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32000-86 JH:REL:MT 7/27/11

$20,000,000

CITY OF VACAVILLE 2011 INSTALLMENT SALE AGREEMENT

(SEWER SYSTEM CAPITAL IMPROVEMENTS PROJECT)

OFFICER'S CERTIFICATE OF THE AUTHORITY

July 27, 2011

The undersigned hereby states and certifies this date that: (i) I am the Executive Director of the Vacaville Public Financing Authority, a

joint exercise of powers authority duly organized and existing under the laws of the State of California (the “Authority”), and operating pursuant to Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California Government Code (the “Act”), and pursuant to a Joint Exercise of Powers Agreement, dated as of April 12, 1988 (the “Joint Powers Agreement”), by and between the Vacaville Redevelopment Agency and the City of Vacaville (the “City”), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same on behalf of the Authority;

(ii) the signatures set forth opposite the names and titles of the following persons are the true and correct specimens of, or are the genuine signatures of such persons, each of whom holds the office designated below and each of the undersigned by their signature confirms the same with respect to the other undersigned:

Name and Title Signature Laura Kuhn, Executive Director Michelle Thornbrugh, Secretary

(iii) on May 24, 2011, the Board of Directors of the Authority duly adopted Resolution No. 2011-1 entitled “Resolution of the Vacaville Public Financing Authority Authorizing the Execution and Delivery of Documentation With Respect to a Line of Credit Extended to the City of Vacaville By JPMorgan Chase Bank, N.A., to Finance Improvements to the City’s Wastewater Enterprise, and Approving Related Documents and Actions” (the “Resolution”), which Resolution was duly adopted at an open public meeting which was called, noticed and conducted in accordance with all applicable requirements of California law, at which a quorum was present and acting throughout, and the Resolution has not been amended, modified, supplemented, rescinded or repealed and is in full force and effect as of the date hereof;

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(iv) by all necessary action, the Authority has duly authorized and approved the execution and delivery, and the performance by the Authority of the obligations on its part contained in the following agreements (collectively, the “Agreements”):

(a) Installment Sale Agreement dated as of July 1, 2011, by and between the Authority, as seller, and the City, as purchaser, and

(b) Assignment Agreement dated as of July 1, 2011, between the Authority and JPMorgan Chase Bank, National Association, as assignee;

(v) for and on behalf of the Authority, the within-named Executive Director is authorized to execute and has duly executed the Agreements;

(vi) to the best of my knowledge, no litigation is pending or threatened (either in state or federal courts) to restrain or enjoin the execution or delivery of the Agreements, in any way contesting or affecting the authority for the execution and delivery of the Agreements or the validity of the Agreements, or in any way contesting the corporate existence or powers of the Authority or the title of the officers thereof to their respective offices;

(vii) all representations and warranties of the Authority contained in the Installment Sale Agreement and in each of the other Financing Documents and each certificate, letter, other writing or instrument delivered by the Authority to the Bank pursuant thereto are true and correct on and as of the date hereof as though made on and as of such date and no Default or Event of Default under the Installment Sale Agreement has occurred and is continuing or would result from the execution and delivery of the Installment Sale Agreement or the Bank’s commitment (on behalf of the Authority) to make Advances under Section 3.01 thereof, and the Executive Director and her designees are authorized to act on the Authority’s behalf in connection with the Installment Sale Agreement to do the things required of Authority pursuant to the Installment Sale Agreement;

(viii) there are no actions, suits, or proceedings pending with service of process accomplished or, to the best knowledge of the Authority after due inquiry, threatened against or affecting the Authority by or before any court, arbitrator, or administrative or governmental body which relate to the execution, delivery or performance by the Authority of the Installment Sale Agreement or any Financing Document or the validity or enforceability thereof or the pledge of the Gross Revenues or the priority of any lien granted thereunder, and in any way affects the existence, organization or powers of the Authority or the title of any officer of the Authority to such Person’s office;

(ix) attached hereto is a true, correct and complete copy of the Joint Powers Agreement, including any and all amendments thereto, which each original member of the Authority had duly executed;

(x) the Joint Powers Agreement has not been further amended, modified, supplemented or rescinded in any way and is in full force and effect as of the date hereof; and

(xi) to the best of my knowledge after due inquiry, all required filings have been made with the California Secretary of State, and the Authority is in good standing as a joint exercise of powers agency under the Act.

Capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the Installment Sale Agreement.

VACAVILLE PUBLIC FINANCING AUTHORITY

By:~~.

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Laura Kuhn Executive Director

ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT (this “Assignment Agreement"), dated as of July 1,

2011, is between the VACAVILLE PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the “Seller”), and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America (the “Bank”).

BACKGROUND:

1. The City of Vacaville (the “Purchaser”) has identified and may in the future

identify capital improvements (each, a “Project Component” and collectively, the “Project”) for its sewer system (the “System”).

2. In order to raise funds required to finance the Project, the Seller and the

Purchaser have entered into an Installment Sale Agreement of even date herewith (the “Installment Sale Agreement”), the terms of which include, without limitation, the obligation of the Purchaser to pay Installment Payments (as defined in the Installment Sale Agreement) to the Seller, in consideration of the Purchaser’s purchase of the Project Components under the Installment Sale Agreement.

3. Under the Installment Sale Agreement, the Seller is required to cause to be

deposited with the Purchaser certain sums of money to be credited, held and applied in accordance with the Installment Sale Agreement, for the purpose of financing the acquisition and construction of the Project.

4. Each of the parties has full power and authority, and has agreed, to enter into

this Assignment Agreement, and has taken all actions necessary to authorize its officers to execute it.

AGREEMENT:

In consideration of the material covenants contained in this Assignment Agreement, the

Seller and the Bank hereby formally covenant, agree and bind themselves as follows: SECTION 1. Defined Terms. All capitalized terms not otherwise defined herein have

the respective meanings given them in the Installment Sale Agreement. SECTION 2. Assignment. The Seller hereby transfers, assigns and sets over to the

Bank all of the Seller’s rights (but none of its obligations) under the Installment Sale Agreement, including but not limited to:

(a) the right to receive and collect all of the Installment Payments from the Purchaser

under the Installment Sale Agreement, (b) the right to receive and collect any proceeds of any insurance maintained

thereunder with respect to the System, or any eminent domain award (or proceeds of sale under threat of eminent domain) paid with respect to the System, and

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(c) the right to exercise such rights and remedies conferred on the Seller under the Installment Sale Agreement as may be necessary or convenient (i) to enforce payment of the Installment Payments and any other amounts required to be deposited in the Enterprise Fund, or (ii) otherwise to protect the interests of the Bank in the event of a default by the Purchaser under the Installment Sale Agreement.

Such assignment is absolute and irrevocable, and without recourse to the Seller. SECTION 3. Acceptance. The Bank hereby accepts the assignments made herein for

the purpose of securing the payments due under the Installment Sale Agreement SECTION 4. Conditions. This Assignment Agreement confers no rights and imposes no

duties upon the Bank beyond those expressly provided in the Installment Sale Agreement. SECTION 5. Advances. In consideration for the assignment of the Seller’s rights set

forth hereinabove, including, without implied limitation, the assignment of the Seller’s rights to receive the Installment Payments, the Bank hereby agrees to advance to the Purchaser, as agent for the Seller, on each Purchase Date, an amount equal to the Purchase Price for the Project Component being purchased by the Purchaser on such Purchase Date; provided, that the Bank’s obligation to make each such Advance shall subject to the each of the conditions set forth in the Installment Sale Agreement to the Seller’s obligation to cause the Bank to make Advances hereunder and the Seller’s obligation sell such Project Component (including, without implied limitation, the condition that such purchase shall not cause the aggregate amount of all outstanding and unpaid Principal Portions to exceed Twenty Million Dollars ($20,000,000)), and the Seller shall not waive any such condition without the prior written consent of the Bank. Whenever it is provided in the Installment Sale Agreement that the Seller’s obligation to make or cause to be made Advances shall cease or be suspended or terminated thereunder, the Bank’s obligation so to do under this Section 5 shall similarly cease or be suspended or terminated, as the case may be.

SECTION 6. Schedules of Installment Payments. The Bank agrees to prepare a

Schedule of Installment Payments specifying the Installment Payment Dates, principal amortization and interest rate formula for each purchase of a Project Component by the Purchaser, and to deliver the same to the Purchaser within five (5) days after the applicable Purchase Date.

SECTION 7. Extension of Maturity Date. Pursuant to Section 4.02(a) of the Installment

Sale Agreement, the Purchaser may request an extension of the Maturity Date and the Commitment Expiration Date not more than 180 days prior to the then current Maturity Date and Commitment Expiration Date. Any extended Maturity Date or Commitment Expiration Date must occur on an Interest Rate Reset Date. The Bank will make reasonable efforts to respond to such request within 90 days after receipt of all information necessary, in the Bank’s judgment, to permit the Bank to make an informed credit decision. If the Bank fails to definitively respond to such request within such 90-day period, the Bank shall be deemed to have refused to grant the extension requested. The Bank may, in its sole and absolute discretion, decide to accept or reject any such proposed extension and no extension shall become effective unless the Bank shall have consented thereto in writing. The Bank’s consent, if granted, shall be conditioned upon the preparation, execution and delivery of documentation in form and substance satisfactory to the Bank, including, without implied limitation, an opinion of counsel nationally recognized in the area of tax-exemption of municipal bonds to the effect that the extension of the Maturity Date and the Commitment Expiration Date will not in and of itself adversely affect

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the exclusion of the Interest Portions from gross income for federal income tax purposes, or a new approving tax opinion of such counsel.

SECTION 8. Execution in Counterparts. This Assignment Agreement may be executed

in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same agreement. It is also agreed that separate counterparts of this Assignment may be separately executed by the Bank and the Seller, both with the same force and effect as though the same counterpart had been executed by the Bank and the Seller.

SECTION 9. Binding Effect. This Assignment Agreement inures to the benefit of and

binds the Seller and the Bank, and their respective successors and assigns, subject, however, to the limitations contained herein.

SECTION 10. Governing Law. This Assignment Agreement is governed by the

Constitution and laws of the State of California.

IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their authorized officers as of the day and year first written above.

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VACAVILLE PUBLIC FINANCING AUTHORITY

s~?tL-Executive Director

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Assignee

By: J s; /(__ <I Authorized Officer

JONES HALL

July 27, 2011

650 California Street

18th Floor

San Francisco, CA 94108

t. 415.391.5780

f. 415.391.5784

City of Vacaville 650 Merchant Street Vacaville, California 95688

JPMorgan Chase Bank, National Association 560 Mission Street, 4th Floor San Francisco, California 941 05

Vacaville Public Financing Authority 650 Merchant Street Vacaville, California 95688

OPINION: $20,000,000 Installment Sale Agreement dated as of July 1, 2011, between the City of Vacaville and the Vacaville Public Financing Authority

Ladies and Gentlemen:

We have acted as bond counsel to the City of Vacaville (the "City") and the Vacaville Public Financing Authority (the "Authority") in connection with the execution and delivery by the City and the Authority of an Installment Sale Agreement, dated as of July 1, 2011 (the "Installment Sale Agreement"), and the execution and delivery by the Authority and JPMorgan Chase Bank, National Association (the "Bank") of an Assignment Agreement, dated as of July 1, 2011 (the "Assignment Agreement").

The proceeds of the Installment Sale Agreement will be drawn by the City from time to time for the purpose of financing certain improvements to the wastewater collection, treatment and disposal system of the City. The amounts drawn by the City under the Installment Sale Agreement are to be repaid in installments of principal and/or interest (the "Installment Payments"), as provided in the Installment Sale Agreement and the Assignment Agreement. The Installment Payments are payable from and secured by a pledge of, lien on and security interest in the Collateral. Capitalized terms used but not defined herein have the meanings ascribed in the Installment Sale Agreement.

We have examined the executed Installment Sale Agreement and Assignment Agreement, the applicable provisions of the Constitution and laws of the State of California, and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City and the Authority contained in the Installment Sale Agreement and the Assignment Agreement, and in certified proceedings and other certifications of public officials and others furnished to us, without undertaking to verify

A PROFESSIONAL LAW CORPORATION www.joneshall.com

City of Vacaville Vacaville Public Financing Authority JPMorgan Chase Bank, National Association July 27, 2011 Page2

the same by independent investigation. As to questions of law material to our opinion, we have relied upon an opinion of the City Attorney dated the date hereof.

Based upon the foregoing, as of the date hereof, we are of the opinion, under existing law, as follows:

1. The City is a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California with the full power to enter into the Installment Sale Agreement and to perform the agreements on its part contained therein.

2. The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California with the full power to enter into the Installment Sale Agreement and the Assignment Agreement and to perform the agreements on its part contained therein.

3. The Installment Sale Agreement has been duly approved, authorized, executed and delivered by the City and the Authority, and constitutes the legal, valid and binding obligation of the City and the Authority enforceable against the City and the Authority in accordance with its terms.

4. The Assignment Agreement has been duly approved, authorized, executed and delivered by the Authority, and constitutes the legal, valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. The Assignment Agreement creates a valid assignment to the Bank of the Authority's rights in and to the Installment Sale Agreement, and the Bank is entitled to the benefits of the Installment Sale Agreement.

5. The Installment Sale Agreement establishes a valid pledge of, lien on and security interest in the Collateral, including Gross Revenues, on a parity with any lien on Gross Revenues securing the outstanding SRF Loans.

6. The Interest Portion of each Installment Payment is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the City and the Authority must comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the execution and delivery of the Installment Sale Agreement and the Assignment Agreement in order that such Interest Portions be, or continue to be, excludable from gross income for federal income tax purposes. The City and the Authority have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of the Interest Portions in gross income for federal income tax purposes to be retroactive to the date of execution and delivery of the Installment Sale Agreement. We express no opinion regarding other federal tax consequences arising with respect to the Installment Sale Agreement or the Assignment Agreement.

A PROFESSIONAL LAW CORPORATION

City of Vacaville Vacaville Public Financing Authority JPMorgan Chase Bank, National Association July 27, 2011 Page 3

7. The Interest Portions are exempt from personal income taxation imposed by the State of California.

The rights of the Bank, and the enforceability of the Installment Sale Agreement and the Assignment Agreement, may be subject to bankruptcy, insolvency, .reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases.

Respectfully submitted,

A Professional Law Corporation

A PROFESSIONAL LAW CORPORATION

INSTALLMENT SALE AGREEMENT

by and between

VACAVILLE PUBLIC FINANCING AUTHORITY, as Seller

and

CITY OF VACAVILLE, as Purchaser

Dated as of July 1, 2011

(SEWER SYSTEM CAPITAL IMPROVEMENTS PROJECT)

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TABLE OF CONTENTS

ARTICLE I DEFINITIONS AND EXHIBITS

Section 1.01. Definitions .................................................................................................................... 2 Section 1.02. Content of Written Certificates ..................................................................................... 2 Section 1.03. Exhibits ........................................................................................................................ 2

ARTICLE II

REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.01. Representations, Covenants and Warranties of the Purchaser................................... 3 Section 2.02. Representations, Covenants and Warranties of the Seller .......................................... 7

ARTICLE III

ADVANCES; ACQUISITION AND CONSTRUCTION OF THE PROJECT

Section 3.01. Advances ..................................................................................................................... 8 Section 3.02. Purchaser as Agent ................................................................................................... 11 Section 3.03. Project Fund............................................................................................................... 12 Section 3.04. Payment of Project Costs .......................................................................................... 12 Section 3.05. Quarterly Facility Fee................................................................................................. 12

ARTICLE IV

SALE OF PROJECT COMPONENTS TERM OF THE INSTALLMENT SALE AGREEMENT; INSTALLMENT

PAYMENTS Section 4.01. Sale of Project Components ...................................................................................... 13 Section 4.02. Extension of Maturity Date and Commitment Expiration Date................................... 13 Section 4.03. Term of Installment Sale Agreement ......................................................................... 14 Section 4.04. Installment Payments................................................................................................. 14 Section 4.05. Special Obligation of the Purchaser........................................................................... 16 Section 4.06. Pledge of Collateral; Application of Gross Revenues ................................................ 16 Section 4.07. Rate Covenant ........................................................................................................... 18 Section 4.08. Limitations on Future Obligations Secured by Gross Revenues ............................... 18 Section 4.09. Payments Generally................................................................................................... 20 Section 4.10. Bank Account............................................................................................................. 20

ARTICLE V

MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS Section 5.01. Discharge Claims....................................................................................................... 22 Section 5.02. Operate System in Efficient and Economical Manner................................................ 22 Section 5.03. Against Sale............................................................................................................... 22 Section 5.04. Eminent Domain ........................................................................................................ 23 Section 5.05. Insurance ................................................................................................................... 24 Section 5.06. Reconstruction of System; Application of Insurance Proceeds ................................. 24 Section 5.07. Records and Accounts............................................................................................... 24 Section 5.08. Collection of Charges................................................................................................. 25 Section 5.09. Against Competing Utility........................................................................................... 25 Section 5.10. Financial Reports ....................................................................................................... 25 Section 5.11. Payment of Obligations.............................................................................................. 26 Section 5.12. Compliance with Documents ..................................................................................... 26 Section 5.13. Observance of Laws and Regulations ....................................................................... 27 Section 5.14. Increased Costs ......................................................................................................... 27 Section 5.15. Capital Adequacy....................................................................................................... 28 Section 5.16. Illegality ...................................................................................................................... 29 Section 5.17. Use of Proceeds ........................................................................................................ 29

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Section 5.18. Maintenance of Existence.......................................................................................... 30 Section 5.19. Notices to Bank.......................................................................................................... 30 Section 5.20. Further Assurances.................................................................................................... 30 Section 5.21. Attorney Fees and Costs ........................................................................................... 30 Section 5.22. Tax Exemption ........................................................................................................... 31

ARTICLE VI

DISCLAIMER OF WARRANTIES; ACCESS Section 6.01. Disclaimer of Warranties............................................................................................ 33 Section 6.02. Access to the System, the Project and Records........................................................ 33

ARTICLE VII

ASSIGNMENT, SALE AND AMENDMENT Section 7.01. Assignment by the Seller ........................................................................................... 34 Section 7.02. Assignment, Sale and Disposition by the Purchaser ................................................. 34 Section 7.03. Amendment of Installment Sale Agreement .............................................................. 34

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES Section 8.01. Events of Default Defined .......................................................................................... 35 Section 8.02. Remedies on Default ................................................................................................. 37 Section 8.03. No Remedy Exclusive................................................................................................ 37 Section 8.04. Prosecution and Defense of Suits.............................................................................. 37 Section 8.05. No Additional Waiver Implied by One Waiver ............................................................ 38 Section 8.06. Liability Limited to Net Revenues............................................................................... 38

ARTICLE IX

PREPAYMENT OF INSTALLMENT PAYMENTS Section 9.01. Prepayment................................................................................................................ 39 Section 9.02. Optional Prepayment ................................................................................................. 39

ARTICLE X

MISCELLANEOUS Section 10.01. Notices ....................................................................................................................... 41 Section 10.02. Inurement................................................................................................................... 42 Section 10.03. Severability ................................................................................................................ 42 Section 10.04. Amendments, Changes and Modifications ................................................................ 42 Section 10.05. Net Contract............................................................................................................... 43 Section 10.06. Further Assurances and Corrective Instruments ....................................................... 43 Section 10.07. Execution in Counterparts.......................................................................................... 43 Section 10.08. Applicable Law........................................................................................................... 43 Section 10.09. Seller and Purchaser Representatives ...................................................................... 43 Section 10.10. Reserved.................................................................................................................... 43 Section 10.11. Captions..................................................................................................................... 43 Section 10.12. Reserved.................................................................................................................... 43 Section 10.13. USA Patriot Act Notice............................................................................................... 43 Section 10.14. Integration .................................................................................................................. 43 Section 10.15. Environmental Indemnity ........................................................................................... 43 EXHIBIT A: DEFINITIONS EXHIBIT B: FORM OF ADVANCE REQUEST EXHIBIT C: CALCULATION OF INSTALLMENT PAYMENTS

INSTALLMENT SALE AGREEMENT THIS INSTALLMENT SALE AGREEMENT, dated as of July 1, 2011, by and between

VACAVILLE PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California, as seller (the “Seller”) and CITY OF VACAVILLE, a municipal corporation and general law city duly organized and existing under the Constitution and laws of the State of California, as purchaser (the “Purchaser”);

WITNESSETH:

WHEREAS, the Purchaser has identified certain capital improvements and may in the

future identify additional capital improvements (collectively, the “Project”) to be made to its system for the collection, storage, conveyance, treatment and disposal of wastewater (the “System”); and

WHEREAS, in order to provide financing for the Project, the Seller and the Purchaser

propose to enter into this Installment Sale Agreement pursuant to which Seller will agree to sell and Purchaser will agree to buy, components of such Project from time to time; and

WHEREAS, the purchase price for the components of the Project will be payable in

installments, as provided herein (the “Installment Payments”); and WHEREAS, in order to secure its obligations hereunder, including the obligation to pay

the Installment Payments, the Purchaser will pledge and grant a lien on certain Collateral, including Gross Revenues, to the Seller on a parity with any lien on Gross Revenues securing Parity Debt; and

WHEREAS, in order to obtain the funds necessary to acquire, construct and install the

components of the Project to be sold to the Purchaser hereunder, the Seller has assigned to JPMorgan Chase Bank, National Association, pursuant to an Assignment Agreement of even date herewith, the Seller’s rights hereunder, including its right to receive the Installment Payments and its security interest in and to the Collateral;

NOW, THEREFORE, in consideration of the above premises and of the mutual

covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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ARTICLE I DEFINITIONS AND EXHIBITS

Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in

Exhibit A attached hereto shall, for all purposes of this Installment Sale Agreement, have the meanings specified therein.

