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HomeMy WebLinkAboutOrdinance - 2002-O0033 - Interest Rate Hedge Agreement; Waterworks Revenue Refunding Bonds Series 2005 - 03/28/2002r - r, ~; \I l!""!l ' r"'l -' ~ !"""' -~ - r -l L -L ,, - TRANSCRIPT OF PROCEEDINGS RELATING TO INTEREST RATE HEDGE AGREEMENT IN CONNECTION WITH CITY OF LUBBOCK, TEXAS, Document Certified Ordinance Hedge Agreement WATERWORKS REVENUE REFUNDING BONDS, SERIES 2005 ISDA Master Agreement Schedule to the Master Agreement ISDA Credit Support Annex Paragraph 13 to Credit Support Annex Confirmation Certificate(s) of Corporate Authority and Signature Identification of JPMorgan Chase Bank Report of Certified Public Accountant General Certificate Signature and No-Litigation Certificate Attorney General's Opinion and Comptroller's Registration Certificate Opinion of Bond Counsel Opinion of JPMorgan Chase Bank Counsel #45087907v2< Tab 1 2 3 4 5 "6 7 8 9 1 ,.... ! - ,... 1 - CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § § § § § COUNTY OF LUBBOCK CITY OF LUBBOCK I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 111hdayof April, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY" COOKE VICTOR HERNANDEZ T. J. PATTERSON DAVID NELSON FRANK W. MORRISON MARC McDOUGAL ) ) ) ) ) ) MAYOR MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: Mon~ Mc..O~' ----------. Among other business considered at said meeting, the attached ordinance entitled: "AN ORDINANCE AUTHORIZING AN INTEREST RATE HEDGE AGREEMENT; PROVIDING FOR PAYMENTS THEREUNDER BY A LIEN ON AND PLEDGE OF THE NET REVENUES OF THE CITY'S WATERWORKS; ENACTING OTHER PROVISIONS INCIDENT THERETO; AND PROVIDING AN EFFECTIVE DATE." was introduced and submitted to the Council for passage and adoptionA After presentation and due consideration of the ordinance, and upon a motion being made by l-ex '~'l" Cooke and seconded by fccm \. W. MUI'Yv,un , the ordinance was finally passed and adopted by the Council to be effective immediately by the following vote: voted "For" 0 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City #45087809v2< - - - on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 1 fh day of April, 2002. ~~.L<Q.~- citYecretary, City of Lubbock, ~xas (City Seal) #45087809v2< -2- - - - - - - - 45081402.7 CITY OF LUBBOCK, TEXAS ORDINANCE NO. 2002-00033 Adopted Aprilll, 2002 Authorizing: AN INTEREST RATE HEDGE AGREEMENT RELATED TO WATERWORKS REVENUE REFUNDING BONDS, SERIES2005 - - RECITALS SECTION 1. SECTION2. SECTION 3. SECTION 4. SECTION 5. SECTION6. SECTION7. SECTION 8. SECTION9. SECTION 10. SECTION 11. SECTION 12. SECTION 13. SECTION 14. SECTION 15. SECTION 16. SECTION 17. SECTION 18. SECTION 19. SECTION20. SECTION21. SECTION22. SECTION23. SECTION24~ TABLE OF CONTENTS .......................................................................................................................... 1 Definitions; Meanings .•......•.....•...•.........•...••••.•..•..••.•.••••..•••..•.•••.....•..••..••...••. 2 Authorization of Hedge Agreement ................................................................ 4 Pledge of Net Revenues •••..••••••••.••.•..••.•..•..••..••••••.••....•••....•.••..•••••••.•....•••.••.•••• 5 Funds and Accounts •....•.•.•..•.•••..•••.•......•.•.•...•.••....••••..•..•.•..•.•..••••.....•••.•..•••••. 6 Termination of Hedge Agreement .................................................................. 6 Rate Covenant .•...••.••..•....••••.•••••.•.••••.•.••.••.••••.••.••••..• -•••••••••..•••...••••..••.•••••..•••••• 6 Operation and Maintenance of System ........................................................... 7 Title •......•••...••••.••••..•..•••....••••..•...•••......•••.....•••...•.•..•••.......••....••.•..•..•••..•.•...•••••. 7 Liens ....•..•...•••••.....•••..••.••.•...•.••.••....•.•••..•••...•••••..•••..•.•••••...••••..•.•.•.•.•••...•••••...•• 7 No Free Senice •••....•••.••.•.•.•••..•...•••.•...••.•.••.•..•••••...•.••.•..•.••.•......•••....•.•••..•.•.•.. 7 Disposition of System Property .•••....•••....••...•.•••..•••.••..••••...•....•...•...••.....••••..... 8 System Accounting •••••....••••...•••..•.••••.•.•.....•.•..•..•••.....•.•..••..•.•••••••••••.•..•••.•....•.. 8 Insurance ...••.••.••.•••..•.••••....•••.••••.... ~ •••...••••....•••.•.•••..•.•..••..•.•••..••••.••.••.•.•••..•••••. 8 Audits .....•.........•..••....•••.....••....•.•..•••.•...••.....•••..•.••...••.••..•.•....•.•..••••..••••••••••••.•.• 8 Governmental Approvals ....•..•••...•.•••.......••.•.•....•••.....••..•..•••••.•..••••••.•..•••••.•••.• 9 Rights of Inspection ••••.•.••.•••••••..••.••••..•.••••....••••.••.••••.••.••••....••..••••...••••••.•••••••• 9 Ordinance a Contract; Amendment; Subrogation ........................................ 9 Inconsistent Provisions .•.•••...•••••.••••••.•••..••••••..•••••...•••.•..•.•..•••.••.••••.•.•••••••••••..• 9 Governing Law .•.•••...•••••...•••.•••.••.•.••••...•••••..••••••••••.••••••..•••••..•••••••••••••••••••••••••• 9 Severability .•••.••••••••••••.••••• ,. ••••••••••••••.•••••...•••••••••••••••••••.••.•••.••••••••••••••.•••..••••.•.. 9 Incorporation of Preamble Recitals •••••.••..•••••••.•••.••.•••.•••.•••••.•••.••••••.••••••...•••. 9 Public Meeting ••••....••.•.•.....••.•.•...•••..•.•.••..•••...••••...••••••..•••••••••.••••••...•••.•.••••.•••• ·9 Furlher Proceedings •••••...•••••.••••••••••...••••••..•••.•.••••••.••••.•..••.••.••••••••••••••••••.•.•• 10 Effective Date .•.••.•.•••••...••••..•••••••.•••••••••••.••••.••••••••••••••••.••.•••••••...•••.••.••.••••••..• 10 -ADOPTION CLAUSE ................................................................................................................. tO EXHIBIT A EXHIBITB FORM OF ISDA MASTER AGREEMENT, SCHEDULE, AND CONFIRMATION SCHEDULE OF NOTIONAL AMOUNTS -' -! f - - ORDINANCE NO. 2002-__ AN ORDINANCE AUTHORIZING AN INTEREST RATE HEDGE AGREEMENT RELATED TO WATERWORKS REVENUE REFUNDING BONDS, SERIES 2005; PROVIDING FOR PAYMENTS THEREUNDER BY A LIEN ON AND PLEDGE OF THE NET REVENUES OF THE CITY'S WATERWORKS; ENACTING OTHER PROVISIONS INCIDENT THERETO; AND PROVIDING FOR AN EFFECTIVE DATE WHEREAS, pursuant to a Water Supply Agreement, dated as of May 11, 1989 (herein referred to as the "Agreement"), by and between the City of Lubbock, Texas (herein referred to as the "City") and the Brazos River Authority (herein referred to as the "Authority"), certain revenue bonds of the Authority were issued and sold to finance the construction of surface water supply facilities known as Lake Alan Henry (herein referred to as the "Project"); and WHEREAS, the currently outstanding revenue bonds of the Authority issued for the Project are identified as follows: "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995", dated June 1, 1995, aggregating in principal amount $50,355,000, and scheduled to mature on August 15 in the years 2002 through 2015 and 2021 (herein referred to as the "BRA Bonds"), of which $40, 465,000 are scheduled to remain outstanding on August 15, 2005 (the obligations of the City to pay debt service on the BRA Bonds pursuant to the Agreement being herein referred to as "Refunded Obligations"); and WHEREAS, in accordance with the terms of the Third Amendment to the Water Supply Contract, dated as of August 6, 2001, the City at any time may deposit with the Authority, or its authorized escrow agent, an amount sufficient to fully pay and discharge the BRA Bonds, and if such prepayment results in the defeasance of such outstanding obligations, the City may elect to assume operation of the Project at any time by written notice to the Board of Directors of the Authority; and WHEREAS, the City intends to issue variable interest rate revenue bonds of the City's waterworks system (herein referred to as the "Bonds") under and pursuant to authority conferred by the laws of the State of Texas, including Chapters 1207, 1371, and 1502, Texas Government Code, in aggregate principal amount and amortizing as described in Exhibit B hereto to prepay and refund the Refunded Obligations under the Agreement, including making provision for full and complete payment of the BRA Bonds under the terms of their authorizing proceedings, on or around or up to 90 days preceding August 15, 2005, when the BRA Bonds may be redeemed at the option of the Authority; and WHEREAS, in order to hedge against possible increases in the rate of interest to be borne by the Bonds, the City Council of the City has determined to enter into an interest rate hedge agreement in connection with and in anticipation of issuance of the Bonds pursuant to the provisions of Chapter 1371, as amended, Texas Government Code; and WHEREAS, no obligations of the City payable from or secured by a lien on or pledge of the gross or net revenues of the City's waterworks are now outstanding except those certain Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999 and Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 1999 and 2002 (herein referred to as the "Junior Obligations") and Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993, 1995, 1998, and 1999 (herein referred to as the "Subordinate Obligations"); in the ordinance of the City Council of the City authorizing the Junior Obligations and the Subordinate Obligations, respectively, the City reserved the right to issue bonds and other obligations (if similar to bonds, in the case of the Junior Obligation ordinances) of the City payable from and secured by a lien on and pledge of net revenues of the waterworks of the City that is prior and superior in claim, rank, and dignity to the respective liens on 45081402.7 -1- r - -' - - - and pledges of such net revenues securing the Junior Obligations and the respective Subordinate Obligations; and the City Council of the City has found and determined, and does hereby find and determine, that the scheduled obligations of the City authorized hereby to be payable from and secured by a lien on and pledge of the Net Revenues (as herein defined) are bonds or obligations similar to bonds; and WHEREAS, the City Council of the City hereby finds and determines that the action authorized hereby is in the best interest of the City and its inhabitants in that such action is expected to result in savings in expenses of operating the Project that will exceed any increase in net debt service requirements that may result from issuing the Bonds and entering into the hedge agreement authorized hereby; NOW, THEREFORE, BE IT ORDAINED BY THE CITY OF LUBBOCK, TEXAS, THAT: SECTION 1. DeDnitions; Meanings. For all purposes of this Ordinance, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Section have the meanings assigned to them in this Section, certain terms defined in other sections of and the preamble to this Ordinance have the meanings assigned to them in such sections and preamble, and all such terms include the plural as well as the singular; all references in this Ordinance to designated "Sections", "Exhibits", and other subdivisions are to the designated Sections, Exhibits, and other subdivisions of this Ordinance as originally adopted, all such exhibits being hereby incorporated herein for all purposes; and the words "herein", "hereof, and "hereunder'' and other words of similar import refer to this Ordinance as a whole and not to any particular Section or other subdivision. The Section headings herein are for convenience only and shall not affect the construction hereof. All accounting terms not otherwise defined herein have the meanings assigned to them, and all computations herein provided for shall be made, in accordance with generally accepted accounting principles. All references herein to "generally accepted accounting principles" refer to such principles as they exist on the date of applicability thereof. "Annual Debt Service Requirements" means, for any fiscal year of the City, the principal of and interest and other sums payable by the City on all Parity Obligations (or that could come due on demand of the owner thereof, other than any Termination Obligation under the Hedge Agreement or any comparable obligation under any future interest rate hedge agreement or any amount due by acceleration or other demand conditioned upon default by the City, or could be payable in respect of any required purchase thereof by the City) in such fiscal year, and, for such purposes, any one or more of the following rules shall apply at the election of the City: (1) Committed Take Out. If the City has entered into a credit agreement with a bank, insurance company, or other financial institution committing it to lend or otherwise advance funds to the City to pay Parity Obligations, then such payments on the Parity Obligations may be excluded from such calculation, in which case the principal of and interest on the loan or reimbursement obligation that would arise upon any such advance shall be added in the fiscal years when due. (2) Balloon Debt. If the amount (including the accretion of interest resulting from original issue discount or compounding of interest) of any series or issue of Parity Obligations due (or payable by reason of any required purchase of such Parity Obligations by the City) in any fiscal year is either (a) equal to 25% or more of the total amount (including the accretion of interest resulting from original issue discount or compounding of interest) of such Parity Obligations or (b) exceeds by more than 50% the greatest amount of such Parity Obligations due in any preceding or succeeding fiscal year (such principal due in such fiscal year for such Parity 45081402.7 -2- I!""' r t;,.:t -• -t -' ; - Obligations being referred to herein as "Balloon Debt"), the amount of such Balloon Debt taken into account during any fiscal year shall be equal to the debt service calculated using the original amount of such Balloon Debt amortized over no more than 30 years from the date of calculation on a level debt service basis at an assumed interest rate equal to the rate borne by such Balloon Debt on the date of calculation or the rate specified in Clause ( 4) of this definition. (3) Prepaid Debt. Payments of Parity Obligations, or portions thereof, payable from capitalized interest, accrued interest, and amounts deposited or set aside in trust for the payment thereof with a. financial institution shall not be included in the computation of the Annual Debt Service Requirements for any fiscal year. (4) Variable Rate. As to any Parity Obligation that bears interest (or is payable in amounts calculated) at a variable interest rate which cannot be ascertained at the time of calculation of the Annual Debt Service Requirements and for purposes of Clause (2) of this definition, at the option of the Issuer, either (a) an interest rate equal to the average rate borne by such Parity Obligation (or by comparable debt in the event that such Parity Obligation has not been outstanding during the preceding 24 months) for any 24-month period ending within 30 days prior to the date of calculation, or (b) an interest rate equal to the 30-year Tax-Exempt Revenue Bond Index (as most recently published in The Bond Buyer), shall be presumed to apply for all future dates, unless such index is no longer published in The Bond Buyer, in which case an index of tax-exempt revenue bonds with maturities of 20 years or more published in a financial newspaper or journal with national circulation may be used for such purpose. (5) Hedge Agreements. If the City has entered into an interest rate swap, collar, cap, or other financial hedge transaction in connection with a Parity Obligation, then payments due to the City thereunder in any fiscal year may be subtracted in calculating Annual Debt Service Requirements, determined in accordance with Clause (4)(a) of this definition, provided that the long-term unsecured obligations of the counterparty or any guarantor of its obligations thereunder are then rated by a nationally recognized credit rating service at least as high as the obligations of the City secured by a first lien on the Net Revenues, determined without regard to credit enhancement. "Bonds" has the meaning stated in the recitals to this Ordinance. "City" has the meaning stated in the recitals to this Ordinance. "Consultant" means a person or entity recognized as having expertise and having a favorable reputation for special skill and knowledge in the operations and financing of municipal waterworks similar in size to the System. "Gross Revenues" means all revenues, income, and receipts received by the City from the operation or ownership of the System, including amounts received by the City pursuant to the Hedge Agreement or any similar agreement entered into in connection with obligations payable from revenues of the System and also interest income and earnings from the investment or deposit of money in any fund or account created pursuant to the Ordinance or maintained by the City in connection with the System, but excluding refundable meter or service deposits, restricted gifts and grants in aid of construction, impact fees charged pursuant to Chapter 395, Texas Local Government Code, and amounts transferred by the City to its General Fund in accordance with the provisions of the Ordinance. "Hedge Agreement" has the meaning stated in Section 2. "Junior Obligations" has the meaning stated in the recitals to this Ordinance. 45081402.7 -3- r ~ . . t;.: r - "Net Revenues" means Gross Revenues less Operating Expenses. "Operating Expenses" means all reasonable and necessary expenses directly related and attributable to the operation or maintenance of the System, including the cost of insurance, materials, labor, salaries, repairs and extensions necessary to provide efficient service, but excluding depreciation and amortization, provided that expenses for repairs to or extension of the System shall be included in Operating Expenses only if, in the judgment of the City Council of the City, the repair or extension is necessary to keep the System in operation and provide adequate service to the City and its residents or to respond to a physical accident or condition that would otherwise impair the Parity Obligations. "Ordinance" shall mean this ordinance adopted by the City Council of the City. "Parity Obligations" means the Hedge Agreement (excluding the Termination Obligation) and all bonds, notes, certificates of obligation, credit agreements (as defined in Section 1371.001, Texas Government Code, as amended to the date of incurrence thereof), and other obligations of the City hereafter lawfully issued or incurred and secured by a lien on the Net Revenues in accordance with the provisions of Section 3B equally and ratably with the lien granted by this Ordinance to secure payment of the Hedge Agreement (excluding the Termination Obligation). ''Prudent Utility Practice" means any of the practices, methods, and acts, in the exercise of reasonable judgment in the light of the facts (including but not limited to the practices, methods, and acts engaged in or approved by a significant portion of the public utility industry prior thereto) known at the time the decision was made, would have been expected to accomplish the desired result at reasonable cost consistent with reliability, safety, and expedition. "Prudent Utility Practice" is not limited to the optimum practice, method, or act at the exclusion of all others, but rather is a spectrum of possible practices, methods, or acts which could have been expected to accomplish the desired result at reasonable cost consistent with reliability, safety, and expedition. "Revenue Fund" has the meaning stated in Section 4. "Subordinate Obligations " has the meaning stated in the recitals to this Ordinance. "System" means all property currently owned and operated by the City for the supply, treatment, and transmission of water together with all future extensions, improvements, and additions thereto and replacements thereof, excluding, to the extent now or hereafter permitted by law, facilities declared by the City not to be part of the System and acquired or constructed with proceeds of special revenue obligations that are not payable from, or secured by a lien on the Net Revenues. "Termination Obligation" means the obligation of the City to pay the Settlement Amount, as defined in the Hedge Agreement, on the terms and conditions described in the Hedge Agreement. SECTION2. Authorization of Hedge Agreement The terms and form of the ISDA Master Agreement, Schedule to the Master Agreement (including the Credit Support Annex thereto), and Confirmation attached hereto asExhibit A are hereby approved. The Mayor and City Secretary of the City are hereby authorized to execute and deliver, for and on behalf of and in the name of the City and as the act and deed of the City Council of the City, within 45 days after the date of enactment hereof, an ISDA Master Agreement, a Schedule to the Master Agreement, and a Confirmation (collectively herein referred to as the "Hedge Agreement"), with JPMorgan Chase Bank substantially in such form and to such effect, with such changes and completions thereto as they may deem advisable; provided that (1) the term of such Confirmation shall not extend beyond August 15, 2021, which is the expected final maturity of the Bonds, (2) the notional amount 45081402.7 -4- - - -' - - - thereof shall not exceed the amounts scheduled in Exhibit B for the relevant calculation periods, which are the respective aggregate principal amounts of Bonds expected to remain outstanding in such calculation periods, (3) the fixed rates of interest at which the obligations of the City thereunder shall be calculated shall not exceed 6.25% per annum, and the six-month average index rate above which its rights thereunder may be terminated shall not be less than 5.5% per annum, each of which are within 1% per annum of the currently estimated market rates for the Hedge Agreement transaction, and the annual premiums payable to the City in 2003 through 2005 shall not be less than $150,000 per year, and (4) the Hedge Agreement and the proceedings of the City Council of the City authorizing the same shall be approved by the Attorney General of Texas and registered by the Comptroller of Public Accounts of the State of Texas prior to delivering the Hedge Agreement. SECTION 3. Pledge of Net Revenues. A. Pledge and Lien. Payment of the obligations of the City under the Hedge Agreement are and shall be secured by and payable solely from the Net Revenues, including Net Revenues deposited in or credited to the Revenue Fund hereafter maintained pursuant to this Ordinance (including investments thereof), but excluding Net Revenues expended in accordance with the terms of this Ordinance, and the City hereby grants a lien on and pledges such Net Revenues to secure such payment. The lien on and pledge of Net Revenues granted and made hereby is and shall be (1) prior and superior in claim, rank, and dignity to the lien on and pledge of Net Revenues securing payment of the Junior Obligations and Subordinate Obligations, insofar as the lien and pledge made hereby secures payment of obligations of the City under the Hedge Agreement other than the Termination Obligation, and (2) junior and subordinate in claim, rank, and dignity to the lien on and pledge of Net Revenues securing the payment of the Junior Obligations, but prior and superior in claim, rank, and dignity to the lienon and pledge of Net Revenues securing payment of the Subordinate Obligations, insofar as the lien and pledge made hereby secure payment of the Termination Obligation. The Hedge Agreement is not, and shall not be, secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting the System. The holders of the Hedge Agreement shall not be entitled to demand payment thereof out of money raised or to be raised by taxation. B. Reservation of Rights. The City hereby reserves the right to issue or incur, from time to time as needed, bonds (including the Bonds), notes, certificates of obligation, credit agreements (as defined in Section 1371.001, Texas Government Code, as amended to the date of incurrence thereof), and other obligations of the City for any lawful purpose relating to the System, and to grant a lien on and pledge of the Net Revenues to secure payment thereof equally and ratably with the liens and pledges securing the outstanding Parity Obligations or the Junior Obligations or the Termination Obligation and to grant liens and pledges subordinate thereto. Notwithstanding the foregoing, for so long as the Hedge Agreement is outstanding the City shall not issue or incur any Parity Obligations (other than the Bonds, any trust indenture or liquidity or reimbursement agreement entered into in connection therewith, or the Hedge Agreement) unless the other party to the Hedge Agreement shall have consented thereto or the City shall have delivered to the other party to the Hedge Agreement:: (1) Officer's Certificate: A certificate signed by the Mayor, City Manager, or Director of Finance of the City, dated within 30 days of the issuance or incurrence of such Parity Obligations, stating that, to the knowledge of the executing officer, no default exists in the obligations of the City hereunder; and 45081402.7 (2) Coverage: either: (a) Historical Coverage: A certificate or opinion of an independent certified public accountant, dated within 30 days of the issuance or incurrence of such Parity Obligations, stating that the Net Revenues for the immediately preceding fiscal -5- -f ,1 r """" -~ . t -.. ' - -f !" -1 -t - year of the City (or for any consecutive 12-month period ending within 180 days prior to the date of such issuance or incurrence) were (or, had the then current rates for System goods and services been in effect throughout such fiscal year or period, would have been) not less than 115% of average Annual Debt Service Requirements for all· future fiscal years in which Parity Obligations are scheduled to remain outstanding; or (b) Projected Coverage: a report, certificate, or opinion of an independent Consultant, dated within 30 days of the issuance or incurrence of such Parity Obligations, stating that projected Net Revenues, for each of the two fiscal years of the City following the earlier of the estimated date of substantial completion of the facilities then being financed or the last date to which interest thereon has been set aside from the proceeds of such Parity Obligations, are not less than 115% of average Annual Debt Service Requirements of the City in either such or any succeeding fiscal year in which Parity Obligations are scheduled to remain outstanding; or (c) Enhanced Coverage: a certificate or opinion of an independent certified public accountant stating that the Annual Debt Service Requirements in each future fiscal year will be reduced, in each case determined as if such Parity Obligations were then outstanding and giving effect to the application of proceeds thereof. SECTION 4. Funds and Accounts. The City hereby establishes and shall maintain on its books and accounts, for so long as any Parity Obligation remains outstanding, a Waterworks Revenue Fund (herein referred to as the "Revenue Funtf') of the City. The City shall account for Gross Revenues separate and apart from all other revenues of the City and shall deposit all Gross Revenues, as collected and received, to the credit of the Revenue Fund. The City shall appropriate, apply, and disburse amounts in the Revenue Fund solely for the following purposes and in the following order of priority: A. First, to pay Operating Expenses .of the System as they come due, B. Second, to pay (or to make required deposits to reserve, sinking, or debt service funds or with custodians for) Parity Obligations when due, C. Third, to pay (or to make required deposits to reserve, sinking, or debt service funds or with custodians for) the Junior Obligations and other obligations issued or incurred and secured by a lien on or pledge of Net Revenues on a parity with the lien and pledge securing the Junior Obligations in accordance with this Ordinance, D. Fourth, to pay (or to make required deposits to reserve, sinking, or debt service funds or with custodians for) the Termination Obligation and other obligations issued or incurred and secured by a lien on or pledge of the Net Revenues on a parity with the lien and pledge securing the Termination Obligation in accordance with this Ordinance, E. Fifth, to pay costs of repairs to and extensions of the System that do not comprise Operating Expenses, and . E. Sixth, for any lawful purpose, including payment of the Subordinate Obligations to the extent permitted thereby and transfer to the General Fund of the City such remaining funds as the City Council of the City may from time to time authorize. 45081402.7 -6- -.. " -' - -' -' . - SECTION 5. Termination of Hedge Agreement. If the City fails to issue the Bonds prior to, on, or within 120 days after the Effective Date of the Transaction described in the Hedge Agreement, or if the CBonds are issued in a substantially smaller principal amount or with a substantially more rapid amortization than is scheduled inExhibit B, or if the Bonds when issued do not bear interest at a variable rate reset at least once every five weeks, then the City shall promptly exercise its option reserved in the Hedge Agreement to terminate or amend such Transaction so that the resulting notional amount of such Transaction in each calculation period does not substantially exceed the aggregate principal amount of Bonds bearing interest at such a variable rate that is scheduled to be outstanding in such period. If the Hedge Agreement is terminated by either party and, as a consequence, a Termination Obligation is payable by the City, the City shall apply available Net Revenues to pay, or shall use its best efforts to issue bonds or other obligations payable from revenues of the System to pay and refund, such Termination Obligation in full promptly after the same becomes due. SECTION 6. Rate Covenant The City shall fix and collect rates, charges, and fees for goods and services supplied by the System from time to time as necessary to realize Gross Revenues in each fiscal year of the City at least equal to (1) Operating Expenses for such fiscal year plus (2) 100% of the greater of (a) Annual Debt Service Requirements for such fiscal year or (b) all obligations of the City due in such fiscal year on outstanding Parity Obligations, less all obligations due to the City in such fiscal year under financial hedge agreements entered into by the City in respect of Parity Obligations with a counterparty whose obligations are rated by any nationally recognized credit rating service at least as high as the obligations of the City secured by a first lien on Net Revenues, determined without regard to credit enhancement. The City shall also fix and collect rates, charges, and fees for goods and services supplied by the System from time to time as necessary to enable the issuance of refunding revenue obligations when, as, and if required by Section 5. If the Gross Revenues for any fiscal year of the City are less than the aggregate amount specified above, the City shall, promptly upon receipt of the annual audit for such fiscal year, cause such rates, charges, and fees to be revised and adjusted as necessary to comply 'with this Section or obtain a written report from an independent Consultant stating that, in its opinion, no revision or adjustment to such rates, charges, and fees need be made to comply with this Section. Notwithstanding anything herein to the contrary, if such action is taken, the City shall be deemed to be in compliance with this Section for the ensuing fiscal year of the City. ·sECTION7. Operation and Maintenance of System. The City shall operate the System in an efficient manner consistent with Prudent Utility Practice and shall maintain, preserve, repair, and replace the plants, facilities, and properties of the System as necessary to keep the same in good repair, working order, and condition and operating in a business like manner. SECTION 8. Title. The City has and shall have lawful title, whether such title is in fee or lesser interest, to the lands, building, structures, and facilities constituting the System. The City warrants that it will defend the title to all such lands, buildings, structures, and facilities and every part thereof against the claims and demands of all persons whomsoever. The City is lawfully empowered to pledge the Net Revenues to the payment of the Hedge Agreement in the manner prescribed herein and has lawfully exercised such power. 