SECOND AMENDED AND RESTATED CONTINUING COVENANT AGREEMENT. dated as of April [ ], 2016, between the

Transcription

1 KUTAK ROCK LLP DRAFT 02/29/16 SECOND AMENDED AND RESTATED CONTINUING COVENANT AGREEMENT dated as of April [ ], 2016, between the SUCCESSOR AGENCY to the REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE and WELLS FARGO BANK, NATIONAL ASSOCIATION Relating to $93,000,000 Redevelopment Agency of the City of San Jose Merged Area Redevelopment Project Taxable Subordinate Housing Set-Aside Tax Allocation Variable Rate Bonds Series 2010C

2 ARTICLE I DEFINITIONS Section 1.1. Certain Defined Terms... 2 Section 1.2. Computation of Time Periods Section 1.3. Construction Section 1.4. Incorporation of Certain Definitions by Reference Section 1.5. Accounting Terms and Determinations Section 1.6. Relation to Other Documents; Acknowledgment of Different Provisions of Bond Documents; Incorporation by Reference ARTICLE II THE AGENCY S OBLIGATIONS Section 2.1. Payment Obligations Section 2.2. Increased Payments; Certain Provisions Relating to Interest; Increased Costs Section 2.3. Obligations Absolute ARTICLE III CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT Section 3.1. Documentary and Related Requirements Section 3.2. Credit Requirements ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Existence and Power; Tax Status Section 4.2. Due Authorization Section 4.3. Valid and Binding Obligations Section 4.4. Noncontravention; Compliance with Laws Section 4.5. Pending Litigation and Other Proceedings; Pending Legislation and Decisions Section 4.6. Financial Statements Section 4.7. Pension Plans Section 4.8. Defaults Section 4.9. No Material Adverse Change Section No Liens; Parity Debt; Insurance Section Recognized Obligation Payment Schedule; Tax Allocation Bonds Section Incorporation by Reference... 25

3 Section Representations as of the Restatement Date Section Accuracy of Information Section Reliance by the Bank Section Non-Controlled Person ARTICLE V AFFIRMATIVE AND NEGATIVE COVENANTS OF THE AGENCY Section 5.1. Reporting Requirements Section 5.2. Proceeds of Bonds; Lien on Trust Estate Section 5.3. Notices Section 5.4. Insurance Section 5.5. Payment of Taxes; Removal of Liens; Related Obligations Section 5.6. Access to Offices Section 5.7. Licensure; Further Assurances Section 5.8. Pension Plans Section 5.9. Compliance with Laws and the Law Section Compliance with Other Agreements Section Transfer, Merger or Change of Business Section Amendments Section Accounting Methods and Fiscal Year Section Successor Fiscal Agent, etc Section Financial Reporting; Financial Covenants Section Judgments; Liens Section Redemption, etc Section Other Defaults Section Most Favored Covenant Section Time is of the Essence Section Hedging Section Federal Reserve Board Regulations Section Certain Information Section Covenants Related to Housing Set-Aside Amounts Section Incorporation of Covenants Section Additional Indebtedness and Enforceable Obligations ii

4 Section Recognized Obligation Payment Schedule; Final and Conclusive Enforceable Obligations Section Sovereign Immunity ARTICLE VI EVENTS OF DEFAULT Section 6.1. Events of Default Section 6.2. Special Termination Event Section 6.3. Consequences of an Event of Default or Special Termination Event Section 6.4. Remedies Cumulative; Solely for the Benefit of Bank Section 6.5. Waivers or Omissions Section 6.6. Discontinuance of Proceedings Section 6.7. Injunctive Relief ARTICLE VII LIABILITY OF THE BANK; INDEMNIFICATION Section 7.1. Limitation of Liability Section 7.2. Indemnification Section 7.3. Survival ARTICLE VIII MISCELLANEOUS Section 8.1. Patriot Act Notice Section 8.2. Further Assurances Section 8.3. Amendments and Waivers; Enforcement Section 8.4. No Implied Waiver; Cumulative Remedies Section 8.5. Notices Section 8.6. Extension; New Interest Rate Mode Section 8.7. No Third-Party Rights Section 8.8. Severability Section 8.9. Arbitration Section Governing Law; Consent To Jurisdiction; Judicial Reference Section No Advisory or Fiduciary Responsibility Section Proposal; Prior Understandings Section Duration Section Counterparts Section Successors and Assigns iii

5 Section Participations Section Preferences Section Headings Section Electronic Signatures EXHIBITS A SINKING ACCOUNT REDEMPTION SCHEDULE B FINANCIAL COVENANT CALCULATION C MATERIAL LITIGATION; SECTION 4.9(a) CHANGES iv

