS OF CITY; CONDITIONS PRECEDENT........ 5 3.1 City Closing Date Obligations..........................................................................................5 Financial Statements .............. 3.2 Conditions Precedent.........................................................................................................6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CITY ......................................... 7 4.1 Authorization; No Conflict; Enforceability.......................................................................7 4.2 Governmental Authorizations...........................................................................................7 4.3 No Default .........................................................................................................................7 4.4 Litigation...........................................................................................................................7 4.5 Sovereign Immunity..........................................................................................................8 4.6 Fiscal Year.........................................................................................................................8 4.7 OFAC and Related Matters...............................................................................................8 4.8 Anti -Terrorism Law..........................................................................................................8 ARTTCT.F. 5 rc r.YF-r'6MN l A r IUIN AIV 1) W AKKAf 5.1 Authorization .......................... 5.2 Acknowledgement of Certain 5.3 Unregistered Status of Notes.. 5.4 Rule 15c2-12 Exemption........ 5.5 Receipt of Information/Non-B 5.6 Inquiry and Analysis .............. 5.7 No Offering/Disclosure Docu; 5.8 Tax Consequences .................. ARTICLE 6 AFFIRMATIVE COVEN 6.1 Payment .................................. 6.2 Notices; Public Filings ........... 6.3 Financial Statements .............. 6.4 Cooperation ............................ 6.5 Books and Records ................. LhN Ur NUTEHULDERS............................................ 8 .......................................................................................9 3ks..................................................................................9 .......................................................................................9 .......................................................................................9 ance...............................................................................9 .....................................................................................10 nts................................................................................10 .....................................................................................10 ITSOF CITY............................................................. 10 .....................................................................................10 .....................................................................................11 .....................................................................................11 .....................................................................................11 .....................................................................................11 1 12.9 No Partnership, Etc.........................................................................................................22 12.10 Limitation on Liability....................................................................................................22 12.11 Waiver of Jury Trial........................................................................................................22 12.12 Counterparts....................................................................................................................22 12.13 No Third Party Beneficiaries...........................................................................................23 12.14 Separate Representation..................................................................................................23 12.15 Ratings.............................................................................................................................23 ui EXCHANGE AGREEMENT This EXCHANGE AGREEMENT (this "Agreement") is dated as of [], 2017, among CITY OF SAN BERNARDINO, CALIFORNIA, a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Code) under the laws of the State of California ("gly"), COMMERZBANK FINANCE & COVERED BOND S.A. (formerly known as Erste Europaische Pfandbrief- and Kommunalkreditbank AG in Luxemburg) ("Commerzbank"), as a Noteholder hereunder, AMBAC ASSURANCE CORPORATION ("Ambac"), as a Noteholder hereunder (together with Commerzbank and each of their successors and assigns, the "Noteholders"), and WELLS FARGO BANK, N.A., as paying agent (in such capacity, the "Paving Agent"). RECITALS A. Pursuant to a Trust Agreement dated as of August 1, 2005 (the "Ori�-inal Trust Aggeement") between City and Wells Fargo Bank, National Association, as indenture trustee (in such capacity, the "Trustee"), City issued certain Taxable Pension Obligation Bonds (the "Pension Obli,,ation Bonds") in the initial aggregate principal amount of $50,401,582.90, consisting of 2005 Series A-1 (Standard Bonds) in the initial aggregate principal amount of $36,050,000 (the "_S.eries A-1 Bonds") and 2005 Series A-2 (Capital Appreciation Bonds) in the initial aggregate principal amount of $14,351,582.90 (the "Series A-2 Bonds"), which Series A-2 Bonds were insured by Ambac pursuant to its Financial Guaranty Insurance Policy No. S24928BE (the "Ambac Policy "). B. The Series A-1 Bonds and the Series A-2 Bonds, together with any Additional Bonds (as defined in the Original Trust Agreement), were validated pursuant to the Default Judgment in Validation Proceeding dated 7/11/2005 in San Bernardino County Superior Court Case No. SCVSS 125783. C. Commerzbank and Ambac are the sole owners of all of the Pension Obligation Bonds, and Ambac is the insurer of the Series A-2 Bonds. D. City is a debtor under chapter 9 of title 11 of the United States Code, pursuant to a petition filed on August 1, 2012, commencing In re City of San Bernardino, California, case number 6:12-bk-28006-MJ (the "BankruptcNi Case") in the United States Bankruptcy Court for the Central District of California, Riverside Division (the `BankrurtcN Court"). E. Pursuant to a Settlement Agreement dated as of March 28, 2016 (the "Settlement Agreement'), a copy of which is attached hereto as Exhibit A, and an amended Plan of Adjustment that incorporates the terms of the Settlement Agreement (the `BankruptcN Plan"), the Noteholders have agreed to accept a payment stream (the "Payment Stream") in the total amount set forth in, and payable in the installments described in, the Settlement Agreement in full satisfaction of the payment and reimbursement obligations of City with respect to the Pension Obligation Bonds and the Ambac Policy, respectively. Exhibit C and shall evidence City's unconditional obligation to pay to each Noteholder its pro rata portion of the Payment Stream. The Commerzbank Note and the Ambac Note shall be dated the Closing Date, and any new Notes shall be dated as of the date each is executed by City. The Notes shall mature on the Scheduled Maturity Date. The Notes shall be paid from the City's general fund and/or any other legally available monies or funds of the City, and are not limited to any special source of funds. City is not empowered or obligated to levy or pledge taxes to make payments with respect to the Notes. The Notes may be issued only in Authorized Denominations. (b) Interest. The Notes shall not bear interest. In the event that any interest is imputed to any portion of the amounts payable by City pursuant to the Notes, such imputed interest may be included in the gross income of the Noteholders for federal income tax purposes pursuant to Section 103 of the Code, or for California state income tax purposes. Notwithstanding the foregoing, if City shall fail to pay when due any amounts payable by City pursuant to the Notes or any other amount whatsoever payable hereunder, City shall pay Default Interest as provided in Section 9.1. (c) Scheduled Pa. nnents. City shall pay to Paying Agent, for the accounts of the Noteholders, the aggregate unpaid amount of the Notes in installments on each Payment Date in accordance with the Payment Schedule set forth on Exhibit D. Such amounts shall be payable in Dollars, in immediately available funds. 2.2 ReLlister (a) Paying Agent shall maintain, at its address referred to in Section 12. 1, a register for the recordation of the names and addresses of the Noteholders (the "Register"). The Register shall be available for inspection by City and each Noteholder at any reasonable time and from time to time upon reasonable prior notice. (b) Paying Agent shall record in the Register (A) the outstanding balance. of each of the Notes from time to time and the Proportionate Share of each Noteholder, (B) the date and amount of any amount due and payable or to become due and payable from City to each Noteholder under its Note, (C) each repayment or prepayment in respect of the Notes, (D) any transfer of a Note pursuant to Section 11.3(b), and (E) such other information as Paying Agent may determine is necessary for administering the Notes and this Agreement. Any such recordation shall be conclusive and binding on City and each Noteholder, absent manifest error; provided, however, that (A) neither failure to make any such recordation, nor any error in such recordation, shall affect City's obligations in respect of this Agreement, the Notes, or otherwise; and (B) except as set forth above, in the event of any inconsistency between the Register and any Noteholder's records, the recordation in the Register shall govern. 2.3 Prepayments. City may, at its option, upon at least five (5) Banking Days' prior notice to Paying Agent, prepay the Notes without premium or penalty, in whole or in part. Upon any prepayment of the Notes by City to Paying Agent for the account of the Noteholders, the amounts prepaid shall be applied to the Notes on a pro rata basis according to the Proportionate Shares of the Noteholders and shall be applied so as to reduce the scheduled payments under the Notes in the inverse order of maturity. Any optional prepayment hereunder shall be in the For further credit: 18613300 Attn: T.Hempeck re: San Bernardino Ref CITY OF SAN BERNARDINO, CALIFORNIA or as otherwise directed by Paying Agent in writing from time to time, in lawful money of the United States and in immediately available funds not later than 12:00 p.m., New York time, on the date on which such payment is due. Any payment made after such time on any day shall be deemed received on the next Banking Day after such payment is received. Paying Agent shall disburse to each Noteholder each such payment received by Paying Agent for such Noteholder, such disbursement to occur by 4:00 p.m., New York time, on the day such payment is received if received by 12:00 p.m., New York time; otherwise on the next Banking Day. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Banking Day, such payment shall be made on the next preceding Banking Day. (c) Pro Rata Treatment. Each payment by City hereunder shall be shared between the Noteholders and applied to the Notes pro rata according to their respective Noteholder Proportionate Shares. (d) Sharing, of Payme its. Etc. If any Noteholder (a "Benefited Noteholder") shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of its Note, in excess of its Proportionate Share of payments on account of the Notes obtained by all Noteholders entitled to such payments, such Noteholder shall forthwith purchase from each other Noteholder such participation in such Noteholder's Note as shall be necessary to cause such Benefited Noteholder to share the excess payment ratably with each other Noteholder; and if after taking into account such participations the Benefited Noteholder continues to have access to additional funds of City for application on account of its Note, then the Benefited Noteholder shall use such funds to reduce the balance of its Note and share such payments with each other Noteholder; Eroded, however, that if all or any portion of any such excess payment is thereafter recovered from such Benefited Noteholder, any such purchase from each other Noteholder shall be rescinded and each other Noteholder shall repay to the Benefited Noteholder such purchase price to the extent of such recovery. City agrees that any Benefited Noteholder so purchasing a participation from another Noteholder pursuant to this Section 2.5(d) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Noteholder were the direct creditor of City in the amount of such participation. 2.6 Payment of Obligations. (a) Source of Payment. All obligations of City under the Notes shall be paid from the City's general fund or any other legally available monies or funds of City, and are not limited to any special source of funds. Amounts due under the Notes shall have the same payment priority accorded under California law to all general fund obligations that are not general obligation debt of the City; provided that City is not empowered or obligated to levy or pledge taxes to make payments with respect to the Notes. (d) Federal Law Com )liance. City shall have delivered to Paying Agent and each requesting Noteholder all such documentation and other information requested by Paying Agent or such Noteholder that are necessary (including the name, address, tax payer identification, copies of government issued identification and names of officers of City) for Paying Agent or such Noteholder, as applicable, to identify such person in accordance with any applicable Anti -Terrorism Laws, Anti -Money Laundering Laws, and the requirements of the Patriot Act (including the "know your customer" and similar regulations thereunder). (e) Series A-1 Bonds. The Series A-1 Bonds shall have been exchanged for the Commerzbank Note and cancelled, and the Series A-1 Bonds, and any ancillary agreements, documents or instruments (other than the Trust Agreement) shall have been cancelled, terminated and of no force and effect. (f) Series A-2 Bonds. Pursuant to the First Supplemental Trust Agreement, City shall have been released from all liability for repayment of the Series A-2 Bonds; and Ambac shall have confirmed that the Ambac Policy is in full force and effect. (g) Representations and Warranties. The representations and warranties contained in Article 4 and Article 5 hereof shall be true and correct in all material respects on and as of the Closing Date. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CITY City makes the following representations and warranties to and in favor of Paying Agent and the Noteholders as of the Closing Date: 4.1 Authorization: No Conflict: Enforceabilit\ . (a) City has duly authorized, executed and delivered this Agreement and the Notes, and neither City's execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor City's compliance with the terms thereof (i) conflicts with or constitutes a default under or results in the violation of the provisions of any Legal Requirement applicable to or binding on City, or (ii) constitutes a default under or results in the violation of the provisions of any indenture, mortgage, deed of trust, or other agreement or instrument to which City is a party or by which it or any of its properties or assets is or may be bound or affected. (b) This Agreement and each of the Notes is a legal, valid and binding obligation of City, enforceable against City in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and subject to general equitable principles. 4.2 Governmental Authorizations. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any court or Governmental Authority or any other Person (including without limitation the Bankruptcy Court and any other creditor of City) is necessary or required in any Person named on any of the OFAC SDN List or any Person included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the Persons referred to or described in the OFAC SDN List. 4.8 Anti -Terrorism Law. City is not in violation of any Anti -Terrorism Law. ARTICLE 5 REPRESENTATION AND WARRANTIES OF NOTEHOLDERS Each Noteholder makes the following representations and warranties to and in favor of City and Paying Agent as of the Closing Date: 5.1 Authorization. Each Noteholder has authority to accept delivery of its Note and to execute this Agreement and any other instruments and documents such Noteholder may be required to execute in connection with the issuance and delivery of its Note. 5.2 Acknowle&,ement of Certain Risks. Each Noteholder acknowledges that the Notes involve risks that may not be appropriate for certain investors. Each Noteholder understands that it may need to bear the risks of its Note for an indefinite time, since any sale before maturity may not be possible for any number of reasons. 5.3 Unrevistered Status of Notes. Each Noteholder understands that the Notes are not registered under the Securities Act and that such registration is not legally required as of the date hereof. Each Noteholder further understands that the Notes (a) are not being registered or otherwise qualified for sale under the "Blue Sky" laws and regulations of any state, (b) will not be listed in any stock or other securities exchange, (c) will not, at least initially, carry a rating from any rating service, and (d) will be delivered in a form that may not be readily marketable. Each Noteholder is either an Accredited Investor or a Qualified Institutional Buyer. 5.4 Rule 15c2-12 Exm tion. Each Noteholder understands that the issuance of the Notes is exempt from the requirements of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, that City is not delivering a "deemed final" official statement with respect to the Notes. 5.5 Recei ?t of Information/Non-Reliance. (a) In entering into this transaction each Noteholder acknowledges that it has had an opportunity to conduct an independent investigation of all the relevant facts and circumstances, including, without limitation, reviewing the Disclosure Statement. Each Noteholder has not otherwise relied upon City or its officers, employees, consultants or counsel (collectively, with City, the "City Representatives") for any other information in connection with the issuance of the Notes. Each Noteholder acknowledges that it is an accredited investor under applicable law and is further a sophisticated institutional investor capable of evaluating the merits, risks and suitability of the Notes, and in making an investment decision, each Noteholder 0 ARTICLE 6 AFFIRMATIVE COVENANTS OF CITY City covenants and agrees that so long as this Agreement is in effect and amounts are outstanding under the Notes, it will, unless Paying Agent and the Noteholders waive compliance in writing: 6.1 Pa anent. Pay all sums due under this Agreement and the Notes according to the terms hereof and thereof. City hereby covenants with the Noteholders that, to the extent legally required as a condition to payment, it shall include the amount of the installments set forth in the Payment Schedule (subject to appropriate adjustment in the event of the optional prepayment of the Notes prior to maturity), for each fiscal year in which such sums are payable in its budget for that year, and shall duly and punctually pay or cause to be paid such installments at the dates and places and in the manner stated herein and therein according to the true intent and meaning thereof. The foregoing covenant shall be specifically enforceable. 6.2 Notices: Public Filings. Immediately following any filing, dissemination, distribution, or provision thereof, City shall provide to Paying Agent, for further dissemination to the Noteholders by first class mail, postage prepaid, at their addresses set forth in Section 12.1 of this Agreement, a copy of (i) any "Material Event Notice" disseminated, distributed or provided in satisfaction of or as may be required by the provisions of Rule 15c2-12 promulgated pursuant to the Securities Exchange Act of 1934, as amended (17 C.F.R. Sec. 240 15c2-12), or any successor or similar legal requirement, and (ii) the filing made by City with the Municipal Securities Rulemaking Board's Electronic Municipal Access System (EMMA) regarding the cancellation of the Series A-1 Bonds in exchange for the Commerzbank Note and amendment of the Series A-2 Bonds. The City shall cooperate with the Paying Agent in arranging for notice to be made to the Paying Agent each time any other filings are made by the City with EMMA, and shall reimburse the Paying Agent for the costs associated with downloading and disseminating such filings to the Noteholders. 6.3 Financial Statements. City agrees to make available on City's website: (a) Audited financial statements of City prepared in accordance with GAAP and certified by an independent certified public accountant selected by City, as such audited financial statements become available publicly; and (b) The annual capital and operating budget of the City approved by its City Council for the upcoming fiscal year, including all amounts payable under the Financing Documents; and promptly after the adoption thereof, any amendments to such annual budgets. 6.4 Cooperation. City shall perform, upon the reasonable request of Paying Agent, such reasonable acts as may be necessary or advisable to comply with the terms of this Agreement and the Notes. 6.5 Books and Records. City shall maintain adequate books, accounts and records (including project, financial and accounting records) and prepare all financial statements required hereunder in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction thereof, and permit employees or agents of Paying 11 7.2 Fiscal Year. Change its fiscal year without prior notice to Paying Agent, unless such change is required by law. 7.3 Accounting Changes. Make any material change in accounting policies or reporting practices, except as required by GAAP or otherwise required by law. ARTICLE 8 EVENTS OF DEFAULT The occurrence of any of the following events (following the giving of notice, as required, and lapse of any grace periods provided hereunder) shall constitute an event of default (individually, an "Event of Default") hereunder: 8.1 Failure to Make Payments. City shall fail to pay or cause to be paid any payment due under the Notes on or before the date that such payment is due under this Agreement and the Notes, and such failure shall continue unremedied for a period of five (5) Banking Days after the Paying Agent has delivered written notice thereof to the City (Paying Agent to deliver such notice on the due date to the extent payment was not received by the Paying Agent by 12:00 p.m.on such due date). Any failure of the Paying Agent to deliver such notice of non-payment as required by this Section 8.1 shall not constitute a waiver of any default or Event of Default arising from the City's failure to pay amounts due hereunder and under the Notes. 8.2 Misstatements. Any financial statement, representation, warranty, or certificate made or prepared by, under the control of, or on behalf of City furnished to Paying Agent or any Noteholder pursuant to this Agreement, or any amendment or modification thereof or waiver thereto shall contain an untrue or misleading statement of. a fact as of the date made that would reasonably be expected to have a Material Adverse Effect, or shall fail to state a fact necessary to make the statements therein not misleading as of the date made and as a result thereof there would reasonably be expected to occur a Material Adverse Effect; provided that no Event of Default shall occur pursuant hereto, unless and until City receives written notice (from any source) that such untrue or misleading statement, or such omission, has occurred, and City has not, within forty-five (45) days of the date on which City receives written notice, eliminated or otherwise cured such untrue or misleading statement, or such omission, so that it would no longer- reasonably be expected to have a Material Adverse Effect. 8.3 Bankruitc,, : Insolvenc\:. Any of the following events shall have occurred: (a) City shall file a petition for relief under the Bankruptcy Law (or any successor statute) or shall otherwise institute any similar proceeding under any other applicable federal, state or other applicable law, or shall consent thereto; or (b) City shall apply for, or by consent or acquiescence there shall be an appointment of, a receiver, liquidator, sequestrator, trustee or other officer with similar powers. 8.4 Other Defaults. City shall fail to perform or observe any other covenant to be performed or observed by it hereunder and not otherwise specifically provided for elsewhere in this Article 8, and such failure shall continue unremedied for a period of forty-five (45) days after the Mayor, City Manager or City Attorney of the City becomes aware thereof or City 13 or dishonor, or other notices or demands of any kind, all such other notices and demands being waived, (a) to the extent permitted by applicable law, accelerate all amounts then outstanding under the Notes and demand immediate payment thereof, and (b) exercise any or all rights and remedies available at law or in equity. 9.4 Bankru )tcv or Insolvency Default. Upon the occurrence and during the continuation of an Event of Default under Section 8.3, notwithstanding anything herein to the contrary, all amounts then outstanding under each of the Notes, to the extent permitted by applicable law, shall automatically become immediately due and payable without further notice or action. ARTICLE 10 PAYING AGENT 10.1 ADI) ointment, Powers. and Immunities. (a) Each Noteholder hereby appoints and authorizes Wells Fargo Bank, N.A. to act as Paying Agent hereunder and under the Notes with such powers as are expressly delegated to Paying Agent by the terms of this Agreement, the First Supplemental Trust Agreement and the Notes, together with such other powers as are reasonably incidental thereto. Paying Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the First Supplemental Trust Agreement, and shall not be a trustee for, or fiduciary of, any Noteholder, except that the Paying Agent also shall be the Trustee under the Trust Agreement. Notwithstanding anything to the contrary contained herein, Paying Agent shall not be required to take any action which is contrary to this Agreement or any Note or any Legal Requirement, or that exposes Paying Agent to any liability. Each of Paying Agent, the Noteholders, and any of their respective affiliates shall not be responsible to any other Noteholder for any recitals, statements, representations, or warranties made by City contained in this Agreement, any Note, or any certificate or other document referred to or provided for in, or received by Paying Agent or any Noteholder under, this Agreement or any Note, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Notes, or any other document referred to or provided for herein, or for any failure by City to perform its obligations hereunder or thereunder. Paying Agent may employ agents and attorneys -in -fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys -in -fact selected by it with reasonable care. (b) Paying Agent and its directors, officers, and employees shall not be responsible for any action taken or omitted to be taken by it or them hereunder or under the Notes or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct as determined by a final non -appealable judgment of a court of competent jurisdiction. Without limiting the generality of the foregoing, Paying Agent (i) may treat the payee of any Note as the holder thereof until Paying Agent receives written notice of the assignment or transfer thereof signed by such payee and in form and substance satisfactory to Paying Agent; (ii) may consult with legal counsel (including counsel for City), independent public accountants, and other experts selected by it with reasonable care and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or experts; (iii) makes no warranty or representation to any Noteholder for 15 Agreement, the Notes or the Trust Agreement, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder, except to the extent that any such loss, damages, liability or expense results from the negligence, willful misconduct or bad faith on the part of the Paying Agent. The rights of the Paying Agent and the obligations of the City under this Section shall survive the discharge of the Notes and this Agreement and the resignation or removal of the Paying Agent. (b) Paying Agent shall . be fully justified in refusing to take or continuing to take any action hereunder unless it shall first be specifically indemnified to its satisfaction by the directing Noteholders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 10.6 Successor Paying Agents. Paying Agent acknowledges that its current intention is to remain Paying Agent hereunder. Nevertheless, Paying Agent may resign at any time by giving thirty (30) days' written notice thereof to the Noteholders and City; provided that, the Paying Agent shall simultaneously resign as Trustee under the Trust Agreement, and such resignation to be effective only upon the acceptance of the appointment of a successor Paying Agent and Trustee. Requisite Noteholders may remove Paying Agent by giving thirty (30) days' written notice thereof to Paying Agent and City, such removal to be effective only upon the acceptance of the appointment of a successor Paying Agent and the simultaneous resignation of the Trustee under the Trust Agreement, with such resignation to be effective only upon the acceptance of the appointment of the successor Paying Agent as successor Trustee under the Trust Agreement. Upon any such resignation or removal, the Noteholders shall have the right to appoint a successor Paying Agent with notice to City; provided that (a) the consent of each of Commerzbank and Ambac shall be required for the appointment of a successor Paying Agent so long as Commerzbank and Ambac remain Noteholders hereunder, and (b) if a Noteholder wishes to appoint a substitute Paying Agent for any reason including any actual or potential Paying Agent fee increase pursuant to Section 2.4 of this Agreement, such consent of the other Noteholder will not be unreasonably withheld or delayed. If no successor Paying Agent shall have been so appointed by the Noteholders, and shall have accepted such appointment, within thirty (30) days after the retiring Paying Agent's giving of notice of resignation or removal, the retiring Paying Agent may on behalf of the Noteholders, appoint a successor Paying Agent, which shall be a commercial bank having a combined capital and surplus of at least One Hundred Million Dollars ($100,000,000). Any successor Paying Agent must also be the successor Trustee under the Trust Agreement. City agrees to take such steps as may be required to appoint such successor Trustee under the Trust Agreement if a successor Paying Agent is appointed under this Agreement. Upon the acceptance of any appointment as Paying Agent under this Agreement by a successor Paying Agent such successor Paying Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations as Paying Agent under this Agreement and the Notes. After any retiring Paying Agent's resignation or removal hereunder as Paying Agent, the provisions of this Article 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Paying Agent. 