Section 1.02. Content of Written Certificates. Every certificate provided for in this

Installment Sale Agreement with respect to compliance with any provision hereof shall include (a) a statement that the person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the certificate is based; (c) a statement that, in the opinion of such person, he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; (d) a statement of the assumptions, if any, upon which such certificate is based, and that such assumptions are reasonable; and (e) a statement as to whether, in the opinion of such person, such provision has been complied with.

Any such certificate made or given by a Purchaser Representative may be based,

insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an accountant, unless such Purchaser Representative knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Purchaser), upon a certificate or opinion of or representation by a Purchaser Representative, unless such counsel or accountant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person's certificate or opinion or representation may be based, as aforesaid, is erroneous. The same Purchaser Representative, or the same counsel or accountant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Installment Sale Agreement, but different officers, counsel or accountants may certify to different matters, respectively.

Section 1.03. Exhibits. The following Exhibits are attached to, and by this reference are

made a part of, this Installment Sale Agreement: Exhibit A: Definitions Exhibit B: Form of Advance Request Exhibit C: Calculation of Installment Payments

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ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES

Section 2.01. Representations, Covenants and Warranties of the Purchaser. The

Purchaser represents, covenants and warrants to the Seller and the Bank as of the Closing Date and as of each Purchase Date as follows:

(a) The Purchaser is a municipal corporation and general law city duly organized

and validly existing under the Constitution and laws of the State and Purchaser has the power, right and authority to own its properties, to carry on its affairs as now being conducted, to own and operate the Project and the System, to pay the Installment Payments at the times and in the manner set forth herein and to execute and deliver this Installment Sale Agreement and the other Financing Documents to which it is a party and to perform its obligations hereunder and thereunder and the Purchaser has complied with the laws of the State in all matters relating to such execution, delivery and performance.

(b) The laws of the State authorize the Purchaser to enter into this Installment Sale

Agreement and the Financing Documents, and to enter into the transactions contemplated hereby and thereby and to carry out its obligations hereunder and thereunder.

(c) The execution, delivery and performance of this Installment Sale Agreement and

all other Financing Documents do not and will not:

(i) violate or conflict with the Constitution of the State or the laws of the State, including any debt limitations or other restrictions or conditions on the debt-issuing power of the Purchaser; or

(ii) violate or conflict with any provision of any law, rule, regulation (including,

without limitation, Regulation U of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Purchaser; or

(iii) result in a breach or constitute a default under any resolution, ordinance,

indenture, trust agreement, loan or credit agreement, lease, instrument or other contractual restriction binding on or affecting the Purchaser or by which it or its properties may be bound or affected; or

(iv) result in or require the creation or imposition of any lien, security interest

or other charge or encumbrance upon or with respect to any of the properties now owned or hereafter acquired by the Purchaser, other than the pledges, liens and security interests granted herein. (d) There are no actions, suits, or proceedings pending with service of process

accomplished or, to the best knowledge of the Purchaser after due inquiry, threatened against or affecting Purchaser by or before any court, arbitrator, or administrative or governmental body which (i) if determined adversely to the Purchaser could adversely affect the Purchaser’s ability to timely perform its obligations under the Parity Debt, this Installment Sale Agreement or any Financing Document to which Purchaser is party or could result in a material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System, (ii) relate to the execution, delivery or performance by the Purchaser of this Installment Sale Agreement or any Financing Document or the validity or enforceability hereof or thereof or

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the pledge of the Collateral or the priority of any lien provided for herein, and (iii) in any way affects the existence, organization or powers of the Purchaser or any elected official thereof or the title of any official of the Purchaser to such Person’s office.

(e) This Installment Sale Agreement and each of the Financing Documents has been

duly authorized, executed, issued and delivered and constitutes a legal, valid and binding obligation of Purchaser, enforceable against the Purchaser in accordance with its terms, subject as to enforceability, to bankruptcy, insolvency, moratorium, or other laws and equitable principles relating to or affecting creditors’ rights generally from time to time in effect.

(f) The Purchaser has granted to the Seller or the Bank (as assignee of the Seller) a

valid lien on and security interest in the Collateral to secure the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller) which is subject to no other lien or encumbrance granted by or contractual obligation incurred by the Purchaser other than any lien or security interest granted for the benefit of the holders of the Parity Debt, provided that Gross Revenues may be applied for the purposes set forth in Section 4.06 hereof, and provided further that such liens and encumbrances may be granted in accordance with the provisions of Section 5.03 of this Installment Sale Agreement.

(g) The Purchaser is not in violation of or in default in any respect under any law,

rule, regulation, order, writ, judgment, injunction, decree, determination or award or any resolution, ordinance, indenture, trust agreement, loan or credit agreement, lease, instrument or other contract, and no condition, event or act has occurred which with notice or lapse of time, or both, would constitute a Default or Event of Default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any resolution, ordinance, indenture, trust agreement, loan or credit agreement, lease, instrument or other contract which could materially adversely affect the Purchaser’s ability to timely perform its obligations under the Parity Debt, this Installment Sale Agreement or any Financing Document to which the Purchaser is party. The Purchaser is in compliance with the terms and conditions of this Installment Sale Agreement and each of the Financing Documents, and no breach of the terms hereof or thereof has occurred and is continuing, and no Default or Event of Default under this Installment Sale Agreement has occurred and is continuing. No default by the Purchaser has occurred and is continuing in the payment of the principal of or premium, if any, or interest on any installment payment or other evidence of indebtedness incurred by the Purchaser, including the Parity Debt or any obligation with a lien on the Gross Revenues.

(h) The execution, delivery and performance by Purchaser of this Installment Sale

Agreement and the other Financing Documents to which it is a party and the transactions contemplated hereby and thereby have been duly authorized by all necessary actions, and the Purchaser has the power and authority to enter into this Installment Sale Agreement and to execute and deliver the Financing Documents to which it is a party.

(i) The Purchaser is in compliance with all applicable laws, rules, ordinances or

regulations noncompliance with which could have a material, adverse effect on the Purchaser’s ability to timely perform its obligations under this Installment Sale Agreement or any Financing Document to which Purchaser is party.

(j) The Purchaser has delivered to the Bank a copy of the audited financial

statements of the Purchaser and the System for the most recently completed Fiscal Year pursuant to Section 5.10(a) hereof. The Purchaser’s audited financial statements which have been delivered to Bank are true and complete, have been prepared in accordance with

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generally accepted accounting principles for government entities consistently applied and fairly represent Purchaser’s financial condition as of the last day of the most recently completed Fiscal Year. Since the last day of the Fiscal Year set forth in such financial statements, there has been no material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System. The Purchaser and the System have no material contingent liabilities or other material contracts or commitments which are not reflected in such financial statements. The current collection of the Gross Revenues and the management of the System and the accounting and recordkeeping therefor are in material compliance with all applicable state and federal laws and all applicable resolutions, ordinances and rules of the Purchaser. The annual operating budget of the System and any supplements thereto for the current Fiscal Year, a true and complete copy of which has been delivered to the Bank pursuant to Section 5.10(a) hereof, fairly presents the anticipated income and expenses of the System and the Net Revenues for such Fiscal Year. The Purchaser has delivered to the Bank a true and complete copy of its investment policy. All investments of the Purchaser have been and are made substantially in accordance with such investment policy. Only the City Council of the City may amend, rescind or otherwise modify the Purchaser’s investment policy.

(k) No consent, approval or other action by or any notice to or filing or registration

with any court or administrative or governmental body is or will be necessary to be made or obtained by the Purchaser for the due execution, delivery and performance by the Purchaser of this Installment Sale Agreement, the Financing Documents to which it is a party or any other documents contemplated hereby or thereby except to the extent such consent, approval and other action has already been obtained.

(l) There is no fact known to the Purchaser that materially adversely affects the

ability of Purchaser to timely perform its obligations hereunder or under the Parity Debt that has not been disclosed in writing to Bank. No written information furnished by the Purchaser to the Bank in connection with this Installment Sale Agreement or any other Financing Document (except information which has been superseded by subsequent information provided by the Purchaser) includes any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made in such information and all other written information delivered by Purchaser, when taken together and in light of the circumstances in which they were made, not misleading.

(m) The Purchaser does not enjoy any rights of immunity on the grounds of

sovereign immunity in respect of contractual claims and agrees pursuant to Section 5.24 hereof not to assert any such rights should the Purchaser ever possess such rights in the future.

(n) The Purchaser has not established, is not a party to and has never contributed to

an employee benefit plan other than a “governmental plan” within the meaning of Section 414(d) of the Code or Section 3(32) of ERISA. The Purchaser is in material compliance with the terms of the employee benefit plans in which the Purchaser or any of its employees participate in.

(o) As a regular part of operating the System, the Purchaser conducts an ongoing

program for monitoring, sampling and testing water quality in order to determine compliance with applicable wastewater discharge regulations, discharge permits and environmental laws, rules and regulations, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the

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nature of operations conducted thereat , and any related costs and expenses). On the basis of such review, the Purchaser is not in violation of any applicable environmental laws, rules or regulations the violation of which would materially and adversely affect its ability to perform its obligations under this Installment Sale Agreement or any other Financing Document.

(p) The Purchaser is not engaged in the business of extending credit for the purpose

of, and no part of the moneys received by the Seller or the Purchaser from the Bank under this Installment Sale Agreement will be used, directly or indirectly, for purchasing or carrying margin stock within the meaning of Federal Reserve Board Regulation U.

(q) The Purchaser hereby makes every representation and warranty made by it in

any Financing Document to which it is a party, which representations and warranties, as well as the defined terms contained therein that are necessary for a correct interpretation thereof, are incorporated herein by this reference with the same effect as if each and every such provision and defined term were set forth herein in its entirety. No amendment to such representations and warranties or defined terms made pursuant to any such Financing Document and no termination or replacement of any such Financing Document shall be effective to amend, terminate or replace such representations and warranties or defined terms as incorporated by reference herein without the prior written consent of the Bank.

(r) There is no public vote or referendum pending, proposed or concluded, the

results of which could in any way adversely affect the transactions contemplated by this Installment Sale Agreement or any of the Financing Documents, or the validity or enforceability hereof or thereof. There is no amendment, or proposed amendment to the Constitution of the State or any State law or any administrative interpretation of the Constitution of the State or any State law, or any legislation that has passed either house of the legislature of the State, or any judicial decision interpreting any of the foregoing, the effect of which could in any way adversely affect the transactions contemplated by this Installment Sale Agreement or any of the Financing Documents, or the validity or enforceability hereof or thereof.

(s) The Purchaser has not taken any action or omitted to take any action, and knows

of no action taken or omitted to be taken by any other Person, which action, if taken or omitted, could adversely affect the exclusion of the Interest Portion of any Installment Payment from gross income for federal income tax purposes of the Bank or the exemption of any such Interest Portion from State personal income taxes.

(t) The Purchaser currently maintains either commercial insurance, self-insurance or

other risk management arrangements with respect to the System of such type and in such amounts or in excess of such amounts as are customarily carried by, and insures against such risks as are customarily insured against by, public agencies with similar public sanitary sewer collection systems. Copies of all policies of insurance, self-insurance or other risk management arrangements (or other evidence thereof satisfactory to the Bank) have been made available to the Bank on or before the Closing Date.

(u) The terms of this Installment Sale Agreement and the other Financing

Documents regarding the calculation and payment of interest and fees do not violate any applicable usury laws.

(v) The Purchaser has maintained the System in good repair and working order and

there have been no changes to and no event has occurred which has had, or may result in, any

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material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System.

(w) The Purchaser represents, warrants and agrees that the Bank’s obligation to

make Advances pursuant to the Assignment Agreement is subject to each and every condition to the Seller’s obligations hereunder to purchase Project Components and to cause the Bank to make Advances pursuant to the Assignment Agreement, and the Purchaser further represents, warrants and agrees that that the Seller may not waive any such condition without the prior written consent of the Bank.

Section 2.02. Representations, Covenants and Warranties of the Seller. The Seller

represents, covenants and warrants to the Purchaser and the Bank as of the Closing Date and as of each Purchase Date as follows:

(a) The Seller is a joint exercise of powers authority, duly organized and existing under

and by virtue of the laws of the State; has power to enter into this Installment Sale Agreement and the Assignment Agreement; is possessed of full power to own and hold real and personal property, and to sell the same; and has duly authorized the execution and delivery of all of the aforesaid agreements.

(b) Neither the execution and delivery of this Installment Sale Agreement or the

Assignment Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a material breach of the terms, conditions or provisions of any restriction or any agreement, instrument, regulation or law to which the Seller is now a party or by which the Seller is bound, or constitutes a default under any of the foregoing.

(c) This Installment Sale Agreement, the Assignment Agreement and each of the

Financing Documents to which the Seller is a party constitutes a legal, valid and binding obligation of Seller, enforceable against the Seller in accordance with its terms, subject as to enforceability, to bankruptcy, insolvency, moratorium, or other laws and equitable principles relating to or affecting creditors’ rights generally from time to time in effect.

(d) The Seller represents, warrants and agrees that the Bank’s obligation to make

Advances pursuant to the Assignment Agreement is subject to each and every condition to the Seller’s obligations hereunder to purchase Project Components and to cause the Bank to make Advances pursuant to the Assignment Agreement, and the Seller further represents, warrants and agrees that that the Seller may not waive any such condition without the prior written consent of the Bank.

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ARTICLE III ADVANCES; ACQUISITION AND

CONSTRUCTION OF THE PROJECT Section 3.01. Advances. (a) In order to provide funds for the acquisition, construction,

installation, improvement and delivery of each Project Component, the Seller agrees to cause the Bank, pursuant to the Assignment Agreement, subject to the terms and conditions of this Installment Sale Agreement, in consideration of the assignment of Seller’s rights hereunder, to advance to the Purchaser, as agent of the Seller, from time to time on any applicable Purchase Date which is a Business Day occurring during the Advance Period, in amounts not to exceed at any time outstanding the Available Commitment, an amount equal to the Purchase Price of such Project Component. Within the limits of this Section 3.01, the Purchaser may borrow, repay pursuant to Section 4.04 hereof and reborrow under this Section 3.01. Upon any prepayment of any Principal Portion of the Installment Payments, the Available Commitment shall be reinstated as set forth in the definition thereof. Upon receipt of an Advance Request by the Bank not later than 12:00 noon (New York City time) on the Business Day which is three Business Days’ immediately prior to the Purchase Date set forth therein, the Seller subject to the terms and conditions of this Installment Sale Agreement, shall cause the Bank, pursuant to the Assignment Agreement, to make an Advance by 2:30 p.m. (New York City time) on such day for the account of the Purchaser in an amount equal to the amount of the requested Advance. With respect to any such Advance Request received by the Bank after 12:00 noon (New York City time) on any Business Day, the Bank shall be required to make such Advances by 2:30 p.m. (New York City time) on the fourth Business Day following receipt. Any Advance Request shall be signed by a Purchaser Representative. All Advance Requests are irrevocable. All Advance Requests shall be delivered to the Bank by facsimile or electronic mail to the facsimile number or electronic mail address, respectively, set forth in Section 10.01 hereof with respect to the Bank for payment and disbursement. Each Advance shall be made by the Bank by wire transfer of immediately available funds directly into the Project Fund. Each Advance shall be made from the Bank’s own funds. If, after examination, the Bank shall have determined that a request for advance does not conform to the terms and conditions hereof, then the Bank shall use its best efforts to give notice to the Purchaser to the effect that negotiation was not in accordance with the terms and conditions hereof and stating the reasons therefor. The Purchaser may attempt to correct any such nonconforming request for advance, if, and to the extent that, the Purchaser is entitled (without regard to the provisions of this sentence) and able to do so.

(b) Conditions Precedent to Effectiveness. The effectiveness of this Installment Sale

Agreement shall be subject to the following conditions precedent:

(i) Documentation. The Purchaser shall have delivered to Bank duly executed originals (or, where authorized, counterpart originals) of the following:

(A) This Installment Sale Agreement; (B) The Assignment Agreement; (C) Certified copies of Resolution No. 2011-57 of the Purchaser and

Resolution No. 2011-1 of the Seller, each adopted on May 24, 2011; (D) Certified copies of legally required filings relating to the Seller and

otherwise in form reasonably acceptable to the Bank, including without limitation,

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a “Roster of Facts, Public Agencies” and the most recent “Notice of Joint Powers Amendment” with the California Secretary of State;

(E) Certified copies of the proceedings of the City Council of the City

approving the 3.5% wastewater rate adjustment effective March 1, 2010 and the five-year operations and maintenance wastewater rate increases commencing March 1, 2011;

(F) All Financing Documents not specifically listed above; and (G) Such authorization documents, financial statements, incumbency

certificates and opinions as the Bank may reasonably require; and

(ii) Compliance. The Purchaser shall have performed and complied with all terms and conditions required by this Installment Sale Agreement to be performed or complied with, including (without limitation) the payment in full of any fees or other charges due to be paid to Bank on or before the first Purchase Date.

(iii) Authorization to Obtain Credit. The Purchaser shall have provided Bank

documentation (in the form of an approving resolution of the Purchaser and appropriate closing certificates) in form and substance satisfactory to Bank demonstrating that Purchaser is duly authorized to execute, deliver and perform this Installment Sale Agreement and the other Financing Documents, all representations and warranties of the Purchaser contained herein and in each of the other Financing Documents and each certificate, letter, other writing or instrument delivered by the Purchaser to the Bank pursuant hereto or thereto are true and correct on and as of the Closing Date as though made on and as of such date and no Default or Event of Default under this Installment Sale Agreement has occurred and is continuing or would result from the execution and delivery of this Installment Sale Agreement or the Seller’s commitment under Section 3.01 hereof to cause the Bank, pursuant to the Assignment Agreement, to make Advances. Such documentation shall also designate the persons who are authorized to act on Purchaser’s behalf in connection with this Installment Sale Agreement to do the things required of Purchaser pursuant to this Installment Sale Agreement.

(iv) Opinions. The Purchaser shall have delivered to Bank the favorable

written opinions of bond counsel and counsel to the Purchaser and the Seller satisfactory to Bank which opinion shall be addressed to Bank and cover such matters as Bank may require, including (without limitation) (i) due execution and enforceability of this Installment Sale Agreement, the Assignment Agreement and each of the other Financing Documents, (ii) the validity of the pledge of the Collateral and the priority of the lien provided for herein, and (iii) the exclusion of the Interest Portions of the Installment Payments from gross income for federal income tax purposes and exemption of such Interest Portions from State personal income taxes.

(v) Fees and Expenses. The Purchaser shall have paid (or the Bank shall be reasonably satisfied that payment thereof will be made promptly after the Closing Date) the fees and expenses of counsel to the Bank as agreed upon by the Purchaser in a separate writing by payment of such amounts directly to the Bank’s counsel.