6 SECOND AMENDED AND RESTATED CONTINUING COVENANT AGREEMENT THIS SECOND AMENDED AND RESTATED CONTINUING COVENANT AGREEMENT, dated as of April [ ], 2016, between the SUCCESSOR AGENCY to the REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE, a public entity existing under the laws of the State of California (the Successor Agency ), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (the Bank ). RECITALS WHEREAS, the Redevelopment Agency of the City of San Jose (the Original Agency ) issued a series of bonds designated as the Merged Area Redevelopment Project Taxable Housing Set-Aside Tax Allocation Variable Rate Bonds, Series 2010C in the principal amount of $93,000,000 (the Bonds ) pursuant to a Fiscal Agent Agreement dated as of April 1, 2010 (said Fiscal Agent Agreement, as amended through the date hereof by the First Supplement (as hereinafter defined) and as it may further be amended, modified or restated in accordance with the terms thereof and hereof, the Fiscal Agent Agreement ), by and between the Original Agency and Wells Fargo Bank, National Association (the Fiscal Agent ); and WHEREAS, the Original Agency used the proceeds of the Bonds for the financing and refinancing of the Project (as hereinafter defined) and to pay certain costs incurred in connection with the issuance of the Bonds; and WHEREAS, the Bank agreed, on and subject to the terms and conditions of the Continuing Covenant Agreement dated as of April 1, 2010 (the Original Continuing Covenant Agreement ), between the Bank and the Original Agency, and the Fiscal Agent Agreement, to purchase and hold the Bonds for an initial period as set forth in the Fiscal Agent Agreement; and WHEREAS, under the Amended and Restated Continuing Covenant Agreement entered into as of September 12, 2013, between the Bank and the Successor Agency (the Amended and Restated Continuing Covenant Agreement ), the Bonds were subject to purchase by the Successor Agency on April 29, 2016, and to the Mandatory Special Redemption provisions set forth in the Fiscal Agent Agreement; and WHEREAS, on June 28, 2011, the Governor of California signed ABx1 26 ( ABx1 26 ), an amendment to the California Community Redevelopment Law (being Division 24 of the Health and Safety Code) of the State of California (the California Community Redevelopment Law, as amended by ABx1 26, as further amended by AB1484, and as further amended, is hereinafter referred to as the Law ), which, among other things, dissolved redevelopment agencies as of February 1, 2011; and WHEREAS, under the Law, the Successor Agency is the successor under California law to the Original Agency and has assumed all rights, titles, powers, duties, obligations and liabilities of the Original Agency including all duties, obligations and liabilities under and in connection with the Bonds, the Obligations (as hereinafter defined) and the other Enforceable Obligations (as hereinafter defined); and

7 WHEREAS, the Bank desires to continue to hold the Bonds, currently outstanding in the principal amount of $77,945,000, and to extend the Mandatory Purchase Date to April 28, 2017, 2017, subject to agreement between the Successor Agency and the Bank on the amendment of certain terms and conditions in the Amended and Restated Continuing Covenant Agreement and the satisfaction of certain other requirements, and the parties intend to set forth their agreement on such terms, conditions and requirements in this Second Amended and Restated Continuing Covenant Agreement (the Agreement ); and WHEREAS, concurrently with the execution and delivery hereof, the Successor Agency and the Fiscal Agent are entering into a Second Supplement to Fiscal Agent Agreement (the Second Supplement ) dated as of April 1, 2016, in order to provide for the extension of the Mandatory Purchase Date to April 28, 2017, to revise the calculation of the interest rate that will be payable with respect to the Bonds from April 29, 2016 through April 28, 2017, and to make certain other changes that are required or advisable in connection with the extension of the Mandatory Purchase Date; and WHEREAS, effective as of April 29, 2016, this Agreement amends and restates in its entirety the Amended and Restated Continuing Covenant Agreement and constitutes for all purposes the Continuing Covenant Agreement with respect to the Bonds. NOW, THEREFORE, to induce the Bank to continue to hold the Bonds, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Successor Agency and the Bank hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1. Certain Defined Terms. In addition to the terms defined in the recitals and elsewhere in this Agreement, the Fiscal Agent Agreement and the Agreement, the following terms shall have the following meanings: Additional Debt Coverage Ratio means, as of any date of determination, the ratio of (a) Housing Set-Aside Amounts to be received by the Agency in the current Fiscal Year, calculated based upon the County s certified and most recent assessed valuation of property in the Project Area divided by (b)(i) the aggregate Maximum Annual Debt Service for all then outstanding Indebtedness plus (ii) the aggregate Maximum Annual Debt Service for the Indebtedness then proposed to be issued or incurred plus (iii) the amount, if any, of any judgment or order or any similar decree or decision of any Governmental Board for the payment of money, which is paid from any Housing Set-Aside Amounts, Subordinate Housing Set-Aside Amounts or Housing Set-Aside Accounts in such Fiscal Year. Affiliate means a Person, corporation, partnership, association, joint venture, business trust or similar entity organized under the laws of any state that directly, or indirectly through one (1) or more intermediaries, Controls or is Controlled by, or is under common Control with, the Agency or the Bank, as may be applicable. 2