45081402.7 -7- - - -. - r ' -t i SECTION9. Liens. The City shall pay all taxes, assessments, and governmental charges, if any, which shall be lawfully imposed upon the System, its properties, or revenues before the same become delinquent and all lawful claims for Operating Expenses in a timely manner. The City shall not create or suffer to be created any mechanicrs, Iaborer'smaterialman's, or other lien or charge which is prior to or on a parity with any lien on and pledge of the Net Revenues granted hereby or in accordance herewith as security for payment or performance of Parity Obligations or do or suffer any matter or thing which would impair any such lien or pledge; provided, however, that no such tax, assessment, or charge, and no such claims that might result in a mechanic's, laborer's, materialman's, or other lien or charge, shall be required to be paid while the validity of the same shall be contested by the City in good faith. Except to secure the payment or performance of Parity Obligations issued or incurred in accordance with Section 3B, the City shall not encumber the Net Revenues in any manner unless such encumbrance is made junior and subordinate in all respects to the liens and pledges granted pursuant to this Ordinance as security for the Hedge Agreement (other than the Termination Obligation) and all other liens and pledges hereafter granted equally and ratably therewith. SECTION 10. No Free Service. Except as permitted by Section 1502.059(b), Texas Government Code, as amended, the City shall not provide any free service from the System. SECTION 11. Disposition of System Property. To the extent and in the manner permitted by law, the City may sell, exchange, or otherwise dispose of, lease, contract, or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights to property constituting part of the System at any time and from time to time, provided that such sale, exchange, disposition, lease, contract, license, arrangement, easement, or right does not impede or disrupt the operations of the System. The City shall deposit the proceeds of any such sale, exchange, or disposal of property to the credit of a special fund or account and apply the same to acquire other property necessary or desirable for the safe or efficient operation of the System, to redeem or purchase Parity Obligations, or for any other lawful System purpose. SECTION 12. System Accounting. The City shall keep proper books, records, and accounts pertaining to the operation and ownership of the System, in accordance with generally accepted accounting principles applicable to governmental entities, separate and apart from all other records and accounts of the City. The City shall make accurate and complete entries of all transactions relating to the System in such books, records, and accounts monthly or more frequently. SECTION 13. Insurance. Except as otherwise permitted by this Section, the City shall insure the properties comprising part of, and the operation of, the System, in the manner and to the extent that municipal corporations operating like properties carry and maintain such insurance, with one or more responsible insurance companies and against such risks customarily insured against by municipal corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage caused by floods, and use and occupancy insurance. At any time while any contractor engaged in construction work shall be fully responsible therefor, the City shall not be required to insure the work 45081402.7 -8- - - - -' - - being constructed if the contractor is required to carry appropriate insurance. All such policies of insurance maintained in accordance with this Section shall be open to inspection by the other party to the Hedge Agreement at all reasonable times during regular business hours. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the City shall make due proof of loss and shall do all things necessary or desirable to cause the insurers to make payment in full directly to the City. The City shall apply the proceeds of insurance covering such property, together with any other funds available for such purpose as the City in its sole discretion shall determine, to repair or replace the property damaged or destroyed; provided, however, if the insurance proceeds and other funds that might be lawfully appropriated therefor are insufficient to repair or replace the damaged or destroyed property, then the City shall deposit such insurance proceeds to the credit of a special account or fund until other funds become available which, together with such deposited funds, will be sufficient to repair or replace the property damaged or destroyed or make other improvements to the System. In lieu of obtaining policies of insurance in accordance with this Section, the City may self-insure against the risks described in this Section or insure against such risks under one or more blanket insurance policies maintained by the City. SECTION 14. Audits. After the close of each fiscal year, the City shall cause an audit of the books, records, and accounts relating to the System by an independent certified public accountant as a part of the City's overall annual comprehensive audit. The audit report shall state whether the City has complied with the requirements of the immediately preceding Section of this Ordinance and shall list the risks against which the City is self-insuring, all policies carried, and whether all insurance premiums on such policies have been paid. SECTION 15. Governmental Approvals. The City shall keep current and in effect any and all franchises, licenses, permits, and authorizations from any governmental agency or department necessary for the operation and maintenance of the System, and the City shall not allow any such franchise, permit, license, or authorization to expire or terminate by a failure of the City to act or to comply with the any terms or condition thereof. SECTION 16. Rights of Inspection. Subject to public safety and other restrictions as may be reasonably imposed, the City shall permit the other party to the Hedge Agreement, at all reasonable times during regular business hours, to inspect the properties of the System and all records, accounts, and data relating thereto and to make copies of such records, accounts, and data. SECTION17. Ordinance a Contract; Amendment; Subrogation. This Ordinance shall constitute a contract with the other party to the Hedge Agreement from and after execution and delivery of the Hedge Agreement. The City shall not amend, repeal, or otherwise modify any provision of this Ordinance in a manner that adversely affects the interests of the other party to the Hedge Agreement without the consent of such person. SECTION 18. Inconsistent ProYisions. All ordinances and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling as to the matters ordained herein. 4508l402.7 -9- r - - - - - - - - - - SECTION 19. Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 20. SeverabiUty. If any provision of this Ordinance or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Ordinance and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council of the City hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 21. Incorporation of Preamble Recitals. The recitals contained in the preamble hereof are hereby found to be true, and such recitals and other statements therein are hereby made a part of this Ordinance for all purposes and are adopted as a part of the judgment and findings of the City Council of the City. SECTION 22. Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION23. Further Proceedings. The officers and employees of the City are hereby authorized, empowered, and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal and on behalf of the City all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance and, upon execution and delivery thereof, the Hedge Agreement. In addition, prior to delivery of the Hedge Agreement, the Mayor, the City Manager, the City Attorney, the General Manager, and the Chief Financial Officer of and Bond Counsel to the City are hereby authorized and directed to approve any technical changes or corrections to this Ordinance or to any of the instruments authorized and approved by this Ordinance necessary in order (1) to correct any ambiguity or mistake or properly or more completely document the transactions contemplated and approved by this Ordinance or (2) to obtain the approval of this Ordinance, the Hedge Agreement, and the proceedings of the City Council of the City authorizing the same by the Attorney General of Texas. In case any officer of the City whose signature shall appear on any certificate shall cease to be such officer before the delivery of such certificate, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. SECTION 24. Effective Date. This Ordinance shall be in force and effect from and after its final passage, and it is so ordained. 45081402.7 -10- ----~··----~--- - ·~ ~'' .; - -j; ' . - - - - - FIRST READING on the 28th day of March, 2002. SECOND AND FINAL READING, PASSED AND ADOPTED on the 11th day of April, 2002. CITY OF LUBBOCK, TEXAS ATTEST: . ·~ City Secr:etarY:" (CITY SEAL) APPROVED AS TO CONTENT: Cash and Debt Manager APPROVED AS TO FORM: ~---··2:.-c:;:..-Y ~ ~;;.,___ -~ Ae;//J City Attorney 45081402.7 -11- ,.., - -i ' - -r -!: . """' ' - .- - -~-' EXHIBIT A FORM OF ISDA MASTER AGREEMENT, SCHEDULE, AND CONFIRMATION 45081402.7 -f - - -' -' ' - - -. - ~ __ , (Multicurrency -Cross Border) International Swap Dealers Association. Inc. MASTER AGREEMENT JPMorgan Chase Bank ("Party A,) dated as of April 11, 2002 between and City of Lubbock, Texas ("Party B") have entered and/or anticipate entering into one or more transactions (each a ''Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:- 1. Interpretation (a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevaiL In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Copyright© 1992 by International Swap Dealers Association, Inc. - -' -,. I -~-. - - Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable:- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) Deduction or Withholding for Tax. · (i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y~ (3) promptly forward toY an official receipt (or a certified copy), or other documentation reasonably acceptable toY, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay toY, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of lndemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or 2 ISDA® 1992 - -i ,. ' r -J - (ii) (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. Liability. If: - (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount toY under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant . Confirmation or elsewbere in this Agreement. 3. Representations Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(t), at all times until the termination of this Agreement) that:- (a) Basic Representations. (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under sucl:i laws, in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; 3 ISDA® 1992 r - r -. -r , (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Cerlain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. Agreements Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- (a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, 4 ISDA®l992 - -,, ' ;_ ! - r f in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax. Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; 5 ISDA®1992 - - - - (iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of ( 1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:' (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition· with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially a11 its assets; (7) has a secured party take possession of all or substantia11y all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or 6 ISDA®1992 -' r ' (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: - (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:- (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (l) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indernnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e). 6(d){ii) or 6(e)) or {2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d}(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); 7 ISDA®l992 -' - - - (iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected· Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) Transfer to Avoid Termination Event. If either an Illegality under Section S(b)(i)(l) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. 8 ISDA® 1992 -• - - (c) (d) (iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b )(i) on action to avoid that Termination Event. (iv) Right to Terminate. If:- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2). a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. · (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). Calculations. (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (I) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confrrmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. 9 ISDA®1992 - - - -.. - -i - (e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) (ii) Events of Default. If the Early Termination Date results from an Event of Default:- ( 1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. Termination Events. If the Early Termination Date results from a Termination Event:- ( l) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss app1ies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: - (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (ll) the Termination Currency Equivalent of the Unpaid Amounts owing toY; and 10 ISDA®1992 - - - - -.! - 7. (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. Transfer Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: - (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Sec-tion will be void. 8. Contractual Currency (a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or 11 ISDA® 1992 r - - - -i - - (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission}, each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall he entered into as soon as practicable and may he executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. 12 ISDA®1992 ,... - - - - -' - r r r (g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. Offices; Multibranch Parties (a) If Section 1 O(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. Expenses A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13 ISDA®l992 - - - - - - - - - - 13. Governing Law and Jurisdiction (a) Governing law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. ·(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts. if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. Definitions As used in this Agreement:- "Additional Termination Event" has the meaning specified in Section 5(b ). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, «control" of any entity or person means ownership of a majority of the voting power of the entity or person. 14 ISDA® 1992 -' -r ,... - - - "Applicable Rate" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section S(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section S(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "DefauiJ Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "DefauiJing Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section S(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section S(b). "lndemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this 15 ISDA® 1992 - - - - r - -• -~-.] - Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market- maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market- maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three· quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Office" means a branch or office of a party, which may be such party's head or home office. 16 ISDA® 1992 - r - - - - - -~ - - - - - "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off'' means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of: - (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meanings specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross- currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any· stamp, registration, documentation or similar tax. "Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "Tax Event" has the meaning specified in Section S(b ). "Tax Event Upon Merger" has the meaning specified in Section S(b ). 17 ISDA® 1992 - r -? - - ... r - "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6{e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. 18 ISDA® 1992 -t - - - ,... •· - IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. JPMORGAN CHASE BANK CITY OF LUBBOCK, TEXAS By: ................................................................... . By: ................................................................. .. Name: Name: Title: Title: Date: Date: Attest: By: ................................................................. .. Title: 19 ISDA® 1992 - -' (1) -(2) !""" ! ... --' ~ ; -' ,.. - -r--~ - - SCHEDULE to the MASTER AGREEMENT dated as of April 11, 2002 between [EXECUTION COPY} JPMorgan Chase Bank ("Party A") and City of Lubbock, Texas ("Party B") PART1 Termination Provisions and Certain Other Matters Transactions. The parties understand and agree that "Transactions" entered into under this Agreement shall, with respect to Party B, relate solely to the System and, unless otherwise specified in the related Confirmation, be payable solely from Net Revenues. "Specified Entity" means, in relation to Party A, for the purpose of: Section S(a)(v), any Affiliate of Party A; Section S(a)(vi), none; Section S(a)(vii), none; and Section S(b)(iv), none; and, in relation to Party B, for the purpose of: Section S(a)(v), none; Section S(a)(vi), none; Section S(a)(vii), none; and Section S(b)(iv), none. - - -k ' ~ - -f ; - (3) (4) (5) (6) (7) (8) •, (9) "Specified Transaction" will have the meaning specified in Section 14, except that with respect to Party B, such term shall include only those transactions described therein pursuant to which Party B' s obligations are payable in whole or in part from Gross Revenues. The "Cross-Default" provisions of Section 5(a)(vi) will apply to Party A and Party B, and for purposes of such provisions, the following shall apply: (a) (b) ''Specified Indebtedness" will have the meaning specified in Section 14, except that (i) with respect to Party A, such term shall not include obligations in respect of deposits received in the ordinary course of such party's banking business, and (ii) with respect to Party B, such term shall include only those obligations payable in whole or in part from Gross Revenues. "Threshold Amount" means, with respect to Party A, an amount equal to three percent of the shareholders' equity of Party A; and with respect to Party B, u.s. $6,000,000. The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not apply to Party A and will not apply to Party B. The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or Party B. Payments on Early Termination. For the purpose of Section 6(e): (i) Market Quotation will apply; and (ii) The Second Method will apply. ''Termination Currency" means United States Dollars. Additional Event of Default. Section 5(a) of the Agreement is hereby amended to include the following additional Event of Default with respect to Party B, which shall be added as subparagraph (ix) of such Section 5(a): "(ix) Authority; Repudiation. Party B shall cease to have authority to make payments under this Agreement or any Transaction subject to this Agreement, or any legislative body having jurisdiction over Party B shall adopt any legislation which would have the effect of repudiating this Agreement or any Transaction subject to this Agreement." 2 -f I - - -; .. - r - - ( 10) Amendments to Section 5. Section 5 of the Agreement is hereby amended as follows: (a) Bankruptcy. Section 5(a)(vii)(6) of the Agreement is amended to read in its (b) entirety as follows: "(6) seeks or becomes subject to the appointment of an administrator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets (regardless of how brief such appointment may be, or whether any obligations are promptly assumed by another entity or whether any other event described in this clause (6) has occurred and is continuing) or, in the case of Party B, there shall be appointed or designated in respect of Party B, pursuant to any applicable law, an organization, board, authority, agency, body or entity to monitor, review, oversee, make recommendations to, or declare financial emergencies in respect of Party B, or there shall be declared or introduced or proposed for or by any legislative 9r regulatory body with competent jurisdiction, pursuant to any applicable law, the existence of a state of financial emergency or similar position of financial distress in respect of Party B." Merger Without Assumption. Section 5(a)(viii) of the Agreement is hereby amended to read in its entirety as follows: "(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity (or, without limiting the foregoing, if such party is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, such party or any Credit Support Provider of such Party) and, at the time of such consolidation, amalgamation, merger, transfer or succession: (1) the resulting, surviving, transferee or successor entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under this Agreement." 3 - - - - - - (ll) Additional Termination Events. For purposes of Section 5(b)(v) of the Agreement the following shall be Additional Termination Events: (i) Credit Event. The occurrence at any time of a Credit Event with respect to Party B shall be an Additional Termination Event with respect to such party, in which case Party B shall be deemed to be the Affected Party and all Transactions will be Affected Transactions. As used herein, "Credit Event" shall mean as of any Certification Date, the Debt Service Coverage Ratio is less than 1.25. (ii) Modification of the Covered Indenture. Party B shall amend. repeal or otherwise modify the Covered Indenture without the prior written consent of Party A, and in the sole judgment of Party A, as a result of such amendment, repeal or other modification, the ability of Party B to comply with and petform its obligations under this Agreement or in respect of any Transaction hereunder shall be materially adversely affected. (iii) Optional Termination by Party B. Party B may, by written notice to Party A, terminate any Transaction at any time, or reduce the Notional Amount specified in the Confirmation with respect thereto, in either case specifying in such notice the date on which the termination or proposed reduction is to occur (the "Optional Early Termination Date"), which date shall not be earlier than 20 days from the date such notice was given. In the case of a partial reduction in the Notional Amount, the notice shall also state the amount by which the Notional Amount is to be reduced for each calculation period. Upon such notice becoming effective, (A) the date specified by Party B shall be deemed an Early Termination Date, (B) Party B shall be the sole Affected Party, (C) the applicable Transaction shall be the sole Affected Transaction, (D) Market Quotation and Second Method shall be selected for purposes of Payments on Early Termination, and (E) in the case of a partial reduction in the Notional Amount, the amount by which such Notional Amount is to be reduced shall be deemed the amount to be terminated on the Early Termination Date, and the parties shall execute an amendment to the Confirmation relating to such Transaction to amend the Notional Amount to reflect such reduction. Notwithstanding anything herein to the contrary, the parties will be obligated to pay any accrued amounts that would otherwise be due on the Optional Termination Date. From and after an Optional Early Termination Date with respect to any Transaction, neither party shall have any payment obligation to the other in respect of the Transaction so terminated or in respect of the amount of any reduction in the Notional Amount thereof, as the case may be, except payment of all Unpaid Amounts relating thereto calculated to the Optional Termination Date. Notwithstanding anything contained herein to the contrary, prior to and as a condition to the exercise by Party B of the optional termination set forth in this paragraph, Party A may request written evidence from Party B of Party B's ability to pay any Settlement Amount due upon such optional termination. 4 1""1 ' ' -. . - -f ' - PART2 Tax Representations None. PART3 Agreement to Deliver Documents For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable: Party required to deliver document 1. Party A 2. Party A 3. PartyB 4. PartyB Form/Document/ Certificate Annual report of Party A Opinion of counsel satisfactory to Party B substantially in the form attached hereto as Exhibit II Annual Report of Party B containing consolidated financial statements certified by independent certified public accountants and prepared in accordance with accounting principles that are generally accepted for governmental entities in the United States Opinion of counsel satisfactory to Party A substantially in the form of Exhibit I hereto, and any restatement, update or supplement to such opinion in connection with any Transaction 5 Date by which to be delivered Upon request Upon execution and deli very of this Agreement As soon as available, and in any event within 180 days after the end of each fiscal year of Party B Upon execution and delivery of this Agreement and, upon request of Party A, prior to the execution and deli very of any Confirmation hereunder Covered by Section 3(d) Representation Yes No Yes No ,..., ~ ' ,., Party required Covered by r- to deliver Form/Document/ Date by which Section 3(d) ... document Certificate to be delivered Re(!resentation ~ 5. Party B Certified copies of all Upon execution Yes ,.. resolutions adopted or other and delivery of actions taken by Party B to this Agreement ·-authorize the execution, and, upon request II"'''" delivery and performance of of Party A, prior this Agreement, along with to the execution such other documents, and delivery of ~ certificates, or other any Confirmation information with respect to such authorization as Party A -may reasonably request, and in ' connection with any Transaction, any supplements -to such authorization or additional authorization r relating to such Transaction 6. Party B A certified copy of the Upon execution Yes -Ordinance and delivery of this Agreement ,..., 7. Party B A certificate duly executed by Upon each Yes an authorized officer of Party B Certification Date as to the Debt Service -Coverage Ratio 8. Party A and Certificate of authority and Upon execution Yes -Party B specimen signatures of and deli very of individuals executing this this Agreement Agreement, Confirmations and and thereafter !""' each Credit Support Document upon request of (as applicable) the other party - ~ ~ .j 6 - (1) r ! - - - -' PART4 Miscellaneous Address for Notices. For the purpose of Section 12(a) of this Agreement: Address for notice or communications to Pany A: Any notice relating to a particular Transaction shall be delivered to the address or facsimile or telex number specified in the Confirmation of such Transaction. Any notice delivered for purposes of Sections 5 and 6 of this Agreement shall be delivered to the following address: JPMorgan Chase Bank Attention: Legal Department-Capital Markets Group 270 Park A venue, 40th Floor New York, New York 10017-2070 Telex No.: 232337; Answerback: CBC UR Facsimile No.: (212) 270-7468 With respect to the delivery to Party A of all financial statements and certificates pursuant . to items (3) and (7) of Part 3 of this Schedule: JPMorgan Chase Bank Attention: Anne Jarema-Credit Analysis Team 270 Park A venue, 22nd Floor New York, New York 10017-2070 Telephone: (212) 270-2361 Facsimile: (212) 270-2642 Address for notice or communications to Party B: City of Lubbock, Texas Attention: Director of Finance P.O. Box 2000 Lubbock,Texas79457-2000 Facsimile No.: (806) 775-2033 7 - - . - - - -r ,... ,... I; - .,..... (2) (3) (4) (5) (6) (7) (8) (9) (1) with a copy to: First Southwest Company Attention: Mike Marz 1700 Pacific A venue, Suite 500 Dal1as, Texas 75201 Facsimile No.: (214) 954-4339 Process Agent. For the purpose of Section 13(c): Party A appoints as its Process Agent: Not applicable. Party B appoints as its Process Agent: Not applicable. Offices. The provisions of Section lO(a) will apply to this Agreement. Multibranch Party. For the purpose of Section 10 of this Agreement: Party A is a Multi branch Party and may act through its New York and London office . Party B is not a Multibranch Party. Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in a Confirmation in relation to the relevant Transaction. Credit Support Documents. With respect to Party B, the Ordinance shall constitute a "Credit Support Document" for all purposes of this Agreement. With respect to Party A, the ISDA Credit Support Annex and supplementary Paragraph 13 -"Elections and Variables" thereto, attached hereto as Exhibit III and by this reference incorporated herein, shall constitute a "Credit Support Document" for all purposes of this Agreement. Credit Support Provider. Not applicable with respect to either party. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas (without reference to choice of law doctrine). NettingofPayments. Section 2(c)(ii) of this Agreement will apply. PARTS Other Provisions Set-off. (i) Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer") under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under 8 - - - - - ,_ ' I Section 5(b )(i v) has occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any Other Payment Amount (as hereinafter defined). As used herein, "Other Payment Amount" shall mean any payment obligation of any description whatsoever (whether arising at such time or in the future or upon the occurrence of a contingency, but in the case of any future or contingent obligation, only if and to the extent such payment obligation may by its terms then be accelerated) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation or whether the relevant party is legally or beneficially the holder of the obligation) arising under any other agreement between the Payee and the Payer or any instrument or undertaking issued or executed or guaranteed by the Payee to, or in favor of, the Payer or any bond, note, or other debt instrument issued or guaranteed by the Payee and owned or held beneficially by the Payer as a result of the purchase thereof by or on behalf of the Payer, whether directly from the issuer or in the secondary market (and the Other Payment Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this section. For purposes of this subparagraph (i), the term "Other Payment Amount," as it relates to Party B as Payer or Payee, shall be limited to obligations payable (in whole or in part) from or which, when paid to Party B, will be included in, Gross Revenues. For purposes of the foregoing, either the Early Termination Amount or the Other Payment Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. Nothing in this section shall be effective to create a charge or other security interest. This section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (ii} Notwithstanding anything to the contrary set forth in this Agreement, a party (the "Delivering Party") may, in its discretion, satisfy, in whole or in part, any payment obligation arising under Section 6 in respect of any Early Termination Date which is designated or occurs as a result of an Event of Default in respect of which the other party is the Defaulting Party or which is designated as a result of a Termination Event in respect of which the other party is the sole Affected Party by delivering to such other party (the "Receiving Party"), or for the account of the Receiving Party, bond(s), note(s), or other debt instrument(s) issued or guaranteed by the Receiving Party and owned or held legally or beneficially by or on behalf of the Delivering Party in a face amount equal to the entirety or relevant part, as the case may be, of the amount of such payment obligation. Any bond, note, or other debt instrument denominated in a currency other than the Termination Currency shall, for this purpose, be valued in an amount of Termination Currency determined by the Delivering Party based upon a currency exchange rate determined in a commercially reasonable manner. Any delivery by a 9 - - - - - -' - (2) (3) (4) Delivering Party shall be made in the manner customary for the relevant bond, note, or debt instrument (including, without limitation, through a depository institution or clearance system) or, if the Delivering Party deems such delivery to be impractical, in a commercially reasonable manner determined by the Delivering Party. For purposes of this subparagraph (ii), in circumstances in which Party B is the Receiving Party, any bond, note or other debt instrument delivered by Party A, as the Delivering Party, shall include only bonds, notes or other debt instruments payable, in whole or in part, from the Gross Revenues. Exchange of Confirmations. For each Transaction entered into hereunder, Party A shall promptly send to Party B a Confirmation, via telex or facsimile transmission. Party B agrees to respond to such Confirmation within 10 Local Business Days, either confirming agreement thereto or requesting a correction of any error(s) contained therein. Failure by Party B to respond within such period shall not affect the validity or enforceability of such Transaction and shall be deemed to be an affirmation of the terms contained in such Confirmation, absent manifest error. The parties agree that any such exchange of telexes or facsimile transmissions shall constitute a Confirmation for all purposes hereunder. Notwithstanding the foregoing, no Confirmation shall create any obligation on the part of Party B unless the Agreement (including the Confirmation) shall have been approved by the Attorney General of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Waiver of .Jurv Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Agre~ment or any Credit Support Document. Each party (i) certifies that no representative, agent or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Agreement and provide for any Credit Support Document, as applicable, by, among other things, the mutual waivers and certifications in this Section. Telephonic Recording. Each party (i) consents to the recording of the telephone conversations of trading, marketing and operations personnel of the parties and their Affiliates in connection with this Agreement or any potential Transaction and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel of it and its Affiliates. 