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HomeMy WebLinkAbout9 Finance Construction of new water storage tank Agenda Item # ry+ s U'Ubic Utility District Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: August 29, 2002 Subject: Consideration of a resolution rescinding resolution 2002-11 and approving a new agreement to finance the construction of a new water storage tank (the Bridge Street 6160 water storage tank) In April, the Board approved resolution number 2002-11 and financing documents for funding the construction of the 6160 tank. It has taken a while to go through all of the design, environmental, surveying and bidding processes. Municipal Services Group had agreed to do the financing. However, we could not complete the loan until all of these processes were complete. In the meantime, the price tag has increased and the amount that we now need to finance is $1,500,000. Also, in the meantime, the interest rate has dropped from 5.98% to 5.78%. Attached please find the new loan documents. Within the documents is a new resolution that needs to be approved. The new resolution rescinds the previous resolution and refers to the new dollar amount and new financing documents. RECOMMENDATION: 1) To approve the attached resolution rescinding resolution 2002-11 and approving a new lease agreement to finance the construction of the Bridge Street 6160 water storage tank in the amount of$1,500,000. 2) To authorize the Board President and the District Clerk to execute the attached Municipal Project Lease and Option Agreement #1551 for the construction of a new water storage tank after approval of the documents by legal counsel. 3) To authorize the General Manager to sign draw requests and acceptance certificates. RESOLUTION NO. 02_ OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT RESCINDING RESOLUTION 2002-11 AND APPROVING A NEW AGREEMENT TO FINANCE THE CONSTRUCTION OF A NEW WATER STORAGE TANK WHEREAS, on April seventeenth the Board of Directors adopted Resolution 2002-11 authorizing the District to enter into a Municipal Project Lease with Municipal Services Group in the amount of $1 ,000,000 for the construction of a new water storage tank; and WHEREAS, the project costs are now expected to be $1,500,000 requiring the District to increase the amount of the financing for construction of the project and thereby requiring a new resolution and new financing documents to be executed; and WHEREAS, the Board of Directors of the Truckee Donner Public Utility District has determined that a true and very real need exists for the construction of a new water storage tank described in the Municipal Project Lease and Option Agreement No. 1551 and the Ground Lease presented at this meeting; and WHEREAS, the Board of Directors has taken has taken the necessary steps under applicable law, including legal bidding requirements, to arrange for the construction of such Project; and WHEREAS, the Board hereby directs its legal counsel to review the new agreement and the ground lease and negotiate appropriate modifications to said documents so as to assure compliance with state law and local statutory law, prior to execution of the agreement and the ground lease by those persons so authorized by the District for such purposes; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: 1. The Board hereby rescinds Resolution 2002-11. 2 The Board finds that the terms of said agreement are in the best interests of the District for the construction of such Project and the Board designates and confirms the Board President and the District Clerk to execute and deliver, and to witness (or attest) respectively, the agreement and any related documents necessary for the consummation of the transactions contemplated by the agreement. 3. That the construction of the project, under the terms and conditions provided for in the agreement is necessary, convenient, in the furtherance of and will at all times be used in connection with the District's governmental and proprietary purposes and functions (except to the extent that subleasing of the Project is permitted under the terms of the Agreement) and are in the best interests of the District and no portion of the project will be used directly or indirectly in any trade or business carried on by any person other than a governmental unit of the State on a basis different from the general public. 4. The lessee covenants that it will perform all acts within its power which are or may be necessary to insure the maintenance of its legal status as being a duly organized and existing entity under the laws of the State, which status is the basis for the interest portion of the Rental Payments coming due under the Agreement to at all times remain exempt from federal income taxation under the laws and regulations of the United States of America as presently enacted and construed or as hereafter amended. 5. It is the intent of the District to be reimbursed from the proceeds of the Agreement approved herein for prior expenditures in the event that the District elects to disburse moneys from its own reserves for construction of the Project. Such declaration of official intent to be reimbursed is issued pursuant to Section 1 .103-18 of the Federal Income Tax Regulations. 6. The Board authorizes the General Manager to sign draw requests and acceptance certificates for the purposes of having Municipal Services Group make the necessary project payments from the escrow account. PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the fourth day of September, 2002 by the following roll call vote: AYES: NOES: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT Nelson Van Gundy, President ATTEST: Peter L. Holzmeister, District Clerk Agreement No.1551 MUNICIPAL PROJECT LEASE AND OPTION AGREEMENT Lessor: Municipal Services Gaup,Inc. 5125 S,Kipling Parkway,Suite 300 Littleton,CO 80127 Lessee: Truckee Donner Public Utility District P.O.Box 309 Truckee,CA 96161 This Municipal Project Lease and Option Agreement (the "Agreement')is entered into between Municipal Services Group, Inc., (together with any assignee thereof collectively referred to herein as"Lessor"),and the Truckee Donner Public Utility District("Lessee").a special district duly organized and existing under the laws of the State of California(the"State'). WITNESSETH: WHEREAS,Lessee desires to finance the design and construction of the Project(as herein defined)pursuant to the terns of this Agreement;and WHEREAS.Lessor desires to lease the Project to Lessee,and Lessee desires to lease the Project from Lessor,subject to the terns and conditions of and for the purposes set forth in this Agreement;and WHEREAS, Lessor,or its assignee, if any,simultaneously with the execution and delivery of this Agreement,shall enter into an escrow agreement(the "Escrow Agreement")with an escrow agent designated by Lessor or its assignee, if any, (the"Escrow Agent')whereby Lessor,or its assignee,if any,shall deposit monies sufficient to finance the Project,equipment,improvements,fixtures,and furnishings to be leased hereunder;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 and in consideration ofthe premises hereinafter contained,the parties hereby agree as follows: ARTICLE COVENANTS OF LESSEE Lessee represents,covenants and warrants,for the benefit of Lessor and its assignees,as follows: (a) Lessee is a special district duly organized and existing under the Constitution and laws of the State. (b) Lessee will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a body corporate and politic. (c) Lessee is authorized under the Constitution and laws of the State to enter into this Agreement,the Ground Lease between Lessor(as Ground Lessee thereunder)and Lessee(as Ground Lessor thereunder)and the transactions contemplated hereby and thereby,and to perforn all of its obligations hereunder and thereunder. (d) Lessee has been duly authorized to execute and deliver this Agreement and the Ground Lease under the terms and provisions of the ordinance or resolution of its governing body,attached hereto as Exhibit A,and by other appropriate official approval,and further represents and warrants that all requirements have been met,and procedures have occurred in order to insure the enforceability of this Agreement and the Ground Lease,and Lessee has complied with such public bidding requirements as may be applicable to this Agreement and the acquisition by Lessee of the Project hereunder. Lessee shall cause to be executed an opinion of its counsel substantially in the form attached hereto as Exhibit B. (e) During the term of this Agreement, the Project will be used by Lessee only for the purpose of performing one or more governmental or proprietary functions of Lessee consistent with the permissible scope of Lessee's authority and will not be used in a trade or business of any person or entity other than Lessee. (f) l he lease of the Project hereunder shall be evidenced by the Agreement,Exhibits and Ground Lease executed by Lessor and Lessee describing specific real property,and setting forth provisions relating to the rent, the term of lease, disposition of Project upon the expiration of the Lease Term(as defined below)and other details with respect to it. The lease of the Project shall become effective on the Accrual Date,as defined below,and the Payment Schedule for the Project shall specify such date as the effective date of the lease. The Lease Term shall commence on the Accrual Date as indicated therein and shall terminate as specified in Section 4,03 hereof. (g) During the period this Agreement is in force, Lessee will annually provide,if requested by Lessor,current financial statements,budgets,proof of appropriation for the ensuing fiscal year and such other financial information relating to the ability of Lessee to continue this Agreement as may be reasonably requested by Lessm or its assignee. (h) The useful life of the Project will be at least 120%of the Lease Term 1 (if The Project and the use thereof are in compliance with, and Lessee will maintain the condition of the Project so that it shall remain in compliance with,all applicable laws,statutes,ordinances,rules and regulations of any govemmental or quasi-governmental authority,specifically including without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental Response,Compensation and Liability Act,both as amended,and all other environmental protection or toxic waste or hazardous substance handling,treatment,storage or disposal laws,statutes,ordinances,rules and regulations, Lesseeagrees to provide Lessor