8 Agency means the Redevelopment Agency of the City of San Jose, as the Original Agency under the Fiscal Agent Agreement and under the Original Continuing Covenant Agreement and, on and after the Restatement Date, means the Successor Agency. Agency Representative means any person authorized from time to time in writing by the Agency, or its successors and assigns, to perform a designated act or execute a designated document. Annual Debt Service means, with respect to any Indebtedness, for each Fiscal Year, the sum of (1) the interest falling due on such Indebtedness (assuming that during any variable rate period for which the interest rate on the Indebtedness has not been determined a rate equal to the Assumed Rate, and assuming further that the Indebtedness is retired as scheduled, whether by maturity or by sinking account payment); and (2) the principal amount or accreted value of such Indebtedness, if any, falling due by its terms in such Fiscal Year, whether by maturity, sinking account payment or otherwise. Approved Low and Moderate Income Housing Fund Loan means a loan in multiple installments from the Approved Low and Moderate Income Housing Fund Loan in an aggregate amount not to exceed Seventy-Five Million Dollars ($75,000,000), which loan is made to assist the Agency in satisfying its Supplemental ERAF obligations for the Agency s and Fiscal Years. Assumed Rate means, for Indebtedness bearing interest at a variable rate, a rate equal to the higher as of the date of calculation of: (1) the current, actual rate on such Indebtedness plus 100 basis points; (2) the average interest rate on such Indebtedness for the previous 12 months plus 100 basis points or (3) the average of One-Month LIBOR for the past three years plus 100 basis points; provided that in no event shall the Assumed Rate exceed the maximum interest rate with respect to any Parity Debt. Bank Affiliate means the Bank and any Affiliates of the Bank, and includes without limitation Wells Fargo Bank, National Association and Wells Fargo Securities. Bank Participant means any Qualified Institutional Buyer to whom the Bank has participated its rights under this Agreement or to whom the Bank or any Bank Participant has sold a participation in rights under this Agreement. Base Rate means a per annum rate equal to the highest of (a) the Prime Rate plus 100 basis points (1.00%), (b) the Fed Funds Rate plus two hundred basis points (2.00%) and (c) seven percent (7.00%). Any change in the Base Rate shall take effect on the date specified in the announcement of such change. Bond Documents means, collectively, this Agreement, the Fiscal Agent Agreement, the Bonds, and any exhibits, instruments or agreements relating thereto, as the same may be amended from time to time in accordance with their respective terms and the terms hereof. Bond Year has the meaning assigned to such term in the Fiscal Agent Agreement. Change in Law means the occurrence, after the Restatement Date, of any of the 3

9 following: (a) the adoption or taking effect of any Laws, including, without limitation Risk- Based Capital Guidelines, (b) any change in any Laws or in the administration, interpretation, implementation or application thereof by any Governmental Board or (c) the making or issuance of any request, rule, ruling, guideline, regulation or directive (whether or not having the force of law) by any Governmental Board; provided that notwithstanding anything herein to the contrary, (i) the Dodd Frank Wall Street Reform and Consumer Protection Act and all requests, rules, rulings, guidelines, regulations or directives thereunder or issued in connection therewith and (ii) all requests, rules, rulings, guidelines, regulations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued. City means the City of San Jose, California. Closing Date means the date of execution of the Original Continuing Covenant Agreement. Code means the Internal Revenue Code of 1986, as amended from time to time. Contract means any indenture, agreement (other than this Agreement), mortgage, other contractual restriction, lease, instrument, certificate of incorporation, charter or by-law. Control or any variant thereof means the ownership of, or power to vote (i) 51% of the outstanding capital stock of a corporation, the membership interests of a limited liability company, or the partnership interests of a partnership; or (ii) 100% of the membership interests of the managing members of a limited liability company or of the partnership interests of the general partners of a partnership. County means the County of Santa Clara, California. Debt Service Coverage Ratio means, as of any date of determination, the ratio of (a) Housing Set-Aside Amounts received in such Fiscal Year divided by (b)(i) the aggregate Annual Debt Service for such Fiscal Year on all outstanding Indebtedness plus (ii) the amount, if any, of any judgment or order or any similar decree or decision of any Governmental Board for the payment of money, which is paid from any Housing Set-Aside Amounts, Subordinate Housing Set-Aside Amounts or Housing Set-Aside Accounts in such Fiscal Year. Default means any event or condition which with notice, passage of time or any combination of the foregoing, would constitute an Event of Default. Default Rate means the fluctuating per annum rate at all times equal to the Base Rate plus 3.0%. Department of Finance means the State of California Department of Finance. Designated Unsecured Obligations means those unsecured Enforceable Obligations, outstanding at any time, the payment of which is subordinated under the Law, the Senior Lien Fiscal Agent Agreement and the Bond Documents, respectively, to the payment of the Senior 4