(vi) SRF Loans. The documentation in connection with the SRF Loans shall

be in form and substance satisfactory to the Bank.

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(vii) Financial Statements. The Purchaser shall have delivered to the Bank a

copy of the audited financial statements for the System for Fiscal Years ending June 30, 2010, 2009 and 2008, a copy of the Purchaser’s investment policy in effect on the Closing Date and a copy of the most recent operating budget of the System.

(viii) Assignment and Pledge. All necessary action on the part of the

Purchaser shall have been taken as required for the assignment and pledge of and the lien on the Collateral, granted hereunder, with the priority provided for herein, for the benefit of the Bank.

(ix) No Default or Event of Default. No Default or Event of Default under this

Installment Sale Agreement has occurred and is continuing. (x) No Litigation. There are no actions, suits, or proceedings pending with

service of process accomplished or, to the best knowledge of the Purchaser after due inquiry, threatened against or affecting Purchaser by or before any court, arbitrator, or administrative or governmental body which (a) if determined adversely to the Purchaser could adversely affect the Purchaser’s ability to timely perform its obligations under the Parity Debt, this Installment Sale Agreement or any Financing Document to which Purchaser is party or could result in a material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System, (b) relate to the execution, delivery or performance by the Purchaser of this Installment Sale Agreement or any Financing Document or the validity or enforceability hereof or thereof or the pledge of the Collateral or the priority of any lien provided for herein, and (c) in any way affects the existence, organization or powers of the Purchaser or any elected official thereof or the title of any official of the Purchaser to such Person’s office.

(xi) No Material Adverse Change. Since June 30, 2010, there has been no

material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System; the Bank has not become aware of any information affecting the Purchaser or the System or the transactions contemplated by this Installment Sale Agreement and the other Financing Documents which is inconsistent in a material manner with what has been previously disclosed to the Bank and such information is true and correct in all material respects; and there is no situation occurring which would, in the opinion of the Bank, materially adversely affect the Purchaser or the System or the transactions contemplated by this Installment Sale Agreement and the other Financing Documents.

(xii) Parity Debt. Evidence satisfactory to the Bank that as of the Closing

Date, the only Parity Debt outstanding consists of the SRF Loans described in clauses (i) and (ii) of the definition thereof contained in Appendix A hereto and no debt service reserve accounts exist that are exclusively available to any such Parity Debt.

(xiii) Insurance. Evidence satisfactory to the Bank that the Purchaser

maintains with responsible insurers all such insurance on the System or otherwise maintains all self-insurance or other risk management arrangements required by Section 5.05 hereof and evidence satisfactory to the Bank that the Bank will receive thirty (30) days prior notice of any cancellation of any such insurance policy, self-insurance or risk management arrangement and evidence satisfactory to the Bank that all premiums

11

necessary to be paid for the effectiveness of such insurance, self-insurance and risk management arrangements have been paid by the Purchaser.

(xiv) Other Legal Matters. All other legal matters pertaining to the execution

and delivery of each of the Financing Documents shall be reasonably satisfactory to the Bank and the Bank shall have received such other documents, certificates, opinions, approvals and filings with respect to this Installment Sale Agreement and the other Financing Documents as the Bank may reasonably request. (c) Conditions Precedent to Advances. The Seller’s obligation pursuant to this

Section 3.01 to cause the Bank to make each Advance shall be subject to the following conditions precedent:

(i) Documentation. The Purchaser shall have delivered to Bank an Advance

Request signed by a Purchaser Representative not later than 12:00 noon (New York City time) on the Business Day which is three Business Days’ immediately prior to the Purchase Date set forth therein.

(ii) Compliance. The Purchaser shall have performed and complied with all

terms and conditions required by this Installment Sale Agreement to be performed or complied with, including (without limitation) the payment in full of any fees or other charges due to be paid to Bank on or before each Advance required by Section 3.01 or any portion thereof.

(iii) Continuing Compliance. At the time any Advance is to be made and as a

result thereof, immediately thereafter, all representations and warranties of the Purchaser set forth in Section 2.01 hereof are true and correct as though made on the date of the applicable Advance Request and on the Purchase Date set forth therein and there shall not exist any Default or Event of Default.

(iv) Commitment. The Seller’s obligation pursuant to this Section 3.01 to

cause the Bank to make Advances shall not have terminated pursuant to Section 8.02 hereof.

(v) Limitations on Amount and Frequency. Seller’s obligation to purchase

Project Components shall be limited to one (1) Purchase Date per calendar month and only on an Interest Rate Reset Date, and in no event shall the aggregate Purchase Price of the Project Component purchased on any one Purchase Date be less than $500,000.

(vi) Available Commitment. The aggregate amount of Advances made on

any Purchase Date shall not exceed the applicable Available Commitment (calculated without giving effect to any Advances made on such date) at 9:00 a.m. (New York City time) on such date.

Unless the Purchaser shall have otherwise previously advised the Bank in writing,

delivery to the Bank of an Advance Request shall be deemed to constitute a representation and warranty by the Purchaser that on the date of such Advance Request and on the Purchase Date set forth therein each such condition is satisfied.

Section 3.02. Purchaser as Agent. The Seller hereby irrevocably appoints the

Purchaser as its agent for the purpose of acquiring, constructing, installing, improving and

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delivering to the Purchaser, the Project Components specified in any Advance Requests delivered hereunder. In order to provide funds for the acquisition, construction, installation, improvement and delivery of each such Project Component, the Seller agrees to cause the Bank, pursuant to the Assignment Agreement, in consideration of the assignment of its rights hereunder, to make an Advance to the Purchaser, as agent for the Seller, under Section 3.01 hereof on the applicable Purchase Date, an amount equal to the Purchase Price of such Project Component. The Purchaser hereby accepts such appointment and, subject to the receipt of the aforesaid funds from the Bank, agrees to acquire, construct, install, improve and deliver the Project Components as aforesaid.

Section 3.03. Project Fund. The Purchaser shall establish and at all times maintain a

fund known as the “2011 Line of Credit Project Fund” (the “Project Fund”) in an account for that express purpose, which shall be clearly identified on the books and records of the Purchaser. The Purchaser shall deposit each Advance in the Project Fund to be applied as provided in this Section 3.03 and Section 3.04. The Project Fund shall not, to the extent permitted by applicable law, be subject to levy or attachment or lien by or for the benefit of any creditor of any of the parties hereto. The cash in the Project Fund from time to time shall be invested and reinvested by the Purchaser in Permitted Investments. Interest earnings of funds held in the Project Fund shall be retained therein and used for the purposes thereof. Wire instructions for the Project Fund shall be as follows:

Bank of America San Francisco Routing #: 0260-0959-3 Account: 00513-80200 Beneficiary: City Of Vacaville The Project Fund may be moved to another depository bank provided that the Purchaser

shall give written notice to the Bank containing the new wire instructions, at least two Business Days in advance of such move.

Section 3.04. Payment of Project Costs. The Purchaser shall use amounts on deposit

in the Project Fund in its discretion, as agent for the Seller, to pay Project Costs. The Purchaser hereby covenants to pay necessary Project Costs in excess of amounts available in the Project Fund from any legally available source of funds.

Section 3.05. Quarterly Facility Fee. The Purchaser shall pay to Bank a nonrefundable

facility fee equal to 25 basis points (0.25%) per annum of the daily average Available Commitment in effect from time to time during the Advance Period, calculated on the basis of a 360-day year and actual days elapsed. The facility fee shall be payable quarterly in arrears and shall be due in installments on or before each Installment Payment Date and on the Termination Date, provided that no installment of the facility fee shall be due fewer than five (5) Business Days after the date on which the Purchaser receives an invoice for the amount due. Each facility fee installment shall be for the period of three calendar months ending immediately prior to each Installment Payment Date, and shall be calculated as the sum of the daily facility fees for each day of the Advance Period occurring during such three-month period. The daily facility fee for each day shall be calculated as the Available Commitment for such day multiplied by 25 basis points (0.25%) and dividing the resulting product by 360. If the Advance Period shall cover less than the entirety of any such three-month period, the corresponding installment of the facility fee shall be prorated accordingly.

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ARTICLE IV SALE OF PROJECT COMPONENTS;

TERM OF THE INSTALLMENT SALE AGREEMENT; INSTALLMENT PAYMENTS Section 4.01. Sale of Project Components. (a) Upon receipt of an Advance Request,

the Seller hereby agrees to sell, bargain and convey to the Purchaser the Project Component described in such request. The Purchaser hereby agrees to purchase such Project Component from the Seller upon the terms and conditions set forth in this Installment Sale Agreement. The Purchaser shall specify the Purchase Price for each Project Component in the Advance Request therefor. The Purchaser shall pay the Purchase Price for each Project Component in Installment Payments as provided in Section 4.04 hereof. The Purchaser may at any time, whether on, before or after a Purchase Date, amend the description in the related Advance Request of a Project Component or portion thereof to a different capital asset or assets of the Enterprise Fund of equal cost; and the Project Component purchased on such Purchase Date shall thereafter be deemed to be the capital asset described in the amended Advance Request.

(b) The Seller shall deliver or cause to be delivered to the Purchaser each Project

Component in the time and manner directed by the Purchaser. Title to each Project Component shall be vested in the Purchaser on the applicable Purchase Date. The Seller shall take all actions necessary to vest in the Purchaser all of the Seller's rights in and title to such Project Component.

(c) Notwithstanding any contrary provision of this Installment Sale Agreement, the

sum of the Principal Portions that remain outstanding and unpaid at any one time shall not exceed Twenty Million Dollars ($20,000,000). If at any time such limit is reached during the term of this Installment Sale Agreement, the Seller shall not sell and the Purchaser shall not purchase additional Project Components (and the Bank shall have no obligation to make Advances on behalf of the Seller pursuant to the Assignment Agreement) until unpaid Principal Portions are repaid, causing the outstanding and unpaid Principal Portions to be less than the aforesaid limit.

Section 4.02. Extension of Maturity Date and Commitment Expiration Date. (a) The Purchaser may request an extension of the Maturity Date and the

Commitment Expiration Date not more than 180 days prior to the then current Maturity Date and Commitment Expiration Date. Any extended Maturity Date or Commitment Expiration Date must occur on an Interest Rate Reset Date. The Bank will make reasonable efforts to respond to such request within 90 days after receipt of all information necessary, in the Bank’s judgment, to permit the Bank to make an informed credit decision. If the Bank fails to definitively respond to such request within such 90-day period, the Bank shall be deemed to have refused to grant the extension requested. The Bank may, in its sole and absolute discretion, decide to accept or reject any such proposed extension and no extension shall become effective unless the Bank shall have consented thereto in writing. The Bank’s consent, if granted, shall be conditioned upon the preparation, execution and delivery of documentation in form and substance satisfactory to the Bank, including, without implied limitation, an opinion of counsel nationally recognized in the area of tax-exemption of municipal bonds to the effect that the extension of the Maturity Date and the Commitment Expiration Date will not in and of itself adversely affect the exclusion of the Interest Portions from gross income for federal income tax purposes, or a new approving tax opinion of such counsel.

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(b) The Available Commitment shall be reduced from time to time as requested by the Purchaser within three (3) days of the Purchaser’s written notice to the Bank requesting such reduction; provided, that (i) each such reduction amount shall be in an amount equal to $1,000,000 or an integral multiple thereof, and (ii) any reduction in the Available Commitment shall not be effective until the Bank delivers to the Purchaser a notice reflecting such reduction.

(c) The Purchaser may at any time and at its sole option terminate the Seller’s

obligation under Section 3.01 hereof to cause the Bank to make Advances upon three (3) days’ prior written notice to the Bank. As a condition to any such termination, the Purchaser shall pay or cause to be paid all Installment Payments and all other amounts due hereunder.

Section 4.03. Term of Installment Sale Agreement. The Term of this Installment Sale

Agreement shall commence as of the Closing Date hereof and shall end on the Maturity Date, unless such term is extended or sooner terminated as hereinafter provided, or unless the Purchaser has not paid all Installment Payments and other amounts due hereunder through such date, in which case this Installment Sale Agreement shall be deemed to be extended until such time as all such payments and other amounts owing hereunder shall have been paid or deemed to have been paid as provided herein.

Section 4.04. Installment Payments. (a) Obligation to Pay. The Purchaser agrees to pay to the Seller, its successors and

assigns, on the Installment Payment Dates, the Purchase Price for each Project Component, in Installment Payments consisting of interest (each, an “Interest Portion”) and principal (each, a “Principal Portion”), in the amounts specified in or calculated under this Installment Sale Agreement. The Installment Payments shall be payable solely from Net Revenues as hereinafter provided, except Interest Portions may be paid from amounts in the Project Fund that are not needed for Project Costs.

(b) Calculation. Each Installment Payment shall consist of an Interest Portion and, if

applicable, a Principal Portion. The Principal Portion of each Installment Payment for a Project Component shall be due on the Maturity Date. The Interest Portion of each Installment Payment for a Project Component shall be determined in accordance with the interest calculation methodology set forth in Exhibit C hereto. The entire Purchase Price for a Project Component including accrued interest shall be paid on or before the Maturity Date.

(c) Reduction Upon Partial Prepayment. In the event the Purchaser prepays less

than all of the remaining Principal Portions of the Installment Payments pursuant to Sections 9.02 or 9.03 hereof, the amount of such prepayment shall be applied to the outstanding Principal Portions of the Installment Payments. Any such partial prepayment shall be applied against the remaining Installment Payments to be made hereunder and will be reflected in the quarterly statements of account from the Bank. Absent manifest error, the application of such partial prepayment against the remaining Installment Payments as computed by the Seller and set forth in the quarterly statements of account shall be conclusive and binding.

(d) Rate on Overdue Payments. In the event the Purchaser should fail to make any

of the payments required in this Section 4.04 on or before the due date therefor, the Installment Payment in default shall continue as an obligation of the Purchaser until the amount in default shall have been fully paid and the Purchaser agrees to pay the same with interest thereon, to

15

the extent permitted by law, from the date thereof at a rate per annum equal to the Interest Rate plus 300 basis points (3.00%).

(e) Intentionally Omitted. (f) Break-Funding Payments. In the event of the payment of any Principal Portion of

an Installment Payment other than on an Interest Rate Reset Date (including as a result of an Event of Default and/or acceleration), then, in any such event, the Purchaser shall compensate the Bank for the loss, cost and expense attributable to such event. Such loss, cost or expense to the Bank shall be deemed to include an amount determined by the Bank to be the excess, if any, of (i) the amount of interest which would have accrued on such Principal Portion had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Principal Portion, for the period from the date of such event to the day immediately preceding the next Interest Rate Reset Date, over (ii) the amount of interest which would accrue on such Principal Portion for such period at the interest rate which the Bank would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of the Bank setting forth any amount or amounts that the Bank is entitled to receive pursuant to this Section 4.04(f) shall be delivered to the Purchaser and shall be conclusive absent manifest error. The Purchaser shall pay the Bank the amount shown as due on any such certificate within 10 days after receipt thereof.

(g) Default Rate. Any and all amounts remaining unpaid when due under this

Agreement shall bear interest at the Default Rate until repaid and shall be payable upon demand. Any such amounts which constitute interest remaining unpaid when due shall be added to principal, and such interest shall, in turn, bear interest at the Default Rate until repaid and shall be payable upon demand. Any sum payable by the Purchaser to the Bank hereunder upon the occurrence or during the continuance of any Event of Default hereunder shall bear interest at the Default Rate.

(h) Late Charge. Any principal or interest which is not paid within 10 days after its

due date (whether as stated, by acceleration or otherwise) shall be subject to a late payment charge of five percent (5.00%) of the total payment due, in addition to the payment of interest, up to the maximum of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge. The Purchaser agrees to pay and stipulates that five percent (5.00%) of the total payment due is a reasonable amount for a late payment charge. The Purchaser shall pay the late payment charge upon demand by the Bank or, if billed, within the time specified.

(i) Maximum Rate. To the extent permitted by law, in the event that a rate of

interest required to be paid by the Purchaser under this Installment Sale Agreement or any other Financing Document shall exceed a maximum rate established by law, any subsequent reduction in the rate of interest required to be paid by the Purchaser hereunder or under any other Financing Document will not reduce the rate of interest below the maximum rate established by law until the total amount of interest accrued equals the amount of interest which would have accrued if the rate of interest required hereunder or under any other Financing Document (without giving effect to this paragraph) had at all time been in effect. Upon the date on which all Installment Payments and all other amounts payable hereunder or under the other Financing Documents are due and payable, and otherwise immediately upon the Maturity Date, in consideration for the limitation of the rate of interest otherwise payable under this Installment Sale Agreement or any other Financing Document, the Purchaser shall pay to the Bank a fee equal to the amount of all such unpaid interest which would have accrued if the rate of interest

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required hereunder or under any other Financing Document (without giving effect to this paragraph) had at all times been in effect.

Section 4.05. Special Obligation of the Purchaser. The Purchaser's obligation to pay

the Installment Payments shall be a special obligation limited solely to Net Revenues. Under no circumstances shall the Purchaser be required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the Installment Payments, nor shall any other funds or property of the Purchaser be liable for the payment of the Installment Payments.

The obligations of the Purchaser to make the Installment Payments from Net Revenues

and to perform and observe the other agreements contained herein shall be absolute and unconditional in all events and shall not be subject to any defense or any right of set-off, counterclaim or recoupment arising out of any breach by the Purchaser or the Seller of any obligation to the Purchaser or otherwise with respect to the Project or the System, whether hereunder or otherwise, or out of any indebtedness or other liability at any time owing to the Purchaser by the Seller. Until such time as all of the Installment Payments shall have been fully paid or prepaid, the Purchaser (a) will not suspend, abate, or discontinue any payments provided for in Section 4.04 hereof, (b) will perform and observe all other agreements contained in this Installment Sale Agreement, and (c) will not terminate the Term of this Installment Sale Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Project or the System, the taking by eminent domain of title to or temporary use of any or all of the Project or the System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either thereof or any failure of the Seller to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Sale Agreement.

Nothing contained in this Section 4.05 shall be construed to release the Seller from the

performance of any of the agreements on its part herein contained, and in the event the Seller shall fail to perform any such agreements on its part, the Purchaser may institute such action against the Seller as the Purchaser may deem necessary to compel performance so long as such action does not abrogate the obligations of the Purchaser contained in the first sentence of the preceding paragraph. The Purchaser may, however, at the Purchaser's own cost and expense and in the Purchaser's own name or in the name of the Seller prosecute or defend any action or proceeding or take any other action involving third persons which the Purchaser deems reasonably necessary in order to secure or protect the Purchaser's right of possession, occupancy and use hereunder, and in such event the Seller hereby agrees to cooperate fully with the Purchaser and to take such action necessary to effect the substitution of the Purchaser for the Seller in such action or proceeding if the Purchaser shall so request.

Section 4.06. Pledge of Collateral; Application of Gross Revenues. (a) Pledge of Collateral. All of the Collateral, including all Gross Revenues in any fund

or account in which they are placed, are hereby irrevocably pledged to the punctual payment and full performance of the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller), and the Collateral shall not be used for any other purpose while any of the Installment Payments remain unpaid or any of such other Obligations remain unpaid or unperformed, except that out of the Gross Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by this Section 4.06.

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This pledge shall constitute a lien on all of the Collateral for the payment of the Installment Payments and the other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller) in accordance with the terms hereof and any other Financing Document, provided, that any other Parity Debt now outstanding or hereafter incurred in accordance herewith shall be equally and ratably secured by said pledge and lien without priority of any of the Installment Payments or such other Obligations or any other Parity Debt over any of the others. This pledge and lien is intended to and shall be parity in all respects to any lien of the SRF Loans on Gross Revenues.

(b) Receipt, Deposit and Investment of Revenues. In order to carry out and effectuate

the pledge contained in subsection (a) of this Section 4.06, the Purchaser agrees and covenants that all Gross Revenues shall be received by the Purchaser in trust and shall be deposited when and as received in a special fund (the “Enterprise Fund”) that the Purchaser agrees and covenants to maintain throughout the term of this Installment Sale Agreement. All moneys in the Enterprise Fund shall be so held in trust and applied and used solely as provided herein. All such Gross Revenues shall be disbursed, allocated and applied solely to the uses and purposes hereinafter set forth in this Section 4.06, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the Purchaser. The cash in the Enterprise Fund from time to time shall be invested and reinvested by the Purchaser in Permitted Investments. Investment earnings of amounts held in the Enterprise Fund shall be deposited therein as Gross Revenues and shall be used as provided in subsection (c).

