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INDENTURE

between the

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

and

DEUTSCHE BANK NATIONAL TRUST COMPANY Trustee

Dated as of November 1, 2010

Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

$7,227,000

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TABLE OF CONTENTS Page

ARTICLE I DEFINITIONS; EQUAL SECURITY

SECTION 1.01. Definitions .............................................................................................................................3 SECTION 1.02. Content of Certificates and Opinions ..............................................................................11 SECTION 1.03. Interpretation ......................................................................................................................12

ARTICLE II ISSUANCE OF BONDS

SECTION 2.01. Authorization of Bonds .....................................................................................................13 SECTION 2.02. Terms of the Bonds.............................................................................................................13 SECTION 2.03. Redemption of Bonds.........................................................................................................13 SECTION 2.04. Form of Bonds .....................................................................................................................15 SECTION 2.05. Execution of Bonds.............................................................................................................15 SECTION 2.06. Transfer and Payment of Bonds; Restrictions on Transfer of Bonds ..........................15 SECTION 2.07. Exchange of Bonds .............................................................................................................16 SECTION 2.08. Bond Registration Books ...................................................................................................16 SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds...................................................................17 SECTION 2.10. Temporary Bonds ...............................................................................................................17 SECTION 2.11. Validity of Bonds ................................................................................................................17

ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS

SECTION 3.01. Issuance of the Bonds.........................................................................................................18 SECTION 3.02. Application of Proceeds of Bonds and Other Amounts ...............................................18 SECTION 3.03. Project Fund.........................................................................................................................18 SECTION 3.04. Costs of Issuance Fund ......................................................................................................18

ARTICLE IV REVENUES

SECTION 4.01. Pledge of Revenues ............................................................................................................19 SECTION 4.02. Receipt and Deposit of Revenues in the Revenue Fund...............................................19 SECTION 4.03. Establishment and Maintenance of Accounts for Use of Money in the Revenue

Fund......................................................................................................................................19 SECTION 4.04. Deposit and Investments of Money in Accounts and Funds .......................................21 SECTION 4.05. Establishment of Surplus Account...................................................................................21

ARTICLE V PARTICULAR COVENANTS

SECTION 5.01. Punctual Payment and Performance ...............................................................................22 SECTION 5.02. Against Encumbrances ......................................................................................................22 SECTION 5.03. Tax Covenants.....................................................................................................................22 SECTION 5.04. Federal Subsidy Payments ................................................................................................23 SECTION 5.05. Accounting Records and Reports.....................................................................................23 SECTION 5.06. Further Assurances.............................................................................................................24

ARTICLE VI THE TRUSTEE

SECTION 6.01. The Trustee ..........................................................................................................................25 SECTION 6.02. Liability of Trustee .............................................................................................................26

ARTICLE VII AMENDMENT OF THE INDENTURE

SECTION 7.01. Amendment of the Indenture ...........................................................................................29

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SECTION 7.02. Disqualified Bonds .............................................................................................................29 SECTION 7.03. Endorsement or Replacement of Bonds After Amendment ........................................29 SECTION 7.04. Amendment by Mutual Consent......................................................................................30 SECTION 7.05. Opinion of Bond Counsel ..................................................................................................30

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF HOLDERS

SECTION 8.01. Events of Default ................................................................................................................31 SECTION 8.02. Institution of Legal Proceedings by Trustee ...................................................................31 SECTION 8.03. Non-Waiver .........................................................................................................................32 SECTION 8.04. Actions by Trustee as Attorney-in-Fact...........................................................................32 SECTION 8.05. Remedies Not Exclusive ....................................................................................................32 SECTION 8.06. Limitation on Bondholders’ Right to Sue........................................................................32

ARTICLE IX [RESERVED]

ARTICLE X

MISCELLANEOUS SECTION 10.01. Liability of Authority Limited to Revenues....................................................................35 SECTION 10.02. Benefits of the Indenture Limited to Parties...................................................................35 SECTION 10.03. Successor Is Deemed Included In All References To Predecessor ..............................35 SECTION 10.04. Execution of Documents by Holders ...............................................................................35 SECTION 10.05. Waiver of Personal Liability..............................................................................................36 SECTION 10.06. Destruction of Cancelled Bonds .......................................................................................36 SECTION 10.07. Content of Certificates .......................................................................................................36 SECTION 10.08. Accounts and Funds; Business Days ...............................................................................36 SECTION 10.09. Article and Section Headings and References................................................................36 SECTION 10.10. Partial Invalidity .................................................................................................................37 SECTION 10.11. Execution in Several Counterparts...................................................................................37 SECTION 10.12. Amendments to Installment Sale Agreement ................................................................37 SECTION 10.13. Governing Law; Venue......................................................................................................37 SECTION 10.14. Unclaimed Money ..............................................................................................................37 EXHIBIT A: FORM OF BOND EXHIBIT B: SALE AND REMARKETING GUIDELINES FOR BONDS RATED “BBB-”

EQUIVALENT OR BELOW BY S&P EXHIBIT C: FORM OF INVESTOR LETTER EXHIBIT D: FORM OF COSTS OF ISSUANCE FUND REQUISITION EXHIBIT E: FORM OF PROJECT FUND REQUISITION

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INDENTURE THIS INDENTURE dated as of November 1, 2010 (the “Indenture”), by and between

DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as trustee (the “Trustee”) and the CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY (the “Authority”), a public instrumentality of the State of California;

W I T N E S S E T H:

WHEREAS, the Authority is a public instrumentality of the State of California, created

by the California Alternative Energy and Advanced Transportation Financing Authority Act (Chapter 1 (commencing with Section 26000) of Division 16 of the California Public Resources Code), as supplemented and amended (the “Act”), and authorized to issue revenue bonds for the purposes of financing the acquisition, installation, improvement and equipping of facilities that utilize or are designed to utilize an alternative energy source constituting a “project” within the meaning of the Act; and

WHEREAS, the Fallbrook Public Utility District (the “District”), has duly caused an

application to be filed with the Authority for financial assistance to acquire and install certain facilities that utilize or are designed to utilize an alternative energy source in the State of California; and

WHEREAS, the Authority, after due review of the District’s application and

deliberation, has adopted a resolution approving the issuance of bonds to finance the Project (as defined herein) for the District; and

WHEREAS, the Authority has authorized the issuance of its Qualified Energy

Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the “Bonds”) pursuant to this Indenture to finance the Project; and`

WHEREAS, the Authority has authorized the execution and delivery of this Indenture

to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured, and to secure the payment of the principal thereof, premium, if any, and interest (if any) thereon; and

WHEREAS, the Authority is financing the cost of acquisition and installation of the

Project by providing the proceeds derived from the sale of the Bonds to the District pursuant to the Installment Sale Agreement, which requires the District to make installment payments sufficient to pay the principal of, premium, if any, and interest (if any), on the Bonds and related expenses; and

WHEREAS, it has been determined that the estimated amount necessary to finance the

cost of the Project requires the issuance, sale and delivery of the Bonds in the aggregate amount of $7,227,000 as hereinafter provided; and

WHEREAS, all acts and proceedings required by law necessary to make the Bonds,

when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal limited obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in

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accordance with its terms, have been done and taken, and the execution and delivery of this Indenture have been in all respects duly authorized; and

WHEREAS, Bonds issued under this Indenture will be secured by a pledge and

assignment of certain rights under the Installment Sale Agreement; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the

payment of the principal of, premium, if any, and the interest, if any, on, all Bonds at any time issued and outstanding under this Indenture, according to their tenor and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Holders (as defined herein) thereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the equal and proportionate benefit of the respective Holders from time to time of the Bonds, as follows:

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ARTICLE I DEFINITIONS; EQUAL SECURITY

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

this section shall for all purposes hereof and of any Supplemental Indenture and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified: Act

“Act” means the California Alternative Energy and Advanced Transportation Financing Authority Act (Chapter 1 (commencing with Section 26000) of Division 16 of the California Public Resources Code), as now in effect and as it may from time to time hereafter be amended or supplemented. Administrative Fees and Expenses

“Administrative Fees and Expenses” means the reasonable and necessary expenses incurred by the Authority pursuant to the Installment Sale Agreement or this Indenture and the compensation and expenses paid to or incurred by the Trustee under the Installment Sale Agreement or this Indenture, which include but are not limited to printing of Bonds, accomplishing transfers or new registration of Bonds, or other charges and other disbursements including those of their respective officers, directors, members, attorneys, agents and employees incurred in and about the administration and execution of the Installment Sale Agreement and this Indenture. Authority

“Authority” means the California Alternative Energy and Advanced Transportation Financing Authority created pursuant to, and as defined in, the Act and any board, commission, department, or officer succeeding to the functions thereof, or to which the powers conferred thereupon by the Act are given. Authorized Denomination

“Authorized Denomination” means, as of any date, the principal amount of the Bonds Outstanding as of such date. Authorized Representative

“Authorized Representative” means with respect to the District, the General Manager, the Engineering and Planning Manager, the Administrative Services Manager/Treasurer, and each individual at the time designated to act on behalf of the District by a written certificate signed by the District, furnished to the Trustee, the Purchaser and the Authority and containing the specimen signature of each such individual. With respect to the Authority, “Authorized Representative” shall mean the Executive Director of the Authority and any individual or individuals at the time designated to act on behalf of the Authority by a written certificate signed by the Executive Director of the Authority, furnished to the Trustee, the District and the Purchaser and containing the specimen signature of each such individual. With respect to the Purchaser, “Authorized Representative” shall mean any individual or individuals at the time designated to act on behalf of the Purchaser by a written certificate signed by the Purchaser, furnished to the Trustee, the District and the Authority and containing the specimen signature of each such individual.

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Available Project Proceeds

“Available Project Proceeds” means (i) the proceeds from the sale of the Bonds, (ii) less costs of executing and delivering the Bonds paid from proceeds of the sale of the Bonds (not exceeding 2% of the proceeds of the sale of the Bonds), plus (iii) investment earnings on the difference between (i) - (ii). Bonds

“Bonds” means the “California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010.” Business Day

“Business Day” means a day, other than a Saturday or Sunday or a day on which State offices or banking institutions located in the State of California are required or authorized to remain closed, on which the Trustee is open for business at its Principal Corporate Trust Office. Certificate of the Authority; Certificate of the District

“Certificate of the Authority” means an instrument in writing signed by its Authorized Representative or such other individual as may be designated and authorized to sign for the Authority. “Certificate of the District” means an instrument in writing signed by its Authorized Representative, or any other officer of the District duly authorized by the District for that purpose. Code

“Code” means the Internal Revenue Code of 1986, as amended.

Completion Date

“Completion Date” means the date of completion of the Project as that date shall be certified as provided in Section 4.05 of the Installment Sale Agreement. Costs of Issuance

“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the Authority or the District and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee, fees of the State Treasurer’s Office, legal fees and charges, fees and disbursements of consultants and professionals, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee incurred in connection with the original issuance of the Bonds. Costs of Issuance Fund

“Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.04 hereof. Costs of the Project

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“Costs of the Project” means the sum of the items, or any such item, authorized to be

paid from the Project Fund pursuant to the provisions of Section 3.03, but shall not include any Costs of Issuance. Defeasance Securities

“Defeasance Securities” means: (1) Cash (insured at all times by the Federal Deposit Insurance Corporation); or (2) Direct noncallable general obligations of (including obligations issued or held in

book-entry form on the books of) the Department of the Treasury of the United States of America. District

“District” means the Fallbrook Public Utility District, a public utility district organized and existing under Sections 15501 et. seq. of the Public Utilities Code of the State of California. Environmental Regulations

“Environmental Regulations” means any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants, Hazardous Substances, chemical waste, materials or substances. Equipment

“Equipment” shall have the meaning ascribed to such term in the Installment Sale Agreement. Events of Default

“Events of Default” has the meaning set forth in Section 8.01. Expenditure Period

“Expenditure Period” means the “expenditure period” defined in Section 54A(d)(2)(B)(ii) of the Code and consists of the period beginning on the date the Bonds are issued (the “Closing Date”) and ending on the later of the date 3 years after the Closing Date or such later date, if any, as permitted by the Internal Revenue Service in response to a request to extend the Expenditure Period.

Federal Subsidy Payments

“Federal Subsidy Payments” means, with respect to the Bonds, the amounts which are

paid by the Federal government under Section 6431 of the Code with respect to the Bonds, which the Authority has elected to receive under Section 6431(f)(2) of the Code.

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Fiscal Year

“Fiscal Year” means the twelve-month period terminating on June 30 of each year, or any other annual accounting period hereafter selected and designated by the Authority as its Fiscal Year in accordance with applicable law. Hazardous Substances

“Hazardous Substances” means (a) any oil, flammable substance, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, materials or pollutants which (i) pose a hazard to the Project or to persons on or about the Project or (ii) cause the Project to be in violation of any Environmental Regulation; (b) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon gas; (c) any chemical, material or substance defined as or included in the definition of “waste,” “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous waste,” “restricted hazardous waste,” or “toxic substances” or words of similar import under any Environmental Regulation including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq.; the Resource Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC §§ 1801 et seq.; the Federal Water Pollution Control Act, 33 USC §§ 1251 et seq.; the California Hazardous Waste Control Law (“HWCL”), Cal. Health & Safety Code §§ 25100 et seq.; the Hazardous Substance Account Act (“HSAA”), Cal. Health & Safely Code §§ 25300 et seq.; the Underground Storage of Hazardous Substances Act, Cal. Health & Safety Code §§ 25280 et seq.; the Porter-Cologne Water Quality Control Act (the “Porter-Cologne Act”), Cal. Water Code §§ 13000 et seq., the Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65); and Title 22 of the California Code of Regulations, Division 4, Chapter 30; (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or agency or may or could pose a hazard to the health and safety of the occupants of the Project or the owners and/or occupants of property adjacent to or surrounding the Project, or any other person coming upon the Project or adjacent property; or (e) any other chemical, materials or substance which may or could pose a hazard to the environment. Holder or Owner

“Holder” or “Owner” means any person who shall be the registered owner of any Outstanding Bond. Independent Certified Public Accountant

The term “Independent Certified Public Accountant” means any certified public accountant or firm of such accountants duly licensed and entitled to practice and practicing as such under the laws of the State or a comparable successor, appointed and paid by the Authority, and who, or each of whom --

(1) is in fact independent according to the Statement of Auditing Standards No. 1

and not under the domination of the Authority; (2) does not have a substantial financial interest, direct or indirect, in the operations

of the Authority; and

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(3) is not connected with the Authority as a member, officer or employee of the Authority, but who may be regularly retained to audit the accounting records of and make reports thereon to the Authority. Indenture

“Indenture” means this Indenture, dated as of November 1, 2010, between the Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Indentures executed pursuant to the provisions hereof. Installment Payments

“Installment Payments” means the Installment Payments (as defined in the Installment Sale Agreement) due and payable under the Installment Sale Agreement. Installment Sale Agreement

“Installment Sale Agreement” means the Installment Sale Agreement, dated as of November 1, 2010, between the Authority and the District, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions hereof and thereof. Interest Account

“Interest Account” means the account by that name in the Revenue Fund established pursuant to Section 4.03 hereof. Interest Payment Date

“Interest Payment Date” means November 18, 2011, and each May 18 and November 18 so long as the Bonds are Outstanding.