with copies of any notifications of releases of oil or hazardous materials or substances or of any environmental hazards or potential hazards(each a"Release')which are given by or on behalf of Lessee to any federal,state or local agencies or authorities or which are received by Lessee from any federal, state or local agencies or authorities with respect to the Project. Such copies shall be sent to Lessor concurrently with their being mailed or delivered to the governmental agencies or authorities or within ten days after they are received by Lessee. Lessee agrees to provide Lessor with copies of all emergency and hazardous chemical inventory forms(hereinafter"notices")with respect to the Project previously given, as of the date hereof, to any federal, state or local governmental authority or agency as required pursuant to the Emergency Planning and Community Right-to-Know Act of 1986,42 U.S.C.A_ Section 1101 et, sea., and to provide Lessor with copies of all such Notices subsequently sent to any such govennnental authority or agency as required pursuant to the Emergency Planning and Community Right-to-Know Act of 19W Such copies of subsequent Notices shall be sent to Lessor concurrently with their being mailed to any such governmental authority or agency. Lessee hereby covenants and agrees to indemnify,protect and hold harmless Lessor and its successors and assigns from and against any and all claims, demands,liabilities and costs, including without limitation attorneys' fees, arising from (a) any 'Release" (as defined herein) or threat of a "Release," actual or alleged, or any "Hazardous Substances" (as defined herein) upon or about the Project or respecting any products or materials previously or now located upon, delivered to or in transit w or from the Project regardless of whether such release or threat of a release or alleged release or threat of a release has occurred prior to the date hereof or hereafter occurs and regardless of Whether such release or threat of a release or alleged release or threat of a release occur as the result of the negligence or misconduct of Lessee or any third party or otherwise,or(b)any violation,actual or alleged,of or any other liability under or in connection with any Environmental Law(as defined herein),upon or about the Project or respecting any products or materials previously or now located upon,delivered to or in transit to or from the Project,regardless of whether such violation or alleged violation has occurred prior to the date hereof or hereafter occurs and regardless of whether such violation or alleged violation occurs as it result of the negligence or misconduct of Lessee or any third party or otherwise. This warranty shall survive any temnination of this Agreement. ARTICLE 2 DEFINITIONS The following terms will have meanings indicated below unless the context clearly requires otherwise: "Acceptance Certificate"means the Acceptance Certificate attached hereto as Exhibit F relating to the Project whereby Lessee acknowledges acceptance of the Project, "Accrual Date"is tine date when lessee's obligation to pay rent accrues. The lease of the Project shall become effective on the Accrual Date,which shall be the Dated Date specified in Exhibit E hereto. "Acquisition Cost(s)"means the total cost of acquiring,including any delivery charges,and preparing the Project for Lessee's use, "Adjusted Base Interest Rate"means the Base Interest Rate as adjusted and as described in Exhibit E hereto. "Base Interest Rate"means the interest rate as set tomb in Exhibit E attached hereto. "Code"means the Internal Revenue Code of 1986,as amended,and all regulations proposed or promulgated thereunder. "Environmental Law" means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. if 9601 et seq, the Resource Conservation and Recovery Act,42 U.S.C.§ 9601 et seq.,the Hazardous Materials Transportation Act,49 U.S.C.§1 802 at seq.,the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act,33 U.S.C. § 1251 at seq.,the Clean Water Act,33 U.S.C. § 1131 et seq.,the Clean Air Act, 2 U.SC. § 7401 et seq.,and any other federal,state,county, municipal,local or other statute,law,ordinance,or regulation that may relate to or deal with the human health or the environment,all as may be from time to time amended. "Equipment"means the personal property described generally in Exhibit D to this Agreement as such may be modified in accordance with the terms hereof from time to time,together with any and all parts,accessories,additions and attachments thereto,modifications, repairs,replacements and parts thereof and substitutions therefor. "Ground Lease"means a Ground Lease between Lessee and lessor,substantially in the form attached hereto,pursuant to which Lessee has leased or will lease to Lessor the site of any Project or portion of a Project which constitutes real property or improvements thereto, as such Ground Lease may be amended, modified and supplemented from time to time. "Hazardous Substance" means (i) any dangerous, toxic or hazardous pollutant, contaminant, chemical, material or substance listed or identified in, or regulated by, any Environmental Law,(i9)any of the following, whether or not included in the foregoing: asbestos,area formaldehyde,polychlorinated biphenyis ("PCBs'), nuclear fuel or material,chemical waste, radioactive material, explosives, known carcinogens, and petroleum products and by-products; and (III) any "recognized em iroumental condition",as that term is defined by the American Society for Testing and Materials in its standards for environmental due diligence. "Lease Term"means the term of this Agreement from the Accord Date to the Termination Date. "Project means the Equipment and the Project Site. "Project Site'means the land described in Exhibit D hereto,which is the site on which the Project,improvements,fixtures,equipment and furnishings will be constructed and installed and which is the subject of the Ground Lease. "Purchase Price"means the amount that Lessee may,in its discretion,pay to Lessor in order to purchase the Project,as set forth in Exhibit E hereto. 2 "Rental Payments mean the rental payments payable by Lessee for the Project pursuant to the provisions of this Agreement during the Lease Term, payable in consideration of the right of Lessee to use the Project during the Lease Term. Rental Payments shall be payable by Lessee to Lessor or its assignee in the amounts and at the times during the Lease Term as set forth in the Exhibit E made a part of this Agreement. `Termination Date"means March 1,2017 or such other date as specified on Exhibit E attached hereto_ "Vendor/Contractor" means if the developer of the Project, if any.as well as the agents or dealers of the manufacturer/contractor from whom Lessee purchased m is purchasing the Project. ARTICLE 3 DEPOSIT OF MONIES;ACQUISITION AND LEASE OF PROJECT Section 3.01. spo t of Mo s Transfers Up2n Acceptance In the event an Escrow Agreement is entered into pursuant to this Agreement,Lessor,or its assignee,if any,shall cause to be deposited in the Acquisition Fund aeated under such Escrow Agreement and held by the Escrow Agent, the amount specified in the Exhibit E,Schedule of Payments. Upon the expiration of three years from the Accrued Date, unless notified earlier by Lessor and Lessee,the Escrow Agent shall apply any monies in the Acquisition Fund represernme the contract price to have been paid to the Vendods)/Contraculds)for any portion of the Project fin which Lessee has not executed an Acceptance Certificate to the reduction of the unpaid principal balance by paying such monies directly to Lessor. The remaining Rental Payments shall be amended to reflect such prepayment ofprincipal. Lessee shall execute a revised Exhibit E to acknowledge such change. Section 3.02. Lessee is Agent-Acq n`ro of the Proi,�t, Lessor hereby appoints Lessee as its agent solely for the purpose of acquiring the Project,and Lessee hereby accepts such appointment. Lessee and Lessor will do all things necessary to effect the acquisition of the Project free and clear of any encumbrances and subject the same to the leasehold interests contemplated hereunder. Lessor agrees to acquire the Project pursuant to Lessee's specifications. Lessor shall not be responsible for the obligations of Vendor/Contractors.and a failure by the Vandal slComractors to perform shall not affect Lessee's obligation to make Rental Payments under this Agreement. Lessee agrees that the Project will be acquired in accordance with the terms,conditions and specifications therefor and on file with Lessor. Upon completion of acquisition ofmc Project satisfactory to Lessee,Lessee shall deliver to the Escrow Agent an executed Acceptance Certificate. Section 3.03. Ea3 e of 4cgds tion Costs. Payment to the Vendon(s)/Contractods) of the Acquisition Cost(s) of acquiring the Project shall be made from the monies deposited with the Escrow Agent,as provided in Section 3.01.which shall be disbursed for that purpose in accordance with and upon compliance with the Escrow Agreement. Said funds shall be disbursed to the Vendors)/Contractor(s)at the direction of Lessee. in the event the amount specified in Section 3.01 to be deposited in the Acquisition Fund is insufficient to pay all Acquisition Costs,Lessee shall pay the remaining Acquisition Costs from its own funds. ARTICLE 4 LEASE TERM Section 4.01. Lease of Protect. Lessor hereby demises, leases, and lets to Lessee, and Lessee rents, leases, and hires from Lessor, the j) Equipment and (it)the Project Site and the improvements and fixtures of Lessee to the Project,and any equipment and furnishings,if any, thereon leased to the Lessor(as ground lessee)pursuant to the Ground Lease(the"Leased Premises"). in accordance with the provisions of this Agreement,to have and to hold for the Lease Tenn. Section 4.02. Commencement of Lease Term, The Lease Term shall commence on the Accrual Date and shall terminate as specified in Section 4.03 hereof. Section 4.03. Termination of Lease Term. The Lease Term will turnimate upon the earliest of any of the following events: (a) the expiration of the Lease Term on the Termination Date; (b) the exercise by Lessee of the option to purchase the Project granted under the provisions of Articles 9 or 11 hereof; (c) a Default by Lessee and Lessor's election to terminate this Agreement under Article 13;or (d) the payment by Lessee of all Rental Payments, late payment charges, past due finance charges, monies due to release liens of any kind whatsoever,or other taxes and utilities authorized or