10.7 Authorization. Paying Agent is authorized by the Noteholders to enter into agreements supplemental hereto with any Person for the purpose of curing any formal defect, 17 the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. 11.3 Assig nients and „Transfer. (a) Permitted Assigninents. Subject to the provisions of Section 11.4 below and provided that the parties to any assignment shall (prior to any such assignment) execute and deliver an appropriate agreement evidencing such assignment substantially in the form attached hereto as Exhibit E (hereinafter, the "Assi�, nment Agreement"), a copy of which shall be provided by the Paying Agent to the City upon execution thereof, a Noteholder may from time to time, at its option, sell, assign, transfer or otherwise dispose of (collectively, "assign," and any such sale, assignment, transfer or other disposition being, for the purposes of this Section 11.3, an "assi,,nment") any of its rights and obligations under its Note (the Noteholder making such assignment being the "assigning Noteholder" and the Noteholder receiving such assignment being a "new Noteholder"); provided that any such assignment shall be only in Authorized Denominations and to an Eligible Assignee. Such restriction on transfer shall be printed prominently on the form of the Notes, and any transfer in violation of the provisions of this Section 11.3 shall be null and void. At the assigning Noteholder's option and upon such Noteholder's prior payment of the cost of any administrative expense charged by the Paying Agent (except as otherwise set forth in this Agreement and/or as otherwise agreed by Paying Agent and the City in their sole discretion), City shall execute and deliver to such new Noteholder a new Note substantially in the form attached hereto as Exhibit C, in an amount equal to such new Noteholder's Proportionate Share of the Payment Stream being assigned, and City shall execute and exchange with the assigning Noteholder a replacement note for its existing Note in an amount equal to the Proportionate Share of the Payment Stream retained by the assigning Noteholder, if any. No assignment or transfer of any portion of a Note shall be effective unless and until recorded in the Register following receipt by the City and Paying Agent of a fully executed Assignment Agreement, the satisfaction of the requirements in Section 11.3(b) and the satisfaction of the other foregoing requirements. (b) Assignment Effective Date. Each assignment shall be recorded in the Register promptly following receipt of such documentation by Paying Agent. Each assignment shall be effective (hereinafter, the "Assignment Effective Date") only upon (i) receipt by Paying Agent and City of an executed Assignment Agreement with respect to each assignment, (ii) the recordation of each assignment in the Register, and (ii) the delivery to Paying Agent of the requisite processing fee for such assignment (except as otherwise set forth in this Agreement or unless otherwise agreed by Paying Agent and City in their sole discretion). All assignments shall be effective as of the Assignment Effective Date. Following the Assignment Effective Date, such new Noteholder shall be a Noteholder for all purposes and shall have all of .the rights and duties of a Noteholder (except as otherwise provided in this Article 11). 11.4 Laws. Notwithstanding the foregoing provisions of this Article 11, no sale, assignment, transfer, negotiation or other disposition of the interests of any Noteholder hereunder or under its Note shall be allowed if it would require registration under the Securities Act, any other federal securities laws or regulations or the securities laws or regulations of any applicable jurisdiction. WE have been validly and effectively given on the day (if a Banking Day and, if not, on the next following Banking Day) on which it is transmitted if transmitted before 4:00 p.m., recipient's time, and if transmitted after that time, on the next following Banking Day; Lo..vided,_however, that if any notice is tendered to an addressee and the delivery thereof is refused by such addressee, such notice shall be effective upon such tender. Any party shall have the right to change its address for notice hereunder to any other location within the United States by giving of thirty (30) days' written notice to the other parties in the manner set forth herein above. 12.2 Delav and Waiver: Amendments. No delay or omission to exercise any right, power or remedy accruing to Paying Agent or the Noteholders upon the occurrence of any Event of Default or Inchoate Default or any breach or default of City under this Agreement or the Notes shall impair any such right, power or remedy of Paying Agent or the Noteholders, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single Event of Default, Inchoate Default or other breach or default be deemed a waiver of any other Event of Default, Inchoate Default or other breach or default theretofore or thereafter occurring. Any waiver, indulgence, permit, consent or approval of any kind or character on the part of the Noteholders of any Event of Default, Inchoate Default or other breach or default under this Agreement or the Notes, or any waiver on the part of Paying Agent or the Noteholders of any provision or condition of this Agreement, must be in a writing signed by Paying Agent and the Noteholders or Requisite Noteholders, as applicable, expressly referencing this Agreement and shall be effective only in the specific instance and to the extent in such writing specifically set forth. All remedies, either under this Agreement or the Notes or by law or otherwise afforded to Paying Agent and the Noteholders, shall be cumulative and not alternative. No waiver of an Event of Default under Section 8.1 or Section 8.3 shall be effective unless signed by each Noteholder that would be affected thereby. No waiver of any other Event of Default or Inchoate Default shall be effective unless signed by the Requisite Noteholders. This Agreement may be amended only by a writing signed by Paying Agent, Noteholders and City. 12.3 Costs. Ex )enses and AttorneN s' Fees. Each of the Noteholders and City will pay its own costs and expenses in connection with the preparation, negotiation, closing and costs of administering this Agreement and the documents contemplated hereby, including the reasonable fees, expenses and disbursements of its counsel in connection with the preparation of such documents and any amendments hereof or thereof, or the negotiation, closing or administration of this Agreement. City will reimburse Paying Agent and the Noteholders for all reasonable costs and expenses, including, but not limited to, reasonable attorneys' fees (but not including third-party consultant fees), actually expended or incurred by Paying Agent and/or the Noteholders, as applicable, in enforcing this Agreement and the Notes in connection with an Event of Default, in actions for declaratory relief related to the enforcement of this Agreement or the Notes, or in collecting any sum which becomes due Paying Agent or any Noteholder under this Agreement or the Notes. 12.4 Entire Agreement. This Agreement, the Settlement Agreement, the Notes, and any other agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings in respect to the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of the Settlement Agreement and this Agreement and/or the 21 TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS OR ANY ACT OR OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 12.11 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, PAYING AGENT, EACH NOTEHOLDER, AND CITY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF PAYING AGENT, ANY NOTEHOLDER OR CITY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PAYING AGENT, CITY AND THE NOTEHOLDERS TO ENTER INTO THIS AGREEMENT. 12.12 Countertparts. This Agreement may be executed in one or more duplicate counterparts and delivered by facsimile or by a portable document format (pdf) via electronic mail, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signatures are physically attached to the same document. A facsimile or portable document format (pdf) signature page shall constitute an original for all purposes. The parties to this Agreement agree that, except as expressly provided above, any deliverable required to be provided pursuant to Article 3 may be delivered by facsimile or electronic mail in a portable document format, or other electronic transmission. 12.13 No Third Parti Beneficiaries. Nothing expressed or referred to in this Agreement will be construed to give any Person, other than the parties hereto and any other Noteholders, any legal or equitable right, remedy or claim under or with respect to this Agreement, the Notes, the other Financing Documents or any provision of this Agreement, the Notes or the other Financing Documents. 12.14 Separate Representation. Each party hereto acknowledges that it has been advised and represented by counsel in the negotiation, execution and delivery of this Agreement and accordingly agrees that if an ambiguity exists with respect to any provision of this Agreement, such provision shall not be construed against any party because such party or its representatives drafted such provision. 12.15 Ratings. In the event that any time after the Closing Date, the Noteholders wish to seek a credit rating for the Notes, City agrees to cooperate with such rating request, to execute and deliver any formal request to obtain or maintain a raring, as required by any rating agency, and to provide any other information required or reasonably requested by any rating agency to obtain or maintain any ratings; provided that the Noteholders pay, or reimburse City for all amounts paid, for any and all rating agency fees, costs and/or expenses incurred by City in cooperating with such rating request, including but not limited to any outside attorneys' fees 23 [Signature Page to Exchange Agreement] IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their officers thereunto duly authorized as of the day and year first above written. CITY OF SAN BERNARDINO, CALIFORNIA By: Name: Title: COMMERZBANK FINANCE & COVERED BOND S.A., as Noteholder By: Name: Title: AMBAC ASSURANCE CORPORATION as Noteholder By: _ . Name: Gary Greendale Title: Managing Director WELLS FARGO BANK, N.A. as Paying Agent By: Name: Theresa Hempeck Vice President, Corporate Trust Services Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 2 of 10 SETTLEMENT AGREEMENT This Settlement Agreement (the "Settlement Agreement"), dated as of Marches 2016, is entered into by and among the City of San Bernardino, California (the "City"), COMMERZBANK Finance & Covered Bond S.A. (formerly known as Erste Europaische Pfandbrief-Und Kommunalkreditbank AG in Luxemburg) ("EEPK"), and Ambac Assurance Corporation ("Ambac"). Back°rte The City is a debtor under chapter 9 of title 1 I of the United States Code (the "Bankruptcy Code"), pursuant to a petition filed on August 1, 2012, commencing In re City of San Bernardino, California, case number 6:12-bk-28006-MJ (the "BankruMev Case"), in the United States Bankruptcy Court for the Central District of California, Riverside Division (the "Bankruptcy Court"). Pursuant to a Trust Agreement, dated as of August 1, 2005 (the "Trust Ap,reement''), between the City and Wells Fargo Bank, National Association, as indenture trustee (the "Trustee"), the City issued certain Taxable Pension Obligation Bonds (the "Pension Obligation Bonds") in the initial aggregate principal amount of $50,401,582.90. EEPK purchased all of the Pension Obligation Bonds, consisting of (a) 2005 Series A-1 (Standard Bonds), in the initial aggregate principal amount of $36,050,000 (the "Series A-1 Bonds"), and (b) 2005 Series A-2 (Capital Appreciation Bonds), in the initial aggregate principal amount of $14,351,582.90 (the "Series A-2 Bonds"). Ambac represents that it insures the regularly scheduled principal and interest payments with respect to the Series A-2 Bonds pursuant to Financial Guaranty Insurance Policy No. S24928BE (the "Insurance Policy"). Ambac and EEPK are hereinafter sometimes referred to collectively as the "POB Creditors." On February 5, 2014, the Trustee, on behalf of EEPK and Ambac, filed a proof of claim in the Bankruptcy Case with respect to the Pension Obligation Bonds (the "EEPK Proof of Claim"). On February 5, 2014, Ambac filed a proof of claim in the Bankruptcy Case with respect to the Pension Obligation Bonds (the "Ambac Proof of Claim" and, together with the EEPK Proof of Claim, the "Proofs of Claim"). On January 7, 2015, EEPK. and Ambac filed a Complaint in the Bankruptcy Court (the "Complaint") against the City, seeking relief under 28 U.S.C. § 2201, and commencing adversary proceeding number 6:15-ap-01004-MJ (the "Adversary Proceeding"). On March 13, 2015, the City filed a Motion to Dismiss the Complaint (the "Motion to Dismiss") under Federal Rule 12(b)(6), made applicable to the Adversary Proceeding by Bankruptcy Rule 7012(b), for failure to state a claim. EEPK and Ambac opposed the Motion to Dismiss, and the Bankruptcy Court held a hearing on May 11, 2015. On May 26, 2015, the Bankruptcy Court, entered an order (the "Order") granting the Motion to Dismiss. EEPK and Ambac appealed from the Order by filing a Notice of Appeal on June 8, 2014 (the "Appeal") to the Bankruptcy Appellate Panel for the Ninth 1758 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 4 of 10 with respect to the Pension Obligation Bond Claims the sum of $1,375,000 (One Million Three Hundred Seventy -Five Thousand Dollars), payable each year in two equal semi-annual installments. e. During each of the eleventh year after the Effective Date, through and including the fifteenth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $1,500,000 (One Million Five Hundred Thousand Dollars), payable each year in two equal semi-annual installments. f. During each of the sixteenth year after the Effective Date, through and including the twentieth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $1,750,000 (One Million Seven Hundred Fifty Thousand Dollars), payable each year in two equal semi-annual installments. g. During each of the twenty-first year after the Effective Date, through and including the twenty-fifth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $2,000,000 (Two Million Dollars), payable each year in two equal semi-annual installments. h. During each of the twenty-sixth year after the Effective Date, through and including the thirtieth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $2,500,000 (Two Million Five Hundred Thousand Dollars), payable each year in two equal semi-annual installments. i. The due dates for the semi-annual installments set forth above shall be scheduled at such time as the Effective Date is known, so as to in each case occur in a single fiscal year. j. The documentation to be executed and delivered under the Conforming Plan to evidence and effect the City's financial obligations under paragraphs La through 1.i. shaIl conform to the terms hereof and shall otherwise be in form and substance reasonably satisfactory to the parties hereto; and such documents shall include any necessary consent or acknowledgement of the Trustee with respect to the terms hereof and thereof to the extent required by the documents evidencing the Pension Obligation Bonds. 2. No Admission,• Reinstatement of Positions. The parties hereto acknowledge that the execution of this Settlement Agreement and consummation of the transactions contemplated herein do not constitute an admission of liability or of any facts by any of such parties, but rather are intended to be in compromise and settlement of disputed and unliquidated claims. Nothing herein shall constitute or be asserted as constituting any admission of liability by or against any party hereto, and this Settlement Agreement shall not be offered or received in evidence 3 1760 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 6 of 10 b. The POB Creditors on behalf of themselves and their respective present and former directors, officers, employees, agents, representatives, advisors, and affiliates (collectively the "POB Parties"), shall be deemed to release and forever discharge the City and its present and former elected and appointed officials, employees, agents, representatives, and advisors (the "City Parties `) from any and all claims, causes of action, liabilities and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph IJ. hereof) and the Conforming Plan; C. The City Parties shall be deemed to release and forever discharge the POB Parties from any and all claims, causes of action, liabilities, and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph IJ. hereof) and the Conforming Plan; d. The release of the City Parties contained herein shall be deemed to include, or, if required to be effective, such of the POB Parties as have the right to direct the Trustee shall direct the Trustee at closing of the documents referenced in paragraph 1 J. hereof (with the consent of all parties hereto) to deliver a release by the Trustee, in its capacity as trustee under the Trust Agreement, of all claims, causes of action, liabilities and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph 1J. hereof) and the Conforming Plan. e. With respect to the releases contained in paragraphs 4.b, 4.c. and 4.d. hereof, the POB Parties and the City Parties each hereby stipulate and agree that upon the Release Date they shall have expressly waived the provisions, rights, and benefits of California Civil Code Section 1542, or any other similar state law, federal law, or principle of common law, which may have the effect of limiting the releases set forth above. Section 1542 of the California Civil Code provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. 5. Revresentations. Each party hereto hereby represents and warrants that: (a) such party has not heretofore assigned or transferred or purported to transfer or assign any claim settled or released hereby; (b) such party, subject to Bankruptcy Court approval, has all corporate, governmental, and other necessary power and authority to enter into this Settlement Agreement and to perform its obligations hereunder, (c) the individual signing this Settlement Agreement on behalf of such party has been duly authorized to so execute and deliver this Settlement Agreement; (d) such party has 1762 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 8 of 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year fust above written. THE CITY OF SAN BERNARDINO �)L By: �. Name: AA ,4- K ,a-- rr Title: C : -¢vl %la ? e r COMMERZBANK FINANCE & COVERED BOND S.A. (FORMERLY KNOWN AS ERSTE EUROPAISCHE PFANDBRIEF-UND KOMMUNALKREDITBANK AG IN LUXEMBURG) By: Name: Title: AMBAC ASSURANCE CORPORATION By: Name: Title: 1764 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 10 of 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. THE CITY OF SAN BERNARDINO By: Name: Title: COMMERZBANK FINANCE & COVERED BOND S.A. (FORMERLY KNOWN AS ERSTE EUROPAISCHE PFANDBRIEF- UND KOMMUNALK.REDITBANK AG IN LUXEMBURG) By: Name: Title: AMBAC ASSURANCE CORPORATION By D r Name:cd-/Ivz� Title: 7 1766 "Bankruptcy Law" means Title 11, United States Code, and any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors. "Bankruptcy Plan" shall have the meaning given in the recitals of this Agreement. "Benefited Noteholder" shall have the meaning given in Section 2.5(d) of this Agreement. "City" shall have the meaning given in the preamble of this Agreement. "City Representatives" shall have the meaning given m Section 5.5 of this Agreement. "Closing" means the satisfaction (or waiver in accordance with the terms of the Agreement) of each of the conditions precedent listed in Section 3.2 of the Agreement. "Closing Date" means the date upon which Closing occurs, which, pursuant hereto, is intended to be on or immediately following the Effective Date. "Code" means the Internal Revenue Code of 1986, as amended, and any successor federal tax statute. "Commerzbank" shall have the meaning given in the preamble of this Agreement. "Commerzbank Note" shall have the meaning given in the recitals of this Agreement. "Default Interest" shall have the meaning given in Section 9..1. of this Agreement. "Department of Treasury Rule" shall have the meaning given in Section 4.7 of this Agreement. "Disclosure Statement" means the Third Amended Disclosure Statement with Respect to the Third Amended Plan for the Adjustment of the Debts of the City of San Bernardino (July 29, 2016) [Dkt. No. 1881]. "Dollars" and "$" means United States dollars or such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts in the United States of America. "Effective Date" means the Effective Date as such term is defined in the City's Bankruptcy Plan. "Eligible Assignee" means a purchaser who qualifies as an Accredited Investor or a Qualified Institutional Buyer. "Event of Default" shall have the meaning given in Article 8 of this Agreement. "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Access System (EMMA). Treasury Regulations, 31 C.F.R. Parts 500 et seq. (implementing the economic sanctions programs administered by OFAC). "OFAC SDN List" means the list of "Specially Designated Nationals and Blocked Persons" maintained by OFAC. "OFAC Violation" has the meaning assigned to such term in Section 6.7 d of this Agreement. "Office" means with respect to any Noteholder, the office designated as such beneath the name of such Noteholder on Schedule I of the Agreement or such other office of such Noteholder as such Noteholder may specify in writing from time to time to Paying Agent and City. "Original Trust Agreement" has the meaning given in the recitals of this Agreement. "Participant Register" shall have the meaning given in Section11.2 b of this Agreement. "Patriot Act" shall have the meaning given in Section 4.7(w of this Agreement "Paying Agent" shall have the meaning given in the preamble of this Agreement. "Payment Date" means each of the payment dates set forth on the Payment Schedule. "Payment Schedule" means the Payment Schedule set forth as Exhibit D to this Agreement, as the same may be amended or replaced pursuant to the Agreement. "Payment Stream" shall have the meaning given in the recitals of this Agreement. "Pension Obligation Bonds" shall have the meaning given in the recitals of this Agreement. "Person" means any natural person, corporation, limited liability company, partnership, firm, association, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity. "Prime Rate" means, for any day, the prime rate in effect for such day as published in the Wall Street Jounzal. "Proportionate Share" means with respect to each Noteholder, the percentages set forth opposite such Noteholder's name on Schedule II to this Agreement, as such percentages may be modified from time to time as a result of transfers of any portion of a Note by a Noteholder and as Paying Agent shall reflect in the Register. "Qualified Institutional Buyer" has the meaning as provided in rule 144A of the Securities Act. "Register" shall have the meaning given in Section 2.2(a) of this Agreement. RULES OF INTERPRETATION 1. The singular includes the plural and the plural includes the singular. 2. The word "or" is not exclusive. 3. A reference to a Governmental Rule includes any amendment or modification to such Governmental Rule, and all regulations, rulings and other Governmental Rules promulgated under such Governmental Rule. 4. A reference to a Person includes its successors and permitted assigns. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. 6. The words "include," "includes" and "including" are not limiting. 7. A reference in a document to an Article, Section, Exhibit, Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of such document unless otherwise indicated. Exhibits, Schedules, Annexes or Appendices to any document shall be deemed incorporated by reference in such document. References to any document, instrument or agreement shall include all exhibits, schedules and other attachments thereto, shall include all documents, instruments or agreements issued or executed in replacement thereof, and shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time (to the extent permitted under the Financing Documents) and in effect at any given time. 9. The words "hereof," "herein" and "hereunder" and words of similar import when used in any document shall refer to such document as a whole and not to any particular provision of such document. 10. References to "days" shall mean calendar days, unless the term "Banking Days" shall be used. References to a time of day shall mean such time in New York, New York, unless otherwise specified. 11. This Agreement and the Notes are the result of negotiations between, and have been reviewed by City, Paying Agent, each Noteholder, and their respective counsel. Accordingly, this Agreement and the Notes shall be deemed to be the product of all parties thereto, and no ambiguity shall be construed in favor of or against City, Paying Agent, or any Noteholder. 12. The words "will" and "shall" shall be construed to have the same meaning and effect. part. Any optional prepayment hereunder shall be in the minimum amount of One Hundred Thousand Dollars ($100,000) (unless the Notes are being repaid in full). It is hereby certified that all acts, conditions and things required to be done, have happened or will be performed precedent to and in the issuance of this Note or in the creation of the debt of which this is evidence, have been done, or have happened and been performed in regular and due form and manner as required by law, and that the debt represented by this Note is not in excess of any constitutional or statutory limitation. This Note shall not bear interest other than Default Interest, solely as set forth in the Agreement. City agrees to pay certain costs and expenses, incurred in connection with the enforcement of this Note in accordance with the Agreement. THIS NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO CONFLICTS OF LAWS. CITY OF SAN BERNARDINO, CALIFORNIA By: Name: Title: C-2 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 June 1, 2034 875,000.00 262,762.50 612,237.50 December 1, 2034 875,000.00 262,762.50 612,237.50 June 1, 2035 875,000.00 262,762.50 612,237.50 December 1, 2035 875,000.00 262,762.50 612,237.50 June 1, 2036 875,000.00 262,762.50 612,237.50 December 1, 2036 875,000.00 262,762.50 612,237.50 June 1, 2037 1,000,000.00 300,300.00 699,700.00 1, 2037 1,000,000.00 300,300.00 699,700.00 June I, 2038 1,000,000.00 300,300.00 699,700.00 EDecember December 1, 2038 1,000,000.00A300,300.00699,700.00 00 699,700.00 June 1, 2039 1,000,000.0000 699,700.00 December 1, 2039 1,000,000.0000 699,700.00 June 1, 2040 1,000,000.0000 699,700.00 December 1, 2040 1,000,000.0000 699,700.00 June 1, 2041 1,000,000.0000 699,700.00 December 1, 2041 1,000,000.000 699,700.00 June 1, 2042 1,250,000.00 375,375.00 874,625.00 December 1, 2042 1,250,000.00 7 375,375.00 874,625.00 June 1, 2043 1,250,000.00 375,375.00 874,625.00 December 1, 2043 1,250,000.00 375,375.00 874,625.00 June 1, 2044 1,250,000.00 375,375.00 874,625.00 December 1, 2044 1,250,000.00 —3 75,37-5.00 874,625.00 June 1, 2045 11250,000.00 375,375.00 874,625.00 December 1, 2045 1,250,000.00 375,375.00 874,625.00 June 1, 2046 1,250,000.00 375,375.00 874,625.00 December 1, 2046 1,250,000.00 375,375.00 �74625 D-2 SCHEDULE]I TO AGREEMENT SCHEDULE OF NOTEHOLDER ORIGINAL PAYMENT STREAM AMOUNTS AND PROPORTIONATE SHARES Noteholder Original Share of Payment Proportionate Share Stream Commerzbank $35,457,297.50 69.97% Ambac $15,217,702.50 30.03% as a Noteholder to the same extent as if Assignee had been an original signatory Noteholder thereto. 3. Retention bw Assi_nor. Assignor retains its right, benefit, title and interest in and to the Original Note, only in the principal amount of [$ ] (the "Retained Amount"), and this Assignment shall have no effect on the Assignor's rights and benefits in connection with the Retained Amount of the Original Note. 4. Consideration. In consideration for the Assignment, Assignee agrees to pay to Assignor the amount of $ 5. Execution and Delivery of New Notes. Assignor may request that City execute and deliver the New Note to Assignee in the Assigned Amount. If Assignor makes such request, (i) Assignor shall pay the cost of any administrative expense charged by the Paying Agent (except as otherwise set forth in the Exchange Agreement and/or otherwise agreed by Paying Agent and City in their sole discretion); (ii) the Assignor shall relinquish and deliver to City, for termination and cancellation, in original form, the Original Note; and (iii) City shall execute and deliver anew Note (the "New Assi 11ior Note") to Assignor in the Retained Amount, if any. Any such request shall be made promptly following the execution of this Assignment Agreement, but in no event more than ten (10) days following the date of execution of this Assignment Agreement. 