HomeMy WebLinkAbout2011/08/16 Item 07~. CITY COUNCIL
AGENDA STATEMENT
~`~~ CITY OF
CHULA VISTA
AUGUST 16, 2011, Item r/
ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA, AUTHORIZING THE EXECUTION AND
DELIVERY OF A TAXABLE QECB EQUIPMENT
LEASE/PURCHASE AGREEMENT (DIRECT SUBSIDY)
WITH RESPECT TO THE ACQUISITION, PURCHASE,
FINANCING AND LEASING OF CERTAIN ENERGY
CONSERVATION EQUIPMENT FOR THE PUBLIC
BENEFIT; AUTHORIZING THE EXECUTION AND
DELIVERY OF A PURCHASE CONTRACT, ACQUISITION
FUND AGREEMENT AND OTHER DOCUMENTS
REQUIRED IN CONNECTION THEREWITH; AND
AUTHORIZING THE TAKING OF ALL OTHER ACTIONS
NECESSARY TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS
RESOLUTION
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROPRIATING $2,256,207 OF BOND
REVENUES TO CAPITAL IMPROVEMENT PROJECT
GG214 AND AMENDING THE FY2011-12 CAPITAL
IMPROVEMENT PROGRAM BUDGET (4/STHS
REQUIRED)
SUBMITTED BY: DIRECTOR OF FINANCE/TREASURE
DIRECTOR OF PUB WORKS
REVIEWED BY: CITY MANAGER
ASSISTANT CIT NAGER ST
4/STHS VOTE: YES ~X NO
SUMMARY
As part of the American Recovery and Reinvestment Act (ARRA), the Internal Revenue
Service (IRS) has approved an allocation of Qualified Energy Conservation Bonds
(QECB) to the City of Chula Vista under Section 54D of the Intemal Revenue Code in
the amount of approximately $2.2 million to finance municipal energy efficiency
retrofits. As such, the City is proposing to enter into an equipment lease/purchase
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August 16, 2011, Item /
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agreement with Banc of America Leasing & Capital, LLC to purchase the bonds totaling
$2,256,207. The bond proceeds would fund the retrofitting of approximately 2,700
streetlights with more energy-efficient LED technologies. The project's energy cost
savings (approximately $230,000 annually) would fully cover the bond debt service as
well as generate approximately $55,000 in additional General Fund annual savings.
Finally, the new LED streetlight fixtures have a longer lifespan than traditional lights
further reducing ongoing maintenance costs and provide better light color and uniformity
improving public safety.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed project for compliance
with the Califomia Environmental Quality Act (CEQA) and has determined that the
project qualifies for a Class 8 categorical exemption pursuant to Section 15308 [Actions
by Regulatory Agencies for Protection of the Environment] of the State CEQA
Guidelines because the energy savings resulting from the energy efficiency project will
contribute to reducing Chula Vista's greenhouse gas or "carbon"' emissions thus
improving air quality. Therefore, no further CEQA environmental review is necessary.
RECOMMENDATION
That Council adopts the resolution.
BOARDS/COMMISSION RECOMMENDATION
The Resource Conservation Commission has reviewed the Streetlight Retrofit Project in
the past and has been generally supportive of the project.
DISCUSSION
In support of Chula Vista's commitment to reduce its greenhouse gas or "cazbon" emissions,
the City Council authorized staff to pursue and secure up to $9.1 million of low-interest
financing to fund the retrofitting of municipal facilities with renewable and high efficiency
energy technologies (Resolutions 2007-241 and 2009-117). In addition to reducing the
City's carbon footprint, the technologies produce annual energy cost savings, which aze
used to repay the debt service (i.e. no General Fund impact), and often help reduce long-
term maintenance costs. To date, City staff has secured over $5.3 million of low-interest
financing which has funded retrofit projects at 52 facilities, reduced energy use by 3.6
million kWh and 62,000 therms annually, and generated over $600,000 in utility cost
savings yearly.
A top priority currently for the City's energy management team is the replacement of Chula
Vista's over 9,000 streetlights with more energy efficient technologies. Streetlighting
represents approximately 38% of municipal electricity use costing over $800,000 annually
in utility fees. In addition, streetlights are responsible for about 15% of municipal
greenhouse gas emissions. In July 2011, the City launched its Streetlight Retrofit Project
(Phase 1) and began installing over 4,600 energy-saving LED streetlight fixtures along
residential streets. The project's first phase, which was funded through aloes-interest loan
from the Califomia Energy Commission, will result in almost 1 million kWh and $200,000
ir. annual savings.
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August 16, 2011, Item
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Now, City staff is working to secure financing to initiate Phase 2 of the Streetlight Retroftt
Project, which would upgrade approximately 2,700 streetlight fixtures along arterial streets
with energy-saving LED technologies. Per City Council direction in August 2010
(Resolutions 2010-197 and 2010-199), staff has been working with Public Financial
Management (PFM) to pursue issuance of Qualified Energy Conservation Bonds (QECBs)
to support these municipal energy efficiency efforts. QECBs were appropriated as part of
the American Recovery and Reinvestment Act and are authorized by the Internal
Revenue Service (IRS) under Section 54D of the Internal Revenue Code. Because of
Chula Vista's population size, the City was allocated over $2.2 million under the QECB
program. QECBs allow local governments to access "below market" interest rates
because the federal government directly subsidizes 70% of the interest for the issuer. In
addition, the bonds' longer term ranging between 14 - 17 years (set by the US Treasury)
allows many projects to be cash positive in the first year after project implementation.
With the assistance of PFM, the City has been in negotiations with Banc of America
Lease & Capital, LLC to purchase the City's Qualified Energy Conservation Bonds
totaling $2,256,207. Banc of America has been the primary purchaser of QECBs across
the nation and regionally. As outlined in the attached agreements with Banc of America,
the QECB purchase would be structured through an equipment lease/purchase agreement
with an effective interest rate not to exceed 3%. The current interest rate is 2.08% (after
federal subsidy) and the agreement term would be 16 years with annual debt service
payments of $172,739. The funded Streetlight Retrofit Project (Phase 2) would generate
over $229,000 in annual energy cost savings, which would fully cover the debt service
and issuance costs and produce a positive annual cash flow of approximately $55,000
after project completion. San Diego Gas & Electric rebates of $335,000 would also be
applied to project costs. These project energy and cost savings estimates have been
reviewed and verified by San Diego Gas & Electric. The QECB issuance and Equipment
Lease/Purchase Agreement with Banc of America has been reviewed by PFM and the
City's bond counsel Stradling, Yocca, Cazlson, & Rauth. If approved by City Council,
the City Manager would be authorized to finalize the Equipment Lease/Purchase
Agreement and related documents at bond closing in eazly September.
The City's conversion to LED streetlights represents one of the most significant
opportunities to reduce municipal energy use and greenhouse gas emissions. In addition
to the direct utility cost savings, the new LED fixtures have a lifespan 7 times longer than
the City's current streetlight technologies, further reducing ongoing maintenance costs
for municipal operations. Finally, the new fixtures provide better light color and
uniformity, thereby improving public safety throughout the community.
DECISION MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is
not site specific and consequently, the 500-foot rule found in California Code of
Regulations ("CCR") Title 2, section 18704.2(a)(1), is not applicable to this decision. In
addition, to the extent this item involves a decision to retrofit streetlight fixtures on
arterial streets, that decision solely concerns the replacement of facilities of the
type contemplated in 2 CCR 18570.2(b)(2) and, as such, the financial effect of the
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August 16, 2011, Item `~
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decision on real property is presumed not to be material. [2 CCR 18705.2(b).]
Consequently, this item does not present a conflict under the Political Reform Act (Cal.
Gov't Code § 87100, et seq.).
CURRENT YEAR FISCAL IMPACT
There is an anticipated positive fiscal impact to the General Fund during the current year.
The bond revenue ($2,256,207) will be appropriated to CIP GG214 (thus amending the
FY2011-12 Capital Improvement Program Budget) and the full project costs
($2,546,000) will be reimbursed through the bond proceeds and utility rebates. In
addition, QECB issuance costs would be covered through the bond proceeds. However,
the equipment lease/purchase agreement does require the expenditure of bond proceeds
for the retrofit project on or before March of 2012. Any unexpended proceeds as of that
date must be refunded to the lessor, and the City is obligated to pay an additional amount
equal to the accrued interest on the obligations being prepaid, if any, plus a penalty of 3%
of the prepaid principal amount (up to approximately $170,758), which would be subject
to appropriation by Council at the applicable time. Staff does not foresee any project
implementation issues that would cause a delay and trigger the penalty.
ONGOING FISCAL IMPACT
There is an anticipated positive fiscal impact anticipated with QECB issuance and
implementing the Streetlight Retrofit Project (Phase 2). The estimated utility cost savings
($229,000 annually) will fully cover the QECB debt service over the 16-year term and
generate about $55,000 annually (net of debt service) in additional General Fund savings
immediately. Once the bonds are repaid, the General Fund would realize the total
avoided energy costs annually.
ATTACHMENTS
Attachment A -Purchase Contract with Banc of America Capital & Leasing
Attachment B -Equipment Lease/Purchase Agreement with Banc of America Capital &
Leasing
Prepared by: Phillip Davis, Assistant Director, Finance Department
Brendan Reed, Environmental Resource Manager, Conservation Section
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ATTACHMENT A
August _, 2011
City of Chula Vista
276 Fourth Avenue
Chula Vista, California 91910
Re: Purchase Contract for Taxable QECB
Equipment Lease/Purchase Agreement (Direct Subsidy)
of City of Chula Vista, California, as Lessee
Ladies and Gentlemen:
Banc of America Leasing & Capital, LLC (the "Purchaser") hereby offers to purchase
from the City of Chula Vista, California (the "Lessee") the above referenced Taxable QECB
Equipment Lease/Purchase Agreement (Direct Subsidy), to be dated the date of execution and
delivery by the parties (the "Agreement"), to be entered into between the Lessee and Banc of
America Leasing & Capital, LLC, as lessor (in such capacity, the "Lessor"), in substantially the
form heretofore agreed upon. This offer is made subject to the Lessee's acceptance hereof on or
before 11:59 p.m., Pacific time, on the date hereof, at which time this offer expires if not
accepted. Upon the Lessee's acceptance of this offer, a contract will be formed and be binding
upon the Lessee and the Purchaser. On the terms and conditions set forth below, the Purchaser
hereby agrees to purchase from the Lessee, and the Lessee hereby agrees to sell and deliver to
the Purchaser, the Agreement:
Description and Amount: $2,256,207.58 Taxable QECB Equipment Lease/Purchase
Agreement (Direct Subsidy), to be dated as of the date of
execution and delivery by the parties
Purchase Price: $2,256,207.58, which equals 100% of the aggregate principal
component of Rental Payments under the Agreement (there
being no accrued interest)
Interest Rate: _% per annum (computed on a 360 day year of twelve
30-day months) commencing to accrue on the Closing Date
(described below); the interest component of Rental Payments
will be subject to federal income taxation
Purpose of Agreemeut: Financing for the acquisition and installation of approximately
2,700 energy-efficiency streetlights (the "Energy
Conservation Equipment"), that constitute "qualified
conservation purposes" within the meaning of Section 54D of
QECB Purchase ConVact_FINAI.
2178523
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the Internal Revenue Code of 1986, as amended (the "Code "),
including an amount to pay costs of issuance (not to exceed
the 2% limitation).
Acquisition Period: The "Acquisition Period" for acquisition and installation of
the Energy Conservation Equipment is from the Closing Date
to the fifth business day prior to March 12, 2012, or such later
date as is agreed to by Lessor and Lessee.
Delivery of Original The Agreement may be executed and delivered in multiple
Agreement: counterparts provided that the original (so identified)
counterpart is delivered to the Purchaser at closing.
Source of Payment and Rental Payments under the Agreement are payable from the
Security: Lessee's general fund or other funds that are legally available
for that purpose. Except for the abatement of Rental
Payments upon the occurrence of certain events of damage,
destruction or condemnation and all of the Equipment being
substantially available for the Lessee's beneficial use and
enjoyment, the Lessee's obligations to make Rental Payments
and to perform its other obligations under the Agreement shall
be absolute and unconditional in all events without abatement,
diminution, deduction, set-off or defense for any reason,
including (without limitation) any failure of the Energy
Conservation Equipment, disputes with any vendor or the
Lessor or the failure or inability (for whatever reason) of the
Lessee to receive (or delay in receipt of) all or any portion of
the direct cash subsidy payments with respect to the
Agreement (as described under "US Treasury Direct Cash
Subsidy Payments" below). Notwithstanding the foregoing,
the Lessee's obligation to pay certain amounts is payable only
from funds that are legally available to the Lessee for the
particular purpose, which at the discretion of the Lessee's City
Council have been appropriated for that purpose as provided
in the Agreement.
The Lessee's obligations under the Agreement shall be
secured by the grant of a first (and exclusive) priority security
interest in the Energy Conservation Equipment, except as
otherwise provided in the Agreement.
The Lessee's obligations under the Agreement shall also be
secured by a first (and exclusive) priority pledge and security
interest in the Acquisition Fund and the Delivery Costs Fund
in which the proceeds of sale of the Agreement are deposited
and held until applied for the purposes described above,
including money and securities held therein and any
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investment earnings thereon, as provided in the Acquisition
Fund and Account Control Agreement (the "Acquisition Fund
Agreement") to be entered into among the Lessee, the Lessor
and the Acquisition Fund Custodian therein identified.
US Treasury Direct Cash Pursuant to the Agreement, the Lessee will designate the
Subsidy Payments: Agreement as a "qualified energy conservation bond" within
the meaning of Section 54D(a) of the Code. The Lessee will
irrevocably elect under the Agreement to receive a direct cash
subsidy payment from the United States Department of the
Treasury with respect to the Agreement (the "Direct Subsidy
Payments ") and acknowledge that, as a consequence of such
election, the Lessor (including its successors and assigns) will
not be entitled to a tax credit as a result of ownership of the
Agreement.
The Lessee will be solely responsible to calculate the amount
of the Direct Subsidy Payments, apply for the Direct Subsidy
Payments and comply with applicable provisions of the Code
during the term of the Agreement to obtain payment of the
Direct Subsidy Payments from the United States Department
of the Treasury. The amount of the Direct Subsidy Payments
will be based on the credit rate published by the Secretary of
the Treasury on the date hereof upon acceptance of this offer
by the of the Lessee. Such credit rate on
the date hereof is %.
Rental Payments: Rental Payments under the Agreement, consisting of a
principal portion and an interest portion, will be payable on
the dates and in the amounts set forth on Exhibit A hereto,
subject to the provisions of the Agreement.
Agreement Term: From the Closing Date to September 12, 2027, subject to
extension as provided in the Agreement, except that in no
event will the term of the Agreement extend past September
12, 2028.
Mandatory, Optional and Rental Payments under the Agreement will not be subject to
Extraordinary Prepayment optional or extraordinary prepayment by the Lessee prior to
Provisions: the final Rental Payment due date, except in the following
circumstances:
• Mandatory Excess Proceeds Prepayment. To the
extent that less than 100% of the available project
proceeds aze expended for qualified purposes by the
earlier of (i) the expiration of the Acquisition Period,
(ii) the date on which the Lessee executes the Final
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Acceptance Certificate pursuant to the Agreement or
(iii) the 90th day following the later of September _,
2014 or, if the Lessee has obtained an extension of the
expenditure period from the Secretary of the Treasury,
the end of such extended period, all amounts then
remaining in the Acquisition Fund will be applied to
prepay Rental Payments in whole, or in part on a pro
rata basis of the amount due on each Rental Payment
due date. The prepayment price with respect to any
such prepayment shall be equal to 103% of the
principal portion to be prepaid (which includes a
prepayment premium) plus accrued interest on the
prepaid principal portion to the prepayment date. In
connection with any such prepayment, the Lessee shall
pay the prepayment premium and interest accrued to
the prepayment date on the unpaid principal portion
from funds that are legally available to the Lessee and
at the discretion of the Lessee's City Council have
been appropriated for that purpose, but not from
available project proceeds.
• Optional Prepayment. The Lessee shall have the
option to purchase all, but not less than all, of the
Energy Conservation Equipment from and after
20 , on any Rental Payment due date,
upon not less than 30 days' prior written notice, and
upon payment in full of the Rental Payments then due
and all other amounts then owing under the Agreement
plus the then applicable Prepayment Price as set forth
on Exhibit A hereto.
• Extraordinary Optional Prepayment Upon Damage,
Destruction or Condemnation. The Lessee shall have
the option to purchase all, but not less than all, of the
Energy Conservation Equipment in the event of
substantial damage to or destruction or condemnation
of substantially all of the Energy Conservation
Equipment, on the day specified in the Lessee's notice
to the Lessor of its exercise of the purchase option
(which shall be the earlier of the next Rental Payment
due date or 60 days after the casualty event) upon
payment in full to the Lessor of the sum of (a) any
Rental Payment then due plus (b) an amount equal to
the lesser of the then applicable Purchase Price or
103% of the aggregate unpaid principal portion of
Rental Paymentcplus (c) all other amounts then owing
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under the Agreement.
• Extraordinary Optional Prepayment Loss of Subsidy.
The Lessee shall have the option to purchase all, but
not less than all, of the Energy Conservation
Equipment from and after any Loss of Subsidy (as
hereafter defined), on the day specified in the Lessee's
notice to the Lessor of its exercise of the prepayment
option upon payment in full to the Lessor of the sum of
(a) any Rental Payment then due plus (b) an amount
equal to the lesser of the then applicable Prepayment
Price or 103% of the aggregate unpaid principal
portion of Rental Payments plus (c) all other amounts
then owing under the Agreement. "Loss of Subsidy"
Loss of Subsidy" means the occurrence of any of the
following: (A) legislation enacted by the Congress of
the United States of America or a ruling, regulation or
statement issued by the Treasury Department or the
Internal Revenue Service, the effect of which (I)
denies, repeals, revokes or reduces the Direct Subsidy
Payments or (II) imposes one or more new substantive
conditions on the receipt by Lessee of Direct Subsidy
Payments and such conditions are unacceptable to
Lessee; and (B) any governmental, administrative,
judicial or other official action that is beyond Lessee's
control and results in the significant reduction or loss
of Direct Subsidy Payments to Lessee or imposes one
or more new substantive conditions on the receipt by
Lessee of Direct Subsidy Payments and such
conditions are unacceptable to Lessee; provided,
however, that in no event shall a "Loss of Subsidy"
occur as the result of Lessee's failure or inability for
reasons within its control to receive (or delay in receipt
of) all or any portion of any Direct Subsidy Payment
from the United States Department of Treasury or
Lessee's failure to comply with applicable law and
regulations to obtain payment of any Direct Subsidy
Payment from the United States Department of
Treasury, including (without limitation) any offset
against any Direct Subsidy Payment as a result of other
liabilities of Lessee to the United States Department of
Treasury.