(c) Use and Withdrawal of Revenues. All Gross Revenues in the Enterprise Fund shall

be set aside or expended by the Purchaser in the following order of priority, each such use to be fully paid or provided for prior to the application to the next item in the below list:

(1) Operation and Maintenance Expenses. Operation and Maintenance

Expenses shall be paid from time to time as they arise. (2) Parity Debt Service. The Installment Payments and all other Parity Debt

Service and payments relating to Parity Debt shall be paid or provided for in accordance with the terms of this Installment Sale Agreement and such Parity Debt, without preference or priority, and in the event of any insufficiency of such moneys, ratably based on the respective principal amounts (including any accreted value) without any discrimination or preference.

Following the payment or provision for payment of amounts referenced in (1) and

(2) above: (3) Reserve Accounts. To make payments required to replenish any reserve

accounts established for Parity Debt in accordance with the terms of such Parity Debt, without preference or priority, and in the event of any insufficiency of such moneys, ratably based on the respective principal amounts (including any accreted value) without any discrimination or preference.

(4) Other Lawful Purposes. For any lawful purpose of the Purchaser, including,

but not limited to, paying any costs of capital improvements to the System, providing for the repayment of any Subordinate Debt and providing for reserves in connection therewith.

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Section 4.07. Rate Covenant. The Purchaser hereby covenants, to the fullest extent permitted by law, to establish,

maintain and collect rates and charges for the System sufficient to yield Net Revenues in each Fiscal Year in an amount equal to one hundred and twenty percent (120%) of annual Parity Debt Service for such Fiscal Year and at least one hundred percent (100%) of annual Debt Service for such Fiscal Year (the “Required Coverage Ratio”).

Section 4.08. Limitations on Future Obligations Secured by Gross Revenues.

(a) No Obligations Superior to Installment Payments. In order to protect further the availability of the Net Revenues and the security for the Installment Payments and any Parity Debt, the Purchaser hereby agrees that the Purchaser shall not, so long as any Installment Payments remain unpaid and outstanding, issue, incur or allow to exist any obligations payable from Net Revenues on a priority superior to the Installment Sale Agreement or any Parity Debt.

(b) Parity Debt. The Purchaser may issue or incur Parity Debt during the Term hereof, if at the time of such issuance or incurrence it satisfies the following requirements:

(i) No Default or Event of Default has occurred and is continuing; (ii) The Net Revenues, calculated in accordance with sound

accounting principles, as shown by the books of the Purchaser for the most recently completed Fiscal Year for which audited financial statements of the Purchaser are available, or for any more recent consecutive 12 month period selected by the Purchaser, in either case verified by an Independent Accountant or a Financial Consultant or shown in the audited financial statements of the Purchaser, plus (at the option of the Purchaser) any Additional Revenues, are at least equal to 125% of Maximum Annual Parity Debt Service (taking into account the Parity Debt then proposed to be issued);

(iii) Such Parity Debt is issued or incurred to finance or refinance the

costs of capital improvements to the System; (iv) The instrument or agreement providing for the issuance or

incurrence of such Parity Debt (x) shall provide that such Parity Debt is secured by a lien on Gross Revenues on a parity with the lien hereof, (y) shall not provide for funding or replenishment of a debt service reserve (pledged solely to or available solely for debt service on such Parity Debt) from Gross Revenues on a parity with or senior to the payment of Installment Payments and all other Parity Debt Service and payments relating to Parity Debt or in any way contrary to the provisions of Section 4.06(c) hereof and (z) shall not otherwise contain any terms inconsistent with the rights of the Bank hereunder, including without limitation, under Section 4.06 hereof;

(v) The issuance or incurrence of such Parity Debt or compliance with

the terms thereof shall not cause the Purchaser to violate or breach any provision of this Installment Sale Agreement, including without limitation, Section 4.06 hereof;

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(vi) No capital reserve or capital replacement fund or other reserve

required under any Parity Debt shall have been drawn and not yet replenished; and

(vii) The Bank shall have received substantially final forms of the Parity

Debt and any instrument or agreement providing for the issuance or incurrence of such Parity Debt and a certificate of the Purchaser (the “Additional Debt Certificate”) certifying that the conditions precedent to the issuance of such Parity Debt set forth in this Section 4.08(b) have been satisfied (except to the extent the Purchaser need not satisfy the condition precedent in Section 4.08(b)(ii) as provided in Section 4.08(e) below);

provided, however, that for purposes of any proposed instrument or agreement that is a Draw-Down Obligation (including without limitation any SRF Loan), the Purchaser shall not enter into any such instrument or agreement unless the conditions precedent to the issuance or incurrence of Parity Debt are satisfied with the assumption that the maximum amount of all draws or advances authorized thereunder are fully issued or incurred at the time such instrument or agreement is entered into by the Purchaser. In addition, for any instrument or agreement that is a Draw-Down Obligation (including without limitation any SRF Loan) in which the initial draw or advance to make payment on a related Principal Contract is to occur more than ninety (90) days after the Closing Date hereof, the Purchaser shall deliver to the Bank (i) an additional Additional Debt Certificate, dated no earlier than ten (10) Business Days prior to the formal award of each Principal Contract relating to the project to be financed by such Draw-Down Obligation, which Additional Debt Certificate shall assume that the maximum amount of all draws or advances authorized under such Draw-Down Obligation are fully issued or incurred on the date of such Additional Debt Certificate, and (ii) if such Principal Contract is a Design-Build Contract, another Additional Debt Certificate, dated no earlier than ten (10) Business Days prior to the commencement of construction of such project, which Additional Debt Certificate shall assume that the maximum amount of all draws or advances under such Draw-Down Obligation were fully issued or incurred on the date of such Additional Debt Certificate. The Purchaser agrees not to seek or accept any draws or advances on any such Draw-Down Obligation to make payment on the related Principal Contract until such second Additional Debt Certificate has been delivered to the Bank. If the Principal Contract is a Design-Build Contract, the Purchaser further agrees not to seek or accept any draws or advances on any such Draw-Down Obligation to make payment for construction costs under such Design-Build Contract until such third Additional Debt Certificate has been delivered to the Bank. (c) Other Debt. The Purchaser will not be or become indebted for borrowed

money, the deferred purchase price of property, leases which would be capitalized in accordance with generally accepted accounting principles for government entities consistently applied, or become liable as a surety, guarantor, accommodation party or otherwise for or upon the obligation of any other Person except as provided above in this Section 4.08 and except that the Purchaser may become indebted for borrowed money that is not secured by any assets or revenues securing the Installment Payments or that is subordinated to the Installment Payments.

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(d) Refunding Debt. Notwithstanding the foregoing provisions of this

Section 4.08, the Purchaser may incur Parity Debt if the proceeds will be used to pay all outstanding Installment Payments and all other Obligations owed to the Bank.

(e) Certain Anticipated SRF Loans. Notwithstanding the foregoing provisions of

this Section 4.08, the Purchaser may incur the SRF Loans described in clause (iii) of the definition thereof set forth in Appendix A hereto in an aggregate principal amount not to exceed Forty Million Dollars ($40,000,000) without the need to satisfy the requirements of subsection (b)(ii) of this Section. Any such SRF Loans in excess of that amount must satisfy all of the requirements of either subsection (b), (c) or (d) of this Section.

Section 4.09. Liquidity. The Purchaser shall maintain Unrestricted Cash and

Investments of at least Ten Million Dollars ($10,000,000) on deposit in the Enterprise Fund, measured on each June 30 and each December 31, commencing December 31, 2011.

Section 4.10. Payments Generally. The Purchaser shall make each payment required to

be made by it hereunder (whether of principal, interest, fees or Installment Payments, or of amounts payable hereunder) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Bank, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Bank at its offices at 560 Mission Street, 4th Floor, San Francisco, California 94105. The Bank shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. To effectuate any payment required to be made by the Purchaser hereunder, the Purchaser hereby authorizes the Bank to initiate debit entries to the Bank Account and to debit the same to the Bank Account. This authorization to initiate debit entries shall remain in full force and effect until the Bank has received written notification from the Purchaser of its termination in such time and in such manner as to afford the Bank a reasonable opportunity to act on it. The Purchaser represents that the Purchaser is and will be the owner of all funds in the Bank Account. The Purchaser acknowledges: (a) that such debit entries may cause an overdraft of such account which may result in the Bank’s refusal to honor items drawn on such account until adequate deposits are made to such account; (b) that the Bank is under no duty or obligation to initiate any debit entry for any purpose; and (c) that if a debit is not made because of the above-referenced account does not have a sufficient available balance, or otherwise, the payment may be late or past due. The Bank shall maintain in accordance with its usual practices an account or accounts evidencing the indebtedness resulting from each Advance made from time to time hereunder and the amounts of the Interest Portions and Principal Portions of each Installment Payment payable and paid from time to time hereunder. In any legal action or proceeding in respect of this Installment Sale Agreement or the other Financing Documents, the entries made in such account or accounts shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations therein recorded.

Section 4.11. Bank Account. The Purchaser shall establish and at all times maintain an

account at the Bank known as the “2011 Line of Credit Bank Account” (the “Bank Account”). The Bank Account shall not, to the extent permitted by applicable law, be subject to levy or

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attachment or lien by or for the benefit of any creditor of any of the parties hereto. The cash in the Bank Account from time to time shall be invested and reinvested by the Purchaser in Permitted Investments described in clauses (a)-(i) of Section 53601 of the California Government Code as in effect on the Closing Date and shall in no event include investment agreements or investment contracts. Interest earnings of funds held in the Bank Account shall be retained therein and used for the purposes thereof. In order to carry out the Purchaser’s payment obligations under Section 4.10 hereof, the Purchaser agrees and covenants to transfer to the Bank Account from time to time Gross Revenues or other available monies sufficient to pay the amount of any Installment Payments and all other amounts due and payable to the Bank under this Installment Sale Agreement not later than the Business Day prior to the day any such amounts are due and payable. The Bank Account and all Gross Revenues or other monies on deposit in the Bank Account shall be subject to the pledge provided for in Section 4.06(a) hereof and shall be applied and used solely for payment of the Installment Payments and all other amounts payable to the Bank under this Installment Sale Agreement.

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ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS

Section 5.01. Discharge Claims. The Purchaser covenants that in order to preserve

and protect fully the priority and security of the Installment Payments, the Purchaser shall pay and discharge all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Collateral or any part thereof or on any funds in the hands of the Purchaser equal or superior to the lien of the Installment Payments or which might impair the security of the Installment Payments. The Purchaser shall also pay from Net Revenues, any taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the System or upon any part thereof or upon any of the Collateral, and duly observe and conform to all valid requirements of any governmental authority relative to any such properties. The Purchaser will not create, assume or suffer to exist any lien on or pledge of any of the assets securing the Installment Payments, except liens or pledges in favor of Bank under the Financing Documents or liens or pledges with respect to Parity Debt authorized hereunder. Notwithstanding the foregoing provisions of this Section 5.01, the Purchaser may contest any such claims, taxes, assessments, charges or requirements if done so in good faith so long as the payments by the Purchaser of any Parity Debt Service is not impaired. The Purchaser shall take all necessary action to maintain and preserve the lien on and security interest in the Collateral securing the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller) and the payment and performance of the Purchaser’s obligations hereunder and under the other Financing Documents.

Section 5.02. Operate System in Efficient and Economical Manner. The Purchaser

covenants and agrees to operate or cause to be operated the System in an efficient and economical manner and to operate, maintain and preserve, or cause to be operated, maintained and preserved, the System and all other properties and assets in good repair and working order and will pay all Operation and Maintenance Expenses as they become due and payable.

Section 5.03. Against Sale. The Purchaser covenants that neither the System as a

whole or substantially as a whole nor any property that is a part thereof which is essential to its proper operation or to the maintenance of the Gross Revenues shall be mortgaged or otherwise encumbered, sold, leased, pledged, any charge placed thereon, or disposed of unless such sale or other disposition be so arranged as to provide for the payment and discharge of the Installment Payments in their entirety or unless such sale or other disposition is in connection with a Permitted Installment Sale Transaction. None of the Bank Account, the Gross Revenues nor any fund or account in which Gross Revenues are placed shall be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed of or used except as otherwise expressly authorized by Section 4.06(c), 5.11(c) and 5.31 of this Installment Sale Agreement and except for any liens and encumbrances securing debt permitted to be issued pursuant to Section 4.08 hereof. The Purchaser shall not pledge, grant, assign, or undertake or not take any action that would result in the creation of a lien or encumbrance on or security interest in, nor grant a negative pledge in favor of any third party covering, the Bank Account or amounts on deposit therein. The Purchaser further covenants that it will not enter into any agreement or transaction, including one selling or otherwise disposing of nonessential property included as part of the System, which impairs the operation of the System or any part of the System necessary to secure adequate Net Revenues to pay the Installment Payments and all Parity Debt, or which otherwise would materially impair the rights of the Purchaser with respect to the Collateral or the operation of the System.

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Section 5.04. Eminent Domain. If all or any part of the System shall be taken by eminent domain proceedings or conveyance in lieu thereof, the net proceeds realized by the Purchaser therefrom shall be deposited in a special separate segregated fund, held in trust by the Purchaser, and be applied and disbursed by the Purchaser subject to the following conditions:

(a) Subject to any required use of such moneys to repay Parity Debt, if such

funds are sufficient to provide for the payment of the entire Principal Portions of the Installment Payments and any Parity Debt due or to become due, together with all of the interest due or to become due thereon and prepayment premium thereon, so as to enable the Purchaser to prepay and retire all of the Installment Payments in accordance with Section 9.03 hereof, the Purchaser shall apply such moneys to such prepayment and to the payment of such interest, unless it proceeds in accordance with subsection (b) or subsection (c) of this Section 5.04. Pending the application of such proceeds for such purpose, such moneys may be invested by the Purchaser in Permitted Investments. The balance of such moneys, if any, may be retained by the Purchaser and used for any lawful purpose.

(b) If the Purchaser desires not to apply such proceeds to prepay and retire

the Installment Payments, or if such proceeds are insufficient to provide the moneys required for the purpose set forth in subsection (a) of this Section 5.04, the Purchaser may send to the Seller by registered mail a written notice of the Purchaser advising the Seller of the Purchaser's intent to apply such proceeds for one of the following purposes:

(i) If such written notice sets forth the Purchaser's intent that the proceeds be applied to the cost of additions, betterments, extensions or improvements to the System, the Purchaser shall also send to the Seller a certificate of a Qualified Engineer showing the loss in annual Gross Revenues, if any, suffered, or to be suffered, by the Purchaser by reason of such eminent domain proceedings, together with a general description of the additions, betterments, extensions or improvements to the System then proposed to be acquired or constructed by the Purchaser from such proceeds. If, in the opinion of the Purchaser (evidenced by a written certificate of a Purchaser Representative), which shall be final and conclusive, the additional Gross Revenues to be derived from such additions, betterments, extensions or improvements will sufficiently offset the loss of Gross Revenues resulting from such eminent domain proceedings so that the ability of the Purchaser to meet its obligations hereunder will not be substantially impaired, such proceeds shall be applied as set forth in the request. The Purchaser, in reaching such determination, may rely upon the certificate of a Qualified Engineer. The Purchaser shall hold such proceeds in trust and apply them to the acquisition or construction of the additions, betterments, extensions or improvements substantially in accordance with such Qualified Engineer's certificate. Any balance of such proceeds not required by the Purchaser for the purposes aforesaid shall be deposited into a separate segregated fund for Operation and Maintenance Expenses.

(ii) If such written notice sets forth the Purchaser's intent that such

proceeds be transferred into a separate segregated fund for Operation and Maintenance Expenses upon the ground that such eminent domain proceedings have had no effect, or at the most a relatively immaterial effect, upon the security

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of the Installment Payments and Parity Debt, the Purchaser shall also send to the Seller a certificate of a Qualified Engineer stating that such eminent domain proceedings have not substantially impaired or affected the operation of the System or the ability of the Purchaser to meet all of its obligations hereunder with respect to the payment of the Installment Payments and Parity Debt. Upon receipt of such written notice and such Engineer's certificate, such proceeds shall be deposited into a separate segregated fund for the Operation and Maintenance Expenses.

(c) If such proceeds are not applied to the prepayment and retirement of the

Installment Payments and Parity Debt in accordance with subsection (a) of this Section 5.04, and the Purchaser does not send to the Seller a notice pursuant to subsection (b) of this Section 5.04 within thirty (30) days of its receipt of such proceeds, then the Purchaser shall promptly pay such proceeds to the Seller for application as provided for in Section 9.03(a) hereof.

Section 5.05. Insurance. (a) The Purchaser shall establish and maintain and keep in

force during the term hereof insurance, self-insurance or other risk management arrangements with respect to the System that are customary for governmental entities such as Purchaser. Any commercial insurance shall be written by companies, and any self-insurance or other risk management arrangements shall be, reasonably acceptable to Bank and in such amounts and types as Bank may reasonably request or consent to. All policies of insurance required to be maintained hereunder shall provide that Bank shall be given thirty (30) days written notice of any intended cancellation thereof or reduction of coverage provided thereby.

(b) The Purchaser shall provide to the Bank evidence that all such insurance or risk

management arrangements with respect to the System is in effect promptly upon renewal thereof.

Section 5.06. Reconstruction of System; Application of Insurance Proceeds. If any

useful portion of the System shall be damaged or destroyed, the Purchaser shall, as expeditiously as possible, continuously and diligently pursue or cause to be pursued the reconstruction or replacement thereof, unless the Purchaser shall file with the Seller a written certificate of a Qualified Engineer to the effect that such reconstruction or replacement is not in the interests of the Purchaser and the Seller (and any assignee thereof). The proceeds of any insurance paid on account of such damage or destruction, other than business interruption loss insurance or public liability insurance, shall be deposited by the Purchaser in a special account, held in trust by the Purchaser, and made available for, and to the extent necessary applied to, the cost of such reconstruction or replacement, if any. Pending such application, such proceeds may be invested by the Purchaser in Permitted Investments which mature not later than such times as shall be necessary to provide moneys when needed to pay such cost of reconstruction or replacement. Any balance of such proceeds of insurance not required by the Purchaser for the purposes aforesaid shall be deposited into a separate segregated fund for Operation and Maintenance Expenses.

Section 5.07. Records and Accounts. The Purchaser will keep and maintain full and

accurate accounts and records and prepare all financial statements in accordance with generally accepted accounting principles for government entities consistently applied, and in compliance with the regulations of any governmental or regulatory authority having jurisdiction over the Purchaser; and will permit employees or agents of Bank, at Bank’s sole cost and expense and at such reasonable times as Bank may request, to examine, audit, and make copies and memoranda of all of Purchaser’s books, accounts and records.

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Section 5.08. Collection of Charges. The Purchaser covenants that, except to the

extent that the Purchaser is required under agreements and/or contracts existing on the Closing Date, no sewer or other service from the System may be furnished or rendered, whether to the United States of America, the State, or any private corporation or person, free of charge, or for consideration lower than that charged other persons for similar service, if in the reasonable determination of the Purchaser the provision of such free or discounted service would materially impair the Purchaser's ability to make Installment Payments and all Debt Service on Parity Debt. The Purchaser covenants that it shall maintain and enforce valid regulations for the payment of bills for sewer service.

Section 5.09. Against Competing Utility. The Purchaser will not acquire, construct,

operate or maintain, and will not, within the scope of its lawful powers, permit any other private or public corporation, political subdivision, Purchaser or agency, or any person whomsoever to acquire, construct, operate or maintain any competing system or utility in an area presently served by the System.