6. Effective Date. The Assignment under this Assignment Agreement shall become effective (the "Effective Date") upon the last of the following to occur: (i) receipt by City and Paying Agent of an executed Assignment Agreement, (ii) the delivery to Paying Agent of the requisite processing fee for such Assignment (except as otherwise set forth in the Exchange Agreement and/or as otherwise agreed by Paying Agent and City in their sole discretion), and (iii) the recordation of the Assignment in the Register maintained by the Paying Agent pursuant to the Exchange Agreement. 7. Effect of Effective Date. Upon and following the Effective Date, Assignee will become a Noteholder under the Exchange Agreement, with the same rights, benefits and obligations, and shall be bound by the Exchange Agreement, as if the Assignee had been an original signatory to the Exchange Agreement. If the Assignor requested that the City execute and deliver a New Note in accordance with Paragraph 5 hereunder, the Original Note shall be canceled and of no further force or effect as of the Effective Date. 8. Representations and_ Warranties of Assi nor. Assignor makes the following representations and warranties to and in favor of Assignee as of the Effective Date (which representations and warranties in each case shall survive the execution of this Assignment Agreement and the consummation of the transaction contemplated hereunder): (a) No Violation. The execution, delivery and performance by Assignor of this Assignment Agreement will not violate any provision of any applicable law, regulation, writ, order or decree by which Assignor is bound or cause a breach of any of its organizational documents or authority. E-2 Article 5 of the Exchange Agreement as of the Effective Date, and (C) to the extent of its Note, shall have the rights and obligations of a Noteholder thereunder. (e) Acknowledgement of Certain Risks.. Assignee acknowledges that the purchase and holding of the New Note involves risks that may not be appropriate for certain investors, and that there may be a limited market for the New Note. Assignee understands that it may need to bear the risks of this investment for an indefinite time, since any sale before maturity may not be possible for any number of reasons. (f) Unregistered Status, of New Note. Assignee understands that the New Note is not registered under the 33 Act and that such registration is not legally required as of the date hereof. Assignee further understands that the New Note (a) is not being registered or otherwise qualified for sale under the "Blue Sky" laws and regulations of any state, (b) will not be listed in any stock or other securities exchange, (c) will not,. at least initially, carry a rating from any rating service, and (d) will be delivered in a form that may not be readily marketable. Assignee agrees that it will comply with any applicable state and federal securities laws in effect with respect to any disposition of the New Note by it, and acknowledges that any current exemption from registration of the New Note does not affect or diminish such requirements. (g) Securities Exemption. Assignee understands that the offering and sale of the New Note is exempt from the requirements of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, that City is not delivering a "deemed final" official statement with respect to the New Note, and that City is not making any representation to Assignee or any other party with respect to the matters governed by Rule 15c2-12. (h) Receipt of Information/Non-Reliance. (i) Assignee (A) is a sophisticated entity with respect to the purchase of the New Note, (B) is able to bear the economic risk associated with the purchase of the New Note, (C) has adequate information, based on its own independent investigation concerning the business and financial condition of the City to make an informed decision regarding the purchase of the New Note, (D) has such knowledge and experience, and has made investments of a similar nature, so as to be aware of the risks and uncertainties inherent in the purchase of rights of the type contemplated in this Assignment Agreement, and (E) has independently and without reliance upon Assignor, and based on such information as Assignee has deemed appropriate, made its own analysis and decision to enter into this Assignment Agreement, except that Assignee has relied upon Assignor's express representations, warranties, covenants, agreements and indemnities in this Assignment Agreement. Assignee acknowledges that Assignor has not given Assignee any investment advice, credit information or opinion on whether the purchase of the New Note is prudent. (ii) Except as otherwise provided in this Assignment Agreement, Assignee has not relied on, and will not rely on, Assignor to furnish or make available any documents or other information regarding the credit, affairs, financial condition or business of the City, or any other matter concerning the City. E-4 has deemed appropriate, made its own analysis and decision to enter into the transaction, except to the extent that Assignee and Assignor have each relied upon the express representations, warranties, covenants, agreements and indemnities made by the other in this Assignment Agreement or any related Purchase and Sale Agreement or confirmation of the transaction. Each of Assignee and Assignor acknowledges that the other has not given it any investment advice or opinion on whether the transaction is prudent. Assignee is aware that payment of the New Note involves certain economic variables and risks that could adversely affect the New Note. Assignee has sufficient knowledge and experience in financial business matters and is capable of evaluating the merits and risks of its investments in the New Note. Assignee represents that it is able to bear the economic risk of an investment in the New Note, including an entire loss of its investment. 0) No Offering/Disclosure Documents. Except as otherwise specifically provided herein, Assignee has not relied, and will not rely, on Assignor to furnish or make available any documents or other information regarding the credit, affairs, financial condition, or business of the City or any other matter concerning the City. Assignee has not received from any of the City Representatives any formal or informal offering or disclosure document relating to the New Note and has concluded that such receipt before the purchase of the New Note is not required. Assignee acknowledges that no written information has been provided by any of the City Representatives and that any written information furnished by any other party may not fully disclose all information pertinent to the New Note. (k) No Intent to Distribute. Assignee is acquiring the New Note solely for investment purposes and does not presently intend to sell, transfer or make a public distribution of all or any part of the New Note. (1) Transfer Restrictions. Assignee acknowledges that it has the right to sell and transfer the New Note, subject to compliance with the transfer restrictions set forth in the Exchange Agreement, including without limitation, the requirement for transfer only to an Accredited Investor or Qualified Institutional Buyer and only in Authorized Denominations. (m) No Recourse to Assigior. Assignee acknowledges that it shall have no recourse to Assignor, except for breach by Assignor of its representations, warranties and agreements under this Assignment Agreement. 10. Notices. Any communications hereunder between or among the Parties hereto or notices provided herein to be given may be given to the following addresses: If to Assignor: II If to Assignee: II E-6 instrument attached hereto or referred to herein, the terms, conditions and provisions of this Assignment Agreement shall prevail. Signatures continued on next a e. EXHIBIT A [COPY OF ORIGINAL NOTE] A-1 EXHIBIT F TO AGREEMENT FORM OF FIRST SUPPLEMENTAL TRUST AGREEMENT F-1 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY.............................................................................. 5 SECTION1.01. Definitions ............................................................................................................5 SECTION 1.02. First Suivlemental Trust Agreement Constitutes Contract ................................. 8 SECTION 1.03. Section Numbers.................................................................................................. 8 ARTICLE H REFINANCING OF 2005 SERIES A-1 BONDS; AMENDMENT OF 2005 SERIES A-2 BONDS; GENERAL BOND PROVISIONS ..................................... 8 SECTION 2.01. Refinancing of the.2005 Series A-1 Bonds- Issuance of Commerzbank Note........................................................... 8 SECTION 2.02. Amendment of the 2005 Series A-2 Bonds......................................................... 8 SECTION2.03. Exchan e A reement........................................................................................... 9 SECTION 2.04. Costs and Fees for Transfers................................................................................ 9 ARTICLE III CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION.............................................................................................. 9 SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse ............................... 9 SECTION 3.02. Implementation Procedures...............................................................................10 ARTICLE IV PROVISIONS REGARDING AMBAC POLICY.......................................................10 SECTION4.01. Ambac Policy .....................................................................................................10 SECTION 4.02. Claims Under Ambac Policy.............................................................................10 ARTICLE V COVENANTS OF THE LOCAL AGENCY.................................................................12 SECTION5.01. Performance.......................................................................................................12 SECTION 5.02. Power to Enter Into Agreement .........................................................................12 SECTION 5.03. Accounting Records and Reports ............................... SECTION 5.04. Prosecution and Defense of Suits.......................................................................12 SECTION 5.05. Waiver of Laws..................................................................................................13 ARTICLEVI THE TRUSTEE............................................................................................................13 1 THIS FIRST SUPPLEMENTAL TRUST AGREEMENT, made and entered into as of , 2017 (the "First Supplemental Trust Agreement") and effective as of the Effective Date (as defined herein), supplements the Trust Agreement dated as of October 1, 2005 (the "Original Trust Agreement", as supplemented by this First Supplemental Trust Agreement, the "Trust Agreement") by and between WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as Trustee (the "Trustee"), and the CITY OF SAN BERNARDINO (the "Local Agency"), a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Government Code), under the laws of the State of California. WITNESSETH: WHEREAS, the Local Agency is obligated by the Public Employees' Retirement Law, commencing with Section 20000 of the Government Code of the State of California, as amended, to make payments to the California Public Employees' Retirement System (the "System") relating to pension benefits accruing to the System's members; and WHEREAS, the Local Agency entered into a contract with the System dated March 1, 1945, as heretofore and hereafter amended from time to time (the "PERS Contract"), evidencing the Local Agency's obligation to pay the Local Agency's unfunded accrued actuarial liability; and WHEREAS, the Local Agency is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California (the "Act") to issue bonds for the purpose of refunding any evidence of indebtedness of the Local Agency; and WHEREAS, for the purpose of refunding the Local Agency's obligations to the System evidenced by the PERS Contract, the Local Agency issued its City of San Bernardino Taxable Pension Obligation Bonds, 2005 Series A-1 Bonds (the "2005 Series A-1 Bonds"), in the aggregate principal amount of $36,050,000 and 2005 Series A-2 Bonds (the "2005 Series A-2 Bonds"), in the initial aggregate principal amount of $14,351,582.90 (collectively, the "2005 Series A Bonds"), all pursuant to the Original Trust Agreement and in the manner provided therein; and WHEREAS, the 2005 Series A-1 Bonds and the 2005 Series A-2 Bonds, together with any Additional Bonds (as defined in the Original Trust Agreement), were validated pursuant to the Default Judgment in Validation Proceeding dated 7/11/2005 in San Bernardino County Superior Court Case No. SCVSS 125783; and 11 WHEREAS, all acts and proceedings required by law necessary to make this First Supplemental Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this First Supplemental Trust Agreement have been in all respects duly authorized; and NOW, THEREFORE, THIS FIRST SUPPLEMENTAL TRUST AGREEMENT WITNESSETH, that in order to implement the matters described above with respect to the 2005 Series A Bonds, to satisfy certain terms of the Exchange Agreement, and to make certain changes to the payment procedures related to the Ambac Policy, and consideration of the premises and of the mutual covenants herein contained and in the Exchange Agreement, the Local Agency does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds (as defined in the Original Trust Agreement), as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01. Definitions. Unless otherwise defined in this First Supplemental Trust Agreement, capitalized terms defined in the Original Trust Agreement shall have the meanings given such terms in the Original Trust Agreement; and unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any First Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified: 2005 Series A-1 Bonds The term "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac The term "Ambac" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac Policv E Insurance Payment Account The term "Insurance Payment Account" means the account by that name established by the Trustee pursuant to Section 4.02(c) of this First Supplemental Trust Agreement. Insured Holders The term "Insured Holder" means a Holder (as defined in the Ambac Policy) of the 2005 Series A-2 Bonds. Note Pa% ins Arent The term "Note Paying Agent" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Notes The term "Notes" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Original Ambac Police The terin "Original Ambac Policy" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Original Trust kreement The term "Original Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. Trust A�-,reement The term "Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. 2005 Series A-1 Bonds The term "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Tiust Agreement. 7 Supplemental Trust Agreement shall not constitute a novation. After the Effective Date, the 2005 Series A-2 Bonds shall continue to be insured by the Original Ambac Policy, endorsed as provided in this First Supplemental Trust Agreement. The Ambac Note shall be issued as an Additional Bond under the Trust Agreement in exchange for rendering the 2005 Series A-2 Bonds non-recourse to the Local Agency. The conditions and procedure for issuance of the Ambac Note set forth in the Exchange Agreement shall supersede and replace the requirements of Sections 3.01 and 3.02 of Original Trust Agreement with respect to conditions precedent to issuance of the Ambac Note. The terms of the Ambac Note shall be set forth in the Exchange Agreement and in the Ambac Note. SECTION 2.03. Exchange Agreement. The Trustee shall serve as Note Paying Agent under the Exchange Agreement. The Exchange Agreement shall govern all terms and provisions of the Notes, including principal, interest (if any) and repayment, as well as all conditions precedent to issuance. SECTION 2.04. Costs and Fees for.. Transfers. Section 2.06(a) of the Original Trust Agreement shall be amended to delete the following sentence: "The cost of printing of Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Local Agency." CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse. Upon satisfaction of the following specific conditions, the 2005 Series A-1 Bonds shall be cancelled and the 2005 Series A-2 Bonds shall be rendered non-recourse to the Local Agency: (a) the Exchange Agreement and this First Supplemental Trust Agreement shall have been executed and delivered by all parties thereto; (b) the Original Ambac Policy shall be endorsed to incorporate the amendments set for in Exhibit B attached hereto; and (c) all conditions for closing under the Exchange Agreement, as set forth in Section 3.2 thereof, shall have been satisfied, including (i) issuance and delivery to Commerzbank of the Commerzbank Note in exchange for the 2005 Series A-1 Bonds, and (ii) issuance and delivery to Ambac of the Ambac Note in exchange for any subrogation, reimbursement, or other rights to payment from the Local Agency to Ambac in connection with amounts paid by Ambac under the Ambac Policy with respect to the 2005 Series A-2 Bonds. M (b) The Trustee shall, after giving notice to Ambac and the Insured Holders of the 2005 Series A-2 Bonds as provided in (a) above, make available to Ambac the registration books of the Local Agency maintained by the Trustee and all records relating to the funds and accounts maintained under this First Supplemental Trust Agreement. (c) The Trustee shall establish an account for the benefit of the Insured Holders and Ambac referred to herein as the "Insurance Payment Account." The Trustee shall deposit upon receipt any amount paid under the Ambac Policy in the Insurance Payment Account and distribute such amount solely for purposes of payment to the Insured Holders for which a claim was made. For the sake of clarity, amounts paid under the Ambac Policy may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Amounts held in the Insurance Payment Account shall not be invested and any amounts remaining in the Insurance Payment Account on the first Business Day following a Principal Payment Date shall be returned to Ambac by the end of such Business Day. (d) The amount of any payment of principal of or interest on the 2005 Series A-2 Bonds from the Insurance Payment Account shall be recorded by the Trustee. Ambac shall have the right to inspect such records upon one (1) Business Day's prior written notice to the Trustee. (e) In the event that the Trustee has notice that any payment of principal of or interest on a 2005 Series A-2 Bond which has become due for payment and which is made to an Insured Holder by or on behalf of the Local Agency has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, non -appealable order of a court having competent jurisdiction, the Trustee shall, at the time Ambac is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to Ambac its records evidencing the payment of principal of and interest on the Ambac Insured Bond which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) - In addition to those rights granted Ambac under this First Supplemental Trust Agreement, and anything herein to the contrary notwithstanding, the Local Agency, the Trustee and each Insured Holder acknowledge and agree, that without the need for any further action on the part of Ambac, Ambac shall, to the extent it makes payment of principal of or interest on 2005 Series A-2 Bonds, become subrogated to all rights of the Holders of such 2005 Series A-2 Bonds, including all rights to payment. To evidence such subrogation, the Trustee shall note Ambac's rights as subrogee on the registration books of the Local Agency maintained by the Trustee upon payment of amounts from the Insurance Payment Account to the Insured Holders of the 2005 Series A-2 Bonds. The Trustee shall simultaneously assign in writing to Ambac, to 11 Section shall survive the discharge of the Bonds and this Agreement and the resignation or removal of the Trustee. SECTION 5.05. Waiver of Laws. The Local Agency shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this First Supplemental Trust Agreement or in the 2005 Series A-2 Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Local Agency to the extent permitted by law. ARTICLE VI THE TRUSTEE SECTION 6.01. The Trustee. Section 6.01 of the Original Trust Agreement is hereby amended (a) to provide that if at any time the Trustee exercises its right to resign thereunder, the Trustee shall simultaneously resign as Note Paying Agent under the Exchange Agreement, (b) to provide that, subject to the provisions of Section 10.6 of the Exchange Agreement, the consent of each of Commerzbank and Ambac shall be required for the appointment of any successor Trustee so long as Commerzbank and Ambac remain Holders, and (c) to delete the requirement that the Trustee and any successor Trustee have a corporate trust office in Los Angeles or San Francisco, California. SECTION 6.02. Trustee's Fees and Expenses: Indemnification. Section 6.03 of the Original Trust Agreement is hereby amended as follows with respect to obligations of the Local Agency to pay fees and expenses of, and to indemnify, the Trustee: (a) The obligation of the Local Agency to pay fees and expenses of the Trustee, including, for the avoidance of doubt, the fees and expenses provided for under Article II of this Trust Agreement, shall be limited to the amounts required to be paid by the Local Agency pursuant to Section 2.4 of the Exchange Agreement. (b) The provisions of Local Agency under Section 6.03 of the Original Trust Agreement regarding indemnification of the Trustee are hereby amended to read as follows: (i) To the extent permitted by law, the Local Agency shall indemnify, defend and hold harmless the Trustee against any loss, damages, liability or expense incurred by the Trustee to the extent arising out of or in connection with a breach by the Local Agency under the Exchange Agreement, the Notes or the Trust Agreement, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder, except to the extent that any loss, damages, liability or expense results from 13 If to the Local Agency: City of San Bernardino 300 North "D" Street San Bernardino, CA 92418-0001 Attention: City Attorney's Office If to the Trustee: Attention: Corporate Trust Services Wells Fargo Bank, National Association 555 Montgomery Street, 10a' Floor MAC # A0167-102 San Francisco, CA 94111 If to Ambac: Attention: Portfolio Risk Management Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com If to the Holders: [Commerzbank:_ TO BE PROVIDED] Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com SECTION 8.04. Article and Section Headings and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles," "Sections" and other subdivisions.or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words "hereby," "herein," "hereof," "hereto," "herewith," "hereunder" and other words of similar import refer to the Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 8.05. Partial Invalidity.. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Local Agency or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed 15 [Signature Page to First Supplemental Trust Agreement] IN WITNESS WHEREOF, the CITY OF SAN BERNARDINO has caused this First Supplemental Trust Agreement to be signed in its name by the Authorized Representative and WELLS FARGO BANK, NATIONAL ASSOCIATION, in token of its acceptance of the trusts created hereunder, has caused this First Supplemental Trust Agreement to be signed by the officer thereunder duly authorized, all as of the day and year first above written. CITY OF SAN BERNARDINO LM ATTEST: Georgeann Hanna, City Clerk WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By _ _ Theresa Hempeck, Vice President, Corporate Trust Services, Authorized Officer Approved as to form and legal content: GARY D. SAENZ City Attorney By: DMEAST #28194828 v13 !.P AmbacAmbac Assurance Corporation One State Street Plaza, 15th Floor New York, New York 10004 Financial Guaranty Insurance Policy Telephone: (212) 668-0340 Obligor: SAN. BERNARDINO, CALIFORNIA Policy Number: S24928BE $14,351,583 Taxable Pension Obligation Capital Obligations: Appreciation. Bonds, Series 2005, dated October Premium: 28, 2005 and maturing October 1 in the years $234,405.00 2007 through 2024, both inclusive. . Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the "Insurance Trustee"), for the benefit of the Holders, that portion of the principal of and interest on the above-described obligations (the "Obligations") which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. Ambac will make such payments to the Insurance Trustee within one (1) business day following written notification to Ambac of Nonpayment. Upon a Holder's presentation arid surrender to the Insurance Trustee of such unpaid Obligations or related coupons, uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder's rights to payment thereon. In cases where the Obligations are issued in registered form, the Insurance Trustee shall disburse principal to a Holder only upon presentation and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such Holders duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation -to the Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery to the Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the Holder or such Holder's duly authorized representative, transferring to Ambac all rights under such Obligation to receive the interest in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights to payment on registered Obligations to the extent of any insurance disbursements so made. In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest'on an Obligation which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from the Holder pursuant to the United Stares Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available. As used herein, the term "Holder" means any person other than (i) the Obligor or (ii) any person whose obligations constitute the underlying security or source of payment for the Obligations who, at t}re time of Nonpayment, is the owner of an Obligation or of a coupon relating to an Obligation. As used herein, "Due for Payment", when referring to the principal of Obligations, is when the scheduled maturity date or mandatory redemption date for the application of a required sinking fund installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or other advancement of maturity; and, when referring 'to interest on the Obligations, is when the scheduled date for payment of interest has been reached. As used herein, "Nonpayment" means the failure of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest on the Obligations which are Due for Payment. 'This Policy is noncancelable. The ptemium on.this Policy is nor -refundable for any reason, including payment of the Obligations prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment. In witness whereof, Ambac has caused this Policy to be affixed viirh a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its. duly authorized representative. I . President December 23, 2005 Effective Date: THE BANK OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form No.: 213-0012 (1101) A-9067 Secretary 1 JL_ Authorize Representative Authonzed Officer of Insurance Trustee I Ambac. Endorsement Policy for. SAN BERNARDINO, CALIFORNIA Ambac Assurance Corporation One State Street Plaza, 15th floor New York, New York 10004 Telephone: (212) 668-0340 Attached to and forming part of policy No.: S24928BE Effective Date of Endorsement: December 23, 2005 In the event that Ambac Assurance Corporation were to become insolvent, any claims arising under the Policy would be excluded from coverage by the California insurance Guaranty Association, established pursuant to the laws of the State of California. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements or limitations of the above mentioned Policy other than as above stated. In Witness Whereof, Ambac has caused this Endorsement to be Affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative. Ambac Assurance Corporation • President +�� dr Secretary 1� Authorized Representative Form No.:2B-0015 (7/97) EXHIBIT B FORM OF ENDORSEMENT TO AMBAC POLICY Effective date: , 2016 Policy No. S24928BE is hereby amended as follows: 1. The first paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to Wells Fargo Bank, National Association or its successor (the "Trustee"), as trustee under that certain Trust Agreement dated October 1, 2005 relating to the issuance of the above-described obligations (the "Obligations"), for the benefit of the Holders, that portion of the principal of and interest on the Obligations which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. 2. The second paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac will make such payments to the Trustee on the later of (a) one (1) business day following written notification to Ambac of Nonpayment or (b) the business day on which the Obligations are Due for Payment. 3. The third paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: The Trustee shall disburse such payments of principal to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee and transferring to Ambac all rights under such Obligations to receive the principal of and interest on the Obligations. The Trustee shall disburse such payments of interest to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, transferring to Ambac all rights under such Obligations to receive the interest on the Obligations in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights to payment on the Obligations to the extent of any insurance disbursements so made. 4. Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements or limitations of the Policy other than as above stated. Ambac Assurance Corporation Attention: Claims Processing One State Street Plaza New York, New York 10004 An electronic copy should be sent to: claimsprocessing@ambac.com CONVEYANCE: SUBROGATION The Trustee hereby transfers, delivers and assigns to Ambac all rights to the payment of the Principal Amount Currently Due for Payment and the Interest Amount Currently Due for Payment (collectively referred to as the "Amount Currently Due for Payment"), together with any rights related to such Amount Currently Due for Payment, with respect to the bonds identified above which bonds are now "Due for Payment" as defined in the Policy, but only to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy. The Trustee agrees that Ambac shall also be subrogated to all of the rights of the "Holders" as defined in the Policy, including all rights to payment, to the extent of such payments made by or on behalf of Ambac. The Trustee represents and warrants that it has full corporate power and authority to execute and deliver this Claim and Assignment For n and this Claim and Assignment Form has been duly authorized, executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee enforceable in accordance with its terns. The Trustee agrees that Ainbac may exercise any option, vote, right, power or the like (including, but not limited to any such rights arising in context of a bankruptcy, insolvency, liquidation or other reorganization of the Bond Issuer), it may have to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy with respect to the bonds identified above. The Trustee agrees to make a notation on the insured bonds and in the bond register or other document of record that Ambac is subrogated to and assigned all of the rights of the Holder as described hereinabove and to hold those bonds for which payment of principal at final maturity has been made in an uncanceled form and manner acceptable to Ambac and the Trustee. [TRUSTEE] 0 C-2 EXHIBIT D FORM OF TRUSTEE'S NOTICE TO AMBAC OF INSUFFICIENT FUNDS [DATE] Ambac Assurance Corporation Attn.: Surveillance Department and General Counsel One State Street Plaza New York, New York 10004 claimsprocessing@ambac.com Re: Notice Regarding Insufficient Funds for Payment of [DATE] Debt Service for San Bernardino Taxable Pension Obligation Bond, Cusip: (the "Bonds"): Reference is made to that certain (i) Trust Agreement, dated as of October 1, 2005, as supplemented by a First Supplemental Trust Agreement, dated as of ., 2017 (collectively, the "Trust Agreement"), by and between the City of San Bernardino (the "City") and Wells Fargo Bank, National Association ("Wells Fargo"), as Trustee, pursuant to which the Bonds were issued. Wells Fargo hereby certifies that: 1. The undersigned is an authorized officer of the Trustee. 2. Pursuant to the terms of the Bonds and the Trust Agreement, payment is due to the holders of the Bonds on [DATE] (the "Payment Due Date"). 3. Pursuant to Section 4.02 of the Trust Agreement, the Trustee is currently holding [$ in the Bond Fund, which is not sufficient to make the [$ ] in debt service due on [DATE] for the Bonds. The total amount of deficiency due on the Bonds is $- 4. Wiring instructions for payment of the deficiency amount to the Trustee are as follows: Bank: Wells Fargo Bank, N.A. ABA 121000248 Beneficiary Name: Corporate Trust Beneficiary Account No. 0001038377 For further credit: 18613300 Attn: T.Hempeck re: San Bernardino Ref- CITY OF SAN BERNARDINO, CALIFORNIA In Witness Whereof, the Trustee has executed and delivered this Notice as of [DATE]. [Trustee] LM D-1 EXHIBIT C TO RESOLUTION Commerzbank Note It is hereby certified that all acts, conditions and things required to be done, have happened or will be performed precedent to and in the issuance of this. Note or in the creation of the debt of which this is evidence, have been done, or have happened and been performed in regular and due form and manner as required by law, and that the debt represented by this Note is not in excess of any constitutional or statutory limitation. This Note shall not bear interest other than Default Interest, solely as set forth in the Agreement. City agrees to pay certain costs and expenses, incurred in connection with the enforcement of this Note in accordance with the Agreement. THIS NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO CONFLICTS OF LAWS. CITY OF SAN BERNARDINO, CALIFORNIA By: _ Name: Title: PROMISSORY NOTE THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY BE TRANSFERRED IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE EXCHANGE AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY PAYING AGENT PURSUANT TO THE TERMS OF SUCH EXCHANGE AGREEMENT. NO TRANSFERS ARE PERMITTED EXCEPT IN ACCORDANCE WITH THE EXCHANGE AGREEMENT. THE TRANSFER OF THIS NOTE OR ANY PORTION HEREOF MAY BE MADE ONLY IN AUTHORIZED DENOMINATIONS TO A PURCHASER WHO QUALIFIES AS AN ACCREDITED INVESTOR OR A QUALIFIED INSTITUTIONAL BUYER, AS SUCH TERMS ARE DEFINED IN THE EXCHANGE AGREEMENT. No. [] San Bernardino, California [ ... 1,20[ 1 For value received, the undersigned, CITY OF SAN BERNARDINO, CALIFORNIA, a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Code) under the laws of the State of California ("C"), unconditionally promises to pay to Ambac Assurance Corporation or its permitted assigns (the "Noteholder"), the principal amount of fifteen million, two hundred seventeen thousand, seven hundred two DOLLARS and fifty cents ($15,217,702.50), pursuant to that certain Exchange Agreement, dated as of 2017 (as may be amended, amended and restated, modified or supplemented from time to time, the "Agreement'), by and among City, the Noteholders from time to time party thereto, and Wells Fargo Bank, N.A., as Paying Agent, together with any and all other amounts owed by City to the Noteholder thereunder. In accordance with the terms and provisions of the Agreement, payments of principal of, and interest on, this Note are to be made to the Paying Agent for the account of, and subsequent distribution to, the Noteholder, in lawful money of the United States of America. This is one of the Notes referred to in the Agreement and is entitled to the benefits thereof and is subject to all terms, provisions and conditions thereof. Capitalized terms used and not defined herein shall have the meanings set forth in the Agreement. This Note is made in connection with and is payable as provided in the Agreement. Reference is hereby made to the Agreement for the provisions, among others, with respect to the rights, duties and obligations of City and the rights of the holder of this Note. The amount hereof is payable in accordance with the Agreement. As set forth in the Agreement, City may, at its option, prepay the Notes without premium or penalty, in whole or in part. Any optional prepayment hereunder shall be in the minimum amount of One Hundred Thousand Dollars ($100,000) (unless the Notes are being repaid in full). 10 11 12 13 14 15 16 17 18 19 20 21 i 22 23 24 25 26 27 i 28 RESOLUTION NO. RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO ACTING AS THE SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY AUTHORIZING THE AMENDMENT OF DOCUMENTS RELATING TO THE REFUNDING CERTIFICATES OF PARTICIPATION (1999 POLICE STATION, SOUTH VALLE AND 201 NORTH E STREET PROJECTS), APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the City of San Bernardino (the "City"), a municipal corporation and charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California, has previously authorized the execution and delivery of Refunding Certificates of Participation (1999 Police Station, South Valle and 201 North E Street Projects) (the "Certificates") to refinance the acquisition of certain facilities; and WHEREAS, the Certificates were executed and delivered pursuant to a Trust Agreement, dated as of September 1, 1999 (the "Trust Agreement"), by and among the City, the San Bernardino Joint Powers Financing Authority (the "Authority"), a joint exercise of powers authority duly organized and existing under and pursuant to the Constitution and laws of the State of California, and U.S. Bank National Association, as trustee; and WHEREAS, the Certificates were secured by payments made by the City under a Police Station Lease Agreement, dated as of September 1, 1999 (the "Police Station Lease Agreement"), by and between the Authority, as lessor of certain assets described in the Police Station Lease Agreement, and the City, as lessee; and WHEREAS, the Authority has determined that it is in the best interest of the Authority to amend the Trust Agreement and the Police Station Lease Agreement in order to enable the City and the Authority to apply certain moneys held thereunder to prepay the Certificates; and WHEREAS, Authority has determined that it is in the best interest of the Authority, upon the prepayment of the Certificates, to enter into a termination agreement for the Police Station Lease Agreement with the City (the "Police Station Lease Termination") and to enter j into a termination agreement for a Police Station Site and Facility Lease dated as of September 1, 1999, with the City as successor lessor to the Successor Agency to the Redevelopment Agency of the City of San Bernardino (the "Site and Facility Lease Termination"). 1 2 3 4 5 M 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by Amendment No. 1 to Trust Agreement, Amendment No. 1 to Police Station Lease Agreement, the Police Station Lease Termination, the Site and Facility Lease Termination and this Resolution. All prior actions of the Authorized Officers and other officers or staff of the Authority with respect to this matter are hereby ratified and approved. Section 6. Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Trust Agreement unless the context otherwise clearly requires. Section 7. This Resolution shall take effect immediately upon its adoption. 3 EXHIBIT A TO RESOLUTION Amendment No. 1 to Trust Agreement SECTION 3. Section 1.01 shall be amended to add the following definitions in the appropriate alphabetical order: "Police Station Lease Amendment" means that certain Amendment No. 1 to Police Station Lease Agreement dated as of f, by and between the Authority and the City." "Police Station Lease Agreement" means that certain Police Station Lease Agreement, dated as of September 1, 1999, by and between the Authority, as lessor, and the City, as lessee, as amended by the Police Station Lease Amendment." SECTION 4. Section 3.06(a) is hereby deleted in its entirety and replaced with the following: "(a) The moneys in the Capital Reserve Fund shall be disbursed by the Trustee as follows: (i) at the written direction of the City with the prior written consent of the Bond Insurer, as directed by the City Manager of the City to be applied to pay certain capital expenses within the City; or (ii) at the written direction of the City with the prior written consent of the Bond Insurer, to prepay Lease Payments and to apply such funds: (A) to the defeasance of a portion of the Certificates in accordance with Section 14.01 hereof in a principal amount equal to the aggregate unpaid principal component of such Lease Payments; and (B) to the optional partial redemption of Certificates in a principal amount equal to the aggregate unpaid principal component of such Lease Payments on the earliest practicable date after such redemption for which notice of redemption can be given in accordance with Section 4.03 hereof. The Trustee may disburse moneys from the Capital Reserve Fund: (1) with respect to payment of capital expenses, only upon receipt of: (1) a sequentially numbered requisition or an instruction, signed by the Executive Director of the Authority or the City Manager of the City, as applicable (or such officer's designee, such designation to be evidenced in writing delivered to the Trustee), setting forth the capital improvements to be performed or reimbursed and the amounts to be disbursed for payment or reimbursement of such capital improvements; and (II) the written consent of the Bond Insurer; or (2) with respect to prepayment of the Police Station Lease Agreement, only upon receipt of. (I) an instruction signed by the Executive Director of the Authority or the City Manager of the City, as applicable (or such officer's designee, such designation to be evidenced in writing delivered to the Trustee): (x) setting forth the amounts to be disbursed from the Capital Reserve Fund for prepayment of Lease Payments; (y) certifying that, together with amounts disbursed from the Reserve Fund pursuant to Section 6.06, the total amount of funds to be released is sufficient to prepay the Lease Payments in full; and (z) directing the Trustee to redeem in accordance with Section 4.01(a) Certificates in an aggregate principal amount equal to the principal component of such Lease Payments at the earliest practicable date for which notice of redemption can be given in accordance with Section 4.03 hereof; (11) the written consent of the Bond Insurer; and (III) the certification required by Section 4.02. Any requisition or instruction hereunder shall be signed by the Authority 2 Disclosure Agreement) in accordance with the terms of the Continuing Disclosure Agreement and Rule 15c2-12 as adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. (c) The City is not a party to any agreement that modifies or purports to modify any of the 1999 Refunding Certificates of Participation Agreements (Police Station/201 North E Street/South Valle). (d) Each of the 1999 Refunding Certificates of Participation Agreements (Police Station/201 North E Street/South Valle) is in full force and effect. (e) The City has duly authorized its execution, delivery and performance of this Amendment and the Police Station Lease Amendment, and each of this Amendment and the Police Station Lease Amendment constitutes a legal, valid and binding obligation of the City enforceable in accordance with its terms. SECTION 8. THIS AMENDMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. SECTION 9. This Amendment shall become effective upon the satisfaction of each of the following conditions precedent: (a) The City has executed and delivered the Police Station Lease Amendment, in the form annexed as Exhibit A hereto. (b) The City has cured, or provided adequate assurance acceptable to the Trustee and the Bond Insurer that it will promptly cure, the Defaults. (c) The City shall have caused to be delivered to the Trustee, the City and the Bond Insurer a written opinion from nationally -recognized bond counsel, in substantially the form attached hereto as Exhibit B. (d) The United States Bankruptcy Court for the Central District of California, Riverside Division, or such other court that lawfully exercises jurisdiction (the "Bankruptcy Court") over the case commenced by the City under chapter 9 of the Bankruptcy Code and styled In re City of San Bernardino, California, Case No. 6:12 -28006 -MJ, has issued a final and non -appealable order, in form and substance satisfactory to the Trustee and the Bond Insurer, approving the Plan of Adjustment of Debts of City of San Bernardino, California (May 29, 2015) (as such Plan of Adjustment may be amended from time to time with the consent of the Bond Insurer, the "Plan of Adjustment"). (e) The City provides a written certification from a City Representative that, as of the date on which the Amendment becomes effective, each of the representations set forth in SECTION 7 is true and correct. (f) The "Effective Date" under the Plan of Adjustment has occurred. [Signature Page to 199 Trust Agreement Amendment] IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Trust Agreement to be duly executed as of the day and year first written above. U.S. BANK NATIONAL ASSOCIATION Authorized Officer SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY Chairperson CITY OF SAN .BERNARDINO LIM S-1 BOND OBLIGATION DOCUMENT EVIDENCING REAL PROPERTY SECURITY LEASED PROPERTY APN NO. DESCRIPTION The Police Station 0140-281-52 TAX AMOUNT DUE (as of 3/31/16) Refunding City obligated to None $710,939.33 Certificates of make payments Site located at 710 N. Participation under lease "D" Street. (Police between the City Station, South and the JPFA for Legal description of a Valle and 201 property single parcel set forth North E identified as the in Exhibit A to lease Street) ("1999 Police Station Site. between City and Refunding JPFA identified as Certificates") Parcel 1 of Parcel Map No. 14725. This corresponds to APN 0140-281-52 perthe County Assessor records. The Assessor's records reflect that this parcel was transferred from the Redevelopment Agency ("RDA") to the Economic Development Corp. ("EDC") in March 2011 and then subsequently transferred to the Successor Agency in November 2014. The taxes due for this APN are $710,939.33. described as the South Valle improvements (legally described in Exhibit Aas consisting of four separate parcels which was recorded as Doc. No. 19990408318). San City obligated to Bernardino make payments Joint Powers for "Project" as Financing defined in Authority Indenture. Lease Revenue Indenture defines Bonds (City Project as "City Hall Project) Hall and the Series 1996) Parking Structure described collectively in Exhibit "A" to the Lease Agreement" The term "Lease Agreement" means the "Lease Purchase Agreement dated December 1, 1996" between the Authority and the City. This None Street, Waterman Avenue and Caroline Street based on the legal descriptions in the South Valle lease. Parcels described in Exhibits A to Lease Agreement contain legal descriptions of Parcels A, B, B-1, C, D and Parking Structure. Parcels A, B and 13- 1 reference portions of "Parcels 24 and 25 of Parcel Map 688 in City of San Bernardino...." These parcels were subsequently split and the legal description of the property now appearsto correspond with the following parcels shown on Assessor Parcel Map No. 0134 pages 25 and 31: (a) 0134-251-58 (identified as Plaza East); (b) Parcel A and B-1 That portion of this legal description now identified as Plaza East, APN 0134-251-58, has outstanding taxes due of $46,654.93. No known taxes due for the remainder of the legally described property which appears to be the land under City Hall (APN 0134- 251-51). transferred to the Successor Agency in November 2014. The taxes due for this APN are $317,435.69. EXHIBIT A Amendment No. 1 to Police Station Lease Agreement "Such option shall be exercised, in the event of prepayment in full, by depositing with said notice cash and/or instructing the Trustee to apply moneys held in the Capital Reserve Fund, in an aggregate amount which, together with amounts then on deposit in the Reserve Fund, the Insurance and Condemnation Fund and the Lease Payment Fund, will be sufficient to pay the aggregate unpaid component of the Lease Payments attributable to the Certificates then due but unpaid, or in the event of prepayment in part, by depositing with said notice cash, and/or instructing the Trustee to apply moneys held in the Capital Reserve Fund, in each case in an amount divisible by $5,000 equal to the amount desired to be prepaid together with any Lease Payments attributable to the Certificates then due but unpaid." SEC'T'ION 4. THIS AMENDMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. SECTION 5. This Amendment shall become effective upon the later to occur of its execution and delivery and the satisfaction or waiver of the conditions precedent to the effectiveness of that certain Amendment No. 1 to the Trust Agreement, dated as of I ], 2017. SECTION 6. This Amendment may be executed in several counterparts, each of which shall be deemed as an original, all of which shall constitute but one of the same instrument. SECTION 7. Except as otherwise amended pursuant to this Amendment, the Original Police Station Lease Agreement shall remain unchanged, is hereby ratified and confirmed, and shall continue to be in full force and effect and binding upon the parties hereto. [This space intentionally left blank; signature page immediately follows.] 2 EXHIBIT B Opinion of Bond Counsel _, 2017 City of San Bernardino San Bernardino Joint Powers Financing Authority U.S. Bank National Association National Public Finance Guarantee Corporation Page Two resolutions of the City and the Authority approving the Amendments; and (v) such other information and documents as we have deemed necessary to render the opinions set forth herein. Based upon and in reliance on the foregoing, we are of the opinion that: (a) The Amendments have been duly authorized, executed and delivered by the City and the Authority in accordance with the amendment provisions of the Original Agreements and constitute amendments that the City and the Authority deem desirable and which do not materially adversely affect the interests of the Owners of the Certificates. (b) Assuming due authorization, execution and delivery of the Trust Agreement Amendment by the Trustee, the Amendments constitute the legal, valid and binding obligations of the City and the Authority enforceable against the City and the Authority in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on remedies against public agencies in the State of California. In addition, neither the execution and delivery of the Amendments nor any of the transactions contemplated thereby will adversely affect the enforceability of the Original Agreements against the City and the Authority, as applicable. (c) Neither the execution and delivery of the Amendments nor any of the transactions contemplated thereby will adversely affect the exclusion from gross income for federal income tax purposes of interest with respect to the Certificates. In order for interest with respect to the Certificates to be excluded from gross income for federal income tax purposes subsequent to their date of issuance, it is necessary that certain provisions of the Internal Revenue Code of 1986, as amended, be complied with on a continuous basis. We have made no independent investigation as to whether there has been such compliance in the present case. Accordingly, we express no opinion as to whether interest with respect to the Certificates is presently excluded from gross income for federal income tax purposes or is exempt from State of California personal income taxation as of the date of this opinion. This opinion letter does not constitute a reaffirmation of any opinions previously delivered by this firm or any other with respect to the Certificates, the Original Agreements or any amendments thereto. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions, and the foregoing opinions cover certain matters not directly addressed by such authorities. We call attention to the fact that such opinions may be affected by actions taken or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken or occur. We expressly disclaim any obligation to update this opinion letter. No attorney-client relationship exists between us and you with respect to the Certificates or the Amendments. EXHIBIT B TO RESOLUTION Amendment No. 1 to Police Station Lease Agreement "Such option shall be exercised, in the event of prepayment in full, by depositing with said notice cash and/or instructing the Trustee to apply moneys held in the Capital Reserve Fund, in an aggregate amount which, together with amounts then on deposit in the Reserve Fund, the Insurance and Condemnation Fund and the Lease Payment Fund, will be sufficient to pay the aggregate unpaid component of the Lease Payments attributable to the Certificates then due but unpaid, or in the event of prepayment in part, by depositing with said notice cash, and/or instructing the Trustee to apply moneys held in the Capital Reserve Fund, in each case in an amount divisible by $5,000 equal to the amount desired to be prepaid together with any Lease Payments attributable to the Certificates then due but unpaid." SECTION 4. THIS AMENDMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. SECTION 5. This Amendment shall become effective upon the later to occur of its execution and delivery and the satisfaction or waiver of the conditions precedent to the effectiveness of that certain Amendment No. 1 to the Trust Agreement, dated as of [ _.._._], 2017. SECTION 6. This Amendment may be executed in several counterparts, each of which shall be deemed as an original, all of which shall constitute but one of the same instrument. SECTION 7. Except as otherwise amended pursuant to this Amendment, the Original Police Station Lease Agreement shall remain unchanged, is hereby ratified and confirmed, and shall continue to be in full force and effect and binding upon the parties hereto. [This space intentionally left blank; signature page immediately follows.] 2 EXHIBIT C TO RESOLUTION Police Station Lease Termination TERMINATION OF POLICE STATION LEASE AGREEMENT THIS TERMINATION OF LEASE (this "Agreement") is dated as of [ 1, 2017 and effective as of the date of recordation hereof, by and between the SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, a public body corporate and politic and existing under the laws of the State of California (the "Authority"), as lessor, and the CITY OF SAN BERNARDINO, a municipal corporation and charter city duly organized and existing under the laws of the State of California (the "City"), as lessee. RECITALS A. The Authority, the City and U.S. Bank National Association (the "Trustee"), entered into a Trust Agreement, dated as of September 1, 1999 (as amended, the "Trust Agreement"), pursuant to which the City caused the execution and delivery of $15,480,000 original aggregate principal amount of Refunding Certificates of Participation (1999 Police Station, South Valle and 201 North E Street Projects) (the "Certificates"). B. The Authority, as lessor, and the City, as lessee, entered into that certain Police Station Lease Agreement (the "Lease Agreement"), dated as of September 1, 1999, which was recorded as Document No. 408313 on September 29, 1999 in the Official Records of the County of San Bernardino, State of California (the "Official Records"), pursuant to which the Authority leased certain property described therein (the "Property") to the City. A legal description of the Property is attached hereto as Exhibit A. C. The City has notified the Authority of its intention to partially defease the Certificates as of the date hereof and to exercise its option of partial redemption of Certificates in a principal amount equal to the aggregate unpaid principal component of the Lease Payments (as such term is defined in the Lease Agreement) on the earliest practicable date for which notice of redemption can be given in accordance with Section 4.03 of the Trust Agreement. D. The City hereby certifies that it has caused to be delivered moneys (the "Defeasance Amount"), pursuant to that certain Escrow Agreement, dated as of even date hereof, by and between the City and U.S. Bank National Association, as escrow agent (the "Escrow Agent"), sufficient to prepay the Lease Payments in full, in order to partially defease the Certificates as of the date hereof and provide funds to exercise its option of partial redemption of the Certificates on September 1, 2017. E. In connection with the partial defeasance of the Certificates, the City and the Authority now desire to terminate and discharge the Lease Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Recordation. This Agreement shall not be recorded until the City deposits the Defeasance Amount with the Escrow Agent. [Signature Page to Police Station Lease Termination] IN WITNESS WHEREOF, this Agreement has been executed by each party's respective duly authorized officers, as of the date first above written. ATTEST: Georgeann Hanna City Clerk ATTEST: Georgeann Hanna Secretary APPROVED AS TO FORM: Gary Saenz City Attorney CITY OF SAN BERNARDINO Mark Scott City Manager SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY in S-1 R. Carey Davis Chairperson A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ss. COUNTY OF SAN BERNARDINO ) On , 2017 before me, Notary Public, personally appeared [ 1, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal EXHIBIT D TO RESOLUTION Site and Facility Lease Termination TERMINATION OF POLICE STATION SITE AND FACILITY LEASE THIS TERMINATION OF LEASE (this "Agreement") is dated as of I j, 2017 and effective as of the date of recordation hereof, by and between the CITY OF SAN BERNARDINO, a municipal corporation and charter city duly organized and existing under the laws of the State of California (the "City"), as successor lessor to the Redevelopment Agency of the City of San Bernardino (the "Agency"), and the SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY duly organized and existing under and by virtue of the laws of the State of California (the "Authority"), as lessee. RECITALS A. The Authority, the City and U.S. Bank National Association (the "Trustee"), entered into a Trust Agreement, dated as of September 1, 1999 (as amended, the "Trust Agreement"), pursuant to which the City caused the execution and delivery of $15,480,000 original aggregate principal amount of Refunding Certificates of Participation (1999 Police Station. South Valle and 201 North E Street Projects) (the "Certificates"). B. The Agency, as lessor, and the Authority, as lessee, entered into that certain Police Station Site and Facility Lease (the "Site and Facility Lease"), dated as of September 1, 1999, which was recorded as Document No. 408312 on September 29, 1999 in the Official Records of the County of San Bernardino, State of California (the "Official Records"), pursuant to which the Agency leased certain property described therein (the "Property") to the Authority. A legal description of the Property is attached hereto as Exhibit A. C. The Authority, as lessor, and the City, as lessee, entered into that certain Police Station Lease Agreement (the "Lease Agreement"), dated as of September 1, 