Davis-Bacon Act Compliance: The Lessee shall comply with the requirements of the
Davis-Bacon Act in connection with the acquisition and
installation of the Energy Conservation Equipment.
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Annual Financial Statements Until all amounts owed to the Lessor under the Agreement aze
& Reporting: paid in full, the Lessee shall deliver to the Lessor its annual
audited financial statements, budget and other financial
information as provided in the Agreement.
Documentation: The Agreement and the Acquisition Fund Agreement shall be
executed and delivered by the Lessee and the Lessor in
substantially the forms agreed upon by the Lessee and the
Lessor prior to the date hereof. All other documentation
relating to the transaction provided in the Agreement shall be
prepazed by Purchaser Counsel and shall be in form and
content acceptable to the Purchaser and the Lessee.
Investment Letter: The Purchaser will sign an investment letter on the Closing
Date to the effect that it (a) is a "qualifzed institutional buyer"
as defined in Rule 144A(a)(1) promulgated under the
Securities Act of 1933, as amended; (b) has conducted its own
investigation of the financial condition of the Lessee, the
purpose for which the Agreement is being entered into and of
the security for payment of the Rental Payments under the
Agreement and has obtained such information regarding the
Agreement and the Lessee and its operations, financial
condition and financial prospects as the Purchaser deems
necessary to make an informed investment decision with
respect to its purchase of the Agreement; (c) is purchasing the
Agreement for its own account and without a present intention
to sell any portion thereof to any other person, provided that
the Purchaser retains the right at any time to dispose of the
Agreement or any interest therein as it may determine to be in
its best interests and that any subsequent resale shall be made
only in accordance with the Agreement and applicable
securities laws; and (d) acknowledges and agrees that the
obligation of the Lessee to pay Rental Payments under the
Agreement shall constitute a current expense of the Lessee
and shall not in any way be construed to be a debt of the
Lessee in contravention of any applicable constitutional or
statutory limitations or requirements concerning the creation
of indebtedness by the Lessee, nor shall anything contained in
the Agreement constitute a pledge of the full faith and credit
or taxing power of the Lessee.
Closing Date: On September _, 2011 (the "Closing Date "), unless the
Lessee and the Purchaser agree to a different date.
Closing conditions: The following are conditions precedent to the Purchaser's
obligations under this contract:
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At or prior to the Closing Date, the Lessee will deliver to the
Purchaser the following:
• the Agreement and the Acquisition Fund Agreement
executed by the respective parties thereto;
• a certified copy of a resolution adopted by the
governing board of the Lessee authorizing the
execution and delivery of the Agreement and the
Acquisition Fund Agreement and an incumbency and
authorization certificate of the Lessee in form and
content acceptable to the Purchaser;
• an opinion of counsel to the Lessee in substantially the
form attached to the Agreement and otherwise in form
and content acceptable to the Purchaser;
• evidence of insurance as required by Section 7.02 of
the Agreement;
• financing statements under Article 9 of the California
Commercial Code with respect to the Energy
Conservation Equipment, sufficient to perfect security
interests in personal property and fixtures and treating
such Article 9 as effective with respect to
governmental transfers;
• fully completed and executed LR.S. information
reporting return with respect to the Agreement;
• a certificate from an authorized officer of the Lessee to
the effect that (a) all financial statements and other
information delivered to the Purchaser are correct and
complete; and (b) from the date hereof to the Closing
Date, there shall not have occurred a downgrade of two
or more sub-grades on any of the Lessee's publicly
available long-term general obligation bond ratings or
any of the Lessee's other long-term general fund
related bond ratings by either Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group; and
• payment and performance bonds (including dual
obligee rider) as required by Section 7.04 of the
Agreement.
From the date hereof to the Closing Date, there shall not have
occurred any (i) downgrade of two or more sub-grades on any
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of the Lessee's publicly available long-term general obligation
bond ratings or any of the Lessee's other long-term general
fund related bond ratings by either Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group, (ii) event, court
decision, proposed law or rule that may have the effect of
changing the federal income tax incidents of the Agreement or
the contemplated transaction, (iii) international or national
crisis or banking moratorium materially affecting, in the
reasonable opinion of the Purchaser, the market value of the
Agreement or (iv) new restrictions on the extension of credit
by banks or other lending institutions by any federal or state
agency.
The Lessee shall have executed a tax certificate with respect
to the Agreement and the Direct Subsidy Payments to the
extent required by the Lessee based upon advice provided by
counsel acceptable to the Lessee.
Fees and Expenses: The Lessee shall be responsible to pay fees and expenses
related to this transaction, including fees and expenses of
counsel to the Lessee and Purchaser Counsel and of the
Acquisition Fund Custodian. Such fees and expenses will be
disbursed from the Delivery Costs Fund pursuant to the
Acquisition Fund Agreement.
Continuing Disclosure: It is understood that, with respect to the Agreement, the
Lessee will not be required to comply with the continuing
disclosure requirements of SEC Rule ISc2-12(b).
Purchaser Contact• Banc of America Leasing and Capital, LLC
11333 McCormick Road
M/C MDS-032-07-OS
Hunt Valley II
Hunt Valley, Maryland 21031
Attention: Contract Administration
Fax: (443) 556-6977
Purchaser Counsel: Buzz Lazsen
Chapman and Cutler LLP
595 Mazket Street, Suite 2600
San Francisco, California 94105-2839
Telephone: (415) 278-9018 or (312) 845-3473
Fax: (312) 516-1473
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Integration Clause: This offer, when accepted, will constitute the complete and
entire contract between the Lessee and the Purchaser, and all
prior communications and correspondence (including the
Proposal Letter previously submitted to the Lessee) between
the Lessee and the Purchaser with respect to the subject matter
of the contract, whether written or oral, are superseded by the
contract.
Governing Law: This offer and the acceptance hereof, the contract formed
hereby and the transactions completed hereunder will be
governed by California law.
If the Lessee is in agreement with the terms and conditions contained herein, please sign
in the space provided below indicating the Lessee's acceptance of this offer and return an
executed copy of the contract via fax or e-mail to the Purchaser. If you should have any
questions, please contact the undersigned.
Sincerely,
BANC OF AMERICA LEASING & CAPITAL, LLC
By:
Name:
Title:
Agreed and accepted on the date first above
written:
CITY OF CHULA VISTA, CALIFORNIA
By:
Name:
Title:
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EXHIBIT E~
RENTAL PAYMENTS SCHEDULE
RENTAL
PAYMENT
DATE
RENTAL
PAYMENT
AMOUNT
INTEREST
PORTION
PRINCIPAL
PORTION
OUTSTANDING
BALANCE PREPAYMENT
PRICE
Including
prepayment
remium, if
applicable)
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THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY THE CITY
ATTORNEY'S OFFICE AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
I°' E RED
glen R. Googins
City Attorney
Dated: ~ ~ ~ ~
TAXABLE QECB EQUIPMENT LEASE/PURCHASE AGREEMENT
BETWEEN
BANC OF AMERICA LEASING & CAPITAL, LLC AND
THE CITY OF CHULA VISTA
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~. ~ ~ ACl-i~IEN'T B
TAXABLE QECB
EQUIPMENT LEASE/PURCHASE AGREEMENT (DIRECT SUBSIDY)
This Taxable QECB Lease/Purchase Agreement (Direct Subsidy) dated as of
September , 2011 (this "Agreement"), entered into by and between Banc of America Leasing
& Capital, LLC, a Delaware limited liability company ("Lessor "), and the City of Chula Vista, a
charter city duly organized and existing under the laws of the State of California ("Lessee "),
WITNESSETH:
WHEREAS, Lessee desires to lease and acquire from Lessor certain Energy Conservation
Equipment (as such term is defined herein), subject to the terms and conditions hereof; and
WHEREAS, Lessee is authorized under the constitution and laws of the State to enter into
this Agreement for the purposes set forth herein;
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the premises hereinafter contained, the parties hereby
agree as follows:
ARTICLE I
Section 1.01. Definitions. The following terms will have the meanings indicated below
unless the context clearly requires otherwise:
`Acceptance Date" means, with respect to the items of Energy Conservation Equipment
identified in a Disbursement Request, the date that Lessee identifies to Lessor and the
Acquisition Fund Custodian and certifies as the date on which Equipment Acceptance with
respect to such items of Energy Conservation Equipment has occurred and for which
disbursement from the Acquisition Fund is then requested in accordance with such Disbursement
Request pursuant to the Acquisition Fund Agreement.
"Acquisition Amount" means $2,256,207.58. The Acquisition Amount is the amount
represented by Lessee to be sufficient, together with other funds of Lessee (if any) that are
legally available for the purpose, to acquire and install the Energy Conservation Equipment and
to pay Delivery Costs.
"Acquisition Fund" means the fund established and held by the Acquisition Fund
Custodian pursuant to the Acquisition Fund Agreement.
"Acquisition Fund Agreement" means the Acquisition Fund and Account Control
Agreement in form and substance acceptable to and executed by Lessee, Lessor and the
Acquisition Fund Custodian, pursuant to which an Acquisition Fund and a Delivery Costs Fund
are established and administered.
QECB Equipment Lease .4greement_FINAL
2!78523 ~_~ ~
"Acquisition Fund Custodian" means the Acquisition Fund Custodian identified in the
Acquisition Fund Agreement, and its successors and assigns.
"Acquisition Period" means the period ending five (5) business days prior to March 12,
2012, or such later date as is agreed to by Lessor and Lessee.
"Agreement" means this Taxable QECB Equipment Lease/Purchase Agreement (Direct
Subsidy), including the exhibits hereto, together with any amendments and modifications to this
Agreement pursuant to Section 13.04.
"Available Project Proceeds" means (a) the proceeds from the sale of this Agreement,
less (b) Delivery Costs (not exceeding 2% of the proceeds of such sale) plus (c)investment
earnings on the amount representing the difference between (a) minus (b).
"Code" means the Internal Revenue Code of 1986, as amended. Each reference to a
Section of the Code herein shall be deemed to include the United States Treasury Regulations
and Internal Revenue Service Notices dealing with Sections 54A, 54D and 6431 of the Code,
including Internal Revenue Service Notice 2010-35.
"Contract Rate "means the rate identified as such in the Payment Schedule.
"Delivery Costs" means the costs incurred in connection with the execution and delivery
of this Agreement, including counsel fees, fees and expenses of the Acquisition Fund Custodian
and similar costs, fees and expenses.
"Disbursement Request" means, with respect to the items of Energy Conservation
Equipment therein identified, a Disbursement Request substantially in the form attached as
Schedule 1 to the Acquisition Fund Agreement.
"Energy Conservation Equipment" means the property listed in the Equipment Schedule
and all replacements, repairs, restorations, modifications and improvements thereof or thereto
made pursuant to Section 8.01 or Article V. Whenever reference is made in this Agreement to
Energy Conservation Equipment, such reference shall be deemed to include all such
replacements, repairs, restorations, modifications and improvements of or to such Equipment.
"Equipment Acceptance"means, with respect to each portion of the Energy Conservation
Equipment that may operate for its intended purpose as a separate and independent functional
unit, that the Energy Conservation Equipment constituting such portion has been acquired and
installed by the Vendor, is operating in a manner consistent with the manufacturer's intended use
and has been inspected and finally accepted by Lessee for all purposes of this Agreement.
"Equipment Costs" means the total cost of the Energy Conservation Equipment,
including related costs such as freight, installation and taxes and other capitalizable costs
incurred in connection with the acquisition, installation and/or financing of the Energy
Conservation Equipment.
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"Equipment Schedule" means the equipment schedule attached hereto as Exhibit A and
made a part hereof.
"Event of Default" means an Event of Default described in Section 12.01.
"Expenditure Period" means the "expenditure period" defined in
Section 54A(d)(2)(B)(ii) of the Code and consists of the period beginning on the Funding Date
and ending on the later of the date 3 years after the Funding Date or such later date, if any, as
permitted by the Secretary of the Treasury in response to a request to extend the Expenditure
Period.
"Funding Date" means September _, 2011, which is the date on which the Acquisition
Amount is deposited with the Acquisition Fund Custodian in accordance with Section 3.04(c).
"Lease Term" means the period that begins on the Funding Date and ends on the first
business day after the last scheduled Rental Payment Date, subject to extension as provided in
Section 3.03; provided that in no event shall any such extension result in the Lease Term
extending past September 12, 2028.
"Lessee "means the entity referred to as Lessee in the first paragraph of this Agreement.
"Lessor" means (a) the entity referred to as Lessor in the first paragraph of this
Agreement or (b) any assignee or transferee of any right, title or interest of Lessor in and to this
Agreement pursuant to Section 11.01 hereof, including the right, title and interest of Lessor in
and to the Energy Conservation Equipment, the Rental Payments and other amounts due
hereunder and the Acquisition Fund and the Delivery Costs Fund, but does not include any entity
solely by reason of that entity retaining or assuming any obligation of Lessor to perform
hereunder.
"Material Adverse Change" means a downgrade of two or more sub-grades on any of
Lessee's publicly available long-term general obligation bond ratings or any of Lessee's other
long-term general fund related bond ratings by either Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group or, if neither such rating agency publishes such ratings at the
date of determination, any other nationally recognized statistical rating organization that is
selected by Lessee for purposes of such long-term general obligation bond ratings and long-term
general fund related bond ratings.
"Payment Schedule" means the Rental Payments Schedule attached hereto as Exhibit B
and made a part hereof.
"Prepayment Price" means the amount that Lessee shall pay to Lessor to prepay its
obligations under this Agreement as provided in Section 10.01.
"Principal Component" means, as of any date of calculation, the aggregate principal
amount of the Rental Payments then unpaid, which equals $2,256,207.58 as of the Funding Date.
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"Qualified Energy Conservation Project" means the cost of acquiring and installing the
qualified energy conservation project that qualifies as a "qualified conservation purpose" under
Section 54D(f) of the Code, and has been approved for financing pursuant to notifications to
Lessee from the California Debt Limit Allocation Committee dated July 22, 2009.
"Rental Payment Commencement Date" means the date on which all of the Energy
Conservation Equipment is substantially available for Lessee's beneficial use and enjoyment or
September 12, 2012, whichever is later, which is the date Lessee becomes obligated to
commence payment of Rental Payments in accordance with the Payment Schedule pursuant to
Section 4.01(a) hereof.
"Rental Payment Date" means each March 12 and September 12, commencing on the
first March 12 or September 12, as applicable, that occurs on or after the Rental Payment
Commencement Date, on which Lessee is required to make a Rental Payment under the
Agreement as specified in the Payment Schedule.
"Rental Payments" means the basic rental payments payable by Lessee pursuant to the
Agreement on the Rental Payment Dates and in the amounts as specified in the Payment
Schedule, consisting of a principal component and an interest component, sufficient to repay the
Principal Component and interest thereon at the Contract Rate.
"State "means the State of California.
"Vendor" means the manufacturer, installer or supplier of the Energy Conservation
Equipment or any other person as well as the agents or dealers of the manufacturer, installer or
supplier with whom Lessor arranged Lessee's acquisition, installation, maintenance and/or
servicing of the Energy Conservation Equipment.
"Vendor Agreement" means any contract entered into by Lessee and any Vendor for the
acquisition, installation, maintenance and/or servicing of the Energy Conservation Equipment.
"Vendor Payment Date" means the date on which a Vendor or Lessee (in the case of
reimbursement) receives payment from amounts disbursed pursuant to the Acquisition Fund
Agreement.
ARTICLE II
Section 2.01. Representations and Covenants of Lessee. Lessee represents, covenants and
warrants for the benefit of Lessor on the date hereof as follows:
(a) Lessee is a charter city duly organized and existing under the constitution
and laws of the State, with full power and authority to enter into this Agreement and the
Acquisition Fund Agreement and the transactions contemplated hereby and thereby and
to perform all of its obligations hereunder and thereunder.
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(b) Lessee has duly authorized the execution and delivery of this Agreement
and the Acquisition Fund Agreement by proper action of its governing body at a meeting
duly called, regularly convened and attended throughout by the requisite quorum of the
members thereof, or by other appropriate official approval, and all requirements have
been met and procedures have occurred in order to ensure the validity and enforceability
of this Agreement and the Acquisition Fund Agreement.
(c) No event or condition that constitutes, or with the giving of notice or the
lapse of time or both would constitute, an Event of Default exists at the date hereof.
(d) Lessee will do or cause to be done all things necessazy to preserve and
keep in full force and effect its existence as a charter city.
(e) Lessee has complied or will comply with such public bidding
requirements as may be applicable to this Agreement and the acquisition by Lessee of the
Energy Conservation Equipment.
(f) During the Lease Term, the Energy Conservation Equipment will be used
by Lessee only for the purpose of performing essential governmental or proprietary
functions of Lessee consistent with the permissible scope of Lessee's authority.
(g) Lessee has kept, and throughout the Lease Term shall keep, its books and
records in accordance with generally accepted accounting principles and practices
consistently applied, and shall deliver to Lessor (i) annual audited financial statements
(including (1) a balance sheet, (2) statement of revenues, expenses and changes in fund
balances for budget and actual, (3) statement of cash flows, and (4) footnotes, schedules
and attachments to the financial statements) within 240 days of its fiscal year end,
(ii) such other financial statements and information as Lessor may reasonably request,
and (iii) upon Lessor's request, its annual proposed budget for the following fiscal yeaz
no later than 30 days prior to its then current fiscal year end. and its annual final budget
for the following fiscal year within 30 days after its approval. The financial statements
described in subsection (g) shall be accompanied by an unqualified opinion of Lessee's
auditor. Credit information relating to Lessee may be disseminated among Lessor and
any of its affiliates and any of their respective successors and assigns.