10 -i~ -' -' ' ;;. ' ' - (5) Obligations. Section 2(a)(iii) of this Agreement is hereby amended to read in its entirety as follows: (6) "(iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default, Potential Event of Default or Incipient Illegality with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement." Representations. (a) The introductory clause of Section 3 of this Agreement is hereby amended to read in its entirety as follows: (b) (c) (d) "Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(a) and 3(g), at all times until the termination of this Agreement) that:". Section 3(a)(ii) of this Agreement is hereby amended to read in its entirety as follows: "(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action and made all necessary determinations and findings to authorize such execution, delivery and performance;". Section 3(b) of this Agreement is hereby amended to read in its entirety as follows: "(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Incipient Illegality (in the case of a Government Entity) or Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party." Section 3 of this Agreement is hereby amended by adding the following subsection "(g)" thereto, which subsection shall only apply to the Government Entity: 11 - -(7) - - - ,... - - (e) "(g) Non-Speculation. This Agreement has been, and each Transaction hereunder will be (and, if applicable, has been) entered into for purposes of managing its borrowings or investments and not for purposes of speculation. Further Representations. Party B represents to Party A (which representations will be deemed to be repeated by Party B on each date on which a Transaction is entered into) that: (i) (ii) Generally Accepted Accounting Principles. The financial information delivered by it pursuant to Part 3 of this Schedule, including the related schedules and notes thereto, has been prepared in accordance with accounting principles established that are generally accepted for governmental entities in the United States applied consistently throughout the periods involved (except as disclosed therein). No Material Contingent Obligation(s). Party B does not have any material contingent obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment, which is not reflected in the financial statements delivered to Party A pursuant to this Schedule or in the notes thereto. Agreements. (a) The introductory clause of Section 4 of this Agreement is hereby amended to read in its entirety as follows: "Each party agrees with the other (or, in the case of Section 4(f) and (g), Party B agrees with the other party) that, so long as either party has or may have any obligation underthis Agreement or under any Credit Support Document to which it is a party:". (b) Section 4 of this Agreement is hereby amended by adding the following subsections "(f)" and "(g)" thereto: "(f) Compliance with the Ordinance. Party B will observe, perform and fulfill each provision in the Ordinance applicable to it in effect on the Incorporation Date, as any of those provisions may be amended, supplemented or modified for purposes of this Agreement with the prior written consent of Party A (the "Incorporated Provisions"), with the effect that Party A will have the benefit of each of the Incorporated Provisions (including, without limitation, covenants, right to consent to certain actions subject to consent under the Ordinance and delivery of financial statements and other notices and information). In the event the Ordinance ceases to be ·in effect prior to the termination of this Agreement, the 12 -.. r - - -to--· r - - r . ' (8) (9) Incorporated Provisions (other than those provisions requiring payments in respect of bonds, notes, warrants or other similar instruments issued under the Ordinance) will remain in full force and effect for purposes of this Agreement as though set forth herein until such date on which all of the obligations of Party B under this Agreement and any obligations of Party B or any Credit Support Provider of Party B under a Credit Support Document have been fully satisfied. The Incorporated Provisions are hereby incorporated by reference and made a part of this Agreement to the same extent as if such provisions were set forth herein. Any amendment, supplement, modification or waiver of any of the Incorporated Provisions without the prior written consent of Party A shall have no force and effect with respect to this Agreement Any amendment, supplement or modification for which such consent is obtained shall be part of the Incorporated Provisions for purposes of this Agreement (g) Notice of Incipient Illegality. If an Incipient Illegality occurs, the Government Entity will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient lllegality as the other party may reasonably require." Hedge Agreement; Security and Source of Payment of Party B's Obligations. This Agreement constitutes a "Hedge Agreement" under the terms of the Ordinance and as such shall be entitled to such rights and benefits under the Ordinance as are described therein. The obligations of Party B hereunder and under each Transaction are and shall be payable solely from the Net Revenues (as defined in the Ordinance) and not from any money raised by taxation, and no other recourse may be had against other assets of Party B for or in respect of such obligations. Pursuant to the Ordinance, Party B has granted as security for its obligations under the Agreement and the initial Transaction a lien on and pledge of such Net Revenues, which lien and pledge is (i) prior and superior in claim, rank, and dignity to the lien on and pledge of Net Revenues securing payment of the Junior Obligations and Subordinate Obligations (as each such term is defined in the Ordinance), insofar as such lien and pledge secures payment of obligations of Party B under the Agreement other than any Settlement Amount due upon early termination of any Transaction, and (ii) junior and subordinate in claim, rank, and dignity to the lien on and pledge of Net Revenues securing the payment of the Junior Obligations, but prior and superior in claim, rank, and dignity to the lien on and pledge of Net Revenues securing payment of the Subordinate Obligations, insofar as such lien and pledge secure payment of any such Settlement Amount. Immunity; Writ of Mandamus. Party B represents and warrants that it is not entitled to claim immunity from suit or jurisdiction of any court in any action to enforce this Agreement. Party B further represents and agrees that Party A is empowered to proceed, by mandamus or other lawful remedy, to enforce and compel performance by officers of Party B of all agreements of Party B contained herein and in the Ordinance, including, but not limited to, the obligation of Party B to make payment of any amount due and payable by 13 - - - - - - Party B in respect of any Transaction hereunder (including payment of any Settlement Amount). (10) Eligible Contract Participant. Each party represents to the other party (which representation will be deemed to be repeated by each party on each date on which a Transaction is entered into) that it is an "eligible contract participant", as defined in the Commodity Futures Modernization Act of 2000. ( 11) Relationship Between Parties. The following representation shall be inserted as a new Section 3(h) of this Agreement: "(h) Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): (i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of . and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction." (12) ISDA EMU Protocol. The parties agree that the definitions and provisions contained in Annexes 1 and 3 and Section 6 of the ISDA EMU Protocol published on 6th May 1998 (the "ISDA Protocol"), are incorporated into and apply to this Agreement and form a part hereof. References in those definitions and provisions to any "ISDA Master Agreement" will be deemed to be references to this Agreement. (13) ISDA Counterparty Definitions. Reference is hereby made to the 1992 ISDA U.S. Municipal Counterparty Definitions (the "1992 Muni Definitions") and the 2000 ISDA Definitions (the "2000 Definitions") (collectively, the "ISDA Definitions") each as published by the International Swaps and Derivatives Association, Inc., which are hereby 14 -' - - - - - - - -t -• ~ incorporated by reference herein. Any terms used and not otherwise defined herein which are contained in the ISDA Definitions shall have the meaning set forth therein. (14) Scope of Agreement. Notwithstanding anything contained in this Agreement to the contrary, any transaction which may otherwise constitute a "Specified Transaction" for purposes of this Agreement which has been or will be entered into between the parties shall constitute a "Transaction" which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless any Confirmation with respect to a Transaction entered into after the execution of this Agreement expressly provides otherwise. (15) Inconsistency. In the event of any inconsistency between any of the following documents, the relevant document first listed below shall govern: (i) a Confirmation; (ii) the Schedule and Paragraph 13-Elections and Variables to the Credit support Annex (as applicable); (iii) the ISDA Definitions; and (iv) the printed forms of ISDA Master Agreement and ISDA Credit Support Annex (as applicable). In the event of any inconsistency between the provision contained in the 2000 Definitions and the 1992 Muni Definitions, the 1992 Muni Definitions shall prevail. (16) Definitions. Section 14 of this Agreement is hereby amended to add or amend the following definitions. Definitions so added shall be inserted in such Section 14 in their appropriate alphabetical order: "Affiliate" will have the meaning specified in Section 14 of this Agreement. "Bonds" means, collectively, the Waterworks Revenue Refunding Bonds, Series 2005, intended to be issued by Party B in accordance with the Ordinance, and any other Parity Obligations issued or entered into from time to time by Party B in accordance with the Ordinance. "Brazos River Authority Obligations" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995, with respect to which Party B is contractually obligated to make payments in respect of principal and interest on such obligations. "Certification Date" means the 30th day following each fiscal quarter of Party B. "Debt Service Coverage Ratio" means, as of any Certification Date, the ratio of (i) Net Revenues of Party B plus all amounts payable by Party B with respect to the Brazos River Authority Obligations during the preceding four fiscal quarters of Party B, to (ii) all amounts payable by Party B with respect to Parity Obligations and the Brazos River Authority Obligations for such preceding four fiscal quarters. "Government Entity" shall mean Party B. 15 - - - - - - - -' "Gross Revenues" has the meaning set forth in the Ordinance. " 'Incipient Illegality' means (a) the enactment by any legislative body with competent jurisdiction over a Government Entity of legislation which, if adopted as law, would render unlawful (i) the performance by such Government Entity of any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of a Transaction or the compliance by such Government Entity with any other material provision of this Agreement relating to such Transaction or (ii) the performance by a Government Entity or a Credit Support Provider of such Government Entity of any contingent or other obligation which the Government Entity (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction, (b) any assertion in any proceeding, forum or action by a Government Entity, in respect of such Government Entity or in respect of any entity located or organised under the laws of the state in which such Government Entity is located to the effect that performance under this Agreement or similar agreements is unlawful or (c) the occurrence with respect to a Government Entity or any Credit Support Provider of such Government Entity of any event that constitutes an Illegality." "Incorporation Date" means the date of this Agreement. "Net Revenues" has the meaning set forth in the Ordinance. "Ordinance" means the Ordinance adopted by the City Council of the City of Lubbock, Texas on second reading on Aprilll, 2002 authorizing this Agreement and the first Transaction hereunder as confirmed by the related Confirmation. "Parity Obligations" has the meaning set forth in the Ordinance. "System" means the water system of Party B, as specifically described in the Ordinance. 16 -" ; - - - -' -I -- Please confirm your agreement to the terms of the foregoing Schedule by signing below. ATTEST: Secretary JPMORGAN CHASE BANK By:. _____________________ _ Name: Title: CITY OF LUBBOCK, TEXAS By: __________________ _ Name:. ____________________ _ Mayor 17 - - - -f j - - - - - - - EXHIBIT I FORM OF OPINION OF COUNSEL TO PARTY B JPMorgan Chase Bank 270 Park A venue New York, New York 10017-2070 Ladies and Gentlemen: April _, 2002 We have acted as counsel to the City of Lubbock, Texas (the "City"), a home rule city organized under the Constitution of the State of Texas, in connection with its execution and delivery of the ISDA Master Agreement, dated as of April 11, 2002, the Schedule thereto (the "Schedule"), and the Confirmation, dated April _, 2002 (collectively, the "ISDA Agreement"), between the City and JPMorgan Chase Bank ("JPMorgan"), pursuant to an ordinance (the "Ordinance") of the City Council of the City passed on second reading on Aprilll, 2002, authorizing the ISDA Agreement. Except as otherwise defined herein, capitalized terms used herein have the meanings given to them in the ISDA Agreement. The ISDA Agreement and the Ordinance collectively are referred to herein as the "Swap Agreements". This opinion letter is delivered at the request of the City pursuant to Part 3 of the Schedule. In rendering the opinions expressed herein, we have examined the Swap Agreements. In addition, we have examined such certificates of the City, such copies certified or otherwise identified to our satisfaction of documents and records of the City (including the Ordinance), such certificates, instruments, and other written communications of other public officials, and such other records, certificates, instruments, agreements and documents, in each case as we have deemed relevant and appropriate as the basis for the opinions expressed herein. As to matters of fact relevant to the opinions expressed herein, and as to factual matters arising in connection with the foregoing examinations, we have relied, to the extent we have deemed appropriate, upon the findings, representations, and warranties contained in the Swap Agreements, certificates of corporate officers of the City, and certificates and other communications of public officials, without further investigation by us as to the facts set forth therein. In making such examination and in such reliance, we have assumed (i) the genuineness and authenticity of all signatures in all such records, certificates, instruments, agreements, and documents, (ii) the legal capacity of each natural person identified in each of those records, certificates, instruments, agreements, and documents, (iii) the authenticity and completeness of all documents, certificates, agreements, instruments, and records submitted to us as originals and the conformity to authentic original documents, certificates, agreements, instruments, and records of all copies submitted to us as copies, - r - -; -' f 1 - - and (iv) the conformity to the final executed original version of the ISDA Agreement reviewed by us in draft form or otherwise unsigned by the parties thereto. Based upon the foregoing, and in reliance thereon, and having due regard for such legal considerations as we have deemed relevant, and subject in all respects to the assumptions, qualifications, limitations, comments, and exceptions set forth herein, we are of the opinion that, under the law of the State of Texas: 1. The City has the requisite legal power and authority to execute and deliver the ISDA Agreement, to enact the Ordinance, and to perform its obligations under the ISDA Agreement and the Ordinance and has duly authorized such execution, delivery, and performance. 2. Enactment of the Ordinance and execution and delivery of the ISDA Agreement by the City do not, and the City may comply with the Swap Agreements in a manner which will not, violate any statutory law or regulation applicable to it or any provision of its charter or any other indenture, ordinance or agreement known to us to which the City is a party or by which it is bouil.d. 3. No authorizations of, or exemptions, actions or approvals by, or notices to, or filings with, any governmental authority is required to be obtained or made by the City under any statutory law or regulation applicable to it as a condition to enactment of the Ordinance or execution and delivery by the City of the ISDA Agreement, or to the performance by the City of its obligations thereunder, except such as have been obtained, given or made. 4. The Swap Agreements are legal, valid, and binding obligations of the City, enforceable against the City in accordance with their respective terms. 5. To our knowledge, there is no action or proceeding against the City, pending or overtly threatened in writing, before any court, government agency, or arbitrator which, by the terms of any pleadings or demand letter provided to us by the City, seeks to prohibit the enforceability of the Swap Agreements against the City. 6. The obligations of the City under the Swap Agreements, including any scheduled payments or termination payment due from the City in respect of any Transaction thereunder, are secured by a lien on and security interest in the Net Revenues pledged by the City under the Ordinance. The City is duly authorized to pledge such Net Revenues, and has pledged the same, to the payment of amounts due under the Swap Agreements, and the lien of such pledge is valid and binding, and no further action on the part of the City or any other party is required to perfect the same or the interest of JPMorgan therein. The opinions expressed herein are further subject to the following assumptions, qualifications, limitations, comments, and exceptions: A. The opinions expressed in paragraph 4 are subject to the following: Exhibit I -Page 2 r -u -' ~ ( - -' ' - -,, -~· i " ' (i) We have assumed that JPMorgan has requisite corporate power and authority to execute and deliver the ISDA Agreement and to perform its obligations thereunder and has duly authorized such execution, delivery, and performance, and that the ISDA Agreement constitutes the legal, valid, and binding obligation of JPMorgan, enforceable against JPMorgan in accordance with its terms. (ii) The enforceability of the Swap Agreements is subject to, and may be limited or affected by, (i) bankruptcy, insolvency, reorganization, liquidation, fraudulent conveyance, fraudulent transfer, preference, conservatorship, rearrangement, moratorium, receivership, and other similar laws (including court decisions) in effect and affecting the rights and remedies of creditors generally or providing for relief of debtors, (ii) the refusal of a particular court (a) to grant certain equitable remedies, including, without limiting the generality thereof, specific performance, or (b) to grant a particular remedy sought under the Swap Agreements as opposed to another remedy provided for therein or another remedy available at law or in equity, (iii) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law), (iv) judicial discretion, (v) standards of good faith, fair dealing, materiality, impracticability or impossibility of performance, unconscionability, diligence, reasonableness and care established by applicable law, including, without limitation, those provided in the Uniform Commercial Code, applicable principles of common law, and judicial decisions, and (vi) Article XI, Section 9 of the Constitution of Texas, which provides that property of the City held only for public purposes is exempt from forced sale. (iii) The provisions of the Swap Agreements that obligate any party to pay another party stipulated sums or amounts or sums or amounts determined by another party, in whatsoever capacity, upon the occurrence of one or more specified events may be unenforceable unless, at the time the Transaction is entered into, (a) such sums or amounts are reasonably proportionate to the probable loss anticipated to be caused by such event or events giving rise to the obligation to pay such sums or amounts, (b) the amount of actual loss resulting from such event or events cannot be easily determined, and (c) such provisions are not intended to punish non-performance or to compel performance. (iv) We express no opinion as to the availability of equitable remedies, and further, we express no opinion as to the enforceability of any provision of the Swap Agreements that (a) relates to rights of set-off (or the waiver thereof), and we note that rights of set-off may be limited to matured mutual obligations, (b) relates to indemnification or exculpation to the extent any such provisions violate public policy or applicable laws or would purport to require any person to provide indemnification or reimbursement or waive indemnification or reimbursement for losses or expenses caused by fraud, illegality, breach, violation of law, negligence, or willful misconduct of an indemnified or exculpated party, (c) waives, restricts, or denies, or has the effect of waiving, restricting, or denying, any right or defense that cannot be waived, so restricted, or denied as a matter of law, (d) purports to require that all amendments, waivers, and Exhibit I -Page 3 -; - - - - - terminations be in writing, (e) purports to make irrevocable the appointment of an agent or attorney in fact, (f) purports to establish, or restrict or otherwise affect, jurisdiction, venue, submission to, or acceptance of, a court's jurisdiction, objections to the laying of venue or submission or acceptance of jurisdiction, limitation periods, or other procedural rights in any proceeding, (g) purports to permit the recording of communications between the parties or others which is in violation of applicable law, or to waive any rights or remedies related thereto, (h) purports to establish or satisfy evidentiary standards or characterizations, treatments, or effect of payments or rights, (i) negates the effect of any course of dealing or any exercise, or failure or delay to exercise, any right, power, privilege, or remedy, (j) authorizes conclusive determinations by any person or entity to make such determinations in its sole discretion, (k) restricts access to legal or equitable remedies, (1) states that (1) prohibition, illegality, invalidity, or unenforceability of any provision of the Swap Agreements in any jurisdiction shall not (A) invalidate the remaining provisions of the Swap Agreements or (B) affect that provision in any other jurisdiction, or (2) the right of JPMorgan to exercise any right or remedy on the basis of any misrepresentation or breach of warranty is not affected by any action by JPMorgan, (m) permits an action against any person or entity to be brought in the courts of the State of Texas or the federal courts of the United States of America sitting in the State of Texas, as applicable, (l) if such person has not been served with process in that action in accordance with applicable rules of procedure, or (2) if such court in which the action is brought does not have jurisdiction over the subject matter of the action, or (n) restricts a party's right to transfer its right to receive payments under the Swap Agreements or purports to void the Swap Agreements on any transfer not made in compliance with its terms; provided, however, in our opinion, the unenforceability of the remedial and other provisions referred to in the preceding clauses does not render void or invalid the remaining provisions of the Swap Agreements and does not, subject to the other qualifications, exceptions, limitations, and assumptions set forth herein, make the remedies generally afforded by the Swap Agreements inadequate for the realization of the substantive principal legal benefits purported to be provided by the Swap Agreements (except for the economic consequences resulting from any delay or procedure imposed by applicable law). B. In rendering the foregoing opinions, we do not express any opinion as to any laws, statutes, regulations, directives, interpretations, opinions, orders, rulings, authorities, or the like regulating, governing, or applicable to JPMorgan (or any successor or assign) (collectively, the "Rules"), or its execution, delivery, or performance of the ISDA Agreement or the consummation of the transactions contemplated thereby, or JPMorgan's (or any successor's or assign's) compliance with any of the Rules in connection with the Swap Agreements or the transactions provided for therein. Further, we have assumed that the Swap Agreements will be enforced in compliance with the enforceable provisions thereof and all requirements of applicable law. C. As used herein, the phrase "to our knowledge" or words of similar import means conscious awareness of facts or other information by the lawyers in our firm who have devoted substantive attention to legal matters on behalf of the City and in no regard Exhibit I -Page 4 ,.... ' - r ' r -' - Ill"'! shall such phrase imply that we performed (nor shall any related inference be made that we performed) nor did we perform, in connection with this opinion letter, any examination of courts, governmental agencies, arbitrators, boards, other tribunals, or public records with respect to any actions, litigation, investigations, or proceedings, or judgments, orders, or decrees, in any event applicable to the City or any of its properties or interests. D. The opinions expressed herein are expressly limited to the internal substantive laws (including statutory laws and regulations) of the State of Texas and applicable federal statutory laws and regulations of the United States of America. In respect to such laws, in addition to other limitations set forth herein, such reference is limited to laws which are normally and customarily applicable to the City in relation to the transactions provided for in the Swap Agreements. References herein to "laws" of a jurisdiction are to the laws of that jurisdiction, other than the statutes and ordinances, the administrative decisions, and the rules and regulations of counties, towns, municipalities, and special political subdivisions other than the City (whether created or enabled through legislative action at the federal, state, or regional level), and judicial decisions to the extent that they deal with any of the foregoing. The opinions expressed herein are for the sole benefit of and may only be relied upon by JPMorgan and, without our prior written consent, may not be relied upon in any manner by any other person or entity. This opinion may not be furnished to any other person or entity without our prior written consent, except that this opinion may be provided (i) to the independent auditors and attorneys of JPMorgan, (ii) to any state or federal authority having regulatory jurisdiction over JPMorgan, (iii) pursuant to an order or legal process of any court or governmental agency, and (iv) to any permitted successor to JPMorgan under the terms of the Swap Agreements. The opinions expressed herein are as of the date of this opinion letter, and we make no undertaking to supplement such opinions if, after the date of this letter, facts or c:ircumstances come to our attention or changes in the law occur which could affect such opinions. Very truly yours, Exhibit I-Page 5 -' - - - - -• - -l r t - EXHIBIT II [FORM OF OPINION OF KING & SPALDING, COUNSEL TO JPMORGAN CHASE BANK] City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457-2000 To the Addressee: April _, 2002 We have acted as counsel to JPMorgan Chase Bank, a New York banking corporation ("JPMorgan Chase"), in connection with the execution and delivery by JPMorgan Chase of the ISDA Master Agreement, dated as of April 11, 2002, including the Schedule thereto (the "Master Agreement"), between the City of Lubbock, Texas (the "City") and JPMorgan Chase. The Master Agreement is to be supplemented by confirmations of Transactions to be entered into by the Authority and JPMorgan Chase from time to time (each a "Confirmation"), including a Confirmation relating to the initial Transaction under the Master Agreement, dated April _, 2002. The Master Agreement, together with the Schedule and all such Confirmations shall constitute one agreement and be referred to herein as the "Agreement"). Capitalized terms used but not otherwise defined herein have the meanings assigned thereto in the Agreement. In rendering this opinion, we have examined an executed original or copy of the Agreement and such records, documents, instruments, certificates of public officials and of JPMorgan Chase, and such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. In such examination, we have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity to originals of all items submitted to us as certified copies and the authenticity of the originals of such copies. As to certain matters of fact relevant to the opinions hereinafter expressed, we have relied upon certifications, statements, representations, and warranties of JPMorgan Chase, the City and their respective representatives, including statements, representations and warranties contained in the Agreement, and we have assumed and have not independently verified that all such certifications, statements, representations