10 Obligations, the Bonds, the Obligations and any other obligations owing under any of the Bond Documents. Law. Enforceable Obligations has the meaning assigned to such term in 34171(d) of the Environmental Laws means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and the Asset Conservation, Lender Liability, and Deposit Insurance Act of 1996, 42 U.S.C et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S. C et seq.; the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C et seq.; the Toxic Substances Control Act of 1976, 15 U.S.C et seq.; the Emergency Planning and Community Right-to Know Act of 1986, 42 U.S.C et seq.; the Clean Air Act of 1966, as amended 42 U.S.C et seq.; the National Environmental Policy Act of 1975, 42 U.S.C et seq.; the Rivers and Harbours Act of 1899, 33 U.S.C. 401 et seq.; the Endangered Species Act of 1973, as amended 16 U.S.C et seq.; the Occupational Safety and Health Act of 1970, as amended 29 U.S.C. 651 et seq.; and the Safe Drinking Water Act of 1974, as amended 42 U.S.C. 300(f) et seq.; and all rules, regulations and guidance promulgated or published thereunder, and any state, regional, country or local statute, law, rule, regulation or ordinance relating to public health, safety or the environment, including, without limitation, those relating (i) to releases, discharges, emissions or disposals to air, water, land or ground water, (ii) to the use, handling or disposal of polychlorinated biphenyls (PCB s), asbestos or urea formaldehyde, (iii) to the treatment, storage, disposal or management of Hazardous Substances (including, without limitation petroleum, crude oil or any fraction thereof) and any other solid, liquid or gaseous substance, exposure to which is prohibited, limited or regulated, or may or could pose a hazard to the health and safety of the occupants of the Property or the adjacent or surrounding property, (iv) to the exposure of persons to toxic, hazardous, or other controlled, prohibited or regulated substances, (v) to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulations, order, injunction, judgment, declaration, notice or demand issued thereunder. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. Event of Default has the meaning assigned to that term in Section 6.1 of this Agreement. Excess Interest Amount has the meaning assigned to that term in Section 2.2(c) of this Agreement. Excluded Taxes means, with respect to the Bank or any other Owner, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under 5

11 the laws of which the Bank or such Owner is organized or in which its principal office is located, and (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any jurisdiction with taxing authority over the Agency. Fed Funds Rate means for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Bank from three Federal funds brokers of recognized standing selected by it. First Supplement has the meaning assigned to that term in the recitals to this Agreement. Fiscal Agent means Wells Fargo Bank, National Association, its successors and assigns. Fiscal Agent Agreement has the meaning assigned to that term in the recitals to this Agreement. Fiscal Year means the period of twelve (12) consecutive calendar months for which financial statements of the respective entity have been examined by its independent certified public accountants; currently for the Agency, a year ending on June 30. Fitch means Fitch, Inc., or any successor thereto. Generally Accepted Accounting Principles or GAAP means generally accepted accounting principles in effect from time to time in the United States and applicable to entities such as the Agency. Governing Body of the Agency means the Board of the Agency. Governmental Board means the government of any nation or state or any political subdivision thereof, or any supranational body or authority, or any agency, board, commission, department or instrumentality of any of the foregoing, or any court, tribunal, central bank or arbitrator. Governmental Requirements means all Laws, ordinances, orders, rules or regulations of any Governmental Board, including without limitation, laws, ordinances, orders and rules relating to public disclosures, zoning, certificates of need, licenses, permits, subdivision building, safety, health fire protection or environmental matters. Hazardous Substance means any substance identified as hazardous under any of the Environmental Laws; provided, however, that Hazardous Substances shall not include cleaning and other maintenance-related materials and supplies in type and quantity customary for buildings of the nature of the Property which are being used in a customary and safe manner. 6

12 Highest Lawful Rate means the maximum rate of interest which the Bank is legally entitled to charge, contract for or receive under any law to which such interest is subject. Housing Project has the meaning assigned to such term in the Fiscal Agent Agreement. Housing Set-Aside Accounts means, collectively, (i) any Housing Set-Aside Amounts, Subordinate Housing Set-Aside Amounts or other funds or investments on deposit in, or otherwise to the credit of, any of the Redevelopment Property Tax Trust Fund, the Redevelopment Obligation Retirement Fund, the Housing Special Fund, the Subordinate Housing Set-Aside Special Fund, the Subordinate Housing Set-Aside Project Fund, the Low and Moderate Income Housing Fund, and each of the foregoing funds and accounts and any other fund or account in which the City, on behalf of the Agency, or the Agency, at any time holds Housing Set-Aside Amounts or Subordinate Housing Set-Aside Amounts, and (ii) any funds or accounts established under the Bond Documents or under the Senior Lien Fiscal Agent Agreement. Housing Set-Aside Amounts means the portion of Tax Increment Revenues required to be set-aside and deposited in the Low and Moderate Income Housing Fund pursuant to Section et seq. and of the Law, but in any event an amount equal to 20% of the Tax Increment Revenues. Housing Set-Aside Enforceable Obligations means the Senior Obligations, the Bonds, the Obligations and all other Enforceable Obligations secured by a pledge of Tax Increment Revenues. Housing Special Fund has the meaning assigned to such term in the Senior Lien Fiscal Agent Agreement. Indebtedness means each of the following obligations of the Agency, if required to be paid from, or secured by, the Housing Set-Aside Amounts or Subordinate Housing Set-Aside Amounts or Housing Set-Aside Accounts, or secured by any other right to or Lien (including any senior, pari passu or junior Lien) upon the Housing Set-Aside Amounts, (a) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services; (b) obligations as lessee under leases which are, should be or should have been reported as capital leases in accordance with Generally Accepted Accounting Principles; (c) current liabilities in respect of unfunded vested benefits under governmental plans (as defined in Section 3(32) of ERISA); (d) all obligations arising under any acceptance facility; (e) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (f) obligations secured by any mortgage, lien, pledge, security interest or other charge or encumbrance on property owned by the Agency, whether or not the obligations have been assumed, (g) all other items or obligations which would be included in determining total liabilities on the balance sheet of a Person and (h) obligations under any Interest Rate Protection Agreement to which it is a party; provided, however, that Indebtedness shall not include (i) trade payables and similar obligations (including the deferred revenues resulting from subscriptions, dues and the like as shown on the financial statements of the Agency) incurred in the ordinary course of business, (ii) both the 7