1999, which was recorded as Document No. 408313 on September 29, 1999 in the Official Records, pursuant to which the Authority leased the Property to the City. D. On June 28, 2016, pursuant to the City's Long Range Property Management Plan, the Property was transferred from the Agency to the City. By operation of law, the City has become the lessor under the Site and Facility Lease and assumed all the rights and obligations of the Agency pursuant to the Site and Facility Lease. E. The term of the Site and Facility Lease shall end when all Lease Payments (as such term is defined in the Lease Agreement) have been fully paid or provided for in accordance with the terms of the Lease Agreement. F. The City has notified the Authority of its intention to partially defease the Certificates as of the date hereof and to exercise its option of partial redemption of Certificates in a principal amount equal to the aggregate unpaid principal component of the Lease Payments on the earliest practicable date for which notice of redemption can be given in accordance with Section 4.03 of the Trust Agreement. G. The City hereby certifies that it has caused to be delivered moneys (the "Defeasance Amount"), pursuant to that certain Escrow Agreement, dated as of even date hereof, by and between the City and U.S. Bank National Association, as escrow agent (the "Escrow Agent"), sufficient to [Signature Page to Police Station Site Lease Termination] IN WITNESS WHEREOF, this Agreement has been executed by each party's respective duly authorized officers, as of the date first above written. ATTEST: Georgeann Hanna City Clerk ATTEST: Georgeann Hanna Secretary APPROVED AS TO FORM: Gary Saenz City Attorney CITY OF SAN BERNARDINO In Mark Scott City Manager SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY By: R. Carey Davis Chairperson S-1 A notary public or other officer completing this certificate verifies only the identity of the maiviauai who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ss. COUNTY OF SAN BERNARDINO ) On , 2017 before me, , Notary Public, personally appeared f 1, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal City of San Bernardino Civil Service Department Date: May 15, 2017 To: Honorable Mayor and City Council Members From: Rebekah Kramer, Chief Examiner Subject: Replacement Pages - Charter Implementation Update - Item Me (Packet Pages 477 - 479) Attached you will find replacement pages for Item #13e (packet pages #477 - 479) scheduled for consideration by the Mayor and City Council on the May 15, 2017. Corrections were made to Section 6 of the Resolution as presented below. SECTION 6: Any act previously performed by the Chief Examiner in the Rules other than the acts related to disciplinary appeals referenced in Rules 513-513.5 and 601 are hereby delegated to a human resources department with approval from the Appointing Power, as such term is used in Rule 103 Rese Fees nonak + RESOLUTION NO. RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY O 211 BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES A REGULATIONS THE PERSONNEL RULES 3 AMENDMENTS TO RULES 513-513.5 AND 601 PURSU�A`NT O CHAP ER 2 501 THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 A 4 601 TO THE NEW CHARTER BY CHANGING REFERENCES FROM THE CI1 SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORI 5 FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGN IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO 6 DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCI DEPARTMENT 7 WHEREAS, the voters of the City of San Bernardino, at an election held s November 8, 2016, approved a new City Charter; and 9 WHEREAS, the new City Charter went into effect upon filing with the Secreta 10 11 of State on January 31, 2017; and 12 WHEREAS, prior to the adoption of the new City Charter, responsibility fc 13 hearing appeals of disciplinary action by classified City employees was assigned to th 14 Civil Service Board; and 15 WHEREAS, Section 604 of the new City Charter assigns responsibility fo 16 1 hearing appeals of disciplinary action by City employees to the Personnel Commission 17 land 1s WHEREAS, Section 604 of the new City Charter states that the 19 responsibility of the Personnel Commission shall be to hear appeals of disci lin 20 p action by City employees; and 21 22 WHEREAS, Section 508 of the new City Charter states that the administration 23 employee matters shall be delegated to a personnel or human resources departure and 24 25 1 I WHEREAS, section 2.50.010 of the San Bernardino Municipal Code states that 2 all amendments to the Civil Service Rules and Regulations shall be adopted b 3 Resolution of the Mayor and City Council. 4 NOW, THERERFORE, BE IT RESOLVED BY THE MAYOR AND CITY 5 COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: 6 SECTION 1: The above Recitals are true and correct and are incorporate s herein by this reference. 9 SECTION 2: The City of San Bernardino's Civil Service Rules and Regulation 10 for the Classified Service shall heretofore be known as the Personnel Rules ("Rules"), 11 SECTION 3: The amendments to Rules 513-513.5 and 601, attached hereto a 12 Exhibit "A" and incorporated herein, are hereby approved. 13 SECTION 4: The Personnel Commission shall be responsible for hearing o 14 disciplinary appeals referenced in and pursuant to Rules 513-513.5 and 601. 15 SECTION 5: Any act previously performed by the Civil Service Board in the 16 Rules other than the acts related to disciplinary appeals referenced in Rules 513-513. 17 18 and 601 are hereby delegated to a human resources department with approval from the Appointing Power, as such term is used in Rule 103. 19 zo SECTION 6: Any act previously performed by the Chief Examiner in theRule 21 other than the acts related to disciplinary appeals referenced in Rules 513-513.5 and 22 601 are hereby delegated to a human resources department with approval from the 23 Appointing Power, as such term is used in Rule 103. 24 25 2 0 1 2 3 4 5 6 7 s 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAI BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES ANI REGULATIONS THE PERSONNEL RULES ("RULES"); APPROVIM AMENDMENTS TO RULES 513-513.5 AND 601 PURSUANT TO CHAPTER 2.50 O THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 ANI 601 TO THE NEW CHARTER BY CHANGING REFERENCES FROM THE CIVI SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORIT FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGNEI IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCE DEPARTMENT I HEREBY CERTIFY that the foregoing Resolution was duly adopted by th Mayor and City Council of the City of San Bernardino, California, at a meeting thereo held on the day of , 2017, by the following vote, to wit: COUNCILMEMBERS: AYES NAYES ABSTAIN ABSENT MARQUEZ BARRIOS VALDIVIA SHORETT NICKEL RICHARD MULVIHILL Georgeann Hanna, City Clerk The foregoing Resolution is hereby approved this 2017. Approved as to form: Gary D. Saenz, City Attorney Un 3 of R. Carey Davis, Mayor City of San Bernardino City of San Bernardino Civil Service Department Date: May 15, 2017 To: Honorable Mayor and City Council Members From: Rebekah Kramer, Chief Examiner Subject: Replacement Pages - Charter Implementation Update - Item #13e (Packet Pages 477 - 479) Attached you will find replacement pages for Item #13e (packet pages #477 - 479) scheduled for consideration by the Mayor and City Council on the May 15, 2017. Corrections were made to Section 6 of the Resolution as presented below. SECTION 6: Any act previously performed by the Chief Examiner in the Rules other than the acts related to disciplinary appeals referenced in Rules 513-513.5 and 601 are hereby delegated to a human resources department with approval from the Appointing Power, as such term is used in Rule 103 N z'ric-rTc• I RESOLUTION NO. ___ RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF S 2 BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES A REGULATIONS THE PERSONNEL RULES 3 AMENDMENTS TO RULES 513-513.5 AND 601 PURSUANT TO CHAP ER 2 501 THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 Ai 4 601 TO THE NEW CHARTER BY CHANGING REFERENCES FROM THE CII SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORI 5 FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGNI IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO 6 DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCI DEPARTMENT 7 WHEREAS, the voters of the City of San Bernardino, at an election held s November 8, 2016, approved a new City Charter; and 9 10 WHEREAS, the new City Charter went into effect upon filing with the Secreta 11 of State on January 31, 2017; and 12 WHEREAS, prior to the adoption of the new City Charter, responsibility fi 13 hearing appeals of disciplinary action by classified City employees was assigned to th 14 Civil Service Board; and 15 WHEREAS, Section 604 of the new City Charter assigns responsibility fo 16 hearing appeals of disciplinary action by City employees to the Personnel Commission 17 and 18 WHEREAS, Section 604 of the new City Charter states that the soled 19 responsibility of the Personnel Commission shall be to hear appeals of disciplina 20 action by City employees; and 21 WHEREAS, Section 508 of the new City Charter states that the administration oij 22 23 employee matters shall be delegated to a personnel or human resources deoartmiznf- ff and 24 25 1] 1 2 3 4 5 6 7 s 9 10 11 12 13 14 15 16 17 1s 19 20 21 22 23 24 25 WHEREAS, section 2.50.010 of the San Bernardino Municipal Code states all amendments to the Civil Service Rules and Regulations shall be adopted Resolution of the Mayor and City Council. NOW, THERERFORE, BE IT RESOLVED BY THE MAYOR AND C COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1: The above Recitals are true and correct and are incorporate herein by this reference. SECTION 2: The City of San Bernardino's Civil Service Rules and Regulatio for the Classified Service shall heretofore be known as the Personnel Rules ("Rules"), SECTION 3: The amendments to Rules 513-513.5 and 601, attached hereto ; Exhibit "A" and incorporated herein, are hereby approved. SECTION 4: The Personnel Commission shall be responsible for hearing disciplinary appeals referenced in and pursuant to Rules 513-513.5 and 601. SECTION 5: Any act previously performed by the Civil Service Board in tl Rules other than the acts related to disciplinary appeals referenced in Rules 513-513 and 601 are hereby delegated to a human resources department with approval from tl Appointing Power, as such term is used in Rule 103. SECTION 6: Any act previously performed by the Chief Examiner in the Rul( other than the acts related to disciplinary appeals referenced in Rules 513-513.5 ar 601 are hereby delegated to a human resources department with approval from t[ Appointing Power, as such term is used in Rule 103. 2 1 2 3 4 5 6 7 s 9 10 11 12 13 14 15 16 17 1s 19 20 21 22 23 24 25 RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAI BERNARDINO, CALIFORNIA, RENAMING THE CIVIL SERVICE RULES ANI REGULATIONS THE PERSONNEL RULES ("RULES"); APPROVINI AMENDMENTS TO RULES 513-513.5 AND 601 PURSUANT TO CHAPTER 2.50 0 THE SAN BERNARDINO MUNICIPAL CODE; CONFORMING RULES 513-513.5 ANI 601 TO THE NEW CHARTER BY CHANGING REFERENCES. FROM THE CIVI SERVICE BOARD TO THE PERSONNEL COMMISSION; DELEGATING AUTHORIT FOR ACTIONS OTHER THAN DISCIPLINARY APPEALS PREVIOUSLY ASSIGNEI IN THE RULES TO THE CIVIL SERVICE BOARD AND CHIEF EXAMINER TO , DESIGNEE OF THE APPOINTING POWER UNDER A HUMAN RESOURCE; DEPARTMENT I HEREBY CERTIFY that the foregoing Resolution was duly adopted by th Mayor and City Council of the City of San Bernardino, California, at a meeting thereo held on the day of , 2017, by the following vote, to wit: COUNCILMEMBERS: AYES NAYES ABSTAIN ABSENT MARQUEZ BARRIOS . VALDIVIA SHORETT NICKEL RICHARD MULVIHILL Georgeann Hanna, City Clerk The foregoing Resolution is hereby approved this 2017. Approved as to form: Gary D. Saenz, City Attorney 0 3 of , R. Carey Davis, Mayor City of San Bernardino RNnRD City Council Memorandum o �r� FD Date May 15, 2016 To: Honorable Mayor and City Council Members From: Mark Scott, City Manager By: Gigi Hanna, City Clerk John Paul Maier, Chief Deputy City Clerk Subject: Amendment to Agenda Items 18 and 19 Attached are Exhibit B to the Resolution for Agenda Item 18 and Attachments 1 and 5 to Agenda Item 19. Please feel free to be in touch with the City Clerk Gigi Hanna (hanna gi(Qsbcity.org) or Chief Deputy City Clerk John Maier (maier moa-sbcity.org) should you have any questions. K. The current property tax liability, including penalty and interest through May 1, 2017, is Eighty Thousand Fifty Seven Dollars ($80,057) plus interest accruing after May 1, 2017 (the "Tax Liability"). L. Throughout the term of the lease, ACAA has remained current with respect to the payment to the County of San Bernardino Tax Collector of all possessory interest/unsecured taxes. M. ACAA has requested that the City discharge the Tax Liability. N. The City previously requested the County of San Bernardino ("County") to remove from the tax rolls and cancel the taxes related to all properties included within the LRPMP, inclusive of the Property. The County has removed all properties included within the LRPMP, inclusive of the Property, from the tax rolls. O. The County has advised the City that it will consider the cancellation of the taxes, interest and penalties related to all properties included within the LRPMP, inclusive of the Tax Liability, subject to a Mutual Release and Settlement Agreement provided by the County. The County and City continue to refine the terms of the Mutual Release and Settlement Agreement P. Based on the expectation of the County and City entering into a final Mutual Release and Settlement Agreement, the Parties now desire to resolve any claims, disputes and/or controversies with respect to the Note, Deed of Trust, and Tax Liability. AGREEMENT NOW, THEREFORE, in consideration of the terms, conditions, and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Quitclaim Deed. Concurrently herewith, the City shall execute and deliver to ACAA for recordation that certain Quitclaim Deed with respect to the Property in the form attached hereto as Exhibit A and incorporated herein by this reference. 2. Tax Liability. In the event the County refuses to cancel the Tax Liability, as described in Recital O, above, the City hereby covenants to discharge the Tax Liability prior to it reaching One Hundred Thousand Dollars ($100,000) through the accrual of interest. 3. Release by the Parties. Except for the obligations imposed upon the City under this Settlement Agreement with respect to the Tax Liability, the Parties and all others claiming by and through them do hereby release and discharge each of them from and for all actions, claims, charges, liabilities, obligations, benefits, compensation, damages, fees, foreclosure, expenses, or suits of any kind whatsoever, known or unknown, which either Party now has, or may ever have had, arising out of, or relating to, the Note, Deed of Trust, Property, and/or Tax Liability. ACAA, on behalf of itself and all others claiming by and through ACAA, does hereby release and discharge the SBEDC, the Successor Agency, and each of them from and for all actions, claims, charges, liabilities, obligations, benefits, compensation, damages, fees, foreclosure, expenses, or suits of any kind whatsoever, known or unknown, which ACAA or anyone claiming by and through ACAA now has, or may ever have had, arising out of, or relating to, the Note, Deed of Trust, Property, and/or Tax Liability. 2 City of San Bernardino Com' 300 North "D" Street With copy via regular U.S. Mail to: Stradling Yocca Carlson & Rauth San Bernardino, CA 92418 Attn: Thomas P. Attn: City Manager and City Attorney 60 Newport Center Dr ve, Suite 16 Newport Beach, CA 92660 00 Ed Haddad, President ACAA: 422 Wier Road, Front Office San Bernardino, CA 92408 5' No Material Reliance. There are no unwritten, oral or verbal understands agreements, promises or representations of any kind whatsoever as between the Parties that are contained in this Agreement. The Parties each represent and acknowledge that, in exec understandings, not Agreement, they have not relied upon any representation, statement, omission, agreement or this made by any other Party except as set forth in this Agreement, nor have they relied u representation, statement, agreement, omission or promise made b r Promise representatives, or attorneys, except as set forth in this Agreement. Pon any y the other Party's agents, 6' Final and Binding Agreement. The Parties have each made such investigation the facts pertaining to this Agreement as they have deemed necessary. This Agreement is i be and is the final, binding and fully integrated agreement of the Parties, regardless g n of any of the Parties of misrepresentation, concealment of fact, or mistake of law o mended to g of any claims of r fact. ie No Admission of Liability. The Parties this constitute an admission of liability, does not constitute any fact allate or legaltprecedent what h is does not may not be used as evidence in any subsequent proceeding of any kind, except in naction alleging alle rig a and breach of this Agreement. S. Agreement Not Subject to Government Code §52200 et seq. The Prope developed and, therefor, is not being treated as an "economic opportuni P rtY is fully Government Code Section 52200.2, nor is it being conveyed for "economic development Opportunity", as defined in California as described in Government Code Section 52201(a)(1),because the subsidy, if an is Purposes" $100,000. y, ss than 9. Parties Shall Pear Their Own Fees And Costs. Each Pa attorneys' fees and costs relating to this Agreement. rt3' shall bear its own 10. Successors and Assigns. This Agreement shall be binding upon and inure to Parties hereto and their respective heirs, executors, administrators, successors and assigns. the 11. Non -Assignment of Claims. ACAA hereby represents and warms been no assignment, sale, or transfer, by operation of law or otherwise, of any claim, rithat there has cause of action, demand, obligation, liability or interest released by it under this Settlement Agreement 12e Further Assurances and Authorizations to Settle. The Parties, actin themselves or through their respective attorneys, shall promptly prepare and execute any and all documents necessary to effectuate the obligations set forth in this Settlementg by Agreement and 0 IN WITNESS WHEREOF, this Settlement Agreement has been executed in the name of the City of San Bernardino, and ACAA, as of the dates set forth below. CITY OF SAN BERNARDINO, a California charter city By:.... - -- Mark Scott, City Manager Dated: ATTEST Geogeann Hanna, City Clerk APPROVED AS TO FORM: STRAI)L,ING YOCCA CARL,S®N & RAUTH, P.C. By: Thomas P. Clark, Jr., Special Counsel 10 ACAA LIMITED PARTNERSHIP, a California limited partnership By: A & A HOLDINGS, INC. Its: General Partner By: Ed Haddad, President Dated: A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ._ , before me, personally appeared ss. (Print Name of Notary Public) , Notary Public, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and aclmowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and con-ect. WITNESS my hand and official seal. Signature of Notary Public OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT ❑ Individual ❑ Corporate Officer Title Or Type Of Document Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) - ElGuardian/Conservator Number Of Pages ❑ Other: Signer is representing: _ Name Of Person(s) Or Entity(ies) Date Of Documents Signer(s) Other Than Named Above 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO AUTHORIZING THE AMENDMENT OF DOCUMENTS RELATING TO THE TAXABLE PENSION OBLIGATION BONDS, 2005 SERIES A, APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the City of San Bernardino (the "City"), a municipal corporation and charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California, has previously issued the Taxable Pension Obligation Bonds, 2005 Series A- 1 (the "2005 Series A-1 Bonds") and 2005 Series A-2 (the "2005 Series A-2 Bonds" and, together with the 2005 Series A-1 Bonds, the "Bonds"); and WHEREAS, the Bonds were issued pursuant to a Trust Agreement, dated as of October 1, 2005 (the "Trust Agreement"), by and between the City and Wells Fargo Bank, National Association, as trustee; and WHEREAS, the City, the holder of the Bonds, and the insurer of the 2005 Series A-2 Bonds entered into a settlement agreement dated as of March 28, 2016 (the "Settlement Agreement"); and WHEREAS, the Mayor and the City Council of the City have determined that it is in the best interest of the City to amend the Trust Agreement and to enter into certain other documents in order: (i) to cause the refunding and cancellation of the 2005 Series A-1 Bonds in exchange for a note to be issued by the City that is payable to Commerzbank Finance & Covered Bond S.A., the holder of the 2005 Series A-1 Bonds (the "Commerzbank Note"); and (ii) to amend the 2005 Series A-2 Bonds to provide that such 2005 Series A-2 Bonds shall be non-recourse to the City; and (iii) to issue a note payable to Ambac Assurance Corporation, the bond insurer of the 2005 Series A-2 Bonds (the "Ambac Note" and, together with the Commerzbank Note, the "Notes"); and WHEREAS, the Bankruptcy Court for the Central District of California (the "Bankruptcy Court") in the City's chapter 9 bankruptcy case (the "Bankruptcy Case"), by order entered on February 7, 2017, among other things: (i) authorized the City to enter into, execute and deliver additional documents that the City reasonably deems necessary to implement the Settlement Agreement, and (ii) confirmed the City's Plan of Adjustment in its Bankruptcy Case. 1 2 3 4 5 Section 5. Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Trust Agreement, as amended by the Supplemental Trust Agreement, unless the context otherwise clearly requires. 6 HI 7 8 /// 9 1/// 11 /// 12 13 14 15 16 17 18 19 iXi7 21 22 23 24 25 26 27 28 Section 6. This Resolution shall take effect immediately upon its adoption. 3 EXHIBIT A TO RESOLUTION Supplemental Trust Agreement TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY .............. SECTION 1.01. Definitions ............... SECTION 1.02. First Su lemental Trust A reement Constitutes Contract ................................. 8 SECTION 1.03. Section Numbers ............................. ARTICLE II REFINANCING OF 2005 SERIES A-1 BONDS; AMENDMENT. OF 2005 SERIES A-2 BONDS; GENERAL BOND PROVISIONS.....................................8 SECTION 2.01. Refinancinu of the 2005 Series A-1 Bonds Issuance of Commerzbank Note............ SECTION 2.02. Amendment of the 2005 Series A-2 Bonds ............................. SECTION 2.03. Exch an e Agreement ...................... SECTION 2.04. Costs and Fees for Transfers ......................... ARTICLE III CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION.............................................................................................. 9 SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse .................... .......... 9 SECTION 3.02. Im �lementation Procedures ............................................ 10 ARTICLE IV PROVISIONS REGARDING AMBAC POLICY ............................................. SECTION 4.01. Ambac Polic............................................................ SECTION 4.02. Claims Under Ambac Police ........................................... ARTICLE V COVENANTS OF THE LOCAL AGENCY ........................................... SECTION 5.01. Performance............................................................ SECTION 5.02. Power to Enter Into A-reement.................................................... SECTION 5.03. Accountin4 Records and Reports ...................12 SECTION 5.04. Prosecution and Defense of Suits .................... SECTION 5.05. Waiver of Laws ......................... ........................................................................13 ARTICLE VI THE TRUSTEE .............. 1 THIS FIRST SUPPLEMENTAL TRUST AGREEMENT, made and entered into as of , 2017 (the "First Supplemental Trust Agreement") and effective as of the Effective Date (as defined herein), supplements the Trust Agreement dated as of October 1, 2005 (the "Original Trust Agreement", as supplemented by this First Supplemental Trust Agreement, the "Trust Agreement") by and between WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as Trustee (the "Trustee"), and the CITY OF SAN BERNARDINO (the "Local Agency"), a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Government Code), under the laws of the State of California. WITNESSETH: WHEREAS, the Local Agency is obligated by the Public Employees' Retirement Law, commencing with Section 20000 of the Government Code of the State of California, as amended, to make payments to the California Public Employees' Retirement System (the "System") relating to pension benefits accruing to the System's members; and WHEREAS, the Local Agency entered into a contract with the System dated March 1, 1945, as heretofore and hereafter amended from time to time (the "PERS Contract"), evidencing the Local Agency's obligation to pay the Local Agency's unfunded accrued actuarial liability; and WHEREAS, the Local Agency is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California (the "Act") to issue bonds for the purpose of refunding any evidence of indebtedness of the Local Agency; and WHEREAS, for the purpose of refunding the Local Agency's obligations to the System evidenced. by the PERS Contract, the Local Agency issued its City of San Bernardino Taxable Pension Obligation Bonds, 2005 Series A-1 Bonds (the "2005 Series A-1 Bonds"), in the aggregate principal amount of $36,050,000 and 2005 Series A-2 Bonds (the "2005 Series A-2 Bonds"), in the initial aggregate principal amount of $14,351,582.90 (collectively, the "2005 Series A Bonds"), all pursuant to the Original Trust Agreement and in the manner provided therein; and WHEREAS, the 2005 Series A-1 Bonds and the 2005 Series A-2 Bonds, together with any Additional Bonds (as defined in the Original Trust Agreement), were validated pursuant to the Default Judgment in Validation Proceeding dated 7/11/2005 in San Bernardino County Superior Court Case No. SCVSS 125783; and 3 WHEREAS, all acts and proceedings required• by law necessary to make this First Supplemental Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this First Supplemental Trust Agreement have been in all respects duly authorized; and NOW, THEREFORE, THIS FIRST SUPPLEMENTAL TRUST AGREEMENT WITNESSETH, that in order to implement the matters described above with respect to the 2005 Series A Bonds, to satisfy certain terms of the Exchange Agreement, and to make certain changes to the payment procedures related to the Ambac Policy, and consideration of the premises and of the mutual covenants herein contained and in the Exchange Agreement, the Local Agency does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds (as defined in the Original Trust Agreement), as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01. Definitions. Unless otherwise defined in this First Supplemental Trust Agreement, capitalized terms defined in the Original Trust Agreement shall have the meanings given such terms in the Original Trust Agreement; and unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any Fust Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified: 2005 Series A-1 Bonds The term "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac The term "Ambac" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Ambac Polic%.- Insurance Payment Account The term "Insurance Payment Account" means the account by that name established by the Trustee pursuant to Section 4.02(c) of this First Supplemental Trust Agreement. Insured Holders The term "Insured Holder" means a Holder (as defined in the Ambac Policy) of the 2005 Series A-2 Bonds. Note PUing Agent The term "Note Paying Agent" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Notes The term "Notes" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. OriL,inal Ambac Policy The term "Original Ambac Policy" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. Original Trust Agreement The term "Original Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. Trust Agreement The term "Trust Agreement" shall have the meaning given such term in the introductory paragraph of this First Supplemental Trust Agreement. 2005 Series A-1 Bonds The term "2005 Series A-1 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 2005 Series A-2 Bonds The term "2005 Series A-2 Bonds" shall have the meaning given such term in the recitals of this First Supplemental Trust Agreement. 7 Supplemental Trust Agreement shall not constitute a novation. After the Effective Date, the 2005 Series A-2 Bonds shall continue to be insured by the Original Ambac Policy, endorsed as provided in this First Supplemental Trust Agreement. The Ambac Note shall be issued as an Additional Bond under the Trust Agreement in exchange for rendering the 2005 Series A-2 Bonds non-recourse to the Local Agency. The conditions and procedure for issuance of the Ambac Note set forth in the Exchange Agreement shall supersede and replace the requirements of Sections 3.01 and 3.02 of Original Trust Agreement with respect to conditions precedent to issuance of the Ambac Note. The terms of the Ambac Note shall be set forth in the Exchange Agreement and in the Ambac Note. SECTION 2.03. Excham,e A reement. The Trustee shall serve as Note Paying Agent under the Exchange Agreement. The Exchange Agreement shall govern all terms and provisions of the Notes, including principal, interest (if any) and repayment, as well as all conditions precedent to issuance. SECTION 2.04. Costs and Fees for Transfers. Section 2.06(a) of the Original Trust Agreement shall be amended to delete the following sentence: "The cost of printing of Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Local Agency." CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse. Upon satisfaction of the following specific conditions, the 2005 Series A-1 Bonds shall be cancelled and the 2005 Series A-2 Bonds shall be rendered non-recourse to the Local Agency: (a) the Exchange Agreement and this First Supplemental Trust Agreement shall have been executed and delivered by all parties thereto; (b) the Original Ambac Policy shall be endorsed to incorporate the amendments set for in Exhibit B attached hereto; and (c) all conditions for closing under the Exchange Agreement, as set forth in Section 3.2 thereof, shall have been satisfied, including (i) issuance and delivery to Commerzbank of the Commerzbank Note in exchange for the 2005 Series A-1 Bonds, and (ii) issuance and delivery to Ambac of the Ambac Note in exchange for any subrogation, reimbursement, or other rights to payment from the Local Agency to Ambac in connection with amounts paid by Ambac under the Ambac Policy with respect to the 2005 Series A-2 Bonds. 