required to be paid by Lessee hereunder. ARTICLE 5 ENJOYMENT OF PROJECT Lessor hereby covenants to provide Lessee during the Lease Term with quiet use and enjoyment of the Leased Premises,and lessee shall during the Lease Term, peaceably and quietly have and hold and enjoy the Leased Premises, without suit, trouble or hindrance from Lessor, except as expressly set form in this Agreement. Lessor shall have the right at all reasonable times during business hours to enter into and upon the property site of Lessee for the purpose of inspecting the Project. ARTICLE 6 RENTAL PAYMENTS Section 6.01_ Rental Payments Constitute a Firm Obligation of Lessee. Lessor and Lessee understand and intend that the obligation of 3 Lessee to pay Rental Payments hereunder shall constitute a current expense of Lessee and shall not in any way be construed to be a debt of Lessee in contravention of any applicable constitutional or statutory limitations or requirements concerning the creation of indebtedness by Lessee, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or monies of Lessee. Rental Payments shall be in consideration of Lessee's use of the Equipment during the year in which such payments are due. Section 0.02. Payment of Rental Payments. Lessee shall pay Rental Payments exclusively from legally available monies from its general fund and such other legally available funds as may be designated by Lessee in lawful money of the United States of America to Lessor or,in the event of assignment by Lessor,to its assignee,in the amounts and no later than the dates set forth in Exhibit E hereto. In the event Lessor or its assignee does not receive Rental Payments within such period of time, then and in such event,a twenty-five dollar S25.00)late charge will be assessed plus finance charges based on the applicable unpaid Rental Payment amount at the rate equal to the lesser of(1)twelve percent(12%)or(2)the highest rate allowed by the laws of the State. Lessee agrees to charge rates, tolls, fees, and charges for use of the Project and other Enterprise Pond activity sufficient to pay Rental Payments and operating and maintenance expenses related to the Project. Section 6.03. bug est and Prit cp I C tmponents A portion of each Rental Payment payable hereunder is paid as,and represents payment of, interest, and the balance of the Rental Payment payable hereunder is paid as, and represents payment of,principal. Exhibit E hereto sets forth the interest component and the principal component of each Rental Payment during the Lease Term. Section 0.04, Rental Payments to be Unconditional. The obligations of Lessee to make payment of the Rental Payments required under this Article 6 and other sections of this Agreement,and to perform and observe the covenants and agreements contained herein,shall be absolute and unconditional in all events,except as expressly provided under this Agreement. Notwithstanding any dispute between Lessee and Lessor,any Vendor/Contractor.supplier,or any other person.Lessee shall make all Rental Payments when due and shall not withhold any Rental Payments, nor shall Lessee assert any right of withholding,set-off or counterclaim against its obligation to make such payments required under this Agreement. Lessee's obligation to make Rental Payments during the Lease Term shall not be abated through accident or unforeseen circumstances. ARTICLE 7 LEASEHOLD INTEREST;TITLE TO THE EQUIPMENT;SECURITY INTEREST Section 7.01. Leasehold(merest. Lessee agrees to execute such documents, including financng statements, deeds, affidavits, notices and similar instruments.in form satisfactory to Lessor,which Lessor deems necessary or appropriate to establish and maintain its leasehold interest in and to the Project Site and ill all additions,attachments,accessions,and substitutions thereto,and upon assignment,the interest of any assignees of Lesso4 in the Project. Section 7.02. Title to the Equipment. Dunne the term of this Agreement,title to the Equipmem and any and all additions,repairs,replacements or modif cations shall vest in Lessee, subject to the rights of Lessor hereunder. Following an event of default as set forth in Section 13.01 or upon termination of this Agreement for any reason other than Lessee's rights under Section 4,03 (a), re) or (c), title to the Equipment shall immediately vest in Lessor, and Lessee will reasonably surrender possession of the Equipment to Lessor. Section 7.03. Liens and Encumbrances to Title. During the Lease Term, Lessee shall not place or permit any liens or encumbrances to title on the Equipment or the Project Site not execute any lease,sublease,extension or lease,easement or other agreement granting any right of occupancy,use or possession with respect to the Equipment or the Project Site, Lessee shall promptly discharge any mechanics'or matenalmen's liens placed on the Equipment or the Project Site and shall cause any tenants occupying the Project promptly to discharge any such lien arising out of such use or occupancy. The obligation of Lessee under this Section shall survive the termination of this Agreement. Section 7.04. Security Interest. To secure the payment of all of Lessee's obligations under this Agreement, Lessee grants to Lessor a security interest constituting a first lien on the Project and on all additions,attachments,accessions and substitutions thereto,and on any proceeds therefrom. Lessee agrees to execute such additional documents, including financing statements, affidavits,notices and similar instruments, in form satisfactory to Lessor, and to pay all fees required to establish and maintain Lessor's security interest,and upon assignment,the security interest of any assignees of Lessor,in the Equipment. ARTICLE 8 MAINTENANCE;MODIFICATION;TAXES; INSURANCE AND OTHER CHARGES Section 8.01 Maintenance of Protect by Lessee Lessee agrees that at all times during the Lease Term,at Lessee's own cost and expense,to cause maintenance to be performed in such a way so as to make all necessary and proper repairs,replacements,and renewals of the Project as may from time to time be required and to maintain,preserve,and keep the Project in good repair,working order,and condition. To the extent of the provisions of this Agreement and except as may otherwise be agreed to,neither Lessor nor any of its assignees shall have responsibility in any of these matters,or for the making of improvements or additions to the Project;provided,however,if required by Lessor.Lessee will enter into such maintenance or management contracts for the Project as Lessor shall require. Section 8.02. Taxes Other Governmental Charges and Utilrt Charges The parties to this Agreement contemplate that the Project will be used for a govemmental or proprietary purpose of Lessee and therefore,that the Project will be exempt from all taxes presently assessed and levied with respect to personal or real property and from all sales,use or similar excise taxes. In the event that the use,possession or acquisition of the Project orally part of the Leased Premises is found to be subject to taxation in any form(except for income taxes of Lessor).Lessee will pay during the Lease Term,as the same respectively come due,all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed at levied against or with respect to the Project or any part of the Leased Premises and any equipment or other property acquired by Lessee in substitution for,as a renewal or replacement of,or a modification,improvement or addition to the Project or any par of the Leased Premises;as well as all gas,water,steam,electric.heat,power,telephone,utility,and other charges incurred in the operation,maintenance, use, occupancy, and upkeep of the Project or any par, of the Leased Premises; provided that, with respect to any governmental charges that may lawfully be paid in installments over a period of years.Lessee may elect to pay only such installments as have seemed during the time this Agreement is in effect. Section 8.03. Provisions Regardint,Insurance. At its own, expense. Lessee shall cause casualty, public liability, contractors general liability and builders risk,if applicable,and property damage insurance to be carried and maintained,m shall demonstrate to the satisfaction of Lessor that adequate self- insurance is provided based upon actuarial sound insurance criteria as are consistent with generally accepted insurance industry standards with respect to the Project, sufficient to protect the Full Insurable Value(as that term is hereinafter defined)of the Project,and to protect Lessor from liability in all events and which name Lessor and/or its assignee as additional insured and as a Lender Loss Payee thereunder. All insurance proceeds from casualty losses shall be payable as hereinafter movided in this Agreement. Lessee shall famish to Lessor Certificates evidencing such coverage throughout the Lease Term- 4 Lessee shall notify Lessor within five(5)business days of any event of damage to or destruction of the Project. The tens"Full Insurable Value"as used herein shall mean the full replacement value of the Project but in no event less than the then applicable Purchase Price. Any insurance policy Pursuant to this Section 8.03 shall be so written or endorsed as to make losses,if any,payable to Lessee and Lessor as their respective interests may appear. The Net Proceeds his defined in Section 9.01)of the insurance required in this Section 8.03 shall be applied as provided in Article 9 hereof. Each insurance policy provided lot in this Section 8.03 shall contain a paovisionto the effect that the insurance company shall not cancel the policy or modify it materially and adversely to the interest of Lessor without first giving written notice thereofto Lessor at least 30 days in advance of such cancellation. Section 8.04. Advances. I the event Lessee shall fall to maintain the fill] insurance coverage required by this Agreement or shall fail to keep the Project in good repair and operating condition,Lessor may(but shall be infidel no obligation to)purchase the required policies ofinsurance and pay the premiums on the same or may cause to be made such repairs or replacements as are necessary and provide fin payment thereof;and all amounts so advanced therefor by Lessor shall become additional rent for the Lease Term which amounts,together with interest thereon st the rate of 12%per annum.Lessee agrees to pay. Section 8.05. Tax Covenants. Lessee will not make or direct any use of the proceeds of the obligation provided herein or any other funds of Lessee which will cause