Section 5.10. Financial Reports. The Purchaser will deliver to Bank or cause to be

delivered to Bank, in form and detail satisfactory to Bank the following financial information, which Purchaser warrants shall be accurate and complete in all material respects:

(a) Fiscal Year End Financial Statements. As soon as available but no later

than one hundred eighty (180) days after and as of the end of each Fiscal Year, a complete copy of the Purchaser’s Comprehensive Annual Financial Report (“CAFR”), audited by an independent certified public accountant (the “Accountant”). The Purchaser shall not change its financial reporting year end from the current Fiscal Year without Bank’s prior written consent unless otherwise required by law. The Purchaser shall not change its accounting practices other than as required by generally accepted accounting principles for government entities consistently applied.

(b) Compliance Certificates. At the time the CAFR is delivered to the Bank, a

certificate of a Purchaser Representative to the effect that all representations and warranties of the Purchaser as set forth in Section 2.01 of the Installment Sale Agreement are true and correct and no Default or Event of Default under this Installment Sale Agreement has occurred and is continuing and setting forth the Purchaser’s compliance with the covenants set forth in Sections 4.07, 4.08 and 4.09 hereof. In addition, no later than each February 15, commencing February 15, 2012, a certificate of a Purchaser Representative setting forth the Purchaser’s compliance with the covenant set forth in Section 4.09 hereof based on unaudited financial statements of the Purchaser.

(c) Budget. As soon as available but no later than thirty (30) days following

the beginning of each Fiscal Year, the balanced operating budget for the System for such Fiscal Year and a certificate of a Purchaser Representative to the effect that such operating budget includes all amounts reasonably anticipated to be necessary to make all payments on Parity Debt, this Installment Sale Agreement or any Financing Document due in such Fiscal Year.

(d) Parity Debt. As soon as available, any disclosure documents or other

contracts proposed to be entered into in connection with any issue of Parity Debt or any other obligations payable from or secured by Gross Revenues.

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(e) Investment Policy. As soon as available, a copy of any modification or

amendment of its investment policy. (f) Insurance. Prior to the expiration thereof, copies of any and all renewals

of Purchaser’s policies of insurance required to be maintained by the Purchaser pursuant to Section 5.05 hereof.

(g) Other Information. Such other statements, budgets, forecasts, reports, or

other information, as Bank may from time to time reasonably request. Section 5.11. Payment of Obligations. (a) The Purchaser shall duly and punctually pay

or cause to be paid the Installment Payments and the other amounts due hereunder, on the dates, at the places and in the manner provided in or determined in accordance with this Installment Sale Agreement according to the true intent and meaning hereof and shall not directly or indirectly extend or assent to the extension of the Installment Payment Dates for any Installment Payments without the written consent of the Seller and any assignee thereof. The Purchaser will at all times faithfully perform and observe any and all covenants, undertakings and provisions contained in this Installment Sale Agreement or arising in connection with any obligation secured by Gross Revenues. The Purchaser will pay and discharge promptly all other payment obligations owed to any person or entity and secured by Gross Revenues including but not limited to the Parity Debt; provided however, that Purchaser shall have the right in good faith to contest any such payment obligations and, pending the outcome of such contest, to delay or refuse payment thereof provided that adequately funded reserves are established by it to pay and discharge any such payment obligations. The Purchaser shall include in each of the annual operating budgets for the System all amounts reasonably anticipated to be necessary to make payments due to the Bank hereunder or under the other Financing Documents.

(b) Purchaser hereby agrees to use its best efforts to incur Subordinate Debt in

accordance with Section 4.08(c) or Parity Debt in accordance with Section 4.08(d) in order to pay off all outstanding Installment Payments due and owing after the Maturity Date if sufficient funds are not otherwise available therefor.

(c) To the extent allowed by law, the Purchaser shall classify any transfer of Gross

Revenues, surpluses or other funds (other than any transfer of voter-approved excise taxes on the System, or any transfer representing reimbursement of reasonable administrative costs) of the Enterprise Fund to the general fund of the Purchaser or any other governmental entity as a transfer of surplus funds and not as an Operation and Maintenance Cost.

(d) The Purchaser shall comply with its investment policy in effect from time to time. Section 5.12. Compliance with Documents. The Purchaser will faithfully observe and

perform or cause to be faithfully observed and performed all the covenants, conditions and requirements of this Installment Sale Agreement and the other Financing Documents, which provisions, as well as the defined terms contained therein that are necessary for a correct interpretation thereof, are incorporated herein by this reference with the same effect as if each and every such provision and defined term were set forth herein in its entirety, and will not suffer or permit any default to occur hereunder or thereunder. No amendment to such provisions or defined terms made pursuant to any such Financing Document and no termination or replacement of any such Financing Document shall be effective to amend, terminate or replace

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such provisions or defined terms as incorporated by reference herein without the prior written consent of the Bank. The Purchaser will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would constitute an Event of Default hereunder. Upon request by the Seller, Purchaser shall provide a Written Certificate of the Purchaser to the effect that it is in compliance with all covenants, conditions and requirements of this Installment Sale Agreement, other than those expressly waived by Seller. The Purchaser will not repeal, modify, amend or supplement any Financing Document without the prior written consent of the Bank.

Section 5.13. Observance of Laws and Regulations. The Purchaser shall comply with

all laws, rules, regulations, orders and directives of any governmental or regulatory authority having jurisdiction over the Purchaser, and shall comply with all laws, regulations and directives necessary to maintain its existence as a municipal corporation and general law city or relating to the System. The Purchaser shall in a timely fashion, comply in all material respects with all requirements under any employee benefit plan in which the Purchaser or any of its employees participate. The Purchaser will comply with all environmental laws, rules and regulations applicable to the construction, ownership or use of the System and will cause, to the extent possible, its tenants and other Persons occupying or using its facilities to comply with such environmental laws, rules and regulations, will timely pay or cause to be paid all costs and expenses incurred in such compliance, and will keep or cause to be kept all of its facilities free and clear of any liens imposed pursuant to such environmental laws, rules and regulations, unless the same are being contested in good faith and by appropriate legal proceedings and such contest shall operate to stay the material adverse effect of any such noncompliance.

Section 5.14. Increased Costs. (a) If the Code or any newly adopted law, treaty, regulation, guideline or directive, or

any change in any law, treaty, regulation, guideline or directive or any new or modified interpretation of any of the foregoing by any authority or agency charged with the administration or interpretation thereof or any central bank or other fiscal, monetary or other authority having jurisdiction over the Bank or the transactions contemplated by this Installment Sale Agreement whether or not having the force of law (each, a “Change in Law”) shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar

requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, the Bank (except any such reserve requirement reflected in the Adjusted LIBOR Rate); or

(ii) impose on the Bank or the London interbank market any other condition, cost or

expense affecting this Installment Sale Agreement or Advances or participation therein; and the result of any of the foregoing shall be to increase the cost to the Bank of making

or maintaining any Advance (or of maintaining its obligation to make any such Advance) or to increase the cost to the Bank of participating in, issuing or maintaining this Installment Sale Agreement or to reduce the amount of any sum received or receivable by the Bank hereunder (whether of principal, interest or otherwise), then the Purchaser will pay to the Bank such additional amount or amounts as will compensate the Bank for such additional costs incurred or reduction suffered.

(b) If the Bank determines that any Change in Law regarding capital requirements

has or would have the effect of reducing the rate of return on the Bank’s capital or on the capital

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of the Bank’s holding company, if any, as a consequence of this Installment Sale Agreement or the Advances made by, or participations therein held by, the Bank, to a level below that which the Bank or the Bank’s holding company could have achieved but for such Change in Law (taking into consideration the Bank’s policies and the policies of the Bank’s holding company with respect to capital adequacy), then from time to time the Purchaser will pay to the Bank such additional amount or amounts as will compensate the Bank or the Bank’s holding company for any such reduction suffered.

(c) A certificate of the Bank setting forth the amount or amounts necessary to

compensate the Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Purchaser and shall be conclusive absent manifest error. The Purchaser shall pay the Bank the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of the Bank to demand compensation pursuant to this

Section shall not constitute a waiver of the Bank’s right to demand such compensation. (e) The protection of this Section 5.14 shall be available to the Bank regardless of

any possible contention of invalidity or inapplicability of the law, regulation or condition which has been imposed. Notwithstanding the foregoing, for purposes of this Installment Sale Agreement (x) all requests, rules, guidelines or directives in connection with the Dodd-Frank Act shall be deemed to be a Change in Law, regardless of the date enacted, adopted or issued and (y) all requests, rules, guidelines or directives promulgated by: (1) the Bank for International Settlements, (2) the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or (3) any Governmental Authority shall be deemed a Change in Law regardless of the date enacted, adopted or issued.

Section 5.15. Taxes. (a) Withholding Taxes; Gross-Up. Each payment by the Purchaser under this

Installment Sale Agreement or any other Financing Document shall be made without withholding for any Taxes, unless such withholding is required by law. If the Bank determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then the Bank may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by the Purchaser shall be increased as necessary so that net of such withholding (including withholding applicable to additional amounts payable under this Section) the Bank receives the amount it would have received had no such withholding been made.

(b) Payment of Other Taxes by the Purchaser. The Purchaser shall timely pay any

Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Evidence of Payment. As soon as practicable after any payment of Indemnified

Taxes by the Purchaser to a Governmental Authority, the Purchaser shall deliver to the Bank the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Bank.

(d) Indemnification by the Purchaser. The Purchaser shall indemnify the Bank for

any Indemnified Taxes that are paid or payable by the Bank in connection with this Installment

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Sale Agreement or the other Financing Documents (including amounts paid or payable under this Section 5.15) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 5.15 shall be paid within 10 days after the Bank delivers to the Purchaser a certificate stating the amount of any Indemnified Taxes so paid or payable by the Bank and describing the basis for the indemnification claim. Such certificate shall be conclusive of the amount so paid or payable absent manifest error.

(e) Treatment of Certain Refunds. If any party determines, in its sole discretion

exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 5.15 (including additional amounts paid pursuant to this Section 5.15), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid such indemnified party pursuant to the previous sentence (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything herein to the contrary in this Section 5.15, in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to this Section 5.15(e) if such payment would place such indemnified party in a less favorable position (on a net after-Tax basis) than such indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 5.15(g).shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the indemnifying party or any other Person.

Section 5.16. Illegality. If the enactment, adoption or promulgation of any applicable

law, regulation or regulatory requirement of general applicability by any governmental authority charged with the administration or application thereof, which in each of the foregoing cases is binding upon Bank or Bank’s participation in the transactions contemplated by this Installment Sale Agreement and the other Financing Documents, renders it unlawful for Bank (on behalf of Seller pursuant to the Assignment Agreement) to make Advances hereunder or to maintain this Installment Sale Agreement or to participate in the transactions contemplated by this Installment Sale Agreement and the other Financing Documents (an “Event of Illegality”), Bank shall promptly inform the Purchaser in writing of such illegality and it shall be an Event of Default hereunder (as such term is defined in Section 8.01 below). Bank shall use its best efforts to avoid such illegality, including taking affirmative steps such as, if applicable, calculating interest using a different standard.

Section 5.17. Use of Proceeds. The Purchaser will use the moneys deposited in the

Project Fund pursuant to Section 3.03 only as provided in Section 3.04 above and only in compliance with the Tax Certificate (taking into account any reallocations to other capital projects of the System permitted by applicable federal tax law which do not adversely affect the exclusion of the Interest Portion of any Installment Payment from gross income for federal income tax purposes). Said moneys shall not be used directly or indirectly to purchase or carry any margin stock, as defined from time to time by the Board of Governors of the Federal Reserve System in Federal Regulation U. In addition, said moneys shall be used in accordance with all applicable Requirements of Law.

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Section 5.18. Maintenance of Existence. The Purchaser will maintain and preserve its existence and all rights, privileges, franchises, licenses and other authority necessary or desirable in connection with the operation of the System. The Purchaser shall not consolidate with or merge into another Person or permit one or more Persons to consolidate with or merge into it or acquire all or substantially all of the property and assets of any other Person.

Section 5.19. Notices to Bank. The Purchaser shall give written notice to Bank of:

(a) as soon as practicable, any litigation or administrative or regulatory proceeding affecting the Purchaser which causes the representation and warranty set forth in Section 2.01(d) to be untrue;

(b) Any substantial dispute between Purchaser and any governmental or

regulatory authority that would have a material adverse effect on the Purchaser’s ability to timely repay the Installment Payments or on the Bank’s access to the security therefor;

(c) Promptly upon obtaining knowledge of any Default or Event of Default

under this Installment Sale Agreement, or notice thereof, and within five days thereafter, a certificate signed by a Purchaser Representative specifying in reasonable detail the nature and period of existence thereof and what action the Purchaser has taken or proposes to take with respect thereto.

(d) The modification, extension, amendment, replacement or termination of

any law, regulation or ordinance affecting the Purchaser’s operation as a municipal corporation and general law city or its ability to grant and maintain Bank’s liens on or irrevocable pledge of the security for the Installment Payments (or any portion hereof); and

(e) Any other matter that has resulted or might reasonably be expected to

result in a material adverse change in (i) its ability to timely repay the Installment Payments, or (ii) Bank’s access to the security therefor. Section 5.20. Further Assurances. Upon Bank’s demand, the Purchaser will promptly

take such further action and execute all such additional documents and instruments in connection with this Installment Sale Agreement and the other Financing Documents as Bank in its reasonable discretion deems necessary, and promptly supply Bank with such other information concerning the System and the Gross Revenues as Bank may request from time to time.

Section 5.21. Attorney Fees and Costs. The Purchaser will pay (i) all reasonable costs,

expenses and fees incurred by Bank in negotiating, preparing, and documenting this Installment Sale Agreement and all the other Financing Documents, including but not limited to all filing and recording fees, costs of appraisals, insurance and all attorneys’ fees, including the allocated costs and expenses of in-house legal counsel and staff incurred in negotiating, preparing, and documenting this Installment Sale Agreement and all the other Financing Documents, and (ii) all costs, expenses and fees (including attorneys’ fees and the allocated costs and expenses of in-house legal counsel and staff) paid or incurred by Bank in collecting, modifying or compromising the Installment Sale Agreement or in enforcing or exercising its rights or remedies created by, connected with or provided for in this Installment Sale Agreement and the other Financing Documents (collectively, whether described in any or all of clauses (i), (ii), or (iii), defined as

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“Bank Expenses”) and all amendments, modifications, waivers or consents in connection with any Financing Documents.

Section 5.22. Tax Exemption. Neither the Purchaser nor the Seller will take any action,

or fail to take any action, that would result in the Interest Portion of any Installment Payments being included in federal gross income under Section 103 of the Code or no longer exempt from State personal income taxes. In furtherance thereof, but without limiting the foregoing, the Purchaser shall comply with its covenants under the Tax Certificate.

Section 5.23. Private Activity Bond Limitation. The Purchaser shall assure that the

proceeds of the Installment Sale Agreement are not so used as to cause the Installment Sale Agreement to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code.

Section 5.24. Federal Guarantee Prohibition. The Purchaser shall not take any action or

permit or suffer any action to be taken if the result of the same would be to cause any of the Installment Payments to be "federally guaranteed" within the meaning of section 149(b) of the Code.

Section 5.25. Rebate Requirement. The Purchaser shall take any and all actions

necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Installment Sale Agreement.

Section 5.26. No Arbitrage. The Purchaser shall not take, or permit or suffer to be taken,

any action with respect to the proceeds of the Installment Sale Agreement which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of execution of the Installment Sale Agreement would have caused the Installment Sale Agreement to be an "arbitrage bond" within the meaning of section 148 of the Code.

Section 5.27. Acquisition, Disposition and Valuation of Investments. Except as otherwise

provided in the following sentence, the Purchaser covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Installment Sale Agreement, or otherwise containing gross proceeds of the Installment Sale Agreement (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Installment Sale Agreement or the Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Code shall be valued at their present value (within the meaning of section 148 of the Code).

Section 5.28. No Impairment. Neither the Purchaser nor the Seller will take any action,

nor cause or permit any Person to take any action, hereunder or under the Financing Documents, inconsistent with the rights of the Bank hereunder, including, without limitation, the Bank’s right to the Installment Payments made by the Purchaser hereunder (as assignee of the Seller) and the pledge of Collateral and the priority of any lien provided for herein. The Purchaser will neither agree to any amendment, modification or supplement to any Financing Document, nor shall the Purchaser waive or consent to any waiver of any condition hereunder or under any other Financing Document, without the prior written consent of the Bank. The Purchaser will not enter into or agree to be bound by any resolution, ordinance, indenture, trust agreement, loan or credit agreement, lease, instrument or other contractual restriction that

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provides for funding or replenishment of a debt service reserve (pledged solely to or available solely for debt service on any indebtedness of the Purchaser including any obligation described in Section 4.08(c) hereof) from Gross Revenues on a parity with or senior to the payment of Installment Payments and all other Parity Debt Service and payments relating to Parity Debt or in any way contrary to the provisions of Section 4.06(c) hereof.

Section 5.29. Sovereign Immunity. The Purchaser agrees not to assert any rights of

immunity on the grounds of sovereign immunity in respect of contractual claims against the Seller or the Bank. To the extent that the Purchaser has or hereafter may acquire under any applicable law any right to immunity from set-off or legal proceedings, including but not limited to a writ of mandamus ordering a levy of taxes by the Purchaser, on the grounds of sovereignty or otherwise, the Purchaser, to the extent permitted by law, hereby irrevocably waives such rights to immunity for itself and agrees not to invoke any defense of immunity in respect of its obligations arising under or related to this Installment Sale Agreement or the other Financing Documents.

Section 5.30. References to Bank. The Purchaser will not refer to the Bank in any

official statement, offering memorandum or private placement memorandum (other than a factual description of this Installment Sale Agreement without a specific reference to the Bank) without the prior written consent of the Bank.

Section 5.31. Only Authorized Uses of Gross Revenues by the Purchaser. Except as

permitted by Section 4.06 hereof, the Purchaser will not transfer, or allow the transfer, of any Gross Revenues, to pay general operating expenses or other expenses of the Purchaser unrelated to the System without the prior written consent of the Bank.

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ARTICLE VI DISCLAIMER OF WARRANTIES; ACCESS

Section 6.01. Disclaimer of Warranties. THE SELLER MAKES NO WARRANTY OR

REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE PURCHASER FOR THE PROJECT, THE SYSTEM OR ANY ITEM THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT, THE SYSTEM OR ANY ITEM THEREOF. IN NO EVENT SHALL THE SELLER BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS INSTALLMENT SALE AGREEMENT FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR PURCHASER'S USE OF THE PROJECT OR THE SYSTEM.

Section 6.02. Access to the System, the Project and Records. To the extent permitted

by law, the Purchaser agrees that the Seller, any Seller Representative, and the Seller’s successors and assigns (including the Bank), at their sole cost and expense, shall have the right at all reasonable times to enter upon and to examine and inspect the System and the Project. The Purchaser further agrees that the Seller, any Seller Representative, and the Seller's successors or assigns shall have such rights of access to the System and the Project as may be reasonably necessary to cause the proper maintenance of the System and the Project in the event of failure by the Purchaser to perform its obligations hereunder. In addition, the Purchaser agrees that the Seller, any Seller Representative, and the Seller's successors or assigns (including the Bank), at their sole cost and expense, shall have the right at all reasonable times to inspect and examine all books, papers and records of the Purchaser pertaining to the System and the Project, to make copies thereof and to take non-privileged memoranda therefrom or with respect thereto as may be desired.

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ARTICLE VII ASSIGNMENT, SALE AND AMENDMENT

Section 7.01. Assignment by the Seller. The rights and interest of the Seller in this

Installment Sale Agreement and the Installment Payments have been assigned by the Seller to the Bank pursuant to the Assignment Agreement. Reference to Seller herein shall include, to the extent provided for in the Assignment Agreement, the Bank. Notwithstanding the foregoing, the obligations of the Seller in connection with the sale of Project Components hereunder have not been assigned or delegated by the Seller to the Bank and are intended to remain the ongoing obligation of the Seller.

Section 7.02. Assignment, Sale and Disposition by the Purchaser. This Installment Sale

Agreement may not be assigned by the Purchaser, and the System may not be sold by the Purchaser during the Term of this Installment Sale Agreement, except as expressly provided herein.

Section 7.03. Amendment of Installment Sale Agreement. THE PURCHASER SHALL

NOT ALTER, MODIFY OR CANCEL OR AGREE OR CONSENT TO ALTER, MODIFY OR CANCEL THIS INSTALLMENT SALE AGREEMENT, INCLUDING THE PLEDGE AND GRANT OF SECURITY INTEREST IN THE GROSS REVENUES WITHOUT THE PRIOR WRITTEN CONSENT OF THE BANK.