(h) Lessee has need for the Energy Conservation Equipment and expects to
make immediate use of the Energy Conservation Equipment upon its installation.
Lessee's need for the Energy Conservation Equipment is not temporary and Lessee does
not expect the need for any item of the Energy Conservation Equipment to diminish
during the Lease Term.
(i) There is no pending litigation, tax claim, proceeding or dispute that may
materially adversely affect Lessee's financial condition or impairs its ability to perform
its obligations under this Agreement or the Acquisition Fund Agreement. Lessee will, at
its expense, maintain its legal existence and do any further act and execute, acknowledge,
deliver, file, register and record any further documents Lessor may reasonably request in
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order to protect Lessor's first priority security interest in the Energy Conservation
Equipment, the Acquisition Fund and the Delivery Costs Fund and Lessor's rights and
benefits under this Agreement and the Acquisition Fund Agreement.
(j) The Energy Conservation Equipment is and will be located on
improvements within aright-of--way that is dedicated to public use for a period that is
longer than the Lease Term. Lessee has good and marketable title to such improvements
on which Energy Conservation Equipment is or will be located, and there exists no
mortgage, pledge, lien, security interest, charge or other encumbrance of any nature
whatsoever on or with respect to such improvements.
(k) Lessee has received allocation of a portion of the national qualified energy
conservation bond limitation in the aggregate amount of $2,256,207.58 and
documentation with respect to such allocation has been provided for inclusion in the
transcript for this Agreement.
(I) No lease, rental agreement, lease-purchase agreement, payment agreement
or contract for purchase to which Lessee has been a party at any time has been terminated
by Lessee as a result of insufficient funds being appropriated in any fiscal yeaz. No
payment default has occurred under any debt, revenue bond or obligation which Lessee
has issued during the past ten (10) years, and no non-payment default of a material nature
has occurred during the past ten (10) years.
ARTICLE III
Section 3.01. Lease of Energy Conservation Equipment. Subject to the terms of this
Agreement, Lessor agrees to provide the Acquisition Amount to acquire and install the Energy
Conservation Equipment and pay the Delivery Costs. Lessor hereby demises, leases, transfers
and lets to Lessee, and Lessee hereby acquires, rents and leases from Lessor, the Energy
Conservation Equipment for the Lease Term.
Section 3.02. Continuation of Lease Term. Lessee intends, subject to Section 3.03, to
continue the Lease Term and to pay the Rental Payments under this Agreement. Lessee affirms
that sufficient funds aze available for its current fiscal year to pay any Rental Payments when due
during the cun•ent fiscal yeaz, and Lessee reasonably believes that an amount sufficient to make
all Rental Payments during the entire Lease Term can be obtained from legally available funds of
Lessee.
Section 3.03. Abatement. During any period in which, by reason of material damage or
destruction or taking under the power of eminent domain (or sale to any entity threatening the
use of such power) or material title defect with respect to any Energy Conservation Equipment,
there is substantial interference with the beneficial use and enjoyment by Lessee of such Energy
Conservation Equipment, the Rental Payments due under this Agreement shall be abated in the
same proportion (including in whole) that the portion of such Energy Conservation Equipment
that is unavailable for Lessee's beneficial use and enjoyment beazs to all of the Energy
Conservation Equipment. Lessee shall immediately notify Lessor upon the occurrence of any
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event causing substantial interference with Lessee's beneficial use and enjoyment of any Energy
Conservation Equipment and the portion of the Energy Conservation Equipment that is so
unavailable, and such notice shall be provided prior to the abatement of any Rental Payments
under this Agreement. The amount of Rental Payments abated under this Agreement shall be
such that the remaining Rental Payment obligation for each rental period represents fair
consideration for the beneficial use and enjoyment of the portions of the Energy Conservation
Equipment that are not affected by such interference. Such abatement shall commence on the
date that Lessee's beneficial use and enjoyment of the affected Energy Conservation Equipment
is restricted because of such interference and end on the earlier of (i) the date on which the
beneficial use and enjoyment thereof aze restored to Lessee, or (ii) the date on which Lessee
either (x) replaces the affected Energy Conservation Equipment, (y) uses the proceeds of
insurance or condemnation awazd to pay the applicable Prepayment Price therefor or (z) elects to
pay the applicable Prepayment Price for the affected Energy Conservation Equipment pursuant
to Section 10.01(b) if no insurance proceeds or condemnation award are available for purposes
of the foregoing clause (y); provided however, that the provisions of this Agreement, including
(but not limited to) dates on which Rental Payments are due, shall be extended for a period equal
to the period the obligation to make Rental Payments was abated; and provided further, however,
that in no event shall any such extension result in the Lease Term extending past September 12,
2028. Notwithstanding any such interference with Lessee's beneficial use and enjoyment of a
portion of the Energy Conservation Equipment, this Agreement shall continue in full force and
effect with respect to any remaining Energy Conservation Equipment. Lessee hereby waives the
benefits of California Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other
rights to terminate this Agreement by virtue of any interference with the use and possession of
the Energy Conservation Equipment.
Section 3.04. Conditions to Lessor's Performance. (a) As a prerequisite to the
performance by Lessor of any of its obligations under this Agreement, Lessee shall deliver to
Lessor the following:
(i) An Acquisition Fund Agreement in the form set forth in Exhibit H hereto,
satisfactory to Lessor and executed by Lessee and the Acquisition Fund Custodian;
(ii) A certified copy of a resolution of Lessee's City Council, substantially in
the form attached hereto as Exhibit C-1, authorizing the execution and delivery of this
Agreement and the Acquisition Fund Agreement and performance by Lessee of its
obligations under this Agreement and the Acquisition Fund Agreement;
(iii) A Certificate executed by the City Clerk or Deputy City Clerk of Lessee,
in substantially the form attached hereto as Exhibit C-2, completed to the satisfaction of
Lessor;
(iv) An opinion of counsel to Lessee in substantially the form attached hereto
as Exhibit D and otherwise satisfactory to Lessor;
(v) Evidence of insurance as required by Section 7.02 hereof;
7-~2
(vi) All documents, including financing statements, affidavits, notices and
similar instruments, in form satisfactory to Lessor, which Lessor deems necessary or
appropriate at that time pursuant to Section 6.02;
(vii) A copy of a fully completed and executed Form 8038-TC with respect to
this Agreement in accordance with Section 4.05(g) hereof;
(viii) A certified copy of any Surety Bond satisfying the conditions set forth in
Section 7.04; provided, however, that such delivery shall not be a condition precedent to
Lessor's performance hereunder so long as any such Surety Bonds that satisfy the
conditions under Section 7.04 are provided to Lessor prior to delivery of a Disbursement
Request pursuant to the Acquisition Fund Agreement for Lessor's approval as therein
provided; and
(ix) Such other items reasonably required by Lessor.
(b) In addition, the performance by Lessor of any of its obligations under this
Agreement and the Acquisition Fund Agreement shall be subject to: (i) no Material Adverse
Change in the financial condition of Lessee since the date of this Agreement, and (ii) no Event of
Default having occurred and continuing; provided, however, that nothing in this subsection (b)
shall terminate Lessor's obligation under Section 5.02 with respect to the covenant of quiet
enjoyment prior to the occurrence of an Event of Default.
(c) Subject to satisfaction of the foregoing, Lessor will deposit the Acquisition Amount
with the Acquisition Fund Custodian for deposit into the Acquisition Fund and the Delivery
Costs Fund as provided in the Acquisition Fund Agreement.
ARTICLE IV
Section 4.01. Rental Payments. (a) Lessee agrees, subject to Section 3.03, to pay to
Lessor beginning on the Rental Payment Commencement Date: (i) Rental Payments representing
a principal component payable in the respective semiannual installments and on the respective
Rental Payment Dates as indicated in the Payment Schedule under the column entitled
"Principal Component" and (ii) Rental Payments representing an interest component in the
respective semiannual installments and on the respective Rental Payment Dates as indicated in
the Payment Schedule under the column entitled "Interest Component. "
(b) Subject to Section 3.03, Lessee shall promptly pay Rental Payments from and after
the Rental Payment Commencement Date, in lawful money of the United States of America, on
the Rental Payment Dates and in such amounts as provided in the Payment Schedule, to Lessor
by wire transfer in immediately available funds in accordance with wire payment instructions
provided by Lessor to Lessee in writing or to such other place or in such other manner as may be
designated by Lessor in writing to Lessee.
(c) Interest on the Acquisition Amount shall begin to accrue as of the Funding Date.
Lessee shall pay Lessor a charge on any Rental Payment not paid on the date such payment is
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due at a rate equal to the Contract Rate plus 5% per annum or the maximum amount permitted by
law, whichever is less, from such date.
Section 4.02. Interest and Principal Components. A portion of each Rental Payment is
paid as, and represents payment of, interest, and the balance of each Rental Payment is paid as,
and represents payment of, principal as more fully detailed on the Payment Schedule.
Section 4.03. Rental Payments to Constitute a Current Expense of Lessee. The Rental
Payment payable on a particular Rental Payment Date shall be for the period from the
immediately preceding Rental Payment Date (or the respective Acceptance Dates in the case of
the first Rental Payment Date) to such particular Rental Payment Date. For each fiscal yeaz or
portion thereof during the Lease Term, Rental Payments and other amounts payable under this
Agreement shall constitute the total rentals for such fiscal year or portion thereof and shall be
paid by Lessee for and in consideration of the right of use and possession, and the continued
quiet use and enjoyment, of the Energy Conservation Equipment by Lessee for and during such
fiscal yeaz or portion thereof. Lessor and Lessee have agreed and determined that such rentals
are not in excess of the fair rental value of the Energy Conservation Equipment. In making such
determination, consideration has been given to the costs of acquiring and installing the Energy
Conservation Equipment, the uses and purposes served by the Energy Conservation Equipment
and the benefits therefrom that will accrue to Lessee by reason of this Agreement and to the
general public by reason of Lessee's use of the Energy Conservation Equipment hereunder.
Lessor and Lessee understand and intend that the obligation of Lessee to pay Rental Payments
and other amounts payable under this Agreement shall constitute a current expense of Lessee
payable solely from its general fund or other funds that are legally available for that purpose and
shall not in any way be construed to be a debt of Lessee in contravention of any applicable
constitutional or statutory limitation or requirement concerning the creation of indebtedness by
Lessee, nor shall anything contained herein constitute a pledge of the general tax revenues, funds
or moneys of Lessee.
Section 4.04. Rental Payments to be Unconditional. Except as provided in Section 3.03,
the obligations of Lessee to make Rental Payments and to perform and observe the other
covenants and agreements contained in this Agreement shall be absolute and unconditional in all
events without abatement, diminution, deduction, set-off or defense, for any reason, including
without limitation any failure of the Energy Conservation Equipment, any defects, malfunctions,
breakdowns or infirmities in the Energy Conservation Equipment, disputes with the Vendor of
any Energy Conservation Equipment or Lessor, failure of the Vendor under any Vendor
Agreement to perform any of its obligations thereunder for whatever reason, including
bankruptcy, insolvency, reorganization or any similar event with respect to the Vendor under any
Vendor Agreement, the failure or inability (for whatever reason) of Lessee to receive (or delay in
receipt of) all or any portion of the direct cash subsidy payment with respect to this Agreement
as provided in Sections 4.05(f) and 4.05(i) hereof or any accident, condemnation or unforeseen
circumstances.
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Section 4.05. Tax Covenants . At all times during the Lease Term, Lessee shall comply
with the following covenants as required to ensure that this Agreement constitutes a "qualified
energy conservation bond" under and as defined in Sections 54A(d)(1)(C) and 54D of the Code:
(a) Status as Local Government. Lessee shall maintain its status as a local
government as required by Section 54D(a)(2) of the Code.
(b) Qualified Energy Conservation Project Requirement; Capital
Expenditures. One hundred percent (100%) of the Available Project Proceeds will be
used for a Qualified Energy Conservation Project, as required by Section 54D(t) of the
Code. Lessee shall design, acquire, install and operate the Energy Conservation
Equipment in such a manner that the Energy Conservation Equipment will be a Qualified
Energy Conservation Project.
(c) Three Year Expenditure of Available Project Proceeds. Lessee reasonably
expects to expend 100% of the Available Project Proceeds on a Qualified Energy
Conservation Project within the Expenditure Period. To the extent that less than 100% of
the Available Project Proceeds are expended for a Qualified Energy Conservation Project
by the end of the Expenditure Period, all nonqualified bonds (as determined under
Section 142 of the Code) shall be prepaid within 90 days after the end of the Expenditure
Period, all in accordance with the requirements of Section 54A(d)(2)(B) of the Code in
the time and manner prescribed by the Code and as provided in Section 4.06 hereof.
(d) Arbitrage Rebate. Lessee will take any and all actions necessazy to assure
compliance with Section 148(f) of the Code, as modified by Section 54A(d)(4) 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 this Agreement.
(e) No Arbitrage. Lessee will not take, or permit or suffer to be taken, any
action with respect to the proceeds of this Agreement which, if such action had been
reasonably expected to have been taken, or had been deliberately and intentionally taken,
on the Funding Date would have caused this Agreement to bean "azbitrage bond" within
the meaning of Section 148(a) of the Code, as modified by Section 54A(d)(4) of the
Code.
(f) LR.S. Form 8038-CP. Lessee acknowledges that, to receive certain
payments with respect to this Agreement under Section 6431 of the Code, it must, among
other requirements, periodically file appropriate returns, now designated Form 8038-CP,
Return for Credit Payments to Issuers of Qualified Bonds, in accordance with the
instructions to such return.
(g) LR.S. Information Reporting Return Form 8038-TC. Lessee shall file or
cause to be filed I.R.S. Form 8038-TC (and all other required information reporting
returns) in a timely manner.
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(h) Designation. Lessee designates this Agreement for purposes of
Section 54D(a)(3) of the Code as a "qualified energy conservation bond" within the
meaning of Section 54D(a) of the Code.
(i) "Qualified Bond" Election with respect to this Agreement. Lessee hereby
irrevocably elects to -have Section 6431(f) of the Code apply to this Agreement. Lessee
hereby acknowledges that as a consequence of this election, Lessor (including its
successors and assigns) will not be entitled to a tax credit as a result of ownership of this
Agreement.
(j) Binding Commitment to Spend Available Project Proceeds. Lessee has
entered into a binding commitment with a third party to spend at least 10% of the
Available Project Proceeds with respect to "qualified conservation purposes" within the
meaning of Section 54D(a)(1) of the Code.
(k) Limitation on Delivery Costs. No proceeds of this Agreement and
investment earnings thereon, in an amount in excess of 2% of the proceeds of the sale of
this Agreement, will be used to pay Delivery Costs. If the fees of Lessor are retained
upon origination of this Agreement as a discount on the purchase of this Agreement, such
retention shall be deemed to be an expenditure of proceeds for said fees.
(1) Allocation of Qualified Energy Conservation Bond Limitation. Lessee has
received an allocation of a portion of the national qualified energy conservation bond
limitation in the aggregate amount of $2,256,207.58, included in the transcript for this
Agreement. The maximum aggregate Principal Component of this Agreement designated
as a "qualified energy conservation bond" under subsection (h) of this Section 4.05 for
purposes of Section 54D(a)(3) of the Code does not exceed the amount of the national
qualified energy conservation bond limitation allocated to Lessee under Section 54D(e)
of the Code for calendar yeaz 2010.
(m) Tax Certificate. Lessee shall comply with the terms of the Tax Certificate
for this Agreement; this covenant shall survive any payment, prepayment or other
dischazge of this Agreement.
(n) Davis-Bacon Act Compliance. Lessee shall comply with the requirements
of Title 40, Subtitle II, Part A, Chapter 31, Subchapter IV of the United States Code in
connection with the acquisition and installation of the Energy Conservation Equipment.
(o) No Private Activity. Lessee shall assure that the Acquisition Amount and
the Energy Conservation Equipment aze not used in a manner that would cause this
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.
(p) Compliance with Conflicts of Interest Laws. Lessee shall comply with all
State and local law requirements governing conflicts of interest as such requirements may
relate, directly or indirectly, to this Agreement. Lessee hereby covenants and agrees to
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comply with any conflict of interest rules prescribed by the Internal Revenue Service or
United States Department of Treasury governing the appropriate Member of Congress
and federal, State and local officials and their spouses as such rules may apply to this
Agreement.
Section 4.06. Payment of Equipment Costs from Acquisition Fund; Mandatory
Prepayment from Unspent Acquisition Fund Moneys. (a) Amounts on deposit in the Acquisition
Fund may be expended for the payment of Equipment Costs for the Qualified Energy
Conservation Project in accordance with the Acquisition Fund Agreement (subject to the last
sentence of this subsection (a) below) to and including the earlier of (i) the expiration of the
Acquisition Period, (ii) the date on which Lessee executes and delivers to Lessor the Final
Acceptance Certificate pursuant to Section 5.01(a) hereof or (iii) the 90th day following the later
of September , 2014 or, if Lessee has obtained an extension for the expenditure of amounts in
such Fund in accordance with Section 54A(d)(2) of the Code, the close of such extended period.
All amounts remaining on deposit in the Acquisition Fund as of the earlier of such dates shall be
applied by the Acquisition Fund Custodian as provided in the Acquisition Fund Agreement to
prepay Rental Payments in whole or in part on a pro rata basis of the amount due on each Rental
Payment Date. The prepayment price with respect to any such prepayment shall be equal to
103% of the principal portion of the Rental Payments to be prepaid (which includes a
prepayment premium) plus accrued interest on such prepaid principal portion to the prepayment
date. Notwithstanding anything in this Agreement to the contrary, an amount may not be
disbursed from the Acquisition Fund to pay Equipment Costs relating to a portion of the Energy
Conservation Equipment prior to the date on which Lessee has certified in the related
Disbursement Request that the Acceptance Date has occurred with respect to such portion of
Energy Conservation Equipment for which funds are requested for disbursement from the
Acquisition Fund pursuant to the Acquisition Fund Agreement.