such obligation to be an "arbitrage bond" within the meaning of Section 148 of the Code,to be "federally guaranteed" within the meaning of Section 149 of the Code,or to be a "private activity bond"within the meaning of Section 141 (a)of the Code. To that end,so long as any Rental Payments are unpaid, Lessee,with respect to such proceeds and such other funds,will comply with all requirements of such Code sections and all regulations of the United States Department of the Treasury issued thereunder to the extent that such requirements are,at the time.applicable and in effect. Furthermore,to the extent applicable pursuant to Section 148 (I)of the Code,Lessee covenants to complete or cause Io be completed all reporting requirements and rebate all required arbitrage income to the United States of America Lessee covenants that the Project will be used only for the purpose of performing one or more governmental or proprietary,functions of Lessee,and the Pullout will not be used in a trade or business of any person to entity other than Lessee on a basis different from the general public. Lessee will not use or permit the use of the Project by any person for a"private business use"within the meaning of Section 141 ho of the Code in such manner or to such extent as would result in the inclusion of interest received hereunder in gross income for federal income tax purposes under Section 103 of the Code. Lessor or its assignee(s)and Lessee shall at all times do and perform all acts and things permitted by law which are necessary or desirable in older to assure that the interest component of the Rental Payments will not be included in the loss income of Lessor or its assignee,if any,for federal income tax purposes. ARTICLE 9 DAMAGE,DESTRUCTION AND CONDEMNATION: USE OF NET PROCEEDS Section 9,01. Damage Destruction and Condemnation Unless Lessee shall have exercised its option to purchase the Project by making payment of the Purchase Price as provided herein,if prior to the termination of the Lease Term(a)the Project 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 Project or any pan thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any person,firm or corporation acting under governmental authority. Lessee and Lessor will cause the Net Proceeds(as defined below)of any insurance claim in condemnation awarded to be applied to the prompt repair,restoration,modification or improvement of the Project. Any balance of the Net Proceeds remaining after such work has been completed shall be paid to Lessee. For purposes of Section 8.03 and this Article 9,the tern'Net Proceeds'shall mean the amount remaining from the gross proceeds of any insurance claim or condemnation award after deducting all expenses(including aromeys fees)incurred in the collection ofsuch claim or award. Lessee hereby waives any rights to condemn or otherwise exercise any power of eminent domain with respect to the Project unless the proceeds of such condemnation shall be not less than the amounts necessary to pay the amount specified in Article 11 hereof. Section 9.02. Insu Fdciency ofNei Proceeds If the Net Proceeds are insufficient to pay in full the cost of any repair, restoration,modification or improvement refencd to in Section 9.01 hereof,Lessee shall,but only from funds available in the Enterprise Fund.either(a)complete the repair or replacement ofdamaged property and pay any costs in excess of the amount of Net Proceeds or(b) pay to Lessor the amount of the applicable Purchase Price,applying Net Proceeds to such payment. ARTICLE]0 DISCLAIMER OF WARRANTIES;VENDOR'S/CONTRACTOR'S WARRANTIES;USE OF THE PROJECT Section 10.01, Disclaimer of Warranties. LESSEE ACKNOWLEDGES THAT THE PROJECT IS IN GOOD ORDER AND CONDITION AND IS OF THE MANUFACTURE, DESIGN,AND CAPACITY SELECTED BY LESSEE,THAT LESSEE IS SA IISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSE, AND THAT FOR PURPOSES OF THIS AGREEMENT,LESSOR AND ITS ASSIGNEE(S) MAKE NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED WITH RESPECT TO THE PROJECT,INCLUDING WITHOUT LIMITATION,ITS VALUE,DESIGN,CAPACITY,CONDITION, MERCHAN FABILITY OR FITNESS FOR PARTICULAR PURPOSE OR FITNESS INTENDED FOR USE OF THE PROJECT.OR WARRANTY WITH RESPECT THERETO, AND LESSOR AND ITS ASSIGNEE(S)HEREBY DISCLAIM ALL SUCH REPRESENTATIONS AND WARRANTIES. In no event shall Lessor or its assignee, if any,be liable for any incidental.indirect, special or consequential damage in connection with or arising out of this Agreement or the existence,furnishing, ftmctioning or Lessee's use of any item,building,improvement,equipment,furnishings,orproducts or services provided form this Agreement. Section 10.02. Warranties. Lessor hereby irrevocably appoints Lessee its agent and anomey-in-fact during the Lease Term,so long as Lessee shall not be in Default hereunder,to assert from time to time whatever claims and rights,including warranties of the Project,which Lessor may have against the supplier, Contractor,or Vendor of the Project. Lessee's sole remedy for the breach of such warranty,indemnification or representation shall be against the supplier,Contractor or Vendor of the Project,and irm against Lessor m an assignee,if any,of lessor,nor shall such matter have any effect whatsoever on the rights and obligations of Lessor with respect to this Agreement.including the right to receive fit]]and timely payments hereunder. Lessee expressly acknowledges that an assignee,if any,of Lessor makes,and has made,no representation orwareanties whatsoever as to the existence or avarlability of such warranties of the Project. Section 10.03. Use of the Project. Lessee will not construct, install. use- operate or maintain the Project or cause the Project to be constructed, installed,used,operated or maintained improperly,carelessly,in violation chary applicable law or in a rotation contraryto that contemplated by this Agreement. Lessee 5 shall provide or cause to be provided all permits and licenses,if any,necessary,for the operation oft lie Project,provided,however,that Lessee may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not,in the opinion of Lessor,adversely affect the estate of Lessor in and to the Project or its interest or rights under this Agreement. Lessee shall notify Lessor within live 0)business days of receipt of actual or consnnchic notice if there are any claims or lawsuits arising in connection with the Project or use thereof. Section 10.04. Co nstmction of Proieci Lessee hereby represents that it has fee simple title to the Project Site,five and clear of all liens and encumbrances except those which are approved by Lessm,and hereby covenants that any improvements which may be constructed or installed thereon will be constructed and installed in accordance with all applicable laws and regulations. Lessee further covenants that all general contractors who perform any such work in connection with the Project shall be licensed and bonded,and such contractors will provide Lessee with a performance and payment bond equal to the total amount of said contractor's contract to construct or install the improvements and such certificates of insurance as may be required by this Agreement Lessee agrees that Lessor shall have the right at any time during regular business horns to enter onto the property for the purposes of observing the construction activity thereon. ARTICLE 11 OPTION TO PURCHASE Provided Lessee provides lessor with 30 days prior written notice, Lessee is hereby granted the option to prepay all or a portion of its obligations under this Agreement and purchase the Project for the Purchase Price set forth in Exhibit E hereto,plus the amounts set forth in this Article 11. At the request of Lessee, lessors leasehold interest in the Project will be terminated and this Agreement shall terminate: (a) at the end of the Lease'Iam,upon payment in full of all Rental Payments due hereunder,plus all past due charges and other amounts hereunder then due and owing,if any,or' (b) at any regularly scheduled payment due date by making the Rental Payment plus the corresponding Purchase Price as set forth in the Exhibit E.plus all past due charges and other amounts hereunder then due and owing,if any:or (c) at any time other than on a regularly scheduled payment due date by paying the preceding Purchase Price as set forth in the Exhibit E.plus accrued interest on the outstanding principal balance at the Base Interest Rate thereon to the date of settlement thereof,plus all past due charges and other amounts hereunder then due and owing,if any;or (d) if the Lease Term is terminated pursuant to Article 9 of this Agreement,in the event of total damage,destruction or condemnation ofthe Project or any portion thereof and,if lessee is not on such date in Defend under this Agreement,upon payment of the then applicable Purchase Price plus all past due charges and other amounts hereunder then due and owing,if any. ARTICLE 12 ASSIGNMENT,SUBLEASING,INDEMNIFICATION AND MORTGAGING Section 12.01. Assignment by Lessor. This Agreement,and Lessor's right to receive payments hereunder, may be assigned and reassigned in whole or in part to one or mole assignees or subassignees by Lessor at anytime subsequent to this execution,without the necessity of obtaining the consent of Lessee; provided, however, that no such assignment or reassignment shall be effective against Lessee unless and until (i) Lessee shall have received notice of the assignment or reassignment disclosing the name and address of the assignee or subassignee,and(it)in the event that such assignment c r reassignment is made to a bank or trust company as trustee for holders of certificates or other evidence representing interest in this Agreement,or rights to receive amounts hereunder,such bank or trust company agrees to maintain.or cause to be maintained on behalf of and as agent for Lessee,a book-entry system by which a record of the names and addresses of such holders as of any particular time is kept and agrees,upon request of Lessee,to furnish such information to Lessee. Upon receipt of notice of assignment,Lessee agrees to reflect in a book entry the assignee designated in such notice of assignment, and to make all payments to the assignee designated in the notice of assignment, notwithstanding any claim,defense,set-off or counterclaim whatsoever(whether arising from a breach of this Agreement or otherwise)that Lessee may from time to time have against Lessor,or the assignee. Lessee agrees to execute all documents,including notices of assignment and chattel mortgages or financing statements which may be reasonably requested by Lessor m its assignee to protect their interests in the Project and in this Agreement Section 12.02. No Sale Assign t r r Sub are.