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ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

Section 8.01. Events of Default Defined. The following shall be “events of default”

under this Installment Sale Agreement and the terms “events of default” and “default” shall mean, whenever they are used in this Installment Sale Agreement, any one or more of the following events:

(a) Failure by the Purchaser to pay any Installment Payment by the Installment

Payment Date or failure to make any other payment required to be paid hereunder or under any Financing Document at the time specified herein or therein; or

(b) Failure by the Purchaser to observe and perform (i) any covenant, condition or

agreement on its part to be observed or performed in Section 4.06, 4.07, 4.08, 4.09, 5.03, 5.04, 5.05(a), 5.06, 5.09, 5.11(a) through (c), 5.17, 5.18, 5.22, 5.28, 5.29, 5.30 or 5.31 hereof, or (ii) any covenant, condition or agreement on its part to be observed or performed (other than those referred to in Sections 8.01(a) and (b)(i) hereof), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the Purchaser by the Seller or the Bank as assignee of the Seller; or

(c) (i) The Purchaser imposes a debt moratorium, debt restructuring, debt

adjustment or comparable restriction on repayment when due and payable of the principal of or interest on any obligation secured by Gross Revenues, or (ii) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, the Purchaser seeks to have an order for relief entered with respect to it or the System or seeking to adjudicate it or the System insolvent or bankrupt or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or the System or its debts or those of the System, or (iii) the Purchaser seeks appointment of a receiver, trustee, custodian or other similar official for itself or the System or for any substantial part of the Purchaser’s property, or the Purchaser shall make a general assignment for the benefit of its creditors, or (iv) there shall be commenced against the Purchaser or the System any case, proceeding or other action of a nature referred to in clause (ii) and the same shall remain undismissed, or (v) there shall be commenced against the Purchaser or the System any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its property which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal, within sixty (60) days from the entry thereof, or (vi) the Purchaser takes action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), (iii), (iv), (v) above, or (vii) the Purchaser or the System shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;

(e) The Bank shall not have a perfected security interest in the Collateral, the Gross

Revenues or any portion of the assets purportedly pledged as security hereunder or under any Financing Document with the priority set forth herein;

(f) The Bank shall have notified the Purchaser in writing that an Event of Illegality,

as defined in Section 5.16 hereof, shall have occurred and be continuing; (g) The Purchaser shall fail to pay when due a final, nonappealable judgment or

order for the payment of money in excess of $1,000,000 and for which insurance proceeds shall

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not be available entered against Purchaser or the System that is payable from Gross Revenues, which judgment or order shall continue unstayed, undischarged unbounded or unsatisfied for a period of sixty (60) days; or

(h) Any representation or warranty made, or financial statement, certificate or other

document provided, by the Purchaser shall prove to have been false or misleading in any material respect when made or deemed made or when effective or when reaffirmed, as the case may be, whether by misstatement or omission.

(i) The Purchaser shall fail to make any payment in respect of any obligation

secured by Gross Revenues when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the governing documents, or the Purchaser shall fail to make any payment in respect of any other obligation owed to the Bank when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) or the occurrence of any act or omission by the Purchaser under the governing documents relating to any obligation secured by Gross Revenues which results in such obligation becoming, or becoming capable of becoming, immediately due and payable or otherwise required to be prepaid (other than by a regularly scheduled required prepayment or an optional prepayment) prior to the stated maturity thereof.

(j) The Purchaser has taken or permitted to be taken any action which would

materially adversely affect the enforceability of this Installment Sale Agreement or the other Financing Documents against the Purchaser or the legal ability of the Purchaser to pay the Installment Payments hereunder or any Parity Debt when due.

(k) Any material provision of this Installment Sale Agreement or the other Financing

Documents shall at any time for any reason cease to be valid and binding on the Purchaser or the Seller or shall be declared to be null and void by any court or governmental authority or agency having jurisdiction over the Purchaser or the Seller, as applicable, or the validity or the enforceability of any material provision of this Installment Sale Agreement or the other Financing Documents shall at any time be contested by the Purchaser in a judicial or administrative proceeding or the Purchaser or the Seller shall deny that it has any or further liability or obligation under any material provision of this Installment Sale Agreement or the other Financing Documents, or the validity or enforceability of any material provision of this Installment Sale Agreement or the other Financing Documents shall be contested by any governmental agency or authority having jurisdiction over the Purchaser or the Seller.

(l) Any funds or investments on deposit in or otherwise to the credit of the

Enterprise Fund or the Bank Account, shall become subject to any writ, judgment, warrant or attachment, execution or similar process if, in the judgment of the Bank, the loss of such funds or investments would have a material adverse effect on the Purchaser’s ability to timely repay the Installment Payments or on the Bank’s access to the security therefor; or

(m) The occurrence and continuation of an event of default under any of the

Financing Documents (other than as specified in another Event of Default under this Section 8.01); or

(n) The occurrence of any event which has had, or may result in, any material

adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System or the ability of the Purchaser to receive any Gross Revenues or to

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comply with its obligations under or in respect of any of this Installment Sale Agreement or the other Financing Documents or in connection with the transactions contemplated hereby or thereby.

Section 8.02. Remedies on Default. In the case of any Event of Default specified in

Section 8.01(c) hereof that has occurred, (i) the Seller’s obligation under Section 3.01 hereof to cause the Bank to make Advances (and therefore the Bank’s obligation to make Advances on behalf of the Seller pursuant to the Assignment Agreement) shall immediately terminate automatically and the Available Commitment shall be reduced to zero automatically and thereafter, the Seller will have no further obligation under Section 3.01 hereof to make or cause to be made Advances (and therefore the Bank will have no further obligation to make Advances under the Assignment Agreement), and (ii) all Installment Payments and all other amounts due hereunder and under the other Financing Documents shall become immediately due and payable. Whenever any Event of Default referred to in Section 8.01 hereof (including any Event of Default specified in Section 8.01(c) hereof) shall have happened and be continuing, the Seller or its assignee shall have the right, at its option and without any further demand or notice, to:

(a) terminate its obligation under Section 3.01 hereof to make or cause to be made

Advances (and thereby terminate the Bank’s obligation to make Advances on behalf of the Seller pursuant to the Assignment Agreement) and reduce the Available Commitment to zero and thereafter, the Seller will have no further obligation under Section 3.01 hereof to make or cause to be made Advances (and the Bank will therefore have no further obligation to make Advances on behalf of the Seller pursuant to the Assignment Agreement); and

(b) declare all Principal Portions of the unpaid Installment Payments, together with

accrued interest thereon, and all other amounts due hereunder and under the other Financing Documents to be immediately due and payable, whereupon the same shall become due and payable and, if such acceleration occurs on a date other than an Interest Rate Reset Date, any break-funding amounts payable pursuant to Section 4.04(f) hereof shall become immediately due and payable without demand; and

(c) apply to and obtain from any court of competent jurisdiction such decree or order

as may be necessary to require officials of the Purchaser to charge and collect rates for services provided by the Purchaser and the System sufficient to meet all requirements of this Installment Sale Agreement; and

(d) take whatever action at law or in equity as may appear necessary or desirable to

collect the Installment Payments then due or thereafter to become due during the Term of this Installment Sale Agreement, or enforce performance and observance of any obligation, agreement or covenant of the Purchaser or the Seller under this Installment Sale Agreement or the other Financing Documents, subject to Section 8.06 hereof.

Section 8.03. No Remedy Exclusive. The rights, powers and remedies given to Seller

hereunder shall be cumulative and not alternative and shall be in addition to all rights, powers and remedies given to Seller by law against Purchaser or any other person or entity, including but not limited to the rights of Seller and its successors and assigns to setoff and banker’s lien.

Section 8.04. Prosecution and Defense of Suits. The Purchaser shall promptly, upon

request of the Seller or its assignee, from time to time take or cause to be taken such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the

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System whether now existing or hereafter arising and shall prosecute all such suits, actions and other proceedings as may be appropriate for such purpose.

Section 8.05. No Additional Waiver Implied by One Waiver. Any forbearance or failure

or delay by Seller in exercising any right, power or remedy hereunder shall not be deemed a waiver thereof and any single or partial exercise of any right, power or remedy shall not preclude the further exercise thereof. No waiver shall be effective unless it is in writing and signed by an officer of Seller.

Section 8.06. Liability Limited to Net Revenues. Notwithstanding any provision of this

Installment Sale Agreement, the Purchaser's liability to pay the Installment Payments and other amounts hereunder shall be limited solely to Net Revenues as provided in Sections 4.05 and 4.06 hereof. In the event that Net Revenues shall be insufficient at any time to pay a Installment Payment in full, the Purchaser shall not be liable to pay or prepay such Installment Payment other than from Net Revenues.

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ARTICLE IX PREPAYMENT OF INSTALLMENT PAYMENTS

Section 9.01. Prepayment. The Purchaser shall have the right to prepay the Installment

Payments, but only in the manner, at the times and in all respects in accordance with the provisions of this Article IX.

Section 9.02. Optional Prepayment.

(a) Subject to the provisions hereof, the Principal Portions of the Installment Payments may be prepaid on any Interest Rate Reset Date, in whole or in part, without penalty or premium, provided the Purchaser has given the Bank prior written notice as provided in subsection (b). Any prepayment of Principal Portions shall include interest accrued on the amount thereof being prepaid and, if prepaid on a date other than an Interest Rate Reset Date, any break-funding amounts payable pursuant to Section 4.04(f) hereof. Such interest shall be calculated at the Interest Rate in accordance with the interest rate calculation methodology set forth in Exhibit C hereto. If the Interest Rate Reset Date is not a Business Day, the prepayment may be made on the next succeeding Business Day without further penalty or interest accrual.

(b) Notice of prepayment shall be given by the Purchaser not later than 12:00

noon (New York City time) on a Business Day which is not less than five (5) Business Days prior to the prepayment date, to the Bank by facsimile or electronic mail at the facsimile number or electronic mail address, respectively, set forth in Section 10.01 for payment and disbursement.

(c) If notice of prepayment shall have been given as aforesaid, the Principal

Portions or portions thereof being prepaid and the interest thereon shall become due and payable at the Prepayment Price and on the date therein designated and if, on the date so designated, money for the payment of the Prepayment Price, or portion of the Installment Payments being prepaid, together with interest to the prepayment date, shall have been paid, then from and after the prepayment date, interest on the Principal Portions of the Installment Payments being prepaid, or portion thereof redeemed, shall cease to accrue and become payable.

(d) Upon payment of the full prepayment amount to the Seller, or provision

for such payment satisfactory to it, and upon receipt of notice that the Purchaser elects to terminate this Installment Sale Agreement, the Seller shall cause the Bank to notify the Purchaser that all amounts payable by the Purchaser under this Installment Sale Agreement have been paid in full.

(e) In no event shall Seller be obligated to make any payment or refund to Purchaser, nor shall Purchaser be entitled to any setoff or other claim against Seller, should the return which Seller could obtain under the foregoing prepayment formula exceed the interest that Seller would have received if no prepayment had occurred. All prepayments shall include payment of accrued interest on the principal amount so prepaid and shall be applied to the payment of interest before application to principal.

(f) Seller shall provide Purchaser a statement of the amount payable on account of prepayment.

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Section 9.03. Extraordinary Mandatory Prepayment.

(a) In the event that all or any part of the System shall be taken by eminent domain proceedings or conveyance in lieu thereof and the net proceeds are to be applied to the full or partial prepayment of the Principal Portions of the Installment Payments as required by Section 5.04(a) or Section 5.04(c) hereof, within thirty (30) days after the occurrence of such event the Purchaser shall send written notice thereof by facsimile or electronic mail to the Bank at its facsimile number or electronic mail address, respectively, set forth in Section 10.01 hereof with respect to payment and disbursement. Thereafter, the Principal Portions of the Installment Payments shall be subject to full or partial prepayment on any Interest Rate Reset Date, at the principal amount to be prepaid, without premium, but including interest accrued on the amount thereof being prepaid and, if prepaid on a date other than an Interest Rate Reset Date, any break-funding amounts payable pursuant to Section 4.04(f) hereof.

(b) Upon payment of the full prepayment price to the Seller pursuant to subsection (a) above, or provision for such payment satisfactory to it, the Seller shall surrender its originally executed copy of this Installment Sale Agreement to the Purchaser.

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ARTICLE X MISCELLANEOUS

Section 10.01. Notices. Any notices or other communications provided for or allowed

hereunder shall be effective only when given by one of the following methods and addressed to the parties at their respective addresses listed, below and shall be considered to have been validly given (a) upon delivery, if delivered personally, (b) upon receipt, if mailed, first class postage prepaid, with the United States Postal Service, (c) on the next Business Day, if sent by overnight courier service of recognized standing, or (d) upon telephoned, faxed or e-mailed confirmation of receipt, if faxed or e-mailed. Notwithstanding the foregoing, where the method or methods of delivery for any deliverable is expressly provided elsewhere in this Installment Sale Agreement, such method or methods shall be used. The addresses to which notices or demands are to be given may be changed from time to time by notice delivered as provided above. The addressee for notices are as follows.

If to the Purchaser: City of Vacaville 650 Merchant Street Vacaville, CA 95688 Attention: Assistant Director of Utilities Phone: (707) 469-6412 Fax: (707) 469-6480 E-Mail: rcunningham@cityofvacaville.com With a copy to: City of Vacaville 650 Merchant Street Vacaville, CA 95688 Attention: Assistant City Manager Phone: (831) 449-5100 Fax: (831) 449-5149 E-Mail: kcampo@cityofvacaville.com If to the Seller: Vacaville Public Financing Authority 650 Merchant Street Vacaville, CA 95688 Attention: Executive Director Phone: (831) 449-5100 Fax: (831) 449-5149 E-Mail: kcampo@cityofvacaville.com If to the Bank for JPMorgan Chase Bank, National Association business purposes: 560 Mission Street, Fourth Floor San Francisco, CA 94105 Attention: Jack Spillane, Sr. Vice President Phone: (415) 315-3968 Fax: (415) 315-8385 E-Mail: john.spillane@chase.com

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With a copy to: JPMorgan Chase Bank, National Association 300 S. Grand Ave., Third Floor Los Angeles, CA 90071 Attention: Jennifer L. Shin, Vice President Phone: (213) 621-8165 Fax: (213) 226-4235 E-Mail: Jennifer.l.shin@chase.com If to the Bank regarding JPMorgan Chase Bank, National Association payments and 560 Mission Street, 4th Floor disbursements: San Francisco, CA 94105 Attention: Client Customer Service, Philip Thomas Phone: (415) 315-5610 Fax: (415) 367-9078 E-Mail: Philip.x.thomas@chase.com

The Seller, the Bank and the Purchaser, by notice given hereunder, may designate

different addresses to which subsequent notices, certificates or other communications will be sent.

Section 10.02. Inurement. The benefits of this Installment Sale Agreement and the

other Financing Documents shall inure to the successors and assigns of Bank and the permitted successors and assigns of Purchaser, but any attempted assignment by Purchaser without Bank’s prior written consent shall be null and void; provided, however, that the Purchaser may not assign its rights or delete its duties hereunder without the prior written consent of the Bank. The Bank may sell participation interests (other than by way of a public or private placement) in this Installment Sale Agreement or any of the other Financing Documents without notice to the Purchaser provided that notwithstanding the sale of any such participation interest, it is understood and agreed by the parties to this Installment Sale Agreement that the Purchaser and the Seller shall continue to deal solely and directly with the Bank. The Bank may assign all or any part of its interest under this Installment Sale Agreement or any of the other Financing Documents to an Affiliate without notice to the Purchaser. The Bank may disclose the Financing Documents and any financial or other information relating to the Purchaser to any potential assignee or participant. In addition, the Bank may collaterally assign and pledge, without the consent of the Purchaser, all or any portion of the obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned obligations made by the Purchaser to the Bank in accordance with the terms of this Installment Sale Agreement shall satisfy the Purchaser’s obligations hereunder in respect of such assigned obligation to the extent of such payment. No such collateral assignment shall release the Bank from its obligations hereunder.

Section 10.03. Severability. In the event any provision of this Installment Sale

Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 10.04. Amendments, Changes and Modifications. Subject to the provisions of

Section 7.03 hereof, this Installment Sale Agreement may be amended or any of its terms modified with the written consent of the Purchaser, the Bank and the Seller.

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Section 10.05. Net Contract. This Installment Sale Agreement shall be deemed and construed to be a “net contract” and the Purchaser hereby agrees that the Installment Payments shall be an absolute net return to the Seller, free and clear of any expenses, charges or set-offs whatsoever.

Section 10.06. Further Assurances and Corrective Instruments. The Seller and the

Purchaser agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project hereby sold or intended so to be or for carrying out the expressed intention of this Installment Sale Agreement.

Section 10.07. Execution in Counterparts. This Installment Sale Agreement may be

executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 10.08. Applicable Law. This Installment Sale Agreement shall be governed by

and construed in accordance with the laws of the State. Section 10.09. Seller and Purchaser Representatives. Whenever under the provisions

of this Installment Sale Agreement the approval of the Seller or the Purchaser is required, or the Seller or the Purchaser is required to take some action at the request of the other, such approval or such request shall be given for the Seller by a Seller Representative and for the Purchaser by a Purchaser Representative, and any party hereto shall be authorized to rely upon any such approval or request.

Section 10.10. Reserved. Section 10.11. Captions. The captions or headings in this Installment Sale Agreement

are for convenience only and in no way define, limit or describe the scope or intent of any provision, Article or Section of this Installment Sale Agreement.

Section 10.12. Reserved. Section 10.13. USA Patriot Act Notice. Purchaser acknowledges that Bank is subject to

the USA Patriot Act and that pursuant to the requirements of that Act, Bank is required to obtain, verify and record information that identifies Purchaser, which information includes the name and address of Purchaser and other information that will allow Bank to identify Purchaser in accordance with that Act.

Section 10.14. Integration. Except for the other Financing Documents, this Installment

Sale Agreement constitutes the entire agreement between Bank and Purchaser regarding the installment sale of the Project, and all prior oral or written communications between Purchaser and Bank shall be of no further effect or evidentiary value.

Section 10.15. Environmental Indemnity. The Purchaser hereby agrees to indemnify

and hold harmless the Bank and its directors, officers, employees, agents and Affiliates (each an “Indemnitee”) from and against any and all liabilities, claims, actions, foreseeable and unforeseeable consequential damages, losses, costs and expenses (including without limitation sums paid in settlement of claims and all reasonable consultant, expert and legal fees and expenses and the reasonable estimate of the allocable costs of the Bank’s in-house legal

44

counsel and staff) directly or indirectly arising out of or resulting from any Hazardous Substance being present at any time, whether before, on or after the date hereof, on or around any parcel of real property which is owned, used or occupied by the Purchaser, or in the soil, groundwater or soil vapor on or under any such parcel of real property, including without limitation those incurred in connection with any investigation of site conditions, any clean-up, remedial, removal or restoration work, or any resulting damages or injuries to the person or property of any Person or to any natural resources, except to the extent that such liabilities, claims, actions, foreseeable and unforeseeable consequential damages, losses, costs and expenses arise out of or result from the gross negligence or willful misconduct of the Bank and the other Indemnitees. Upon notice from by the Bank, the Purchaser shall defend any investigation, action or proceeding alleging the presence of any Hazardous Substance on, around or under any parcel of real property owned, used or occupied by the Purchaser, which affects any such parcel of real property and which is brought or commenced against the Bank or any other Indemnitee, whether alone or with the Purchaser and/or any other Person, all at the sole cost and expense of the Purchaser and by counsel and consultants to be approved by the Bank in the exercise of its reasonable judgment. In the alternative, but only if the Bank reasonably and in good faith determines that such defense as the Purchaser is providing, or is proposing or offering to provide, does not or will not adequately protect the interests of the Bank and the other Indemnitees, or if the Purchaser fails to provide the defense which it is required to provide pursuant to the preceding sentence of this Section, the Bank may elect to conduct such defense at the sole cost and expense of the Purchaser.