Moody’s

“Moody’s” means Moody’s Investors Service, Inc., and its successors and assigns, except that if Moody’s no longer maintains a rating on the Bonds, any other nationally recognized bond rating agency then maintaining a rating on the Bonds, but only so long as a nationally recognized rating agency then maintains a rating on the Bonds. Net Proceeds

“Net Proceeds” shall have the meaning ascribed to such term in the Installment Sale Agreement. Opinion of Bond Counsel

The term “Opinion of Bond Counsel” means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, acceptable to the Authority. Outstanding

“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 7.02) all Bonds except

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(1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation;

(2) Bonds paid or deemed to have been paid within the meaning of Section 9.01; and (3) Bonds in lieu of or in substitution for which other Bonds shall have been

executed, issued and delivered by the Authority pursuant hereto. Permitted Investments

“Permitted Investments” means any of the following which at the time are legal investments under the laws of the State for moneys held hereunder and then proposed to be invested therein:

(1) bonds or interest-bearing notes or obligations of the United States, or those for

which the faith and credit of the United States are pledged for the timely payment of principal and interest;

(2) bonds or interest-bearing notes or obligations that are guaranteed as to principal

and interest by a federal agency of the United States; (3) bonds of the State or bonds for which the faith and credit of the State are pledged

for the payment of principal and interest; (4) bonds or warrants, including but not limited to revenue warrants, of any county,

city, metropolitan water district, California water district, California water storage district, irrigation district in the State, municipal utility district or school district of the State;

(5) bonds, consolidated bonds, collateral trust debentures, consolidated debentures

or other obligations issued by general land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, stocks, bonds, debentures and other obligations of the Federal National Mortgage Association established under the National Housing Act, as amended, and the bonds of any federal home loan bank established under said act, obligations of the Federal Home Loan Mortgage Corporation, and bonds, notes and other obligations issued by the Tennessee Valley Authority under the Tennessee Valley Authority Act, as amended;

(6) commercial paper rated within the top rating designation by a nationally

recognized rating service and issued by corporations (i) organized and operating within the United States, (ii) having total assets in excess of $500,000,000 and (iii) approved by the Pooled Money Investment Board, provided, however that eligible commercial paper may not exceed 180 days’ maturity, represent more than 10 percent of the outstanding paper of an issuing corporation nor exceed 30 percent of the resources of an investment program, and that at the request of the Pooled Money Investment Board, such investment shall be secured by the issuer by depositing with the State;

(7) bills of exchange or time drafts drawn on and accepted by a commercial bank the

general obligations of which are rated within the top two rating categories by a nationally recognized rating service, otherwise known as banker’s acceptances, which are eligible for purchase by the Federal Reserve System;

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(8) negotiable certificates of deposit issued by a nationally or state-chartered bank or

savings and loan association or by a state-licensed branch of a foreign bank which, to the extent they are not insured by federal deposit insurance, are issued by an institution the general obligations of which are rated in one of the top two rating categories by a nationally recognized rating service;

(9) bonds, debentures and notes issued by corporations organized and operating

within the United States which securities are rated in one of the top two rating categories by a nationally recognized rating service;

(10) interest-bearing accounts in state or national banks or in state or federal savings

and loan associations having principal offices in the State, the deposits of which shall be secured at all times and in the same manner as state moneys are by law required to be secured;

(11) repurchase agreements or reverse repurchase agreements, as such terms are

defined in and pursuant to the terms of Section 16480.4 of the California Government Code, including those of the Trustee or any affiliate;

(12) collateralized or uncollateralized investment agreements or other contractual

arrangements with corporations, financial institutions or national associations within the United States, provided that the senior long-term debt of such corporations, institutions or associations is rated within the top two rating categories by Moody’s or Standard & Poor’s; or

(13) money market funds registered under the Federal Investment Company Act of

1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AAm-G or AAm, and (if rated by Moody’s) a rating by Moody’s of Prime-1 that invest solely in obligations described in clause (1) of this definition, which funds may include funds for which the Trustee, its affiliates, parent or subsidiaries serve as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from funds for services rendered, (ii) the Trustee collects fees for services rendered pursuant to this Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee. Person

“Person” means an individual, corporation, firm, association, limited liability company, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Principal Account

“Principal Account” means the account by that name in the Revenue Fund established pursuant to Section 4.03 hereof. Principal Corporate Trust Office

“Principal Corporate Trust Office” means the corporate trust office of the Trustee located in San Francisco, California or such other office or offices as the Trustee shall designate from time to time.

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Project Fund

“Project Fund” means the fund by that name established in Section 3.02 hereof. Project

“Project” has the meaning set forth in the Installment Sale Agreement. Purchaser

“Purchaser” shall mean Banc of America Leasing & Capital, LLC, as initial purchaser of the Bonds. QECB

“QECB” means a “qualified energy conservation bond,” as defined in Section 54D of the Code. Qualified Institutional Buyer

“Qualified Institutional Buyer” has the meaning ascribed to that term in Securities and Exchange Commission Rule 144A adopted under the Securities Act of 1933. Record Date

“Record Date” means the fifteenth day of the month immediately preceding an Interest Payment Date, whether or not such day is a Business Day. Registration Books

“Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Sections 2.06 and 2.08 hereof. Responsible Officer

“Responsible Officer” of the Trustee means any Vice President, Assistant Vice President or Trust Officer of the Trustee having regular responsibility for corporate trust matters related to this Indenture. Retained Rights

“Retained Rights” means the right of the Authority to receive certain payments, if any, with respect to fees, expenses and indemnification under Section 10.03 of the Installment Sale Agreement, or to enforce its rights under Sections 3.08, 7.01 (solely in respect of other Retained Rights), 8.01 and 10.03 of the Installment Sale Agreement and the rights expressly granted to the Authority under the Indenture and the Installment Sale Agreement to indemnification, inspection, consent and receipt of certificates, notices and opinions. Revenues

“Revenues” means all Installment Payments paid by the District and received by the Authority or Trustee, the Federal Subsidy Payments, and all interest or other income from any

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investment of any money in any fund or account held by the Trustee pursuant hereto (other than the Rebate Fund) pursuant to Section 4.04 hereof. Standard & Poor’s

“Standard & Poor’s” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, except that if Standard & Poor’s no longer maintains a rating on the bonds, any other nationally recognized bond rating agency, but only so long as a nationally recognized rating agency then maintains a rating on the Bonds. State

“State” means the State of California. Supplemental Indenture

“Supplemental Indenture” means any Indenture then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory hereof or supplemental hereto; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. Surplus Account

“Surplus Account” means the account established within the Revenue Fund pursuant to Section 4.05 hereof. Tax Certificate

“Tax Certificate” means the Tax Certificate delivered by the Authority at the time of the issuance and delivery of the Bonds, as the same may be amended or supplemented in accordance with its terms. Trustee

“Trustee” means Deutsche Bank National Trust Company, or its successor Trustee hereunder as provided in Section 6.01. Written Request of the Authority; Written Request of the District

“Written Request of the Authority” means an instrument in writing signed by the Executive Director of the Authority and any individual or individuals at the time designated to act on behalf of the Authority by a written certificate signed by the Executive Director of the Authority. The term “Written Request of the District” means an instrument in writing signed by the Chief Deputy Director, the Chief Financial Officer, the Chief, Division of Business Facilities and Security, and the Chief, Office of Innovative Finance of the District or by any other officer of the District duly authorized by the District for that purpose.

SECTION 1.02. Content of Certificates and Opinions. Every certificate or opinion provided for in this Indenture with respect to compliance with any provision hereof shall include (1) a statement that the Person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such Person, such Person has made or caused to be made

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such examination or investigation as is necessary to enable such Person to express an informed opinion with respect to the subject matter referred to in the instrument to which such Person’s signature is affixed; (4) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such Person, such provision has been complied with.

Any such certificate or opinion made or given by an officer of the Authority or an officer or Authorized Representative of the District may be based, insofar as it relates to legal, accounting or business matters of either of them, upon a certificate or opinion of or representation by counsel, an Accountant or a management consultant, unless such officer or Authorized Representative knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate, opinion or representation may be based, as aforesaid, is erroneous. Any such certificate, opinion or representation made or given by counsel, an Accountant or a management consultant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Authority or the District, as the case may be) upon a certificate or opinion of or representation by an officer of the Authority or an officer or Authorized Representative of the District, unless such counsel, Accountant or management consultant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such Person’s certificate or opinion may be based, as aforesaid, is erroneous. The same officer of the Authority or officer or Authorized Representative of the District, or the same counsel or Accountant or management consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Indenture, but different officers, Authorized Representatives, counsel, Accountants or management consultants may certify to different matters, respectively.

SECTION 1.03. Interpretation. (a) Unless the context otherwise indicates, words

expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean and include the neuter, masculine or feminine gender, as appropriate.

(b) Headings of articles and sections herein and the table of contents hereof are

solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.

(c) All references herein to “Articles,” “Sections” and other subdivisions are to the

corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof.

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ARTICLE II ISSUANCE OF BONDS

SECTION 2.01. Authorization of Bonds. Bonds shall be issued hereunder in order to obtain moneys to carry out the purposes of the Act for the benefit of the Authority and the District. The Bonds are designated as “California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010.” This Indenture constitutes a continuing agreement with the Holders from time to time of the Bonds to secure the full payment of the principal (or redemption price) of, premium if any, and interest, if any, on all such Bonds, subject to the covenants, provisions and conditions herein contained.

SECTION 2.02. Terms of the Bonds. The Bonds shall be issued in one series designated

the “California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010,” (the “Bonds”) in the aggregate principal amount of seven million two hundred twenty-seven thousand dollars ($7,227,000). The Bonds shall be dated the date of delivery of the Bonds, shall be issued only in fully registered form in Authorized Denominations, and shall mature on November 18, 2027 and bear interest at the rate of 5.74% (based on a 360-day year comprised of twelve 30 day months).

The Bonds shall bear interest at the rates set forth above, payable on Interest Payment

Dates. Each Bond shall bear interest (if any) from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is an Interest Payment Date, in which event such Bond shall bear interest (if any) from such date, or unless such date of authentication is on or before the Record Date for the first Interest Payment Date, in which event such Bond shall bear interest (if any) from the date of delivery of the Bonds, to the respective maturities of the Bonds or the date of prior redemption thereof; provided, however, that if at the time of authentication of any Bond, interest (if any) is then in default on the Outstanding Bonds, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the Outstanding Bonds. Payment of interest (if any) on the Bonds due on or before the maturity or prior redemption thereof shall be made to the person whose name appears in the registration books kept by the Trustee pursuant to Section 2.08 as the registered owner thereof as of the close of business on the Record Date, such interest to be paid by check mailed by first class mail to such registered owner at the address as it appears in such books or by wire pursuant to instructions on file with the Trustee.

Payment of the principal of the Bonds shall be made in lawful money of the United

States of America by check or by wire at maturity or on redemption prior to maturity at the Principal Corporate Trust Office of the Trustee.

SECTION 2.03. Redemption of Bonds. (a) Extraordinary Redemption. The Bonds are

subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as hereinafter provided, as a whole, or in part on a proportional basis among maturities or sinking fund payments within each stated maturity so that the aggregate annual principal amount of Bonds which shall be payable after such redemption date shall be as nearly proportional as practicable to the aggregate annual principal amount of Bonds Outstanding prior to such redemption date, from prepayments made by the District from Net Proceeds pursuant to Section 3.07(a) of the Installment Sale Agreement, at the redemption price equal to the principal amount thereof and interest (if any) accrued thereon to the date fixed for redemption, without premium.

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(b) Mandatory Sinking Fund Redemption. The Bonds are subject to redemption prior to their stated maturity, in part by lot, from

mandatory sinking account payments deposited in the Principal Account pursuant to Section 4.03(b) hereof, on each Interest Payment Date, at the redemption price equal to the principal amount thereof, and interest accrued thereon to the date fixed for redemption, without premium.

(c) Optional Redemption. The Bonds are subject to redemption prior to their stated maturity, at the direction of the

Authority, from moneys deposited by the Authority or the District from any source of available funds, in whole only, and not in part, on any Interest Payment Date, at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:

Redemption Periods Redemption Prices May 18, 2011 through November 18, 2015 103% May 18, 2016 through November 18, 2020 102% May 18, 2021 and thereafter 101% (d) Extraordinary Mandatory Redemption. The Bonds are subject to redemption on the 60th day occurring after the expiration of the

Expenditure Period, at the direction of the Authority upon the request of the District, from proceeds of the Bonds remaining on deposit in the Project Fund at the expiration of the Expenditure Period, at a redemption price equal to the principal amount of Bonds to be redeemed, plus accrued interest to the date of redemption, without premium.

(e) Notice of Redemption. Notice of redemption shall be mailed by the Trustee, not less than thirty (30) nor more

than sixty (60) days prior to the redemption date to) the respective Holders of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee. Notice of redemption to the Securities Depositories and the Information Services shall be given by registered mail, certified mail, overnight delivery or facsimile transmission. Each notice of redemption shall state the date of such notice, the redemption price, if any (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the redemption price, if any, thereof and in the case of a Bond to be redeemed in part only, the specified portion of the principal amount thereof to be redeemed, together with interest (if any) accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. Neither failure to receive such notice nor any defect therein shall affect the sufficiency of such redemption.

With respect to any notice of optional redemption of Bonds under Section 2.03(c), such

notice may, at the discretion and written direction of the Authority, state that such redemption

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shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest, if any, on such Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee, upon written direction of the Authority, shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.

If notice of redemption has been duly given as aforesaid and, in the case of a conditional

notice for purposes of Section 2.03(c), money for the payment of the redemption price of the Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds shall cease to accrue, and the Holders of such Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof equal to the principal, premium (if any) and interest (if any) accrued thereon to the redemption date.

(f) All Bonds redeemed pursuant to the provisions of this Section 2.03 shall be

cancelled and destroyed by the Trustee and shall not be reissued. SECTION 2.04. Form of Bonds. The Bonds and the authentication endorsement and

assignment to appear thereon shall be substantially in the forms set forth in Exhibit A hereto attached and by this reference herein incorporated.

SECTION 2.05. Execution of Bonds. The Bonds shall be executed in the name and on

behalf of the Authority with the manual or facsimile signature of its Chairman. The Bonds shall then be delivered to the Trustee for authentication by it. In case the officer who shall have signed any of the Bonds shall cease to be such officer of the Authority before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though the officer who signed the same had continued to be such officer of the Authority, and also any Bonds may be signed on behalf of the Authority by such individual as at the actual date of execution of such Bonds shall be the proper officer of the Authority although at the nominal date of such Bonds any such individual shall not have been such officer of the Authority.

Only such of the Bonds as shall bear thereon a certificate of authentication substantially

in the form set forth in Exhibit A, with the manual signature of the Trustee as authenticating agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture.

SECTION 2.06. Transfer and Payment of Bonds; Restrictions on Transfer of Bonds. (a) Any Bond may, in accordance with its terms, be transferred in the books

required to be kept pursuant to the provisions of Section 2.08 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Corporate Trust Office of the Trustee accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. Whenever any Bonds shall be surrendered for transfer at the Principal Corporate Trust Office of the Trustee, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a

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new Bond or Bonds of the same series and maturity for a like aggregate principal amount in authorized denominations. The Trustee shall require the payment by the Holder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer as a condition precedent to the exercise of such privilege.