0 (b) The Trustee shall, after giving notice to Ambac and the Insured Holders of the 2005 Series A-2 Bonds as provided in (a) above, make available to Ambac the registration books of the Local Agency maintained by the Trustee and all records relating to the funds and accounts maintained under this First Supplemental Trust Agreement. (c) The Trustee shall establish an account for the benefit of the Insured Holders and Ambac referred to herein as the "Insurance Payment Account." The Trustee shall deposit upon receipt any amount paid under the Ambac Policy in the Insurance Payment Account and distribute such amount solely for purposes of payment to the Insured Holders for which a claim was made. For the sake of clarity, amounts paid under the Ambac Policy may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Amounts held in the Insurance Payment Account shall not be invested and any amounts remaining in the Insurance Payment Account on the first Business Day following a Principal Payment Date shall be returned to Ambac by the end of such Business Day. (d) The amount of any payment of principal of or interest on the 2005 Series A-2 Bonds from the Insurance Payment Account shall be recorded by the Trustee. Ambac shall have the right to inspect such records upon one (1) Business Day's prior written notice to the Trustee. (e) In the event that the Trustee has notice that any payment of principal of or interest on a 2005 Series A-2 Bond which has become due for payment and which is made to an Insured Holder by or on behalf of the Local Agency has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, non -appealable order of a court having competent jurisdiction, the Trustee shall, at the time Ambac is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to Ambac its records evidencing the payment of principal of and interest on the Ambac Insured Bond which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted Ambac under this First Supplemental Trust Agreement, and anything herein to the contrary notwithstanding, the Local Agency, the Trustee and each Insured Holder acknowledge and agree, that without the need for any further action on the part of Ambac, Ambac shall, to the extent it makes payment of principal of or interest on 2005 Series A-2 Bonds, become subrogated to all rights of the Holders of such 2005 Series A-2 Bonds, including all rights to payment. To evidence such subrogation, the Trustee shall note Ambac's rights as subrogee on the registration books of the Local Agency maintained by the Trustee upon payment of amounts from the Insurance Payment Account to the Insured Holders of the 2005 Series A-2 Bonds. The Trustee shall simultaneously assign in writing to Ambac, to 11 Section shall survive the discharge of the Bonds and this Agreement and the resignation or removal of the Trustee. SECTION 5.05. Waiver of Laws. The Local Agency shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this First Supplemental Trust Agreement or in the 2005 Series A-2 Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Local Agency to the extent permitted by law. ARTICLE VI THE TRUSTEE SECTION 6.01. The Trustee. Section 6.01 of the Original Trust Agreement is hereby amended (a) to provide that if at any time the Trustee exercises its right to resign thereunder, the Trustee shall simultaneously resign as Note Paying Agent under the Exchange Agreement, (b) to provide that, subject to the provisions of Section 10.6 of the Exchange Agreement, the consent of each of Commerzbank and Ambac shall be required for the appointment of any successor Trustee so long as Commerzbank and Ambac remain Holders, and (c) to delete the requirement that the Trustee and any successor Trustee have a corporate trust office in Los Angeles or San Francisco, California. SECTION 6.02. Trustee's Fees and Expenses: Indemnification. Section 6.03 of the Original Trust Agreement is hereby amended as follows with respect to obligations of the Local Agency to pay fees and expenses of, and to indemnify, the Trustee: (a) The obligation of the Local Agency to pay fees and expenses of the Trustee, including, for the avoidance of doubt, the fees and expenses provided for under Article II of this Trust Agreement, shall be limited to the amounts required to be paid by the Local Agency pursuant to Section 2.4 of the Exchange Agreement. (b) The provisions of Local Agency under Section 6.03 of the Original Trust Agreement regarding indemnification of the Trustee are hereby amended to read as follows: (i) To the extent permitted by law, the Local Agency shall indemnify, defend and hold harmless the Trustee against any loss, damages, liability or expense incurred by the Trustee to the extent arising out of or in connection with a breach by the Local Agency under the Exchange Agreement, the Notes or the Trust Agreement, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder, except to the extent that any loss, damages, liability or expense results from 13 If to the Local Agency: City of San Bernardino 300 North "D" Street San Bernardino, CA 92418-0001 Attention: City Attorney's Office If to the Trustee: Attention: Corporate Trust Services Wells Fargo Bank, National Association 555 Montgomery Street, 10'' Floor MAC # A0167-102 San Francisco, CA 94111 If to Ambac: Attention: Portfolio Risk Management Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com If to the Holders: [Commerzbank: TO BE PROVIDED] Ambac Assurance Corporation One State Street Plaza New York, New York 10004 Email address: notices@ambac.com SECTION 8.04. Article and Section Headings and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles," "Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words "hereby," "herein," "hereof," "hereto," "herewith," "hereunder" and other words of similar import refer to the Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 8.05. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Local Agency or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed 15 [Signature Page to First Supplemental Trust Agreement] IN WITNESS WHEREOF, the CITY OF SAN BERNARDINO has caused this First Supplemental Trust Agreement to be signed in its name by the Authorized Representative and WELLS FARGO BANK, NATIONAL ASSOCIATION, in token of its acceptance of the trusts created hereunder, has caused this Fust Supplemental Trust Agreement to be signed by the officer thereunder duly authorized, all as of the day and year first above written. CITY OF SAN BERNARDINO ATTEST. IM Georgeann Hanna, City Clerk WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By Approved as to form and legal content: GARY D. SAENZ City Attorney By: DMEAST #28194828 A3 Theresa Hempeck, Vice President, Corporate Trust Services, Authorized Officer AmbaAmbac Assurance Corporation One State Street Plaza, 15th Floor Financial Guarant Insurance Polic New YorkNew York 10004 Y }� Telephone:: (212) 668-0340 Obligor: SAN. BERNARDINO, CALIFORNIA Policy Number: S24928BE $14,351,583 Taxable Pension Obligation Capital Obligations: Appreciation. Bonds, Series 2005, dated October Premium: 28, 2005 and maturing October 1 in the years $234,405.00 2007 through 2024, both inclusive. . Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the "Insurance Trustee"), for the benefic of the Holders, that portion of the principal of and interest on the.above-described obligations (the "Obligations") which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. Ambac will make such payments to the Insurance Trustee within one (1) business day following written notification to Ambac of Nonpayment. Upon a Holder's presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons, uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder's rights to payment thereon. In cases where the Obligations are issued in registered form, the Insurance Trustee shall disburse principal to a Holder only upon presentation and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation -to the Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery to the Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the Holder or such Holder's duly authorized representative, transferring co Ambac all _rights under such Obligation to receive the interest in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights to payment on registered Obligations to the extent of any insurance disbursements so made. In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest -on an Obligation which has become Due for Payment and which is made to a Holder'by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available. As used herein, the term "Holder" means any person other than (i) the Obligor or (ii) any person whose obligations constitute the underlying security or source of payment for the Obligations who, at Elie time of Nonpayment, is the owner of an Obligation or of a coupon relating to an Obligation. As used herein, "Due for Payment', when referring to the principal of Obligations, is when the scheduled maturity date or mandatory redemption date for the application of a required sinking fund installment has been reached and does nor refer to any earlier date on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or other advancement of maturity; and, when referring to interest on the Obligations, is when the scheduled date for payment of interest has been reached. As used herein, "Nonpayment" means the failure of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest on the Obligations which are Due for Payment. .This Policy is noncancelable. The premium on.this Policy is not refundable for any reason, including payment of the Obligations prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment. In witness whereof, Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its.duly authorized representative. , President December 23, 2005 Effective Date: THE BANK OF NEW YORK acknowledges that it has agreed to perform the duties of Insurance Trustee under this Policy. Form No.: 213-0612 (1/01) A-9067 {lJ Secretary Auth rizi Representative Authorized Officer of Insurance Trustee i Ambac Endorsement Policy for SAN BERNARDINO, CALIFORNIA Ambac Assurance Corporation One State Street Plaza, 15th Floor New York, New York 10004 Telephone: (212) 668-0340 Attached to and forming part of Polity No.: S24928BE Effective Date of Endorsement: December 23, 2005 In the event that Ambac Assurance Corporation were to become insolvent, any claims arising under the Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. Nothing herein contained shall be held to vary, alter, waive or extend ariy of the terms, conditions, provisions, agreements or limitations of the above mentioned Policy other than as above stated. In Witness Wizereof, Ambac has caused this Endorsement to be affixed with a facsimile of its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative. Ambac Assurance Corporation OF /?o� CV -4 i President fit; ^ �.'.'%",.".��� �,� Secretary Authorized Representative Form No-: 28-0015 (7/97) EXHIBIT B FORM OF ENDORSEMENT TO AMBAC POLICY Effective date: , 2016 Policy No. S24928BE is hereby amended as follows: 1. The first paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees to pay to Wells Fargo Bank, National Association or its successor (the "Trustee"), as trustee under that certain Trust Agreement dated October 1, 2005 relating to the issuance of the above-described obligations (the "Obligations"), for the benefit of the Holders, that portion of the principal of and interest on the Obligations which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor. 2. The second paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: Ambac will make such payments to the Trustee on the later of (a) one (1) business day following written notification to Ambac of Nonpayment or (b) the business day on which the Obligations are Due for Payment. 3. The third paragraph of the Policy is hereby replaced and amended in its entirety to read as follows: The Trustee shall disburse such payments of principal to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its nominee and transferring to Ambac all rights under such Obligations to receive the principal of and interest on the Obligations. The Trustee shall disburse such payments of interest to a Holder only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac duly executed by the Trustee, as the Holder's duly authorized representative, transferring to Ambac all rights under such Obligations to receive the interest on the Obligations in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders' rights to payment on the Obligations to the extent of any insurance disbursements so made. 4. terms, stated. Nothing herein contained shall be held to vary, alter, waive or extend any of the conditions, provisions, agreements or limitations of the Policy other than as above Ambac Assurance Corporation Attention: Claims Processing One State Street Plaza New York, New York 10004 An electronic copy should be sent to: claimsprocessing@ambac.com CONVEYANCE: SUBROGATION The Trustee hereby transfers, delivers and assigns to Ambac all rights to the payment of the Principal Amount Currently Due for Payment and the Interest Amount Currently Due for Payment (collectively referred to as the "Amount Currently Due for Payment"), together with any rights related to such Amount Currently Due for Payment, with respect to the bonds identified above which bonds are now "Due for Payment" as defined in the Policy, but only to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy. The Trustee agrees that Ambac shall also be subrogated to all of the rights of the "Holders" as defined in the Policy, including all rights to payment, to the extent of such payments made by or on behalf of Ambac. The Trustee represents and warrants that it has full corporate power and authority to execute and deliver this Claim and Assigmnent Form and this Claim and Assignment Form has been duly authorized, executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee enforceable in accordance with its terns. The Trustee agrees that Ambac may exercise any option, vote, right, power or the like (including, but not limited to any such rights arising in context of a bankruptcy, insolvency, liquidation or other reorganization of the Bond Issuer), it may have to the extent of payment by or on behalf of Ambac of the above Amount Claimed Under the Policy with respect to the bonds identified above. The Trustee agrees to make a notation on the insured bonds and in the bond register or other docu vent of record that Ambac is subrogated to and assigned all of the rights of the Holder as described hereinabove and to hold those bonds for which payment of principal at final maturity has been made in an uncanceled form and manner acceptable to Arnbac and the Trustee. [TRUSTEE] C-2 EXHIBIT D FORM OF TRUSTEE'S NOTICE TO AMBAC OF INSUFFICIENT FUNDS [DATE] Ambac Assurance Corporation Attn.: Surveillance Department and General Counsel One State Street Plaza New York, New York 10004 claimsprocessing@ambac.com Re: Notice Regarding Insufficient Funds for Payment of [DATE] Debt Service for San Bernardino Taxable Pension Obligation Bond, Cusip: (the `Bonds"): Reference is made to that certain (i) Trust Agreement, dated as of October 1, 2005, as supplemented by a First Supplemental Trust Agreement, dated as of , 2017 (collectively, the "Trust Agreement'), by and between the City of San Bernardino (the "City") and Wells Fargo Bank, National Association ("Wells Fargo"), as Trustee, pursuant to which the Bonds were issued. Wells Fargo hereby certifies that: 1. The undersigned is an authorized officer of the Trustee. 2. Pursuant to the terms of the Bonds and the Trust Agreement, payment is due to the holders of the Bonds on [DATE] (the "Payment Due Date"). 3. Pursuant to Section 4.02 of the Trust Agreement, the Trustee is currently holding [$__] in the Bond Fund, which is not sufficient to make the [$____] in debt service due on [DATE] for the Bonds. The total amount of deficiency due on the Bonds is $ 4. Wiring instructions for payment of the deficiency amount to the Trustee are as follows: Bank: Wells Fargo Bank, N.A. ABA 121000248 Beneficiary Name: Corporate Trust Beneficiary Account No. 0001038377 For further credit: 18613300 Attn: T.Hempeck re: San Bernardino Ref: CITY OF SAN BERNARDINO, CALIFORNIA In Witness Whereof, the Trustee has executed and delivered this Notice as of [DATE]. [Trustee] D-1 EXHIBIT B TO RESOLUTION Exchange Agreement TABLE OF CONTENTS Page ARTICLE1 DEFINITIONS........................................................................................................... 2 1.1 Definitions.........................................................................................................................2 1.2 Rules of Interpretation.......................................................................................................2 ARTICLE2 THE NOTES........................................................................................................ 2 2.1 Note Terms........................................................................................................................2 2.2 Register..............................................................................................................................3 2.3 Prepayments......................................................................................................................3 2.4 Fees....................................................................................................................................4 2.5 Other Payment Terms........................................................................................................4 2.6 Payment of Obligations.....................................................................................................5 ARTICLE 3 CLOSING DATE OBLIGATIONS OF CITY; CONDITIONS PRECEDENT........ 5 3.1 City Closing Date Obligations..........................................................................................5 3.2 Conditions Precedent.........................................................................................................6 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CITY ......................................... 7 4.1 Authorization; No Conflict; Enforceability.......................................................................7 4.2 Governmental Authorizations...........................................................................................7 4.3 No Default ....................................... 7 4.4 Litigation...........................................................................................................................7 4.5 Sovereign Immunity..........................................................................................................8 4.6 Fiscal Year.........................................................................................................................8 4.7 OFAC and Related Matters...............................................................................................8 4.8 Anti -Terrorism Law..........................................................................................................8 ARTICLE 5 REPRESENTATION AND WARRANTIES OF NOTEHOLDERS ............................................ 8 5.1 Authorization.....................................................................................................................9 5.2 Acknowledgement of Certain Risks..................................................................................9 5.3 Unregistered Status of Notes.............................................................................................9 5.4 Rule 15c2-12 Exemption...................................................................................................9 5.5 Receipt of Information/Non-Reliance...............................................................................9 5.6 Inquiry and Analysis.......................................................................................................10 5.7 No Offering/Disclosure Documents................................................................................10 5.8 Tax Consequences...........................................................................................................10 ARTICLE 6 AFFIRMATIVE COVENANTS OF CITY............................................................. 10 6.1 Payment...........................................................................................................................10 6.2 Notices; Public Filings....................................................................................................11 6.3 Financial Statements.......................................................................................................11 6.4 Cooperation.....................................................................................................................11 6.5 Books and Records..........................................................................................................11 I 12.9 No Partnership, Etc.........................................................................................................22 12.10 Limitation on Liability....................................................................................................22 12.11 Waiver of Jury Trial........................................................................................................22 12.12 Counterparts....................................................................................................................22 12.13 No Third Party Beneficiaries ...........................................................................................23 12.14 Separate Representation..................................................................................................23 12.15 Ratings.............................................................................................................................23 iii EXCHANGE AGREEMENT This EXCHANGE AGREEMENT (this "Ageement") is dated as of [_], 2017, among CITY OF SAN BERNARDINO, CALIFORNIA, a duly organized, validly existing and operating local agency (as defined in Section 53570 of the California Code) under the laws of the State of California ("City"), CON EAERZBANK FINANCE & COVERED BOND S.A. (formerly known as Erste Europaische Pfandbrief- and Kommunalkreditbank AG in Luxemburg) ("Commerzbank"), as a Noteholder hereunder, AMBAC ASSURANCE CORPORATION ("Ambac"), as a Noteholder hereunder (together with Commerzbank and each of their successors and assigns, the "Noteholders"), and WELLS FARGO BANK, N.A., as paying agent (in such capacity, the "Paying Agent"). RECITALS A. Pursuant to a Trust Agreement dated as of August 1, 2005 (the "Original Trust .greement") between City and Wells Fargo Bank, National Association, as indenture trustee (in such capacity, the "Trustee"), City issued certain Taxable Pension Obligation Bonds (the "Pension -0 liation Bonds") in the initial aggregate principal amount of $50,401,582.90, consisting of 2005 Series A-1 (Standard Bonds) in the initial aggregate principal amount of $36,050,000 (the "Series A-1 Bonds") and 2005 Series A-2 (Capital Appreciation Bonds) in the initial aggregate principal amount of $14,351,582.90 (the "Series A-2 Bonds"), which Series A-2 Bonds were insured by Ambac pursuant to its Financial Guaranty Insurance Policy No. S24928BE (the "Ambac Police"). B. The Series A-1 Bonds and the Series A-2 Bonds, together with any Additional Bonds (as defined in the Original Trust Agreement), were validated pursuant to the Default Judgment in Validation Proceeding dated 7/11/2005 in San Bernardino County Superior Court Case No. SCVSS 125783. C. Commerzbank and Ambac are the sole owners of all of the Pension Obligation Bonds, and Ambac is the insurer of the Series A-2 Bonds. D. City is a debtor under chapter 9 of title 11 of the United States Code, pursuant to a petition filed on August 1, 2012, commencing In re City of San Bernardino, California, case number 6:12-bk-28006-MJ (the "Bankruptcy Case") in the United States Bankruptcy Court for the Central District of California, Riverside Division (the "Bankruptcy Court"). E. Pursuant to a Settlement Agreement dated as of March 28, 2016 (the "Settlement AL7reement" ), a copy of which is attached hereto as Exhibit A, and an amended Plan of Adjustment that incorporates the terms of the Settlement Agreement (the "Bankruptcy Plan"), the Noteholders have agreed to accept a payment stream (the "Payment Stream") in the total amount set forth in, and payable in the installments described in, the Settlement Agreement in full satisfaction of the payment and reimbursement obligations of City with respect to the Pension Obligation Bonds and the Ambac Policy, respectively. Exhibit C and shall evidence City's unconditional obligation to pay to each Noteholder its pro rata portion of the Payment Stream. The Commerzbank Note and the Ambac Note shall be dated the Closing Date, and any new Notes shall be dated as of the date each is executed by City. The Notes shall mature on the Scheduled Maturity Date. The Notes shall be paid from the City's general fund and/or any other legally available monies or funds of the City, and are not limited to any special source of funds. City is not empowered or obligated to levy or pledge taxes to make payments with respect to the Notes. The Notes may be issued only in Authorized Denominations. (b) Interest. The Notes shall not bear interest. In the event that any interest is imputed to any portion of the amounts payable by City pursuant to the Notes, such imputed interest may be included in the gross income of the Noteholders for federal income tax purposes pursuant to Section 103 of the Code, or for California state income tax purposes. Notwithstanding the foregoing, if City shall fail to pay when due any amounts payable by City pursuant to the Notes or any other amount whatsoever payable hereunder, City shall pay Default Interest as provided in Section 9.1. (c) Scheduled Pay inents. City shall pay to Paying Agent, for the accounts of the Noteholders, the aggregate unpaid amount of the Notes in installments on each Payment Date in accordance with the Payment Schedule set forth on Exhibit D. Such amounts shall be payable in Dollars, in immediately available funds. 2.2 Resister (a) Paying Agent shall maintain, at its address referred to in Section 12.1, a register for the recordation of the names and addresses of the Noteholders (the "Re inter"). The Register shall be available for inspection by City and each Noteholder at any reasonable time and from time to time upon reasonable prior notice. (b) Paying Agent shall record in the Register (A) the outstanding balance of each of the Notes from time to time and the Proportionate Share of each Noteholder, (B) the date and amount of any amount due and payable or to become due and payable from City to each Noteholder under its Note, (C) each repayment or prepayment in respect of the Notes, (D) any transfer of a Note pursuant to Section 11.3(b), and (E) such other information as Paying Agent may determine is necessary for administering the Notes and this Agreement. Any such recordation shall be conclusive and binding on City and each Noteholder, absent manifest error; provided, however, that (A) neither failure to make any such recordation, nor any error in such recordation, shall affect City's obligations in respect of this Agreement, the Notes, or otherwise; and (B) except as set forth above, in the event of any inconsistency between the Register and any Noteholder's records, the recordations in the Register shall govern. 2.3 Preps ents. City may, at its option, upon at least five (5) Banking Days' prior notice to Paying Agent, prepay the Notes without premium or penalty, in whole or in part. Upon any prepayment of the Notes by City to Paying Agent for the account of the Noteholders, the amounts prepaid shall be applied to the Notes on a pro rata basis according to the Proportionate Shares of the Noteholders and shall be applied so as to reduce the scheduled payments under the Notes in the inverse order of maturity. Any optional prepayment hereunder shall be in the 3 For further credit: 18613300 Attn: T.Hempeck re: San Bernardino Rei CITY OF SAN BERNARDINO, CALIFORNIA or as otherwise directed by Paying Agent in writing from time to time, in lawful money of the United States and in immediately available funds not later than 12:00 p.m., New York time, on the date on which such payment is due. Any payment made after such time on any day shall be deemed received on the next Banking Day after such payment is received. Paying Agent shall disburse to each Noteholder each such payment received by Paying Agent for such Noteholder, such disbursement to occur by 4:00 p.m., New York time, on the day such payment is received if received by 12:00 p.m., New York time; otherwise on the next Banking Day. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Banking Day, such payment shall be made on the next preceding Banking Day. (c) Pro Rata Treatment. Each payment by City hereunder shall be shared between the Noteholders and applied to the Notes pro rata according to their respective Noteholder Proportionate Shares. (d) Sharim of Pavinents. Etc. If any Noteholder (a "Benefited Noteholder") shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of its Note, in excess of its Proportionate Share of payments on account of the Notes obtained by all Noteholders entitled to such payments, such Noteholder shall forthwith purchase from each other Noteholder such participation in such Noteholder's Note as shall be necessary to cause such Benefited Noteholder to share the excess payment ratably with each other Noteholder; and if after taking into account such participations the Benefited Noteholder continues to have access to additional funds of City for application on account of its Note, then the Benefited Noteholder shall use such funds to reduce the balance of its Note and share such payments with each other Noteholder; provided, however, that if all or any portion of any such excess payment is thereafter recovered from such Benefited Noteholder, any such purchase from each other Noteholder shall be rescinded and each other Noteholder shall repay to the Benefited Noteholder such purchase price to the extent of such recovery. City agrees that any Benefited Noteholder so purchasing a participation from another Noteholder pursuant to this Section 2.5(d) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Noteholder were the direct creditor of City in the amount of such participation. 2.6 PaNment of Oblivations. (a) Source of Payment. All obligations of City under the Notes shall be paid from the City's general fund or any other legally available monies or funds of City, and are not limited to any special source of funds. Amounts due under the Notes shall have the same payment priority accorded under California law to all general fund obligations that are not general obligation debt of the City; provided that City is not empowered or obligated to levy or pledge taxes to make payments with respect to the Notes. (d) Federal Law Com 7liance. City shall have delivered to Paying Agent and each requesting Noteholder all such documentation and other information requested by Paying Agent or such Noteholder that are necessary (including the name, address, tax payer identification, copies of government issued identification and names of officers of City) for Paying Agent or such Noteholder, as applicable, to identify such person in accordance with any applicable Anti -Terrorism Laws, Anti -Money Laundering Laws, and the requirements of the Patriot Act (including the "know your customer" and similar regulations thereunder). (e) Series A-1 Bonds. The Series A-1 Bonds shall have been exchanged for the Commerzbank Note and cancelled, and the Series A-1 Bonds, and any ancillary agreements, documents or instruments (other than the Trust Agreement) shall have been cancelled, terminated and of no force and effect. (f) Series A-2 Bonds. Pursuant to the First Supplemental Trust Agreement, City shall have been released from all liability for repayment of the Series A-2 Bonds; and Ambac shall have confirmed that the Ambac Policy is in full force and effect. (g) Representations and Warranties. The representations and warranties contained in Article 4 and Article 5 hereof shall be true and correct in all material respects on and as of the Closing Date. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CITY City makes the following representations and warranties to and in favor of Paying Agent and the Noteholders as of the Closing Date: 4.1 Authorization: No Conflict: Enforceability . (a) City has duly authorized, executed and delivered this Agreement and the Notes, and neither City's execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor City's compliance with the terms thereof (i) conflicts with or constitutes a default under or results in the violation of the provisions of any Legal Requirement applicable to or binding on City, or (ii) constitutes a default under or results in the violation of the provisions of any indenture, mortgage, deed of trust, or other agreement or instrument to which City is a party or by which it or any of its properties or assets is or may be bound or affected. (b) This Agreement and each of the Notes is a legal, valid and binding obligation of City, enforceable against City in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and subject to general equitable principles. 4.2 Governmental Authorizations. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any court or Governmental Authority or any other Person (including without limitation the Bankruptcy Court and any other creditor of City) is necessary or required in 7 any Person named on any of the OFAC SDN List or any Person included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the Persons referred to or described in the OFAC SDN List. 4.8 Anti -Terrorism Law. City is not in violation of any Anti -Terrorism Law. ARTICLE 5 REPRESENTATION AND WARRANTIES OF NOTEHOLDERS Each Noteholder makes the following representations and warranties to and in favor of City and Paying Agent as of the Closing Date: 5.1 Authorization. Each Noteholder has authority to accept delivery of its Note and to execute this Agreement and any other instruments and documents such Noteholder may be required to execute in connection with the issuance and delivery of its Note. 5.2 Acknowled,,ement of Certain Risks. Each Noteholder acknowledges that the Notes involve risks that may not be appropriate for certain investors. Each Noteholder understands that it may need to bear the risks of its Note for an indefinite time, since any sale before maturity may not be possible for any number of reasons. 5.3 Unre,istered Status of Notes. Each Noteholder understands that the Notes are not registered under the Securities Act and that such registration is not legally required as of the date hereof. Each Noteholder fiuther understands that the Notes (a) are not being registered or otherwise qualified for sale under the `Blue Sky" laws and regulations of any state, (b) will not be listed in any stock or other securities exchange, (c) will not, at least initially, carry a rating from any rating service, and (d) will be delivered in a form that may not be readily marketable. Each Noteholder is either an Accredited Investor or a Qualified Institutional Buyer. 5.4 Rule 15c2-12 Exemption. Each Noteholder understands that the issuance of the Notes is exempt from the requirements of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, that City is not delivering a "deemed final" official statement with respect to the Notes. 5.5 Recei �t of Infonnation/Non-Reliance. (a) In entering into this transaction each Noteholder acknowledges that it has had an opportunity to conduct an independent investigation of all the relevant facts and circumstances, including, without limitation, reviewing the Disclosure Statement. Each Noteholder has not otherwise relied upon City or its officers, employees, consultants or counsel (collectively, with City, the "City Representatives") for any other information in connection with the issuance of the Notes. Each Noteholder acknowledges that it is an accredited investor under applicable law and is further a sophisticated institutional investor capable of evaluating the merits, risks and suitability of the Notes, and in making an investment decision, each Noteholder ARTICLE 6 AFFIRMATIVE COVENANTS OF CITY City covenants and agrees that so long as this Agreement is in effect and amounts are outstanding under the Notes, it will, unless Paying Agent and the Noteholders waive compliance in writing: 6.1 Paent. Pay all sums due under this Agreement and the Notes according to the terms hereof and thereof. City hereby covenants with the Noteholders that, to the extent legally required as a condition to payment, it shall include the amount of the installments set forth in the Payment Schedule (subject to appropriate adjustment in the event of the optional prepayment of the Notes prior to maturity), for each fiscal year in which such sums are payable in its budget for that year, and shall duly and punctually pay or cause to be paid such installments at the dates and places and in the manner stated herein and therein according to the true intent and meaning thereof. The foregoing covenant shall be specifically enforceable. 6.2 Notices: Public FilinLs. Immediately following any filing, dissemination, distribution, or provision thereof, City shall provide to Paying Agent, for further dissemination to the Noteholders by first class mail, postage prepaid, at their addresses set forth in Section 12.1 of this Agreement, a copy of (i) any "Material Event Notice" disseminated, distributed or provided in satisfaction of or as may be required by the provisions of Rule 15c2-12 promulgated pursuant to the Securities Exchange Act of 1934, as amended (17 C.F.R. Sec. 240 15c2-12), or any successor or similar legal requirement, and (ii) the filing made by City with the Municipal Securities Rulemaking Board's Electronic Municipal Access System (EMMA) regarding the cancellation of the Series A-1 Bonds in exchange for the Commerzbank Note and amendment of the Series A-2 Bonds. The City shall cooperate with the Paying Agent in arranging for notice to be made to the Paying Agent each time any other filings are made by the City with EMMA, and shall reimburse the Paying Agent for the costs associated with downloading and disseminating such filings to the Noteholders. 6.3 Financial Statements. City agrees to make available on City's website: (a) Audited financial statements of City prepared in accordance with GAAP and certified by an independent certified public accountant selected by City, as such audited financial statements become available publicly; and (b) The annual capital and operating budget of the City approved by its City Council for the upcoming fiscal year, including all amounts payable under the Financing Documents; and promptly after the adoption thereof, any amendments to such annual budgets. 6.4 CooJ)eration. City shall perform, upon the reasonable request of Paying Agent, such reasonable acts as may be necessary or advisable to comply with the terms of this Agreement and the Notes. 6.5 Books and Records. City shall maintain adequate books, accounts and records (including project, financial and accounting records) and prepare all financial statements required hereunder in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction thereof, and permit employees or agents of Paying 11 7.2 Fiscal Year. Change its fiscal year without prior notice to Paying Agent, unless such change is required by law. 7.3 Accounting-, Charrfjes. Make any material change in accounting policies or reporting practices, except as required by GAAP or otherwise required by law. ARTICLE 8 EVENTS OF DEFAULT The occurrence of any of the following events (following the giving of notice, as required, and lapse of any grace periods provided hereunder) shall constitute an event of default (individually, an "Event of Default") hereunder: 8.1 Failure to Make Payments. City shall fail to pay or cause to be paid any payment due under the Notes on or before the date that such payment is due under this Agreement and the Notes, and such failure shall continue unremedied for a period of five (5) Banking Days after the Paying Agent has delivered written notice thereof to the City (Paying Agent to deliver such notice on the due date to the extent payment was not received by the Paying Agent by 12:00 p.m.on such due date). Any failure of the Paying Agent to deliver such notice of non-payment as required by this Section 8.1 shall not constitute a waiver of any default or Event of Default arising from the City's failure to pay amounts due hereunder and under the Notes. 8.2 Misstatements. Any financial statement, representation, warranty, or certificate made or prepared by, under the control of, or on behalf of City furnished to Paying Agent or any Noteholder pursuant to this Agreement, or any amendment or modification thereof or waiver thereto shall contain an untrue or misleading statement of a fact as of the date made that would reasonably be expected to have a Material Adverse Effect, or shall fail to state a fact necessary to make the statements therein not misleading as of the date made and as a result thereof there would reasonably be expected to occur a Material Adverse Effect; provided that no Event of Default shall occur pursuant hereto, unless and until City receives written notice (from any source) that such untrue or misleading statement, or such omission, has occurred, and City has not, within forty-five (45) days of the date on which City receives written notice, eliminated or otherwise cured such untrue or misleading statement, or such omission, so that it would no longer reasonably be expected to have a Material Adverse Effect. 8.3 Bankruptcy.- Insolvency . Any of the following events shall have occurred: (a) City shall file a petition for relief under the Bankruptcy Law (or any successor statute) or shall otherwise institute any similar proceeding under any other applicable federal, state or other applicable law, or shall consent thereto; or (b) City shall apply for, or by consent or acquiescence there shall be an appointment of, a receiver, liquidator, sequestrator, trustee or other officer with similar powers. 8.4 Other Defaults. City shall fail to perform or observe any other covenant to be performed or observed by it hereunder and not otherwise specifically provided for elsewhere in this Article 8, and such failure shall continue unremedied for a period of forty-five (45) days after the Mayor, City Manager or City Attorney of the City becomes aware thereof or City 13 or dishonor, or other notices or demands of any kind, all such other notices and demands being waived, (a) to the extent permitted by applicable law, accelerate all amounts then outstanding under the Notes and demand immediate payment thereof, and (b) exercise any or all rights and remedies available at law or in equity. 9.4 Bankrur)—tcy or Insolvency Default. Upon the occurrence and during the continuation of an Event of Default under Section 8.3, notwithstanding anything herein to the contrary, all amounts then outstanding under each of the Notes, to the extent permitted by applicable law, shall automatically become immediately due and payable without further notice or action. ARTICLE 10 PAYING AGENT 10.1 A.� ?ointment. Powers and Immunities. (a) Each Noteholder hereby appoints and authorizes Wells Fargo Bank, N.A. to act as Paying Agent hereunder and under the Notes with such powers as are expressly delegated to Paying Agent by the terms of this Agreement, the First Supplemental Trust Agreement and the Notes, together with such other powers as are reasonably incidental thereto. Paying Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the First Supplemental Trust Agreement, and shall not be a trustee for, or Trust Agreement. Notwithstanding anything to the contrary contained herein, Pa fiduciary of, any Noteholder, except that the Paying Agent also shall be the Trustee under the ying Agent shall not be required to take any action which is contrary to this Agreement or any Note or any Legal Requirement, or that exposes Paying Agent to any liability. Each of Paying Agent, the Noteholders, and any of their respective affiliates shall not be responsible to any other Noteholder for any recitals, statements, representations, or warranties made by City contained in this Agreement, any Note, or any certificate or other document referred to or provided for in, or received by Paying Agent or any Noteholder under, this Agreement or any Note, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Notes, or any other document referred to or provided for herein, or for any failure by City to perform its obligations hereunder or thereunder. Paying Agent may employ agents and attorneys -in -fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys -in -fact selected by it with reasonable care. (b) Paying Agent and its directors, officers, and employees shall not be responsible for any action taken or omitted to be taken by it or them hereunder or under the Notes or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct as determined by a final non -appealable judgment of a court of competent jurisdiction. Without limiting the generality of the foregoing, Paying Agent (i) may treat the payee of any Note as the holder thereof until Paying Agent receives written notice of the assignment or transfer thereof signed by such payee and in form and substance satisfactory to Paying Agent; (ii) may consult with legal counsel (including counsel for City), independent public accountants, and other experts selected by it with reasonable care and shall not in liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or experts; (iii) makes no warranty or representation to any Noteholder for 15 Agreement, the Notes or the Trust Agreement, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder, except to the extent that any such loss, damages, liability or expense results from the negligence, willful misconduct or bad faith on the part of the Paying Agent. The rights of the Paying Agent and the obligations of the City under this Section shall survive the discharge of the Notes and this Agreement and the resignation or removal of the Paying Agent. (b) Paying Agent shall. be fully justified in refusing to take or continuing to take any action hereunder unless it shall first be specifically indemnified to its satisfaction by the directing Noteholders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 10.6 Successor Paving _ ents. Paying Agent acknowledges that its current intention is to remain Paying Agent hereunder. Nevertheless, Paying Agent may resign at any time by giving thirty (30) days' written notice thereof to the Noteholders and City; provided that, the Paying Agent shall simultaneously resign as Trustee under the Trust Agreement, and such resignation to be effective only upon the acceptance of the appointment of a successor Paying Agent and Trustee. Requisite Noteholders may remove Paying Agent by givin thi written notice thereof to Paying Agent and Ci g' (30) days' City, such removal to be effective only upon the acceptance of the appointment of a successor Paying Agent and the simultaneous resignation of the Trustee under the Trust Agreement, with such resignation to be effective only upon the acceptance of the appointment of the successor Paying Agent as successor Trustee under the Trust Agreement. Upon any such resignation or removal, the Noteholders shall have the right to appoint a successor Paying Agent with notice to City; provided that (a) the consent of each of Commerzbank and Ambac shall be required for the appointment of a successor Paying Agent so long as Commerzbank and Ambac remain Noteholders hereunder, and (b) if a Noteholder wishes to appoint a substitute Paying Agent for any reason including any actual or potential Paying Agent fee increase pursuant to Section 2.4 of this Agreement, such consent of the other Noteholder will not be unreasonably withheld or delayed. If no successor Paying Agent shall have been so appointed by the Noteholders, and shall have accepted such appointment, within thirty (30) days after the retiring Paying Agent's giving of notice of resignation or removal, the retiring Paying Agent may on behalf of the Noteholders, appoint a successor Paying Agent, which shall be a commercial bank having a combined capital and surplus of at least One Hundred Million Dollars ($100,000,000). Any successor Paying Agent must also be the successor Trustee under the Trust Agreement. City agrees to take such steps as may be required to appoint such successor Trustee under the Trust Agreement if a successor Paying Agent is appointed under this Agreement. Upon the acceptance of any appointment as Paying Agent under this Agreement by a successor Paying Agent such successor Paying Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations as Paying Agent under this Agreement and the Notes. After any retiring Paying Agent's resignation or removal hereunder as Paying Agent, the provisions of this Article 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Paying Agent. 10.7 Authorization. Paying Agent is authorized by the Noteholders to enter into agreements supplemental hereto with any Person for the purpose of curing any formal defect, 17 the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. 11.3 Assiznments and Transfer. (a) PermittedAssi�r�uzIents. Subject to the provisions of Section 11.4 below and provided that the parties to any assignment shall (prior to any such assignment) execute and deliver an appropriate agreement evidencing such assignment substantially he form attached hereto as Exhibit E (hereinafter, the "Assignment Agreement"), a copy of which tshall be provided by the Paying Agent to the City upon execution thereof, a Noteholder may from time to time, at its option, sell, assign, transfer or otherwise dispose of (collectively, "assign," and any such sale, assignment, transfer or other disposition being, for the purposes of this Sectio, an "assignment") any of its rights and obligations under its Note (the Noteholder making such assignment being the "assigning Noteholder" and the Noteholder receivingsuch assignment a "new Noteholder"); irovided that an such assignment gement being Y gement shall be only in Authorized Denominations and to an Eligible Assignee. Such restriction on transfer shall be printed prominently on the form of the Notes, and any transfer in violation of the provisions of this Section 11.3 shall be null and void. At the assigning Noteholder's option and upon such Noteholder's prior payment of the cost of any administrative expense charged by the Paying Agent (except as otherwise set forth in this Agreement and/or as otherwise agreed by Paying Agent and the City in their sole discretion), City shall execute and deliver to such new Noteholder a new Note substantially in the form attached hereto as Exhibit C, in an amount equal to such new Noteholder's Proportionate Share of the Payment Stream being assigned, and City shall execute and exchange with the assigning Noteholder a replacement note for its existing Note in an amount equal to the Proportionate Share of the Payment Stream retained by the assigning Noteholder, if any. No assignment or transfer of any portion of a Note shall be effective unless and until recorded in the Register following receipt by the City and Paying Agent of a fully executed Assignment Agreement, the satisfaction of the requirements in Section 11.310 and the satisfaction of the other foregoing requirements. (b) Assignment Effective Date. Each assignment shall be recorded in the Register promptly following receipt of such documentation by Paying Agent. Each assignment shall be effective (hereinafter, the "Assignment Effective Date") only upon (i) receipt by Paying Agent and City of an executed Assignment Agreement with respect to each assignment, a the recordation of each assignment in the Register, and (ii) the delivery to Paying Agent of the requisite processing fee for such assignment (except as otherwise set forth in this Agreement or unless otherwise agreed by Paying Agent and City in their sole discretion). All assignments shall be effective as of the Assignment Effective Date. Following the Assignment Effective Date, such new Noteholder shall be a Noteholder for all purposes and shall have all of the rights and duties of a Noteholder (except as otherwise provided in this Article 11). 11.4 Laws. Notwithstanding the foregoing provisions of this Article 11, no sale, assignment, transfer, negotiation or other disposition of the interests of any Noteholder hereunder or under its Note shall be allowed if it would require registration under the Securiries Act, any other federal securities laws or regulations or the securities laws or regulations of any applicable jurisdiction. 19 have been validly and effectively given on the day (if a Banking Day and, if not, on the next following Banking Day) on which it is transmitted if transmitted before 4:00 p.m., recipient's time, and if transmitted after that time, on the next following Banking Day; nroL vided,however, that if any notice is tendered to an addressee and the delivery thereof is refused by such addressee, such notice shall be effective upon such tender. Any parry shall have the right to change its address for notice hereunder to any other location within the United States by giving of thirty (30) days' written notice to the other parties in the manner set forth herein above. 12.2 Delay and Waiver: Amendments. No delay or omission to exercise any right, power or remedy accruing to Paying Agent or the Noteholders upon the occurrence of any Event of Default or Inchoate Default or any breach or default of City under this Agreement or the Notes shall impair any such right, power or remedy of Paying Agent or the Noteholders, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single Event of Default, Inchoate Default or other breach or default be deemed a waiver of any other Event of Default, Inchoate Default or other breach or default theretofore or thereafter occurring. Any waiver, indulgence, permit, consent or approval of any kind or character on the part of the Noteholders of any Event of Default, Inchoate Default or other breach or default under this Agreement or the Notes, or any waiver on the part of Paying Agent or the Noteholders of any provision or condition of this Agreement, must be in a writing signed by Paying Agent and the Noteholders or Requisite Noteholders, as applicable, expressly referencing this Agreement and shall be effective only in the specific instance and to the extent in such writing specifically set forth. All remedies, either under this Agreement or the Notes or by law or otherwise afforded to Paying Agent and the Noteholders, shall be cumulative and not alternative. No waiver of an Event of Default under Section 8.1 or Section 8.3 shall be effective unless signed by each Noteholder that would be affected thereby. No waiver of any other Event of Default or Inchoate Default shall be effective unless signed by the Requisite Noteholders. This Agreement may be amended only by a writing signed by Paying Agent, Noteholders and City. 12.3 Costs. Expenses and Attorney s' Fees. Each of the Noteholders and City will pay its own costs and expenses in connection with the preparation, negotiation, closing and costs of administering this Agreement and the documents contemplated hereby, including the reasonable fees, expenses and disbursements of its counsel in connection with the preparation of such documents and any amendments hereof or thereof, or the negotiation, closing or administration of this Agreement. City will reimburse Paying Agent and the Noteholders for all reasonable costs and expenses, including, but not limited to, reasonable attorneys' fees (but not including third -party consultant fees), actually expended or incurred by Paying Agent and/or the Noteholders, as applicable, in enforcing this Agreement and the Notes in connection with an Event of Default, in actions for declaratory relief related to the enforcement of this Agreement or the Notes, or in collecting any sum which becomes due Paying Agent or any Noteholder under this Agreement or the Notes. 12.4 Entire Agreement. This Agreement, the Settlement Agreement, the Notes, and any other agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings in respect to the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of the Settlement Agreement and this Agreement and/or the 21 TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS OR ANY ACT OR OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 12.11 Waiver of Jure Trial. TO THE EXTENT PERMITTED BY LAW, PAYING AGENT, EACH NOTEHOLDER, AND CITY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF PAYING AGENT, ANY NOTEHOLDER OR CITY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PAYING AGENT, CITY AND THE NOTEHOLDERS TO ENTER INTO THIS AGREEMENT. 12.12 Counterp s. This Agreement may be executed in one or more duplicate counterparts and delivered by facsimile or by a portable document format (pdf) via electronic mail, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signatures are physically attached to the same document. A facsimile or portable document format (pdf) signature page shall constitute an original for all purposes. The parties to this Agreement agree that, except as expressly provided above, any deliverable required to be provided pursuant to Article 3 may be delivered by facsimile or electronic mail in a portable document format, or other electronic transmission. 12.13 No Third Parte Beneficiaries. Nothing expressed or referred to in this Agreement will be constiued to give any Person, other than the parties hereto and any other Noteholders, any legal or equitable right, remedy or claim under or with respect to this Agreement, the Notes, the other Financing Documents or any provision of this Agreement, the Notes or the other Financing Documents. 12.14 Se :)agate Re rresentation. Each party hereto acknowledges that it has been advised and represented by counsel in the negotiation, execution and delivery of this Agreement and accordingly agrees that if an ambiguity exists with respect to any provision of this Agreement, such provision shall not be construed against any party because such party or its representatives drafted such provision. 