13 indebtedness directly incurred and any corresponding indirect guaranty thereof or (iii) planned giving actuarial liabilities as reflected in the financial statements of the Agency to the extent they are offset by planned giving investments. Indemnified Taxes means Taxes other than Excluded Taxes. Insufficient Funds Report means, with respect to a Recognized Obligation Payment Schedule, a report of the Agency delivered to the Santa Clara County Auditor-Controller pursuant to Section 34183(b) of the Law specifying that the Tax Increment Revenues expected to be received by the Agency for the period covered by such Recognized Obligation Payment Schedule will be insufficient to pay all obligations of the Agency due in that period. Interest Payment Date means the first day of each May, August, November and February commencing with May 1, Interest Rate Protection Agreement means an interest rate swap, cap or collar agreement or similar arrangement between any Person and a financial institution providing for the transfer or mitigation of interest rate risks either generally or under specific contingencies. Law means the California Community Redevelopment Law (being Division 24 of the Health and Safety Code) of the State of California, as amended by ABx1 26, as further amended by AB1484, and as further amended. Laws means all applicable federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Board having jurisdiction as may be in effect from time to time. Lien means any lien, security interest, pledge or other charge or encumbrance of any kind, or any other type of preferential arrangement, including without limitation the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to Property. Low and Moderate Income Housing Fund means the Low and Moderate Income Housing Fund established with respect to the Merged Area Redevelopment Project all in accordance with Sections et seq. and of the Law. Majority Bondowners has the meaning assigned to such term in the Fiscal Agent Agreement. Mandatory Purchase Date means April 28, 2017, or such later date agreed to by the Bank and the Agency in accordance with the terms of Section 8.6 hereof. Margin Stock has the meaning assigned to such term in Regulation U promulgated by the Board of Directors of the Federal Reserve System, as now and hereafter from time to time in effect. Material Adverse Effect means an event or occurrence which adversely affects in a 8

14 material manner (a) the Housing Set-Aside Amounts or Subordinate Housing Set-Aside Amounts, or their pledge under the Senior Lien Fiscal Agent Agreement and Fiscal Agent Agreement, respectively, or the business or operations of the Agency in a manner that could impact such Amounts, (b) the taxable value of property in the Project Area, the assessment, collection or allocation to the Agency of property taxes, or the amount of Tax Increment Revenues, or (c) the ability of the Agency to meet or perform its obligations under any of this Agreement, the other Bond Documents, the Senior Lien Fiscal Agent Agreement or the Law on a timely basis. Material Indebtedness means any Indebtedness of the Agency which has a principal amount outstanding of not less than $100,000 (or, in the case of any Interest Rate Protection Agreement, has an exposure of not less than $100,000). For purposes hereof, the exposure under an Interest Rate Protection Agreement to which the Agency is a party shall be determined at such time in accordance with the standard methods of calculating such exposure under similar arrangements as prescribed from time to time by the Bank, taking into account the respective termination provisions set forth therein, the notional principal amount and term thereof. Material Litigation has the meaning assigned to such term in Section 4.5(a) of this Agreement. Matters Contested in Good Faith means the imposition of charges, assessments, taxes or other payments, the application of any laws, rules, regulations or policies, or any other matters (a) then being contested in good faith by appropriate proceedings diligently and continuously pursued, (b) of which the Bank has been notified in writing and is being kept informed in such detail as the Bank may from time to time reasonably request, (c) the enforcement of which is effectively stayed during the period of the contest and (d) with respect to which either (i) adequate reserves in the nature of a cash deposit or pledge of bonds or other securities, or a payment bond of a corporate surety in the face amount equal to the total amount in controversy, reasonably satisfactory to the Bank, have been furnished or (ii) adequate provision therefor, reasonably satisfactory to the Bank, has been reserved on the financial statements of the Agency. Maximum Annual Debt Service means, with respect to Indebtedness or proposed Indebtedness, the largest amount of Annual Debt Service during the period from the date of such determination through the final maturity date of such Indebtedness or proposed Indebtedness. Moody s means Moody s Investors Service, Inc., or any successor thereto. Obligations means all amounts payable by the Agency to the Bank under this Agreement or the other Bond Documents, and all other obligations to be performed by the Agency, pursuant to the Bond Documents (including any amounts to reimburse the Bank for any advances or expenditures by it under any of such documents). One-Month LIBOR has the meaning assigned to such term in the Fiscal Agent Agreement. Optional Prepayment Breakage Fee has the meaning assigned to such term in the Fiscal Agent Agreement. 9