� This Agreement and the interest of Lessee in the Project may not be sold, assigned or encumbered by Lessee without the prior written consent of Lessor,which consent may be withheld in the total discretion of Lessor taking into account,among other things the treatment for federal income tax purposes of the interest component of the Rental Payments. Section 12.03. Release and Indemnification Covenants. Except tot the intentional or negligent acts of Lessor or any of its employees or agents thereof arising out of 1)entering into this Agreement,and/or 2)any liability,obligation,loss,claim or damage arising out of or in connection with any misstatement of a material fact or failure to make a statement of material fact by Lessor or any assignee thereof(other than a misstatement by Lessee)in connection with any offer,sale or other transfer of this Agreement or any interest herein,to the extent permitted by the laws and Constitution of the State,Lessee shall protect,hold harmless,and indemnify lessor from and against any and all liability,obligations,losses,claims and damages,regardless of cause thereof,and expenses in connection therewith,including,without ]imitation, counsel fees and expenses,penalties and interest arising out of or as the result of the entering into of this Agreement in connection with the ownership or intended ownership,delivery,rejection,storage or return of the Project or any accident in connection with the operation,use,condition,possession,storage or return of the Project resulting in damage to property or injury to or death to any person. Lessee's agreement to protect,hold harmless,and indemnity Lessor under this paragraph shall continue in fail]force and effect notwithstanding the full payment of all obligations tinder this Agreement or the termination of the Lease Term for any reason_ ARTICLE 13 EVENTS OF DEFAULT AND REMEDIES Section 13.01. Events of Default Defined. The following shall be"events of default"under this Agreement and the terms"Event of Default"and "Default"shall mean,whenever they are used in this Agreement,any one or more of the following events: (a) Failure by Lessee to pay any Rental Payment or other payment required to be paid hereunder at the time specified heroin; 6 (b) Failure by Lessee to observe and perform any covenant,condition or agreement on its pan to be observed or performed,other than as referred to in Section 13,01(a)or 13.01(c), for a period of 30 days after written notice,specifying such failure and requesting that it be remedied as given to Lessee by Lessor,unless Lessor shall agree in writing to an extension of such time prior to its expiration;provided, however, 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 deemed appropriate by Lessor in its sole discretion,is instituted by Lessee within the applicable period and diligently pursued until the Default is corrected; (c) Failure by Lessee to maintain insurance on the Project in accordance with Section 8,03 hereof,or (d) Initiation by Lessee of a proceeding under any federal or state bankruptcy or insolvency law seeking relief tinder such laws concerning its indebtedness. The foregoing provisions of this Section 13.01 are subject to,if by reason of force maiet re Lessee is unable in whole or in part to carry out its agreement on its parr herein contained,other than the obligations on the part of 1 essee contained in Article 6 and Section 8.03 hereof,Lessee shall not be deemed in Default during the continuance of such inability. The term "force majewe" as used herein shall mean,without limitation, the following: acts of God, strikes, lockouts or other industrial disturbances;acts of public enemies,orders at restraints of any kind of the government of the United States of America or of the state wherein Lessee is located m any of their departments,agencies or officials,orally civil or military authority;insurreetioas;riots;landslides;earthquakes:fires;stomas;droughts;floods;or explosions. Section 13.02. Remedies on Default. Whenever any Event of Default referred to in Section 13.01 hereof shall have happened and be continuing.Lessor shall have the light,at its sole option without further demand or notice,to take one or any combination of the following remedial steps: (a) Terminate this Agreement,enter onto the Project Site and retake possession ofthe Project wherever situated,without any court order or other process of law and without liability for entering the premises,and sell,lease,sublease or make other disposition of the Project and the Project Site for use over the term permissible under the Ground Lease in a commercially reasonable manner,and collect and retain any and all amounts which would have been payable by Lessee through the balance of the Lease Term hereunder,all for the account of Lessee;provided that Lessee shall remain directly liable for the deficiency,if any,between(i)the rent and other amounts due and payable by Lessee through the balance of the Lease Tema,and(it)the rent or other amounts paid by a lessee or sublessee of the Project pursuant to such lease or sublease during the same period of time,after deducting all costs and expenses,including reasonable attorneys'fees and expend incurred with respect to the recovery, repair and,forage of the Project during such period of time. (b) Proceed by appropriate court action to enforce performance by Lessee of the applicable covenants of this Agreement or to recover for the breach thereof,including the payment of all amounts due from Lessee hereunder. (c) Use or retake such portion of the Project as Lessor,in its sole discretion and as permissible under the Ground Lease,may decide. (d) With or without terminating this Agreement,declare all Rental Payments due or to become due to immediately become due and payable by Lessee, whereupon such Rental Payments shall be immediately due and payable. (a) Notwithstanding any othcr remedy exercised hereunder.Lessee shall remain obligated to pay to Lessor any unpaid portion of the Purchase Price. All of Lessee's right,title and interest in the Project,the possession of which is retaken by lessor upon the occurrence of an Event of Default(including,without limitation,warranties,guaranties or completion assurances applicable to such Project),shall terminate immediately upon such repossession. Section 13.03. Return of Project Upon an Event of Default. Lessee agrees to allow Lessor m recover the Project,the costs and expenses of which shall be additional amounts due to Iessorhereunder,at Lessee's sole cost and expense. Section 13.04, No Remedy Exclusive. No remedy herein conferred upon or reserved to Lesso'is intended to be exclusive and aya—every such remedy shall be cumulative and shall be in addition to every,other remedy given under this Agreement now or hereafter existing at law or in equity_ Any repossession or subsequent disposition or lease by Lessor of the Project shall not bar an action against Lessee fora deficiency,and the bringing of any action against or the entry of judgment against Lessee shall not bar Lessor's right to repossess the Project. No delay or omission to exercise any right o power accruing upon any Default shall impair any such right or power or shall be construed to be a waiver thereof,but any such right and power may be exercised from time to time and as often as may be deemed expedient. ARTICLE 14 MISCELLANEOUS Section 14.0L Notices. All notices. certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail,postage prepaid,to the parties at their respective places of business. Section 14.02. Bind no Effect This Agreement shall inure to the benefit of and slid]] be binding upon Lessor and Lessee and their respective successors and assigns. Section 14.03. Severabi]ity. 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,and the invalid or unenforceable provision shall be reformed and revised to be enforceable Lo the full extent permissible under the laws of the State. Section 14.04. Amendments. The terms of this Agreement shall not be waived, altered, modified, supplemented or amended in any manner whatsoever except by written instrument signed by Lessor and Lessee,nor shall any such amendment that affects the rights of Lessor's assignee be effective without such assignees consent Section 14.05. Execution in Counterparts This Agreement may be executed in several counterparts,each of which shall be an original and all of which shall constitute but one and the same instrument. Section 14.06. Aophcable Law. This Agreement shall be governed by and construed in accordance with the laws of the state of California. 7 Section 14,07, 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. 8 Section 14.08. Entire Agreement. This Agreement constitutes the entire agreement between Lessor and Lessee as to the matters herein described. No waiver, consent,modification, or change of terms of this Agreement shall bind either party, unless in writing signed by both parties,and then such waiver,consent, modification or change shall be effective only in the specific instance and for the specific purpose given. There are no understandings, agreements, representations or warranties,express or implied. not specified herein regarding this Agreement or the Project leased hereunder. Any tents and conditions of any purchase order or other document (with the exception of Supplements) submitted by Lessee in connection with this Agreement which are in addition to or inconsistent with the terms and conditions of this Agreement will not be binding on Lessm and will not apply to this Agreement. Lessee, by the signature below of its authorized representative acknowledges that it has read this Agreement,understands it,and agrees to be bound by its temu and conditions. IN WITNESS W HEREOF, Lessor has executed this Agreement in its corporate name and attested by its duly authonzed officers,and Lessee has caused this Agreement to be executed in its corporate name and attested by its duly authorized officers. This document is dated as of the.Accrual Date,whether or not executed as of such date. LESSEE:Truckee Donner Public Utility District By: Title: Date: STATE OF COUNTY OF On , 20 , before me PERSONALLY APPEARED of the Truckee Donner Public Utility District,and acknowledged the foregoing instrument to be his/her free act and deed in his/her said capacity and the free act and deed of the Truckee Donner Public Utility District. Notary Public Print Name Notary Expiration Date: _ LESSOR: Municipal Services Group,Inc. By. — -- ---- Title: Date: —__ STATE OF COUNTY OF On _ _, 20_, before me PERSONALLY APPEARED __ _ ______ _____ -__.