12.15 Ratings. In the event that any time after the Closing Date, the Noteholders wish to seek a credit rating for the Notes, City agrees to cooperate with such rating request, to execute and deliver any formal request to obtain or maintain a rating, as required by any rating agency, and to provide any other information required or reasonably requested by any rating agency to obtain or maintain any ratings; provided that the Noteholders pay, or reimburse City for all amounts paid, for any and all rating agency fees, costs and/or expenses incurred by City in cooperating with such rating request, including but not limited to any outside attorneys' fees 23 [Signature Page to Exchange Agreement] IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their officers thereunto duly authorized as of the day and year first above written. CITY OF SAN BERNARDINO, CALIFORNIA By: Name: Title: COMMERZBANK FINANCE & COVERED BOND S.A., as Noteholder By: Name: Title: AMBAC ASSURANCE CORPORATION as Noteholder By: Name: Gary Greendale Title: Managing Director WELLS FARGO BANK, N.A. as Paying Agent By: Name: Theresa Hempeck Vice President, Corporate Trust Services Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 2 of 10 SETTLEMENT AGREEMENT This Settlement Agreement (the "Settlement Agreement"), dated as of March 7 2016, is entered into by and among the City of San Bernardino, California (the "City"), COMMERZBANK Finance & Covered Bond S.A. (formerly known as Erste Europaische Pfandbrief-Und Kommunalkreditbank AG in Luxemburg) ("EEPK"), and Ambac Assurance Corporation ("Ambac"). Background The City is a debtor under chapter 9 of title 11 of the United States Code (the "BankruiAcy Coale"), pursuant to a petition filed on August 1, 2012, commencing M re City of San Bernardino, California, case number 6:12-bk-28006-MJ (the "Bankruptev Case"), in the United States Bankruptcy Court for the Central District of California, Riverside Division (the "Bankruptcy Court"). Pursuant to a Trust Agreement, dated as of August 1, 2005 (the "Trust Anr� eement''), between the City and Wells Fargo Bank, National Association, as indenture trustee (the "Trustee'), the City issued certain Taxable Pension Obligation Bonds (the. "Pension Obligation Bonds") in the initial aggregate principal amount of $50,401,582.90. EEPK purchased all of the Pension Obligation Bonds, consisting of (a) 2005 Series A-1 (Standard Bonds), in the initial aggregate principal amount of $36,050,000 (the "Series A-1 Bonds"), and (b) 2005 Series A-2 (Capital Appreciation Bonds), in the initial aggregate principal amount of $14,351,582.90 (the "Series A-2 Bonds"). Ambac represents that it insures the regularly scheduled principal and interest payments with respect to the Series A-2 Bonds pursuant to Financial Guaranty Insurance Policy No. S24928BE (the "Insurance Policy"). Ambac and EEPK are hereinafter sometimes referred to collectively as the "POB Creditors." On February 5, 2014, the Trustee, on behalf of EEPK and Ambac, filed a proof of claim in the Bankruptcy Case with respect to the Pension Obligation Bonds (the "EEPK Proof of Claim"). On February 5, 2014, Ambac filed a proof of claim in the Bankruptcy Case with respect to the Pension Obligation Bonds (the "Ambac Proof of Claim" and, together with the EEPK Proof of Claim, the "Proofs of CIaim"). On January 7, 2015, EEPK and Anlbac filed a Complaint in the Bankruptcy Court (the "Complaint") against the City, seeking relief under 28 U.S.C. § 2201, and commencing adversary proceeding number 6:15-ap-01004-MJ (the "Adversary Proceeding"). On March 13, 2015, the City filed a Motion to Dismiss the Complaint (the "Motion to Dismiss'') under Federal Rule 12(b)(6), made applicable to the Adversary Proceeding by Bankruptcy Rule 7012(b), for failure to state a claim. EEPK and Ambac opposed the Motion to Dismiss, and the Bankruptcy Court held a hearing on May 11, 2015. On May 26, 2015, the Bankruptcy Court, entered an order (the "Order") granting the Motion to Dismiss. EEPK and Ambac appealed from the Order by filing a Notice of Appeal on June 8, 2014 (the "Appeal") to the Bankruptcy Appellate Panel for the Ninth 1758 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 4 of 10 with respect to the Pension Obligation Bond Claims the sum of $1,375,000 (One Million Three Hundred Seventy -Five Thousand Dollars), payable each year in two equal semi-annual installments. e. During each of the eleventh year after the Effective Date, through and including the fifteenth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $1,500,000 (One Million Five Hundred Thousand Dollars), payable each year in two equal semi-annual installments. f. During each of the sixteenth year after the Effective Date, through and including the twentieth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $1,750,000 (One Million Seven Hundred Fifty Thousand Dollars), payable each year in two equal semi-annual installments. g. During each of the twenty-first year after the Effective Date, through and including the twenty-fifth year after the Effective Date, the City shall distribute to the POB Creditors with respect to the Pension Obligation Bond Claims the sum of $2,000,000 (Two Million Dollars), payable each year in two equal semi-annual installments. h. During each of the twenty-sixth year after the Effective Date, through and including the thirtieth year after the Effective Date, the City shall distribute to the FOS Creditors with respect to the Pension Obligation Bond Claims the sum of $2,500,000 (Two Million Five Hundred Thousand Dollars), payable each year in two equal semi-annual installments. i. The due dates for the semi-annual installments set forth above shall be scheduled at such time as the Effective Date is known, so as to in each case occur in a single fiscal year. The documentation to be executed and delivered under the Conforming Plan to evidence and effect the City's financial obligations under paragraphs La through I J. shall conform to the terms hereof and shall otherwise be in form and substance reasonably satisfactory to the parties hereto; and such documents shall include any necessary consent or acknowledgement of the Trustee with respect to the terms hereof and thereof to the extent required by the documents evidencing the Pension Obligation Bonds. 2. No Admission; Reinstatement of Positions. The parties hereto acknowledge that the execution of this Settlement Agreement and consummation of the transactions contemplated herein do not constitute an admission of liability or of any facts by any of such parties, but rather are intended to be in compromise and settlement of disputed and unliquidated claims. Nothing herein shall constitute or be asserted as constituting any admission of liability by or against any party hereto, and this Settlement Agreement shall not be offered or received in evidence 1760 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 6 of 10 b. The POB Creditors on behalf of themselves and their respective present and former directors, officers, employees, agents, representatives, advisors, and affiliates (collectively the "POB Parties"), shall be deemed to release and forever discharge the City and its present and former elected and appointed officials, employees, agents, representatives, and advisors (the " Cir► Parties") from any and all claims, causes of action, liabilities and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph I.J. hereof) and the Conforming flan; C. The City Parties shall be deemed to release and forever discharge the POB Parties from any and all claims, causes of action, liabilities, and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph 1 J. hereof) and the Conforming Plan; d. The release of the City Parties contained herein shall be deemed to include, or, if required to be effective, such of the POB Parties as have the right to direct the Trustee shall direct the Trustee at closing of the documents referenced in paragraph 1 J. hereof (with the consent of all parties hereto) to deliver a release by the Trustee, in its capacity as trustee under the Trust Agreement, of all claims, causes of action, liabilities and obligations arising under or in connection with the Pension Obligation Bonds, other than the claims, causes of action, liabilities, and obligations arising under this Settlement Agreement (and attendant documents referenced in paragraph 1J. hereof) and the Conforming Plan. e. With respect to the releases contained in paragraphs 4.b, 4.c. and 4.d. hereof, the POB Parties and the City Parties each hereby stipulate and agree that upon the Release Date they shall have expressly waived the provisions, rights, and benefits of California Civil Code Section 1542, or any other similar state law, federal law, or principle of common law, which may have the effect of limiting the releases set forth above. Section 1542 of the California Civil Code provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. 5. Representations. Each party hereto hereby represents and warrants that: (a) such party has not heretofore assigned or transferred or purported to transfer or assign any claim settled or released hereby; (b) such party, subject to Bankruptcy Court approval, has all corporate, governmental, and other necessary po«ter and authority to enter into this Settlement Agreement and to perform its obligations hereunder, (c) the individual signing this Settlement Agreement on behalf of such party has been duly authorized to so execute and deliver this Settlement Agreement; (d) such party has 1762 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 8 of 10 IN WI'T'NESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. THE CITY OF SAN BERNARDINO By:�� Name: A+ Title: 0- 4vj /Vf�.a q e r' COMMERZBANK FINANCE & COVERED BOND S.A. (FORMERLY KNOWN AS ERSTE EUROPAISCHE PFANDBRIEF-UND KOMMUNALKREDITBANK AG IN LUXEMBURG) By.-_, Name: Title: AMBAC ASSURANCE CORPORATION By: Name: Title: 1764 Case 6:12-bk-28006-MJ Doc 1882-27 Filed 07/29/16 Entered 07/29/16 19:36:33 Desc Exhibit 26 Page 10 of 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the clay and year first above written. TI -JE CITY OF SAN BERNARDINO By: _ Name: Title: COMMERZBANK FINANCE & COVERED BOND S.A. (FORMERLY KNOWN AS ERSTE EUROPAISCHE PFANDBRIEF- UND KOMMUNALKREDITBANK AG IN LUXEMBURG) By:_ _ Name: Title: AMBAC ASSURANCE CORPORATION By: Name: Cdlq; Title: 7 1766 "Bankruptcy Law" means Title 11, United States Code, and any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors. "Bankruptcy Plan" shall have the meaning given in the recitals of this Agreement. "Benefited Noteholder" shall have the meaning given in Section 2.5t d_j of this Agreement. "City" shall have the meaning given in the preamble of this Agreement. "City Representatives" shall have the meaning given in Section 5.5 of this Agreement. "Closing" means the satisfaction (or waiver in accordance with the terms of the Agreement) of each of the conditions precedent listed in Section 3.2 of the Agreement. "Closing Date" means the date upon which Closing occurs, which, pursuant hereto, is intended to be on or immediately following the Effective Date. "Code" means the Internal Revenue Code of 1986, as amended, and any successor federal tax statute. "Commerzbank" shall have the meaning given in the preamble of this Agreement. "Commerzbank Note" shall have the meaning given in the recitals of this Agreement. "Default Interest" shall have the meaning given in Section 9.1 of this Agreement. "Department of Treasury Rule" shall have the meaning given in Section 4.7 of this Agreement. "Disclosure Statement" means the Third Amended Disclosure Statement with Respect to the Third Amended Plan for the Adjustment of the Debts of the City of San Bernardino (July 29, 2016) [Dkt. No. 1881]. "Dollars" and "$" means United States dollars or such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts in the United States of America. "Effective Date" means the Effective Date as such term is defined in the City's Bankruptcy Plan. "Eligible Assignee" means a purchaser who qualifies as an Accredited Investor or a Qualified Institutional Buyer. "Event of Default" shall have the meaning given in Article 8 of this Agreement. "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Access System (EMMA). MR Treasury Regulations, 31 C.F.R. Parts 500 et seq. (implementing the economic sanctions programs administered by OFAC). "OFAC SDN List" means the list of "Specially Designated Nationals and Blocked Persons" maintained by OFAC. "OFAC Violation" has the meaning assigned to such term in Section 6.7Ld) of this Agreement. "Office" means with respect to any Noteholder, the office designated as such beneath the name of such Noteholder on Schedule I of the Agreement or such other office of such Noteholder as such Noteholder may specify in writing from time to time to Paying Agent and City. "Original 'frust Agreement" has the meaning given in the recitals of this Agreement. "Participant Register" shall have the meaning given in Section ..11.2 of this Agreement. "Patriot Act" shall have the meaning given in Section 4.7(a) of this Agreement "Paying Agent" shall have the meaning given in the preamble of this Agreement. "Payment Date" means each of the payment dates set forth on the Payment Schedule. "Payment Schedule" means the Payment Schedule set forth as Exhibit D to this Agreement, as the same may be amended or replaced pursuant to the Agreement. "Payment Stream" shall have the meaning given in the recitals of this Agreement. "Pension Obligation Bonds" shall have the meaning given in the recitals of this Agreement. "Person" means any natural person, corporation, limited liability company, partnership, firm, association, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity. "Prime Rate" means, for any day, the prime rate in effect for such day as published in the Wall Street Journal. "Proportionate Share" means with respect to each Noteholder, the percentages set forth opposite such Noteholder's name on Schedule II to this Agreement, as such percentages may be modified from time to time as a result of transfers of any portion of a Note by a Noteholder and as Paying Agent shall reflect in the Register. "Qualified Institutional Buyer" has the meaning as provided in rule 144A of the Securities Act. "Register" shall have the meaning given in Section 2.21 a of this Agreement. RULES OF INTERPRETATION 1. The singular includes the plural and the plural includes the singular. 2. The word "or" is not exclusive. 3. A reference to a Governmental Rule includes any amendment or modification to such Governmental Rule, and all regulations, rulings and other Governmental Rules promulgated under such Governmental Rule. 4. A reference to a Person includes its successors and permitted assigns. 5. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. 6. The words "include," "includes" and "including" are not limiting. 7. A reference in a document to an Article, Section, Exhibit, Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of such document unless otherwise indicated. Exhibits, Schedules, Annexes or Appendices to any document shall be deemed incorporated by reference in such document. 8. References to any document, instrument or agreement shall include all exhibits, schedules and other attachments thereto, shall include all documents, instruments or agreements issued or executed in replacement thereof, and shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time (to the extent permitted under the Financing Documents) and in effect at any given time. 9. The words "hereof," "herein" and "hereunder" and words of similar import when used in any document shall refer to such document as a whole and not to any particular provision of such document. 10. References to "days" shall mean calendar days, unless the term "Banking Days" shall be used. References to a time of day shall mean such time in New York, New York, unless otherwise specified. 11. This Agreement and the Notes are the result of negotiations between, and have been reviewed by City, Paying Agent, each Noteholder, and their respective counsel. Accordingly, this Agreement and the Notes shall be deemed to be the product of all parties thereto, and no ambiguity shall be construed in favor of or against City, Paying Agent, or any Noteholder. 12. The words "will" and "shall" shall be construed to have the same meaning and effect. LOU part. Any optional prepayment hereunder shall be in the minimum amount of One Hundred Thousand Dollars ($100,000) (unless the Notes are being repaid in full). It is hereby certified that all acts, conditions and things required to be done, have happened or will be performed precedent to and in the issuance of this Note or in the creation of the debt of which this is evidence, have been done, or have happened and been performed in regular and due form and manner as required by law, and that the debt represented by this Note is not in excess of any constitutional or statutory limitation. This Note shall not bear interest other than Default Interest, solely as set forth in the Agreement. City agrees to pay certain costs and expenses, incurred in connection with the enforcement of this Note in accordance with the Agreement. THIS NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO CONFLICTS OF LAWS. CITY OF SAN BERNARDINO, CALIFORNIA By: Name: Title: C-2 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 June 1, 2034 875,000.00 262,762.50 612,237.50 December 1, 2034 875,000.00 262,762.50 612,237.50 June 1, 2035 875,000.00 262,762.50 612,237.50 December 1, 2035 875,000.00 262,762.50 612,237.50 June 1, 2036 875,000.00 262,762.50 612,237.50 December 1, 2036 875,000.00 262,762.50 612,237.50 June 1, 2037 1,000,000.00 300,300.00 699,700.00 December 1, 2037 1,000,000.00 300,300.00 699,700.00 June 1, 2038 1,000,000.00 300,300.00 699,700.00 December 1, 2038 1,000,000.00 300,300.00 699,700.00 June 1, 2039 —1,2039 1,000,000.00 300,300.00 699,700.00 December 11000,000-00 300,300.00 699,700.00 June 1, 2040 1,000,000.00 300,300.00 699,700.00 December 1, 2040 1,000,000.00 300,300.00 699,700.00 June 1, 2041 11000,000.00 300,300.00 699,700.00 December 1, 2041 1,000,000.00 300,300.00 699,700.00 June 1, 2042 1,250,000.00 375,375.00 874,625.00 December 1, 2042 1,250,000.00 375,375.00 874,625.00 June 1, 2043Alk 00.00 375,375.00 874,625.00 December 1, 204300.00 375,375.00 —874,625.00 June 1, 204400.00 375,375.00 874,625.00 December 1, 204400.00 375,375.00 874,625.00 June 1, 204500.00 375,375.00 874,625.00December 1, 204500.00 375,375.00 874,625.00June1,204600.00 375,375.00 874,625.00December 1, 204600.00 375,375.00 874,625.00 D-2 SCHEDULEII TO AGREEMENT SCHEDULE OF NOTEHOLDER ORIGINAL PAYMENT STREAM AMOUNTS AND PROPORTIONATE SHARES Noteholder Original Share of Payment Proportionate Share Stream Commerzbank $35,457,291.50 69.97% Ambac $15,217,702.50 30.03% as a Noteholder to the same extent as if Assignee had been an original signatory Noteholder thereto. 3. Retention bv AssiLnor. Assignor retains its right, benefit, title and interest in and to the Original Note, only in the principal amount of [$ ] (the "Retained Amount"), and this Assignment shall have no effect on the Assignor's rights and benefits in connection with the Retained Amount of the Original Note. 4. Consideration. In consideration for the Assignment, Assignee agrees to pay to Assignor the amount of $ 5. Execution and Deliven__ of New Notes. Assignor may request that City execute and deliver the New Note to Assignee in the Assigned Amount. If Assignor makes such request, (i) Assignor shall pay the cost of any administrative expense charged by the Paying Agent (except as otherwise set forth in the Exchange Agreement and/or otherwise agreed by Paying Agent and City in their sole discretion); (ii) the Assignor shall relinquish and deliver to City, for termination and cancellation, in original form, the Original Note; and (iii) City shall execute and deliver a new Note (the "New Assignor Note") to Assignor in the Retained Amount, if any. Any such request shall be made promptly following the execution of this Assignment Agreement, but in no event more than ten (10) days following the date of execution of this Assignment Agreement. 6. Effective Date. The Assignment under this Assignment Agreement shall become effective (the "Effective Date") upon the last of the following to occur: (i) receipt by City and Paying Agent of an executed Assignment Agreement, (ii) the delivery to Paying Agent of the requisite processing fee for such Assignment (except as otherwise set forth in the Exchange Agreement and/or as otherwise agreed by Paying Agent and City in their sole discretion), and (iii) the recordation of the Assignment in the Register maintained by the Paying Agent pursuant to the Exchange Agreement. 7. Effect of Effective Date. Upon and following the Effective Date, Assignee will become a Noteholder under the Exchange Agreement, with the same rights, benefits and obligations, and shall be bound by the Exchange Agreement, as if the Assignee had been an original signatory to the Exchange Agreement. If the Assignor requested that the City execute and deliver a New Note in accordance with Para agr ph 5 hereunder, the Original Note shall be canceled and of no further force or effect as of the Effective Date. 8. Re vresentations_...and Warranties of Assignor. Assignor makes the following representations and warranties to and in favor of Assignee as of the Effective Date (which representations and warranties in each case shall survive the execution of this Assignment Agreement and the consummation of the transaction contemplated hereunder): (a) No Violation. The execution, delivery and performance by Assignor of this Assignment Agreement will not violate any provision of any applicable law, regulation, writ, order or decree by which Assignor is bound or cause a breach of any of its organizational documents or authority. E-2 Article 5 of the Exchange Agreement as of the Effective Date, and (C) to the extent of its Note, shall have the rights and obligations of a Noteholder thereunder. (e) Acknowledgement of Certain Risks. Assignee acknowledges that the purchase and holding of the New Note involves risks that may not be appropriate for certain investors, and that there may be a limited market for the New Note. Assignee understands that it may need to bear the risks of this investment for an indefinite time, since any sale before maturity may not be possible for any number of reasons. (f) Unregistered Status of New Note. Assignee understands that the New Note is not registered under the 33 Act and that such registration is not legally required as of the date hereof. Assignee further understands that the New Note (a) is not being registered or otherwise qualified for sale under the "Blue Sky" laws and regulations of any state, (b) will not be listed in any stock or other securities exchange, (c) will not, at least initially, carry a rating from any rating service, and (d) will be delivered in a form that may not be readily marketable. Assignee agrees that it will comply with any applicable state and federal securities laws in effect with respect to any disposition of the New Note by it, and acknowledges that any current exemption from registration of the New Note does not affect or diminish such requirements. (g) Securities Exemjition. Assignee understands that the offering and sale of the New Note is exempt from the requirements of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, that City is not delivering a "deemed final" official statement with respect to the New Note, and that City is not making any representation to Assignee or any other party with respect to the matters governed by Rule 15c2-12. (h) ReceiLt of Information/Non-Reliance. (i) Assignee (A) is a sophisticated entity with respect to the purchase of the New Note, (B) is able to bear the economic risk associated with the purchase of the New Note, (C) has adequate information, based on its own independent investigation concerning the business and financial condition of the City to make an informed decision regarding the purchase of the New Note, (D) has such knowledge and experience, and has made investments of a similar nature, so as to be aware of the risks and uncertainties inherent in the purchase of rights of the type contemplated in this Assignment Agreement, and (E) has independently and without reliance upon Assignor, and based on such information as Assignee has deemed appropriate, made its own analysis and decision to enter into this Assignment Agreement, except that Assignee has relied upon Assignor's express representations, warranties, covenants, agreements and indemnities in this Assignment Agreement. Assignee acknowledges that Assignor has not given Assignee any investment advice, credit information or opinion on whether the purchase of the New Note is prudent. (ii) Except as otherwise provided in this Assignment Agreement, Assignee has not relied on, and will not rely on, Assignor to fiu*nish or make available any documents or other information regarding the credit, affairs, financial condition or business of the City, or any other matter concerning the City. E-4 has deemed appropriate, made its own analysis and decision to enter into the transaction, except to the extent that Assignee and Assignor have each relied upon the express representations, warranties, covenants, agreements and indemnities made by the other in this Assignment Agreement or any related Purchase and Sale Agreement or confirmation of the transaction. Each of Assignee and Assignor acknowledges that the other has not given it any investment advice or opinion on whether the transaction is prudent. Assignee is aware that payment of the New Note involves certain economic variables and risks that could adversely affect the New Note. Assignee has sufficient knowledge and experience in financial business matters and is capable of evaluating the merits and risks of its investments in the New Note. Assignee represents that it is able to bear the economic risk of an investment in the New Note, including an entire loss of its investment. 0) No Offering,/Disclosure Documents. Except as otherwise specifically provided herein, Assignee has not relied, and will not rely, on Assignor to furnish or make available any documents or other information regarding the credit, affairs, financial condition, or business of the City or any other matter concerning the City. Assignee has not received from any of the City Representatives any formal or informal offering or disclosure document relating to the New Note and has concluded that such receipt before the purchase of the New Note is not required. Assignee acknowledges that no written information has been provided by any of the City Representatives and that any written information furnished by any other parry may not fully disclose all information pertinent to the New Note. (k) No Intent to Distribute. Assignee is acquiring the New Note solely for investment purposes and does not presently intend to sell, transfer or make a public distribution of all or any part of the New Note. (1) Transfer Restrictions. Assignee acknowledges that it has the right to sell and transfer the New Note, subject to compliance with the transfer restrictions set forth in the Exchange Agreement, including without limitation, the requirement for transfer only to an Accredited Investor or Qualified Institutional Buyer and only in Authorized Denominations. (m) No Recourse to Assi2rior. Assignee acknowledges that it shall have no recourse to Assignor, except for breach by Assignor of its representations, warranties and agreements under this Assignment Agreement. 10. Notices. Any communications hereunder between or among the Parties hereto or notices provided herein to be given may be given to the following addresses: If to Assignor: II If to Assignee: I E-6 instrument attached hereto or referred to herein, the terms, conditions and provisions of this Assignment Agreement shall prevail. Si natures continued on next yggej IM' EXHIBIT A [COPY OF ORIGINAL NOTE] A-1 EXHIBIT F TO AGREEMENT FORM OF FIRST SUPPLEMENTAL TRUST AGREEMENT F-1 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY.............................................................................. 5 SECTION1.01. Definitions............................................................................................................5 SECTION 1.02. First Supplemental Trust Areement Constitutes Contract ................................. 8 SECTION 1.03. Section Numbers..................................................................................................8 ARTICLE II REFINANCING OF 2005 SERIES A-1 BONDS; AMENDMENT OF 2005 SERIES A-2 BONDS; GENERAL BOND PROVISIONS ..................................... 8 SECTION 2.01. Refinancing of the 2005 Series A-1 Bonds: Issuance of Commerzbank Note........................................................... 8 SECTION 2.02. Amendment of the 2005 Series A-2 Bonds......................................................... 8 SECTION2.03. Exchange Agreement 9 ........................................................................................... SECTION 2.04. Costs and Fees for Transfers................................................................................ 9 ARTICLE III CONDITIONS PRECEDENT FOR CANCELLATION AND EXCHANGE; IMPLEMENTATION.............................................................................................. 9 SECTION 3.01. Conditions for the Cancellation of the 2005 Series A-1 Bonds and Conversion of the 2005 Series A-2 Bonds to Non -Recourse ............................... 9 SECTION 3.02. Imlzlementation Procedures...............................................................................10 ARTICLE IV PROVISIONS REGARDING AMBAC POLICY.......................................................10 SECTION4.01. Ambac Policy.....................................................................................................10 SECTION 4.02. Claims Under Ambac Polic�.............................................................................10 ARTICLE V COVENANTS OF THE LOCAL AGENCY...:.............................................................12 SECTION5.01. Performance.......................................................................................................12 SECTION 5.02. Power to Enter Into Agreement.........................................................................12 SECTION 5.03. A counting Records and Reports .......................................................................12 SECTION 5.04. Prosecution and Defense of Suits.......................................................................12 SECTION 5.05. Waiver of Laws ................................ ARTICLEVI THE TRUSTEE............................................................................................................13 1