Section 10.16. Waiver of Jury Trial. The Purchaser and the Seller, to the extent

permitted by law, each waives any right to have a jury participate in resolving any dispute arising from this Installment Sale Agreement or the other Financing Documents and the transactions contemplated thereby. To the extent such waiver is unenforceable, the Purchaser and the Seller each consent to the adjudication of any and all claims pursuant to judicial reference in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure and the judicial referee shall be empowered to hear and determine any and all issues in such references whether fact or law.

Section 10.17. Indemnification. The Purchaser shall indemnify each Indemnitee

against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Installment Sale Agreement, the other Financing Documents or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the transactions contemplated hereby and thereby, (ii) any Advance or the use of the proceeds therefrom, (iii) any matter covered by Section 10.15 hereof, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. This Section 10.17 shall not apply with respect to Taxes other than any Taxes that represent losses or damages arising from any non-Tax claim.

Section 10.18. Damage Waiver. To the extent permitted by applicable law, the

Purchaser shall not assert, and hereby waives, any claim against any Indemnitee, on any theory

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of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Installment Sale Agreement, the other Financing Documents or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or the use of the proceeds thereof.

Section 10.19. Liability of the Bank. Neither the Bank nor any of its officers, directors,

employees, representatives or agents shall be liable or responsible for (i) the use which may be made of any Advances or this Installment Sale Agreement or for any acts, omissions, errors, interruptions, delays in transmission, dispatch or delivery of any message or advice, however transmitted, of the Bank in connection with this Installment Sale Agreement, (ii) any action, inaction or omission which may be taken by the Bank in connection with this Installment Sale Agreement, (iii) the validity, sufficiency or genuineness of documents, or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged, (iv) payment by the Bank against presentation of documents which do not comply with the terms of this Installment Sale Agreement or an Advance Request, including failure of any documents to bear any reference or adequate reference to this Installment Sale Agreement, or (v) any other circumstances whatsoever in making or failing to make payment under this Installment Sale Agreement or pursuant to an Advance Request, except for acts or events described in the immediately preceding clauses (i) through (v), to the extent, but only to the extent, of any direct, as opposed to special, indirect, consequential or punitive damages (the right to receive special, indirect, consequential or punitive damages being hereby waived) suffered by it which the Purchaser proves were caused by (y) the Bank’s willful misconduct or gross negligence in determining whether documents presented under this Installment Sale Agreement comply with the terms of this Installment Sale Agreement or (z) the Bank’s failure to pay hereunder after the presentation to it of an Advance Request strictly complying with the terms and conditions of this Installment Sale Agreement. The Purchaser further agrees that any action taken or omitted by the Bank under or in connection with this Installment Sale Agreement or the related draft or documents, if done without gross negligence, shall be effective against the Purchaser as to the rights, duties and obligations of the Bank and shall not place the Bank under any liability to the Purchaser. In furtherance and not in limitation of the foregoing, the Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

Section 10.20. Obligations Unconditional. The Purchaser’s obligation to pay the

Installment Payments and all of its other obligations under this Installment Sale Agreement shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Purchaser may have against the Bank, any Participant, or any other Person, including, without limitation, any defense based on the failure of any nonapplication or misapplication of the proceeds of Advances hereunder, and irrespective of the legality, validity, regularity or enforceability of this Installment Sale Agreement or any or all other Financing Documents, and notwithstanding any amendment or waiver of (other than an amendment or waiver signed by the Bank explicitly reciting the release or discharge of any such obligation), or any consent to, or departure from, this Installment Sale Agreement or any or all other Financing Documents or any exchange, release, or nonperfection of any collateral securing the obligations of the Purchaser hereunder and any other circumstances or happening whatsoever, whether or not similar to any of the foregoing; provided, however, that nothing contained in this Section 10.20 shall abrogate or otherwise affect the rights of the Purchaser pursuant to Section 10.19 hereof.

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Section 10.21. Right of Set-off; Other Collateral. (a) Upon the occurrence and during the continuation of an Event of Default, the

Bank is hereby authorized at any time and from time to time without notice to the Purchaser (any such notice being expressly waived by the Purchaser), and to the fullest extent permitted by law, to setoff, to exercise any banker’s lien or any right of attachment and to apply any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies relating to the System at any time held and other indebtedness at any time owing by the Bank to or for the account of the Purchaser relating to the System (irrespective of the currency in which such accounts, monies or indebtedness may be denominated and the Bank is authorized to convert such accounts, movies and indebtedness into dollars) against any and all of the obligations and liabilities of the Purchaser arising under or connected with this Installment Sale Agreement and the other Financing Documents, whether or not the Bank shall have made any demand hereunder or thereunder.

(b) The rights of the Bank under this Section are in addition to, in augmentation of,

and do not derogate from or impair, other rights and remedies (including, without limitation, other rights of set-off) which the Bank may have. The Bank agrees to promptly notify the Purchaser after any such set-off and application referred to in subsection (a) above, provided that failure to give such notice shall not affect the validity of such set-off and application.

(c) For such purpose, the Bank shall have, and the Purchaser hereby grants to the

Bank, a first lien on and security interest in such deposits, property, funds and accounts held or maintained by the Bank relating to the System and the proceeds thereof.

Section 10.22. Survival. All covenants, agreements, representations and warranties

made in this Installment Sale Agreement shall survive the Closing Date and shall continue in full force and effect so long as the Seller’s obligation to make or cause to be made Advances under Section 3.01 hereof (and the corresponding obligation of the Bank pursuant to the Assignment Agreement to make Advances on behalf of the Seller) shall be unexpired or any sums drawn or due thereunder or any other obligations shall be outstanding and unpaid, regardless of any investigation made by any Person and so long as any amount payable hereunder remains unpaid. The agreement of the Purchaser to indemnify the Bank under Sections 10.15 and 10.17 hereof shall continue in full force and effect notwithstanding a termination of the Seller’s obligation to make or cause to be made Advances under Section 3.01 hereof (and the corresponding termination of the Bank’s obligation pursuant to the Assignment Agreement to make Advances on behalf of the Seller) or the payment in full of the Installment Payments and any other obligations of the Purchaser hereunder. The obligations of the Purchaser under Sections 3.05, 5. 14, 5.15, 5.18, 10.15 and 10.17 hereof shall also continue in full force and effect notwithstanding a termination of the Seller’s obligation to make or cause to be made Advances under Section 3.01 hereof (and the corresponding termination of the Bank’s obligation pursuant to the Assignment Agreement to make Advances on behalf of the Seller) or the payment in full of the Installment Payments and any other obligations of the Purchaser hereunder.

IN WITNESS WHEREOF, the Seller has caused this Installment Sale Agreement to be executed in its name by its duly authorized officer and the Purchaser has caused this Installment Sale Agreement to be executed in its name by its duly authorized officer, all as of the date first above written. ·

VACAVILLE PUBLIC FINANCING AUTHORITY, as Seller

By~[d~ Exec ive Director

CITY OF VACAVILLE, as Purchaser

By:~~ City Manager

[Signature page to Installment Sale Agreement dated as of July 1, 2011]

A-1

EXHIBIT A

DEFINITIONS

“Additional Revenues” means, with respect to the issuance of any Parity Debt, an allowance for Net Revenues arising from any increase in the charges made for service from the System which has been adopted prior to the incurring of such Parity Debt and which has become effective or which will become effective without further approval or act other than the passage of time, but which, during all or any part of the most recent completed Fiscal Year for which audited financial statements of the Purchaser are available, or for any more recent consecutive 12 month period selected by the Purchaser under Section 4.08(b) of the Installment Sale Agreement, was not in effect, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or 12 month period, all as shown by the certificate or opinion of a Financial Consultant.

“Adjusted LIBOR Rate” means, for any day, the sum of (i) 1.18% per annum plus (ii)

74% of the quotient of (a) the interest rate determined by the Bank by reference to the Page to be the rate at approximately 11:00 a.m. London time, on the second Business Day preceding the applicable Interest Rate Reset Date or, if the initial Advance occurs other than on an Interest Rate Reset Date, the second Business Day preceding the date of the initial Advance, for dollar deposits with a maturity equal to one (1) month, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month. Upon a Determination of Taxability, commencing on the effective date of the Determination of Taxability the Adjusted LIBOR Rate shall be amended as follows: “Adjusted LIBOR Rate” means, for any day, the sum of (i) 1.18% per annum plus (ii) the quotient of (a) the interest rate determined by the Bank by reference to the Page to be rate at approximately 11:00 a.m. London time, on the second Business Day preceding the applicable Interest Rate Reset Date or, if the initial Advance occurs other than on an Interest Rate Reset Date, the second Business Day preceding the date of the initial Advance for dollar deposits with a maturity equal to one (1) month, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month.

“Adjusted One-Month LIBOR Rate” means, for any day, the sum of (i) 2.50% per annum

plus (ii) the quotient of (a) the interest rate determined by the Bank by reference to the Page to be the rate at approximately 11:00 a.m. London time, on the second Business Day preceding the applicable Interest Rate Reset Date, or, if the initial Advance occurs other than on an Interest Rate Reset Date, the second Business Day preceding the date of the initial Advance, for dollar deposits with a maturity equal to one (1) month, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to dollar deposits in the London interbank market with a maturity equal to one (1) month.

“Adjusted Operation and Maintenance Expenses” means, for any period, Operation and

Maintenance Expenses incurred during said period, less property taxes received by the Purchaser during said period that are deposited into the Enterprise Fund.

“Advance” means an advance requested by the Purchaser under Section 3.01 hereof.

A-2

“Advance Period” shall mean the period from the Closing Date to and including the Termination Date.

“Advance Request” means a written request signed by a Purchaser Representative

requesting the amounts to be deposited to the Project Fund pursuant to Section 3.01, in substantially the form set forth as Exhibit B hereto.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly

controlling, controlled by, or under direct or indirect common control with such Person; a Person shall be deemed to control another Person if such Person owns, directly or indirectly, five percent (5%) or more of the outstanding capital stock or similar interests of the other Person or otherwise possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through ownership of voting securities, by contract or otherwise.

“Assignment Agreement” means the Assignment Agreement, dated as of July 1, 2011,

between Seller and the Bank, pursuant to which the Seller has assigned its rights under the Installment Sale Agreement, including its right to receive the Installment Payments, to the Bank.

“Available Commitment” means, on any date, an initial amount equal to $20,000,000 and

thereafter such initial amount adjusted from time to time as follows: (a) downward in an amount equal to any Advance or any Revolving Loan in respect of such Advance; (b) upward in an amount equal to the principal amount of any Revolving Loan that is prepaid; (c) downward in an amount equal to any reduction thereof effected pursuant to Section 4.02(b) or 8.02; and (d) downward to zero upon the expiration or termination of the Available Commitment in accordance with the terms hereof.

“Bank” means JPMorgan Chase Bank, National Association, and its successors and

assigns. “Bank Account” means account number 937780906 at the Bank and any replacements

thereof or successor accounts thereto established pursuant to Section 4.11 hereof. “Business Day” means (i) with respect to the Adjusted LIBOR Rate and any Advance or

prepayment, a day (other than a Saturday or Sunday) on which banks generally are open in California and/or New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State are closed or are required to close or a day on which the New York Stock Exchange is closed.

“CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate shall, on

any day, not be less than the Adjusted One-Month LIBOR Rate. The CB Floating Rate is a variable rate and any change in the CB Floating Rate due to any change in the Prime Rate or the Adjusted One-Month LIBOR Rate is effective from and including the effective date of such change in the Prime Rate or the Adjusted One-Month LIBOR Rate, respectively.

“Closing Date” means July 27, 2011, the effective date of this Installment Sale

Agreement.

A-3

“Code” means the Internal Revenue Code of 1986, as amended, as in effect on the Closing Date or (except as otherwise referenced in the Installment Sale Agreement) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated under the Code.

“Collateral” means (i) the Gross Revenues, and (ii) the Bank Account and all monies and

investments on deposit therein. “Commitment Expiration Date” means July 1, 2014 unless extended as provided herein. “Debt Service” means for any period in question the Parity Debt Service and any

Subordinate Debt Service payable during such period. For purposes of Section 4.07, the following assumptions shall be used in calculating Debt Service:

(A) Any obligations which bear a variable interest rate shall be assumed to bear

interest at a fixed rate, calculated as follows:

(i) If the obligations are issued on a tax-exempt basis, the interest rate on such obligations shall be deemed to be equal to the greater of: (A) the most recently published Bond Buyer 20-Bond Index (or comparable index if no longer published); or (B) the average variable rate of interest borne by such obligations during the preceding 36 months;

(ii) If the obligations are issued on a taxable basis, the interest rate on such

obligations shall be deemed to be the greater of: (A) the rate of interest borne by U.S Treasury Bonds of a 30-year maturity, as published in a financial publication or electronically disseminated as of the date of calculation, plus 75 basis points; or (B) the average of the actual interest rate borne by such obligations over a 36-month period occurring immediately prior to the date of calculation;

(iii) If an interest rate "cap" (or similar instrument) has been purchased for such

obligations, neither of the formulas set in (i) or (ii) above shall produce an interest rate in excess of said cap for the period that such interest rate cap is in effect; and

(iv) If the Purchaser has entered into an “interest rate swap" agreement (a

"Swap Agreement") with respect to an obligation or portion thereof, the interest rate borne by such obligation or portion thereof during the term of such Swap Agreement shall be considered to be the interest rate payable by the Purchaser under such Swap Agreement. (B) The Debt Service on any obligation which requires at least 25% of the principal

thereof to be repaid in any single calendar year (a “Balloon Obligation”) shall be computed as if the aggregate principal of such obligation were to be fully amortized, beginning in the year of issuance and ending on the twentieth (20th) anniversary of the issue date of such Balloon Obligation, assuming substantially level debt service in each year. In calculating the assumed amortization of a Balloon Obligation that is a variable rate obligation, a fixed interest rate calculated in accordance with paragraph (A), above, shall be assumed.

“Default” means any event or condition which constitutes an Event of Default or which

upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

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“Default Rate” means the Interest Rate plus 300 basis points (3.00%). “Design-Build Contract” means, with respect to a capital improvement project to be

financed with Parity Debt, an engineering-procurement-construction contract, design-build contract, or similar contract providing for both design services and construction services.

“Determination of Taxability” means and shall be deemed to have occurred on the first to

occur of the following: (i) the date when the Purchaser or the Seller files any statement, supplemental statement or other tax schedule return or document which discloses that an Event of Taxability shall have in fact occurred; (ii) the date when the Purchaser or the Seller shall be advised in writing by the Commissioner or any District Director of the Internal Revenue Service (or any other governmental official exercising the same or a substantially similar function from time to time) that, based upon the filings of the Purchaser or the Seller, as applicable, or upon any review or audit of the Purchaser or the Seller, as applicable, or upon any other ground whatsoever, an Event of Taxability shall have occurred; or (iii) the date when the Purchaser or the Seller shall receive notice from the Bank that the Internal Revenue Service (or any other governmental agency or official exercising the same or a substantially similar function from time to time) has assessed as includable in the gross income of the Bank the Interest Portion of the Installment Payments due to the occurrence of an Event of Taxability; provided, however, no Determination of Taxability shall occur under subparagraph (ii) or (iii) above unless the Purchaser or the Seller, as applicable, has been afforded the opportunity, at its or the Purchaser’s expense, to contest any such assessment, and, further, no Determination of Taxability shall occur until such contest, if made, has been finally determined; provided, further, however, that upon demand from the Bank, the Purchaser shall promptly reimburse the Bank for any payments, including any taxes, interest, penalties or other charges, the Bank shall be obligated to make as a result of the Determination of Taxability.

“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection

Act of 2010, as enacted by the United States Congress, and signed into law on July 21, 2010, and all statutes, rules, guidelines or directives promulgated thereunder.

“Draw-Down Obligation” means any obligation, instrument or agreement providing for

the future issuance or incurrence of Parity Debt in one or more draws or advances, including, without limitation, a line of credit agreement, a draw-down loan agreement such as an SRF Loan, or a draw-down installment sale agreement.

“Enterprise Fund” means the fund or funds established and held by the Purchaser with

respect to the System for the receipt and deposit of Gross Revenues. “Event of Default” means an event of default under the Installment Sale Agreement, as

defined in Section 8.01 thereof. “Event of Taxability” means a change in law or fact or the interpretation thereof, or the

occurrence or existence of any fact, event or circumstance (including, without limitation, the taking of any action by the Purchaser or the Seller, or the failure to take any action by the Purchaser or the Seller, or the making by the Purchaser or the Seller of any misrepresentation herein or in any certificate required to be given in connection with the Installment Sale Agreement) which has the effect of causing the Interest Portions of the Installment Payments to become included, in whole or in part, in the gross income of the Bank for federal income tax purposes.

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“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to the Bank: (a) income or franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which the Bank is organized or in which its principal office is located or in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Taxes imposed by any other jurisdiction in which the Purchaser is located and (c) in the case the Bank is not incorporated under the laws of the United States of America or a state thereof (a “Non-U.S. Bank”), any U.S. Federal withholding Taxes resulting from any law in effect on such date such Non-U.S. Bank becomes the assignee of the Seller under this Installment Sale Agreement (or designates a new lending office), except to the extent that such Non-U.S. Bank (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Purchaser with respect to such withholding Taxes pursuant to Section 5.15(a) hereof.

“Fair Market Value” means the price at which a willing buyer would purchase the

investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, (iv) the investment is the Local Agency Investment Fund of the State but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States or (v) shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended.

“Federal Securities” means direct, noncallable obligations of the United States of

America or securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to which direct obligations, or guarantee, the full faith and credit of the United States of America has been pledged, Refcorp interest strips, CATS, TIGRS, STRPS or defeased municipal bonds rated “AAA” by S&P or “Aaa” by Moody's (or any combination thereof.)

“Financial Consultant” means any consultant or firm of such consultants appointed by

the Purchaser and who, or each of whom: (a) is judged by the Purchaser to have experience in matters relating to the financing of municipal utility enterprises; (b) is in fact independent and not under domination of the Purchaser; (c) does not have any substantial interest, direct or indirect, with the Purchaser other than as assignee or purchaser of the Installment Sale Agreement or any other Parity Debt; and (d) is not connected with the Purchaser as an officer or employee of the Purchaser, but who may be regularly retained to make reports to the Purchaser.

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“Financing Documents” means this Installment Sale Agreement, the Assignment Agreement, and all other documents, instruments and agreements required by Bank and, executed in connection with this Installment Sale Agreement or the Assignment Agreement.

“Fiscal Year” means any period of 12 consecutive months established by the Purchaser

as its fiscal year and shall initially mean the period commencing July 1 of one year and ending on June 30 of the following year.

"Governmental Authority" means the government of the United States of America, any

other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Gross Revenues” means all gross charges (including surcharges, if any) received for,

and all other gross income and receipts derived by the Purchaser from, the ownership and operation of the System or otherwise arising from the System, including but not limited to (a) connection charges, and (b) investment earnings on amounts held in the Enterprise Fund or in any other fund established with respect to the System. Gross Revenues does not include (i) refundable deposits made to establish credit, (ii) the proceeds of any ad valorem property taxes, and (iii) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the Purchaser for the purpose of paying special assessment bonds or special tax obligations of the Purchaser relating to the System.

“Hazardous Substance” means any substance or material (whether a raw material,

building component or waste, a product or by-product of manufacturing or other activities, or any other substance or material) which is or becomes designated, classified or regulated as being “hazardous” or “toxic”, or is or becomes otherwise similarly designated, classified or regulated, under any Federal, state or local law, regulation or ordinance, including without limitation (i) any substance defined as a “hazardous substance” or a “hazardous waste” for purposes of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., respectively, (ii) any substance defined as a “hazardous waste” or a “hazardous substance” for purposes of applicable state or local law and (iii) petroleum, flammable explosives, urea formaldehyde insulation, asbestos and radioactive materials; and “Hazardous Substances” shall mean two (2) or more of such substances.

"Indemnified Taxes" means (a) Taxes other than Excluded Taxes, imposed on or with

respect to any payment made by the Purchaser under this Installment Sale Agreement and (b) Other Taxes.

“Independent Counsel” means an attorney or a firm of attorneys duly admitted to the

practice of law before the highest court of the state in which he or such firm maintains an office and who is not an employee of the Seller or the Purchaser.