__. of Municipal Services Group,Inc.,and acknowledged the foregoing instrument to be his/her free act and deed in his/her said capacity and the free act and deed of Municipal Services Group,Inc. Notary Public Print Name Notary Expiration Date: 9 EXHIBITS TO MUNICIPAL PROJECT LEASE AND OPTION AGREEMENT NUMBER 1551 Entered into as of September 1,2002,(the"Dated Date"). whether or not executed as of such date,by and between Lessor and Lessee,these Exhibits are made a part of Municipal Project Lease and Option Agreement Number 1551 and all terms and conditions of said Agreement with respect to Lessee's and Lessor's rights in the Project described in the Agreement are hereby incorporated. These Exhibits consist of: Exhibit A Resolution of Governing Body Exhibit B Opinion of Lessee's Counsel Exhibit C Certificate as to Arbitrage Exhibit D Description of Project and Project Site Exhibit E Schedule of Payments Exhibit F Acceptance Certificate Exhibit G Insurance Coverage Requirements Supplements: 8038-G IRS Filing Ground Lease LESSOR: Municipal Services Group,Inc. LESSEE: Truckee Donner Public Utility District By: By Title: Title: Date: Date: 10 RESOLUTION NO. 02� OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT RESCINDING RESOLUTION 2002-11 AND APPROVING A NEW AGREEMENT TO FINANCE THE CONSTRUCTION OF A NEW WATER STORAGE TANK WHEREAS, on April seventeenth the Board of Directors adopted Resolution 2002-11 authorizing the District to enter into a Municipal Project Lease with Municipal Services Group in the amount of $1,000,000 for the construction of a new water storage tank; and WHEREAS, the project costs are now expected to be $1 ,500,000 requiring the District to increase the amount of the financing for construction of the project and thereby requiring a new resolution and new financing documents to be executed; and WHEREAS, the Board of Directors of the Truckee Donner Public Utility District has determined that a true and very real need exists for the construction of a new water storage tank described in the Municipal Project Lease and Option Agreement No. 1551 and the Ground Lease presented at this meeting; and WHEREAS, the Board of Directors has taken has taken the necessary steps under applicable law, including legal bidding requirements, to arrange for the construction of such Project; and WHEREAS, the Board hereby directs its legal counsel to review the new agreement and the ground lease and negotiate appropriate modifications to said documents so as to assure compliance with state law and local statutory law, prior to execution of the agreement and the ground lease by those persons so authorized by the District for such purposes; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: 1. The Board hereby rescinds Resolution 2002-11. 2 The Board finds that the terms of said agreement are in the best interests of the District for the construction of such Project and the Board designates and confirms the Board President and the District Clerk to execute and deliver, and to witness (or attest) respectively, the agreement and any related documents necessary for the consummation of the transactions contemplated by the agreement. 3. That the construction of the project, under the terms and conditions provided for in the agreement is necessary, convenient, in the furtherance of and will at all times be used in connection with the District's governmental and proprietary purposes and functions (except to the extent that subleasing of the Project is permitted under the terms of the Agreement) and are in the best interests of the District and no portion of the project will be used directly or indirectly in any trade or business carried on by any person other than a governmental unit of the State on a basis different from the general public. 4. The lessee covenants that it will perform all acts within its power which are or may be necessary to insure the maintenance of its legal status as being a duly organized and existing entity under the laws of the State, which status is the basis for the interest portion of the Rental Payments coming due under the Agreement to at all times remain exempt from federal income taxation under the laws and regulations of the United States of America as presently enacted and construed or as hereafter amended. 5. It is the intent of the District to be reimbursed from the proceeds of the Agreement approved herein for prior expenditures in the event that the District elects to disburse moneys from its own reserves for construction of the Project. Such declaration of official intent to be reimbursed is issued pursuant to Section 1.103-18 of the Federal Income Tax Regulations. 6. The Board authorizes the General Manager to sign draw requests and acceptance certificates for the purposes of having Municipal Services Group make the necessary project payments from the escrow account. PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the fourth day of September, 2002 by the following roll call vote: AYES: NOES: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT Nelson Van Gundy, President ATTEST: Peter L. Holzmeister, District Clerk EXHIBIT B OPINION OF LESSEE'S COUNSEL (Letterhead of Lessee's Counsel) Date Municipal Services Group, Inc. 5125 S. Kipling Parkway, Suite 300 Littleton.CO 80127 Ladies and Gentlemen: As Counsel for the Truckee Donner Public Utility District("Lessee"), we have examined duly executed originals of the Municipal Project Lease and Option Agreement No. 1551 and the Ground Lease(collectively,the"Agreements')by and between Lessee and Municipal Services Group, Inc. ("Lessor"), the proceedings taken by Lessee to authorize and execute the Agreements together with the other related documents, and the Constitution and laws of the state of California(the"State") as presently enacted and construed. Based upon said examination and upon such other examination as we have deemed necessary or appropriate,it is our opinion that: 1. Lessee was duly organized and is validly existing under the Constitution and laws of the State as a political subdivision of the State. 2. The Agreements have been duly authorized, executed, and delivered by Lessee, pursuant to Constitutional, statutory and/or home rule provisions which authorized this transaction and the Resolution attached as Exhibit A to the Municipal Project Lease and Option Agreement. 3. The Resolution has been duly adopted and is a valid and binding obligation of Lessee. 4. The Agreements are legal,valid,and binding obligation of Lessee,enforceable in accordance with their terms. In the event Lessor obtains a judgment against Lessee in money damages, as a result of an Event of Default under the Municipal Project Lease and Option Agreement,Lessee will be obligated to pay such judgment. 5. Applicable public bidding requirements have been complied with. 6. To the best of my knowledge,no litigation is pending or threatened in any court or other tribunal,state or Federal,in any way questioning or affecting the validity of the Resolution or the Agreements. 7. The signatures of the officers of Lessee which appear on the Agreements are true and genuine: I know said officers and know them to hold the offices set forth below their names. 8. Lessee is a political subdivision within the meaning of Section 103 of the Internal Revenue Code and the related regulations and rulings and the portion of payments identified as interest charges to maturity, upon receipt, will not be includable in Federal gross income under statutes, regulations, court decisions and rulings existing on the date of this opinion and consequently,will be exempt from present Federal income taxes and income tax of the State of California This Opinion of Counsel may be relied upon by any assignee(s)of Municipal Services Group,Inc.. Attorney for Lessee Agreement No. 1551 EXHIBIT C CERTIFICATE AS TO ARBITRAGE 1, the undersigned officer of the Truckee Donner Public Utility District in the state of California (tire "Lessee") being the person duly charged, with others, with responsibility of issuing Lessee's obligation in the form of that certain Municipal Project Lease and Option Agreement '`lumbered 1551 (the "Agreement") by and between Lessee and Municipal Services Group, Inc. as lessor ("Lessor") HEREBY CERTIFY that: Capitalized terms used but not defined herein shall have the meaning provided in the Agreement. I. The Agreement was executed and delivered by Lessee under and pursuant to existing law to finance the construction of the Project as described in the Agreement. 2. Pursuant to the Agreement, Lessee is entitled to the use and possession of the Project in consideration for the obligations of Lessee under and pursuant to the Agreement. The Project will be used in furtherance of the public purposes of Lessee and only for the performance of one or more governmental or proprietary functions of Lessee consistent with the permissible scope of Lessee's authority. 3. Lessee does not intend to sell the Project during the term of the Agreement. Lessee will not receive any monies,funds or other "proceeds"as a result of the execution or delivery of the Agreement other than as described in Paragraph 6 hereof. 4. Lessee has not established any sinking fund from which it intends to make payment under the Agreement, and no monies are pledged in amounts equal to the required payments under the Agreement. No other monies,except as set forth in the Agreement, are pledged to the payments due under the Agreement or reasonably expected to be used to pay principal and interest payments due under the Agreement. 5. Lessee certifies that the Project (as defined in the Agreement)is or in be o«med and operated by Lessee and will not be used in the trade or business of any person on a basis different from the general public. 6. The proceeds to be derived from the Agreement by Lessor or its assignee on the date hereof($ )together with anticipated investment earnings thereon ($ ) are expected to pay the costs of the construction of the Project(S ) and the financing and legal costs with respect of the execution and delivery of the Agreement. The proceeds derived from the sale of an interest in rights to receive Rental Payments under the Agreement,together with anticipated investment earnings thereon, will not exceed the amount neccssary for the purpose of the Agreement. It is anticipated that the construction of the Project will proceed with due diligence to completion by and that all of the proceeds derived from the Agreement will be spent within the eighteen (18)months following the execution and delivery of the Agreement and this certificate. 