15 Original Agency has the meaning assigned to that term in the recitals to this Agreement. Oversight Board means the oversight board as defined and constituted in 34171(f) and of the Law, as established with respect to the Agency. Owner has the meaning assigned to such term in the Fiscal Agent Agreement. Parity Debt means the Bonds and any Indebtedness, installment sale obligation, lease obligation or other obligation of the Agency having an equal lien and charge upon the Subordinate Housing Set-Aside Amounts and therefore payable on a parity with the Bonds or an obligation of the Agency the regularly scheduled payments of which are payable on a parity with the Bonds. Patriot Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L (signed into law October 26, 2001). Pension Plan means any employee pension benefit plan which is (a) maintained by the Agency or (b) maintained by any other Person and to which the Agency contributes (or permits any other Person to contribute) or has an obligation to contribute, or has made contributions at any time during the immediately preceding six (6) plan years and which contributions can under applicable law be paid from Housing Set-Aside Amounts or Subordinate Housing Set-Aside Amounts. Permitted Liens means, with respect to the Housing Set-Aside Amounts and the Subordinate Housing Set-Aside Amounts, respectively, Liens in favor of the Senior Lien Fiscal Agent and Fiscal Agent, respectively, for the benefit of holders of Senior Obligations and for the benefit of Holders of Parity Debt, respectively, established pursuant to and in accordance with the Senior Lien Fiscal Agent Agreement and the Fiscal Agent Agreement, respectively. Person means an individual, partnership, corporation (including a business trust), limited liability company, trust, unincorporated association, joint venture, governmental unit or other entity. Prime Rate means on any day, the rate of interest per annum then most recently established by the Bank as its prime rate. Any such rate is a general reference rate of interest, may not be related to any other rate, and may not be the lowest or best rate actually charged by the Bank to any customer or a favored rate and may not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general, and that the Bank may make various business or other loans at rates of interest having no relationship to such rate. If the Bank ceases to exist or to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported. Project means housing projects, programs or loans that increase or improve the supply 10

16 of low and moderate income housing in the City of San Jose and are permitted under the Law. Project Area has the meaning assigned to such term in the Fiscal Agent Agreement. Property means the real and personal property of the Agency wherever located. Proposal means the Proposal, Direct Purchase of Taxable Fixed Rate Bonds to: Successor Agency to the Redevelopment Agency of the City of San Jose from the Bank dated February 29, Purchase Price means, with respect to the Bonds, the aggregate principal amount of, plus all accrued interest on, all outstanding Bonds. Rating Agency means S&P and Fitch. Recognized Obligation Payment Schedule has the meaning set forth in Section 34171(h) of the Law. Redevelopment Obligation Retirement Fund means the fund established, held and maintained by the Agency pursuant to Section (a) of the Law. Redevelopment Plans has the meaning assigned to such term in the Fiscal Agent Agreement. Redevelopment Property Tax Trust Fund means the Redevelopment Property Tax Trust Fund as established by the County pursuant to Section (b) of the Law. Restatement Date means the date of execution and delivery of this Agreement. Risk-Based Capital Guidelines means (a) the risk-based capital guidelines in effect in the United States of America, including transition rules, and (b) the corresponding capital regulations promulgated by regulatory authorities outside the United States of America including transition rules, and any amendment to such regulations. S&P means Standard & Poor s, a division of The McGraw-Hill Companies, Inc., or any successor thereto. Senior Lien Fiscal Agent has the meaning assigned to the term Fiscal Agent in the Senior Lien Fiscal Agent Agreement. Senior Lien Fiscal Agent Agreement has the meaning assigned to that term in the Fiscal Agent Agreement. Senior Obligations means the Bonds and Parity Obligations outstanding under the Senior Lien Fiscal Agreement (as such terms are defined therein). Senior Obligations Rating shall mean each long-term rating by S&P or Fitch on the Senior Obligations or on any other Indebtedness of the Agency which is secured on a parity with the Senior Obligations by a Lien on all or any portion of the Housing Set-Aside Amounts, 11