“Installment Payment” means any payment required to be paid by the Purchaser to the

Seller pursuant to Section 4.04 of the Installment Sale Agreement. “Installment Payment Date” means each date on which Installment Payments are due, in

accordance with the methodology set forth in Exhibit C hereto.

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“Installment Sale Agreement” means the agreement by that name, dated as of July 1, 2011, by and between the Seller and the Purchaser, and any duly authorized and executed amendment or supplement thereto.

“Interest Rate” means the interest rate being charged on the outstanding Principal

Portions of the Installment Payments in accordance with the interest calculation methodology set forth in Exhibit C hereto.

“Interest Rate Reset Date” means the first Business Day of each calendar month. “Maturity Date” means July 1, 2014, as the same may be extended from time to time

upon mutual agreement of the Seller and the Purchaser, but only with the written consent of the Bank and the delivery to the Bank of an opinion of bond counsel, as further provided in the Assignment Agreement.

“Maximum Annual Parity Debt Service” means as of any particular date of computation,

the greatest amount required in the then current or any single future Fiscal Year to pay the Parity Debt Service on the Parity Debt in question. For purposes of Section 4.08(b)(ii), the assumptions set forth in paragraphs (A) and (B) in the definition of Debt Service shall be used in calculating Maximum Annual Parity Debt Service.

“Moody's” means Moody's Investors Service, New York, New York, or its successors. “Net Proceeds” means any insurance proceeds or condemnation award paid with

respect to the System, if any, remaining after payment therefrom of all expenses incurred in the collection thereof.

“Net Revenues” means, for any period, an amount equal to all of the Gross Revenues

received during such period, minus the amount required to pay all Adjusted Operation and Maintenance Costs becoming payable during such period.

“Obligations” means and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Purchaser to the Bank of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of this Installment Sale Agreement or any of the other Financing Documents, including without limitation all interest, fees, charges, expenses, attorneys’ fees and accountants' fees chargeable to the Purchaser or incurred by the Bank in connection with its dealings with the Purchaser and payable by the Purchaser hereunder and thereunder.

“Operation and Maintenance Costs” means the reasonable and necessary costs and

expenses paid by the Purchaser to maintain and operate the System, including but not limited to (a) costs of collecting, storing, conveying, treating and disposing wastewater, (b) costs of electricity and other forms of energy supplied to the System, (c) the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the System in good repair and working order, and (d) the reasonable administrative costs of the Purchaser attributable to the operation and maintenance of the System, including without limitation reasonable administrative costs paid or reimbursed by voter-approved excise taxes or other amounts legally transferred by the Purchaser from the Enterprise Fund to the general fund or other fund of the Purchaser or other governmental entity. Operation and Maintenance Costs do not include (i) Debt Service payable on obligations incurred by the Purchaser with respect to

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the System, including but not limited to the Installment Payments and any Parity Debt, (ii) depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a similar nature.

"Other Connection Taxes" means Taxes imposed as a result of a present or former

connection between the Bank and the jurisdiction imposing such Taxes (other than a connection arising from the Bank having executed, delivered, enforced, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, or engaged in any other transaction pursuant to, or enforced, this Installment Sale Agreement or any other Financing Document), or sold or assigned an interest in this Installment Sale Agreement or any other Financing Document).

“Other Taxes” means any present or future stamp, court, documentary intangible,

recording, filing or similar other excise or property Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, this Installment Sale Agreement or any other Financing Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Page” means Reuters Screen LIBOR01, formerly known as Page 3750 of the

Moneyline Telerate Service (together with any successor substitute, the “Service”) or any successor or substitute page of the Service, providing rate quotations comparable to those currently provided on such page of the Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market.

“Parity Debt” means this Installment Sale Agreement and any bonds, notes, leases,

installment sale agreements or other obligations of the Purchaser payable from and secured by a pledge of and lien upon any of the Gross Revenues on a parity with the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller), entered into or issued under and in accordance with Section 4.08(b) of the Installment Sale Agreement. The SRF Loans shall be deemed to be Parity Debt for purposes of the calculation of Parity Debt Service hereunder unless and until a court of competent jurisdiction makes a determination that such loans are not secured by a lien on Gross Revenues or any part thereof on a parity with the lien of this Installment Sale Agreement, or unless the lender admits the same in writing, it being further agreed that nothing contained in this Installment Sale Agreement shall grant any lien, security interest or other interest in the Gross Revenues or any part thereof to the lender under the SRF Loans.

“Parity Debt Service” means for any period in question and with respect to the

Installment Payments and any Parity Debt an amount equal to the sum of (a) the Interest Portion of all Installment Payments payable during such period and all interest payable during such period on Parity Debt, and (b) the Principal Portions of all Installment Payments payable during such period and all principal, sinking fund or redemption premium payments payable on any Parity Debt during such period. For purposes of the Required Coverage Ratio in Section 4.07, the assumptions set forth in paragraphs (A) and (B) of the definition of Debt Service shall be used in calculating annual Parity Debt Service. For purposes of calculating the Parity Debt Service of any proposed SRF Loan, the Purchaser may use the maximum principal amount and the anticipated commencement of principal amortization set forth in the related SRF Loan agreement, to the extent such details cannot be determined at the time of such calculation.

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“Permitted Installment Sale Transactions” shall mean any sale of the System pursuant to installment sale agreements permitted to be entered into pursuant to Section 4.08(b) hereof.

“Permitted Investments” means any investments in which the Purchaser may invest its

funds, as listed in Section 53601 of the California Government Code, or any other applicable California statute.

“Person” means any individual or entity. “Prepayment” means any payment applied toward the prepayment of the Installment

Payments, in whole or in part, pursuant to Article IX of the Installment Sale Agreement. “Prepayment Price” means 100% of the amount of the Principal Portions being prepaid,

together with accrued but unpaid interest, without penalty or premium. “Prime Rate” means the per annum rate of interest announced by the Bank from time to

time as its “Prime Rate.” The Prime Rate is a variable rate and each change in the Prime Rate is effective from and including the date the change is announced as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE THE BANK’S LOWEST RATE. Interest computed at the Prime Rate shall be calculated on the basis of a 360-day year and the actual number of days elapsed.

“Principal Contract” means, with respect to a capital improvement project to be financed

by Parity Debt, any construction contract, Design-Build Contract, procurement contract or similar contract providing for the acquisition, construction and installation of such capital improvement project, but not including any contract providing principally for planning, design or other preliminary expenditures with respect to such capital improvement project. If the capital improvement project requires more than one such construction contract, Design-Build Contract, procurement contract or similar contract, the term “Principal Contract” shall refer to each such contract.

“Proceeds,” when used with reference to the purchase of a Project Component pursuant

to this Installment Sale Agreement, means the aggregate amount received by the Purchaser to pay the Purchase Price of such Project Component, less the fees and expenses chargeable by the Bank.

“Project” means the capital assets of the Purchaser’s Enterprise Fund that are

purchased by the Purchaser with Proceeds. “Project Component” means the portions of the Project purchased on any single

Purchase Date. “Project Costs” means the capital costs of the Project including, without limitation,

engineering, design, special studies, planning, permitting, construction management and other necessary fees, costs or expenses relating to the costs of the design, planning, acquisition, construction, rehabilitation, equipping, improvement or financing of the Project.

“Project Fund” means the fund by that name established pursuant to Section 3.03. “Purchase Date” means a date specified by the Purchaser in an Advance Request as

the date on which it will purchase a Project Component pursuant to this Installment Sale

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Agreement, and on which the Bank will advance amounts for the acquisition or construction of such Project Component pursuant to the Assignment Agreement.

“Purchase Price” when used in reference to a Project Component means the amount

specified by the Purchaser in an Advance Request as the purchase price for such Project Component.

“Purchaser” means City of Vacaville, a municipal corporation and general law city duly

organized and existing under the Constitution and laws of the State. “Purchaser Representative” means the City Manager, Assistant City Manager, Director

of Public Works or the Assistant Director of Utilities of the Purchaser, or any other person authorized by the City Manager- to act on behalf of the Purchaser under or with respect to the Installment Sale Agreement.

“Qualified Engineer” means a consulting engineer of recognized skill and experience in

the field of engineering matters related to the construction and maintenance of systems similar to the System who is selected by the Purchaser and who may be an employee of the Purchaser.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve

System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Requirements of Law” means, as to any Person, the articles or certificate of incorporation and bylaws or charter or other organizational or government documents of such Person, and any law, treaty, rule or regulation, or a final and binding determination of an arbitrator or a determination of a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Reserve Requirement” means the maximum aggregate reserve percentage (including

all basic, supplemental, marginal and other reserves) which is imposed under Regulation D. “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., New

York, New York, or its successors. “Seller” means Vacaville Public Financing Authority, and its successors and assigns. “Seller Representative” means the President, Vice President, Treasurer or Secretary of

the Seller, or any persons authorized to act on behalf of the Seller under or with respect to the Installment Sale Agreement.

“SRF Loans” means (i) the State Revolving Fund Loan Program Loan Contract, dated

October 7, 1999, between the State of California, acting by and through its State Water Resources Control Board, and the City of Vacaville, (ii) the State Revolving Fund Loan Program Loan Contract, dated July 7, 2000, between the State of California, acting by and through its State Water Resources Control Board, and the City of Vacaville, (iii) the proposed state revolving fund loans anticipated to be made by the State of California, acting by and through its State Water Resources Control Board, to the Purchaser for the purpose of financing and

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refinancing the Tertiary Treatment Project at its Easterly Wastewater Treatment Plant, and (iv) such other future state revolving fund loan program loan contracts entered into between the State of California, acting by and through its State Water Resources Control Board, and the Purchaser from time to time in accordance herewith, in each case as the same may have been or may be amended from time to time.

“State” means the State of California. “Subordinate Debt” means any bonds, notes, leases, installment sale agreements or

other obligations of the Purchaser that are payable from and secured by a pledge of and lien upon any of the Gross Revenues on a basis subordinate to the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller), or that are not secured by any assets or revenues securing the Installment Payments and all other Obligations of the Purchaser to the Seller or the Bank (as assignee of the Seller).

“Subordinate Debt Service” means for any period in question and with respect to the

Subordinate Debt an amount equal to the sum of (a) all interest payable during such period on Subordinate Debt, and (b) and all principal, sinking fund or redemption premium payments payable on any Subordinate Debt during such period.

“System” means the entire system of the Purchaser for the collection, storage,

conveyance, treatment and disposal of wastewater within the service area of the Purchaser, including but not limited to all facilities, properties, lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the Purchaser.

“Tax Certificate” means, collectively, the Arbitrage Certificate and the Use of Proceeds

Certificate, each dated the Closing Date and relating to this Installment Sale Agreement, and any duly authorized and executed amendments or supplements thereto.

"Taxes" means any and all present or future taxes, levies, imposts, duties, deductions,

charges or withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term of the Installment Sale Agreement” means the time during which the Installment

Sale Agreement is in effect, as provided in Section 4.03 of the Installment Sale Agreement. “Termination Date” means the earlier of (i) the Commitment Expiration Date, as such

date may be extended pursuant to Section 4.02(a) hereof, and (ii) the date the Seller’s obligation to make or cause to be made Advances under Section 3.01 hereof (and therefore the Bank’s obligation pursuant to the Assignment Agreement to make Advances on behalf of the Seller) terminates by its terms in accordance with Section 8.02 hereof.

“Unrestricted Cash and Investments” means cash and investments on deposit in the

Enterprise Fund that are available or can be made available by the Purchaser to pay Operation and Maintenance Costs or Parity Debt Service without any further consent, approval or other act by any Person other than the Purchaser.

“Written Certificate” of the Purchaser means a written certificate signed in the name of

the Purchaser by a Purchaser Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation,

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and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02 of the Installment Sale Agreement, each such certificate shall include the statements provided for in Section 1.02 of the Installment Sale Agreement.

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EXHIBIT B

FORM OF ADVANCE REQUEST

_________________, 20___ [Insert Date]

Vacaville Public Financing Authority 580 Merchant Street Vacaville, CA 95688 JPMorgan Chase Bank, National Association 560 Mission Street, 4th Floor San Francisco, CA 94105 Email: Philip.x.thomas@chase.com

Re: Installment Sale Agreement, dated July 1, 2011, between Vacaville Public Financing Authority (“Seller”) and the City of Vacaville (“Purchaser”)

Ladies and Gentlemen:

Pursuant to the above-referenced agreement (the “Installment Sale Agreement”) and

that certain Assignment Agreement, dated as of July 1, 2011, relating to said Installment Sale Agreement (the “Assignment Agreement”), between Seller and JPMorgan Chase Bank, National Association (the “Bank”), the undersigned, as Purchaser and as agent for the Seller, hereby requests as follows:

1. Pursuant to Section 4.01 of the Installment Sale Agreement, the undersigned

Purchaser hereby requests the Seller to sell the following Project Component to the Purchaser for the aggregate Purchase Price of $________________ [insert amount of Advance] on the Purchase Date of ______________________, 20___ [insert date of Advance]:

No. Description Cost

1.

2.

3.

[add additional lines if necessary]

Aggregate Purchase Price

2. The undersigned hereby certifies that the above-described Project Component

represents capital assets of the City of Vacaville Sewer Fund and that the above-described costs have not been previously financed under the Installment Sale Agreement.

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3. The undersigned hereby certifies that all representations and warranties of the

Purchaser as set forth in Section 2.01 of the Installment Sale Agreement are true and correct as though made on the date hereof and on the Purchase Date set forth above and no Default or Event of Default under the Installment Sale Agreement has occurred and is continuing as of the date hereof.

4. Pursuant to Section 5 of the Assignment Agreement, the undersigned agent for

the Seller hereby requests the Bank to advance the amount of the aggregate Purchase Price set forth above on the Purchase Date set forth above to the undersigned by wire transferring or directly depositing immediately available funds in the Project Fund [insert account information]

Capitalized terms used but not defined in this Advance Request shall have the meanings

given in the Installment Sale Agreement.

Sincerely, CITY OF VACAVILLE, as Purchaser and as agent for Seller

By: Purchaser Representative

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EXHIBIT C

CALCULATION OF INSTALLMENT PAYMENTS

The Installment Payments for each Project Component shall be determined in accordance with the following assumptions:

Installment Payment Dates: The first day of January, April, July and October,

provided that if any such date is not a Business Day, the due date shall be automatically extended to the next occurring Business Day without penalty or further interest accrual.

First Installment Payment Date: The first Installment Payment Date to occur after

the applicable Advance is made. Final Installment Payment Date: The Maturity Date. Interest Rate: The Interest Rate shall be the Adjusted LIBOR

Rate; provided, however, that if the Bank determines that quotations of interest rates for the relevant deposits referred to in the definition of Adjusted LIBOR Rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the Interest Rate or do not accurately or fairly cover or reflect the cost to the Bank of making or maintaining an Advance under the Installment Sale Agreement, the Bank shall forthwith give notice of such circumstances to the Purchaser, whereupon, commencing upon the last day of the then effective Adjusted LIBOR Rate and continuing until the Bank notifies the Purchaser that such circumstances no longer exist, the Interest Rate shall be the CB Floating Rate. Each Interest Rate determined as provided above shall apply to interest accruals from and including the applicable Interest Rate Reset Date through and including the calendar day immediately preceding the next following Interest Rate Reset Date, irrespective of whether such calendar day is a Business Day.

Interest Rate Calculation Convention: Actual/360 Interest Rate Reset Date: The first Business Day of each calendar month.

32000-86 JH:REL:MT 7/27/11

$20,000,000

CITY OF VACAVILLE 2011 INSTALLMENT SALE AGREEMENT

(SEWER SYSTEM CAPITAL IMPROVEMENTS PROJECT)

OFFICER'S CERTIFICATE OF THE CITY

July 27, 2011

The undersigned hereby states and certifies this date that: (i) I am the City Manager of the City of Vacaville, a municipal corporation

duly organized and existing under the Constitution and laws of the State of California (the “City”), and as such, I am familiar with the facts herein certified and am authorized to certify the same;

(ii) the signatures set forth opposite the names and titles of the following persons are the true and correct specimens of, or are the genuine signatures of such persons, each of whom holds the office designated below and each of the undersigned by their signature confirms the same with respect to the other undersigned:

Name and Title Signature Laura Kuhn, City Manager Michelle Thornbrugh, City Clerk

(iii) on May 24, 2011, the City Council of the City duly adopted Resolution No. 2011-57 entitled “Resolution of the City Council of the City of Vacaville Authorizing the Execution and Delivery of Documentation with Respect to a Line of Credit Extended by JPMorgan Chase Bank, N.A. to Finance Improvements to the City’s Wastewater Enterprise, and Approving Related Documents and Actions” (the “Resolution”), which Resolution was duly adopted at an open public meeting which was called, noticed and conducted in accordance with all applicable requirements of California law, at which a quorum was present and acting throughout, and the Resolution has not been amended, modified, supplemented, rescinded or repealed and is in full force and effect as of the date hereof;

(iv) by all necessary action, the City has duly authorized and approved the execution and delivery, and the performance by the City of the obligations on its part contained in the Installment Sale Agreement, dated as of July 1, 2011 (the “Installment Sale Agreement”), by and between the Vacaville Public Financing Authority, as seller, and the City, as purchaser;

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(v) for and on behalf of the City, the within-named City Manager is authorized to execute and has executed the Installment Sale Agreement;

(vi) to the best of my knowledge, no litigation is pending or threatened (either in state or federal courts) to restrain or enjoin the execution or delivery of the Installment Sale Agreement, in any way contesting or affecting the authority for the execution and delivery of the Installment Sale Agreement or the validity of the Installment Sale Agreement, or in any way contesting the corporate existence or powers of the City or the title of the officers thereof to their respective offices;

(vii) the federal employer identification number of the City is 94-6000447;

(viii) all representations and warranties of the City contained in the Installment Sale Agreement and in each of the other Financing Documents and each certificate, letter, other writing or instrument delivered by the City to the Bank pursuant thereto are true and correct on and as of the date hereof as though made on and as of such date and no Default or Event of Default under the Installment Sale Agreement has occurred and is continuing or would result from the execution and delivery of the Installment Sale Agreement or the Bank’s commitment (on behalf of the Seller) to make Advances under Section 3.01 thereof, and the City Manager, Assistant City Manager, Director of Public Works or the Assistant Director of Utilities of the City are authorized to act on the City’s behalf in connection with the Installment Sale Agreement to do the things required of the City pursuant to the Installment Sale Agreement;

(ix) there are no actions, suits, or proceedings pending with service of process accomplished or, to the best knowledge of the City after due inquiry, threatened against or affecting the City by or before any court, arbitrator, or administrative or governmental body which (a) if determined adversely to the City could adversely affect the City’s ability to timely perform its obligations under the Parity Debt, the Installment Sale Agreement or any Financing Document to which the City is party or could result in a material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System, (b) relate to the execution, delivery or performance by the City of the Installment Sale Agreement or any Financing Document or the validity or enforceability thereof or the pledge of the Gross Revenues or the priority of any lien granted thereunder, and (c) in any way affects the existence, organization or powers of the City or any elected official thereof or the title of any official of the City to such Person’s office;

(x) since June 30, 2010, there has been no material adverse change in the condition (financial or otherwise), results of operations or projections of revenues of the System; any information affecting the Purchaser or the System or the transactions contemplated by the Installment Sale Agreement and the other Financing Documents which has been previously disclosed to the Bank is true and correct in all material respects; and there is no situation occurring which would materially adversely affect the Purchaser or the System or the transactions contemplated by the Installment Sale Agreement and the other Financing Documents;

(xi) as of the date hereof, the only Parity Debt outstanding consists of the SRF Loans described in clauses (i) and (ii) of the definition thereof contained in Appendix A to the Installment Sale Agreement and the only reserve accounts that exist with respect to any such Parity Debt are capital reserve accounts; and

(xii) the Bank will receive thirty ,(30) days prior notice of any cancellation of any insurance policy required by Section 5.05 of the Installment Sale Agreement and all premiums necessary to be paid for the effectiveness of such insurance have been paid by the City.

Capitalized terms u~ed herein but not otherwise defined shall have the meanings ascribed thereto in the Installment Sale Agreement.

.CITY OF VACAVILLE

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laura Kuhn City Manager