7. Lessee has not received notice that its Certificate may not be relied upon with respect to its own issues, nor has it been advised that any adverse action by the Commissioner of Internal Revenue is contemplated. To the best of my knowledge,information,and belief the expectations herein expressed are reasonable and there are no facts, estimates or circumstances other than those expressed herein that would materially affect the expectations. LESSEE: Truckee Donner Public Utility District By: Title: Date: Agreement No.1551 EXHIBIT D DESCRIPTION OF PROJECT The Project which is the subject of the attached Municipal Project Lease and Option Agreement is as follows: Storage Project,to include: Grading and site work to accommodate new water storage tank Construction of a 1.5 million gallon water storage tank Construction of 2,000 feet of water transmission main Together with all additions,accessions and replacements thereto. The Legal Description of the'Project Site" is as follows: Together with all additions,accessions and replacements thereto. Lessee hereby certifies that the description of the Project set forth above constitutes an accurate description of the"Project", as defined in the attached Municipal Project Lease and Option Agreement. LESSEE: Truckee Donner Public Utility District By: Title: Agreement No. 1551 EXHIBIT E SCHEDULE OF PAYMENTS Page 2 of 2 Base Interest Rate: 5.78% U. S.Treasury Note Yield: 5.34% U. S.Treasury Note Index Percent: 108.24% Adjusted Base Interest Rate: Dated Date: September 1,2002 Termination Date: September 1,2017 Provided all documents have been returned in a form acceptable to Lessor within thirty (30) days of the Dated Date (the 'Period"), then the Base Interest Rate can remain in effect during the Period. In the event all documents have not been returned within the Period, in a form acceptable to Lessor,and/or if the U. S.Treasury Note Yield for a maturity comparable to the Lease Term increases significantly.Lessor reserves the right to adjust and determine a new Base Interest Rate(the"Adjusted Base Interest Rate")pursuant to the provisions hereof. The Adjusted Base Interest Rate shall be determined by multiplying the U. S. Treasury Note Yield for a maturity comparable to the Lease Term (as of the business day immediately preceding the receipt of the documents by Lessor)by the U.S.Treasury Note Index Percent. Such Adjusted Base Interest Rate shall be the applicable interest rate for the principal balance of the Project that is the subject of this Agt cement, and Lessor and Lessee shall execute a revised Exhibit E to this Agreement to acknowledge such change. LESSEE: Truckee Donner Public Utility District By: Title: EXHIBIT E SCHEDULE OF PAYMENTS Agreement No. 1551 DATED DATE: Sep 01_, 2002 Truckee Donner Public Utility Di5iri0t PMT PAYMENT PRINCIPAL INTEREST PURCHASE # DATE PAYMENT PORTION PORTION PRICE 1 1 - Mar-03 75,444.75 32,094.75 43,350.00 1,543,112,99 2 1 - Sep-03 75,444.75 33,022.30 42,422,46 1,506,246.06 3 1 - Mar-04 75,444.75 33,976.63 41,468.12 1,468,457.46 4 1 - Sep-04 76,444.75 34,958.56 40,486.19 1,429,724.15 5 1 - Mar-05 75,444.75 35,968.86 39,475.89 1,390,022.50 6 1 - Sep-05 75444.75 37,008.36 38,436.39 1,349,328.31 7 1 - Mar-06 75,444.75 38.077.90 37,366.85 1,307,616.77 8 1 - Sep-06 75,444.75 39,178,35 36,266.40 1,264,862.44 9 1 - Mar-07 75,444.75 40,3%61 35,134.14 1,221,039.25 10 - Sep-07 75,444,75 41,475.58 33,969.17 1,176,120.48 11 - Mar-08 75,444.75 42,674,23 32,770,52 1,130,078.74 12 1 - Sep-08 75,444.75 43,907.51 31,537.24 1,082,885.96 13 1 - Mar-09 75.444.75 45,176,44 30,268.31 1,034,513.36 14 1 - Sep-09 75,444.75 46,482.04 28,962.71 984,931.44 15 1 - Mar-10 75,444.75 47,825.37 27,619.38 934,109.97 16 1 - Sep-10 75,444.75 49,207.52 26,237.23 882,017.97 17 1 - Mar-11 75,444.75 50,629.62 24;815.13 828,623.67 18 1 - Sep-11 75,444.75 52,092.82 23,351,93 773,894,51 19 1 - Mar-12 75,44475 53,598.30 21,846A5 717,797.12 20 1 - Sep-12 75,444.75 55,147.29 20,297.46 660,297.30 21 1 - Mar-13 75,444.75 56,741.05 18,703.70 601,359.98 22 1 - Sep-13 75,444.75 58,380.86 17,063.89 540,949.23 23 1 - Mar-14 75,444.75 60,068.07 15,376,68 479,028.21 24 1 - Sep-14 75,444.75 61,804.04 13,640.71 415,559,16 25 1 - Mar-15 75,444.75 63,590.17 11,854.58 350,503,39 26 1 - Sep-15 75,444.75 65,427,93 10,016.82 283,821.22 27 1 - Mar-16 75,444.75 67,318.80 8125.95 215,472.00 28 1 - Sep-16 75,444.75 69,264.31 6,180.44 145,414.05 29 1 - Mar-17 75,444.75 71,266,05 4,178.70 73,604.65 30 1 - Sep-17 75,444.75 73,325.65 2,119.10 OA1 TOTAL 2,2632342,54 1,500,000.00 763,342.54 LESSEE: Truckee Donner Public Utility District BY: TITLE: Agreement No.1551 EXHIBIT F ACCEPTANCE CERTIFICATE The undersigned, as Lessee under the Municipal Project Lease and Option Agreement(the"Agreement') with Municipal Services Group, Inc. I"Lessor"), acknowledges receipt in good condition of the Project described in the Agreement this day of and certifies that Lessor has fully and satisfactorily performed all of its covenants and obligations required under the Agreement. Lessee confirms that it will commence payments in accordance with Article 6 of the Agreement or the provisions of the Exhibit E. The undersigned officer of Lessee hereby reaffirms in all respects the Certificate as to Arbitrage attached as Exhibit C to the Agreement, and represents that, to the best of his or her knowledge,information and belief,the expectations therein expressed were reasonable as of the Accrual Date on which they were made, and are reasonable as of this date, and that there were, and are as of this date, no facts, estimates or circumstances other than those expressed therein that would materially affect the expectations expressed therein. LESSEE: Truckee Donner Public Utility District By: Title: Agreement No.1551 EXHIBIT G INSURANCE COVERAGE REQUIREMENTS TO: Municipal Services Group, Inc. 5125 S.Kipling Parkway,Suite 300 Littleton,CO 80127 FROM: Truckee Donner Public Utility District R O.309 Truckee,CA 96161 SUBJECT: INSURANCE COVERAGE REQUIREMENTS 1. In accordance with Section 8.03 of the Municipal Project Lease and Option Agreement(the"Agreement"),we have instructed the insurance agent named below(please till in name,address and telephone number) to issue: a. All Risk Physical Damage Insurance on the leased Project(as defined in the Agreement)evidenced by a Certificate of Insurance and Long Form Loss Payable Clause naming Lessor"and/or its assigns" as Loss Payee. b. Public Liability Insurance evidence by a Certificate of Insurance naming"Lessor and/or its assigns" as an Additional Insured. Minimum Coverage Required: S1,000,000.00 general aggregate C. Business interruption insurance d. Contractor's general liability and builder's risk insurance OR 2. Pursuant to Section 8.03 of the Agreement,we are self-insured for all risk,physical damage,and public liability and will provide proof of such self-insurance in letter form together with a copy of the statute authorizing this form of insurance. 3. Proof of insurance coverage will be provided to Lessor prior to the time that the Project is constructed and/or delivered to us. LESSEE: Truckee Donner Public Utility District By: Title: GROUND LEASE This Ground Lease(the"Ground Lease"),dated as of September 1,2002,is entered into by and between the Truckee Donner Public Utility District, existing pursuant to the constitution and laws of the state of California,("District")as lessor, and Municipal Services Group,Inc. ("MSG"). as lessee: WITNESSETH WHEREAS, MSG intends to construct certain improvements on the real estate described in Exhibit A attached hereto and made a part hereof(the"Land"),The Land,the improvements,and the equipment located thereon or therein are sometimes hereinafter referred to as the"Project'; and WHEREAS. MSG intends to lease the improvements and equipment and sublease the Land to the District pursuant to a Municipal Project Lease and Option Agreement dated as of the date hereof(the"Agreement"). NOW,THEREFORE,IT IS HERESY MUTUALLY AGREED,AS FOLLOWS: Section 1. Lease. The District hereby leases to MSG,and MSG hereby rents and leases from the District the Land and all improvements, fixtures and equipment of the District located on the Land(the"Premises"),on the terns and conditions hereinafter set forth. Section 2. Term. The term of this Ground Lease shall commence as of September 1,2002. and shall end on September 1, 2032, unless such term is sooner terminated as hereinafter provided. Section 3. Rental. As and for rental hereunder and in full consideration for the leasing of the Land and the Premises to MSG,the receipt and sufficiency of which are hereby acknowledged by the District, MSG,or its assignee,if any,shall: (a) Simultaneously with the delivery of this Ground Lease,enter into the Agreement;and (b) Deposit funds in an Acquisition Fund(as defined in the Agreement)to pay costs of the construction and installation of the Project on the Land. Section 4. Owner in Fee. The District warrants that it is the owner of unencumbered fee title to the Land. Section 5. Assignments and Subleases. MSG,or its assigns, may assign its rights under this Ground Lease or sublet the Project without the written consent of the District (i) in connection with any assignment of its rights under the Agreement, (it) if the Agreement is terminated for any reason other than as described in Section 6 hereof,or(iii)if an"Event of Default" as defined in the Agreement has occurred. Section 6. Tennination. This Ground Lease shall terminate upon the completion of the term set forth in Section 2,provided however,in the event the District makes payment of the purchase price and other amounts due under the All cement or makes all of the rental payments provided for in Article VI of the Agreement and other amounts due under the Agreement and exercises the option to purchase MSG's interest in the Project pursuant to Article XI of the Agreement, then this Ground Lease shall be considered assigned to the District and terminated through merger of the leasehold interest with the fee interest if the District is the owner of the fee interest and elects to tentrinate the leasehold interest so acquired from MSG. MSG agrees,upon such assignment and termination or upon termination of this Ground Lease upon completion of the term set forth in Section 2, to quit and