17 without regard to any third-party credit enhancement of any such Indebtedness; and, in the event that (i) either of S&P or Fitch assigns more than one rating to any such Indebtedness or (ii) the ratings assigned by S&P and Fitch, as applicable, to such Indebtedness differ, Senior Obligations Rating means the lowest such rating assigned by any such Rating Agency. Special Termination Event has the meaning ascribed to such term in Section 6.2 of this Agreement. State means the State of California. Subordinate Housing Set-Aside Amounts means (i) prior to the discharge of the Senior Obligations in accordance with the Senior Lien Fiscal Agent Agreement, all Housing Set-Aside Amounts which are permitted to be released from the lien of the Senior Lien Fiscal Agent Agreement and/or the Housing Special Fund established by the Senior Lien Fiscal Agent Agreement, (ii) following the discharge of the Senior Obligations in accordance with the Senior Lien Fiscal Agent Agreement, all Housing Set-Aside Amounts and all interest, profits and other income received from the investment of Housing Set-Aside Amounts and, (iii) all interest, profits and other income received from the investment of amounts held by the Fiscal Agent under the Fiscal Agent Agreement. Subordinate Housing Set-Aside Project Fund has the meaning assigned to such term in the Fiscal Agent Agreement. Subordinate Housing Set-Aside Special Fund has the meaning assigned to such term in the Fiscal Agent Agreement. Subsidiary means any corporation, partnership or association (a) of which more than fifty percent (50%) of the outstanding voting power of such entity is at the time directly or indirectly held by the Agency and one (1) or more other Subsidiaries, or by one (1) or more other Subsidiaries or (b) of which a majority of the directors or members of its governing body are subject to election or appointment by the Agency and one (1) or more other Subsidiaries, or by one (1) or more other Subsidiaries. Successor Agency has the meaning assigned to that term in the recitals to this Agreement, and includes any permitted successor or assign hereunder. Swap has the meaning ascribed to such term in Section 5.26 of this Agreement. Tax(es) means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Board, including any interest, fines, additions to tax or penalties applicable thereto. Tax Increment Revenues has the meaning assigned to that term in the Fiscal Agent Agreement. Transactions means, collectively, the amendments to this Agreement and the other Bond Documents accomplished as of the Restatement Date and the performance by the Agency 12

18 of its obligations and covenants under the Bond Documents, as amended and restated. Transferee means each Bank Transferee or Non-Bank Transferee pursuant to Section 8.15 for so long as such Bank Transferee or Non-Bank Transferee is an Owner. UCC means the Uniform Commercial Code. Unfunded Pension Liability means the excess of a Pension Plan s benefit liabilities over the current value of that Pension Plan s assets, determined in accordance with the assumptions used for funding the Pension Plan for the applicable plan year. Section 1.2. Computation of Time Periods. In this Agreement, in the computation of a period of time from a specified date to a later specified date, the word from means from and including and the words to and until each mean to but excluding. Section 1.3. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, to the singular include the plural and to the part include the whole. The word including shall be deemed to mean including but not limited to, and or has the inclusive meaning represented by the phrase and/or. The words hereof, herein, hereunder and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section headings contained in this Agreement and the table of contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. Section 1.4. Incorporation of Certain Definitions by Reference. Any capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Fiscal Agent Agreement. Section 1.5. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with Generally Accepted Accounting Principles. In the event of changes to Generally Accepted Accounting Principles which become effective after the Restatement Date, the Agency and the Bank agree to negotiate in good faith appropriate revisions of this Agreement so as to perpetuate the meaning and effect of such provisions as originally negotiated and agreed upon. Section 1.6. Relation to Other Documents; Acknowledgment of Different Provisions of Bond Documents; Incorporation by Reference. (a) Nothing in this Agreement shall be deemed to amend, or relieve the Agency of its obligations under, any Bond Document to which it is a party. Conversely, to the extent that the provisions of any Bond Document allow the Agency to take certain actions, or not to take certain actions, with regard for example to Permitted Liens, incurrence of Indebtedness, transfers of assets, maintenance of financial ratios and similar matters, the Agency nevertheless shall be fully bound by the provisions of this Agreement. 13

19 (b) Except as provided in subsection (c) of this Section 1.6, all references to other documents shall be deemed to include all amendments, modifications and supplements thereto to the extent such amendment, modification or supplement is made in accordance with the provisions of such document and this Agreement. (c) All provisions of this Agreement making reference to specific sections of any Bond Document shall be deemed to incorporate such sections into this Agreement by reference as though specifically set forth herein (with such changes and modifications as may be herein provided) and shall continue in full force and effect with respect to this Agreement notwithstanding payment of all amounts due under or secured by the Bond Documents, the termination or defeasance thereof or any amendment thereto or any waiver given in connection therewith, so long as this Agreement is in effect and until all Obligations are paid in full. No amendment, modification, consent, waiver or termination with respect to any of such sections shall be effective as to this Agreement until specifically agreed to in writing by the parties hereto with specific reference to this Agreement. Section 2.1. Payment Obligations. ARTICLE II THE AGENCY S OBLIGATIONS (a) The Agency hereby unconditionally, irrevocably and absolutely agrees to make prompt and full payment of all payment obligations owed to the Bank under the Bond Documents and to pay any other Obligations owing to the Bank whether now existing or hereafter arising, irrespective of their nature, whether direct or indirect, absolute or contingent, with interest thereon at the rate or rates provided in such Bond Documents and under such Obligations. (b) (i) The Agency shall pay the Purchase Price of the Bonds on the Mandatory Purchase Date; provided, however, if on the Mandatory Purchase Date the conditions set forth in clause (ii) below are satisfied, the Agency shall not be required to pay the Purchase Price for the Bonds on the Mandatory Purchase Date except to the extent of available proceeds from the remarketing of the Bonds. In the event that the conditions in clause (ii) are satisfied on the Mandatory Purchase Date, the available proceeds from the remarketing of the Bonds shall, to the extent available, be applied to pay the Purchase Price for the Bonds and that portion of Bonds for which the Purchase Price cannot be paid from such proceeds shall instead be repaid in accordance with the amortization provisions set forth in Section 4.01(c) of the Fiscal Agent Agreement, such that the Purchase Price of the Bonds shall be paid to the Bank in full on the third anniversary of the Mandatory Purchase Date, subject to the earlier remarketing, repayment, acceleration, prepayment or redemption of the Bonds. 14