The Authority and the Trustee may deem and treat the registered owner of any Bonds as

the absolute owner of such Bonds for the purpose of receiving payment thereof and for all other purposes, whether such Bonds shall be overdue or not, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of and redemption premium, if any, on such Bonds shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on such Bonds to the extent of the sum or sums so paid.

The Trustee shall not be required to issue, register the transfer of or exchange any Bonds

during the fifteen (15) days preceding each Interest Payment Date, or to register the transfer of or exchange any Bond which has been selected for redemption in whole or in part, from and after the day of mailing of a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 2.03.

Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall

execute and the Trustee shall authenticate and deliver a new Bond or Bonds for a like aggregate principal amount in Authorized Denominations. The Trustee shall require the Bondholder requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any such transfer shall be paid by the District.

(b) No Bond shall be transferred except to a Qualified Institutional Buyer or an

“accredited investor” as generally defined under Regulation D of the Securities Act of 1933 in Authorized Denominations. Each registered owner or beneficial owner of a Bond agrees by purchase of the Bond to abide by these limitations. In addition, underwriters shall not deposit the Bonds in any trust or account under its control and sell any shares, participatory interests or certificates in such trust or account, and any initial purchaser of the Bonds from underwriters shall not deposit the Bonds in any trust or account under its control and sell any shares, participatory interests or certificates in such trust or account except to Qualified Institutional Buyers, or “accredited investors” as generally defined under Regulation D of the Securities Act of 1933, in whole. The sale and remarketing guidelines set forth in Exhibit B shall apply and each transferee of the Bonds shall deliver to the Authority an investor’s letter in substantially the form of Exhibit C hereto.

Failure to comply with this Section 2.06 shall cause any purported transfer to be null and

void. SECTION 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal

Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds of the same series and maturity of other authorized denominations. The Trustee shall require the payment by the Holder requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange as a condition precedent to the exercise of such privilege. The Trustee shall not be required to make any such exchange during the fifteen (15) days preceding each Interest Payment Date.

SECTION 2.08. Bond Registration Books. The Trustee will keep at its Principal

Corporate Trust Office sufficient books for the registration and transfer of the Bonds which shall at all times be open to inspection by the Authority during regular business hours with

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reasonable prior notice, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Bonds in such books as hereinabove provided.

SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds. If any Bond shall become

mutilated the Trustee at the expense of the Holder shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled.

If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft

may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Holder, shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen.

The Trustee may require payment of a reasonable sum for each new Bond issued under

this Section 2.09 and of the expenses which may be incurred by the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds of the same series secured by this Indenture. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same.

SECTION 2.10. Temporary Bonds. The Bonds issued under this Indenture may be

initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed and authenticated as authorized by the Authority, in accordance with the terms of the Act. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Corporate Trust Office of the Trustee and the Trustee shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds delivered hereunder.

SECTION 2.11. Validity of Bonds. The validity of the authorization and issuance of the

Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority or the Trustee with respect to or in connection with the Installment Sale Agreement. The recital contained in the Bonds that the same are issued pursuant to the Act and the Constitution and laws of the State shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance.

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ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS

SECTION 3.01. Issuance of the Bonds. At any time after the execution and delivery of

this Indenture or from time to time thereafter, upon the execution of the Bonds by the Authority and delivery thereof to the Trustee, as hereinabove provided, and without any further action on the part of the Authority, the Trustee shall authenticate upon Written Request of the Authority, and deliver the Bonds in an aggregate principal amount not exceeding $7,227,000.

SECTION 3.02. Application of Proceeds of Bonds and Other Amounts. The net Bond

proceeds received by the Authority from the sale of the Bonds shall be deposited with the Trustee, who shall forthwith deposit $144,540 of such proceeds into the Costs of Issuance Fund, which fund and account the Trustee shall establish and maintain as further provided in Section 3.04 hereof. The balance of such proceeds ($7,082,460) shall be deposited by the Trustee into the Project Fund, which Project Fund the Trustee shall hereby establish and maintain.

In addition, the Trustee shall deposit the amount of $33,460 received from the District on

or prior to the Closing Date into the Costs of Issuance Fund, resulting in a total deposit to the Costs of Issuance Fund of $178,000.

SECTION 3.03. Project Fund. The moneys in the Project Fund shall be held free and

clear of any security interest hereunder and shall be applied to the payment of the Costs of the Project, in accordance herewith. The Trustee shall disburse moneys in the Project Fund for the purpose of paying or reimbursing the payment of the Costs of the Project, including but not limited to all costs incidental to or connected with such acquisition and construction, upon receipt of: (i) a requisition, substantially in the form attached hereto as Exhibit E, signed by an Authorized Representative of the District, and approved by the Purchaser; and (ii) an Additional Equipment Certificate in the form attached as Exhibit C to the Installment Sale Agreement.

Any amounts remaining in the Project Fund at the expiration of the Expenditure Period

shall be transferred to the Surplus Account, to be applied to the redemption of Bonds in accordance with Section 2.03(d).

All interest earnings and profits or losses on the investment of amounts in the Project

Fund shall be deposited in or charged to the Project Fund and applied to the purposes thereof. SECTION 3.04. Costs of Issuance Fund. The Trustee shall establish the Costs of

Issuance Fund (the “Costs of Issuance Fund”). The moneys in the Costs of Issuance Fund shall be held by the Trustee in trust and applied to the payment of Costs of Issuance for the Bonds, upon a sequentially numbered Requisition of the District filed with the Trustee, in the form attached hereto as Exhibit D, signed by an Authorized Representative of the District. All payments from the Costs of Issuance Fund shall be reflected in the Trustee’s regular accounting statements. Any amounts remaining in the Costs of Issuance Fund six months following the date of delivery of the Bonds shall be transferred by the Trustee to the Project Fund. Upon such transfer, the Trustee shall close the Costs of Issuance Fund.

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ARTICLE IV REVENUES

SECTION 4.01. Pledge of Revenues. All Revenues, and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established hereunder (other than amounts on deposit in the Rebate Fund created pursuant to Section 5.03) are hereby irrevocably pledged to the payment of the interest and premium, if any, on and principal of the Bonds as provided herein, and the Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding; provided, however, that out of the Revenues and other moneys there may be applied such sums for such purposes as are permitted hereunder. This pledge shall constitute a first pledge of and charge and lien upon the Revenues and all other moneys on deposit in the funds and accounts established hereunder (other than amounts on deposit in the Rebate Fund created pursuant to Section 5.03) for the payment of the interest on and principal of the Bonds in accordance with the terms hereof and thereof.

The Authority hereby assigns to the Trustee all of the Revenues, to the extent of its

interest therein, and all of the Authority’s rights, title, interest and remedies (other than the Retained Rights) under the Installment Sale Agreement. The assignment of the Installment Sale Agreement to the Trustee is solely in its capacity as Trustee under this Indenture, and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of this Indenture, including, without limitation, the provisions of Article VI hereof. The Trustee shall have no responsibility for the representations, covenants or warranties of the Authority under the Installment Sale Agreement.

SECTION 4.02. Receipt and Deposit of Revenues in the Revenue Fund. In order to carry

out and effectuate the pledge, charge and lien contained herein, the Authority agrees and covenants that all Revenues when and as received shall be received by the Authority in trust hereunder for the benefit of the Holders and shall be deposited when and as received by the Authority in a separate revenue account (the “Revenue Fund”), which fund is hereby created and which fund the Authority hereby agrees and covenants to maintain with the Trustee so long as any Bonds shall be Outstanding hereunder; provided, however, that Revenues received pursuant to Section 4.05 shall be deposited as provided in Section 4.05. Subject to the preceding sentence, all Revenues shall be accounted for through and held in trust in the Revenue Fund, and the Authority shall have no beneficial right or interest in any of the Revenues except only as herein provided. All Revenues, whether received by the Authority in trust or deposited with the Trustee as herein provided, shall nevertheless be allocated, applied and disbursed solely to the purposes and uses hereinafter in this Article set forth, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the Authority.

SECTION 4.03. Establishment and Maintenance of Accounts for Use of Money in the

Revenue Fund. Subject to Section 5.03, all money in the Revenue Fund shall be set aside by the Trustee in the following respective special accounts within the Revenue Fund (each of which is hereby created and each of which the Authority hereby covenants and agrees to cause to be maintained) in the following order of priority: (i) Interest Account, and (ii) Principal Account.

All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this section.

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(a) Interest Account. On or before the second Business Day preceding each Interest

Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on the next succeeding Interest Payment Date.

No deposit need be made in the Interest Account if the amount contained therein is at

least equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date.

All money in the Interest Account shall be used and withdrawn by the Trustee solely for

the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity).

(b) Principal Account. On or before the second Business Day preceding each Interest

Payment Date the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the aggregate amount of all sinking fund payments required to be made on the Bonds on the next succeeding Interest Payment Date.

No deposit need be made in the Principal Account if the amount contained therein is at

least equal to the aggregate amount of all sinking fund payments required to be made on such Interest Payment Date for all Outstanding Bonds.

Subject to the terms and conditions set forth in this Section and Section 2.03(b), the

Bonds shall be redeemed (or paid at maturity, as the case may be) by application of mandatory sinking account payments in the amounts and upon the dates hereby established, as follows:

Mandatory

Sinking Account Mandatory

Sinking Mandatory

Sinking Account Mandatory

Sinking Payment Date Account Payments Payment Date Account Payments

11/18/11 $207,681.23 5/18/20 163,441.08 5/18/12 276,377.68 11/18/20 171,864.00

11/18/12 286,548.85 5/18/21 173,452.03 5/18/13 289,196.56 11/18/21 182,210.28

11/18/13 295,386.56 5/18/22 183,893.90 5/18/14 298,115.93 11/18/22 192,999.99

11/18/14 304,588.66 5/18/23 194,783.30 5/18/15 307,403.06 11/18/23 204,250.17

11/18/15 314,168.54 5/18/24 206,137.45 5/18/16 317,071.46 11/18/24 215,978.52

11/18/16 134,592.93 5/18/25 217,974.16 5/18/17 135,836.57 11/18/25 228,203.35

11/18/17 143,324.21 5/18/26 230,311.95 5/18/18 144,648.52 11/18/26 240,943.65

11/18/18 152,436.55 5/18/27 243,169.97 5/18/19 153,845.06 11/18/27* 254,219.11

11/18/19 161,944.71 * Maturity.

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(c) All money in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds as they shall become due and payable, whether at maturity or redemption.

SECTION 4.04. Deposit and Investments of Money in Accounts and Funds. Subject to

Sections 3.03, 4.05 and 5.03, all money held by the Trustee in any of the accounts or funds established pursuant hereto shall be invested in Permitted Investments at the Written Request of the Authority or the Written Request of the District; provided that any moneys representing prepayments of Installment Payments shall be invested only in Permitted Investments which are then rated at least “AAA” or equivalent. In the absence of written direction with respect to a fund or account, the Trustee will hold funds uninvested. All investments hereunder shall be valued by the Trustee as frequently as may be requested by the Authority and not less frequently than annually on or before June 30 of each year at the market value thereof, exclusive of accrued interest. Subject to Section 5.03, all interest or profit on money in any of the funds and accounts herein invested as provided herein (except the Rebate Fund) shall be deposited in the Revenue Fund.

The Authority acknowledges that to the extent regulations of the Comptroller of the

Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority with periodic cash transaction statements which include details for all investment transactions made by the Trustee hereunder. The Trustee or any of its affiliates (including its parent or any of its subsidiaries) may act as sponsor, adviser, manager, administrator, servicing agent or custodian in connection with any investments made by the Trustee hereunder.

SECTION 4.05. Establishment of Surplus Account. The Trustee shall establish a

separate account within the Revenue Fund, which the Trustee shall establish and hold in trust, and which shall be entitled the “Surplus Account.” The moneys in any Surplus Account shall be used and applied (subject to Section 4.03) at the written direction of the District (unless some other application of such moneys permitted by the Indenture and the Installment Sale Agreement is requested by the District and would not, in the Opinion of Bond Counsel, cause the Bonds to lose their status, or fail to qualify, as QECBs) to redeem Bonds, to the maximum degree permissible, in increments of $1.00, and at the earliest possible dates at which the Bonds can be redeemed pursuant to Section 2.03 of the Indenture. Notwithstanding Section 4.04 hereof, the moneys in the Surplus Account shall be invested at the written instruction of the District at a yield no higher than the yield on the Outstanding Bonds (unless in the Opinion of Bond Counsel, addressed and delivered to the Authority and the Trustee, investment at a higher yield would not cause the Bonds to lose their status, or fail to qualify, as QECBs), and all such investment income shall be deposited in the Surplus Account and expended or reinvested as provided above.

In the event of redemption of all of the Bonds pursuant to Section 2.03 hereof, any moneys then remaining in the account within the Project Fund relating to such Bonds transferred by the District to the Trustee for deposit into the Surplus Account within the Revenue Fund shall be used to redeem Bonds.

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ARTICLE V PARTICULAR COVENANTS

SECTION 5.01. Punctual Payment and Performance. The Authority will punctually pay out of the Revenues the interest on and the principal of and redemption premiums, if any, to become due on every Bond issued hereunder in strict conformity with the terms hereof and of the Bonds, and will faithfully observe and perform all the agreements and covenants to be observed or performed by the Authority contained herein and in the Bonds.

SECTION 5.02. Against Encumbrances. The Authority will not make any pledge of or

place any charge or lien upon the Revenues except as provided herein, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except the Bonds.

SECTION 5.03. Tax Covenants. (a) Designation of Bonds as Qualified Energy Conservation Revenue Bonds; Election

to Apply Section 6431(f) of the Code. The Authority hereby designates the Bonds as Qualified Energy Conservation Revenue Bonds for purposes of Section 54D(a)(3) of the Code. The Authority also hereby irrevocably elects to apply the provisions of Section 6431(f) of the Code to the Bonds and intends that the Bonds be treated as specified tax credit bonds within the meaning of Section 6431(f)(2) of the Code. It is the intent of the Issuer that the Bonds be eligible for direct payment from the United States Department of Treasury of an amount equal to the tax credit.

(b) Limitation on Issuance Costs. No proceeds of the Bonds and investment earnings

thereon, in an amount in excess of 2% of the proceeds of the sale of the Bonds, will be used to pay costs of issuing of the Bonds or the Installment Sale Agreement. If the fees of the original purchaser are retained as a discount on the purchase of the Bonds, such retention shall be deemed to be an expenditure of proceeds of the Bonds for said fees.

(c) Qualified Issuer. The Authority is qualified to issue the Bonds under Section

54D(a)(2) of the Code. (d) Arbitrage and Rebate Compliance. The Authority shall not take, or permit or

suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code as modified by Section 54A(d)(4) of the Code. The Authority shall take any and all actions necessary to assure compliance with Section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds. For purposes of this paragraph, investments of Available Project Proceeds during the Expenditure Period are deemed to comply with the requirements and limitations of Section 148 of the Code.