surrender the Project (except as provided in the following paragraph), and agrees that any permanent improvements and structures existing upon the Land at the time of the termination of this Ground Lease and any equipment described in the Agreement shall remain thereon and title thereto shall vest with the District. If an "Event of Default" under the Agreement shall occur and be continuing,MSG shall have the right to possession of the Project for the remainder of MSG's Lease Tenn and shall have the right to sublease the Project or sell its interest in the Project and this Ground Lease upon whatever terms and conditions it deems prudent,and the District shall recognize the assignee/purchaser as lessee hereunder. Section 7. Default. The District shall not have the right to exclude MSG from the Project or take possession of the Project(other than pursuant to the Agreement) or to terminate this Ground Lease prior to the expiration of its term upon any Default by MSG hereunder, except that if, upon the exercise of the option to purchase MSG's interest in the Project granted to the District in Section 11.01 of the Agreement and after the payment of the purchase price specified that ein and other sums payable under the Agreement. MSG fails to convey its interest in the Project to the District pursuant to said option,then the District shall have the right to terminate this Ground Lease, such termination to be effective thirty (30)days after delivery of written notice of such termination to MSG. Section 8. Quiet Enjoyment. MSG at all times during the term of this Ground Lease shall peaceably and quietly have,hold and enjoy all of the Project, and shall have the right to assign this Ground Lease and,following termination of the Agreement(other than following the exercises of the District's option to purchase)to sublease the Project. Section 9. Taxes. The District covenants and agrees to pay any and all assessments of any kind or character and also all taxes levied or assessed upon the Land or any part of the Premises. Section 10, Waiver of Personal Liability. All liabilities under this Ground Lease on the part of MSG are solely corporate liabilities of MSG as a corporation, and, to the extent permitted by law, the District hereby releases each and every incorporator,member,director and officer of MSG of and from any personal or individual liability under this Ground Lease. No incorporator,member,director or officer of MSG shall at anytime or under any circumstances be individually or personally liable under this Ground Lease for anything done or omitted to be done by MSG under the provisions of this Section 10. The Land and the use thereof are in compliance with,and MSG will maintain the condition of the Land so that it shall remain in compliance with, all applicable laws, statutes, ordinances, rules and regulations of any governmental or quasi-governmental authority, specifically including without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act, both as amended, and all other environmental protection or toxic waste or hazardous substance handling treatment,storage or disposal laws,statutes, ordinances,rules and regulations. The District agrees to provide MSG with copies of any notifications of releases of oil or hazardous materials or substances or of any environmental hazards or potential hazards(each a"Release')which are given by or on behalf of the District to any federal,state or local agencies or authorities or which are received by the District from any federal,state or local agencies or authorities with respect to the Land. Such copies shall be sent to MSG concurrently with copies being mailed or delivered to the governmental agencies or authorities or within ten days after they are received by the District. The District agrees to provide MSG with copies of all emergency and hazardous chemical inventory forms (hereinafter "Notices") with respect to the Land previously given, as of the date hereof,to any federal, state or local governmental authority or agency as required pursuant to the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S,C.A. Section 1101 et. se and to provide MSG with copies of all such Notices subsequently sent to any such governmental authority or agency as required pursuant to the Emergency Planning and Community Right-to- Know Act of 1986. Such copies of subsequent Notices shall be sent to MSG concurrently with their being mailed to any such governmental authority or agency. The District hereby covenants and agrees to indemnify,protect and hold harmless MSG and its successors and assigns from and against any and all claims, demands, liabilities and costs,including without limitation attorneys'fees,arising from(a)any "Release" (as defined above)or threat of a"Release," actual or alleged,or any"Hazardous Substances" (defined as"(i)any dangerous,toxic or hazardous pollutant,contaminant,chemical, material or substance listed or identified in, or regulated by, any Environmental Law, (ii) any of the following, whether or not included in the foregoing: asbestos, area formaldehyde, polychlorinated biphenyls ('PCBs"), nuclear fuel or material, chemical waste, radioactive material, explosives,known carcinogens, and petroleum products and by-products;and(iii) any"recognized environmental condition",as that term is defined by the American Society for Testing and Materials in its standards for environmental due diligence") upon or about the Land or respecting any products or materials previously or now located upon, delivered to or in transit to or from the Land regardless of whether such release or threat of a release or alleged release or threat of it release has occurred prior to the date hereof or hereafter occurs and regardless of whether such release or threat of a release or alleged release or threat of a release occurs as the result of the negligence or misconduct of the District or any third party of otherwise, or(b) any violation, actual or alleged,of or any other liability under or in connection with any Environmental Law(defined as "the Comprehensive Environmental Response, Compensation and Liability Act,42 U.S.C. §9601 et seq.,the Resource Conservation and Recovery Act,42 U.S.C.§ 9601 or seq.,the Hazardous Materials Transportation Act,49 U.S.C.§1 802 at seq.,the Toxic Substances Control Act, 15 U.S.C. §2601 at seq.,the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Clean Water Act,33 U.S.C. § 1131 et seq.,the Clean Air Act, 2 U.S.C. § 7401 at seq., and any other federal, state,county,municipal,local or other statute,law,ordinance,or regulation which may relate to or deal with the human health or the environment, all as may be from time to time amended"), upon or about the Land or respecting any products or materials previously or now located upon, delivered to or in transit to or from the Land, regardless of whether such violation or alleged violation has occurred prior to the date hereof or hereafter occurs and regardless of whether such violation or alleged violation occurs as a result of the negligence or misconduct of the District or any third party or otherwise. This agreement shall survive any termination of this Ground Lease. Section 11. Eminent Domain. In the event the whole or any part of the Land is taken by eminent domain proceedings, the interest of the Land shall be recognized; the proceeds of said condemnation to be applied as provided in the Agreement. The District agrees, to the extent lawful, that it shall not exercise any rights of eminent domain with respect to the Project. Section 12. Leaseback to the District Term Rental Contemporaneously herewith MSG and the District will execute the Agreement whereby MSG subleases back to the District and the District subleases from MSG the Premises,and MSG leases to the District and the District leases from MSG the Project and the Premises in accordance therewith. Title to the Premises shall remain with the District at all times. The Agreement between the parties includes the option of the District, upon payment of the purchase price,to purchase MSG's interest in the Project. Section 13. Partial Invalidity. If any one or more of the terms,provisions,covenants or conditions of this Ground lease shall to any extent be declared invalid, unenforceable,void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Ground Lease shall be affected thereby, and each provision of this Ground Lease shall be valid and enforceable to the fullest extent permitted by law. Section 14. Notices. All written notices to be given under this Ground Lease shall be given by mail to the party entitled thereto at its address set forth in the Agreement,or at such address as the party may provide to the other party in writing from time to time. Any such notice shall be deemed to have been received 48 hours after deposit in the United States mail in certified form,with postage fully prepaid. Section 15. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Ground Lease. Section 16. Applicable Law. This Ground Lease shall be governed by and construed in accordance with the laws of the state of California. Section 17. Execution. This Ground Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same Ground Lease. It is also agreed that separate counterparts of this Ground Lease may separately be executed by MSG and the District. Section 18. Successors. This Ground Lease shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including the holder of any mortgage,deed of trust,security or other interest granted by MSG in the Project or its leasehold interest in the Land. IN WITNESS WHEREOF, the Truckee Donner Public Utility District and Municipal Services Group, Inc.have caused this Ground Lease to be executed by their respective officers thei eunto duly authorized,all as of the date and year first above written. Truckee Donner Public Utility District By: Title: Date: STATE OF COUNTY OF On . 20 , before me PERSONALLY APPEARED _ of the Truckee Donner Public Utility District,and acknowledged the foregoing instrument to be his/her free act and deed in his/her said capacity and the free act and deed of the Truckee Donner Public Utility District. Notary Public Print Name Notary Expiration Date: Municipal Services Group,inc. By: Title: Date: STATE OF COUNTY OF On 201 before me PERSONALLY APPEARED of Municipal Services Group, Inc., and acknowledged the foregoing instrument to be his/her free act and deed in his/her said capacity and the free act and deed of Municipal Services Group,Inc. Notary Public Print Name Notary Expiration Date: EXHIBIT A TO GROUND LEASE LAND