20 (ii) The Purchase Price of the Bonds is due and payable in full on the Mandatory Purchase Date unless on such date the following conditions are satisfied: (A) no Default shall have occurred and be continuing and (B) the Agency shall be deemed to have made on and as of such date each of the representations and warranties of the Agency made in this Agreement and in any certificate or document delivered in connection with this Agreement and each such representation and warranty shall continue to be accurate and complete in all material respects on and as of such date. (c) The Agency shall pay within thirty (30) days after demand: (i) if an Event of Default or Special Termination Event shall have occurred, all reasonable costs and expenses of the Bank in connection with the enforcement (whether by means of legal proceedings or otherwise) of any of its rights under this Agreement, the other Bond Documents and such other documents which may be delivered in connection therewith; (ii) a fee for each amendment of any Bond Document, consent by the Bank or waiver by the Bank under any Bond Document, in each case in a minimum amount of $2,500; (iii) the reasonable fees and out-of-pocket expenses for counsel or other reasonably required consultants to the Bank in connection with advising the Bank as to its rights and responsibilities under this Agreement and the other Bond Documents or in connection with responding to requests from the Agency for approvals, consents and waivers; (iv) any amounts advanced by or on behalf of the Bank to the extent required to cure any Default, Event of Default or event of nonperformance hereunder or under any other Bond Document, together with interest at the Default Rate; and (v) all reasonable fees, costs and expenses of any consultants providing services to the Agency or the Bank in accordance with this Agreement. In addition, if at any time any Governmental Board shall require revenue or other documentary stamps or any other Tax in connection with the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any of the other Bond Documents, then, if the Agency lawfully may pay for such stamps, Taxes or fees, the Agency shall pay, when due and payable, for all such stamps, Taxes and fees, including interest and penalties thereon, and the Agency agrees to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay of Agency in paying, or omission of Agency to pay, such stamps, Taxes and fees hereunder. (d) The Bonds are special limited obligations of the Agency and are payable, as to interest thereon and principal thereof, exclusively from Subordinate Housing Set- Aside Amounts, and the Agency is not obligated to pay them except from Subordinate Housing Set-Aside Amounts. Notwithstanding anything in this Agreement, the Agency shall not be required to pay or advance any moneys derived from any source other than the Subordinate Housing Set-Aside Amounts for the payment of the principal of or 15

21 interest (and premium, if any) on the Bonds, or for any other purpose of this Agreement. Nevertheless, the Agency may advance, but shall not be required under any circumstances whatsoever, for any of the purposes hereof, any funds of the Agency which may be made available to it for such purposes. The Bonds are not a debt of the City, the State of California or any of its political subdivisions, and neither said City, said State nor any of its political subdivisions is liable therefor, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Agency pledged therefor as provided in the Fiscal Agent Agreement. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction. Section 2.2. Breakage Fee; Increased Payments; Certain Provisions Relating to Interest; Increased Costs. (a) In addition to other amounts payable by the Agency to the Bank under the Bond Documents, upon any redemption, conversion or other prepayment of the Bonds, in whole or in part, prior to the Mandatory Purchase Date (including in connection with any acceleration of the Bonds), other than a redemption pursuant to Sections 4.01(b) or (c) of the Fiscal Agent Agreement, the Agency shall pay to the Bank the Optional Prepayment Breakage Fee in addition to any other costs and fees due hereunder or under the other Bond Documents. The amount of such Optional Prepayment Breakage Fee shall be determined by the Bank and absent manifest error shall be conclusive and binding upon the Agency. (b) Upon the occurrence of an Event of Default or a Special Termination Event, interest shall accrue on the Obligations at the Default Rate and shall be payable by the Agency to the Bank upon demand therefor. (c) (i) If the amount of interest payable for any period in accordance with the terms hereof or the Bonds exceeds the amount of interest that would be payable for such period had interest for such period been calculated at the maximum interest rate permitted by applicable law, then interest for such period shall be payable in an amount calculated at the maximum interest rate permitted by applicable Laws. (ii) Any interest that would have been due and payable for any period but for the operation of the immediately preceding subclause (i) shall accrue and be payable as provided in this subclause (ii) and shall, less interest actually paid to the Bank for such period, constitute the Excess Interest Amount. If there is any accrued and unpaid Excess Interest Amount as of any date, then the principal amount with respect to which interest is payable shall bear interest at the maximum interest rate permitted by applicable law until payment to the Bank of the entire Excess Interest Amount. (iii) Notwithstanding the foregoing, on the date on which no principal amount hereunder remains unpaid, the Agency shall, to the extent possible without violating 16