In addition, the Authority shall not take any action or inaction, or fail to take any action,

or permit any action to be taken on its behalf or cause or permit any circumstances within its control to arise or continue, if such action or inaction would cause the Bonds to not be Qualified Energy Conservation Revenue Bonds under Section 54D of the Code. Without limiting the generality of the forgoing, the Authority shall comply with the instructions and requirements of the Tax Certificate, which is incorporated herein as if fully set forth herein (provided, that no

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representation or covenant is made herein regarding the collection or application of the Federal Subsidy Payments). This covenant shall survive payment in full or defeasance of the Bonds.

In the event that at any time the Authority is of the opinion that for purposes of this

Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee under this Indenture, the Authority shall so instruct the Trustee in writing accompanied by a supporting Opinion of Bond Counsel, and the Trustee shall take such action as may be necessary in accordance with such instructions.

The Trustee shall establish and maintain a separate fund designated the “Rebate Fund.”

There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Written Request of the Authority. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to Article IX hereof or anything to the contrary contained herein, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Authority, and shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Authority’s determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the Authority’s calculations.

Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and

after payment of any amounts described in this Section, shall, upon receipt by the Trustee of a Written Request of the Authority, be withdrawn by the Trustee and remitted to the Authority.

Notwithstanding any provisions of this Section, if the Authority shall provide to the

Trustee an Opinion of Bond Counsel that any specified action required under this Section is no longer required or that some further or different action is required in order for the Bonds to be Qualified Energy Conservation Revenue Bonds under Sections 54A and 54D of the Code, the Trustee may conclusively rely on such opinion in complying with the requirements of this Section and of the Tax Certificate, and the covenants hereunder shall be deemed to be modified to that extent.

(e) Allocation of Qualified Energy Conservation Bond Limitation. The Authority has

received an allocation of a portion of the national qualified energy conservation bond limitation in the aggregate amount of $7,227,000, included in the transcript for the Bonds.

SECTION 5.04. Federal Subsidy Payments. (a) The Bonds are secured by and payable from the Revenues, which includes the

Federal Subsidy Payments. (b) The District covenants to cause, within the 45-day period beginning on the date

that is 90 days before the next Interest Payment Date, to be filed Form 8038-CP, or any successor form designated by the federal government, requesting payment of the Federal Subsidy Payments with respect to the next interest payment on the Bonds.

SECTION 5.05. Accounting Records and Reports. The Trustee will keep or cause to be

kept proper books of record and accounts in which complete and correct entries shall be made

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of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Authority and District at reasonable hours and under reasonable conditions. Not more than 210 days after the close of each Fiscal Year, the Trustee shall furnish or cause to be furnished to the Authority and District a complete financial statement covering receipts, disbursements, allocation and application of Revenues for such Fiscal Year. The Authority shall also keep or cause to be kept such other information as may be required under the Tax Certificate. The Trustee shall have no duty to review, analyze or verify such financial statements and shall hold such financial statements, solely as a repository for the Holders of the Bonds. The Trustee shall not be deemed to have notice of any information contained in such financial statements or circumstances which might constitute an Event of Default which may be disclosed therein.

SECTION 5.06. Further Assurances. The Authority will promptly execute and deliver

or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Holders all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby.

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ARTICLE VI THE TRUSTEE

SECTION 6.01. The Trustee. Deutsche Bank National Trust Company shall serve as the Trustee for the Bonds for the purpose of receiving all money which the Authority is required to deposit with the Trustee hereunder and for the purpose of allocating, applying and using such money as provided herein and for the purpose of paying the interest on and principal of any redemption premiums, if any, on the Bonds presented for payment at the Principal Corporate Trust Office of the Trustee, with the rights and obligations provided herein. The Authority agrees that it will at all times maintain a Trustee having a Principal Corporate Trust Office in San Francisco, California.

The Authority may at any time, unless there exists any Event of Default remove the

original Trustee appointed hereunder and any successor Trustee thereto and appoint a successor Trustee thereto by an instrument in writing; provided that any such successor shall be a bank or trust company doing business and having a principal office in San Francisco or Los Angeles, California, having a combined capital (exclusive of borrowed capital) and surplus of at least seventy-five million dollars ($75,000,000) and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Authority and by mailing to the Holders notice of such resignation. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of a Trustee and appointment of a successor Trustee shall become effective only upon the acceptance of appointment by the successor Trustee. If, within thirty (30) days after notice of the removal or resignation of the Trustee no successor Trustee shall have been appointed and shall have accepted such appointment, the removed or resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Trustee having the qualifications required hereby.

The Trustee is hereby authorized to redeem the Bonds when duly presented for

payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof or upon the surrender thereof by the Authority and shall destroy such Bonds and a certificate of destruction shall be delivered to the Authority. The Trustee shall keep accurate records of all Bonds paid and discharged and cancelled by it.

The Authority shall from time to time, subject to any agreement between the Authority

and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures including but not limited to advances to and fees and expenses incurred pursuant to this Section 6.01 and fees and expenses of independent accountants and counsel or other experts employed by it and reasonably required in the exercise and performance of its rights and obligations hereunder, and, to the extent permitted by law, indemnify and hold the Trustee, its officers, agents, attorneys, employees and directors, harmless against costs, expenses, claims and liabilities, including without limitation the reasonable fees and expenses of its attorneys and agents, not arising from the Trustee’s own active or passive negligence or willful misconduct which the Trustee may incur in the exercise and performance of its rights and obligations hereunder. Such indemnity shall survive the resignation or removal of the Trustee and defeasance of the Bonds.

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When the Trustee incurs expenses or renders services after the occurrence of an Event of

Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

SECTION 6.02. Liability of Trustee. The recitals of facts, agreements and covenants

herein and in the Bonds shall be taken as recitals of facts, agreements and covenants of the Authority, and the Trustee assumes no responsibility for the correctness of the same or makes any representation as to the sufficiency or validity hereof or of the Bonds, or shall incur any responsibility in respect thereof other than in connection with the rights or obligations assigned to or imposed upon it herein, in the Bonds or in law or equity. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own active or passive negligence or willful misconduct. The Trustee shall perform only such duties as are expressly provided herein, and no implied duties or obligations shall be read into this Indenture against the Trustee.

The Trustee shall not be bound to recognize any person as the Holder of a Bond unless

and until such Bond is submitted for inspection, if required, and his or her title thereto satisfactorily established, if disputed.

Whenever in the administration of its rights and obligations hereunder the Trustee shall

deem it necessary or desirable that a matter be established or proved prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a Certificate of the Authority, which certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such matter or may require such additional evidence as it may deem reasonable.

The Trustee shall not be liable for any error of judgment made in good faith, unless it

shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be liable with respect to any action taken or omitted to be taken by

it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding (or such lesser number as may direct the Trustee in accordance with this Indenture) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty.

The Trustee shall be under no obligation to exercise any of the rights or powers vested in

it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.

The Trustee shall not be deemed to have knowledge of any Event of Default hereunder

or event of default under the Installment Sale Agreement unless and until a Responsible Officer shall have actual knowledge thereof or shall have received written notice thereof at its Principal Corporate Trust Office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms,

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conditions, covenants or agreements herein or of any of the documents executed in connection with the Bonds or as to the existence of an Event of Default hereunder.

No provision of this Indenture shall require the Trustee to expend or risk its own funds

or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee has no obligation or liability to the Holders for the payment of interest, principal or redemption premium, if any, with respect to the Bonds other than from Revenues.

The Trustee shall not be bound to ascertain or inquire as to the validity or genuineness

of any collateral given to or held by it. The Trustee shall not be responsible for the recording or filing of any document relating to this Indenture or of financing statements (or continuation statements in connection therewith) or of any supplemental instruments or documents of further assurance as may be required by law in order to perfect the security interests in any collateral given to or held by it.

The Trustee shall not be concerned with or accountable to anyone for the subsequent use

or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof.

The Trustee makes no representation or warranty, express or implied, as to the title,

value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the District of the Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Installment Sale Agreement or this Indenture for the existence, furnishing or use of the Project.

The rights given the Trustee under the Installment Sale Agreement are subject in all

respects to the privileges and immunities afforded the Trustee under this Indenture. The Trustee shall be protected in acting upon any notice, requisition, resolution, request,

consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.

The Trustee shall not be bound to recognize any person as the Holder of a Bond unless

and until such Bond is submitted for inspection, if required, and his or her title thereto is satisfactorily established, if disputed.

The Trustee shall have no responsibility with respect to any information, statement, or

recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds.

The immunities extended to the Trustee also extend to its directors, officers, employees,

attorneys, and agents. The permissive right of the Trustee to do things enumerated in this Indenture shall not

be construed as a duty.

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The Trustee may execute any of the trusts or powers hereof and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care.

The Trustee shall not be accountable for the use or application by the Authority or the

District of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any paying agent. The Trustee may become the owner of Bonds secured hereby with the same rights it would have if not Trustee.

The Trustee agrees to accept and act upon instructions or directions pursuant to this

Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority or the District elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The District agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

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ARTICLE VII AMENDMENT OF THE INDENTURE

SECTION 7.01. Amendment of the Indenture. The Indenture and the rights and obligations of the Authority, the Trustee and of the Holders may be amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Holders of a majority in aggregate principal amount of the Bonds then Outstanding exclusive of Bonds disqualified as provided in Section 7.02, are filed with the Trustee. No such amendment shall (1) extend the maturity of or reduce the interest rate on or amount of interest on or principal of or redemption premium, if any, on any Bond without the express written consent of the Holder of such Bond, or (2) permit the creation by the Authority of any pledge of or charge or lien upon the Revenues as provided herein superior to or on a parity with the pledge, charge and lien created hereby for the benefit of the Bonds, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify any rights or obligations of the Trustee, the Authority, or the District without their prior written assent thereto, respectively.

The Indenture and the rights and obligations of the Authority, the Trustee and of the

Holders may also be amended at any time by a Supplemental Indenture which shall become binding upon adoption without the consent of any Holders, but only to the extent permitted by law, for any purpose that will not materially adversely affect the interests of the Holders, including (without limitation) for any one or more of the following purposes --

(a) to add to the agreements and covenants required herein to be performed by the

Authority other agreements and covenants thereafter to be performed by the Authority, or to surrender any right or power reserved herein to or conferred herein on the Authority;

(b) to make such provisions for the purpose of curing any ambiguity or of

correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority may deem desirable or necessary and not inconsistent herewith; or

(c) to add to the agreements and covenants required herein, such agreements and

covenants as may be necessary to qualify the Indenture under the Trust Indenture Act of 1939. SECTION 7.02. Disqualified Bonds. Bonds owned or held by or for the account of the

Authority shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds provided in this article, and shall not be entitled to consent to or take any other action provided in this article, except that in determining whether the Trustee shall be protected in relying upon any such approval or consent of a Holder, only Bonds which the Trustee actually knows to be owned or held by or for the account of the Authority shall be disregarded.

SECTION 7.03. Endorsement or Replacement of Bonds After Amendment. After the

effective date of any action taken as hereinabove provided, the Authority may determine that the Bonds may bear a notation by endorsement in form approved by the Authority as to such action, and in that case upon demand of the Holder of any Outstanding Bonds and presentation of his or her Bond for such purpose at the Principal Corporate Trust Office of the Trustee a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Holder of any Outstanding Bond, a new Bond or Bonds shall be exchanged at the Principal

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Corporate Trust Office of the Trustee without cost to each Holder for its Bond or Bonds then Outstanding upon surrender of such Outstanding Bonds.

SECTION 7.04. Amendment by Mutual Consent. The provisions of this article shall not

prevent any Holder from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.

SECTION 7.05. Opinion of Bond Counsel. Prior to executing any supplemental

Indenture, the Trustee and the Authority shall be furnished an Opinion of Bond Counsel, upon which it may conclusively rely, to the effect that all conditions precedent to the execution of such supplemental Indenture hereunder have been satisfied and such supplemental Indenture is authorized and permitted hereunder and does not adversely affect the status of the Bonds as QECBS or adversely affect the exemption of interest on the Bonds from personal income taxation by the State.

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ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF HOLDERS

SECTION 8.01. Events of Default. Each of the following events constitutes an “Event of Default” hereunder:

(a) if default shall be made by the Authority in the due and punctual payment of the

interest (if any) on any Bond when and as the same shall become due and payable; (b) if default shall be made by the Authority in the due and punctual payment of the

principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed or by proceedings for redemption;

(c) if default shall be made by the Authority in the performance of any of the

agreements or covenants required herein to be performed by the Authority, and such default shall have continued for a period of thirty (30) days after the Authority shall have been given notice in writing of such default by the Trustee;

(d) if the Authority shall file a petition or answer seeking arrangement or

reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property; or

(e) if an event described in Section 7.01 of the Installment Sale Agreement, therein

referred to as an Event of Default, occurs and is continuing. The Trustee shall promptly notify all Holders of any such Event of Default which is

continuing. Such notice shall include a reference to or a summary of the rights and remedies available to the Holders as set forth herein.

SECTION 8.02. Institution of Legal Proceedings by Trustee. If one or more of the Events

of Default shall happen and be continuing, the Trustee may, and upon the written request of the Holders of a majority in principal amount of the Bonds then Outstanding and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Holders of Bonds under this Indenture and under the Installment Sale Agreement by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights and duties hereunder. The Trustee may exercise its rights under this Indenture to collect its fees and expenses without the consent of the Holders of any Bonds so long as such exercise does not result in the acceleration of any Bonds.

Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or

accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment, or composition affecting the Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding without the approval of the Holders of Bonds so affected.

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SECTION 8.03. Non-Waiver. Nothing in this Article or in any other provision hereof or

in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Bonds to the respective Holders of the Bonds at the respective dates of maturity or upon prior redemption as provided herein from the Revenues as provided herein pledged for such payment, or shall affect or impair the right of such Holders, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Bonds.

A waiver of any default or breach of duty or contract by any Holder shall not affect any

subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by any Holder to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Holders by the Act or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Holders.

If any action, proceeding or suit to enforce any right or exercise any remedy is

abandoned, the Authority and any Holder shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

SECTION 8.04. Actions by Trustee as Attorney-in-Fact. Any action, proceeding or suit

which any Holder shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Holders, whether or not the Trustee is a Holder, and the Trustee is hereby appointed (and the successive Holders, by taking and holding the Bonds issued hereunder, shall be conclusively deemed to have so appointed it) the true and lawful attorney-in-fact of the Holders for the purpose of bringing any such action, proceeding or suit and for the purpose of doing and performing any and all acts and things for and on behalf of the Holders as a class or classes as may be advisable or necessary in the opinion of the Trustee as such attorney-in-fact.

SECTION 8.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved

to the Holders is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law.

SECTION 8.06. Limitation on Bondholders’ Right to Sue. No Holder of any Bond issued

hereunder shall have the right to institute any suit, action or proceeding at law or equity, for any remedy under or upon this Indenture, unless (a) such Holder shall have previously given to the Trustee written notice of the occurrence of an Event of Default as defined in Section 8.01 hereunder; (b) the Holders of at least a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) said Holders shall have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such request shall have been received by, and said tender of indemnity shall have been made to, the Trustee.