Lessee hereby acknowledges and agrees that prior to Equipment Acceptance any
demands for payment of related Equipment Costs or any other amounts due to the
Vendors shall be paid by Lessee from its own funds that are legally available for the
purpose and not from funds held in the Acquisition Fund. Such funds so paid by the
Lessee may be reimbursed as provided in this Agreement, subject to any limitations on any
such reimbursement as otherwise provided in this Agreement.
(b) In connection with any prepayment pursuant to subsection (a) of this Section 4.06,
Lessee shall pay the prepayment premium and interest portion of Rental Payments accrued to the
prepayment date on such principal portion to be prepaid from funds (other than Available Project
Funds) legally available to Lessee for that purpose, which at the discretion of Lessee's City
Council have been appropriated for that purpose.
(c) Lessee will give Lessor notice of any such prepayment in accordance with this
Section 4.06 not less than 60 days in advance of the prepayment date.
Section 4.07. Covenant to Budget and Appropriate. Lessee hereby covenants to take such
action as is necessary under the laws applicable to Lessee to budget for and appropriate and
maintain funds sufficient and available to-discharge its obligation to meet all Rental Payments
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and pay other amounts that are required to be paid under this Agreement in each of its fiscal
years during the Lease Term; provided that such covenant shall not apply to payment obligations
of Lessee that are payable only from funds (if any) that are subject to appropriation at the
discretion of Lessee's City Council pursuant to Section 4.06(b), 7.03, 7.05 or 8.02 hereof.
The covenants on the part of Lessee herein contained shall be deemed to be and shall be
construed to be ministerial duties imposed by law and it shall be the duty of each and every
public official of Lessee to take such action and do such things as are required by law in the
performance of the official duty of such officials to enable Lessee to carry out and perform the
covenants and agreements in this Agreement agreed to be carried out and performed by Lessee.
ARTICLE V
Section 5.01. Delivery, Installation and Acceptance of Energy Conservation Equipment.
(a) Lessee shall order the Energy Conservation Equipment, cause the Energy Conservation
Equipment to be delivered and installed at the location or locations specified in the Equipment
Schedule and pay any and all Equipment Costs and other delivery and installation costs in
connection therewith. When items of Energy Conservation Equipment have been delivered and
installed and aze available for Lessee's beneficial use and enjoyment, Lessee shall promptly
accept such Energy Conservation Equipment and evidence said acceptance by executing and
delivering to Lessor a Disbursement Request as provided in the Acquisition Fund Agreement.
Upon the occurrence of Equipment Acceptance for all of the Energy Conservation Equipment,
Lessee shall execute and deliver to Lessor a Final Acceptance Certificate in the form attached
hereto as Exhibit E.
(b) Lessee shall deliver to Lessor original invoices (and proof of payment of such
invoices if Lessee seeks reimbursement) relating to each item of Energy Conservation
Equipment accepted by Lessee pursuant to the related Disbursement Request; provided that each
such original invoice shall contain a footnote inserted thereon by the Vendor (or by Lessee in the
event that Lessee has paid such invoice and is seeking reimbursement) that states the amount of
California State sales tax actually paid with respect to the Energy Conservation Equipment that is
subject to such invoice. Any such invoice that does not contain the required footnote as provided
in this subsection (b) shall not be sufficient for purposes of submitting a Disbursement Request.
Section 5.02. Quiet Enjoyment of Energy Conservation Equipment. So long as Lessee is
not in default hereunder, neither Lessor nor any entity claiming by, through or under Lessor,
shall interfere with Lessee's quiet use and enjoyment of the Energy Conservation Equipment
during the Lease Term.
Section 5.03. Location; Inspection. Once installed, no item of the Energy Conservation
Equipment will be moved or relocated from the location specified for it in the Equipment
Schedule without Lessor's prior written consent, which consent shall not be unreasonably
withheld. Lessor shall have the right at all reasonable times during regulaz business hours to
enter into and upon the property where the Energy Conservation Equipment is located for the
purpose of inspecting the Energy Conservation Equipment.
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Section 5.04. Use and Maintenance of the Energy Conservation Equipment. Lessee shall
not install, use, operate or maintain the Energy Conservation Equipment (or cause the Energy
Conservation Equipment to be installed, used, operated or maintained) improperly, carelessly, in
violation of any applicable law or in a manner contrary to that contemplated hereby. Lessee
shall provide all permits and licenses, if any, necessary for the installation and operation of the
Energy Conservation Equipment. In addition, Lessee agrees to comply in all respects with all
applicable laws, regulations and rulings of any legislative, executive, administrative or judicial
body; provided that Lessee may contest in good faith the validity or application of any such law,
regulation or ruling in any reasonable manner that does not, in the opinion of Lessor, adversely
affect the interest of Lessor in and to the Energy Conservation Equipment or its interest or rights
hereunder.
Lessee agrees that it will maintain, preserve and keep the Energy Conservation
Equipment in good repair and working order, in a condition comparable to that recommended by
the manufacturer. Lessor shall have no responsibility to maintain, repair or make improvements
or additions to the Energy Conservation Equipment. In all cases during the Lease Term and
prior to return of Energy Conservation Equipment to Lessor as provided in this Agreement,
Lessee agrees to pay any costs necessary for the manufacturer to re-certify the Energy
Conservation Equipment as eligible for manufacturer's maintenance upon the return of the
Energy Conservation Equipment to Lessor as provided for herein.
Lessee shall not alter any item of Energy Conservation .Equipment or install any
accessory, equipment or device on an item of Energy Conservation Equipment if that would
impair any applicable warranty, the originally intended function or the value of that Energy
Conservation Equipment. All repairs, parts, accessories, equipment and devices furnished,
affixed to or installed on any Energy Conservation Equipment, excluding temporary
replacements, shall thereupon become subject to the security interest of Lessor.
ARTICLE VI
Section 6.01. Title to the Energy Conservation Equipment. Except as otherwise provided
in Section 10.01 hereof, title to Energy Conservation Equipment shall be deemed to vest in
Lessor on the applicable Vendor Payment Date upon payment to Vendor or reimbursement to
Lessee pursuant to the Acquisition Fund Agreement for such Energy Conservation Equipment
and immediately and automatically (without any further action by Lessor or Lessee) shall pass
from Lessor to Lessee on such Vendor Payment Date in reliance on Lessee's acceptance of
Energy Conservation Equipment as evidenced by the related Disbursement Request. Title will,
at Lessor's option, immediately vest in Lessor upon termination of this Agreement as the result
of the occurrence of an Event of Default. Lessee shall at all times protect and defend, at its own
cost and expense, its title in and to the Energy Conservation Equipment from and against all
claims, liens and legal processes of its creditors, and keep all Energy Conservation Equipment
free and clear of all such claims, liens and processes. Upon prepayment for the Energy
Conservation Equipment under this Agreement by Lessee pursuant to Section 10.01, Lessor shall
release its security interest in and to the Energy Conservation Equipment under this Agreement,
as is and where is, without warranty of any kind other than as to the absence of liens created by
or through Lessor, and -shall execute and deliver to Lessee such documents as Lessee may
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reasonably request to evidence the release of Lessor's security interest in the Energy
Conservation Equipment subject to this Agreement.
Section 6.02. Security Interest. As additional security for the payment and performance
of all of Lessee's obligations hereunder, Lessee hereby grants to Lessor a first priority security
interest constituting a first lien on (a) the Energy Conservation Equipment, (b) moneys and
investments held from time to time in the Acquisition Fund and the Delivery Costs Fund and
(c) any and all proceeds of any of the foregoing. Lessee authorizes Lessor to file (and Lessee
agrees to execute, if applicable) such notices of assignment, chattel mortgages, financing
statements and other documents, in form satisfactory to Lessor, which Lessor deems necessazy or
appropriate to establish and maintain Lessor's security interest in the Energy Conservation
Equipment, the Acquisition Fund, the Delivery Costs Fund and the proceeds thereof, including
such financing statements with respect to personal property and fixtures under Article 9 of the
California Commercial Code and treating such Article 9 as applicable to entities such as Lessee.
Section 6.03. Personal Property, No Encumbrances. Lessee agrees that, as and to the
extent permitted by law, the Energy Conservation Equipment is deemed to be and will remain
personal property, and will not be deemed to be affixed to or a part of the real estate on which it
may be situated, notwithstanding that the Energy Conservation Equipment or any part thereof
may be or hereafter become in any manner physically affixed or attached to real estate or any
building thereon. Lessee shall not create, incur, assume or permit to exist any mortgage, pledge,
lien, security interest, charge or other encumbrance of any nature whatsoever on any of the real
estate where the Energy Conservation Equipment is or will be located or enter into any
agreement to sell or assign or enter into any sale/leaseback arrangement of such real estate
without the prior written consent of Lessor; provided, that if Lessor or its assigns is famished
with a waiver of interest in the Energy Conservation Equipment acceptable to Lessor or its
assigns in its discretion from any party taking an interest in any such real estate prior to such
interest taking effect, such consent shall not be unreasonably withheld.
ARTICLE VII
Section 7.01. Liens, Taxes, Other Governmental Charges and Utility Charges. Lessee
shall keep the Energy Conservation Equipment free of all levies, liens, and encumbrances except
those created by this Agreement. The parties to this Agreement contemplate that the Energy
Conservation Equipment will be used for a governmental or proprietary purpose of Lessee and
that the Energy Conservation Equipment will therefore be exempt from all property taxes. If the
use, possession or acquisition of any Energy Conservation Equipment is nevertheless determined
to be subject to taxation, Lessee shall pay when due all taxes and governmental charges lawfully
assessed or levied against or with respect to such Equipment. Lessee shall pay all utility and
other charges incurred in the use and maintenance of the Energy Conservation Equipment.
Lessee shall pay such taxes or charges as the same may become due; provided that, with respect
to any such taxes or charges that may lawfully be paid in installments over a period of years,
Lessee shall be obligated to pay only such installments as accme during the Lease Term. During
the Lease Term, Lessor will not claim ownership of the Equipment for the purposes of any tax
credits, benefits or deductions with respect to the Equipment.
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Section 7.02. Insurance. Lessee shall during the Lease Term maintain or cause to be
maintained (a) casualty insurance naming Lessor and its assigns as loss payee and additional
insured and insuring the Energy Conservation Equipment against loss or damage by fire and all
other risks covered by the standard extended coverage endorsement then in use in the State, and
any other risks reasonably required by Lessor, in an amount at least equal to the greater of (i) the
then applicable Prepayment Price of the Energy Conservation Equipment or (ii) the replacement
cost of the Energy Conservation Equipment; (b) liability insurance naming Lessor and its assigns
as additional insured that protects Lessor from liability with limits of at least $1,000,000 per
occurrence/$3,000,000 in the aggregate for bodily injury and property damage coverage, and
excess liability umbrella coverage of at least $5,000,000, and in all events in form and amount
satisfactory to Lessor; (c) worker's compensation coverage as required by the laws of the State
and (d)rental interruption insurance naming Lessor as loss payee, with coverage equal to the
maximum total Rental Payments payable by Lessee under the Lease for any consecutive
24-month period and insuring against abatement of Rental Payments payable by Lessee resulting
from Lessee's loss of beneficial use or enjoyment of the Energy Conservation Equipment or any
substantial portion thereof and caused by any and all perils insured under the casualty insurance
described in clause (a) above; provided that, with Lessor's prior written consent, Lessee may
self-insure against the risks described in clauses (a), (b) and/or (c). In the event Lessee is
permitted, at Lessor's sole discretion, to self-insure as provided in this Section, Lessee shall
provide to Lessor aself-insurance letter in substantially the form attached hereto as Exhibit F.
Lessee shall famish to Lessor evidence of such insurance or self-insurance coverage throughout
the Lease Term. Lessee shall not cancel or modify such insurance or self-insurance coverage in
any way that would affect the interests of Lessor without first giving written notice thereof to
Lessor at least 30 days in advance of such cancellation or modification.
Section 7.03. Risk of Loss. Whether or not covered by insurance or self-insurance, Lessee
hereby assumes all risk of loss of, or damage to and liability related to injury or damage to any
persons or property arising from the Energy Conservation Equipment from any cause
whatsoever, and no such loss of or damage to or liability arising from the Energy Conservation
Equipment shall relieve Lessee of the obligation to make the Rental Payments or to perform any
other obligation under this Agreement, except as otherwise provided in Section 3.03. Whether or
not covered by insurance or self-insurance, Lessee hereby agrees to reimburse Lessor (to the
fullest extent permitted by applicable law) and subject to appropriation of moneys sufficient for
any and all liabilities, obligations, losses, costs, claims, taxes or damages suffered or incurred by
Lessor, regazdless of the cause thereof and all expenses incurred in connection therewith
(including, without limitation, counsel fees and expenses, and penalties connected therewith
imposed on interest received) arising out of or as a result of (a) entering into of this Agreement
or any of the transactions contemplated hereby, (b) the ordering, acquisition, ownership use,
operation, condition, purchase, delivery, acceptance, rejection, storage or return of any item of
the Energy Conservation Equipment, (c) any accident in connection with the operation, use,
condition, possession, storage or return of any item of the Energy Conservation Equipment
resulting in damage to property or injury to or death to any person, and/or (d) the breach of any
covenant of Lessee under or in connection with this Agreement or any material
misrepresentation provided by Lessee under or in connection with this Agreement; provided,
however, that any amount payable by Lessee pursuant to this Section 7.03 shall be payable solely
from moneys appropriated for such purpose by Lessee's City Council in its discretion, and
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failure to appropriate such moneys shall not constitute an Event of Default under this Agreement.
The provisions of this paragraph shall continue in full force and effect notwithstanding the full
payment of all obligations under this Agreement or the termination of the Lease Term for any
reason.
Section 7.04. Surety Bonds; Lessee to Pursue Remedies Against Contractors and
Sub-Contractors and Their Sureties. Lessee shall secure from each Vendor directly employed by
Lessee in connection with the acquisition, construction, installation, improvement or equipping
of the Energy Conservation Equipment, a payment and performance bond ("Surety Bond ")
executed by a surety company authorized to do business in the State, having a financial strength
rating by A.M. Best Company of "A--" or better, and otherwise satisfactory to Lessor and naming
Lessor as a co-obligee in a sum equal to the entire amount to become payable under each Vendor
Agreement. Each bond shall be conditioned on the completion of the work in accordance with
the plans and specifications for the Energy Conservation Equipment and upon payment of all
claims of subcontractors and suppliers. Lessee shall cause the surety company to add Lessor as a
co-obligee on each Surety Bond, and shall deliver a certified copy of each Surety Bond to Lessor
promptly upon receipt thereof by Lessee. Any proceeds from a Surety Bond shall be applied
first to amounts due Lessor under this Agreement, and any remaining amounts shall be payable
to Lessee.
In the event of a material default of any Vendor under any Vendor Agreement in
connection with the acquisition, construction, maintenance and/or servicing of the Energy
Conservation Equipment or in the event of a material breach of warranty with respect to any
material workmanship or performance guaranty with respect to the Energy Conservation
Equipment, Lessee will promptly proceed to exhaust its remedies against the Vendor in default.
Lessee shall advise Lessor of the steps it intends to take in connection with any such default.
Any amounts received by Lessee in respect of damages, refunds and adjustments or otherwise in
connection with the foregoing shall be paid to Lessor and applied against Lessee's obligations
hereunder.
Section 7.05. Advances. In the event Lessee shall fail to keep the Energy Conservation
Equipment in good repair and working order or shall fail to maintain any insurance required by
Section 7.02 hereof, Lessor may, but shall be under no obligation to, maintain and repair the
Energy Conservation Equipment or obtain and maintain any such insurance coverages, as the
case may be, and pay the cost thereof. All amounts so advanced by Lessor shall constitute
additional rent for the Lease Term, and Lessee covenants and agrees to pay such amounts so
advanced by Lessor with interest thereon from the date advanced until paid at a rate equal to the
Contract Rate plus 5% per annum or the maximum amount permitted by law, whichever is less;
provided, however, that any amount payable by Lessee pursuant to this Section 7.05 shall be
payable solely from moneys appropriated for such purpose by Lessee's City Council in its
discretion, and failure to appropriate such moneys shall not constitute an Event of Default under
this Agreement.
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ARTICLE VII](
Section 8.01. Damage, Destruction and Condemnation. If, prior to the termination of the
Lease Term, (a) the Energy Conservation Equipment or any portion thereof is destroyed, in
whole or in part, or is damaged by fire or other casualty or (b) title to, or the temporary use of,
the Energy Conservation Equipment or any part thereof shall be taken under the exercise or
threat of the power of eminent domain by any governmental body or by any person, firm or
corporation acting pursuant to governmental authority, (i) Lessee and Lessor will cause the Net
Proceeds of any insurance claim or condemnation award or sale under threat of condemnation to
be applied to the prompt replacement, repair, restoration, modification or improvement of the
Energy Conservation Equipment or such part thereof and any balance of the Net Proceeds
remaining after such work has been completed shall be paid to Lessee or (ii) Lessee shall
exercise its option to prepay in accordance with Section 10.01(b).
If Lessee elects to replace any item of the Energy Conservation Equipment (the
"Replaced Equipment") pursuant to this Section, the replacement equipment (the "Replacement
Equipment") shall be new or of a quality, type, utility and condition at least as good as the
Replaced Equipment, shall be of equal or greater value than the Replaced Equipment and shall
provide at least the same level of energy and/or operational savings expected in the aggregate
from the Replaced Equipment prior to such casualty, destruction or condemnation. Lessee shall
grant to Lessor a first priority security interest in any such Replacement Equipment. Lessee shall
represent, warrant and covenant to Lessor that each item of Replacement Equipment is free and
clear of all claims, liens, security interests and encumbrances, excepting only those liens created
by or through Lessor, and shall provide to Lessor any and all documents as Lessor may
reasonably request in connection with the replacement, including, but not limited to,
documentation in form and substance satisfactory to Lessor evidencing Lessor's security interest
in the Replacement Equipment. Lessor and Lessee hereby acknowledge and agree that any
Replacement Equipment acquired pursuant to this paragraph shall constitute "Energy
Conservation Equipment" for purposes of this Agreement. Lessee shall complete the
documentation of Replacement Equipment on or before the next Rental Payment Date after the
occurrence of a casualty event, or exercise its option to prepay in accordance with
Section 10.01(b).