and warranties are true, accurate and complete. We have assumed that the City has the legal capacity, power and authority to execute, deliver and perform its obligations under the Agreement and that the Agreement - - -' - - - -' - - -f· • constitutes the legal, valid and binding agreement of the City and is enforceable against the City in accordance with the terms thereof. The Agreement provides that it is to be governed by and construed in accordance with the laws of the State of Texas. Notwithstanding such provision, for purposes of the opinions expressed herein we have assumed that the Agreement will be governed by and construed in accordance with the laws of the State of New York, and the opinions expressed herein are limited to the laws of the State of New York and the Federal laws of the United States of America. Based upon the foregoing and having regard to such legal considerations as we have deemed relevant, we are of the opinion, subject to the qualifications expressed herein, that: (1) JPMorgan Chase is duly licensed by the Superintendent of Banks of the State of New York to operate as a banking corporation in the State of New York. (2) The execution, deli very and performance by JPMorgan Chase of the Agreement do not contravene any law, rule or regulation of the State of New York or the laws of the United States. (3) No approval, consent or authorization of any governmental or public agency or authority or any other institution not already obtained is required for the execution by. JPMorgan Chase of, or performance of JPMorgan Chase's obligations under, the Agreement. (4) The Agreement has been duly executed and delivered by JPMorgan Chase and constitutes the legal, valid and binding obligation of JPMorgan Chase enforceable against JPMorgan Chase in accordance with its terms. The opinions expressed herein are subject to the following qualifications: (A) The enforceability of the Agreement and the rights and remedies thereunder are subject to and may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws from time to time in effect relating to or affecting generally the enforcement of creditors' rights, and (ii) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding at law or in equity). (B) The opinion expressed in paragraph 4 above is subject to the qualification that we express no opinion regarding the enforceability of Section 6(e) of the Agreement insofar as it purports to obligate a party, on termination of the Agreement, to pay an amount in excess of that measured by the lowest quotation from a Reference Market-maker. In addition, in connection with any such early termination on the grounds Exhibit ll -Page 2 - -' , ' - - - - - - of default, a court might limit the non-defaulting party's recovery to its actual damages in the circumstances, imposing its own settlement procedures in lieu of the provisions of Section 6(e) of the Agreement (C) We express no opinion herein as to whether a court or other authority or body located outside the State of New York would enforce the governing law provision of, or honor, the Agreement. (D) We have rendered the opmwns expressed herein based on facts and circumstances existing, and applicable laws, rules, regulations, court decisions and regulatory authority determinations in effect, on the date hereof. We disclaim any obligation to update or supplement this opinion letter for events occurring or coming to our attention after the date hereof. We are furnishing this letter to the addressee solely for its benefit, and no other person is entitled to rely hereon. Without the prior written consent of the undersigned, this letter may not be used, circulated, quoted, or otherwise referred to for any other purpose not disclosed or delivered to, or relied upon by, anyone other than the addressee. Very truly yours, Exhibit ll -Page 3 EXHIBIT III -CREDIT SUPPORT ANNEX [separately provided] -,, -' r - - - -' - - - - - (Bilateral Form) (ISDA Agreements Subject to New York Law Only) International Swaps and Derivatives Association, Inc. CREDIT SUPPORT ANNEX to the Schedule to the ISDA MASTER AGREEMENT JPMorgan Chase Bank ("Party A") dated as of Aprilll, 2002 between and City of Lubbock, Texas ("Party B") This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows:- Paragraph 1. Interpretation (a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) Secured Party and Pledgor. All references in this Annex to the "Secured Party" will be to either party when acting in that capacity and all corresponding references to the "Pledgor" will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. Paragraph 2. Security Interest Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. Copyright© 1994 by International Swap Dealers Association, Inc. -f -; II""' ' - -f - - - - Paragraph 3. Credit Support Obligations (a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for any Valuation Date will equal the amount by which: (i) the Credit Support Amount exceeds (ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party. (b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable to the Secured Party for any Valuation Date will equal the amount by which: (i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds (ii) the Credit Support Amount. "Credit Support Amount" means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and Substitutions (a) Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: (i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and (ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party. (b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. (c) Calculntions. All calcufations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if 2 ISDA ® 1994 - - - the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). (d) Substitutions. (i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); and (ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the "Substitution Date"); provided that the Secured Party wi!l only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support. Paragraph 5. Dispute Resolution ·If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then ( 1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 incase of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) ifthey fail to resolve the dispute by the Resolution Time, then:- (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute; (B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used for that Transaction (or Swap Transaction); and (C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. 3 ISDA ® 1994 ,., - - Paragraph 6. Holding and Using Posted Collateral (a) Care of Posted Collateral. Without limiting the Secured Party's rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. (b) Eligibility to Hold Posted Collateral; Custodians. (i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions. (iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to: (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and (ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above. (d) Distributions and Interest Amount. (i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). 4 ISDA ® 1994 - - !""" ! (ii) Interest Amount. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2. Paragraph 7, Events of Default For purposes of Section 5(a)(iii)( L) of this Agreement, an Event of Default will exist with respect to a party if: (i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or (iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party. Paragraph 8. Certain Rights and Remedies (a) Secured Party's Rights and Remedies. If at any time (l) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any; (iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect. Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived. 5 ISDA ® 1994 - - ,..... ,. - - - - r - - (b) Pledgor's Rights and Remedies. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement): (i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law with respect to Posted Collateral held by the Secured Party; (ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: (A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor. (c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b). (d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2( d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. Paragraph 9. Representations Each party represents to the other party (which representation will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that: (i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and 6 ISDA ® 1994 - - -' - (iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. Paragraph 10. Expenses (a) General. Except as otherwise provided in Paragraphs lO(b) and lO(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. (b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes. assessments and charges that result from the exercise of the Secured Party's rights under Paragraph 6(c). (c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreem~nt, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. Paragraph 11. Miscellaneous (a) Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obliged to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that the Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (b) Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount. (c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party's rights under Paragraph 6(c). (d) Good Faith and CommerciJJUy Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. (e) Demands and Notices. All demands and notices given by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13. (f) Specifications of Certain Ma#ers. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. 7 ISDA®1994 -' - - - r - Paragraph 12. Definitions As used in this Annex:- "Cash" means the Ia wful currency of the United States of America. "Credit Support Amount" has the meaning specified in Paragraph 3. "Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13. "Delivery Amount" has the meaning specified in Paragraph 3(a). "Disputing Party" has the meaning specified in Paragraph 5. "Distributions" means, with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein. "Eligible Collateral" means, with respect to a party, the items, if any, specified as such for that party m Paragraph 13. "Eligible Credit Support" means Eligible Collateral and Other Eligible Support. "Exposure" means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of "Market Quotation"). "Independent Amount" means, with respect to party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Interest Amount" means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows: (x) the amount of Cash on that day; multiplied by (y) the Interest Rate in effect for that day; divided by (z) 360. "Interest Period'' means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred. "Interest Rate" means the rate specified in Paragraph 13. 8 ISDA® 1994 r f - - - - "Local Business Day," unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex. "Minimum Transfer Amount" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Notification Time" has the meaning specified in Paragraph 13. "Obligations" means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13. "Other Eligible Support" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "Other Posted Support" means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party. "Pledgor" means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). "Posted Collateral" means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6( d)(ii) will constitute Posted Collateral in the form of Cash. "Posted Credit Support" means Posted Collateral and Other Posted Support. "Recalculation Date" means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the "Recalculation Date" means the most recent Valuation Date under Paragraph 3. ''Resolution Time'' has the meaning specified in Paragraph 13. "Return Amount" has the meaning specified in Paragraph 3(b). "Secured Party" means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support. "Specified Condition" means, with respect to a party, any event specified as such for that party in Paragraph 13. "Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i). "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). "Threshold" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable: (i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient; 9 ISDA ®1994 - - - - - I""' - -.. f - - (ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient; (iii) in the case of securities that can be paid or delivered in book-entry, the gtvmg of written instruments to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and (iv) in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13. "Valuation Agent" has the meaning specified in Paragraph 13. "Valuation Date" means each date specified in or otherwise determined pursuant to Paragraph 13. "Valuation Percentage" means, for any item of Eligible Collateral, the percentage specified in Paragraph 13. "Valuativn Time" has the meaning specified in Paragraph 13. "Value" means for any Valuation Date or other date for which Value is calculated, and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A) Cash, the amount thereof; and (B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Coilateral that consists of items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13. 10 ISDA ® 1994 - - - - . . ~· - - [EXECUTION COPY] CREDIT SUPPORT Am.'EX JPMorgan Chase Bank ("Party A") To the Schedule to the Master Agreement dated as of April 11, 2002 between and City of Lubbock, Texas ("Party 8") Paragraph 13. Elections and Variables (a) (b) Security Interest for "Obligations". The term "Obligations" as used in this Annex includes no additional obligations with respect to either party. Credit Support Obligations. (i) Delivery Amount, Return Amount and Credit Support Amount. (A) "Delivery Amount" will have the meaning specified in Paragraph 3(a). (B) "Return Amount" will have the meaning specified in Paragraph 3(b ). (C) "Credit Support Amount" will have the meaning specified in Paragraph 3. (ii) Eligible Collateral. The following items will qualify as "Eligible Collateral" for Party A as Pledgor: (A) USD Cash (B) negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of one year or less from the Valuation Date 11 Valuation Percentage 100% 99% -k - - - -r , r - ,.... -t • (C) negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of more than one year but less than ten years from the Valuation Date (D) negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of ten years or more from the Valuation Date (E) (F) (G) (H) Agency Securities having a remaining maturity of one year or less from the Valuation Date Agency Securities having a remaining maturity of more than one year but less than ten years from the Valuation Date Agency Securities having a remaining maturity of ten years or more from the Valuation Date USD denominated Commercial Paper rated Al/Pl by S&P and Moody's, respectively, which settles within DTC; provided, however, that Commercial Paper issued by either party or any of its Affiliates shall be excluded For purposes of the foregoing: Valuation Percentage 98% 96% 98% 97% 95% 97% (A) "Agency Securities" means negotiable debt obligations .which are fully guaranteed as to both principal and interest by the Federal National Mortgage Association, the Government National Mortgage Association or . the Federal Home Loan Mortgage Corporation, but excluding (i) interest only and principal only securities and (ii) Collateralized Mortgage Obligations, Real Estate Mortgage Investment Conduits and similar derivative securities. 12 - - - -. :. - - - -! -' (iii) (B) "DTC' shall mean The Depository Trust & Clearing Corporation, or its successor. (C) "Moody's" shall mean Moody's Investors Service, Inc., or its successor. (D) "S&P" shall mean Standard & Poor's Ratings Group, or its successor. Other Eligible Support. There shall be no "Other Eligible Support" for either party for purposes of this Annex. (iv) Thresholds. (A) "Independent Amount" shall not apply for purposes of this Annex. (B) "Threshold" means, with respect to Party A, the amounts determined on the basis of the higher of the Credit Ratings set forth in the following table, provided, however, that if (i) Party A has no Credit Rating, or (ii) an Event of Default has occurred and is continuing with respect to Party A, Party A's Threshold shall be U.S.$0: Credit Rating Threshold (S&P I Moody's) Party A A-/A3 and above Infinite BBB+/Baal US$5,000,000 BBB/Baa2 US$2,500,000 BBB-/Baa3 and below US$0 As used herein, the term "Credit Rating" shall mean the rating assigned by S&P and Moody's to the long term, unsecured and unsubordinated indebtedness of Party A. (C) "Minimum Transfer Amount" means $100,000, provided, however, that if an Event of Default has occurred and is continuing with respect to Party A, the Minimum Transfer Amount shall be $0. (D) Rounding. The Delivery Amount and the Return Amount will be rounded up and down respectively to the nearest integral multiple of $10,000. 13 - -t ' ,... - - - -' - -r , - - - (c) (d) Valuation and Timing. (i) "Valuation Agent" means Party A. (ii) "Valuation Date" means the first Local Business Day of each calendar month. (iii) "Valuation Time" means the close of business on the Local Business Day preceding the Valuation Date or date of calculation, as applicable. (iv) "Notification Time" means by 1:00 p.m., New York time, on a Local Business Day. Conditions Precedent With respect to Party A, an Illegality (if Party A is the Affected Party with respect to such Termination Event) will be a "Specified Condition". With respect to Party B, an Illegality and any Additional Termination Event (if Party B is the Affected Party with respect to such Termination Events) will be a "Specified Condition". (e) Substitution. (i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). (ii) Consent. Inapplicable. (f) Dispute Resolution. (g) (i) "Resolution Time" means 1:00 p.m., New York time, on the Local Business Day following the date on which notice is given that gives rise to a dispute under Paragraph 5. (ii) Value. For the purpose of Paragraphs S(i)(C) and S(ii), the Value of Posted Credit Support other than Cash will be calculated as follows: (A) with respect to any Eligible Collateral except Cash, the sum of en (x) the mean of the high bid and low asked prices quoted on such date by any principal market maker for such Eligible Collateral chosen by the Disputing Party, or (y) if no quotations are available from a principal market maker for such date, the mean of such high bid and low asked prices as of the first day prior to such date on which such quotations were available, plus (ll) the accrued interest on such Eligible Collateral (except to the extent Transferred to a party pursuant to any applicable provision of this Agreement or included in the applicable price referred to in Cn of this clause (A)) as of such date; multiplied by the applicable Valuation Percentage. Holding and Using Posted Collateral. (i) Eligibility to Hold Posted Collateral; Custodians. Party B will be entitled to hold Posted Collateral itself or through a Custodian pursuant to Paragraph 6(b ), provided that the following conditions applicable to it are satisfied: 14 - - -, ; -• - - r f (h) (i) (k) (1) (2) Party B is not a Defaulting Party. The Custodian is a Bank (as defined in the Federal Deposit Insurance Act) located in the State of New York whose rating with respect to its long term unsecured, unsubordinated indebtedness is at least BBB-by S&P or Baal by Moody's. (ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to Party B. Distributions and Interest Amount. (i) Interest Rate. "Interest Rate" means, for any day, the "Federal Funds Overnight Rate" minus 1/8%. For the purposes hereof, "Federal Funds Overnight Rate" means, for any day, an interest rate per annum equal to the rate published as the Federal Funds Effective Rate that appears on Telerate Page 118 for such day. (ii) Transfer of Interest Amount. The Transfer of the Interest Amount will be made monthly on the second Local Business Day of each calendar month. Additional Representations. None. Other Eligible Support and Other Posted Support. (i) "Value" shall have no meaning with respect to Other Eligible Support and Other Posted Support. (ii) "Transfer" shall have no meaning with respect to Other Eligible Support and Other Posted Support. Demands and Notices. All demands, specifications and notices made by a party to this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here: With respect to Party A: JPMorgan Chase Bank Collateral Middle Office Americas 3/0PS2 500 Stanton Christiana Road Newark, DE 19713 USA Telephone No.: 302-634-3191 Fax No.: 302-634-3260 15 - - .r - -l (1) With respect to Party B: As set forth in the Schedule. Other Provisions. (i) Modification to Paragraph 1: The following subparagraph (b) is substituted for subparagraph (b) of the Annex: "(b) Secured Party and Pledgor. All references in this Annex to the "Secured Party" will be to Party B and all corresponding references to the "Pledgor" will be to Party A; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as beneficiary thereof to provisions of law generally relating to security interests and secured parties." (ii) Modification to Paragraph 2: The following Paragraph 2 is substituted for Paragraph 2 of this Annex: "Paragraph 2. Security Interest. The Pledgor hereby pledges to the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set~off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party." (iii) Modification to Paragraph 9: The following first clause of Paragraph 9 is substituted for the first clause of this Annex: "Paragraph 9. Representations. The Pledgor represents to the Secured Party (which representations will be deemed to be repeated as of each date on which it Transfers Eligible Collateral) that:" (iv) Modifications to Paragraph 12: The following definitions of "Pledgor" and "Secured Party" are substituted for the definitions of those terms contained in Paragraph 12 of this Annex: "Pledgor" means Party A, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). "Secured Party" means Party B, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support." 16 r - - - - Please confirm your agreement to the terms of the foregoing Paragraph 13 by signing below: JPMORGAN CHASE BANK CITY OF LUBBOCK, TEXAS By: _____________ _ Name: ______________ _ Mayor ATTEST: By: ______________ _ Secretary 17 -f ' -t ' ,.,.. r -' - AT1N: FROM: RE: YOUR REF: OUR REF: DATE SENT: NO OF PAGES: CITY OF LUBBOCK, TEXAS SHLOMI RAZ On behalf ofJP MORGAN SECURITIES INCORPORATED As Agent for JPMORGAN CHASE BANK-NEW YORK SWAP TRANSACTION CONFIRMATION TRADE DATE: TBD EFFECTIVE DATE: 511/05 CONFIRMATION EFFECTIVE DATE: TBD TBD 6 (Excluding Cover) -; - - - - - - S\\IPLF: CO'\FIR\t\TlO'\ 4/10/02 Date: April_, 2002 Swap Transaction ~· YJPMorgan The purpose of this letter agreement is to confirm the terms and conditions of the Swap Transaction entered into between: JPMORGAN CHASE BANK -NEW YORK and CITY OF LUBBOCK, TEXAS on the Trade Date and identified by the JPMorgan Deal Number specified below (the 'Swap Transaction'). This letter agreement constitutes a 'Confirmation' as referred to in the agreement specified below. The definitions and provisions contained in the 2000 ISDA Definitions, incorporating the June 2000 version of the Annex (the "2000 Definitions") and the 1992 ISDA U.S. Municipal Counterparty Definitions (the" 1992 Muni Definitions"), each as amended and supplemented through the date of this Confirmation (as published by the International Swaps and Derivatives Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. References in this Confirmation to 'Transaction' shall be deemed to be references to 'Swap Transaction' for the purposes of interpreting the Swap Definitions, and references in the Swap Definitions to 'Swap Transaction' shall be deemed to be references to 'Transaction' for the purposes of interpreting this Confirmation. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of April 11, 2002, as amended and supplemented from time to time (the 'Agreement'), between JPMORGAN CHASE BANK-NEW YORK ('JPMorgan') and THE CITY OF LUBBOCK (the 'Counterparty'). All provisions contained in the Agreement govern this Confirmation except as expressly modified below. l. The terms of the particular Swap Transaction to which this Confirmation relates are as follows: JPMorgan Deal Number: TBD Trade Date: April _, 2002 Effective Date: May t•t, 2005 Termination Date: August l 51, 2022 Fixed Amounts: Fixed Rate Payer: Counterparty 1 of6 - S .. \ \IPI.l CO\FIRVI\110"' ~/10/02 Notional Amount: Fixed Rate Payer Payment Dates: - Fixed Rate: Fixed Rate Day Count Fraction: Floating Amounts: -. Floating Rate Payer: Notional Amount: Floating Rate Payer Payment Dates: Floating Rate Option: Designated Maturity: Spread: Floating Rate Day Count Fraction: Reset Dates: 2of6 ~-­·'JPMorgan 40,465,000.00 USD, subject to reduction as set forth on Schedule A hereto. For each Calculation Period set forth on Schedule A, the Notional Amount for such Calculation Period shall be effective from and including the first day of such Calculation Period to but not including the last day of such Calculation Period. One business day prior to the I st of each month, starting with June I'\ 2005 up to, and including, the Termination Date, subject to adjustment in accordance with the Preceding Business Day Convention and there will not be an adjustment to the Calculation Period. TBD 30/360 JPMorgan 40,465,000.00 USD, subject to reduction as set forth on Schedule A hereto. For each Calculation Period set forth on Schedule A, the Notional Amount for such Calculation Period shall be effective from and including the first day of such Calculation Period to but not including the last day of such Calculation Period. One business day prior to the I st of each month, starting with June I •t, 2005 up to, and including, the Termination Date, subject to adjustment in accordance with the Preceding Business Day Convention and there will not be an adjustment to the Calculation Period. BMA Municipal Swap Index (as defined below) 1 Week None Actual/Actual Weekly on each Wednesday for value Thursday - - S\.\IPLI CO'\FIR\1 \ !10\ 4/,10i02 Compounding: Method of Averaging: Calculation Period (applies to Fixed and Floating Payment Calculation Periods) Municipal Swap Index Definition: Inapplicable Daily Weighted Average ~-­'-'JPMorgan Each period from, and including, one Payment Date to, but excluding, the next following applicable Payment Date during the term of the Swap Transaction, except (a) the initial Calculation Period will commence on, and include, the Effective Date, and (b) the final Calculation Period will end on, but exclude, the Termination Date. "Municipal Swap Index" means the BMA Municipal Swap IndeXfM (formerly, the PSA Municipal Swap IndexTM ), as defined in the ISDA !992 Municipal Counterparties Definitions (the "1992 Definitions"); provided, however, that if the BMA Municipal Swap [ndexTM is no longer available, the Municipal Swap Index shall be deemed to be the Kenny IndexTM (as defined in the 1992 Definitions), and provided, further, however, that if the Kenny IndexTM is no longer available, JPMorgan, in consultation with the Counterparty, will select or calculate a comparable index (which comparable index shall reflect taxable bond rates in the event a legislative or regulatory change has the effect of eliminating tax-exempt bonds) which shall be deemed to be the Municipal Swap Index. Fixed Premium: Each August I st, starting on August I st 2003, up to and including August I st, 2005, JPMorgan pays a premium of$280,000 to the Counterparty. (subject to change) Other Provisions: JPMorgan shall have the right, but not the obligation, to terminate this transaction in whole, but not in part, on each day that the daily weighted average ofthe Municipal Swap Index for any immediately preceding rolling consecutive 180 day period within the Exercise Period is more than 6.50% per annum (subject to change). The date on which JPMorgan exercises its right to terminate the Transaction is defined as the Optional Termiation Date. If JPMorgan exercises its right to terminate the Transaction, the Counterparty shall pay two Business Days after the Optional Termination Date the Fixed Amount for the period from and including the last Fixed Rate Payer Payment Date to but excluding the Optional Termination Date, and JPMorgan shall pay two Business Days after the Optional Termiation Date the Floating Amount for the period from and including the last Floating Rate Payer Payment Date to but excluding the Optional Termination Date. Upon payment and receipt ofthese amounts, neither party shall have any further obligations related to this Transaction. Exercise Period: Beginning on Effective Date, and up to but excluding the Termination Date Exercise Dates: Any day after Effective Date Notification Provisions: JPMorgan shall deliver Notice of Exercise to the Counterparty between 9:00 am and 3:00pm on any Business Days within the Exercise Period. Two business days following the Trade Date, JPMorgan will pay First Southwest an Advisory fee in the amount of$TBD USD. 3 of6 - -. - - - - -. ' SA\IPI.F CO'>F!R\L\TIO'\ -1/10/02 ~· YJPMorgan Two business days following the Trade Date, JPMorgan will pay Fulbright & Jawarski a Bond Counsel fee in the amount of $TBD USD. 2. Account Details Payments to JPMorgan: Account for payments in USD: Favour: SWIFT/BIC: Account No.: Reference: Payments to Counterparty: Account for payments in USD: Favour: ABA/Bank No.: Account No.: Reference: 3. Offices JPMorgan Chase Bank New York JPMorgan Chase Bank, New York Branch CHASUS33XXX 099997979 Interest rate swap no. __ _ To be advised CITY OF LUBBOCK, TEXAS To be provided To be provided To be provided (a) The Office of JPMorgan for the Swap Transaction is NEW YORK; and (b) The Office ofthe Counterparty for the Swap Transaction is LUBBOCK, TEXAS. All inquiries regarding confirmations should be sent to: JPMorgan Chase Bank 4 Chase Metrotech Center 171h Floor Brooklyn, New York 11245 Attention: Telephone: Facsimile: Documentation Control 1-718-242-3100 1-718-242-4809 Please quote the JPMorgan Deal Number indicated above. JP MORGAN SECURITIES INCORPORATED is acting solely as agent for JPMorgan and will have no obligations under this Swap Transaction. 4of6 ,...., .. - - SA\1PLE CO'\FIR\1.\ 110"\ ~!JOiH2 ~-­'-'JPMorgan Each party represents that (i) it is entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity); (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except those expressly set forth in the Agreement or this Confirmation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding ofthe terms, conditions and risks thereof and it is capable of and willing to assume those risks. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Swap Transaction to which this Confirmation relates and indicates agreement to those terms. When referring to this Confirmation, please indicate: JPMorgan Deal Number: ___ _ Confirmed as of the date first above written: CITY OF LUBBOCK, TEXAS By: ____ ,x~x~x~x~x~xx~x~------Name: ____________________ _ Mayor ATTEST: By: XXXXXXXX Secretary 5 of6 Yours sincerely, JP MORGAN SECURITIES INCORPORATED, as Agent for and signing on behalf of: JPMORGAN CHASE BANK-NEW YORK By: ___ ..,.x..,.x....,x....,xx=x ... x ... x,. ______ _ Name: _________________________ _ Title:------------------- l"""'t t " ""' 111""1 ' ' -' ' f 111""1 r r· -' - - - -r-: - - '·A \1 PL F ( 0'\ Fl R\1. \ IIO:\i -l/10ill2 Schedule A: Calculation Periods From To Effective Date 8/01/06 8/01106 8/01/07 8/0l/07 8/01/08 8/01/08 8/01/09 8/01109 8/0 Ill 0 8/0 Ill 0 8/01/11 8/01111 8/01112 8/0 l/12 8/01/13 8/01/13 8/01/14 8/01114 8/01/15 8/01115 8/01/16 8/01/16 8/01117 8/01/17 8/0 1!18 8/01118 8/0 l/19 8/0l/19 8/01/20 8/01120 8/01/21 8/0 l/21 Termination Date 6of6 ... ,..,JPMorgan Outstanding Notional $40,465,000 39,090,000 37,450,000 35,720,000 33,895,000 31,965,000 29,930,000 27,785,000 25,520,000 23,130,000 20,605,000 17,940,000 15,130,000 12,165,000 9,035,000 5,730,000 2,245,000 - ~ ~· ' EXHIBITB SCHEDULE OF NOTIONAL AMOUNTS ~ Calculation Period Notional Amount r-05/15/2005 to 07/3112006 $40,465,000 08/01/2006 to 07/3112007 38,950,000 -08/01/2007 to 07/31/2008 37,340,000 -08/01/2008 to 07/31/2009 35,650,000 ~ ; 08/0112009 to 07/31/2010 33,860,000 ,..... 