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Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy hereunder; it being understood and intended that no one or more Holders of Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of the Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Holders of the Outstanding Bonds.

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ARTICLE IX [RESERVED]

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ARTICLE X MISCELLANEOUS

SECTION 10.01. Liability of Authority Limited to Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF OR ANY LOCAL AGENCY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST, IF ANY, ON THE BONDS. The Authority shall not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reason of or in connection with the Installment Sale Agreement, the Bonds or this Indenture, except only to the extent amounts are received for the payment thereof from the District under the Installment Sale Agreement.

SECTION 10.02. Benefits of the Indenture Limited to Parties. Nothing contained herein,

expressed or implied, is intended to give to any person other than the Authority, the Trustee and the Holders any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Trustee and the Holders.

SECTION 10.03. Successor Is Deemed Included In All References To Predecessor.

Whenever herein either the Authority or any member, officer or employee thereof or of the State of California is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the Project that are presently vested in the Authority or such member, officer or employee, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or any member, officer or employee thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.

SECTION 10.04. Execution of Documents by Holders. Any declaration, request or other

instrument which is permitted or required herein to be executed by Holders may be in one or more instruments of similar tenor and may be executed by Holders in person or by their attorneys appointed in writing. The fact and date of the execution by any Holder or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public (or other officer authorized to make acknowledgments of deeds to be recorded in the state or territory in which he purports to act) that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of any Bonds and the amount, maturity, number and date of holding the same may be proved by the registration books relating to the Bonds at the Principal Corporate Trust Office of the Trustee.

Any declaration, request or other instrument or writing of the Holder of any Bond shall

bind all future Holders of such Bond with respect to anything done or suffered to be done by the Authority in good faith and in accordance therewith.

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SECTION 10.05. Waiver of Personal Liability. No member, officer, agent or employee of the Authority, and no officer, official agent or employee of the State of California or any department, board or agency of the foregoing shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture.

SECTION 10.06. Destruction of Cancelled Bonds. Whenever provision is made for the

return to the Authority of any Bonds which have been cancelled pursuant to the provisions hereof, the Authority may, by a Written Request of the Authority, direct the Trustee to destroy such Bonds and furnish to the Authority a certificate of such destruction.

SECTION 10.07. Content of Certificates. Every Certificate of the Authority with respect

to compliance with any agreement, condition, covenant or provision provided herein shall include (a) a statement that the person or persons making or giving such certificate have read such agreement, condition, covenant or provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such agreement, condition, covenant or provision has been complied with; and (d) a statement as to whether, in the opinion of the signers, such agreement, condition, covenant or provision has been complied with.

Any Certificate of the Authority may be based, insofar as it relates to legal matters, upon

an Opinion of Bond Counsel unless the person making or giving such certificate knows that the Opinion of Bond Counsel with respect to the matters upon which his certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Bond Counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Authority, upon a representation by an officer or officers of the Authority unless the counsel executing such Opinion of Bond Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous.

SECTION 10.08. Accounts and Funds; Business Days. Any account or fund required

herein to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such accounts and funds shall at all times be maintained in accordance with the Tax Certificate and sound industry practice and with due regard for the protection of the security of the Bonds and the rights of the Holders. Any action required to occur hereunder on a day which is not a Business Day shall be required to occur on the next succeeding Business Day.

SECTION 10.09. Article and Section Headings and References. The headings or titles of

the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,” “Sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to the Indenture as a whole and not to any particular article, section, subdivision or clause hereof.

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SECTION 10.10. Partial Invalidity. If any one or more of the agreements or covenants

or portions thereof required hereby to be performed by or on the part of the Authority or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof or of the Bonds, and the Holders shall retain all the benefit, protection and security afforded to them under the Act or any other applicable provisions of law. The Authority and the Trustee hereby declare that they would have executed and delivered the Indenture and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.

SECTION 10.11. Execution in Several Counterparts. This Indenture may be executed in

any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument.

SECTION 10.12. Amendments to Installment Sale Agreement. The Authority shall not

supplement, amend, modify or terminate any of the terms of the Installment Sale Agreement, or consent to any such supplement, amendment, modification or termination, without the written consent of the Trustee. The Trustee shall give such written consent only if (a) such supplement, amendment, modification or termination will not materially adversely affect the interests of the Holders or result in any material impairment of the security hereby given for the payment of the Bonds or (b) the Trustee first obtains the written consents of the Holders of a majority in principal amount of the Bonds then Outstanding to such supplement, amendment, modification or termination; provided, that no such supplement, amendment, modification or termination shall reduce the amount of Installment Payments to be made to the Authority or the Trustee by the District pursuant to the Installment Sale Agreement or extend the time for making such payments, or permit the creation of any lien prior to or on a parity with the lien created by the Installment Sale Agreement (except as expressly provided in the Installment Sale Agreement), in each case without the written consents of all of the Holders of the Bonds then Outstanding.

Notwithstanding any provisions in this Indenture, with respect to any addition or

removal of Equipment (as such terms are defined in the Installment Sale Agreement) pursuant to the Installment Sale Agreement, upon satisfaction of the conditions set forth therein, an amendment shall be made to Exhibit B of the Installment Sale Agreement in order to affect such addition or removal without obtaining the consent of the Holders of the Bonds.

SECTION 10.13. Governing Law; Venue. This Indenture shall be construed in

accordance with and governed by the Constitution and laws of the State applicable to contracts made and performed in the State. This Indenture shall be enforceable in the State, and any action arising out of this Indenture shall be filed and maintained in the Sacramento County Superior Court, Sacramento, California, unless the Authority waives this requirement in writing.

SECTION 10.14. Unclaimed Money. Notwithstanding any provisions of this Indenture,

any moneys deposited with the Trustee in trust for the payment of the principal of, or interest or premium on, any Bonds remaining unclaimed after the principal of any Bond has become due and payable (whether at maturity or upon call for redemption or by declaration as provided in this Indenture), shall be disposed of as provided by law and the Holders of such

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Bonds shall thereafter be entitled to look only to the transferee of such moneys (currently the State Controller) for payment thereof, and all liability of the Trustee with respect to such moneys shall thereupon cease.

IN WITNESS WHEREOF, the CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY has caused this Indenture to be signed in its name by its authorized officers and DEUTSCHE BANK NATIONAL TRUST COMPANY, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed by one of the officers thereunder duly authorized, all as of the day and year first above written.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

By Bill Lockyer, Chairman

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee

By:------,----------Authorized Officer

By: ____ -:----------Authorized Officer

(Signature Page to Indenture, dated as of November 1, 20101

IN WITNESS WHEREOF, the CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY has caused this Indenture to be signed in its name by its authorized officers and DEUTSCHE BANK NATIONAL TRUST COMPANY, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed by one of the officers thereunder duly authorized, all as of the day and year first above written.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

By Bill Lockyer, Chairman

By: _ _ _ _ ____ _ _ _ _

Deputy Treasurer

By: ____ _ ___ _ __ _ Executive Director

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee

[Signature Page to Indenture, dated as of November 1, 2010]

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EXHIBIT A

[FORM OF BOND]

NO BOND SHALL BE TRANSFERRED EXCEPT TO A QUALIFIED INSTITUTIONAL BUYER OR ACCREDITED INVESTOR IN AUTHORIZED DENOMINATIONS, AND SUCH OTHER LIMITATIONS SET FORTH IN THE INDENTURE. EACH REGISTERED OWNER OR BENEFICIAL OWNER OF A BOND AGREES BY PURCHASE OF THE BOND TO ABIDE BY THESE LIMITATIONS. IN ADDITION, UNDERWRITERS SHALL NOT DEPOSIT THE BONDS IN ANY TRUST OR ACCOUNT UNDER ITS CONTROL AND SELL ANY SHARES, PARTICIPATORY INTERESTS OR CERTIFICATES IN SUCH TRUST OR ACCOUNT, AND ANY INITIAL PURCHASER OF THE BONDS FROM UNDERWRITERS SHALL NOT DEPOSIT THE BONDS IN ANY TRUST OR ACCOUNT UNDER ITS CONTROL AND SELL ANY SHARES, PARTICIPATORY INTERESTS OR CERTIFICATES IN SUCH TRUST OR ACCOUNT EXCEPT TO QUALIFIED INSTITUTIONAL BUYERS IN AUTHORIZED DENOMINATIONS.

UNITED STATES OF AMERICA STATE OF CALIFORNIA

No. R- 1 $7,227,000

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF OR ANY LOCAL AGENCY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST, IF ANY, ON THIS BOND. MATURITY DATE: DATED DATE: INTEREST RATE November 18, 2027 November 18, 2010 5.74% REGISTERED OWNER: BANC OF AMERICA LEASING & CAPITAL, LLC PRINCIPAL SUM: ***SEVEN MILLION TWO HUNDRED TWENTY-SEVEN THOUSAND

DOLLARS***

The CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY, a public instrumentality of the State of California (the “Authority”), for value received hereby, promises to pay (but only out of the Revenues

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hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal sum from the Interest Payment Date next preceding the date of authentication of this Bond (unless this Bond is authenticated as of an Interest Payment Date, in which event it shall bear interest, if any, from that date, or unless this Bond is authenticated on or before November 3, 2011, in which event it shall bear interest (if any) from the dated date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on November 18, 2011, and semi-annually thereafter on each May 18 and November 18. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed by first class mail to the registered owner hereof, or by wire pursuant to instructions on file with the Trustee. The principal hereof is payable in lawful money of the United States of America at the Principal Corporate Trust Office of Deutsche Bank National Trust Company, as trustee (the “Trustee”).

This Bond represents the duly authorized issue of bonds of the Authority designated as

its “Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010” (the “Bonds”) in the aggregate principal amount of Seven Million Two Hundred Twenty-Seven Thousand Dollars ($7,227,000), and is issued under and pursuant to the provisions of the Division 16 of the California Public Resources Code as amended and supplemented (the “Act”) and under and pursuant to the provisions of a Indenture, dated as of November 1, 2010 (the “Indenture”), between the Authority and the Trustee (copies of which are on file at the Principal Corporate Trust Office of the Trustee).

The Bonds are issued to provide funds to finance the cost of the acquisition and

installation of solar energy systems and related appurtenances thereto for the Fallbrook Public Utility District (the “District”). The Bonds are limited obligations of the Authority and are payable, as to interest thereon (if any) and principal thereof, solely from certain proceeds of the Bonds held in certain funds and accounts pursuant to the Indenture and the revenues (the “Revenues”) derived from Installment Payments and other payments made by the District pursuant to an Installment Sale Agreement (as more fully defined in the Indenture, the “Installment Sale Agreement”), by and between the Authority and the District, and the Authority is not obligated to pay interest (if any) on and principal of the Bonds except from the Revenues. All Bonds are equally and ratably secured in accordance with the terms and conditions of the Indenture by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of the Bonds as provided in the Indenture. The general fund of the Authority is not liable, and the full faith and credit of the Authority and the District are not pledged, for the payment of the interest on or principal of the Bonds. No tax shall ever be levied or collected to pay the interest on or principal of the Bonds, except for Tax Revenues (as defined in the Installment Sale Agreement). The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues, and neither the payment of the interest on nor principal of the Bonds is a debt, liability or general obligation of the Authority. Reference is hereby made to the Act and to the Indenture and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, security for payment of the Bonds, remedies upon default and limitations thereon, and amendment of the Indenture (with or without consent of the registered owners of the Bonds); and all the terms of the Indenture are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond, by acceptance hereof, agrees and consents.

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The Bonds are subject to redemption by the Authority on the terms and conditions set forth in the Indenture.

If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds

may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture; except that the Indenture provides that in certain events such declaration and its consequences may be rescinded under the circumstances as provided therein.

This Bond is transferable by the registered owner hereof in person or by his duly

authorized attorney upon payment of the charges provided in the Indenture and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount in authorized denominations will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of this Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid.

This Bond shall not be entitled to any benefit, protection or security under the Indenture

or become valid or obligatory for any purpose until the certificate of authentication attached hereto shall have been executed and dated by the Trustee.

It is hereby certified that all acts, conditions and things required by law to exist, to have

happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Indenture.

IN WITNESS WHEREOF, the California Alternative Energy and Advanced

Transportation Financing Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of its Chairman, all as of the above date.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY By Chairman

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[FORM OF CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS]

This is one of the Bonds described in the within mentioned Indenture which has been authenticated on ___________, 2010. DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee By Authorized Officer

[FORM OF ASSIGNMENT TO APPEAR ON BONDS]

For value received the undersigned hereby sells, assigns and transfers unto ______________________________ (Tax ID No._______________) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises. ______________________________ Dated: __________ Note: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ___________________________ Notice: Signature must be guaranteed by an eligible guarantor institution

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EXHIBIT B

SALE AND REMARKETING GUIDELINES FOR UNRATED BONDS

1. Purchasers of Bonds (in both primary and secondary markets) are limited to “Qualified Institutional Buyers” (QIBs), as QIBs are defined under SEC Rule 144A, or “accredited investors” (AIs), as defined under Regulation D, promulgated under the Securities Act of 1933.

2. Bonds may be initially placed with and remarketed to no more than 35 QIBs and

AIs in any one offering. 3. Bonds must be issued in authorized denominations, which is defined, as of any

date, the principal amount of the Bonds Outstanding as of such date. 4. All sale restriction information must be prominently printed on the cover and

described in the body of any offering materials. The Indenture’s “Registration and Transfer of Bonds” section must clearly describe all sale and purchase restrictions, and the Bond certificates in their legends must note all sale and purchase restrictions.

5. Sinking fund maturities must match the aggregate of the Bond denomination

then outstanding. 6. Participatory shares of Bonds in trusts which include any of the Bonds may be

sold only to QIBs or AIs, and such trust shares must be sold only in increments equal to the Bond’s minimum denomination.

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EXHIBIT C

FORM OF INVESTOR LETTER California Alternative Energy and Advanced Transportation Financing Authority Sacramento, California

Re: California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Ladies and Gentlemen

The undersigned (the “Investor”) hereby acknowledges receipt of the above-referenced bonds (the “Bonds”), in fully registered form and in the aggregate principal amount of $7,227,000, constituting all of the full face amount of the Bonds. The Bonds have been acquired checked, inspected and approved by the Investor.

The undersigned acknowledges that the Bonds were issued for the purpose of assisting

in the financing of the acquisition, improvement, installation and/or equipping of facilities that utilize or are designed to utilize an alternative energy source in Fallbrook, California (the “Project”), as more particularly described in that certain Installment Sale Agreement, dated as of November 1, 2010 (the “Installment Sale Agreement”), between the California Alternative Energy and Advanced Transportation Financing Authority (the “Issuer”) and the Fallbrook Public Utility District (the “District”), as duly amended or supplemented from time to time in accordance with its terms. The undersigned further acknowledges that the Bonds are secured by an Indenture dated as of November 1, 2010 (the “Indenture”), between the Issuer and Deutsche Bank National Trust Company (the “Trustee”), which creates a security interest in the trust estate under the Indenture for the benefit of the holders and owners of the Bonds.

In connection with the purchase of the Bonds by the Investor, the Investor hereby makes

the following representations upon which you may rely: 1. The Investor has authority to purchase the Bonds and to execute this letter and

any other instruments and documents required to be executed by the Investor in connection with the purchase of the Bonds.