For purposes of this Article, the term "Net Proceeds" shall mean the amount remaining
from the gross proceeds of any insurance claim or condemnation award or sale under threat of
condemnation after deducting all expenses, including attorneys' fees, incurred in the collection
thereof.
Section 8.02. Insufficiency of Net Proceeds. If the Net Proceeds are insufficient to pay in
full the cost of any repair, restoration, modification or improvement referred to in Section 8.01,
Lessee shall either (a) complete such replacement, repair, restoration, modification or
improvement and pay any costs thereof in excess of the amount of the Net Proceeds (to the
fullest extent permitted by applicable law, but only from legally available funds), or (b) pay or
cause to be paid to Lessor the amount of the then applicable Prepayment Price for the Energy
Conservation Equipment, and, upon such payment, the Lease Term shall terminate and Lessor's
security interest in the Energy Conservation Equipment shall terminate as provided in
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Section 6.01 hereof; provided, however, that any amount payable by Lessee pursuant to this
Section 8.02 shall be payable solely from moneys appropriated for such purpose by Lessee's
City Council in its discretion, and failure to appropriate such moneys shall not constitute an
Event of Default under this Agreement. The amount of the Net Proceeds, if any, remaining after
completing such repair, restoration, modification or improvement or after purchasing such
Equipment shall be retained by Lessee. If Lessee shall make any payments pursuant to this
Section, Lessee shall not be entitled to any reimbursement therefor from Lessor nor shall Lessee
be entitled to any diminution of the amounts payable under Article IV.
ARTICLE IX
Section 9.01. Disclaimer of Warranties. Lessor makes no warranty or representation,
either express or implied, as to the value, design, condition, merchantability or fitness for
particulaz purpose or fitness for use of the Energy Conservation Equipment, or any other
warranty or representation, express or implied, with respect thereto and, as to Lessor, Lessee's
acquisition of the Energy Conservation Equipment shall be on an "as is" basis. In no event shall
Lessor be liable for any incidental, indirect, special or consequential damage in connection with
or arising out of this Agreement, the Energy Conservation Equipment or the existence,
furnishing, functioning or Lessee's use of any item, product or service provided for in this
Agreement.
Section 9.02. Vendor's Agreements; Warranties. Lessee covenants that it shall not in any
material respect amend, modify, rescind or alter any Vendor Agreement without the prior written
consent of Lessor. Lessor hereby irrevocably appoints Lessee its agent and attorney-in-fact
during the Lease Term, so long as Lessee shall not be in default under this Agreement, to assert
from time to time whatever claims and rights (including without limitation warranties) relating to
the Energy Conservation Equipment that Lessor may have against Vendor. Lessee's sole remedy
for the breach of such warranty, indemnification or representation shall be against the applicable
Vendors of the Energy Conservation Equipment, and not against Lessor. Any such matter shall
not have any effect whatsoever on the rights and obligations of Lessor hereunder, including the
right to receive full and timely Rental Payments. Lessee expressly acknowledges that Lessor
makes, and has made, no representations or warranties whatsoever as to the existence or the
availability of such warranties relating to the Equipment.
ARTICLE X
Section 10.01. Prepayment Option. Lessee shall have the option to prepay or satisfy all (or
in the case of subsection (b) below, all or par[) of its obligations hereunder, at the following
times and upon the following terms:
(a) From and after the date specified (if any) in the Payment Schedule (the
"Prepayment Option Commencement Date "), on the Rental Payment Dates specified in
the Payment Schedule, upon not less than 30 days' prior written notice, and upon
payment in full of the Rental Payments then due and all other amounts then owing under
this Agreement plus the then applicable Prepayment Price, which may include a
prepayment premium on the unpaid balance as set forth in the Payment Schedule; or
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(b) In the event of substantial damage to or destmction or condemnation of all
or a portion (representing at least $250,000 of the then aggregate Principal Component)
of the Energy Conservation Equipment, on the day specified in Lessee's notice to Lessor
of its exercise of the prepayment option (which shall be the earlier of the next Rental
Payment Date or 60 days after the casualty event) upon payment in full to Lessor of the
sum of (i) any Rental Payment then due (calculated in accordance with Sections 3.03 and
4.01 hereof) plus (ii) an amount equal to the lesser of the then applicable Prepayment
Price or 103% of the aggregate unpaid principal portion of Rental Payments to be prepaid
(or, in the event such prepayment occurs on a date other than a Rental Payment Date, the
sum of such amount determined as of the next preceding Rental Payment Date plus
accrued interest to such prepayment date) plus (iii) all other amounts then owing
hereunder; or
(c) Upon the expiration of the Lease Term, upon payment in full of all Rental
Payments then due and all other amounts then owing hereunder to Lessor; or
(d) In the event that a Loss of Subsidy (as hereafter defined) occurs, on the
day specified in Lessee's notice to Lessor of its exercise of the prepayment option
provided under this subsection (d), Lessee shall have the option to prepay all, but not less
than all, of the Rental Payments from and after any Loss of Subsidy upon payment in full
to Lessor of the sum of (i) any Rental Payment then due plus (ii) an amount equal to the
lesser of the then applicable Prepayment Price or 103% of the aggregate unpaid principal
portion of Rental Payments (or, in the event such prepayment occurs on a date other than
a Rental Payment Date, the sum of such lesser amount determined as of the next
preceding Rental Payment Date plus accrued interest to such prepayment date) plus
(iii) all other amounts then owing hereunder. "Loss of Subsidy" means the occurrence of
any of the following: (A) legislation enacted by the Congress of the United States of
America or a ruling, regulation or statement issued by the Treasury Department or the
Internal Revenue Service, the effect of which (I) denies, repeals, revokes or reduces
Lessee's applicable cash subsidy payments from the United States Treasury under
Section 54A or 6431 of the Code (as currently in effect) with respect to this Agreement
(herein referred to as "Direct Subsidy Payments ") or (II) imposes one or more new
substantive conditions on the receipt by Lessee of Direct Subsidy Payments and such
conditions are unacceptable to Lessee; and (B) any governmental, administrative, judicial
or other official action that is beyond Lessee's control and results in the significant
reduction or loss of Direct Subsidy Payments to Lessee or imposes one or more new
substantive conditions on the receipt by Lessee of Direct Subsidy Payments and such
conditions are unacceptable to Lessee; provided, however, that in no event shall a "Loss
of Subsidy" occur as the result of Lessee's failure or inability for reasons within its
control to receive (or delay in receipt of) all or any portion of any Direct Subsidy
Payment from the United States Department of Treasury or Lessee's failure to comply
with applicable law and regulations to obtain payment of any Direct Subsidy Payment
from the United States Department of Treasury, including (without limitation) any offset
against any Direct Subsidy Payment as a result of other liabilities of Lessee to the United
States Department of Treasury.
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Afrer payment of the applicable Prepayment Price and all other amounts owing
hereunder, Lessor's security interests in and to such Energy Conservation Equipment will be
terminated and Lessee will own the Energy Conservation Equipment free and clear of Lessor's
security interest in the Energy Conservation Equipment.
ARTICLE XI
Section 11.01. Assignment by Lessor. (a) Lessor's right, title and interest in and to this
Agreement, the Rental Payments and any other amounts payable by Lessee hereunder, the
Acquisition Fund Agreement, its security interest in the Energy Conservation Equipment, the
Acquisition Fund and the Delivery Costs Fund, and all proceeds therefrom may be assigned and
reassigned in whole or in part to one or more assignees or subassignees by Lessor, without the
necessity of obtaining the consent of Lessee; provided, that any such assignment, transfer or
conveyance (i) shall be made only to investors each of whom Lessor reasonably believes is a
"qualified institutional buyer" as defined in Rule 144A(a)(1) promulgated under the Securities
Act of 1933, as amended, and is purchasing the Agreement (or any interest therein) for its own
account with no present intention to resell or distribute the Agreement (or interest therein),
subject to each investor's right at any time to dispose of the Agreement or any interest therein as
it determines to be in its best interests, (ii) shall not result in more than 35 owners of Lessor's
rights and interests under this Agreement or the creation of any interest in this Agreement in an
aggregate principal component that is less than $100,000 and (iii) shall not require Lessee to
make Rental Payments, send notices or otherwise deal with respect to matters arising under this
Agreement with or to more than one individual or entity and any trust agreement, participation
agreement or custodial agreement under which multiple ownership interests in this Agreement
are created shall provide the method by which the owners of such interests shall establish the
rights and duties of a single trustee, owner, servicer or other fiduciary or agent to act on their
behalf with respect to the rights and interests of Lessor under this Agreement, including with
respect to the exercise of rights and remedies by Lessor on behalf of such owners upon the
occurrence of an Event of Default hereunder. Lessor and Lessee hereby acknowledge and agree
that the restrictions and limitations on transfer as provided in this Section 11.01 shall apply to the
first and subsequent assignees and sub-assignees of any of Lessor's right, title and interest in, to
and under this Agreement (or any interest therein).
(b) Unless to an affiliate controlling, controlled by or under common control with
Lessor, no assignment, transfer or conveyance permitted by this Section 11.01 shall be effective
until Lessee shall have received a written notice of assignment that discloses the name and
address of each such assignee; provided, that if such assignment is made to a bank or trust
company as trustee or paying agent for owners of certificates of participation, trust certificates or
partnership interests with respect to the Rental Payments payable under this Agreement, it shall
thereafter be sufficient that Lessee receives notice of the name and address of the bank or trust
company as trustee or paying agent. During the Lease Term, Lessee shall keep, or cause to be
kept, a complete and accurate record of all such assignments in form necessazy to comply with
Section 149 of the Code. Lessee shall retain all such notices as a register of all assignees and
shall make all payments to the assignee or assignees designated in such register. Lessee shall not
have the right to and shall not assert against any assignee any claim, counterclaim or other right
Lessee may have against Lessor or the Vendor. Assignments ir. part may include without
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limitation assignment of all of Lessor's security interest in and to the Energy Conservation
Equipment and all rights in, to and under this Agreement related to such Equipment, and all of
Lessor's security interest in and to the Acquisition Fund and the Delivery Costs Fund, or all
rights in, to and under the Acquisition Fund Agreement.
(c) If Lessor notifies Lessee of its intent to assign this Agreement, Lessee agrees that it
shall execute and deliver to Lessor a Notice and Acknowledgement of Assignment substantially
in the form of Exhibit G attached hereto within five (5) business days after its receipt of such
request.
Section 11.02. Assignment and Subleasing by Lessee. None of Lessee's right, title, and
interest in, to and under this Agreement or any portion of the Energy Conservation
Equipment or the Acquisition Fund Agreement, the Acquisition Fund or the Delivery Costs
Fund may be assigned, encumbered or subleased by Lessee for any reason, and any
purported assignment, encumbrance or sublease without Lessor's prior written consent
shall be null and void.
ARTICLE XII
Section 12.01. Events of Default Defined. Any of the following events shall constitute an
"Event of Default" under this Agreement:
(a) Failure by Lessee to (i) pay any Rental Payment or other payment required
to be paid under this Agreement within 10 days after the date when due as specified
herein or (ii) maintain insurance as required herein;
(b) Failure by Lessee to observe and perform any covenant, condition or
agreement contained in this Agreement on its part to be observed or performed, other
than as referred to in subparagraph (a) above and other than a failure by Lessee to
perform any covenant contained in Section 4.05 hereof that does not materially adversely
affect Lessor and its interests, for a period of 30 days after written notice specifying such
failure and requesting that it be remedied is given to Lessee by Lessor, unless Lessor
shall agree in writing to an extension of such time prior to its expiration; provided that, if
the failure stated in the notice cannot be corrected within the applicable period, Lessor
will not unreasonably withhold its consent to an extension of such time if corrective
action is instituted by Lessee within the applicable period and diligently pursued until the
default is corrected;
(c) Any statement, representation or warranty made by Lessee in or pursuant
to this Agreement or its execution, delivery or performance shall prove to have been
false, incorrect, misleading, or breached in any material respect on the date when made;
(d) Any default occurs under any other agreement for borrowing money, lease
financing of property or otherwise receiving credit under which Lessee is an obligor, if
such default (i) arises under any other agreement for borrowing money, lease financing of
property or provision of credit provided by Lessor or any affiliate cf Lessor, or (ii) arises
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under any obligation under which there is outstanding, owing or committed an aggregate
amount in excess of $1,000,000;
(e) Lessee shall (i) apply for or consent to the appointment of a receiver,
trustee, custodian or liquidator of Lessee, or of all or a substantial part of the assets of
Lessee, (ii) be unable, fail or admit in writing its inability generally to pay its debts as
they become due, (iii) make a general assignment for the benefit of creditors or (iv) file a
voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors or taking advantage of any insolvency law or any answer
admitting the material allegations of a petition filed against Lessee in any bar>lauptcy,
reorganization, moratorium or insolvency proceeding; or
(f) An order, judgment or decree shall be entered by any court of competent
jurisdiction, approving a petition or appointing a receiver, trustee, custodian or liquidator
for the Lessee or of all or a substantial part of the assets of Lessee, in each case without
its application, approval or consent, and such order, judgment or decree shall continue
unstayed and in effect for any period of 30 consecutive days.
Failure on the part of Lessee to make any payment, transfer or disbursement provided for
in this Agreement or in the Acquisition Fund Agreement to be paid from moneys in Lessee's
general fund that are legally available and duly appropriated by Lessee's City Council at its
discretion and not at its obligation shall not be a default or Event of Default under this
Agreement or the Acquisition Fund Agreement and no remedy is provided for any such failure.
Section 12.02. Remedies on Default. Whenever any Event of Default exists, Lessor shall
have the right, at its sole option without any further demand or notice, to take one or any
combination of the following remedial steps:
(a) By written notice to Lessee, Lessor may without terminating this
Agreement, take whatever action at law or in equity may appear necessary or desirable to
collect each Rental Payment payable by Lessee and other amounts payable by Lessee
hereunder as they become due and payable;
(b) With or without terminating the Lease Term, Lessor may enter the
premises where the Energy Conservation Equipment is located and retake possession of
such Equipment or require Lessee at Lessee's expense to promptly return any or all of
such Equipment to the possession of Lessor at such place within the United States as
Lessor shall specify, and sell or lease such Equipment or, for the account of Lessee,
sublease such Equipment, continuing to hold Lessee liable, but solely from legally
available funds, for the difference between (i) the Rental Payments payable by Lessee
and other amounts hereunder or the Energy Conservation Equipment that are payable by
Lessee to the end of the Lease Term, and (ii) the net proceeds of any such sale, leasing or
subleasing (after deducting all expenses of Lessor in exercising its remedies hereunder,
including without limitation all expenses of taking possession, storing, reconditioning and
selling or leasing such Equipment and all brokerage, auctioneer's and attorney's fees),
subject, however, to the provisions of Section 3.03; provideu? that in no event shall
-23-
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Lessee be liable in any fiscal year for any amount in excess of the Rental Payments
shown for such year in the Payment Schedule. The exercise of any such remedies
respecting any such Event of Default shall not relieve Lessee of any other liabilities
hereunder or the Energy Conservation Equipment;
(c) Lessor may terminate the Acquisition Fund Agreement and apply any
proceeds in the Acquisition Fund and the Delivery Costs Fund to the Rental Payments
due hereunder;
(d) Lessor may take whatever action at law or in equity may appear necessazy
or desirable to enforce its rights under this Agreement or the Acquisition Fund
Agreement or as a secured party in any or all of the Energy Conservation Equipment or
the Acquisition Fund or the Delivery Costs Fund; and
(e) By action pursuant to the California Code of Civil Procedure, or as
otherwise provided by law, obtain the issuance of a writ of mandamus enforcing, for each
fiscal year seriatim during the entire balance of the remaining Lease Term, subject to
Section 3.03, the duty of Lessee to appropriate and take all other administrative steps
necessary for the payment of Rental Payments and other amounts due hereunder.
Section 12.03. No Remedy Exclusive; No Acceleration. No remedy herein conferred upon
or reserved to Lessor is intended to be exclusive and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder now or hereafter existing at law or in
equity; provided that Lessor shall have no right to accelerate any Rental Payment or otherwise
declaze any Rental Payment or other amount payable not then in default to be immediately due
and payable. No delay or omission to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle Lessor to exercise any remedy reserved to it in this Article it shall not be
necessary to give any notice other than such notice as may be required in this Article.
ARTICLE X1"1•
Section 13.01. Notices. All notices, certificates or other communications under this
Agreement shall be sufficiently given and shall be deemed given when delivered or mailed by
registered mail, postage prepaid, or delivered by overnight courier, or sent by facsimile
transmission (with electronic confirmation) to the parties hereto at the addresses immediately
after the signatures to this Agreement (or at such other address as either party hereto shall
designate in writing to the other for notices to such party) and to any assignee at its address as it
appears on the registration books maintained by Lessee.
Section 13.02. Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon Lessor and Lessee and their respective successors and assigns.
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Section 13.03. Severability. In the event any provision of this 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 13.04. Amendments, Changes and Modifications. This Agreement may only be
amended by Lessor and Lessee in writing, provided, however, that Lessee may modify or amend
any of its covenants set forth in Section 4.05 in such manner as Lessee shall determine without
prior notice to, or consent or approval of, Lessor.
Section 13.05. Execution in Counterparts. This Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 13.06. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State.
Section 13.07. Captions. The captions or headings in this Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of
this Agreement.
[Remainder of Page Intentionally Left Blank)
[S/GNATURE PAGE FOLLOWS)
-25-
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IN WITT(ESS WHEREOF, Lessor and Lessee have caused this Agreement to be executed in
their names by their duly authorized representatives as of the date first above written.