08/01/2010 to 07/31/2011 31,970,000 08/01/2011 to 07/31/2012 29,970,000 f""'l !, -i 08/0112012 to 07/31/2013 27,855,000 ~ 08/01/2013 to 07/31/2014 25,620,000 i . 08/0112014 to 07/3112015 23,260,000 ,.... 08/01/2015 to 07/31/2016 20,765,000 08/01/2016 to 07/31/2017 18,130,000 ~ 08/01/2017 to 07/3112018 15,345,000 08/01/2018 to 07/3112019 12,400,000 08/01/2019 to 07/3112020 9,290,000 !""' 08/01/2020 to 07/31/2021 6,000,000 08/0112021 to 07/31/2022 2,525,000 r 45081402.7 2 -r r ' r - - r ' - - (Multicurrency-Cross Border) International Swap Dealers Association, Inc. MASTER AGREEMENT JPMorgan Chase Bank ("Party A") dated as of April 11, 2002 between and City of Lubbock, Texas ("Party B") have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: - 1. Interpretation (a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Copyright© 1992 by International Swap Dealers Association, Inc. 453745 - - r . - - - Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable:- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) Deduction or Withholding for Tax. (i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward toY an official receipt (or a certified copy), or other documentation reasonably acceptable toY, evidencing such payment to such authorities; and (4) if such Tax is an Indernnifiable Tax, pay toY, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or 2 ISDA® 1992 -r -~. - - -; - -,, (ii) (B) the failure of a representation made by Y pursuant to Section 3(t) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. LUlbility. If: (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount toY under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. · 3. Representations Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(t), at all times until the termination of this Agreement) that:- (a) Basic Representations. (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; 3 ISDA® 1992 - . ' -! ' ~··. r - - - -' (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (t) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(t) is accurate and true. 4. Agreements Each party agrees with the other that. so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- (a) Furnish Specified lnfonnation. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, 4 ISDA® 1992 -• - r . - - -'I in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event.or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (I) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; 5 ISDA® 1992 - - -# -- (iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of ( 1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party: - (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or 6 ISDA® 1992 -·4 - (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: - (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:- (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either ( 1) be required to pay an additional amount in respect of an Indernnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any lndemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section S(a)(viii); 7 ISDA®1992 - - -;: t ! ' r l .i f . " j (iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) Additional Termination Event. If any ''Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non~defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and .each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b )(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. 8 ISDA® 1992 - (c) . / (d) - (iii) Two Affected Parties. If an Illegality under Section S(b)(i)(l) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b){i) on action to avoid that Termination Event. (iv) Right to Terminate. If:- (1) a transfer under Section 6(b){ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b){i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). Calculations. (i) Statement. On or as soon as reasonably-practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and {2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.· (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. 9 ISDA® 1992 - - - ; ' (e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) (ii) E11ents of Default. If the Early Termination Date results from an Event of Default: - (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. Termination Events. If the Early Termination Date resf.!lts from a Termination Event:- (l) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: - (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and 10 ISDA® 1992 - r -I -' 7. (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount toY. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. Transfer Subject to Section 6(b )(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: - (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. Contractual Currency (a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the ''Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or 11 ISDA® 1992 - - ... ' ' - - - - - (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or ~laim or proof being made for any other sums payable in respect of this Agreement. (d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall he entered into as soon as practicable and may he executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (t) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. 12 ISDA® 1992 ..... . ' - - (g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement 10. Offices; Multibrancb Parties (a) If Section lO(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. Expenses A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13 ISDA® 1992 - -' 13. Governing Law and Jurisdiction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. Definitions As used in this Agreement:- "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b ). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affilio.te" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. 14 ISDA® 1992 ·-• "Applicable Rate" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section S(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent "Credit Event Upon Merger'' has the meaning specifiedin Section S(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider'' has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). ·~Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a) and, if appli<;able, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and «[awful" and «unlawful" will be construed accordingly. uLocal Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this 15 ISDA®l992 - -" . Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section S(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section ll. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. aMarket Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market- maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market- maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined . "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Parly" has the meaning specified in Section 6(a). "0/fJCe" means a branch or office of a party, which may be such party's head or home office. 16 ISDA® 1992 Ji'M..· -I -Ji """' ' . "Potentiill Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off' means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meanings specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specifted Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross- currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any stamp, registration, documentation or similar tax. ••Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. ••Tax Event" has the meaning specified in Section S(b ). "Tax Event Upon Merger" has the meaning specified in Section S(b). 17 ISDA® 1992 -'#:- - - - "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if"Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about ll:OO a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to .be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. 18 ISDA®l992 - - IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. JPI\lORGAN CHASE BANK ~-J_ By: ................................................................... . Name: Title: Date: ANNA MARlA BEISSEl VICE PRESIDENT CITY OF LUBBOCK, TEXAS By: .................................................................. . Name: Title: Date: Attest: By: .................................................................. . Title: 19 ISDA® 1992 - r - - - IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. JPMORGAN CHASE BANK CITY OF LUBBOCK, TEXAS By: ................................................................... . Name: @.fk . .P./ .... Name:'!..~ .. Title: Title: Date: Date: Attest: By: ... ~~~;: .. Title: ... ~ 19 ISDA® 1992 ,...., ' - ~ ,,, __ oo; ,.., ;,-.. (1) -(2) SCHEDULE to the MASTER AGREEMENT dated as of Aprilll, 2002 between [EXECUTION COPY] JPMorgan Chase Bank ("Party A") and City of Lubbock, Texas ("Party B") PART I Termination Provisions and Certain Other Matters Transactions. The parties understand and agree that ''Transactions" entered into under this Agreement shall, with respect to Party B, relate solely to the System and, unless otherwise specified in the related Confirmation, be payable solely from Net Revenues. "Specified Entity" means, in relation to Party A, for the purpose of: Section 5(a)(v), any Affiliate of Party A; Section 5(a)(vi), none; Section 5(a)(vii), none; and Section 5(b)(iv), none; and, in relation to Party B, for the purpose of: Section 5(a)(v), none; Section 5(a)(vi), none; Section 5(a)(vii), none; and Section 5(b)(iv), none. r """' lie II'"'\ r - M ' . •· . .,..., .. r -· r .- (3) (4) (5) (6) (7) (8) (9) "Specified Transaction" will have the meaning specified in Section 14, except that with respect to Party B, such term shall include only those transactions described therein pursuant to which Party B's obligations are payable in whole or in part from Gross Revenues. The "Cross-Default" provisions of Section S(a)(vi) will apply to Party A and Party B, and for purposes of such provisions, the following shall apply: (a) "Specified Indebtedness" will have the meaning specified in Section 14, except that (i) with respect to Party A, such term shall not include obligations in respect of deposits received in the ordinary course of such party's banking business, and (ii) with respect to Party B, such term shall include only those obligations payable in whole or in part from Gross Revenues. (b) "Threshold Amount" means, with respect to Party A, an amount equal to three percent of the shareholders' equity of Party A; and with respect to Party B, u.s. $6,000,000. The "Credit Event Upon Merger" provisions of Section S(b)(iv) will not apply to Party A and will not apply to Party B. The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or Party B. Payments on Early Termination. For the purpose of Section 6( e): (i) Market Quotation will apply; and (ii) The Second Method will apply. "Termination Currency" means United States Dollars. Additional Event of Default. Section S(a) of the Agreement is hereby amended to include the following additional Event of Default with respect to Party B, which shall be added as subparagraph (ix) of such Section S(a): "(ix) Authority; Repudiation. Party B shall cease to have authority to make payments under this Agreement or any Transaction subject to this Agreement, or any legislative body having jurisdiction over Party B shall adopt any legislation which would have the effect of repudiating this Agreement or any Transaction subject to this Agreement." 2 - .,-.. j ' - -' (10) Amendments to Section 5. Section 5 of the Agreement is hereby amended as follows: (a) Bankruptcy. Section 5(a)(vii)(6) of the Agreement is amended to read in its (b) entirety as follows: "(6) seeks or becomes subject to the appointment of an administrator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets (regardless of how brief such appointment may be, or whether any obligations are promptly assumed by another entity or whether any other event described in this clause (6) has occurred and is continuing) or, in the case of Party B, there shall be appointed or designated in respect of Party B, pursuant to any applicable law, an organization, board, authority, agency, body or entity to monitor, review, oversee, make recommendations to, or declare financial emergencies in respect of Party B, or there shall be declared or introduced or proposed for or by any legislative or regulatory body with competent jurisdiction, pursuant to any applicable law, the existence of a state of financial emergency or similar position of financial distress in respect of Party B." Merger Without Assumption. Section 5(a)(viii) of the Agreement is hereby amended to read in its entirety as follows: "(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity (or, without limiting the foregoing, if such party is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, such party or any Credit Support Provider of such Party) and, at the time of such consolidation, amalgamation, merger, transfer or succession: (1) the resulting, surviving, transferee or successor entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under this Agreement." 3 . i - - (11) Additional Termination Events. For purposes of Section 5(b)(v) of the Agreement the following shall be Additional Termination Events: (i) Credit Event. The occurrence at any time of a Credit Event with respect to Party B shall be an Additional Termination Event with respect to such party, in which case Party B shall be deemed to be the Affected Party and all Transactions will be Affected Transactions. As used herein, "Credit Event" shall mean as of any Certification Date, the Debt Service Coverage Ratio is less than 1.25. (ii) Modification of the Covered Indenture. Party B shall amend. repeal or otherwise modify the Covered Indenture without the prior written consent of Party A, and in the sole judgment of Party A, as a result of such amendment, repeal or other modification, the ability of Party B to comply with and perform its obligations under this Agreement or in respect of any Transaction hereunder shall be materially adversely affected. (iii) Optional Termination by Party B. Party B may, by written notice to Party A, terminate any Transaction at any time, or reduce the Notional Amount specified in the Confirmation with respect thereto, in either case specifying in such notice the date on which the termination or proposed reduction is to occur (the "Optional Early Termination Date"), which date shall not be earlier than 20 days from the date such notice was given. In the case of a partial reduction in the Notional Amount, the notice shall also state the amount by which the Notional Amount is to be reduced for each calculation period. Upon such notice becoming effective, (A} the date specified by Party B shall be deemed an Early Termination Date, (B) Party B shall be the sole Affected Party, (C) the applicable Transaction shall be the sole Affected Transaction, (D) Market Quotation and Second Method shall be selected for purposes of Payments on Early Termination, and (E) in the case of a partial reduction in the Notional Amount, the amount by which such Notional Amount is to be reduced shall be deemed the amount to be terminated on the Early Termination Date, and the parties shall execute an amendment to the Confirmation relating to such Transaction to amend the Notional Amount to reflect such reduction. Notwithstanding anything herein to the contrary, the parties will be obligated to pay any accrued amounts that would otherwise be due on the Optional Termination Date. From and after an Optional Early Termination Date with respect to any Transaction, neither party shall have any payment obligation to the other in respect of the Transaction so terminated or in respect of the amount of any reduction in the Notional Amount thereof, as the case may be, except payment of all Unpaid Amounts relating thereto calculated to the Optional Termination Date. Notwithstanding anything contained herein to the contrary, prior to and as a condition to the exercise by Party B of the optional termination set forth in this paragraph, Party A may request written evidence from PartyB of Party B's ability to pay any Settlement Amount due upon such optional termination. 4 - r ...... ,, I PART2 Tax Representations None. PART3 Agreement to Deliver Documents For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable: Party required to deliver document 1. Party A 2. Party A 3. Party B 4. PartyB Form/Document/ Certificate Annual report of Party A Opinion of counsel satisfactory to Party B substantially in the form attached hereto as Exhibit ll Annual Report of Party B containing consolidated financial statements certified by independent certified public accountants and prepared in accordance with accounting principles that are generally accepted for governmental entities in the United States Opinion of counsel satisfactory to Party A substantially in the form of Exhibit I hereto, and any restatement, update or supplement to such opinion in connection with any Transaction 5 Date by which to be delivered Upon request Upon execution and delivery of this Agreement As soon as available, and in any event within 180 days after the end of each fiscal year of Party B Upon execution and delivery of this Agreement and, upon request of Party A, prior to the execution and delivery of any Confirmation hereunder Covered by Section 3(d) Representation Yes No Yes No -y rl Party required Covered by to deliver Form/Document/ Date by which Section 3(d) ,.... document Certificate to be delivered Representation 5. PartyB Certified copies of all Upon execution Yes ,_ resolutions adopted or other and delivery of ' actions taken by Party B to this Agreement authorize the execution, and, upon request ~ delivery and performance of of Party A, prior ' this Agreement, along with to the execution such other documents, and delivery of ,_ certificates, or other any Confirmation information with respect to ,...., such authorization as Party A may reasonably request, and in connection with any ..... Transaction, any supplements ,, j to such authorization or additional authorization ,...., relating to such Transaction 6. Party B A certified copy of the Upon execution Yes ,.., Ordinance and delivery of this Agreement ,...., 7. Party B A certificate duly executed by Upon each Yes an authorized officer of Party B Certification Date as to the Debt Service ,_ Coverage Ratio 8. Party A and Certificate of authority and Upon execution Yes ,... Party B specimen signatures of and deli very of ' individuals executing this this Agreement Agreement, Confirmations and and thereafter -' ' each Credit Support Document upon request of (as applicable) the other party ,.... 6 - (1) I"""' ' - - PART4 Miscellaneous Address for Notices. For the purpose of Section 12(a) of this Agreement: Address for notice or communications to Party A: Any notice relating to a particular Transaction shall be delivered to the address or facsimile or telex number specified in the Confirmation of such Transaction. Any notice delivered for purposes of Sections 5 and 6 of this Agreement shall be delivered to the following address: JPMorgan Chase Bank Attention: Legal Department-Capital Markets Group 270 Park A venue, 40th Floor New York, New York 10017-2070 Telex No.: 232337; Answerback: CBC UR Facsimile No.: {212) 270-7468 With respect to the delivery to Party A of all financial statements and certificates pursuant to items (3) and (7) of Part 3 of this Schedule: JPMorgan Chase Bank Attention: Anne Jarema-Credit Analysis Team 270 Park A venue, 22nd Floor New York, New York 10017-2070 Telephone: (212) 270-2361 Facsimile: (212) 270-2642 Address for notice or communications to Party B: City of Lubbock, Texas Attention: Director of Finance P.O. Box 2000 Lubbock, Texas 79457-2000 Facsimile No.: (806) 775-2033 7 -• - - - r - - -[ - (2) (3) (4) with a copy to: First Southwest Company Attention: Mike Marz 1700 Pacific A venue, Suite 500 Dallas, Texas 75201 Facsimile No.: (214) 954-4339 Process Agent. For the purpose of Section 13(c): Party A appoints as its Process Agent: Not applicable. Party B appoints as its Process Agent: Not applicable. Offices. The provisions of Section lO(a) will apply to this Agreement. Multibranch Party. For the purpose of Section 10 of this Agreement: Party A is a Multi branch Party and may act through its New York and London office. Party B is not a Multibranch Party. (5) Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in a Confirmation in relation to the relevant Transaction. (6) Credit Support Documents. With respect to Party B, the Ordinance shall constitute a "Credit Support Document" for all purposes of this Agreement. With respect to Party A, the ISDA Credit Support Annex and supplementary Paragraph 13 -''Elections and Variables" thereto, attached hereto as Exhibit ill and by this reference incorporated herein, shall constitute a "Credit Support Document" for all purposes of this Agreement. (7) Credit Support Provider. Not applicable with respect to either party. (8) Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas (without reference to choice of law doctrine). (9) Netting of Payments. Section 2(c)(ii) of this Agreement will apply. (1) PARTS Other Provisions Set-off. (i) Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer'') under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under 8 -' -• - - - - - Section 5(b)(iv) has occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any Other Payment Amount (as hereinafter defined). As used herein, "Other Payment Amount" shall mean any payment obligation of any description whatsoever (whether arising at such time or in the future or upon the occurrence of a contingency, but in the case of any future or contingent obligation, only if and to the extent such payment obligation may by its terms then be accelerated) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation or whether the relevant party is legally or beneficially the holder of the obligation) arising under any other agreement between the Payee and the Payer or any instrument or undertaking issued or executed or guaranteed by the Payee to, or in favor of, the Payer or any bond, note, or other debt instrument issued or guaranteed by the Payee and owned or held beneficially by the Payer as a result of the purchase thereof by or on behalf of the Payer, whether directly from the issuer or in the secondary market (and the Other Payment Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this section. For purposes of this subparagraph (i), the term "Other Payment Amount," as it relates to Party B as Payer or Payee, shall be limited to obligations payable (in whole or in part) from or which, when paid to Party B, will be included in, Gross Revenues. For purposes of the foregoing, either the Early Termination Amount or the Other Payment Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. Nothing in this section shall be effective to create a charge or other security interest. This section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (ii) Notwithstanding anything to the contrary set forth in this Agreement, a party (the "Delivering Party") may, in its discretion, satisfy, in whole or in part, any payment obligation arising under Section 6 in respect of any Early Termination Date which is designated or occurs as a result of an Event of Default in respect of which the other party is the Defaulting Party or which is designated as a result of a Termination Event in respect of which the other party is the sole Affected Party by delivering to such other party (the "Receiving Party"), or for the account of the Receiving Party, bond(s), note(s), or other debt instrument(s) issued or guaranteed by the Receiving Party and owned or held legally or beneficially by or on behalf of the Delivering Party in a face amount equal to the entirety or relevant part, as the case may be, of the amount of such payment obligation. Any bond, note, or other debt instrument denominated in a currency other than the Termination Currency shall, for this purpose, be valued in an amount of Termination Currency determined by the Delivering Party based upon a currency exchange rate determined in a commercially reasonable manner. Any delivery by a 9 - - r r - - r Delivering Party shall be made in the manner customary for the relevant bond, note, or debt instrument (including, without limitation, through a depository institution or clearance system) or, if the Delivering Party deems such delivery to be impractical, in a commercially reasonable manner determined by the Delivering Party. For purposes of this subparagraph (ii), in circumstances in which Party B is the Receiving Party, any bond, note or other debt instrument delivered by Party A, as the Delivering Party, shall include only bonds, notes or other debt instruments payable, in whole or in part, from the Gross Revenues. (2) Exchange of Confirmations. For each Transaction entered into hereunder, Party A shall promptly send to Party B a Confirmation, via telex or facsimile transmission. Party B agrees to respond to such Confirmation within 10 Local Business Days, either confirming agreement thereto or requesting a correction of any error(s) contained therein. Failure by Party B to respond within such period shall not affect the validity or enforceability of such (3) (4) · Transaction and shall be deemed to be an affirmation of the terms contained in such Confirmation, absent manifest error. The parties agree that any such exchange of telexes or facsimile transmissions shall constitute a Confirmation for all purposes hereunder. Notwithstanding the foregoing, no Confirmation shall create any obligation on the part of Party B unless the Agreement (including the Confirmation) shall have been approved by the Attorney General of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Agreement or any Credit Support Document. Each party (i) certifies that no representative, agent or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Agreement and provide for any Credit Support Document, as applicable, by, among other things, the mutual waivers and certifications in this Section. Telephonic Recording. Each party (i) consents to the recording of the telephone conversations of trading, marketing and operations personnel of the parties and their Affiliates in connection with this Agreement or any potential Transaction and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel of it and its Affiliates. 10 - (5) - (6) -~' I""'\ ' " -., f""'' - - - Obligations. Section 2(a)(iii) of this Agreement is hereby amended to read in its entirety as follows: "(iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default, Potential Event of Default or Incipient lllegality with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement." Representations. (a) (b) The introductory clause of Section 3 of this Agreement is hereby amended to read in its entirety as follows: "Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(a) and 3(g), at all times until the termination of this Agreement) that:". Section 3(a)(ii) of this Agreement is hereby amended to read in its entirety as follows: "(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all-necessary action and made all necessary determinations and findings to authorize such execution, deli very and performance;". (c) Section 3(b) of this Agreement is hereby amended to read in its entirety as follows: (d) "(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Incipient lllegality (in the case of a Government Entity) or Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party." Section 3 of this Agreement is hereby amended by adding the following subsection "(g)" thereto, which subsection shall only apply to the Government Entity: 11 ,.... ' """" ' ' t~"" --- ,.... j.,-~ - - r f -• -r - (7) (e) "(g) Non-Speculation. This Agreement has been, and each Transaction hereunder will be (and, if applicable, has been) entered into for purposes of managing its borrowings or investments and not for purposes of speculation. Further Representations. Party B represents to Party A (which representations will be deemed to be repeated by Party B on each date on which a Transaction is entered into) that: (i) (ii) Generally Accepted Accounting Principles. The financial information delivered by it pursuant to Part 3 of this Schedule, including the related schedules and notes thereto, has been prepared in accordance with accounting principles established that are generally accepted for governmental entities in the United States applied consistently throughout the periods involved (except as disclosed therein). No Material Contingent Obligation(s). Party B does not have any material contingent obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment, which is not reflected in the financial statements delivered to Party A pursuant to this Schedule or in the notes thereto. Agreements. (a) (b) The introductory clause of Section 4 of this Agreement is hereby amended to read in its entirety as follows: "Each party agrees with the other (or, in the case of Section 4(f) and (g), Party B agrees with the other party) that, so long as eit;her party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:". Section 4 of this Agreement is hereby amended by adding the following subsections "(f)" and "(g)" thereto: "(f) Compliance with the Ordinance. Party B will observe, perform and fulfill each provision in the Ordinance applicable to it in effect on the Incorporation Date, as any of those provisions may be amended, supplemented or modified for purposes of this Agreement with the prior written consent of Party A (the ''Incorporated Provisions"), with the effect that Party A will have the benefit of each of the Incorporated Provisions (including, without limitation, covenants, right to consent to certain actions subject to consent under the Ordinance and delivery of financial statements and other notices and information). In the event the Ordinance ceases to be in effect prior to the termination of this Agreement, the 12 -.. - - - - (8} (9} Incorporated Provisions (other than those provisions requiring payments in respect of bonds, notes, warrants or other similar instruments issued under the Ordinance} will remain in full force and effect for purposes of this Agreement as though set forth herein until such date on which all of the obligations of Party B under this Agreement and any obligations of Party B or any Credit Support Provider of Party B under a Credit Support Document have been fully satisfied. The Incorporated Provisions are hereby incorporated by reference and made a part of this Agreement to the same extent as if such provisions were set forth herein. Any amendment, supplement, modification or waiver of any of the Incorporated Provisions without the prior written consent of Party A shall have no force and effect with respect to this Agreement. Any amendment, supplement or modification for which such consent is obtained shall be part of the Incorporated Provisions for purposes of this Agreement. (g) Notice of Incipient Illegality. If an Incipient lllegality occurs, the Government Entity will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient illegality as the other party may reasonably require." Hedge Agreement; Security and Source of Payment of Party B's Obligations. This Agreement constitutes a "Hedge Agreement" under the terms of the Ordinance and as such shall be entitled to such rights and benefits under the Ordinance as are described therein. The obligations of Party B hereunder and under each Transaction are and shall be payable solely from the Net Revenues (as defined in the Ordinance} and not from any money raised by taxation, and no other recourse may be had against other assets of Party B for or in respect of such obligations. Pursuant to the Ordinance, Party B has granted as security _ for its obligations under the Agreement and the initial Transaction a lien on and pledge of such Net Revenues, which lien and pledge is (i} prior and superior in claim, rank, and dignity to the lien on and pledge of Net Revenues securing payment of the Junior Obligations and Subordinate Obligations (as each such term is defined in the Ordinance}, insofar as such lien and pledge secures payment of obligations of Party B under the Agreement other than any Settlement Amount due upon early termination