2. The Investor is a “qualified institutional buyer” under Rule 144A of the Securities

Act of 1933 (the “Act”) or an “accredited investor” as generally defined under Regulation D of the Act, which has sufficient knowledge and experience in financial and business matters, including purchase and ownership of public utility district sewer revenue bonds, to be able to evaluate the risks and merits of the investment represented by the Bonds and which can bear the economic risk of their investment in the Bonds.

3. The Bonds are being acquired by the Investor for investment and not with a view

to, or for resale in connection with, any distribution of the Bonds, and, subject to the further provisions of this paragraph 3, the Investor intends to hold the Bonds for its own account and for an indefinite period of time, and does not intend at this time to dispose of all or any part of the Bonds. The Investor understands that it may need to bear the risks of this investment for an indefinite time, since any sale prior to maturity may not be possible. Notwithstanding the foregoing, the undersigned may transfer the Bonds to a trustee or custodian of a trust the

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ownership interests in which are to be distributed through the sale of (a)(i) investment grade securities that are registered under the Securities Act and/or (ii) investment grade securities in transactions that are exempt from the registration requirements of the Securities Act and (b) non-investment grade securities in transactions that are exempt from the registration requirements of the Securities Act to “qualified institutional buyers” under Rule 144A or “accredited investor” under Regulation D of said Act in increments equal to the Authorized Denominations (as defined in the Indenture); provided that any prospectus relating to the investment grade securities and/or private placement memorandum relating to any non-investment grade securities will, unless approved in advance by the Issuer, disclose no more regarding the Issuer than its name and status as a political subdivision of the State of California and that the Bonds are special limited obligations of the Issuer secured solely by the Trust Estate as described in the Indenture.

4. The Investor understands that the Bonds are not registered under the Act and

that such registration is not legally required as of the date hereof; and further understands that the Bonds (a) are not being registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any state, (b) will not be listed in any stock or other securities exchange, (c) will not carry a rating from any rating service and (d) will be delivered in a form which may not be readily marketable.

5. The Investor acknowledges that the obligations of the Issuer to make payments

under the Bonds are special, limited obligations payable solely from amounts paid to the Issuer from the District pursuant to the terms of the Bonds and the Indenture and that notwithstanding anything to the contrary contained in the Bonds or the Indenture, the Issuer shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under the Indenture whether for the payment of the principal or interest on the Bonds or for any other purpose of the Indenture. The Investor further understands that the Issuer shall not be directly or indirectly or contingently or morally obligated to use any other moneys or assets of the Issuer to make any payment under the Bonds or the Indenture.

6. The Investor acknowledges that no offering document has been produced in

connection with the issuance or sale of the Bonds. 7. The Investor acknowledges that it has either been supplied with or been given

access to the Indenture, the Installment Sale Agreement and information, including financial statements and other financial information, to which a reasonable investor would attach significance in making investment decisions, and the Investor has had the opportunity to ask questions and receive answers from knowledgeable individuals concerning the District, the Project, the Indenture, the Installment Sale Agreement and the Bonds and the security therefor so that, as a reasonable investor, the Investor has been able to make our decision to purchase the Bonds. The Investor acknowledges that it has not relied upon the Issuer or any of its members, employees, officers or agents for any information in connection with the Investor’s purchase of the Bonds.

8. Although the Investor does not intend at this time to dispose of all or any part of

the Bonds (other than to an affiliate), the Investor acknowledges that it has the right to sell and transfer the Bonds, in accordance with terms and conditions of the Indenture (i.e., sales limited to “qualified institutional buyers” as defined in Rule 144A or “accredited investor” as defined in Regulation D under the Act in the minimum denomination of, as of any date, the principal amount of the Bonds Outstanding as of such date), and subject to the transferee’s delivery to the Authority and the Trustee of an investor’s letter to the same effect as this Investor’s Letter, including this Paragraph 8, with no revisions except as may be approved in writing by the

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Authority. Failure to deliver such investor’s letter shall cause the purported transfer to be null and void.

9. Notwithstanding the provisions of this Investor Letter to the contrary, including,

but not limited to Paragraph 3 above, the Investor covenants and agrees to the Issuer that it shall not sell, transfer or otherwise dispose of the Bonds in violation of the transfer restrictions set forth in this Investor Letter or Section 2.06 of the Indenture or of any applicable law.

10. The Investor agrees to indemnify and hold harmless the Issuer and its members,

employees, officers and agents with respect to any claim asserted against any of them that is based upon the Investor’s sale, transfer or other disposition of its interests in the Bonds in violation of the provisions hereof or of the Indenture or any inaccuracy in any statement made by the Investor in this letter.

Capitalized terms used herein and not otherwise defined have the meanings given such terms in the Indenture.

[INVESTOR] By:

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EXHIBIT D

FORM OF COSTS OF ISSUANCE FUND REQUISITION

REQUISITION FOR MONEY FROM THE COSTS OF ISSUANCE FUND To: DEUTSCHE BANK NATIONAL TRUST COMPANY, as trustee

Re: California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Requisition No. ___ Account: Costs of Issuance Fund

The undersigned, on behalf of the Fallbrook Public Utility District (the “District”), hereby requests payment, from the Costs of Issuance Fund identified above for the Project identified above, the total amount shown below to the order of the payee or payees named below, as payment or reimbursement for costs incurred or expenditures made in connection with the issuance of the Bonds. The payee(s), the purpose and the amount of the disbursement requested are as follows and as stated in the attached invoice(s) (no payment to be made without an accompanying invoice):

Payee Purpose Amount [name and address] Total $ The undersigned hereby certifies as follows: Each obligation mentioned herein is described in Section 4.04(b) of the Installment Sale

Agreement relating to the Project, has been properly incurred and is a proper charge against the Costs of Issuance Fund, and each item for which payment is requested is or was necessary in connection with the issuance of the Bonds. None of the items for which payment is requested has been reimbursed previously from the Costs of Issuance Fund, and none of the payments herein requested will result in a breach of the representations and agreements in Section 2.05 of the Installment Sale Agreement relating to the Project. Invoices evidencing each obligation mentioned herein are attached hereto. Dated: _____________________

FALLBROOK PUBLIC UTILITY DISTRICT By Authorized Representative

[Attachment: Invoices for each listed obligation]

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EXHIBIT E

FORM OF PROJECT FUND REQUISITION

REQUISITION FOR MONEY FROM THE PROJECT FUND To: DEUTSCHE BANK NATIONAL TRUST COMPANY, as trustee

Re: California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Requisition No. ___ Account: Project Fund

The undersigned, on behalf of the Fallbrook Public Utility District (the “District”), hereby requests payment, from the Project Fund identified above for the Project identified above, the total amount shown below to the order of the payee or payees named below, as payment or reimbursement for costs incurred or expenditures made in connection with the issuance of the Bonds. The payee(s), the purpose and the amount of the disbursement requested are as follows and as stated in the attached invoice(s) (no payment to be made without an accompanying invoice):

Payee Purpose Amount [name and address] Total $ The undersigned hereby certifies as follows: Each obligation mentioned herein is described in Section 4.04(a) of the Installment Sale

Agreement relating to the Project, has been properly incurred and is a proper charge against the Project Fund, and, as applicable, each item for which payment, together with all payments requisitioned to date, have been used to pay for expenditures properly allocated to costs of the Project pursuant to the Installment Sale Agreement and the covenants contained in Section 4.02 therein. . None of the items for which payment is requested has been reimbursed previously from the Project Fund, and none of the payments herein requested will result in a breach of the representations and agreements in Section 2.05 of the Installment Sale Agreement relating to the Project. Each item for which payment was made was necessary in connection with the acquisition and installation of the Project. Invoices evidencing each obligation mentioned herein are attached hereto. Dated: _____________________

FALLBROOK PUBLIC UTILITY DISTRICT By Authorized Representative

[Attachment: Invoices for each listed obligation]

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APPROVED: Banc of America Leasing & Capital, LLC By Authorized Representative

1

RESOLUTION OF OFFICIAL INTENT TO ISSUE BONDS TO

FINANCE A QUALIFIED ENERGY CONSERVATION PROJECT FOR FALLBROOK PUBLIC UTILITY DISTRICT

April 6, 2010

WHEREAS, the California Alternative Energy and Advanced Transportation Financing

Authority (“Authority”), a public instrumentality, is authorized and empowered by the provisions of the California Alternative Energy and Advanced Transportation Financing Authority Act (“Act”) to issue bonds for the purpose of providing financial assistance (as defined in the Act) to participating parties (as defined in the Act) for the financing of land, buildings, improvements to the land or buildings, rehabilitation, work, property, or structures, real or personal, stationary or mobile, including, but not limited to, machinery and equipment, whether or not in existence or under construction, that utilizes, or is designed to utilize, an alternative source (as defined in the Act); and

WHEREAS, Fallbrook Public Utility District (the “Applicant”), has requested that the

Authority assist in financing facilities for the qualified energy conservation solar project described on the attached Exhibit A (the “Facilities”); and

WHEREAS, the Authority desires to encourage the Applicant to finance the Facilities, as

such Facilities utilize alternative methods and sources of energy, in furtherance of the purposes of the Authority, as specified in Section 26002 of the Act; and

WHEREAS, the Applicant has determined to finance the Facilities through a financing

structure which provides the lowest cost of funds to the Applicant for the Facilities, and has also determined that the lowest cost of funds to finance the Facilities will be achieved if the obligations issued to finance the Facilities are issued as “Qualified Energy Conservation Bonds” (“QECBs”) under Section 54D of the Internal Revenue Code of 1986 (the “Tax Code”), as amended, added to the Tax Code by the American Recovery and Reinvestment Act of 2009, and is requesting the Authority to issue the bonds as QECBs; and

WHEREAS, QECBs may only be issued if the issuer of the QECBs has received an

allocation from the California Debt Limit Allocation Committee; and WHEREAS, in addition, the Applicant requires satisfactory assurances from the

Authority that the proceeds of the sale of bonds of the Authority will be made available to finance such Facilities; and

WHEREAS, the Applicant expects to incur or pay from its own funds certain

expenditures in connection with the Facilities prior to the issuance of indebtedness for the purpose of financing costs associated with the Facilities on a long-term basis; and

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WHEREAS, subject to meeting all the conditions set forth in this Resolution, the Authority reasonably expects that debt obligations in an amount not expected to exceed in the aggregate $7,227,000 will be issued, and that certain of the proceeds of such debt obligations will be used to reimburse the Applicant for its prior expenditures for the Facilities; and

WHEREAS, Section 1.150-2 of the Treasury Regulations requires the Authority to

declare its reasonable official intent to reimburse prior expenditures for the Facilities with proceeds of a subsequent borrowing;

NOW, THEREFORE, BE IT RESOLVED by the California Alternative Energy and

Advanced Transportation Financing Authority as follows: Section 1. The Authority finds and determines that the foregoing recitals are true and

correct. Section 2. The Authority declares its official intent to issue, at one time or from time to

time, an aggregate of up to $7,227,000 principal amount of bonds of the Authority for the Facilities; including for the purpose of reimbursing to the Applicant costs incurred for the Facilities prior to the issuance of the bonds.

Section 3. The bonds will be payable solely from the revenues to be received by the

Authority pursuant to a loan agreement, lease agreement, installment sale agreement or other agreement to be entered into between the Authority and the Applicant in connection with the Facilities. Each bond shall contain a statement to the following effect:

“Neither the faith and credit nor the taxing power of the State of California

or any political subdivision thereof or any local agency is pledged to the payment of the principal of, premium, if any, or any interest on this bond.” Section 4. The bonds shall be issued subject to the conditions that (i) the Authority has

first agreed to mutually acceptable terms for the bonds and of the sale and delivery thereof, and mutually acceptable terms and conditions of the loan or advance of the proceeds thereof to the Applicant; (ii) all requisite governmental approvals have been obtained; (iii) a Final Resolution has been received from the Authority; and (iv) an allocation to issue the bonds as QECBs has been received from the California Debt Limit Allocation Committee.

Section 5. The Executive Director of the Authority is hereby directed to: (1) indicate the

willingness of the Authority to proceed with and effect such financing in order to assist the Applicant by defraying the cost of the Facilities; and (2) submit an application to the California Debt Limit Allocation Committee for Qualified Energy Conservation Bond Allocation for the bonds to be issued by the Authority to fund the Facilities, subject to due compliance with all requirements of the law and the obtaining of all necessary consents and approvals and meeting all other requirements of the Authority.

Section 6. It is intended that this Resolution shall constitute “official intent” within the

meaning of Section 1.150-2 of the Treasury Regulations, as applicable under Section

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54A(d)(2)(D) of the Tax Code. It is also intended that this statement of “official action” or “official intent” by the Authority shall continue in full force and effect even if this Resolution ceases to be effective for other purposes.

Section 7. This Resolution shall take effect immediately upon its passage and remain in

full force and effect thereafter; provided that, subject to Section 6, this Resolution shall cease to be effective on April 6, 2013 unless prior thereto the Authority specifically adopts a further resolution extending the effective date of this Initial Resolution, which it will do only after receiving a specific request for such action from the Applicant, accompanied by an explanation of the reason why the applicable project listed above in the definition of “Facilities” has not proceeded prior to the date of the letter.

Agenda Item – 4.A.2.

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Exhibit A

Description of Applicant’s Qualified Energy Conservation Bond Project

Fallbrook Public Utility District Wastewater Treatment Plant A solar generating facility consisting of (i) a 1 MW solar electric system to provide electric energy for consumption at the District’s Wastewater Treatment Plant, located at 1425 Alturas Road in San Diego County, CA. The District has entered into a design-build contract with SunPower Corporation for the construction and maintenance of the system and expects to issue a “Notice-to-Proceed” as soon as the financing of the QECBs and/or other funding mechanisms are closed on or about August 24, 2010.

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Resolution No. 10-001 Application No. 10-002

FINAL RESOLUTION OF THE

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

AUTHORIZING THE ISSUANCE OF REVENUE BONDS TO FINANCE OF ALTERNATIVE SOURCE ENERGY FACILITIES FOR FALLBROOK PUBLIC UTILITY DISTRICT

October 27, 2010

WHEREAS, the California Alternative Energy and Advanced Transportation Financing

Authority (the “Authority”) has heretofore received the application of the Fallbrook Public Utility District, a public utility district organized under Section 15501 et seq. of the Public Utility Code of the State of California (the “District”), for financial assistance to finance the acquisition and installation of photovoltaic solar energy systems and related appurtenances thereto, as more particularly described in the Term Sheet attached hereto as Exhibit A and incorporated herein (the “Term Sheet”) (collectively, the “Project”); and

WHEREAS, the District has requested the Authority to issue its revenue bonds in an amount not to exceed $7,227,000 to assist in the financing of the Project; and

WHEREAS, the Authority will make the proceeds of the Bonds (as defined herein) available to finance (i) the Project, and (ii) costs of issuance of the Bonds;

WHEREAS, the District will enter into an installment sale agreement (the “Installment

Sale Agreement”), between the Authority and the District, under which the District will, among other things, purchase the Project from the Authority and make installment payments to the Authority, including amounts for the full payment of the principal or redemption price of, and interest on the Bonds;

WHEREAS, the Bonds issued under the Indenture (herein defined) will be secured by a pledge and assignment of the Authority’s right to receive Installment Payments payable by the District under the Installment Sale Agreement, as well as a security interest in the Project;

WHEREAS, final approval of the terms of such Bonds and certain documents relating to such Bonds is now sought; and

WHEREAS, the Bonds will be sold in a private placement with Banc of America Leasing & Capital, LLC as sole initial purchaser of the Bonds (the “Purchaser”);

NOW, THEREFORE, BE IT RESOLVED by the California Alternative Energy and Advanced Transportation Financing Authority, as follows:

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Section 1. The Project constitutes a “project” and the District is a “participating party” within the meaning of the California Alternative Energy and Advanced Transportation Financing Authority Act (the “Act”).