LESSOR:
Banc of America Leasing & Capital, LLC
11333 McCormick Road
Hunt Valley II
M/C MDS-032-07-OS
Hunt Valley, MD 21031
Attention: Contract Administration
Fax No.: (443) 556-6977
LESSEE:
City of Chula Vista, California
276 Fourth Avenue
Chula Vista, California 91910
Attention: Finance Director
Fax No.: (619) 585-5698
By:
Name:
Title:
By:
Name:
Title:
Counterpart No. of manually executed and serially numbered counterparts.
To the extent that this Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code), no security interest herein may be created through the transfer or possession
of any Counterpart other than Counterpart No. 1.
[Signature Page of Taxable QECB Egiipment Lease/Purchase Agreement]
LisT of ExxiaiTs
Exhibit A - Equipment Schedule
Exhibit B - Rental Payments Schedule
Exhibit C-1 - Form of Authorizing Resolution
Exhibit C-2 - Form of Incumbency and Authorization Certificate
Exhibit D - Form of Opinion of Counsel Form
Exhibit E - Form of Final Acceptance Certificate
Exhibit F - Form of Self-Insurance Certificate
Exhibit G - Form of Notice and Acknowledgement of Assignment
Exhibit H - Form of Acquisition Fund and Account Control Agreement
7-42
EXHIBIT A
EQUIPMENT SCHEDULE
Location of Energy Conservation Equipment:
[to be provided]
Energy Conservation Equipment Description (Scope of Work):
[to be provided]
,~_ 1
7-43
EXHIBIT B
RENTAL PAYMENTS SCHEDULE
RENTAL
PAYMENT
DATE
RENTAL
PAYMENT
AMOUNT
INTEREST
PORTION
PRINCIPAL
PORTION
OUTSTANDING
BALANCE PREPAYMENT
PRICE
(including
prepayment
premium, if
applicable)
Contract Rate. The Contract Rate is % per annum.
Prepayment Option Commencement Date. For purposes of Section 10.01 of the
Agreement, the Prepayment Option Commencement Date is , 20_.
LESSOR:
Banc of America Leasing & Capital, LLC
By:
Name:
Title:
LESSEE:
City of Chula Vista, California
By:
Name:
Title:
B-1
7-44
EXHIBIT G1
FORM OF AUTAORIZING RESOLUTION
A RESOLUTION OF THE GOVERNING BODY OF CHULA VISTA,
CALIFORNIA, AUTHORIZING THE EXECUTION AND DELIVERY OF A
TAXABLE QECB EQUIPMENT LEASE/PURCHASE AGREEMENT (DIRECT
SUBSIDY) WITH RESPECT TO THE ACQUISITION, PURCHASE, FINANCING
AND LEASING OF CERTAIN ENERGY CONSERVATION EQUIPMENT;
AUTHORIZING THE EXECUTION AND DELIVERY OF A PURCHASE
CONTRACT, ACQUISITION FUND AGREEMENT AND OTHER DOCUMENTS
REQUIRED IN CONNECTION THEREWITH; AND AUTHORIZING THE
TAKING OF ALL OTHER ACTIONS NECESSARY TO THE CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED BY THIS RESOLUTION.
WHEREAS, the City of Chula Vista (the "City"), a charter city duly organized and
existing under the laws of the State of California, is authorized by the laws of the State of
California to purchase, acquire and lease personal property for the benefit of the City and its
inhabitants and to enter into contracts with respect thereto; and
WHEREAS, the City desires to lease and purchase certain equipment and other personal
property with an aggregate cost not to exceed $2,256,207.58 for energy facilities (the "Energy
Conservation Equipment") that constitute a qualified energy conservation project that qualifies
as a "qualified conservation purpose" under Section 54D(f) of the Internal Revenue Code of
1986, as amended (the "Code "); and
WHEREAS, in connection with the financing of the acquisition and installation of the
Energy Conservation Equipment, Banc of America Leasing & Capital, LLC (in such capacity,
the "Offeror ") has submitted to the City its written offer that, upon acceptance by the City, will
constitute a binding written contract (the "Purchase Contract ") to enter into that certain Taxable
QECB Equipment Lease/Purchase Agreement (Direct Subsidy) (the "Agreement") between the
City and Banc of America Leasing & Capital, LLC (or one of its affiliates) (in such capacity, the
"Lessor") and that certain Acquisition Fund and Account Control Agreement (the "Acquisition
Fund Agreement") among the City, the Lessor and the Acquisition Fund Custodian therein
identified, and the Purchase Contract executed by the Offeror and the forms of the Agreement
and the Acquisition Fund Agreement have been presented to the City Council of the City at this
meeting; and
WHEREAS, the City desires to designate the aggregate principal component of Rental
Payments under the Agreement for purposes Section 54D(a)(3) of the Code as a "qualified
energy conservation bond" within the meaning of Section 54D(a) of the Code; and
WHEREAS, the City desires to receive direct cash subsidy payments from the United
States Deparhnent of Treasury as provided by Section 6431 of the Code with respect to the
Agreement and, in that connection, to irrevocably elect to have Section 6431(f) of the Code
apply to the Agreement; and
G1-1
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WHEREAS, the City Council of the City deems it for the benefit of the City and for the
efficient and effective administration thereof to enter into the Purchase Contract, the Agreement
and the Acquisition Fund Agreement (collectively, the "Financing Agreements ") and the
documentation related to the financing of the Energy Conservation Equipment on the terms and
conditions therein provided;
NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED by the City Council Of the City as
follows:
Section 1. Defned Terms. Capitalized terms that are used, but not defined, in this
Resolution shall have the same meaning as when such terms are used in the preambles to this
Resolution.
Section 2. Approval and Authorization of Purchase Contract. The form, terms and
provisions of the Purchase Contract are hereby approved and each of the Mayor, the City
Manager, the Finance Director or their designees (together, the "Authorized Officers ") of the
City acting alone is hereby authorized and directed to accept, execute and deliver the Purchase
Contract for and on behalf of the City, with such insertions, omissions and changes as shall be
approved by the Authorized Officer executing the same. The Purchase Contract shall be
effective and binding on the City upon such acceptance, execution and delivery on behalf of the
City.
Section 3. Approval and Authorization ofAgreement and Acquisition Fund Agreement.
The form, terms and provisions of the Agreement and the Acquisition Fund Agreement aze
hereby approved in substantially the forms presented at this meeting, with such insertions,
omissions and changes as shall be approved by the Authorized Officer executing the same, with
the execution of each such agreement being conclusive evidence of such approval. Each of the
Authorized Officers is hereby authorized and directed to execute, and the City Clerk of the City
or any Deputy City Clerk is hereby authorized and directed to attest, the Agreement (including
any related Exhibits attached thereto) and the Acquisition Fund Agreement and to deliver the
Agreement (including such Exhibits) and the Acquisition Fund Agreement to the respective
parties thereto.
Section 4. Designation for Purposes of Section 54D(a)(3) of the Internal Revenue
Code of 1986; Irrevocable Election. The City hereby designates the Agreement for purposes
Section 54D(a)(3) of the Code as a "qualified energy conservation bond" within the meaning of
Section 54D(a) of the Code. The City hereby further irrevocably elects to have Section 6431(f)
of the Code apply to the Agreement.
Section 5. Other Actions Authorized. The officers and employees of the City shall
take all action necessary or reasonably required by the parties to the Financing Agreements to
carry out, give effect to and consummate the transactions contemplated thereby (including the
execution and delivery of Acceptance Certificates and any tax certificate and agreement, as
contemplated in the Agreement) and to take all action necessazy in conformity therewith,
including, without limitation, the execution and delivery of any closing and other documents
required to be delivered in connection with any of the Financing Agreements.
G1-2
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Section 6. Appointment of Authorized Lessee Representatives. Each of the Authorized
Officers is hereby designated to act as authorized representatives of the City for purposes of the
Agreement and the Acquisition Fund Agreement until such time as the City Council of the City
shall designate any other or different authorized representative for purposes of the Agreement
and the Acquisition Fund Agreement.
Section 7. Severability. If any section, paragraph, clause or provision of this
Resolution shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such section, paragraph, clause or provision shall not affect any of the
remaining provisions of this Resolution.
Section 8. Repealer. All bylaws, orders and resolutions or parts thereof, inconsistent
herewith, are hereby repealed to the extent only of such inconsistency. This repealer shall not be
construed as reviving any bylaw, order, resolution or ordinance or part thereof.
Section 9. Effective Date. This Resolution shall be effective immediately upon its
approval and adoption.
C-1-3
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ADOPTED AND APPROVED this day of August, 2011.
CITY OF CHULA VISTA, CALIFORNIA
By:
ATTEST:
City Clerk
Mayor
C-1-4
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EXHHfIT C-2
FORM OF INCUMBENCY AND AUTHORIZATION CERTIFICATE
The undersigned, the duly elected or appointed and acting City Clerk of the City of Chula
Vista, California ("Lessee "), certifies as follows:
A. The following listed persons aze duly elected or appointed and acting
officials of Lessee (the "Officials ") in the capacity set forth opposite their respective
names below and that the facsimile signatures aze true and correct as of the date hereof;
B. The Officials are duly authorized, on behalf of Lessee, to negotiate,
execute and deliver that certain purchase offer letter from Banc of America Leasing &
Capital, LLC (in such capacity, the "Purchaser") dated August _, 2011, the Taxable
QECB Equipment Lease/Purchase Agreement (Direct Subsidy) dated as of September _,
2011, between Lessee and Banc of America Leasing & Capital, LLC (in such capacity,
"Lessor"), the Acquisition Fund and Account Control Agreement dated as of
September _, 2011, among Lessor, Lessee and Deutsche Bank National Trust
Company, as Acquisition Fund Custodian, and all documents related thereto and
delivered in connection therewith (collectively, the "Agreements"), and the Agreements
are each the binding and authorized agreements of Lessee, enforceable in all respects in
accordance with their respective terms.
NAME OF OFFICIAL TITLE SIGNATURE
C. All financial statements and other information delivered to the Purchaser
are correct and complete and from August , 2011 to the date hereof, no change has
occurred in the Lessee's creditworthiness that could have a material adverse effect on the
financial condition or operations of the Lessee or the Lessee's ability to perform its
obligations under the Agreements.
Dated:
By:
Name:
Title:
(The signer of this Certificate cannot be listed above as authorized to execute the Agreements.)
C-2-1
7-49
EXxIBIT D
FORM OF OPINION OF COUNSEL TO LESSEE
(to be typed on letterhead of counsel)
September , 201 I
Banc of America Leasing & Capital, LLC
11333 McCormick Road
Mail Code: MDS-032-07-OS
Hunt Valley, MD 21031
Attn: Contract Administration
Re: Taxable QECB Equipment Lease/Purchase Agreement (Direct Subsidy)
dated as of September , 2011, between
Banc of America Leasing & Capital, LLC, as Lessor, and
City of Chula Vista, California, as Lessee
Ladies and Gentlemen:
As legal counsel to the City of Chula Vista, California ("Lessee "), we have examined
(a) an executed counterpart of that certain offer letter dated August _, 2011 from Banc of
America Leasing & Capital, LLC and accepted by Lessee on August _, 2011 (the "Purchase
Contract "), (b)an executed counterpart of that certain Taxable QECB Equipment
Lease/Purchase Agreement (Direct Subsidy), dated as of September _, 2011 (the "Agreement "),
and Exhibits thereto, between Banc of America Leasing & Capital, LLC ("Lessor ") and Lessee,
which, among other things, provides for the lease of certain property (the "Energy Conservation
Equipment"), (c) an executed counterpart of that certain Acquisition Fund and Account Control
Agreement dated as of September _, 2011 (the "Acguisition Fund Agreement ") among Lessor,
Lessee, and Deutsche Bank National Trust Company, as Acquisition Fund Custodian, (d) a
certified copy of the resolutions of Lessee with respect to the transaction contemplated by the
Purchase Contract, the Agreement, the Acquisition Fund Agreement and documents related
thereto and (e) such other opinions, documents and matters of law as we have deemed necessary
in connection with the following opinions. The Purchase Contract, the Agreement, the
Acquisition Fund Agreement and the documents relating thereto are referred to collectively as
the "Transaction Documents."
Based on the foregoing, we are of the following opinions:
1. Lessee is a charter city duly organized and existing under the laws of the
State of California.
D-i
7-50
2. Lessee has the requisite power and authority to lease and acquire the
Energy Conservation Equipment and to execute and deliver the Transaction Documents
and to perform its obligations under the Transaction Documents.
3. The Transaction Documents have been duly authorized, approved,
executed and delivered by and on behalf of Lessee and the Transaction Documents aze
legal, valid and binding obligations of Lessee enforceable in accordance with their
respective terms.
4. The Purchase Contract created on its date of acceptance, execution and
delivery by Lessee a binding, written contract under applicable California law (assuming
due authorization, execution and delivery thereof by Banc of America Leasing & Capital,
LLC).
5. The authorization, approval, execution and delivery of the Transaction
Documents and all other proceedings of Lessee relating to the transactions contemplated
thereby have been performed in accordance with all open meeting laws, public bidding
laws and all other applicable state or federal laws.
6. There is no proceeding pending or, to the best of our knowledge,
threatened in any court or before any governmental authority or arbitration boazd or
tribunal that, if adversely determined, would adversely affect the transactions
contemplated by the Transaction Documents or the security interest of Lessor or its
assigns, as the case may be, in the Energy Conservation Equipment, the Acquisition
Fund, the Delivery Costs Fund or other collateral thereunder.
Notwithstanding anything stated to the contrary herein
1. We expressly decline to render any opinion regazding the taxability or tax
effect (under both state and federal law) of the transactions which aze the subject of this
opinion letter.
2. This opinion is based on the existing laws of the State of California as of
this date and we expressly decline to render any opinion as to any laws or regulations of
other state or jurisdictions (including federal law and regulations) as they may pertain to
the transactions that are the subject of this opinion letter, the Transaction Documents or
the effect of noncompliance under any such laws or regulations of any other jurisdictions.
3. This opinion is furnished for you and is solely for your benefit and the
benefit of your successors and assigns. Other than you and your successors and assigns, it
may not be relied upon by any other person or entity however organized. No attomey-
client relationship is created by the rendering of this opinion.
4. This opinion may be used only in connection with the transactions
contemplated under the Transaction Documents.
D-2
7-51
5. This opinion is given as of this date, and we expressly decline any
undertaking to advise you of any matters arising subsequent to the date hereof which
would cause us to amend any portion of the foregoing in whole or in part.
6. The opinions set forth are subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles affecting the
enforcement of creditors' rights generally. The enforcement of the Transaction
Documents is subject to the effect of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law, and to the exercise of judicial discretion in
appropriate cases and to the limitations on legal remedies against public entities in the
State of California and the application of California law relating to conflicts of interest to
which public entities are subject. We express no opinion as to the enforceability of any
provisions relating to indemnification or forum.
7. Our failure to enumerate any exclusion from our representations set forth
above does not in any manner expand our opinion.
All capitalized terms herein shall have the same meanings as in the Transaction
Documents unless otherwise provided herein. Lessor and its successors and assigns are entitled
to rely on this opinion.
Sincerely,
D-3
7-52
EXHIBIT E
FORM OF FINAL ACCEPTANCE CERTIFICATE
Banc of America Leasing & Capital, LLC
11333 McCormick Road
Mail Code: MDS-032-07-OS
Hunt Valley, MD 21031
Attn: Contract Administration
Re: Taxable QECB Equipment Lease/Purchase Agreement (Direct Subsidy)
between Banc of America Leasing & Capital, LLC, as Lessor, and
City of Chula Vista, California, as Lessee
Ladies and Gentlemen:
In accordance with Section 5.01 of the Taxable QECB Equipment Lease/Purchase
Agreement (Direct Subsidy) (the `Agreement"), the undersigned Lessee hereby certifies and
represents to, and agrees with Lessor as follows:
1. Equipment Acceptance for all of the Energy Conservation Equipment (as
such term is defined in the Agreement) has occurred as evidenced by the related
Disbursement Requests heretofore or herewith delivered in accordance with the
Acquisition Fund Agreement.
2. Lessee has conducted such inspection and/or testing of the Energy
Conservation Equipment as it deems necessary and appropriate and hereby acknowledges
that it accepts the Energy Conservation Equipment for all purposes.
3. Lessee is currently maintaining the insurance coverage required by
Section 7.02 of the Agreement.
4. Lessee hereby reaffirms that the representations, warranties and covenants
contained in the Agreement are true and correct as of the date hereof.
5. No event or condition that constitutes, or with notice or lapse of time, or
both, would constitute, an Event of Default (as defined in the Agreement) exists at the
date hereof.
Date:
LESSEE: CITY OF CHULA VISTA, CALIFORNIA
By:
Name:
Title:
E-1
7-53
EXHIBIT F
FORM OF SELF-INSURANCE CERTIFICATE
Banc of America Leasing & Capital, LLC
11333 McCormick Road
Mail Code: MDS-032-07-OS
Hunt Valley, MD 21031
Attn: Contract Administration
Re: Taxable QECB Equipment Lease/Purchase Agreement (Direct Subsidy)
dated as of September , 2011 (the "Agreement")
between Banc of America Leasing & Capital, LLC, as Lessor,
and City of Chula Vista, California, as Lessee
In connection with the above-referenced Agreement, the City of Chula Vista, California
(the "Lessee "), warrants and represents to Banc of America Leasing & Capital, LLC the
following information. The terms capitalized herein but not defined herein shall have the
meanings assigned to them in the Agreement.
1. The Lessee is self-insured for damage or destruction to the Energy Conservation
Equipment. The dollar amount limit for property damage to the Energy Conservation Equipment
under such self-insurance program is $ [The Lessee maintains an umbrella
insurance policy for claims in excess of Lessee's self-insurance limits for property damage to the
Energy Conservation Equipment which policy has a dollar limit for property damage to the
Energy Conservation Equipment under such policy of $ .]
2. The Lessee is self-insured for liability for injury or death of any person or damage
or loss of property arising out of or relating to the condition or operation of the Energy
Conservation Equipment. The dollar limit for such liability claims under the Lessee's self-
insurance program is $ [The Lessee maintains an umbrella insurance
policy for claims in excess of Lessee's self-insurance limits for liability which policy has a dollar
limit for liabilities for injury and death to persons as well as damage or loss of property azising
out of or relating to the condition or operation of the Energy Conservation Equipment in the
amount of $
[3]. The Lessee maintains aself-insurance fund. Monies in the self-insurance fund
[are/aze not] subject to annual appropriation. The total amount maintained in the self-insurance
fund to cover Lessee's self-insurance liabilities is $ [Amounts paid from
the Lessee's self-insurance fund are subject to a dollaz per claim of $ .]