of any Transaction, and (ii} junior and subordinate in claim, rank, and dignity to the lien on and pledge of Net Revenues securing the payment of the Junior Obligations, but prior and superior in claim, rank, and dignity to the lien on and pledge of Net Revenues securing payment of the Subordinate Obligations, insofar as such lien and pledge secure payment of any such Settlement Amount. Immunity; Writ of Mandamus. Party B represents and warrants that it is not entitled to claim immunity from suit or jurisdiction of any court in any action to enforce this Agreement. Party B further represents and agrees that Party A is empowered to proceed, by mandamus or other lawful remedy, to enforce and compel performance by officers of Party B of all agreements of Party B contained herein and in the Ordinance, including, but not limited to, the obligation of Party B to make payment of any amount due and payable by 13 ~ ' ' ,..., - - - - - - - - Party B in respect of any Transaction hereunder (including payment of any Settlement Amount). (10) Eligible Contract Participant. Each party represents to the other party (which representation will be deemed to be repeated by each party on each date on which a Transaction is entered into) that it is an "eligible contract participant", as defined in the Commodity Futures Modernization Act of 2000. ( 11) Relationship Between Parties. The following representation shall be inserted as a new Section 3(h) of this Agreement: "(h) Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): (i) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as 'a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction." ISDA EMU Protocol. The parties agree that the definitions and provisions contained in Annexes 1 and 3 and Section 6 of the ISDA EMU Protocol published on 6th May 1998 (the "ISDA Protocol"), are incorporated into and apply to this Agreement and form a part hereof. References in those definitions and provisions to any "ISDA Master Agreement" will be deemed to be references to this Agreement. (13) ISDA Countemarty Definitions. Reference is hereby made to the 1992 ISDA U.S. Municipal Counterparty Definitions (the "1992 Muni Definitions") and the 2000 ISDA Definitions (the "2000 Definitions") (collectively, the "ISDA Definitions") each as published by the International Swaps and Derivatives Association, Inc., which are hereby 14 -" ' -· - "'"" ~-_; - r- - - incorporated by reference herein. Any terms used and not otherwise defined herein which are contained in the ISDA Definitions shall have the meaning set forth therein. (14) Scope of Agreement. Notwithstanding anything contained in this Agreement to the contrary, any transaction which may otherwise constitute a "Specified Transaction" for purposes of this Agreement which has been or will be entered into between the parties shall constitute a "Transaction" which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless any Confirmation with respect to a Transaction entered into after the execution of this Agreement expressly provides otherwise. (15) (16) Inconsistency. In the event of any inconsistency between any of the following documents, the relevant document first listed below shall govern: (i) a Confirmation; (ii) the Schedule and Paragraph 13-Elections and Variables to the Credit support Annex (as applicable); (iii) the ISDA Definitions; and (iv) the printed forms of ISDA Master Agreement and ISDA Credit Support Annex (as applicable). In the event of any inconsistency between the provision contained in the 2000 Definitions and the 1992 Muni Definitions, the 1992 Muni Definitions shall prevaiL Definitions. Section 14 of this Agreement is hereby amended to add or amend the following definitions. Definitions so added shall be inserted in such Section 14 in their appropriate alphabetical order: "Affiliate" will have the meaning specified in Section 14 of this Agreement. "Bonds" means, collectively, the Waterworks Revenue Refunding Bonds, Series 2005, intended to be issued by Party B in accordance with the Ordinance, and any other Parity Obligations issued or entered into from time to time by Party B in accordance with the Ordinance. "Brazos River Authority Obligations" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995, with respect to which Party B is contractually obligated to make payments in respect of principal and interest on such obligations. "Certification Date" means the 30th day following each fiscal quarter of Party B. "Debt Service Coverage Ratio" means, as of any Certification Date, the ratio of (i) Net Revenues of Party B plus all amounts payable by Party B with respect to the Brazos River Authority Obligations during the preceding four fiscal quarters of Party B, to (ii) all amounts payable by Party B with respect to Parity Obligations and the Brazos River Authority Obligations for such preceding four fiscal quarters. "Government Entity" shall mean Party B. 15 - - - ,.., r-. - "Gross Revenues" has the meaning set forth in the Ordinance. " 'Incipient Illegality' means (a) the enactment by any legislative body with competent jurisdiction over a Government Entity of legislation which, if adopted as law, would render unlawful (i) the performance by such Government Entity of any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of a Transaction or the compliance by such Government Entity with any other material provision of this Agreement relating to such Transaction or (ii) the performance by a Government Entity or a Credit Support Provider of such Government Entity of any contingent or other obligation which the Government Entity (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction, (b) any assertion in any proceeding, forum or action by a Government Entity, in respect of such Government Entity or in respect of any entity located or organised under the laws of the state in which such Government Entity is located to the effect that performance under this Agreement or similar agreements is unlawful or (c) the occurrence with respect to a Government Entity or any Credit Support Provider of such Government Entity of any event that constitutes an lllegality." "Incorporation Date" means the date of this Agreement. "Net Revenues" has the meaning set forth in the Ordinance. "Ordinance" means the Ordinance adopted by the City Council of the City of Lubbock, Texas on second reading on Aprilll, 2002 authorizing this Agreement and the first Transaction hereunder as confirmed by the related Confirmation. "Parity Obligations" has the meaning set forth in the Ordinance. "System" means the water system of Party B, as specifically described in the Ordinance. 16 n ' -I - - -; - - Please confirm your agreement to the terms of the foregoing Schedule by signing below. ATTEST: Secretary JPMORGAN CHASE BANK By:~~ Name: Title: ANNA MARIA BEISSEl VICE PRESIDENT CITY OF LUBBOCK, TEXAS Mayor 17 r ,... ' ' - - - - - - Please con:finn your agreement to the tenns of the foregoing Schedule by signing below. JPMORGAN CHASE BANK By: ________ _ Name: Title: CITY OF LUBBOCK, TEXAS Mayor A1TEST: 17 -~-) -• t - -- EXHIBIT I FORM OF OPINION OF COUNSEL TO PARTY B JPMorgan Chase Bank 270 Park A venue New York, New York 10017-2070 Ladies and Gentlemen: April_, 2002 We have acted as counsel to the City of Lubbock, Texas (the "City"), a home rule city organized under the Constitution of the State of Texas, in connection with its execution and delivery of the ISDA Master Agreement, dated as of April 11, 2002, the Schedule thereto (the "Schedule"), and the Confirmation, dated April _, 2002 (collectively, the "ISDA Agreement"), between the City and JPMorgan Chase Bank ("JPMorgan"), pursuant to an ordinance (the "Ordinance") of the City Council of the City passed on second reading on Aprilll, 2002, authorizing the ISDA Agreement. Except as otherwise defined herein, capitalized terms used herein have the meanings given to them in the ISDA Agreement. The ISDA Agreement and the Ordinance collectively are referred to herein as the "Swap Agreements". This opinion letter is delivered at the request of the City pursuant to Part 3 of the Schedule. In rendering the opinions expressed herein, we have examined the Swap Agreements. In addition, we have examined such certificates of the City, such copies certified or otherwise identified to. our satisfaction of documents and records of the City (including the Ordinance), such certificates, instruments, and other written communications of other public officials, and such other records, certificates, instruments, agreements and documents, in each case as we have deemed relevant and appropriate as the basis for the opinions expressed herein. As to matters of fact relevant to the opinions expressed herein, and as to factual matters arising in connection with the foregoing examinations, we have relied, to the extent we have deemed appropriate, upon the findings, representations, and warranties contained in the Swap Agreements, certificates of corporate officers of the City, and certificates and other communications of public officials, without further investigation by us as to the facts set forth therein. In making such examination and in such reliance, we have assumed (i) the genuineness and authenticity of all signatures in all such records, certificates, instruments, agreements, and documents, (ii) the legal capacity of each natural person identified in each of those records, certificates, instruments, agreements, and documents, (iii) the authenticity and completeness of all documents, certificates, agreements, instruments, and records submitted to us as originals and the conformity to authentic original documents, certificates, agreements, instruments, and records of all copies submitted to us as copies, - - - - - - and (iv) the conformity to the final executed original version of the ISDA Agreement reviewed by us in draft form or otherwise unsigned by the parties thereto. Based upon the foregoing, and in reliance thereon, and having due regard for such legal considerations as we have deemed relevant, and subject in all respects to the assumptions, qualifications, limitations, comments, and exceptions set forth herein, we are of the opinion that, under the law of the State of Texas: 1. The City has the requisite legal power and authority to execute and deliver the ISDA Agreement, to enact the Ordinance, and to perform its obligations under the ISDA Agreement and the Ordinance and has duly authorized such execution, delivery, and performance. 2. Enactment of the Ordinance and execution and delivery of the ISDA Agreement by the City do not, and the City may comply with the Swap Agreements in a manner which will not, violate any statutory law or regulation applicable to it or any provision of its charter or any other indenture, ordinance or agreement known to us to which the City is a party or by which it is bound. 3. No authorizations of, or exemptions, actions or approvals by, or notices to, or filings with, any governmental authority is required to be obtained or made by the City under any statutory law or regulation applicable to it as a condition to enactment of the Ordinance or execution and delivery by the City of the ISDA Agreement, or to the performance by the City of its obligations thereunder, except such as have been obtained, given or made. 4. The Swap Agreements are legal, valid, and binding obligations of the City, enforceable against the €ity in accordance with their respective terms. 5. To our knowledge, there is no action or proceeding against the City, pending or overtly threatened in writing, before any court, government agency, or arbitrator which, by the terms of any pleadings or demand letter provided to us by the City, seeks to prohibit the enforceability of the Swap Agreements against the City. 6. The obligations of the City under the Swap Agreements, including any scheduled payments or termination payment due from the City in respect of any Transaction thereunder, are secured by a lien on and security interest in the Net Revenues pledged by the City under the Ordinance. The City is duly authorized to pledge such Net Revenues, and has pledged the same, to the payment of amounts due under the Swap Agreements, and the lien of such pledge is valid and binding, and no further action on the part of the City or any other party is required to perfect the same or the interest of JPMorgan therein. The opinions expressed herein are further subject to the following assumptions, qualifications, limitations, comments, and exceptions: A. The opinions expressed in paragraph 4 are subject to the following: Exhibit I -Page 2 -. ' - - -r - - (i) We have assumed that JPMorgan has requisite corporate power and authority to execute and deliver the ISDA Agreement and to perform its obligations thereunder and has duly authorized such execution, delivery, and performance, and that the ISDA Agreement constitutes the legal, valid, and binding obligation of JPMorgan, enforceable against JPMorgan in accordance with its terms. (ii) The enforceability of the Swap Agreements is subject to, and may be limited or affected by, (i) bankruptcy, insolvency, reorganization, liquidation, fraudulent conveyance, fraudulent transfer, preference, conservatorship, rearrangement, moratorium, receivership, and other similar laws (including court decisions) in effect and affecting the rights and remedies of creditors generally or providing for relief of debtors, (ii) the refusal of a particular court (a) to grant certain equitable remedies, including, without limiting the generality thereof, specific performance, or (b) to grant a particular remedy sought under the Swap Agreements as opposed to another remedy provided for therein or another remedy available at law or in equity, (iii) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law), (iv) judicial discretion, (v) standards of good faith, fair dealing, materiality, impracticability or impossibility of performance, unconscionability, diligence, reasonableness and care established by applicable law, including, without limitation, those provided in the Uniform Commercial Code, applicable principles of common law, and judicial decisions, and (vi) Article XI, Section 9 of the Constitution of Texas, which provides that property of the City held only for public purposes is exempt from forced sale. (iii) The provisions of the Swap Agreements that obligate any party to pay another party stipulated sums or amounts or sums or amounts determined by another party, in whatsoever capacity, upon the occurrence of one or more specified events may be unenforceable unless, at the time the Transaction is entered into, (a) such sums or amounts are reasonably proportionate to the probable loss anticipated to be caused by such event or events giving rise to the obligation to pay such sums or amounts, (b) the amount of actual loss resulting from such event or events cannot be easily determined, and (c) such provisions are not intended to punish non-performance or to compel performance. (iv) We express no opinion as to the availability of equitable remedies, and further, we express no opinion as to the enforceability of any provision of the Swap Agreements that (a) relates to rights of set-off (or the waiver thereof), and we note that rights of set-off may be limited to matured mutual obligations, (b) relates to indemnification or exculpation to the extent any such provisions violate public policy or applicable laws or would purport to require any person to provide indemnification or reimbursement or waive indemnification or reimbursement for losses or expenses caused by fraud, illegality, breach, violation of law, negligence, or willful misconduct of an indemnified or exculpated party, (c) waives, restricts, or denies, or has the effect of waiving, restricting, or denying, any right or defense that cannot be waived, so restricted, or denied as a matter of law, (d) purports to require that all amendments, waivers, and Exhibit I -Page 3 - - ,... - ,... ., terminations be in writing, (e) purports to make irrevocable the appointment of an agent or attorney in fact, (t) purports to establish, or restrict or otherwise affect, jurisdiction, venue, submission to, or acceptance of, a court's jurisdiction, objections to the laying of venue or submission or acceptance of jurisdiction, limitation periods, or other procedural rights in any proceeding, (g) purports to permit the recording of communications between the parties or others which is in violation of applicable law, or to waive any rights or remedies related thereto, (h) purports to establish or satisfy evidentiary standards or characterizations, treatments, or effect of payments or rights, (i) negates the effect of any course of dealing or any exercise, or failure or delay to exercise, any right, power, privilege, or remedy, (j) authorizes conclusive determinations by any person or entity to make such determinations in its sole discretion, (k) restricts access to legal or equitable remedies, (1) states that (1) prohibition, illegality, invalidity, or unenforceability of any provision of the Swap Agreements in any jurisdiction shall not (A) invalidate the remaining provisions of the Swap Agreements or (B) affect that provision in any other jurisdiction, or (2) the right of JPMorgan to exercise any right or remedy on the basis of any misrepresentation or breach of warranty is not affected by any action by JPMorgan, (m) permits an action against any person or entity to be brought in the courts of the State of Texas or the federal courts of the United States of America sitting in the State of Texas, as applicable, ( 1) if such person has not been served with process in that action in accordance with applicable rules of procedure, or (2) if such court in which the action is brought does not have jurisdiction over the subject matter of the action, or (n) restricts a party's right to transfer its right to receive payments under the Swap Agreements or purports to void the Swap Agreements on any transfer not made in compliance with its terrils; provided, however, in our opinion, the unenforceability of the remedial and other provisions referred to in the preceding clauses does not render void or invalid the remaining provisions of the Swap Agreements and does not, subject to the other qualifications, exceptions, limitations, and assumptions set forth herein, make the remedies generally afforded by the Swap Agreements inadequate for the realization of the substantive principal legal benefits purported to be provided by the Swap Agreements (except for the economic consequences resulting from any delay or procedure imposed by applicable law). B. In rendering the foregoing opinions, we do not express any opinion as to any laws, statutes, regulations, directives, interpretations, opinions, orders, rulings, authorities, or the like regulating, governing, or applicable to JPMorgan (or any successor or assign) (collectively, the "Rules"), or its execution, delivery, or performance of the ISDA Agreement or the consummation of the transactions contemplated thereby, or JPMorgan's (or any successor's or assign's) compliance with any of the Rules in connection with the Swap Agreements or the transactions provided for therein. Further, we have assumed that the Swap Agreements will be enforced in compliance with the enforceable provisions thereof and all requirements of applicable law. C. As used herein, the phrase "to our knowledge" or words of similar import means conscious awareness of facts or other information by the lawyers in our firm who have devoted substantive attention to legal matters on behalf of the City and in no regard Exhibit I-Page 4 -. ' r, -f ' - - - - shall such phrase imply that we performed (nor shall any related inference be made that we performed) nor did we perform, in connection with this opinion letter, any examination of courts, governmental agencies, arbitrators, boards, other tribunals, or public records with respect to any actions, litigation, investigations, or proceedings, or judgments, orders, or decrees, in any event applicable to the City or any of its properties or interests. D. The opm10ns expressed herein are expressly limited to the internal substantive laws (including statutory laws and regulations) of the State of Texas and applicable federal statutory laws and regulations of the United States of America. In respect to such laws, in addition to other limitations set forth herein, such reference is limited to laws which are normally and customarily applicable to the City in relation to the transactions provided for in the Swap Agreements. References herein to "laws" of a jurisdiction are to the laws of that jurisdiction, other than the statutes and ordinances, the administrative decisions, and the rules and regulations of counties, towns, municipalities, and special political subdivisions other than the City (whether created or enabled through legislative action at the federal, state, or regional level), and judicial decisions to the extent that they deal with any of the foregoing . The opinions expressed herein are for the sole benefit of and may only be relied upon by JPMorgan and, without our prior written consent, may not be relied upon in any manner by any other person or entity. This opinion may not be furnished to any other person or entity without our prior written consent, except that this opinion may be provided (i) to the independent auditors and attorneys of JPMorgan, (ii) to any state or federal authority having regulatory jurisdiction over JPMorgan, (iii) pursuant to an order or legal process of any court or governmental agency, and (iv) to any permitted successor to JPMorgan under the terms of the Swap Agreements. The opinions expressed herein are as of the date of this opinion letter, and we make no undertaking to supplement such opinions if, after the date of this letter, facts or circumstances come to our attention or changes in the law occur which could affect such opinions. · Very truly yours, Exhibit I -Page 5 - -' r l ' - M ,... ' EXHIBIT II [FORM OF OPINION OF KING & SPALDING, COUNSEL TO JPMORGAN CHASE BANK] City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457-2000 To the Addressee: April _, 2002 We have acted as counsel to JPMorgan Chase Bank, a New York banking corporation ("JPMorgan Chase"), in connection with the execution and delivery by JPMorgan Chase of the ISDA Master Agreement, dated as of April 11, 2002, including the Schedule thereto (the "Master Agreement"), between the City of Lubbock, Texas (the "City") and JPMorgan Chase. The Master Agreement is to be supplemented by confirmations of Transactions to be entered into by the Authority and JPMorgan Chase from time to time (each a "Confirmation"), including a Confirmation relating to the initial Transaction under the Master Agreement, dated April _, 2002. The Master Agreement, together with the Schedule and all such Confirmations shall constitute one agreement and be referred to herein as the "Agreement"). Capitalized terms used but not otherwise defined herein have the meanings assigned thereto in the Agreement. In rendering this opinion, we have examined an executed original or copy of the Agreement and such records, documents, instruments, certificates of public officials and of JPMorgan Chase, and such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. In such examination, we have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity to originals of all items submitted to us as certified copies and the authenticity of the originals of such copies. As to certain matters of fact relevant to the opinions hereinafter expressed, we have relied upon certifications, statements, representations, and warranties of JPMorgan Chase, the City and their respective representatives, including statements, representations and warranties contained in the Agreement, and we have assumed and have not independently verified that all such certifications, statements, representations and warranties are true, accurate and complete. We have assumed that the City has the legal capacity, power and authority to execute, deliver and perform its obligations under the Agreement and that the Agreement - - - - - -, - - constitutes the legal, valid and binding agreement of the City and is enforceable against the City in accordance with the terms thereof. The Agreement provides that it is to be governed by and construed in accordance with the laws of the State of Texas. Notwithstanding such provision, for purposes of the opinions expressed herein we have assumed that the Agreement will be governed by and construed in accordance with the laws of the State of New York, and the opinions expressed herein are limited to the laws of the State of New York and the Federal laws of the United States of America. Based upon the foregoing and having regard to such legal considerations as we have deemed relevant, we are of the opinion, subject to the qualifications expressed herein, that: (1) JPMorgan Chase is duly licensed by the Superintendent of Banks of the State of New York to operate as a banking corporation in the State of New York. (2) The execution, delivery and performance by JPMorgan Chase of the Agreement do not contravene any law, rule or regulation of the State of New York or the laws of the United States. (3) No approval, consent or authorization of any governmental or public agency or authority or any other institution not already obtained is required for the execution by JPMorgan Chase of, or performance of JPMorgan Chase's obligations under, the Agreement. - (4) The Agreement has been duly executed and delivered by JPMorgan Chase and constitutes the legal, valid and binding obligation of JPMorgan Chase enforceable against JPMorgan Chase in accordance with its terms. The opinions expressed herein are subject to the following qualifications: (A) The enforceability of the Agreement and the rights and remedies thereunder are subject to and may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws from time to time in effect relating to or affecting generally the enforcement of creditors' rights, and (ii) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding at law or in equity). (B) The opinion expressed in paragraph 4 above is subject to the qualification that we express no opinion regarding the enforceability of Section 6(e) of the Agreement insofar as it purports to obligate a party, on termination of the Agreement, to pay an amount in excess of that measured by the lowest quotation from a Reference Market-maker. In addition, in connection with any such early termination on the grounds Exhibit II-Page 2 - ,.... ' - - of default, a court might limit the non-defaulting party's recovery to its actual damages in the circumstances, imposing its own settlement procedures in lieu of the provisions of Section 6(e) of the Agreement. (C) We express no opinion herein as to whether a court or other authority or body located outside the State of New York would enforce the governing law provision of, or honor, the Agreement. (D) We have rendered the optmons expressed herein based on facts and circumstances existing, and applicable laws, rules, regulations, court decisions and regulatory authority determinations in effect, on the date hereof. We disclaim any obligation to update or supplement this opinion letter for events occurring or coming to our attention after the date hereof. We are furnishing this letter to the addressee solely for its benefit, and no other person is entitled to rely hereon. Without the prior written consent of the undersigned, this letter may not be used, circulated, quoted, or otherwise referred to for any other purpose not disclosed or delivered to, or relied upon by, anyone other than the addressee. Very truly yours, Exhibit ll-Page 3 -' r r -' t -i - ,.. ' r -' - - EXHIBIT III CREDITSUPPORTANNEX [separately provided] !"""' • (Bilateral Form) (ISDA Agreements Subject to New York Law Only) International Swaps and Derivatives Association, Inc. CREDIT SUPPORT ANNEX to the Schedule to the ISDA MASTER AGREEMENT JPMorgan Chase Bank ("Party A") dated as of April 11, 2002 between and City of Lubbock, Texas ("Party B") This Annex: supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows:- Paragraph L Interpretation (a) Definitions and lnconsistem:y. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex: to Paragraphs are to Paragraphs of this Annex:. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) Secured Party and Pledgor. All references in this Annex to the "Secured Party" will be to either party when acting in that capacity and all corresponding references to the "Pledgor" will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. """" Paragraph 2. Security Interest - Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. Copyright (i) 1994 by International Swap Dealers Association. Inc. - - r - - - Paragraph 3. Credit Support Obligations (a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount. then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for any Valuation Date will equal the amount by which: (i) the Credit Support Amount exceeds (ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party. (b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date. if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount. then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable to the Secured Party for any Valuation Date will equal the amount by which: (i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds (ii) the Credit Support Amount. "Credit Support Amount'' means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) atrlndependent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and Substitutions (a) Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3. 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: (i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and (ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party. (b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. (c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if 2 ISDA ® 1994 - -' ' ,.... ,.... the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Dav following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). · (d) Substitutions. (i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); and (ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the "Substitution Date"); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support. Paragraph 5. Dispute Resolution If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in case of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and ( 4) if they fail to resolve the dispute by the Resolution Time, then:· (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute; (B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used for that Transaction (or Swap Transaction); and (C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. 3 ISDA ®1994 - - - ,... ' - ,... ' Paragraph 6. Holding and Using Posted Collateral (a) Care of Posted Collateral. Without limiting the Secured Party's rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law,and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. (b) Eligibility to Hold Posted Collateral; Custodians. (i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions. (iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to: (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and (ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above. (d) Distributions and Interest Amount. (i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). 4 ISDA ® 1994 •· . !"""~ (ii) Interest Amount. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2. Paragraph 7. Events of Default For purposes of Section 5(a)(iii)( 1) of this Agreement, an Event of Default will exist with respect to a party if: (i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or (iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party. ~> Paragraph 8. Certain Rights and Remedies - - (a) Secured Party's Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any; (iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect. Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived. 5 ISDA®1994 - - -r ' - ,.... -' - (b) Pledgor's Rights and Remedies. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement): (i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law with respect to Posted Collateral held by the Secured Party; (ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: (A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (B) to the extent that the Pledgor does not Set-off under {iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor. {c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b ). (d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. Paragraph 9. Representations Each party represents to the other party (which representation will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that: (i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the. action required of it under applicable law for perfection of that interest); and 6 ISDA® 1994 - r - - - (iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. Paragraph 10. Expenses (a) General. Except as otherwise provided in Paragraphs lO(b) and lO(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. (b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party's rights under Paragraph 6(c). (c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreem~nt. by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. Paragraph 11. Miscellaneous (a) Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obliged to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that the Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (b) Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount. (c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party's rights under Paragraph 6(c). (d) Good Faith and CommerciaUy Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. (e) Demands and Notices. All demands and notices given by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13. r (f) Specifications of Certain Matters. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. 7 ISDA® 1994 r r -~· - - Paragraph 12. Definitions As used in this Annex:- "Cash'' means the lawful currency of the United States of America. "Credit Support Amount" has the meaning specified in Paragraph 3. "Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13. "Delivery Amount" has the meaning specified in Paragraph 3(a). "Disputing Party" has the meaning specified in Paragraph 5. "Distributions" means, with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein. "Eligible Collateral" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "Eligible Credit Support" means Eligible Collateral and Other Eligible Support. "Exposure" means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of "Market Quotation"). "Independent Amount" means, with respect to party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Interest Amount" means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows: (x) the amount of Cash on that day; multiplied by (y) the Interest Rate in effect for that day; divided by (z) 360. "Interest Period" means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted CoiJateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred. "Interest Rate" means the rate specified in Paragraph 13. 8 ISDA® 1994 - - -' - - "Local Business Day," unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex. "Minimum Transfer Amount" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Notification Time" has the meaning specified in Paragraph 13. "Obligations" means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13. "Other Eligible Support" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "Other Posted Support" means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party. "Pledgor" means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). «Posted Collateral" means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash. "Posted Credit Support" means Posted Collateral and Other Posted Support. "Recalculation Date" means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the "Recalculation Date" means the most recent Valuation Date under Paragraph 3. "Resolution Time" has the meaning specified in Paragraph 13. "Return Amount" has the meaning specified in Paragraph 3(b). "Secured Party" means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support. "Specified Condition" means, with respect to a party, any event specified as such for that party in Paragraph 13. "Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i). "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). "Threshold" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable: (i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient; 9 ISDA® 1994 - -~ . L ..• r . - - (ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank. transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient; (iii) in the case of securities that can be paid or delivered in book-entry, the gtvmg of written instruments to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and (iv) in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13. "Valuation Agent" has the meaning specified in Paragraph 13. "Valuation Date" means each date specified in or otherwise determined pursuant to Paragraph 13. "Valuation Percentage" means, for any item of Eligible Collateral, the percentage specified in Paragraph 13. "Valuation Time" has the meaning specified in Paragraph 13. "Value" means for any Valuation Date or other date for which Value is calculated, and subject to ParagraphS in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A) Cash, the amount thereof; and (B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13. 10 ISDA ®1994 - - -' -! ' !""" [EXECUTION COPY] CREDIT SUPPORT ANNEX JPMorgan Chase Bank ("Party A") To the Schedule to the Master Agreement dated as of April 11, 2002 between and City of Lubbock, Texas ("Party B") Paragraph 13. Elections and Variables (a) (b) Security Interest for "Obligations". The term "Obligations" as used in this Annex includes no additional obligations with respect to either party. Credit Support Obligations. (i) Delivery Amount, Return Amount and Credit Support Amount. (A) "Delivery Amount" will have the meaning specified in Paragraph 3(a). (B) "Return Amount" will have the meaning specified in Paragraph 3(b). (C) "Credit Support Amount" will have the meaning specified in Paragraph 3. (ii) Eligible Collateral. The following items will qualify as "Eligible Collateral" for Party A as Pledgor: (A) USDCash (B) negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of one year or less from the Valuation Date 11 Valuation Percentage 100% 99% """' r - ~ !""* - """' . ' fill""! ~ ! I""'! - - - - (C) (D) (E) (F) (G) negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of more than one year but less than ten years from the Valuation Date negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of ten years or more from the Valuation Date Agency Securities having a remaining maturity of one year or less from the Valuation Date Agency Securities having a remaining maturity of more than one year but less than ten years from the Valuation Date Agen'?y Securities having a remaining maturity of ten years or more from the Valuation Date (H) USD denominated Commercial Paper rated Al/Pl by S&P and Moody's, respectively, which settles within DTC; provided, however, that Commercial Paper issued by either party or any of its Affiliates shall be excluded For purposes of the foregoing: Valuation Percentage 98% 96% 98% 97% 95% 97% (A) "Agency Securities" means negotiable debt obligations which are fully guaranteed as to both principal and interest by the Federal National Mortgage Association, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation, but excluding (i) interest only and principal only securities and (ii) Collateralized Mortgage Obligations, Real Estate Mortgage Investment Conduits and si.milar derivative securities. 12 r -,, i r ,, > > - - - - (iii) (B) "DTC" shall mean The Depository Trust & Clearing Corporation, or its successor. (C) "Moody's" shall mean Moody's Investors Service, Inc., or its successor. (D) "S&P" shall mean Standard & Poor's Ratings Group, or its successor. Other Eligible Support. There shall be no "Other Eligible Support" for either party for purposes of this Annex. (iv) Thresholds. (A) (B) I "Independent Amount" shall not apply for purposes of this Annex. "Threshold'' means, with respect to Party A, the amounts determined on the basis of the higher of the Credit Ratings set forth in the following table, provided, however, that if (i) Party A has no Credit Rating, or (ii) an Event of Default has occurred and is continuing with respect to Party A, Party A's Threshold shall be U.S.$0: Credit Rating (S&P I Moody's) A-/A3 and above BBB+/Baal BBB/Baa2 BBB-/Baa3 and below Threshold Party A Infinite US$5,000,000 US$2,500,000 US$0 As used herein, the term "Credit Rating" shall mean the rating assigned by S&P and Moody's to the long term, unsecured and unsubordinated indebtedness of Party A. (C) "Minimum Transfer Amount" means $100,000, provided, however, that if an Event of Default has occurred and is continuing with respect to Party A, the Minimum Transfer Amount shall be $0. (D) Rounding. The Delivery Amount and the Return Amount will be rounded up and down respectively to the nearest integral multiple of $10,000. 13 - - M ' -. ~ ! - -~~ - (c) Valuation and Timing. (d) (e) (f) (g) (i) "Valuation Agent" means Party A. (ii) "Valuation Date" means the first Local Business Day of each calendar month. (iii) "Valuation Time" means the close of business on the Local Business Day preceding the Valuation Date or date of calculation, as applicable. · (iv) "Notification Time" means by 1:00 p.m., New York time, on a Local Business Day. Conditions Precedent. With respect to Party A, an Illegality (if Party A is the Affected Party with respect to such Termination Event) will be a "Specified Condition". With respect to Party B, an Illegality and any Additional Termination Event (if Party B is the Affected Party with respect to such Termination Events) will be a "Specified Condition". · Substitution. (i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). (ii) Consent. Inapplicable. Dispute Resolution. (i) "Resolution Time" means 1:00 p.m., New York time, on the Local Business Day following the date on which notice is given that gives rise to a dispute under Paragraph 5. (ii) Value. For the purpose of Paragraphs S(i)(C) and S(ii), the Value of Posted Credit Support other than Cash will be calculated as follows: (A) with respect to any Eligible Collateral except Cash, the sum of (I) (x) the mean of the high bid and low asked prices quoted on such date by any principal market maker for such Eligible Collateral chosen by the Disputing Party, or (y) if no quotations are available from a principal market maker for such date, the mean of such high bid and low asked prices as of the first day prior to such date on which such quotations were available, plus (II) the accrued interest on such Eligible Collateral (except to the extent Transferred to a party pursuant to any applicable provision of this Agreement or included in the applicable price referred to in (l) of this clause (A)) as of such date; multiplied by the applicable Valuation Percentage. Holding and Using Posted Collateral (i) Eligibility to Hold Posted Collateral; Custodians. Party B will be entitled to hold Posted Collateral itself or through a Custodian pursuant to Paragraph 6(b ), provided that the following conditions applicable to it are satisfied: 14 Jll"'' I. -I ' ' r -; - - - - - -L (h) (i) (j) (k) (l) Party B is not a Defaulting Party. (2) The Custodian is a Bank (as defined in the Federal Deposit Insurance Act) located in the State of New York whose rating with respect to its long term unsecured, unsubordinated indebtedness is at least BBB-by S&P or Baal by Moody's. (ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to Party B. Distributions and Interest Amount. (i) Interest Rate. "Interest Rate" means, for any day, the "Federal Funds Overnight Rate" minus 1/8%. For the purposes hereof, "Federal Funds Overnight Rate" means, for any day, an interest rate per annum equal to the rate published as the Federal Funds Effective Rate that appears on Telerate Page 118 for such day. (ii) Transfer of Interest Amount. The Transfer of the Interest Amount will be made monthly on the second Local Business Day of each calendar month. Additional Representations. None. Other Eligible Support and Other Posted Support. (i) "Value" shall have no meaning with respect to Other Eligible Support and Other Posted Sup port. (ii) "Transfer" shall have no meaning with respect to Other Eligible Support and Other Posted Support. Demands and Notices. All demands, specifications and notices made by a party to this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here: · With respect to Party A: JPMorgan Chase Bank Collateral Middle Office Americas 3/0PS2 500 Stanton Christiana Road Newark, DE 19713 USA Telephone No.: 302-634-3191 Fax No.: 302-634-3260 15 -' r '""" ' ' ' - -.. - - ,... ' -! - - - (1) With respect to Party B: As set forth in the Schedule. Other Provisions. (i) Modification to Paragraph 1: The following subparagraph (b) is substituted for subparagraph (b) of the Annex: "(b) Secured Party and Pledgor. All references in this Annex to the "Secured Party" will be to Party B and all corresponding references to the "Pledgor" will be to Party A; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as beneficiary thereof to provisions of law generally relating to security interests and secured parties." (ii) Modification to Paragraph 2: The following Paragraph 2 ts substituted for Paragraph 2 of this Annex: "Paragraph 2. Security Interest. The Pledgor hereby pledges to the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party." (iii) Modification to Paragraph 9: The following first clause of Paragraph 9 is substituted for the first clause of this Annex: "Paragraph 9. Representations. The Pledgor represents to the Secured Party (which representations will be deemed to be repeated as of each date on which it Transfers Eligible Collateral) that:" (iv) Modifications to Paragraph 12: The following definitions of "Pledgor" and "Secured Party" are substituted for the definitions of those terms contained in Paragraph 12 of this Annex: "Pledgor" means Party A, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). "Secured Party" means Party B, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support." 16 - - - ,... - - - Please confirm your agreement to the terms of the foregoing Paragraph 13 by signing below: JPMORGAN CHASE BANK By:. __ ~~~-·~~~·~~~~~~-------Name~··---------~-N~NA~M~.A~R~IA~B~s~'~~~-L ______ ___ -'ltGt PRESlDtr.\1 Title:. __________________________ _ CITY OF LUBBOCK, TEXAS Name:~--------------------------- Mayor ATTEST: By:. ____________________________ __ Secretary -7- ,_ ' < -~· ' - Please confirm your agreement to the terms of the foregoing Paragraph 13 by signing below: JPMORGAN CHASE BANK By: ______________ _ Name:~---------------Title:,__ _____________ _ CITY OF LUBBOCK, TEXAS By:~}M~ ~ Name: ' Mayor ATTEST: 17 -t • ~. j -. -f ' - - -' - -; J;r···· - ATTN: FROM: RE: YOUR REF: OUR REF: DATE SENT: NO OF PAGES: CITY OF LUBBOCK, TEXAS SHLOMIRAZ On behalf of JP MORGAN SECURITIES IN CORPORA TED As Agent for JPMORGAN CHASE BANK-NEW YORK SWAP TRANSACTION CONFIRMATION TRADE DATE: 4/11/02 EFFECTIVE DATE: 5/1105 CONFIRMATION EFFECTIVE DATE: 4/11/02 513615 6 (Excluding Cover) - -• ' - Swap Transaction Date: April 11, 2002 The purpose of this letter agreement is to confirm the terms and conditions of the Swap Transaction entered into between: JPMORGAN CHASE BANK-NEW YORK and CITY OF LUBBOCK, TEXAS on the Trade Date and identified by the JPMorgan Deal Number specified below (the 'Swap Transaction'). This letter agreement constitutes a 'Confirmation' as referred to in the agreement specified below. The definitions and provisions contained in the 2000 ISDA Definitions, incorporating the June 2000 version of the Annex (the "2000 Definitions") and the 1992 ISDA U.S. Municipal Counterparty Definitions (the "1992 Muni Definitions"), each as amended and supplemented through the date of this Confirmation (as published by the International Swaps and Derivatives Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. References in this Confirmation to 'Transaction' shall be deemed to be references to 'Swap Transaction' for the purposes of interpreting the Swap Defmitions, and references in the Swap Definitions to 'Swap Transaction' shall be deemed to be references to 'Transaction' for the purposes of interpreting this Confumation. This Confumation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of Aprilll, 2002, as amended and supplemented from time to time (the 'Agreement'), between JPMORGAN CHASE BANK-NEW YORK ('JPMorgan') and THE CITY OF LUBBOCK (the 'Counterparty'). All provisions contained in the Agreement govern this Confumation except as expressly modified below. 1. The terms of the particular Swap Transaction to which this Confirmation relates are as follows: JPMorgan Deal Number: 513615 Trade Date: Effective Date: May 1 •t, 2005 Termination Date: August 1 s', 2022 Fixed Amounts: Fixed Rate Payer: Counterparty 1 of6 -t n t . ,_ t - - - Notional Amount: Fixed Rate Payer Payment Dates: Fixed Rate: Fixed Rate Day Count Fraction: Floating Amounts: Floating Rate Payer: Notional Amount: Floating Rate Payer Payment Dates: Floating Rate Option: Designated Maturity: Spread: Floating Rate Day Count Fraction: Reset Dates: 2 of6 ... •'JPMorgan 40,465,000.00 USD, subject to reduction as set forth on Schedule A hereto. For each Calculation Period set forth on Schedule A, the Notional Amount for such Calculation Period shall be effective from and including the first day of such Calculation Period to but not including the last day of such Calculation Period. One business day prior to the 1 '1 of each month, starting with June 151, 2005 up to, and including, the Termination Date, subject to adjustment in accordance with the Preceding Business Day Convention and there will not be an adjustment to the Calculation Period. 5.26% 30/360 JPMorgan 40,465,000.00 USD, subject to reduction as set forth on Schedule A hereto. For each Calculation Period set forth on Schedule A, the Notional Amount for such Calculation Period shall be effective from and including the first day of such Calculation Period to but not including the last day of such Calculation Period. One business day prior to the 1st of each month, starting with June 151, 2005 up to, and including, the Termination Date, subject to adjustment in accordance with the Preceding Business Day Convention and there will not be an adjustment to the Calculation Period. BMA Municipal Swap Index (as defined below) 1 Week None Actual/ Actual Weekly on each Wednesday for value Thursday -t: . -< ,.., ' ' - Compounding: Method of Averaging: Calculation Period (applies to Fixed and Floating Payment Calculation Periods) Municipal Swap Index Definition: Inapplicable Daily Weighted Average .... .,.,JPMorgan Each period from, and including, one Payment Date to, but excluding, the next following applicable Payment Date during the term of the Swap Transaction, except (a) the initial Calculation Period will commence on, and include, the Effective Date, and (b) the fmalCalculation Period will end on, but exclude, the Termination Date. "Municipal Swap Index" means the BMA Municipal Swap IndexTM (formerly, the PSA Municipal Swap IndexTM ), as defmed in the ISDA 1992 Municipal Counterparties Definitions (the "1992 Defmitions"); provided, however, that if the BMA Municipal Swap IndexTM is no longer available, the Municipal Swap Index shall be deemed to be the Kenny Index TM (as defmed in the 1992 Definitions), and provided, further, however, that if the Kenny Index TM is no longer available, JPMorgan, in consultation with the Counterparty, will select or calculate a comparable index (which comparable index shall reflect taxable bond rates in the event a legislative or regulatory change has the effect of eliminating tax-exempt bonds) which shall be deemed to be the Municipal Swap Index. Fixed Premium: Each August 1st , starting on August 151 2003, up to and including August 1st, 2005, JPMorgan pays a premium of$280,000 to the Counterparty. (subject to change) Other Provisions: JPMorgan shall have the right, but not the obligation, to terminate this transaction in whole, but not in part, on each day that the daily weighted average of the Municipal Swap Index for any immediately preceding rolling consecutive 180 day period within the Exercise Period is more than 6.50% per annum (subject to change). The date on which JPMorgan exercises its right to terminate the Transaction is defmed as the Optional Termiation Date. If JPMorgan exercises its right to terminate the Transaction, the Counterparty shall pay two Business Days after the Optional Termination Date the Fixed Amount for the period from and including the last Fixed Rate Payer Payment Date to but excluding the Optional Termination Date, and JPMorgan shall pay two Business Days after the Optional Termiation Date the Floating Amount for the period from and including the last Floating Rate Payer Payment Date to but excluding the Optional Termination Date. Upon payment and receipt of these amounts, neither party shall have any further obligations related to this Transaction. Exercise Period: Beginning on Effective Date, and up to but excluding the Termination Date Exercise Dates: Any day after Effective Date Notification Provisions: JPMorgan shall deliver Notice of Exercise to the Counterparty between 9:00 am and 3:00 pm on any Business Days within the Exercise Period. At the request of Counterparty, JPMorgan will pay to First Southwest Company, as financial advisor to Counterparty, an advisory fee in the amount of $81,000 US. Such fee will be paid two Business Days following the Trade Date. 3 of6 r I!""! ' ' ' r -' l .... .,.,JPMorgan At the request of Counterparty, JPMorgan will pay to Fulbright & Jaworski L.L.P ., as bond counsel to Counterparty, a fee in the amount of$80,000 US. Such fee will be paid two Business Days following the Trade Date. 2. Account Details Payments to JPMorgan: Account for payments in USD: Favour: SWIFT/BIC: Account No.: Reference: Payments to Counterparty: Account for payments in USD: Favour: ABA!Bank No.: Account No.: Reference: 3. Offices JPMorgan Chase Bank New York JPMorgan Chase Bank, New York Branch CHASUS33XXX 099997979 Interest rate swap no. __ _ To be advised CITY OF LUBBOCK, TEXAS To be provided To be provided To be provided (a) The Office of JPMorgan for the Swap Transaction is NEW YORK; and (b) The Office of the Counterparty for the Swap Transaction is LUBBOCK, TEXAS. All inquiries regarding confirmations should be sent to: JPMorgan Chase Bank 4 Chase Metrotecb Center l71b Floor Brooklyn, New York 11245 Attention: Telephone: Facsimile: Documentation Control 1-718-242-3100 1-718-242-4809 Please quote the JPMorgan Deal Number indicated above. JP MORGAN SECURITIES IN CORPORA TED is acting solely as agent for JPMorgan and will have no obligations under this Swap Transaction. 4of6 r - -• ~ ' -' M - ~· •'JPMorgan Each pa11y represents that (i) it is entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity); (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except those expressly set forth in the Agreement or this Confinnation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume those risks. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Swap Transaction to which this Confirmation relates and indicates agreement to those terms. When referring to this Confirmation, please indicate: JPMorgan Deal Number: 513615 . Confirmed as of the date first above written: CITY OF LUBBOCK, TEXAS Bygy~ bJ1__ Name: _______________________ _ Mayor ATTEST: By: &;2e._O.ML('«c<:· ~~ ) Secretary ~ 5 of6 Yours sincerely, JP MORGAN SECURITIES INCORPORATED, as Agent for and signing on behalf of: JPMORGAN CHASE BANK -NEW YORK By: _____________ _ Name: ___________________________ _ Title:----------------- - - - - ~ ... ,..,JPMorgan Each party represents that (i) it is entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity); (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except those expressly set forth in the Agreement or this Confirmation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume those risks. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Swap Transaction to which this Confirmation relates and indicates agreement to those terms. When referring to this Confirmation, please indicate: JPMorgan Deal Number: 513615. -- Confirmed as of the date first above written: CITY OF LUBBOCK, TEXAS Name: ------~------------------Mayor ATTEST: Secretary 5 of6 Yours sincerely, JP MORGAN SECURITIES TN CORPORA TED, as Agent for and signing on behalf of: By: __ --;;;:>~~--~..:::--=¥====:::::.._-- Name: __________________ ~~-------- Title: __________ _.;;:.. ___ _ etorls Uu Assistant Treasurer JPMorgan Chase Bank jl!lli! ! ~ ... •'JPMorgan ffl"'\ Schedule A: Calculation Periods Outstanding Notional n From Th ' Effective Date 8/01106 $40,465,000 8/01106 8/01107 38,950,000 !"""' 8/01/07 8/01/08 37,345,000 8/01/08 8/01109 35,650,000 8/01/09 8/01/10 33,860,000 8/01/10 8/01/11 31,970,000 -8/01/11 8/01112 29,970,000 ' • 8/01/12 8/01/13 27,855,000 8/01/13 8/01/14 25,620,000 -8/01/14 8/01/15 23,260,000 ~ 8/01/15 8/01/16 20,765,000 8/01/16 8/0l/17 18,130,000 r 8/01117 8/01/18 15,345,000 8/01/18 8/01/19 12,400,000 ' 8/01/19 8/01/20 9,290,000 8/01120 8/01/21 6,000,000 1""1 8/01/21 Termination 2,525,000 Date - ,... ; 6of6 ------~----~------------------------ 3 -t ' i JPMorgan Chase Bank Office of the Secretary 270 Park Avenue, 35th floor New York, NY 10017-2070 I, Jean E. Rugani, an Assistant Corporate Secretary of JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), hereby certify that the following is a true and correct copy of resolutions adopted at a meeting of the Board of Directors of Chemical Bank, now known as JPMorgan Chase Bank (the "Bank"), a New York state chartered bank, on the 19th day of March 1996, which meeting was properly called and held and at which a quorum was present and voted in favor of said resolutions. I further certify that the said resolutions, at the date hereof, are still in full force and effect. RESOLVED that loan agreements, contracts, indentures, mortgages, deeds, releases, conveyances, assignments, transfers, certificates, certifications, declarations, leases, discharges, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, guarantees, proxies, requisitions, demands, proofs of debt, claims, records, notes signifying indebtedness-of this Bank, and any other contracts, instruments or documents in connection with the conduct of the business of this Bank, whether or not specified in the foregoing resolutions may be signed, executed, acknowledged, verified, delivered or accepted on behalf of this Bank by the Chairman of the Board, the Chief Executive Officer, the President, a Vice Chairman of the Board, a Vice Chairman, any member of the Executive Committee, any Executive Vice President, the Chief Financial Officer, the Chief Credit Officer, the Secretary, any Senior Vice President, any Vice President, any Managing Director or any other officer who the Secretary or any Assistant Corporate Secretary certifies as having a functional title or official status which is equivalent to any of the foregoing, and the seal of this Bank may be affixed to any thereof and attested by the Secretary, any Assistant Corporate Secretary, any Vice President or any Assistant Secretary; RESOLVED that powers of attorney may be executed on behalf of this Bank by the Chairman of the Board, the Chief Executive Officer, the President, a Vice Chairman of the Board, a Vice Chairman, any member of the Executive Committee, any Executive Vice President, the Chief Financial Officer, the Chief Credit Officer, the Secretary, any Senior Vice President, and by any Managing Director having a rank equivalent to Senior Vice President. I further certify that Anna Maria Beissel is a Vice President of JPMorgan Chase Bank and is empowered to act in confomiity with the above resolutions. I also certify that the signature of said Anna Maria Beissel appearing below is a true and exact facsimile specimen of her signature. ~S my hand ~2oog. -&A and the seal of JPMorgan Chase Bank as of this / /{ day of OTS-#39054-vl-VP_<Uid_above_JPMCB_incumbency.DOC -f - -' \ - - - JPMorgan Chase Bank Office of the Secretary 270 Park Avenue, 35th floor New York, NY 10017-2070 I, Mary C. Brosnan, an Assistant Corporate Secretary of JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), hereby certify that the following is a true and correct copy of resolutions adopted at a meeting of the Board of Directors of Chemical Bank, now known as JPMorgan Chase Bank (the "Bank"), a New York state chartered bank, on the 19th day of March 1996, which meeting was properly called and held and at which a quorum was present and voted in favor of said resolutions. I further certify that the said resolutions, at the date hereof, are still in full force and effect. RESOLVED that loan agreements, contracts, indentures, mortgages, deeds, releases, conveyances, assignments, transfers, certificates, certifications, declarations, leases, discharges, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, guarantees, proxies, requisitions, demands, proofs of debt, claims, records, notes signifying indebtedness of this Bank, and any other contracts, instruments or documents in connection with the conduct of the business of this Bank, whether or not specified in the foregoing resolutions may be signed, executed, acknowledged, verified, delivered or accepted on behalf of this Bank by the Chairman of the Board, the Chief Executive Officer, the President, a Vice Chairman of the Board, a Vice Chairman, any member of the Executive Committee, any Executive Vice President, the Chief Financial Officer, the Chief Credit Officer, the Secretary, any Senior Vice President, any Vice President, any Managing Director or any other officer who the Secretary or any Assistant Corporate Secretary certifies as having a functional title or official status which is equivalent to any of the foregoing, and the seal of this Bank may be affixed to any thereof and attested by the Secretary, any Assistant Corporate Secretary, any Vice President or any Assistant Secretary; RESOLVED that powers of attorney may be executed on behalf of this Bank by the Chairman ofthe Board, the ChiefExecutive Officer, the President, a Vice Chairman of the Board, a Vice Chairman, any member of the Executive Committee, any Executive Vice President, the Chief Financial Officer, the Chief Credit Officer, the Secretary, any Senior Vice President, and by any Managing Director having a rank equivalent to Senior Vice President. I further certify that Cloris Y. Liu is an Associate of the Bank and, pursuant to the authority provided in the above resolutions, a power of attorney has been signed by Neil Wright, a Managing Director of the Bank, authorizing Cloris Y. Liu to execute confirmations of swap and derivative transactions and related documentation in the name, and on behalf of the Bank. I also certify that the signature of said Cloris . Y. Liu appearing below is a true and~~ signature WITNESS my hand and the seal of JPMorgan Chase Bank as of this 19th day of April2002. Mary C. Brosnan 4 - - - - -' ~-a - - REPORT OF CERTlFIED PUBLIC ACCOUNT ANT THE STATE OF TEXAS COUNTY OF LUBBOCK § § § I, the undersigned, ofthe finn ofRobinson Burdette Martin Seright & Burrows, L.L.P., Certified Public Accountants, Lubbock, Texas, DO HEREBY MAKE the following report: 1. According to the books and records ofthe Waterworks System (the"System") of the City of Lubbock, Texas (the "City"), the gross revenues available for debt service, operating expenses and net revenues available for debt service of the System for the fiscal year ending September 30, 2001 are as follows: Gross Revenues Available for Debt Service, Net $32,955,584 Operating Expenses and other Cash Disbursements $20,194,590 Net Revenues Available for Debt Service $12,760,994 2. In our opinion, the net revenues of the System for such fiscal year exceed the maximum annual fixed rate payment obligations of the City under the ISDA Master Agreement, Schedule to the Master Agreement, and Confirmation being entered into by the City with JPMorgan Chase Bank. ROBINSON BURDETTE MARTIN, SERIGHT & BURROWSL.L.P. Certified Public Accountants ._k~ w &,~14-L f1 ,4A SWORN TO AND SUBSCRIBED BEFORE ME, this the ll~ay of c:;kp~u'Q , 2002. LETA L. OWENS M,AXFIELD Notary Public, State of Texas ~~~~~b%~es 5 -f - - THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK GENERAL CERTIFICATE § § § § § We, the undersigned, Cash and Debt Manager and City Secretary, respectively, of the City of Lubbock, Texas (the "City"), DO HEREBY CERTIFY as follows: 1. Relative to Nonencumbrance. Save and except for the pledge of the income and revenues of the City's Waterworks System (the "System") to the payment of (i) water supply contracts with the Canadian River ~ Municipal Authority and the Brazos River Authority and {ii) the principal of and interest to become due with respect to the outstanding: ~ (a) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) - - Revenue Certificates of Obligation, Series 1993", dated October 1, 1993, now outstanding in the principal amount of $900,000; (b) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1995", dated December 15, 1995, now outstanding in the principal amount of $7,000,000; {c) "City of Lubbock, Texas, Tax and Waterworks System {Limited Pledge) Revenue Certificates of Obligation, Series 1998", dated January 1, 1998, now outstanding in the principal amount of $8,220,000; {d) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999", dated January 15, 1999, now outstanding in the principal amount of $13,045,000; (e) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999", dated April1, 1999, now outstanding in the principal amount of $1 0,540,000; (f) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 1999", dated September 15, 1999, now outstanding in the principal amount of $23,270,000; and (g) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002," dated February 15, 2002, now outstanding in the principal amount of $6,450,000 #45087954v2< (hereinafter collectively referred to as the "Outstanding Obligations") and the proposed interest rate hedge agreement (the "Hedge Agreement") to be entered into in connection with anticipated "City of Lubbock, Texas, Waterworks Revenue Refunding Bonds, Series 2005", said income and revenues of said System have not been pledged or hypothecated in any other manner or for any other purpose; and that the Outstanding Obligations, the Hedge Agreement, and the above referenced water supply contracts are the only obligations secured by liens, encumbrances or indebtedness of said System or against the income and revenues of such System, other than obligations for operating and maintenance expense incurred in the ordinary course of operations. 