Section 2. Pursuant to the Act, revenue obligations of the Authority, designated as the “California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010” (the “Bonds”) in an aggregate principal amount not to exceed $7,227,000, are hereby authorized to be issued. The Bonds may be issued at one time, or from time to time, in one or more series separately or differently identified, and may be issued as federally taxable, qualified energy conservation bonds, all in accordance with the Indenture (as hereinafter defined) as finally executed. The proceeds of the Bonds shall be used to finance the Project and to pay costs of issuance of the Bonds.

Section 3. The Treasurer of the State of California (the “Treasurer”) is hereby authorized to sell the Bonds, at one time or from time to time before December 31, 2010, by negotiated sale, at such price, at such interest rate or rates, with such maturity dates and amounts, such determination to be as set forth in the hereinafter referred to Bond Purchase Agreement.

Section 4. The following documents:

(a) the Installment Sale Agreement relating to the Bonds (the “Installment Sale Agreement”), between the Authority and the District,

(b) Indenture relating to the Bonds (the “Indenture”), between the Authority and

Deutsche Bank National Trust Company (the “Trustee

(c) the Bond Purchase Agreement relating to the Bonds (the “Bond Purchase Agreement”) among the Purchaser, the Treasurer, the Authority and the District

(d) the Calculation Agency Agreement, among the District, the Trustee and the

Authority.

are hereby approved in substantially the forms on file with the Authority prior to this meeting with such insertions, deletions or changes therein as the officer(s) executing and/or delivering the same may require or approve, such approval to be conclusively evidenced by execution and delivery thereof. Section 5. The dated date, maturity dates, interest rate(s), interest payment dates,

principal payment dates, denominations, forms, registration privileges, manner of execution, places of payment and other terms of the Bonds shall be as provided in the Indenture as finally executed.

Section 6. The Bonds, when executed, shall be delivered to the Trustee under the Indenture for authentication by the Trustee. The Trustee is hereby requested and directed to authenticate the Bonds by executing the Trustee’s certificate of authentication appearing thereon.

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The Trustee is hereby requested and directed to deliver the Bonds, when duly executed and authenticated, to the Purchaser or its nominee, in accordance with written instructions executed on behalf of the Authority Such instructions shall provide for the delivery of the Bonds to the Purchaser or its nominee, as determined and confirmed by the Treasurer, upon payment of the purchase price thereof.

Section 7. Each officer of the Authority is hereby authorized and directed to do any and all ministerial acts he or she may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds, and otherwise to effectuate the purpose of this Resolution. The Authority hereby approves any and all documents to be delivered in furtherance of the foregoing purposes, including without limitation: (a) certifications; and (b) any tax certificate and/or tax agreement. The Treasurer is hereby requested and authorized to take any and all acts within his or her authority as agent for sale that he or she may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds, and otherwise effectuate the purposes of this Resolution.

Section 8. The provisions of the Authority’s resolution entitled “RESOLUTION OF THE CALIFORNIA ALTERANTIVE ENERGY AND ADNACED TRANSPORTATION FINANCING AUTHOIRTY DELEGATING CERTAIN POWERS AND AUTHORIZING CERTAIN ACTIONS RELATED TO BOND FINANCINGS” adopted on April 28, 2010 apply to the documents and actions approved in this Resolution.

Section 9. The Authority hereby approves and ratifies each and every action taken by its

officers, agents, members and employees prior to the date hereof in furtherance of the purposes of this Resolution.

Section 10. This Resolution shall take effect immediately upon its passage. The

adoption by the Authority of this final Resolution for the District shall not be referred to in any application before any government agency as evidence of the feasibility, practicality or suitability of the Project or in any application for any required permission or authority to construct or operate the Project.

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EXHIBIT A

TERM SHEET Name of Issue: California Alternative Energy and Advanced

Transportation Financing Authority Qualified Energy Conservation Bonds (Fallbrook PUD Solar Projects), Series 2010 (the “Bonds”)

Maximum Amount of Issue: $7,227,000

Issuer: California Alternative Energy and Advanced Transportation Financing Authority (the “Authority”), Sacramento, CA

Applicant: Fallbrook Public Utility District

Trustee: Deutsche Bank National Trust Company

Bond Counsel: Jones Hall, A Professional Law Corporation, San Francisco, CA

Project: Acquisition and installation of photovoltaic solar energy systems and related appurtenance thereto, to be located in Fallbrook, California

Maximum Bond Term: Not to exceed 20 years

Type of Sale: Private placement; restriction on transfer to Qualified Institutional Buyers

Financing Structure: Qualified Energy Conservation Bonds privately placed with Banc of America Leasing & Capital, LLC

Interest Rate: Fixed rates not to exceed 12 % to be determined prior to sale and delivery

Anticipated Bond Rating: Not rated

Type of Financing: Alternative Source/ Photovoltaic Electricity Generation Qualified Energy Conservation Bonds

Prepared by: Bill Madison (415-391-5780)

Execution Copy

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$7,227,000

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

BOND PURCHASE AGREEMENT

November 16, 2010

Fallbrook Public Utility District 990 East Mission Road Fallbrook, CA 92088-2290 Attn: General Manager The Honorable Bill Lockyer Treasurer of the State of California 915 Capitol Mall, Room 261 Sacramento, California 95814 California Alternative Energy and Advanced Transportation Financing Authority 915 Capitol Mall, Room 457 Sacramento, California 95814 Ladies and Gentlemen:

The undersigned, Banc of America Leasing & Capital, LLC, as the sole initial purchaser (the “Purchaser”), hereby offers to enter into this Bond Purchase Agreement, including the appendices hereto (the “Bond Purchase Agreement”) with you, the Honorable Bill Lockyer, Treasurer of the State of California (the “State Treasurer”), the California Alternative Energy and Advanced Transportation Financing Authority (the “Authority”), and the Fallbrook Public Utility District (the “District”) for the purchase of the Bonds specified below. This offer is made subject to acceptance by the State Treasurer, the Authority and the District prior to 11:59 p.m., California time, on the date hereof, and upon such acceptance this Bond Purchase Agreement shall be in full force and effect in accordance with its terms, and shall be binding upon the State Treasurer, the Authority, the Purchaser and the District. Any capitalized term used herein and not otherwise defined shall have the meaning given such term as set forth in the Indenture hereinafter defined.

1. Upon the terms and conditions and upon the basis of the representations set

forth herein, the State Treasurer, on behalf of the Authority, hereby agrees to sell to the Purchaser, all of the $7,227,000 aggregate principal amount of California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the “Bonds”) to be dated as of the date of delivery thereof and as more fully described in the Indenture hereinafter defined. The aggregate purchase price for the Bonds shall be $7,227,000, representing the aggregate principal amount of the Bonds. The Bonds shall bear interest at the rate and mature (and be subject to sinking fund redemption in the amounts), all as set forth in Exhibit D attached hereto.

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2. The Bonds will be issued under the provisions of the California Alternative Energy and Advanced Transportation Financing Authority Act, commencing with Section 26000 of the California Public Resources Code, as now in effect and as it may from time to time hereafter be amended or supplemented (the “Act”). The Bonds shall be substantially in the form, subject to optional and mandatory redemption as described in, and shall be issued and secured under and pursuant to the provisions of, an Indenture, dated as of November 1, 2010 (the “Indenture”), by and between the Authority and Deutsche Bank National Trust Company, as trustee (the “Trustee”). The Bonds are secured by installment payments made by the District to the Authority pursuant to an Installment Sale Agreement, dated as of November 1, 2010 (the “Installment Sale Agreement”), by and between the Authority and the District. The proceeds of sale of the Bonds will be used to (i) finance the acquisition and installation of equipment used for the production of electricity from solar energy (as described in the Installment Sale Agreement) (the “Project”) and (ii) pay certain costs of issuing the Bonds.

3. The Authority, subject to the limitations provided herein, warrants, represents to

and agrees with the Purchaser with respect to the Bonds that:

(a) The Authority is a duly organized and validly existing public instrumentality of the State of California (the “State”) authorized under the Act to issue the Bonds and to exercise all rights and powers permitted under the Act.

(b) The Authority has complied with the provisions of the Act and all other

applicable laws, rules and regulations and has the requisite power and authority to (i) execute and deliver this Bond Purchase Agreement, the Indenture, and the Installment Sale Agreement, (ii) issue and deliver the Bonds as provided in this Bond Purchase Agreement, and (iii) consummate the transactions on its part contemplated by, and perform its obligations under, this Bond Purchase Agreement, the Indenture and the Installment Sale Agreement.

(c) By the adoption of its resolution dated October 27, 2010, the Authority

has approved the execution and delivery of, and the due performance by the Authority of the obligations on its part contained in this Bond Purchase Agreement, the Indenture, the Bonds and Installment Sale Agreement and the consummation by the Authority of all other transactions contemplated thereby and hereby.

(d) When executed and delivered on the Closing Date (as hereinafter

defined) in accordance with the provisions of this Bond Purchase Agreement and assuming the due authorization, execution and delivery by the other respective parties thereto, the Indenture, the Bonds, the Installment Sale Agreement and this Bond Purchase Agreement will constitute valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, except as their enforceability may be limited by reasons of bankruptcy, insolvency, reorganization or other laws generally affecting creditors’ remedies; the application of equitable principles regardless of whether equitable remedies are sought; by provisions of California law governing claims against public agencies; and by matters of public policy.

(e) To the best knowledge of the Authority, the execution and delivery by the

Authority of this Bond Purchase Agreement, the Indenture, the Bonds, and the Installment Sale Agreement and compliance with the terms thereof will not conflict with, or constitute a violation, breach of, or default under, any lease, indenture, bond, note, resolution or any other agreement or instrument to which the Authority is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Authority or any of its

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activities or properties, or result in the creation or imposition of any prohibited lien, charge, encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default or prohibited lien, charge or encumbrance would materially and adversely affect the transactions contemplated hereby or which, in any way, would adversely affect the validity of the Bonds, the Indenture, the Installment Sale Agreement, or this Bond Purchase Agreement; provided, however, that no representation is made regarding compliance with any federal or state securities or “blue sky” laws.

(f) To the best knowledge of the Authority, without independent

investigation, there is no action, suit, or proceeding at law or in equity before or by any court with respect to which service of process on the Authority has been completed or threatened against the Authority, or inquiry or investigation before or by any governmental agency, public board or body pending or threatened against the Authority, seeking to prohibit, restrain or enjoin the execution and delivery of the Bonds by the Authority; seeking to prohibit, restrain or enjoin the collection of revenues pledged or to be pledged to pay the principal of and interest on the Bonds; contesting or seeking to affect the validity or enforceability of the Indenture, the Bonds, the Installment Sale Agreement, or this Bond Purchase Agreement; contesting the powers of the Authority or its authority to enter into, adopt or perform its obligations under any of the foregoing documents wherein an unfavorable decision, ruling or finding would materially and adversely affect the transactions contemplated hereby, or which would materially and adversely affect the validity of the Indenture, the Bonds, the Installment Sale Agreement or this Bond Purchase Agreement.

(g) No consent, approval, authorization or other action by any governmental

or regulatory authority having jurisdiction over the Authority that has not been obtained is or will be required for the execution and delivery of the Bonds or the consummation by the Authority of the other transactions on its part contemplated by this Bond Purchase Agreement, except as such may be required for the state securities or blue sky laws, for final filings or notice to the California Debt Limit Allocation Committee or the California Debt and Investment Advisory Commission and for filings to be made to the Internal Revenue Service on Form 8038-TC.

(h) To the best knowledge of the Authority, without independent

investigation, the Authority is not in breach of or in default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree, or any lease, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject; and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute an event of default under any such instrument, which breach or default would materially and adversely affect the transactions contemplated hereby or which, in any way would materially and adversely affect the validity of the Indenture, the Bonds, the Installment Sale Agreement or this Bond Purchase Agreement; provided that no representation is made regarding compliance with any federal or state securities or “blue sky” laws. Any certificate signed by any officer of the Authority and delivered to the Purchaser

shall be deemed a representation and warranty of the Authority to the Purchaser as to the statements made therein.

The execution and delivery of this Bond Purchase Agreement by the Authority shall

constitute a representation by the Authority to the Purchaser that the representations and

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warranties contained in this Section 3 are true as of the date hereof; provided, however, that it is specifically understood and agreed that the Authority makes no representations or warranties as to the District or any party to the agreements or instruments described herein other than the Authority and does not represent or warrant in any respect as to any of the statements, information (financial or otherwise), action taken or to be taken, representations or certifications furnished, or to be made and furnished, by the District or any parties to the agreements or instruments described herein other than the Authority in connection with the execution and delivery of the Bonds. Additionally, as to matters of law other than federal tax law the Authority is relying on the advice of counsel to the Authority; and as to matters of federal tax law the Authority is relying on the advice of Bond Counsel (as hereinafter defined).

No member of the governing body of the Authority, or any officer or employee of the

Authority, shall be individually liable for the breach of any representation, warranty or agreement contained herein.

4. In order to induce the State Treasurer, the Authority and the Purchaser to enter

into the Bond Purchase Agreement, the District hereby represents, warrants, covenants and agrees with each of such parties, as follows:

(a) The District is a public utility district duly organized under the laws of

the State, has full power and authority to enter into this Bond Purchase Agreement and the Installment Sale Agreement, and to carry out and consummate all transactions contemplated by this Bond Purchase Agreement, the Installment Sale Agreement and the Indenture, and by proper action has duly authorized the execution and delivery of this Bond Purchase Agreement and the Installment Sale Agreement.

(b) The authorized representative of the District executing this Bond

Purchase Agreement and the Installment Sale Agreement, and approving the Indenture, is duly and properly authorized to execute the same on behalf of the District.

(c) The information provided by the District to the Authority and all

representations made by the District in its application to the Authority are true and correct as of the date hereof.

(d) The Indenture has been duly approved by the District; this Bond

Purchase Agreement has been duly authorized, executed and delivered by the District, and the Installment Sale Agreement has been duly authorized, and on the Closing Date will have been duly executed and delivered by the District.

(e) The Installment Sale Agreement, when assigned to the Trustee pursuant

to the Indenture, will, to the extent of such assignment, constitute the legal, valid and binding agreement of the District with the Trustee enforceable against the District in accordance with its terms for the benefit of the owners of the Bonds, and this Bond Purchase Agreement will constitute the legal, valid and binding agreement of the District enforceable against the District in accordance with its terms, except as enforcement of each of the above-named documents may be limited by bankruptcy, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and by the application of such equitable principles as the court having jurisdiction may impose, regardless of whether such enforceability is considered in a proceeding in equity or at law and except as the indemnification provisions contained in any of the above-named documents may be found to be contrary to public policy.