[3]. The Lessee does not maintain aself-insurance fund. The Lessee obtains funds to
pay claims for which it has self-insured from the following sources:
F-1
7-54
Amounts payable for claims from the such sources are limited as follows:
4. Attached hereto are copies of certificates of insurance with respect to policies
maintained by Lessee.
LESSEE:
City of Chula Vista, California
By:
Name:
Title:
F-2
7-55
EXHIBIT G
FORM OF NOTICE AND ACKNOWLEDGEMENT OFASSIGNMENT
DATED
BANC OF AMERICA LEASING & CAPITAL, LLC ("Assignor ") hereby gives notice that It has
assigned and sold to ("Assignee ") all of Assignor's right, title
and interest in, to and under the Taxable QECB Equipment Lease/Purchase Agreement (Direct
Subsidy) dated as of September 2011 (the "Agreement"), between Assignor and City of
Chula Vista, California ("Lessee"), together with all exhibits, schedules, addenda and
attachments related thereto, and all certifications and other documents delivered in connection
therewith, the Rental Payments and other amounts due under the Agreement, all of Assignor's
right, title and interest in the Energy Conservation Equipment (as defined in the Agreement), and
all of Assignor's right, title and interest in, to and under the Acquisition Fund and Account
Control Agreement dated as of September _, 2011 (the "Acquisition Fund Agreement") by
and among Lessee, Assignor and Deutsche Bank National Trust Company, as Acquisition Fund
Custodian, together with the Acquisition Fund and the Delivery Costs Fund related thereto
(collectively, the "Assigned Property ").
1. In accordance with the terms of the Agreement, Lessee hereby
acknowledges the effect of the assignment of the Assigned Property and absolutely and
unconditionally agrees to deliver to Assignee all Rental Payments and other amounts
coming due under the Agreement in accordance with the terms thereof on and after the
date of this Acknowledgment.
2. Lessee hereby agrees that: (i) Assignee shall have all the rights of Lessor
under the Agreement and all related documents, including, but not limited to, the rights to
issue or receive all notices and reports, to give all consents or agreements to
modifications thereto, to receive title to the Energy Conservation Equipment in
accordance with the terms of the Agreement, to declare a default and to exercise all
remedies thereunder; and (ii) except as provided in Section 3.03 of the Agreement, the
obligations of Lessee to make Rental Payments and to perform and observe the other
covenants and agreements contained in the Agreement shall be absolute and
unconditional in all events without abatement, diminution, deduction, set-off or defense.
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3. Lessee agrees that, as of the date of this Notice and Acknowledgment of
Assignment (this "Acknowledgement"), the following information about the Agreement
is true, accurate and complete:
Number of Rental Payments Remaining -
Amount of Each Rental Payment - $
Total Amount of Rents Remaining - $
Frequency of Rental Payments -
Next Rental Payment Due -
Funds Remaining in Acquisition Fund
and the Delivery Costs Fund - $
4. The Agreement remains in full force and effect, has not been amended and
no Event of Default (or event which with the passage of time or the giving of notice or
both would constitute a default) has occurred thereunder.
5. Any inquiries of Lessee related to the Agreement and any requests for
disbursements from the Acquisition Fund, if applicable, and all Rental Payments and
other amounts coming due pursuant to the Agreement on and after the date of this
Acknowledgment should be remitted to Assignee at the following address (or such other
address as provided to Lessee in writing from time to time by Assignee):
ACKNOWLEDGED AND AGREED:
LESSEE: CITY OF CHULA VISTA, CALIFORNIA
By:
Name:
Title:
ASSIGNOR: BANC OF AMERICA LEASING & CAPITAL, LLC.
By:
Name:
Title:
G-2
7-57
ExxISIT H
FORM OF ACQUISITION FUND AND ACCOUNT CONTROL AGREEMENT
This Acquisition Fund and Account Control Agreement (this "Agreement"), dated as of
September 2011, by and among Banc of America Leasing & Capital, LLC (hereinafter
referred to as "Lessor "), the City of Chula Vista, California (hereinafter referred to as "Lessee ")
and Deutsche Bank National Trust Company (hereinafter referred to as "Acquisition Fund
Custodian ").
Reference is made to that certain Taxable QECB Equipment Lease/Purchase Agreement
(Direct Subsidy) dated as of September 2011, between Lessor and Lessee (hereinafter
referred to as the "Lease "), covering the acquisition, installation and lease of certain Energy
Conservation Equipment described therein (the "Energy Conservation Equipment"). It is a
requirement of the Lease that the Acquisition Amount ($2,256,207.58) be deposited into an
escrow under terms satisfactory to Lessor, for the purpose of fully funding the Lease, and
providing a mechanism for the application of such amounts to the acquisition and installation of
and payment for the Energy Conservation Equipment and payment of the Delivery Costs.
The parties agree as follows:
1. Creation of Acquisition Fund and Delivery Costs Fund.
(a) There is hereby created a special trust fund to be known as the
"City of Chula Vista, California, Energy Conservation Equipment Acquisition
Fund" (the "Acquisition Fund ") to be held in trust by Acquisition Fund Custodian
for the purposes stated herein, for the benefit of Lessor and Lessee, to be held,
disbursed and returned in accordance with the terms hereof.
(b) There is hereby created a special trust fund to be known as the
"City of Chula Vista, California, Energy Conservation Equipment Delivery Costs
Fund" (the "Delivery Costs Fund") to be held in trust by Acquisition Fund
Custodian for the purposes stated herein, for the benefit of Lessor and Lessee, to
be held, disbursed and returned in accordance with the terms hereof.
(c) Acquisition Fund Custodian shall invest and reinvest moneys on
deposit in the Acquisition Fund and the Delivery Costs Fund in Qualified
Investments (as hereinafter defined in this subsection) in accordance with written
instructions received from Lessee. Lessee shall be solely responsible for
ascertaining that all proposed investments and reinvestments are Qualified
Investments and that they comply with federal, State and local laws, regulations
and ordinances governing investment of such funds and for providing appropriate
notice to Acquisition Fund Custodian for the reinvestment of any maturing
investment. Accordingly, neither Acquisition Fund Custodian nor Lessor shall be
responsible for any liability, cost; expense, loss or claim of any kind, directly or
indirectly arising out of or related to the investment or reinvestment of all or any
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portion of the moneys on deposit in the Acquisition Fund or the Delivery Costs
Fund, and Lessee agrees to and does hereby release Acquisition Fund Custodian
and Lessor from any such liability, cost, expenses, loss or claim. Interest on the
Acquisition Fund and the Delivery Costs Fund shall become part of the respective
Funds, and gains and losses on the investment of the moneys on deposit in the
Acquisition Fund and the Delivery Costs Fund shall be borne by the respective
Funds. For purposes of this agreement, "Qualified Investments" means any
investments which meet the requirements of California Government Code
Sections 53600 et seq.
(d) Unless the Acquisition Fund is earlier terminated in accordance
with the provisions of paragraph (f) below, amounts in the Acquisition Fund shall
be disbursed by the Acquisition Fund Custodian in payment of amounts described
in Section 2 hereof upon receipt of written authorization(s) from Lessor, as is
more fully described in Section 2 hereof. If the amounts in the Acquisition Fund
are insufficient to pay such amounts, Lessee shall provide any balance of the
funds needed to complete the acquisition and installation of the Energy
Conservation Equipment; provided, however, that any amount required for such
purpose shall be payable solely from moneys appropriated for such purpose by the
City Council of Lessee in its discretion, and failure to appropriate such moneys
shall not constitute an event of default under this Agreement or the Lease. Any
moneys remaining in the Acquisition Fund on or after the earlier of (i) the
expiration of the Acquisition Period, (ii) the date on which Lessee executes and
delivers to Lessor the Final Acceptance Certificate pursuant to Section 5.01(a) of
the Agreement or (iii) the 90th day following the later of September , 2014 or,
if Lessee has obtained an extension for the expenditure of amounts in such Fund
in accordance with Section 54A(d)(2) of the Code, the close of such extended
period, shall be applied as provided in Section 4 hereof in accordance with
Section 4.06 of the Lease.
(e) Unless the Delivery Costs Fund is earlier terminated in accordance
with the provisions of paragraph (f) below, amounts in the Delivery Costs Fund
shall be applied to pay Delivery Costs upon receipt by Acquisition Fund
Custodian of written directions from Lessee, which are approved in writing by
Lessor, that identifies the payees and the amounts to be paid for Delivery Costs.
Upon the earlier of January 1, 2012 or payment of all Delivery Costs, amounts in
the Delivery Costs Fund shall be transferred to, and used for the purposes of, the
Acquisition Fund.
(f) The Acquisition Fund and the Delivery Costs Fund shall be
terminated at the earliest of (i) the final distribution of amounts in the Acquisition
Fund and the Delivery Costs Fund or (ii) written notice given by Lessor of the
occurrence of a default under the Lease.
(g) The Acquisition Fund Custodian may act in reliance upon any
writing or instrumern or signature which it, in good faith, believes to be genuine
7-5~
and may assume the validity and accuracy of any statement or assertion contained
in such a writing or instrument. The Acquisition Fund Custodian shall not be
liable in any manner for the sufficiency or correctness as to form, manner of
execution, or validity of any instrument nor as to the identity, authority, or right of
any person executing the same; and its duties hereunder shall be limited to the
receipt of such moneys, instruments or other documents received by it as the
Acquisition Fund Custodian, and for the disposition of the same in accordance
herewith.
(h) Unless Acquisition Fund Custodian is guilty of gross negligence or
willful misconduct with regard to its duties hereunder, Lessee agrees to and does
hereby release and indemnify Acquisition Fund Custodian (to the fullest extent
permitted by applicable law and subject to appropriation of moneys sufficient for
such purpose by the City Council of Lessee in its discretion, and failure to
appropriate such moneys shall not constitute an event of default under this
Agreement or the Lease) and hold it harmless from any and all claims, liabilities,
losses, actions, suits or proceedings at law or in equity, or any other expense, fees
or charges of any character or nature, which it may incur or with which it may be
threatened by reason of its acting as Acquisition Fund Custodian under this
Agreement; and in connection therewith, does indemnify Acquisition Fund
Custodian (to the fullest extent permitted by applicable law and subject to
appropriation of moneys sufficient for such purpose by the City Council of Lessee
in its discretion, and failure to appropriate such moneys shall not constitute an
event of default under this Agreement or the Lease) against any and all expenses;
including reasonable attorneys' fees and the cost of defending any action, suit or
proceeding or resisting any claim.
(i) If Lessee and Lessor shall be in disagreement about the
interpretation of the Lease, or about the rights and obligations, or the propriety of
any action contemplated by Acquisition Fund Custodian hereunder, Acquisition
Fund Custodian may, but shall not be required to, file an appropriate civil action
to resolve the disagreement. Acquisition Fund Custodian shall be reimbursed by
Lessee for all costs, including reasonable attomeys' fees, in connection with such
civil action, and shall be fully protected in suspending all or part of its activities
under the Lease until a final judgment in such action is received.
(j) Acquisition Fund Custodian may consult with counsel of its own
choice and shall have full and complete authorization and protection with the
opinion of such counsel. Acquisition Fund Custodian shall otherwise not be
liable for any mistakes of fact or errors of judgment, or for any acts or omissions
of any kind unless caused by its willful misconduct.
(k) Subject to Lessee's prior written approval of any costs and
expenses related to extraordinary administration as herein provided prior to an
Event of Default, Lessee shall reimburse Acquisition Fund Custodian for all
reasonable costs and expenses, including those of Acquisition Fund Custodian's
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attorneys, agents and employees incurred for extraordinary administration of the
Acquisition Fund and the Delivery Costs Fund and the performance of
Acquisition Fund Custodian's powers and duties hereunder in connection with
any Event of Default under the Lease, or in connection with any dispute between
Lessor and Lessee concerning the Acquisition Fund or the Delivery Costs Fund.
2. Acquisition and Installation of Energy Conservation Equipment
(a) Acquisition Contracts. Lessee will arrange for, supervise and
provide for, or cause to be supervised and provided for, the acquisition and
installation of the Equipment with moneys from the Acquisition Fund. Lessee
represents that the estimated costs of the Energy Conservation Equipment are
within the funds estimated to be available therefor, and Lessor makes no warranty
or representation with respect thereto. Lessor shall have no liability under any of
the acquisition or construction contracts. Lessee shall obtain all necessary permits
and approvals, if any, for the acquisition, equipping and installation of the Energy
Conservation Equipment, and the operation and maintenance thereof.
(b) Authorized Acquisition Fund Disbursements. Disbursements from
the Acquisition Fund shall be made for the purpose of paying (including the
reimbursement to Lessee for advances from its own funds to accomplish the
purposes hereinafter described) the cost of acquiring the Energy Conservation
Equipment. Lessee and Acquisition Fund Custodian hereby acknowledge and
agree that prior to Equipment Acceptance any demands for payment of
related Equipment Costs or any other amounts due to the Vendors shall be
paid by Lessee from its own funds that are legally available for the purpose
and not from funds held in the Acquisition Fund. Such funds so paid by the
Lessee may be reimbursed as provided in the Lease, subject to any
limitations on any such reimbursement as otherwise provided in the Lease.
(c) Requisition Procedure. Prior to disbursement from the Acquisition
Fund there shall be filed with the Acquisition Fund Custodian a requisition for
such payment in the form of Disbursement Request attached hereto as Schedule 1
(a "Disbursement Request"), stating each amount to be paid and the name of the
person, firm or corporation to whom payment thereof is due and certifying the
Acceptance Date of Equipment Acceptance for the portion of Energy
Conservation Equipment for which disbursement is requested. Each such
Disbursement Request shall be signed by an authorized representative of Lessee
(an "Authorized Representative") and by Lessor, and shall be subject to the
following:
1. Delivery to Lessor of an executed Disbursement Request in
the form attached hereto as Schedule 1 certifying that:
(i) Equipment Acceptance has occurred as of the
Acceptance Date identified therein with respect to the portion of
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Energy Conservation Equipment for which disbursement is
requested; (ii) an obligation in the stated amount has been incurred
by Lessee, is a proper charge against the Acquisition Fund for
costs relating to the Energy Conservation Equipment identified in
the Lease and has not been paid (or has been paid by Lessee and
Lessee requests reimbursement thereof); (iii) the Authorized
Representative has no notice of any vendor's, mechanic's or other
liens or rights to liens, chattel mortgages, conditional sales
contracts or security interest which should be satisfied or
discharged before such payment is made; (iv) such requisition
contains no item representing payment on account, or any retained
percentages which Lessee is, at the date of such certificate, entitled
to retain (except to the extent such amounts represent a
reimbursement to Lessee); (v) the Energy Conservation Equipment
is insured in accordance with the Lease; (vi) no Event of Default
(nor any event which, with notice or lapse of time or both, would
become an Event of Default) has occurred and is continuing; (vii)
since the Funding Date, no Material Adverse Change (as such term
is defined in the Lease) has occurred; (viii) the representations,
warranties and covenants of Lessee set forth in the Lease are true
and correct as of the date thereof; and (ix) each invoice delivered
therewith contains the footnote required by Section 5.01(b) of the
Lease.
2. Delivery to Lessor of invoices (and proofs of payment of
such invoices, if Lessee seeks reimbursement) as required by
Section 5.01(b) of the Lease and any additional documentation reasonably
requested by Lessor; provided that each such original invoice shall contain
a footnote inserted thereon by the Vendor (or by Lessee in the event that
Lessee has paid such invoice and is seeking reimbursement) that states the
amount of California State sales tax actually paid with respect to the
Energy Conservation Equipment that is subject to such invoice and any
such invoice that does not contain the required footnote as herein provided
shall not be sufficient for purposes of submitting a Disbursement Request;
and
3. The disbursement shall occur during the Acquisition
Period.
4. No Event of Default (nor any event which, with notice or
lapse of time or both, would become an Event of Default) has occurred
and is continuing under the Lease, and since the date of the Lease no
Material Adverse Change has occurred.
Notwithstanding anything in this Agreement to the contrary, an amount may not be
disbursed from the Acquisition Fund to pay Equipment Costs relating to a portion of the Energy
H-5
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Conservation Equipment prior to the date on which Lessee has certified to Acquisition Fund
Custodian in the related disbursement request that Equipment Acceptance has occurred with
respect to such portion of Energy Conservation Equipment for which funds are requested for
disbursement from the Acquisition Fund.
3. Deposit to Acquisition Fund and Delivery Costs Fund. Upon satisfaction
of the conditions specified in Section 3.04 of the Lease, Lessor will cause the Acquisition
Amount to be deposited as follows: (a) $ into the Acquisition Fund and
(b) $ into the Delivery Costs Fund. Lessee agrees to pay any costs with respect
to the Energy Conservation Equipment in excess of amounts available therefor in the
Acquisition Fund and to pay Delivery Costs in excess of amounts available therefor in the
Delivery Costs Fund; provided, however, that any amount required for such purpose shall
be payable solely from moneys appropriated for such purpose by the City Council of
Lessee in its discretion, and failure to appropriate such moneys shall not constitute an
event of default under this Agreement or the Lease.
4. Excessive Acquisition Fund. Any funds remaining in the Acquisition
Fund (including any funds transferred from the Delivery Costs Fund pursuant to
Section 1(e) hereof) on or afrer the earlier of (a) the expiration of the Acquisition Period,
(b) the date on which Lessee executes and delivers to Lessor the Final Acceptance
Certificate pursuant to Section 5.01(a) of the Agreement or (c) the 90th day following the
later of September , 2014 or, if Lessee has obtained an extension for the expenditure
of amounts in the Acquisition Fund in accordance with Section 54A(d)(2) of the Code,
the close of such extended period, or upon a termination of the Acquisition Fund and the
Delivery Costs Fund as otherwise provided herein, shall be applied by Acquisition Fund
Custodian to the prepayment price owed under the Lease in accordance with Section 4.06
of the Lease.