2. Relative to No-Default. The City is not in default as to any covenant, condition or obligation contained in the ordinances authorizing the issuance of the Outstanding Obligations; and there is on deposit in the respective special funds and accounts created for the payment and security ofthe Outstanding Obligations the amounts now required to be on deposit therein. 3. Relative to Income and Revenues. ,_ The following is a schedule of the gross receipts, operating expenses and net revenues of - the System for the years stated: Fiscal Year Gross Operating Net Ending 9/30 Receipts Expenses Revenues 1997 $26,401,991 $17,356,117 $ 9,045,874 1998 30,788,751 18,710,947 12,077,804 1999 29,244,116 17,180,436 12,063,680 2000 32,442,573 18,238,503 14,204,071 2001 32,955,584 20,194,590 12,760,994 4. Relative to Utilitv Properties. The water utility properties owned, operated and maintained by the City currently provide water to numerous customers. The City secures its water from its wells and pursuant to contracts with the Canadian River Authority and the Brazos River Authority. As of the date hereof, no question is pending and no proceedings of any nature have been instituted in any manner questioning the City's right and title to its utility properties or its authority to operate the same, or the contracts with the Canadian River Authority and the Brazos River Authority. 5. Relative to Rates and Charges. The current monthly rates and charges for water services provided by the System are as follows: #45087954v2< -2- - - - - - -' ' b . -' Base Rate:* 3/4" meter 1" meter (single family residential) 1" meter (other than residential) Flow Rate (per 1.000 gallons}: Single Family Residence: Multiple Family: Commercial: Schools: Sprinkler Systems: * Higher base rates apply to larger meters. 6. Relative to City Officials. $ 8.89 $11.32 $18.98 $1.63 $1.38 $1.50 $1.53 $1.91 Certain duly qualified and acting officials of the City are as follows: WINDY SITTON ALEX "TV" COOKE BOB CASS DEBRA B. FORTE BEVERLY HODGES REBECCA GARZA ANITA BURGESS ANDY BURCHAM 7. Relative to No Free Service. MAYOR MAYOR PROTEM CITY MANAGER DEPUTY CITY MANAGER DIRECTOR OF FINANCE CITY SECRETARY CITY ATIORNEY CASH AND DEBT MANAGER Except for city buildings and institutions operated by the City, no free services of the System are allowed, and rates charges for services furnished by the System are equal and uniform as required by law. 8. Relative to Incorporation. The City is incorporated under the general laws of the State of Texas and is operating under the Home Rule Amendment to the Texas Constitution, Section 5, Article XI, as amended in 1912. The City Charter was originally adopted at an election held on December 27, 1917, and said Charter has not been amended or revised in any respect since January 18, 1992, the date of the last Charter Amendment Election. The City has more than 50,000 inhabitants and has outstanding indebtedness that is rated by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for a long-term obligation. #45087954v2< -3- - - - - - - - - WITNESS OUR HANDS AND THE SEAL OF THE CITY OF LUBBOCK, TEXAS, this the 11~h day of April, 2002. CITY OF LUBBOCK, TEXAS k{..J..e~ _, eo~~ citY secretary (City Seal) LUBBOCK -4- 6 -' - - -' - - - SIGNATURE AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTY OF LUBBOCK § § § WE, the undersigned, officials of the City of Lubbock, Texas (the "City"), do hereby certify with respect to the ISDA Master Agreement, Schedule to the Master Agreement, and Confirmation (collectively, the "Hedge Agreement") between the City and JPMorgan Chase Bank in connection with anticipated "CITY OF LUBBOCK, TEXAS, WATERWORKS REVENUE REFUNDING BONDS, SERIES 2005", as follows: ( 1) The Hedge Agreement has been duly and officially executed by the undersigned with their manual signature in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures on the Hedge Agreement as their true, genuine and official signatures. (2) At the time of execution and on the date hereof, we were and are the duly qualified and acting officials of the City indicated below. (3) Certificate. The legally adopted proper and official corporate seal of the City is impressed on this (4) No litigation of any nature is now pending before any federal or state court, or administrative body, or to our knowledge threatened, seeking to restrain or enjoin or in any manner questioning the delivery of the Hedge Agreement, the authority or action of the governing body of the City authorizing the Hedge Agreement, the collection of the revenues of the City's Waterworks System (the "System"), or the imposition of rates and charges with respect to the System, pledged to pay the Hedge Agreement or that would otherwise adversely affect in a material manner the financial ability of the City to pay the Hedge Agreement; and that neither the corporate existence or boundaries of the City nor the right to hold office of any member of the governing body of the City or any other elected or appointed official of the City is being contested or otherwise questioned. (5) No authority or proceeding for the authorization, execution, or delivery of the Hedge Agreement by the governing body of the City has been amended, repealed, revoked, rescinded or otherwise modified since the date of passage thereof, and all such proceedings and authority relating to the authorization, execution, and delivery of the Hedge Agreement remain in full force and effect as of the date of this Certificate. DELIVERED this ~i \ ~ Q'/Jt:hL.. OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas (City's Seal) THE STATE OF TEXAS COUNTY OF LUBBOCK § § The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Windy Sitton and Rebecca Garza, Mayor and City Secretary, respectively, ofthe City of Lubbock, Texas, appearing r"" above is genuine. d GIVEN UNDER MY HAND AND SEAL OF OFFICE, this .,/L:_ day of April, 2002. ~LS~ NOtaiPlJbuC:state o( Texas - 1:;, l,INDA B. HART • .. ~·~ Notary Public, State of Texas 't.~. /.} My Commission Expires ~-:li.~f.~~;~·' June 30, 2003 (Notary sA;;jiiiiiiii~~~~q;;;;;;~;;;q;;;;;;;;;;;;;;l - --' -45088043 -2- 7 - - - '\'&'OFFICE Of THE ATTORNEY GENERAL · STATE OF TEXAS joHN CoRNYN April 24, 2002 THIS IS TO CERTIF=Y that the City of Lubbock, Texas (the "Issuer") has submitted to me for approval (i) an ISDA Master Agreement, (ii) a Schedule to the Master Agreement, (iii) a Credit Support Annex to the Schedule to the Master Agreement, and (iv) a "Swap Transaction" letter agreement, each between the Issuer and JPMorgan Chase Bank and dated as of April 11, 2002 (collectively, the "Agreements") executed in relation to the City of Lubbock, Texas Waterworks Revenue Refunding Bonds, Series 2005. The Agreements were authorized by Ordinance No. 2002-00033 of the Issuer passed on Apri111, 2002. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions offact material to my opinion, I have relied upon representations of the Board contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. Based on my examination, I am of the opinion, as of the date hereof and under existing law, that the Ordinance was lawfully adopted and the Agreements conform to the ~"""'~ requirements of law. Therefore, pursuant to the provisions of chapter 1371 of the Government Code, the 1!'111!1 Ordinance and the Agreements are approved. - No. 3n12 Book No. 2002-B -LKL - - - -POST 0Hict: BOX 12548, AliST!N, TEXAS 78711-2548 TEL: (512)463-2100 WEB: WWW.OM;.SL'\TE.TX.t:S r t : - r - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Carole Keeton Rylander, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving: Agreements authorized by Ordinance NO. 2002-00033 of the City of Lubbock passed on April 11, 2002 each between the City of Lubbock and JPMorgan Chase Bank dated as of April11, 2002 executed in relation to the City of Lubbock. Texas Waterworks Revenue Refunding Bonds. Series 2005 and certain related documents (the "Proceedings''), under and by authority of which Proceedings were registered electronically in the office of the Comptroller, on the 24th day of April 2002, under Registration Number 65489. Given under my hand and seal of office, at Austin, Texas, the 24th day of April 2002. tZ-&~~ CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas 8 - - - - - - - r TELEPHONE:: 713/651-5151 FACSIMILE:: 713/651-5246 April25, 2002 JPMorgan Chase Bank 270 Park A venue FULBRIGHT & .JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 1301 McKINNEY, SurTE 5roo HOUSTON, TEXAS 77010-3095 New York, New York 10017-2070 Ladies and Gentlemen: HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG We have acted as counsel to the City of Lubbock, Texas (the "City"), a home rule city organized under the Constitution of the State of Texas, in connection with its execution and delivery ofthe ISDA Master Agreement, dated as of Aprill1, 2002, the Schedule thereto (the "Schedule"), and the Confirmation, dated April11, 2002 (collectively, the "ISDA Agreement"), between the City and JPMorgan Chase Bank ("JPMorgan"), pursuant to an ordinance (the "Ordinance") of the City Council of the City passed on second reading on April 11, 2002, authorizing the ISDA Agreement. Except as otherwise defined herein, capitalized terms used herein have the meanings given to them in the ISDA Agreement. The ISDA Agreement and the Ordinance collectively are referred to herein as the "Swap Agreements". This opinion letter is delivered at the request of the City pursuant to Part 3 of the Schedule. In rendering the opinions expressed herein, we have examined the Swap Agreements. In addition, we have examined an approving opinion of the Attorney General of Texas, a registration certificate of the Comptroller of Public Accounts of the State of Texas, and such certificates of the City, such copies certified or otherwise identified to our satisfaction of documents and records of the City (including the Ordinance), such certificates, instruments, and other written communications of other public officials, and such other records, certificates, instruments, agreements and documents, in each case as we have deemed relevant and appropriate as the basis for the opinions expressed herein. As to matters of fact relevant to the opinions expressed herein, and as to factual matters arising in connection with the foregoing examinations, we have relied, to the extent we have deemed appropriate, upon the findings, representations, and warranties contained in the Swap Agreements, certificates of corporate officers of the City, and certificates and other communications of public officials, without further investigation by us as to the facts set forth therein. In making such examination and in such reliance, we have assumed (i) the genuineness and authenticity of all signatures in all such records, certificates, instruments, agreements, and documents, (ii) the legal capacity of each natural person identified in each of those records, certificates, instruments, agreements, and documents, (iii) the authenticity and completeness of all documents, certificates, agreements, instruments, and records submitted to us as originals and the conformity to authentic original documents, certificates, agreements, instruments, and records of all copies submitted to us as copies, and (iv) the conformity to the final executed - - - - JPMorgan Chase Bank April25, 2002 Page2 original version of the ISDA Agreement reviewed by us in draft form or otherwise unsigned by the parties thereto. Based upon the foregoing, and in reliance thereon, and having due regard for such legal considerations as we have deemed relevant, and subject in all respects to the assumptions, qualifications, limitations, comments, and exceptions set forth herein, we are of the opinion that, under the law of the State ofTexas: 1. The City has the requisite legal power and authority to execute and deliver the ISDA Agreement, to enact the Ordinance, and to perform its obligations under the ISDA Agreement and the Ordinance and has duly authorized such execution, delivery, and performance. 2. Enactment of the Ordinance and execution and delivery of the ISDA Agreement by the City do not, and the City may comply with the Swap Agreements in a manner which will not, violate any statutory law or regulation applicable to it or any provision of its charter or any other indenture, ordinance or agreement known to us to which the City is a party or by which it is bound. 3. No authorizations of, or exemptions, actions or approvals by, or notices to, or filings with, any governmental authority is required to be obtained or made by the City under any statutory law or regulation applicable to it as a condition to enactment of the Ordinance or execution and delivery by the City of the ISDA Agreement, or to the performance by the City of its obligations thereunder, except such as have been obtained, given or made. 4. The Swap Agreements are legal, valid, and binding obligations of the City, enforceable against the City in accordance with their respective terms. 5. To our knowledge, there is no action or proceeding against the City, pending or overtly threatened in writing, before any court, government agency, or arbitrator which, by the -terms of any pleadings or demand letter provided to us by the City, seeks to prohibit the enforceability of the Swap Agreements against the City. !""" 6. The obligations of the City under the Swap Agreements, including any scheduled , , payments or termination payment due from the City in respect of any Transaction thereunder, are secured by a lien on and security interest in the Net Revenues pledged by the City under the -Ordinance. The City is duly authorized to pledge such Net Revenues, and has pledged the same, to the payment of amounts due under the Swap Agreements, and the lien of such pledge is valid and binding, and no further action on the part of the City or any other party is required to perfect """' the same or the interest of JPMorgan therein. The opinions expressed herein are further subject to the following assumptions, -qualifications, limitations, comments, and exceptions: A. The opinions expressed in paragraph 4 are subject to the following: r ' - - - - JPMorgan Chase Bank April25, 2002 Page3 (i) We have assumed that JPMorgan has requisite corporate power and authority to execute and deliver the ISDA Agreement and to perform its obligations thereunder and has duly authorized such execution, delivery, and performance, and that the ISDA Agreement constitutes the legal, valid, and binding obligation of JPMorgan, enforceable against JPMorgan in accordance with its terms. (ii) The enforceability of the Swap Agreements is subject to, and may be limited or affected by, (i) bankruptcy, insolvency, reorganization, liquidation, fraudulent conveyance, fraudulent transfer, preference, conservatorship, rearrangement, moratorium, receivership, and other similar laws (including court decisions) in effect and affecting the rights and remedies of creditors generally or providing for relief of debtors, (ii) the refusal of a particular court (a) to grant certain equitable remedies, including, without limiting the generality thereof, specific performance, or (b) to grant a particular remedy sought under the Swap Agreements as opposed to another remedy provided for therein or another remedy available at law or in equity, (iii) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law), (iv) judicial discretion, (v) standards of good faith, fair dealing, materiality, impracticability or impossibility of performance, unconscionability, diligence, reasonableness and care established by applicable law, including, without limitation, those provided in the Uniform Commercial Code, applicable principles of common law, and judicial decisions, and (vi) Article XI, Section 9 of the Constitution of Texas, which provides that property of the City held only for public purposes is exempt from forced sale. (iii) The provisions of the Swap Agreements that obligate any party to pay another party stipulated sums or amounts or sums or amounts determined by another party, in whatsoever capacity, upon the occurrence of one or more specified events may be unenforceable unless, at the time the Transaction is entered into, (a) such sums or amounts are reasonably proportionate to the probable loss anticipated to be caused by such event or events giving rise to the obligation to pay such sums or amounts, (b) the amount of actual loss resulting from such event or events cannot be easily determined, and (c) such provisions are not intended to punish non-performance or to compel performance. (iv) We express no opinion as to the availability of equitable remedies, and further, we express no opinion as to the enforceability of any provision of the Swap Agreements that (a) relates to rights of set-off (or the waiver thereof), and we note that rights of set-off may be limited to matured mutual obligations, (b) relates to indemnification or exculpation to the extent any such provisions violate public policy or applicable laws or would purport to require any person to provide indemnification or reimbursement or waive indemnification or reimbursement for losses or expenses caused by fraud, illegality, breach, violation of law, negligence, or willful misconduct of an indemnified or exculpated party, (c) waives, restricts, or denies, or has the effect of waiving, restricting, or denying, any right or defense that cannot be waived, so restricted, or denied as a matter of law, (d) purports to require that all amendments, waivers, and terminations be in writing, (e) purports to make irrevocable the appointment of an agent or attorney in fact, (f) purports to establish, or restrict or otherwise affect, jurisdiction, venue, submission to, or acceptance of, a court's jurisdiction, objections to the laying of venue or submission or acceptance of jurisdiction, limitation periods, or other procedural rights in any - - - - - JPMorgan Chase Bank April25,2002 Page4 proceeding, (g) purports to permit the recording of communications between the parties or others which is in violation of applicable law, or to waive any rights or remedies related thereto, (h) purports to establish or satisfy evidentiary standards or characterizations, treatments, or effect of payments or rights, (i) negates the effect of any course of dealing or any exercise, or failure or delay to exercise, any right, power, privilege, or remedy, (j) authorizes conclusive determinations by any person or entity to make such determinations in its sole discretion, (k) restricts access to legal or equitable remedies, (1) states that (1) prohibition, illegality, invalidity, or unenforceability of any provision of the Swap Agreements in any jurisdiction shall not (A) invalidate the remaining provisions of the Swap Agreements or (B) affect that provision in any other jurisdiction, or (2) the right of JPMorgan to exercise any right or remedy on the basis of any misrepresentation or breach of warranty is not affected by any action by JPMorgan, (m) permits an action against any person or entity to be brought in the courts ofthe State of Texas or the federal courts of the United States of America sitting in the State of Texas, as applicable, (1) if such person has not been served with process in that action in accordance with applicable rules of procedure, or (2) if such court in which the action is brought does not have jurisdiction over the subject matter of the action, or (n) restricts a party's right to transfer its right to receive payments under the Swap Agreements or purports to void the Swap Agreements on any transfer not made in compliance with its terms; provided, however, in our opinion, the unenforceability of the remedial and other provisions referred to in the preceding clauses does not render void or invalid the remaining provisions of the Swap Agreements and does not, subject to the other qualifications, exceptions, limitations, and assumptions set forth herein, make the remedies generally afforded by the Swap Agreements inadequate for the realization of the substantive principal legal benefits purported to be provided by the Swap Agreements (except for the economic consequences resulting from any delay or procedure imposed by applicable law). B. In rendering the foregoing opinions, we do not express any opinion as to any laws, statutes, regulations, directives, interpretations, opinions, orders, rulings, authorities, or the like regulating, governing, or applicable to JPMorgan (or any successor or assign) (collectively, the "Rules"), or its execution, delivery, or performance of the ISDA Agreement or the consummation of the transactions contemplated thereby, or JPMorgan's (or any successor's or assign's) compliance with any of the Rules in connection with the Swap Agreements or the transactions provided for therein. Further, we have assumed that the Swap Agreements will be enforced in compliance with the enforceable provisions thereof and all requirements of applicable law. C. As used herein, the phrase "to our knowledge" or words of similar import means conscious awareness of facts or other information by the lawyers in our firm who have devoted substantive attention to legal matters on behalf of the City and in no regard shall such phrase imply that we performed (nor shall any related inference be made that we performed) nor did we perform, in connection with this opinion letter, any examination of courts, governmental agencies, arbitrators, boards, other tribunals, or public records with respect to any actions, litigation, investigations, or proceedings, or judgments, orders, or decrees, in any event applicable to the City or any of its properties or interests. -,, - - - - - - - JPMorgan Chase Bank April25, 2002 Page 5 D. The opinions expressed herein are expressly limited to the internal substantive laws (including statutory laws and regulations) of the State of Texas and applicable federal statutory laws and regulations of the United States of America. In respect to such laws, in addition to other limitations set forth herein, such reference is limited to laws which are normally and customarily applicable to the City in relation to the transactions provided for in the Swap Agreements. References herein to "laws" of a jurisdiction are to the laws of that jurisdiction, other than the statutes and ordinances, the administrative decisions, and the rules and regulations of counties, towns, municipalities, and special political subdivisions other than the City (whether created or enabled through legislative action at the federal, state, or regional level), and judicial decisions to the extent that they deal with any ofthe foregoing. The opinions expressed herein are for the sole benefit of and may only be relied upon by JPMorgan and, without our prior written consent, may not be relied upon in any manner by any other person or entity. This opinion may not be furnished to any other person or entity without our prior written consent, except that this opinion may be provided (i) to the independent auditors and attorneys of JPMorgan, (ii) to any state or federal authority having regulatory jurisdiction over JPMorgan, (iii) pursuant to an order or legal process of any court or governmental agency, and (iv) to any permitted successor to JPMorgan under the terms of the Swap Agreements. The opinions expressed herein are as of the date of this opinion letter, and we make no undertaking to supplement such opinions if, after the date of this letter, facts or circumstances come to our attention or changes in the law occur which could affect such opm10ns. Very truly yours, 9 - - - - - - - - - KING & SPALDING City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457-2000 To the Addressee: 1185 A VENUE OF THE AMERICAS NEW YORK, NEW YORK 10036-4003 TELEPHONE: 212/556-2100 FACSiMILE: 2121556-2222 April 11, 2002 We have acted as counsel to JPMorgan Chase Bank, a New York banking corporation ("JPMorgan Chase"), in connection with the execution and delivery by JPMorgan Chase of the ISDAMaster Agreement, dated as of April11, 2002, including the Schedule thereto (the "Master Agreement"), between the City of Lubbock, Texas (the "City") and JPMorgan Chase. The Master Agreement is to be supplemented by confirmations of Transactions to be entered into by the Authority and JPMorgan Chase from time to time (each a "Confirmation"), including a Confirmation relating to the initial Transaction under the Master Agreement, dated April 11, 2002. The Master Agreement, together with the Schedule and all such Confirmations shall constitute one agreement and be referred to herein as the "Agreement"). Capitalized terms used but not otherwise defined herein have the meanings assigned thereto in the Agreement. In rendering this opinion, we have examined an executed original or copy of the Agreement and such records, documents, instruments, certificates of public officials and of JPMorgan Chase, and such questions of law as we have deemed necessary for the purpose of rendering the opinions set forth herein. In such examination, we have assumed the genuineness of all signatures and the authenticity of all items submitted to us as originals and the conformity to originals of all items submitted to us as certified copies and the authenticity of the originals of such copies. As to certain matters of fact relevant to the opinions hereinafter expressed, we have relied upon certifications, statements, representations, and warranties of JPMorgan Chase, the City and their respective representatives, including statements, representations and warranties contained in the Agreement, and we have assumed and have not independently verified that all such certifications, statements, representations and warranties are true, accurate and complete. We have assumed that the City has the legal capacity, power and authority to execute, deliver and perform its obligations under the Agreement and that the Agreement constitutes the legal, valid and binding agreement of the City and is enforceable against the City in accordance with the terms thereof. The Agreement provides that it is to be governed by and construed in accordance with the laws of the State of Texas. Notwithstanding such provision, for purposes of the opinions expressed herein we have assumed that the Agreement will be governed by and construed in 191PEACHTREESTREET ATLANTA, GA 30303-1763 TELEPHONE: 404/572-4600 FACSIMILE: 404/572-5100 1730PENNSYLVANIA AVE:"ruE, N.W. WASHINGTON, DC 20006-4706 TELEPHONE: 202n37-0500 FACSIMILE: 202/626-3737 1100 LOUISIANA STREET, SL'ITE 4000 HOUSTON, TX 77002-5213 TELEPHONE: 713n51-3200 FACSIMILE: 713n51-3290 - - - - - - - - - - - - City of Lubbock, Texas April 11, 2002 Page2 accordance with the laws of the State of New York, and the opinions expressed herein are limited to the laws of the State of New York and the Federal laws of the United States of America. Based upon the foregoing and having regard to such legal considerations as we have deemed relevant, we are of the opinion, subject to the qualifications expressed herein, that: (1) JPMorgan Chase is duly licensed by the Superintendent of Banks of the State of New York to operate as a banking corporation in the State of New York. (2) The execution, delivery and performance by JPMorgan Chase of the Agreement do not contravene any law, rule or regulation of the State of New York or the laws of the United States. (3) No approval, consent or authorization of any governmental or public agency or authority or any other institution not already obtained is required for the execution by JPMorgan Chase of, or performance of JPMorgan Chase's obligations under, the Agreement. (4) The Agreement has been duly executed and delivered by JPMorgan Chase and constitutes the legal, valid and binding obligation of JPMorgan Chase enforceable against JPMorgan Chase in accordance with its terms. The opinions expressed herein are subject to the following qualifications: (A) The enforceability of the Agreement and the rights and remedies thereunder are subject to and may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws from time to time in effect relating to or affecting generally the enforcement of creditors' rights, and (ii) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding at law or in equity). (B) The opinion expressed in paragraph 4 above is subject to the qualification that we express no opinion regarding the enforceability of Section 6(e) of the Agreement insofar as it purports to obligate a party, on termination of the Agreement, to pay an amount in excess of that measured by the lowest quotation from a Reference Market-maker. In addition, in connection with any such early termination on the grounds of default, a court might limit the non-defaulting party's recovery to its actual damages in the circumstances, imposing its own settlement procedures in lieu of the provisions of Section 6( e) of the Agreement. (C) We express no opinion herein as to whether a court or other authority or body located outside the State of New York would enforce the governing law provision of, or honor, the Agreement. - - - - - - - - - City of Lubbock, Texas April 11, 2002 Page3 (D) We have rendered the opinions expressed herein based on facts and circumstances existing, and applicable laws, rules, regulations, court decisions and regulatory authority determinations in effect, on the date hereof. We disclaim any obligation to update or supplement this opinion letter for events occurring or coming to our attention after the date hereof. We are furnishing this letter to the addressee solely for its benefit, and no other person is entitled to rely hereon. Without the prior written consent of the undersigned, this letter may not be used, circulated, quoted, or otherwise referred to for any other purpose not disclosed or delivered to, or relied upon by, anyone other than the addressee. Very truly yours, DAB:jc