5. Securiiy Interest. Acquisition Fund Custodian and Lessee acknowledge
and agree that the Acquisition Fund, the Delivery Costs Fund and all proceeds thereof are
being held by Acquisition Fund Custodian for disbursement or return as set forth herein.
Lessee hereby grants to Lessor a first priority perfected security interest in the
Acquisition Fund, the Delivery Costs Fund and all proceeds thereof and all investments
made with any amounts in the Acquisition Fund and the Delivery Costs Fund. If the
Acquisition Fund and the Delivery Costs Fund, or any part of either thereof, is converted
to investments as set forth in this Agreement, such investments shall be made in the name
of Acquisition Fund Custodian and Acquisition Fund Custodian hereby agrees to hold
such investments as bailee for Lessor so that Lessor is deemed to have possession of such
investments for the purpose of perfecting its security interest.
6. Control of Acquisition Fund and Delivery Costs Fund. In order to perfect
Lessor's security interest by means of control in (i) the Acquisition Fund established
hereunder, (ii) the Delivery Costs Fund established hereunder, (iii) all securities
entitlements, investment property and other financial assets now or hereafter credited to
the Acquisition Fund or the Delivery Costs Fund, as the case may be, (iv) all of Lessee's
rights in respect of the Acquisition Fund and the Delivery Costs Fund, such securities
H-6
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entitlements, investment property and other financial assets, and (v) all products,
proceeds and revenues of and from any of the foregoing personal property (collectively,
the "Collateral "), Lessor, Lessee and Acquisition Fund Custodian further agree as
follows:
(a) All terms used in this Section 6 which are defined in the California
Commercial Code (the "Commercial Code ") but are not otherwise defined herein
shall have the meanings assigned to such terms in the Commercial Code, as in
effect on the date of this Agreement.
(b) Acquisition Fund Custodian will comply with all entitlement
orders originated by Lessor with respect to the Collateral, or any portion of the
Collateral, without further consent by Lessee.
(c) Acquisition Fund Custodian hereby represents and warrants that
(i) the records of Acquisition Fund Custodian show that Lessee is the sole owner
of the Collateral, (ii) Acquisition Fund Custodian has not been served with any
notice of levy or received any notice of any security interest in or other claim to
the Collateral, or any portion of the Collateral, other than Lessor's claim pursuant
to this Agreement, and (iii) Acquisition Fund Custodian is not presently obligated
to accept any entitlement order from any person with respect to the Collateral,
except for entitlement orders that Acquisition Fund Custodian is obligated to
accept from Lessor under this Agreement and entitlement orders that Acquisition
Fund Custodian, subject to the provisions of paragraph (e) below, is obligated to
accept from Lessee.
(d) Without the prior written consent of Lessor, Acquisition Fund
Custodian will not enter into any agreement by which Acquisition Fund
Custodian agrees to comply with any entitlement order of any person other than
Lessor or, subject to the provisions of paragraph (e) below, Lessee, with respect to
any portion or all of the Collateral. Acquisition Fund Custodian shall promptly
notify Lessor if any person requests Acquisition Fund Custodian to enter into any
such agreement or otherwise asserts or seeks to assert a lien, encumbrance or
adverse claim against any portion or all of the Collateral.
(e) Except as otherwise provided in this paragraph (e) and subject to
Section 1(c) hereof, Acquisition Fund Custodian may allow Lessee to effect sales,
trades, transfers and exchanges of Collateral within the Acquisition Fund and the
Delivery Costs Fund, but will not, without the prior written consent of Lessor,
allow Lessee to withdraw any Collateral from the Acquisition Fund or the
Delivery Costs Fund. Acquisition Fund Custodian acknowledges that Lessor
reserves the right, by delivery of written notice to Acquisition Fund Custodian, to
prohibit Lessee from effecting any withdrawals (including withdrawals of
ordinary cash dividends and interest income), sales, trades, transfers or exchanges
of any Collateral held in the Acquisition Fund or the Delivery Costs Fund.
Further, Acquisition Fund Custodian hereby agrees to comply with any and all
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written instructions delivered by Lessor to Acquisition Fund Custodian (once it
has had a reasonable opportunity to comply therewith) and has no obligation to,
and will not, investigate the reason for any action taken by Lessor, the amount of
any obligations of Lessee to Lessor, the validity of any of Lessor's claims against
or agreements with Lessee, the existence of any defaults under such agreements,
or any other matter.
(f) Lessee hereby irrevocably authorizes Acquisition Fund Custodian
to comply with all instructions and entitlement orders delivered by Lessor to
Acquisition Fund Custodian.
(g) Acquisition Fund Custodian will not attempt to assert control, and
does not claim and will not accept any security or other interest in, any part of the
Collateral, and Acquisition Fund Custodian will not exercise, enforce or attempt
to enforce any right of setoff against the Collateral, or otherwise charge or deduct
from the Collateral any amount whatsoever.
(h) Acquisition Fund Custodian and Lessee hereby agree that any
property held in the Acquisition Fund and the Delivery Costs Fund shall be
treated as a financial asset under such section of the Commercial Code as
corresponds with Section 8-102 of the Uniform Commercial Code,
notwithstanding any contrary provision of any other agreement to which
Acquisition Fund Custodian may be a party.
(i) Acquisition Fund Custodian is hereby authorized and instructed,
and hereby agrees, to send to Lessor at its address set forth in Section 7 below,
concurrently with the sending thereof to Lessee, duplicate copies of any and all
monthly Acquisition Fund and Delivery Costs Fund statements or reports issued
or sent to Lessee with respect to the Acquisition Fund and the Delivery Costs
Fund.
7. Miscellaneous. Capitalized terms not otherwise defined herein shall have
the meanings assigned to them in the Lease. This Agreement may not be amended except
in writing signed by all parties hereto. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original instrument and each shall
have the force and effect of an original and all of which together constitute, and shall be
deemed to constitute, one and the same instrument. Notices hereunder shall be made in
writing and shall be deemed to have been duly given when personally delivered or when
deposited in the mail, first class postage prepaid, or delivered to an express carrier,
charges prepaid, or sent by facsimile with electronic confirmation, addressed to each
party at its address below:
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7-65
If to Lessor: Banc of America Leasing & Capital, LLC
11333 McCormick Road
Mail Code: MDS-032-07-OS
Hunt Valley, MD 21031
Attn: Contract Administration
Fax: (443)556-6977
If to Lessee: City of Chula Vista
276 Fourth Avenue
Chula Vista, California
Attn: Finance Director
Fax: (619) 585-5698
If to Acquisition
Fund Custodian: Deutsche Bank National Trust Company
200 South Tryon Street, Suite 550
Charlotte, NC 28202
Attn: Michael Weber
Phone: (704)333-5744
Fax: (704)333-5852
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7-66
IN Wi'rIVESS WHEREOF, the parties have executed this Acquisition Fund and Account
Control Agreement as of the date first above written.
Banc of America Leasing & Capital, LLC, City of Chula Vista, California
as Lessor as Lessee
By:
Name:
Title:
Deutsche Bank National Trust Company,
as Acquisition Fund Custodian
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
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7-67
SCHEDULEI
TO THE ACQUISITION FUND AND ACCOUNT CONTROL AGREEMENT
FORM OF DISBURSEMENT REQUEST
Re: Taxable QECB Equipment Lease/Purchase Agreement (Direct Subsidy) dated as of
September , 2011 (the "Lease "), between Banc of America Leasing & Capital, LLC,
as Lessor, and the City of Chula Vista, California, as Lessee (Capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the Lease.)
In accordance with the terms of the Acquisition Fund and Account Control Agreement,
dated as of September , 2011 (the "Acquisition Fund and Account Control Agreement") by
and among Banc of America Leasing & Capital, LLC ("Lessor"), the City of Chula Vista,
California ("Lessee") and Deutsche Bank National Trust Company (the "Acquisition Fund
Custodian "), the undersigned on behalf of Lessee hereby (a) accepts for purposes of the Lease
(described above) the Energy Conservation Equipment described below as of the Acceptance
Date identified below and (b) requests that the Acquisition Fund Custodian pay the following
persons the following amounts from the Acquisition Fund created under the Acquisition Fund
and Account Control Agreement for the following purposes:
PAYEE'S NAME INVOICE DOLLAR
AND ADDRESS NUMBER AMOUNT PURPOSE '
The undersigned hereby certifies as follows:
(i) The Acceptance Date on which Equipment Acceptance has occurred for
the Energy Conservation Equipment for which disbursement is hereby requested is
,20
(ii) An obligation in the stated amount has been incurred by Lessee, is a
proper charge against the Acquisition Fund for costs relating to the Energy Conservation
Equipment identified above and has not been paid (or has been paid by Lessee and
Lessee requests reimbursement thereof). Attached hereto is the original invoice with
respect to each such obligation, each of which contains the footnote required by
Section 5.01 (b) of the Lease.
Schedule 1-1
7-68
(iii) The undersigned, as Authorized Representative, has no notice of any
vendor's, mechanic's or other liens or rights to liens, chattel mortgages, conditional sales
contracts or security interest which should be satisfied or discharged before such payment
is made.
(iv) This requisition contains no item representing payment on account, or any
retained percentages which Lessee is, at the date hereof, entitled to retain (except to the
extent such amounts represent a reimbursement to Lessee).
(v) The Energy Conservation Equipment for which disbursement is hereby
requested is insured in accordance with Section 7.02 of the Lease.
(vi) No Event of Default, and no event which with notice or lapse of time, or
both, would become an Event of Default, under the Lease has occurred and is continuing
at the date hereof. Since the Funding Date, no Material Adverse Change has occurred.
(vii) The disbursement shall occur during the Acquisition Period.
(viii) The representations, warranties and covenants of Lessee set forth in the
Lease are true and correct as of the date hereof.
Dated:
CITY OF CHULA VISTA, CALIFORNIA
By:
Authorized Representative
Disbursement of funds from the Acquisition
Fund in accordance with the foregoing
Disbursement Request hereby is authorized
BANC OF AMERICA LEASING & CAPITAL, LLC,
as Lessor under the Lease
By:
Name:
Title:
Schedule 1-2
7-69
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA AUTHORIZING THE EXECUTION AND
DELIVERY OF A TAXABLE QECB EQUIPMENT
LEASE/PURCHASE AGREEMENT (DIRECT SUBSIDY) WITH
RESPECT TO THE ACQUISITION, PURCHASE, FINANCING
AND LEASING OF CERTAIN ENERGY CONSERVATION
EQUIPMENT; AUTHORIZING THE EXECUTION AND
DELIVERY OF A PURCHASE CONTRACT, ACQUISITION
FUND AGREEMENT AND OTHER DOCUMENTS REQUIRED
IN CONNECTION THEREWITH; AND AUTHORIZING THE
TAKING OF ALL OTHER ACTIONS NECESSARY TO THE
CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS RESOLUTION
WHEREAS, the City of Chula Vista (the "City"), a municipal corporation and a
chartered city duly organized and existing under and pursuant to the Constitution and laws of the
State of California, is authorized by the laws of the State of California to purchase, acquire and
lease personal property for the benefit of the City and its inhabitants and to enter into contracts
with respect thereto; and
WHEREAS, the City desires to lease and.purchase certain equipment and other personal
property with an aggregate cost not to exceed $2,256,207.58 for energy facilities (the "Energy
Conservation Equipment") that constitute a qualified energy conservation project that qualifies
as a "qualified conservation purpose" under Section 54D(f) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, in connection with the financing of the acquisition and installation of the
Energy Conservation Equipment, Banc of America Leasing & Capital, LLC (in such capacity,
the "Offeror") has submitted to the City its written offer that, upon acceptance by the City, will
constitute a binding written contract (the "Purchase Contract") to enter into that certain Taxable
QECB Equipment Lease/Purchase Agreement (Direct Subsidy) (the "Agreement") between the
City and Banc of America Leasing & Capital, LLC (or one of its affiliates) (in such capacity, the
"Lessor") and that certain Acquisition Fund and Account Control Agreement (the "Acquisition
Fund Agreement") among the City, the Lessor and the Acquisition Fund Custodian therein
identified, and the Purchase Contract executed by the Offeror and the forms of the Agreement
and the Acquisition Fund Agreement have been presented to the City Council of the City at this
meeting; and
WHEREAS, the City desires to designate the aggregate principal component of Rental
Payments under the Agreement for purposes Section 54D(a)(3) of the Code as a "qualified
energy conservation bond" within the meaning of Section 54D(a) of the Code; and
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Resolution No.
Page 2
WHEREAS, the City desires to receive direct cash subsidy payments from the United
States Department of Treasury as provided by Section 6431 of the Code with respect to the
Agreement and, in that connection, to irrevocably elect to have Section 6431(1) of the Code
apply to the Agreement; and
WHEREAS, the City Council of the City deems it for the benefit of the City and for the
efficient and effective administration thereof to enter into the Purchase Contract, the Agreement
and the Acquisition Fund Agreement (collectively, the "Financing Agreements") and the
documentation related to the financing of the Energy Conservation Equipment on the terms and
conditions therein provided.
NOW, THEREFORE, the City Council of the City of Chula Vista does hereby resolve as
follows:
SECTION 1. Defined Terms. Capitalized terms that are used, but not defined, in this
Resolution shall have the same meaning as when such terms are used in the preambles to this
Resolution.
SECTION 2. Apnroval and Authorization of Purchase Contract. The form, terms and
provisions of the Purchase Contract are hereby approved and each of the Mayor, the City
Manager, the Finance Director or their designees (together, the "Authorized Officers") of the
City acting alone is hereby authorized and directed to accept, execute and deliver the Purchase
Contract for and on behalf of the City in substantially the same form presented at this meeting
and with such non-material or minor modifications as necessary to further the intent and spirit of
the Purchase Contract, which modifications shall be subject to the review and approval of the
City Attorney. The Purchase Contract shall be effective and binding on the City upon such
acceptance, execution and delivery on behalf of the City.
SECTION 3. Approval and Authorization of Agreement and Acquisition Fund
Agreement. The form, terms and provisions of the Agreement and the Acquisition Fund
Agreement are hereby approved in substantially the same form presented at this meeting, with
such non-material or minor modifications as necessary to further the intent and spirit of the
Agreement and Acquisition Fund Agreement, which modifications shall be subject to the review
and approval of the City Attorney. Each of the Authorized Officers is hereby authorized and
directed to execute, and the City Clerk of the City or any Deputy City Clerk is hereby authorized
and directed to attest, the Agreement (including any related Exhibits attached thereto) and the
Acquisition Fund Agreement and to deliver the Agreement (including such Exhibits) and the
Acquisition Fund Agreement to the respective parties thereto.
SECTION 4. Designation for Purposes of Section 54D(a)(3) of the Internal Revenue
Code of 1986; Irrevocable Election. The City hereby designates the Agreement for purposes
Section 54D(a)(3) of the Code as a "qualified energy conservation bond" within the meaning of
Section 54D(a) of the Code. The City hereby further irrevocably elects to have Section 6431(f)
of the Code apply to the Agreement.
SECTION 5. Other Actions Authorized. The officers and employees of the City shall
take all action necessary or reasonably required by the parties to the Financing Agreements to
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Resolution No.
Page 3
carry out, give effect to and consummate the transactions contemplated thereby (including the
execution and delivery of Acceptance Certificates and any tax certificate and agreement, as
contemplated in the Agreement) and to take all action necessary in conformity therewith,
including, without limitation, the execution and delivery of any closing and other documents
required to be delivered in connection with any of the Financing Agreements.
SECTION 6. Appointment of Authorized Lessee Representatives. Each of the
Authorized Officers is hereby designated to act as authorized representatives of the City for
purposes of the Agreement and the Acquisition Fund Agreement until such time as the City
Council of the City shall designate any other or different authorized representative for purposes
of the Agreement and the Acquisition Fund Agreement.
SECTION 7. Severability. If any section, paragraph, clause or provision of this
Resolution shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such section, paragraph, clause or provision shall not affect any of the
remaining provisions of this Resolution.
SECTION 8. Repealer. All bylaws, orders and resolutions or parts thereof, inconsistent
herewith, are hereby repealed to the extent only of such inconsistency. This repealer shall not be
construed as reviving any bylaw, order, resolution or ordinance or part thereof.
SECTION 9. Effect. This Resolution shall take effect
Presented by
Maria Kachadoorian / len R. G~oog
Director of Finance/Treasurer City Attorney
For: Jill Maland
7-72
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROPRIATING $2,256,207 OF BOND
REVENUES TO CAPITAL IMPROVEMENT PROJECT GG214
AND AMENDING THE FY2011-12 CAPITAL IMPROVEMENT
PROGRAM BUDGET (4/STHS REQUIRED)
WHEREAS, a top priority currently for the City's energy management team is the
replacement of Chula Vista's over 9,000 streetlights with more energy efficient technologies; and
WHEREAS, in July 2011, the City launched its Streetlight Retrofit Project (Phase 1) and
began installing over 4,600 energy-saving LED streetlight fixtures along residential streets; and
WHEREAS, City staff is now working to secure financing to initiate Phase 2 of the
Streetlight Retrofit Project, which would upgrade approximately 2,700 streetlight fixtures along
arterial streets with energy-saving LED technologies; and
WHEREAS, the City has been working to pursue issuance of Qualified Energy
Conservation Bonds (QECBs), which allow local governments to access "below market" interest
rates, to support these municipal energy efficiency efforts; and
WHEREAS, the City has been in negotiations with Banc of America Lease & Capital,
LLC to purchase the City's QECBs totaling $2,256,207; and
WHEREAS, the funded Streetlight Retrofit Project (Phase 2) would generate over
$229,000 in annual energy cost savings, which would fully cover the debt service and bond
issuance costs.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Chula Vista
as follows:
1. That it appropriates $2,256,207 of bond revenues to Capital Improvement Project
GG214, and
2. That it amends the FY2011-12 Capital Improvement Program Btiydget to reflect such
appropriation. ~ , 1 ~)
Presented by
Richard Hopkins
Director, Public Works
R. Goog
Attorney
Jill Maland
7-73