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(f) To the best knowledge of the District, the District is not in any material way in breach of or default under (i) any applicable law or administrative regulation of the State or the United States or any applicable judgment, order or decree or (ii) any lease, indenture, bond, note, resolution, agreement or other instrument to which the District is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a default or an event of default under any such instrument, except as disclosed in writing to the Authority and the Purchaser.

(g) The execution and delivery of this Bond Purchase Agreement; the

approval of the Indenture; the execution and delivery of the Installment Sale Agreement; the consummation of the transactions contemplated by, and the fulfillment of or compliance with the terms and conditions of and the performance by the District of its obligations under, this Bond Purchase Agreement, the Indenture and the Installment Sale Agreement, will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order to which the District is a party or of which the District is aware, or any indenture, lease, contract or other agreement or instrument to which the District is a party or of which the District is aware, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the District, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Bond Purchase Agreement and the Installment Sale Agreement, or the financial condition, assets, properties or operations of the District.

(h) No consent or approval of any trustee or holder of any indebtedness of

the District, and no consent, approval, authorization, permission, order or license of, or filing or registration with, any governmental or regulatory authority (except in connection with Blue Sky proceedings, if and as applicable) is necessary in connection with the execution and delivery of this Bond Purchase Agreement; at the Closing, the execution and delivery of the Installment Sale Agreement; the approval of the Indenture; or the consummation of any transaction contemplated in this Bond Purchase Agreement, the Indenture and the Installment Sale Agreement, except as have been obtained or made and as are in full force and effect (or, in case of either the Installment Sale Agreement, will be obtained or made and will be in full force and effect at the Closing).

(i) There is no action, suit, proceeding, inquiry or investigation before or by

any court or federal, state, municipal or other government authority pending or, to the knowledge of the District, threatened against or affecting the District or the assets, properties or operations of the District which, if determined adversely to the District or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by the Indenture, the Installment Sale Agreement or this Bond Purchase Agreement or the validity and enforceability of this Bond Purchase Agreement and the Installment Sale Agreement, or the financial condition, assets, properties or operations of the District.

(j) The proceeds of the Bonds will be used in connection with the financing

of a “project” as defined in the Act, and the District is a “participating party” as defined in the Act.

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(k) The District has all necessary power and authority to conduct the business now being conducted by it and as contemplated by this Bond Purchase Agreement and the Installment Sale Agreement.

5. At 8:00 a.m., California time, on November 18, 2010 (the “Closing Date”), the

Authority will deliver or cause to be delivered to the Purchaser, the Bonds in registered form, duly executed and authenticated and will deliver to the Purchaser at the offices of Jones Hall, A Professional Law Corporation, 650 California Street, 18th Floor, San Francisco, California 94108 (or such other location as may be designated by the Purchaser and approved by the Authority), the other documents herein mentioned. The Purchaser will pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer or by certified or official bank check or checks payable in immediately available funds to the order of the Trustee for the account of the Authority, and will accept delivery of the Bonds as set forth below. This payment for and delivery of the Bonds, together with the delivery of the documents herein mentioned, is herein called the “Closing.” The Bonds shall be made available to the Purchaser not less than one business day before the Closing for purposes of inspection. The Bonds shall be registered in the name of the Purchaser and shall be in the form of a single fully registered Bond representing the original aggregate principal amount thereof.

6. The Purchaser has entered into this Bond Purchase Agreement in reliance upon

the representations and agreements of the Authority and the District herein, the performance by the Authority of its obligations hereunder, both as of the date hereof and as of the Closing Date, and the opinions of counsel to the Authority and the District. The Purchaser’s obligations under this Bond Purchase Agreement are and shall be subject to the following further conditions:

(a) Between the date hereof and the Closing Date, (i) the ability of the

Purchaser to cause the transfer of funds required for Closing, or (ii) the lawful status of the purchase of the Bonds, shall not have been materially adversely affected, in the reasonable judgment of the Purchaser (evidenced by a written notice to the Authority and the District, terminating the obligation of the Purchaser to accept delivery of and pay for the Bonds), after consultation with the District, the Authority and the State Treasurer, by reason of any of the following:

(1) Legislation shall have been enacted by the Congress of the United

States, or the Legislature of the State of California, or a decision shall have been rendered by a court of the United States, including the Tax Court of the United States, or of the State of California, or a ruling or an official release shall have been made or a regulation shall have been made by the Treasury District of the United States or the Internal Revenue Service or other federal or State of California authority having jurisdiction over tax matters, with respect to interest on obligations of the general character of the Bonds, which may have the purpose or effect, directly or indirectly, of affecting the tax status of the Authority or the District, their respective property or income, its securities (including the Bonds) or the interest thereon, or any tax exemption granted or authorized by relevant State statutes, or other action or events shall have transpired that would, in the reasonable judgment of the Purchaser, have the purpose or effect, directly or indirectly, of changing the federal or State of California tax consequences of any of the transactions contemplated in connection herewith;

(2) Legislation enacted in the United States Congress, or a decision

rendered by a court established under Article III of the Constitution of the United

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States or by the Tax Court of the United States, or an order, ruling, regulation (final or temporary), or official statement issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under the Trust Indenture Act of 1939, as amended;

(3) There shall have occurred a material effect on the financial

markets of the United States resulting from any new material outbreak or escalation of hostilities or any domestic or international calamity or crisis;

(4) The declaration of a general banking moratorium by federal, New

York or California authorities; (5) The imposition by the New York Stock Exchange or other national

securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the extension of credit by, or the charge to the net capital requirements of, purchasers;

(6) An order, decree or injunction of any court of competent

jurisdiction, or order, ruling, regulation or official statement by the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including any or all underlying obligations, as contemplated hereby, is or would be in violation of the federal securities laws as amended and then in effect; (b) At the time of Closing, the representations, agreements and warranties of

each of the Authority and the District shall be true, complete and correct with the same effect as if made on the Closing Date, this Bond Purchase Agreement, the Indenture and the Installment Sale Agreement shall each be in full force and effect as valid, binding and enforceable agreements between or among the various parties thereto and said documents shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Purchaser and the Authority shall have duly adopted and there shall be in full force and effect such resolutions as, in the opinion of Jones Hall, A Professional Law Corporation (“Bond Counsel”), shall be necessary in connection with the transactions contemplated hereby, and such resolutions shall not have been amended, modified or rescinded;

(d) The Bonds shall have been duly authorized, executed and authenticated

in accordance with the provisions of the Indenture; (e) At or prior to the Closing Date, the Purchaser shall receive the following

documents with respect to the Bonds, in each case satisfactory in form and substance to the Purchaser and its counsel:

(1) Certified copies of the Authorizing Resolution, and any other

resolutions adopted by the Authority which relate to the Bonds;

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(2) This Agreement, the Indenture, and the Installment Sale Agreement, each duly executed and delivered by the respective parties thereto, together with such amendments, modification or supplements as may have been agreed to in writing by the Purchaser;

(3) The Bonds; (4) Internal Revenue Service Form 8038-TC; (5) A copy of the executed original of the Application for Allocation

of Qualified Energy Conservation Bond Volume Cap; (6) A copy of the Resolution of the California Debt Limit Allocation

Committee awarding Volume Cap for the issuance of Qualified Energy Conservation Bonds;

(7) The approving opinion of Bond Counsel, dated the Closing Date

and addressed to the Authority, in substantially the form attached hereto as Exhibit A, along with a reliance letter addressed to the Trustee, the District and the Purchaser;

(8) The opinion of the Attorney General of the State, counsel to the

Authority, addressed to the Authority, dated the Closing Date, in substantially the form attached hereto as Exhibit B;

(9) A certificate of the Authority, dated the date of Closing, subject to

the reliances and agreements set forth in Section 3 hereof, to the effect that: (i) the Authority has complied with all the terms, covenants and agreements contained in the Indenture and the Installment Sale Agreement and this Bond Purchase Agreement to be complied with by the Authority as of the date of Closing; and (ii) all of the representations and warranties of the Authority contained in this Bond Purchase Agreement, the Indenture and in the Installment Sale Agreement are true and correct in all material respects on and as of the date of the Closing with the same effect as if made on the date of Closing;

(10) A certificate of the General Manager of the District, dated the

Closing Date to the effect that: (i) as of the Closing Date, the District has complied with all the terms, covenants and agreements contained in, and performed all of its obligations that are a condition precedent to the execution and delivery of the Indenture, the Bonds and the Installment Sale Agreement, (ii) as of the Closing Date, the District has complied with the terms and conditions contained in, and performed all obligations under, this Bond Purchase Agreement to be complied with, and to be performed, by the District, (iii) to the best knowledge of the officer executing the certificate, as of the Closing Date, no default, event of default or an event which, with notice or lapse of time, or both would become a default or an event of default, has occurred or is continuing under the Installment Sale Agreement, (iv) all of the representations and warranties of the District contained in this Bond Purchase Agreement and the Installment Sale Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, (v) as of the Closing Date, no material and adverse change has occurred in the financial position or results of operations of the District since October 20, 2010, except as

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disclosed to the Purchaser, and (vi) the District has not, since October 20, 2010, incurred any material debt that has not been disclosed to the Purchaser;

(11) Signature and incumbency certificates, dated the Closing Date, of

the officers of the Authority and the District who are authorized, on behalf of the District or the Authority, to execute (and did execute) any documents or instruments contemplated hereby to which either the District or the Authority is a party;

(12) The opinion of the general counsel to the District, addressed to the

Authority, the Trustee and the Purchaser, dated the Closing Date, in substantially the form attached hereto as Exhibit C;

(13) An opinion of counsel to the Trustee, addressed to the Authority

and the Purchaser, dated the Closing Date, to the effect that: (i) the Trustee is a national banking association with trust powers, duly created and lawfully existing under the laws of the United States of America, having the legal authority to exercise trust powers in the State; and (ii) the Trustee has full legal power and corporate authority to accept the duties and obligations imposed on it by the Indenture and to authenticate the Bonds and the full legal power and authority to own its properties and to carry on its business;

(14) The Tax Certificate, executed by the Authority and the District, in

form and substance acceptable to Bond Counsel, the Purchaser and its counsel; (15) A certificate of the Trustee, dated the Closing Date, to the effect

that: (i) it is the Trustee under the Indenture, relative to the issuance and delivery of the Bonds; (ii) the Trustee has been duly organized, is validly existing, is in good standing under the laws of the United States of America, and is empowered, authorized and duly qualified to serve as trustee and registrar pursuant to the Indenture and the other documents relating to the issuance of the Bonds; (iii) the Indenture has been duly executed, acknowledged and delivered on behalf of the Trustee by an authorized officer; (iv) the Bonds have been duly authenticated and delivered by the Trustee, acting as registrar pursuant to the Indenture; (v) attached thereto as Exhibit A is an extract from the by-laws of the Trustee, duly adopted by its board of directors, respecting the signing authority of the authorized officer, which by-laws at that date are in full force and effect; and (vi) the Trustee has received executed counterparts of the Indenture, the Installment Sale Agreement and the Tax Certificate;

(16) A certificate, dated the Closing Date, signed by an authorized

officer of the Purchaser, to the effect that: (i) the Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of a purchase of the Bonds, (ii) the Purchaser has conducted its own investigation into the merits and risks of an investment in the Bonds, and has received, or been afforded access to, from the District or otherwise, all the information it deems necessary to make an investment decision with regard to the Bonds, and (iii) the Purchaser is acquiring the Bonds (a) for investment for its own account or (b) for resale to an affiliated entity in which the Purchaser will retain an interest, and not with a view to, or for resale in connection with, any distribution of the Bonds;

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(17) Evidence of required filings with the California Debt and Investment Advisory Commission; and

(18) Such additional legal opinions, certificates, proceedings,

instruments and other documents as Bond Counsel, the Purchaser or its counsel may reasonably request to evidence compliance by the Authority with legal requirements, the truth and accuracy, as of the time of Closing, of the representations contained herein and the due performance or satisfaction by the Authority and the District, at or prior to such time, of all agreements then to be performed and all conditions then to be satisfied.

7. The Authority’s obligations hereunder with respect to the Bonds shall be subject

to the following conditions:

(a) The performance by the District of its obligations, to be performed hereunder at or prior to the Closing; and

(b) No order, decree, injunction, ruling or regulation of any court, regulatory

agency, public board or body shall have been issued, nor shall any legislation have been enacted, with the purpose or effect, directly or indirectly, of prohibiting the offering, sale or issuance of the Bonds as contemplated hereby.

(c) At or before the Closing, the Authority shall have received:

(1) Executed counterparts of this Bond Purchase Agreement, a

Certificate of the District acceptable to the Authority, the Indenture and the Installment Sale Agreement;

(2) Duly executed originals or conformed copies, as may be

determined by the Authority, of the letters, documents, certificates and opinions referred to in Section 6(e) hereof and such other certificates, opinions and documents reasonably required by the Authority; and

(3) The Authority shall have received evidence of payment or

provision for payment of the fees of the Authority and the State Treasurer as agent for sale.

In addition, not later than 10 days after the Closing, the Purchaser shall submit to the

Authority the report(s) required by Section 1899.532 of Article 4 of Subchapter 4 of Chapter 4 of Division 2 of Title 2 of the California Code of Regulations.

8. (a) Whether or not the sale of the Bonds by the State Treasurer, on behalf of

the Authority to the Purchaser, is consummated, the Purchaser shall be under no obligation to pay any, and the Authority and the District, pursuant to their agreement, shall pay all, expenses and costs incident to the performance by the Authority of its obligations in connection with the authorization, issuance and delivery of the Bonds. The District shall pay all reasonable costs of issuance associated with the Bonds.

(b) All reasonable expenses and costs of the Authority and the State

Treasurer incident to the performance of its obligations in connection with the authorization, issuance and sale of the Bonds, including printing costs, fees and expenses of consultants, reasonable fees and expenses of Bond Counsel, counsel to the Authority and counsel for the District, shall be paid by the District. All out-of-pocket

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expenses of the Purchaser, including travel and other expenses and the fees and expenses of its counsel (not to exceed $15,000) shall be paid by the District. The fees and expenses of the California Debt and Investment Advisory Commission shall also be paid by the District.

(c) All fees and expenses described in this Section 8, to the extent they are

identifiable and billed, shall be paid on the Closing Date, and the remainder shall be paid promptly upon receipt of statements therefor. 9. Any notice or other communication to be given under this Bond Purchase

Agreement:

(a) To the State Treasurer may be given by delivering the same in writing to the Treasurer of the State of California, 915 Capitol Mall, Room 261, Sacramento, California 95814;

(b) To the Authority may be given by delivering the same in writing to the

California Alternative Energy and Advanced Transportation Financing Authority, 915 Capitol Mall, Room 457, Sacramento, California 95814, Attention: Executive Director;

(c) To the Purchaser may be given by delivering the same in writing to Banc

of America Leasing & Capital, LLC, 11333 McCormick Road, Hunt Valley II, Mail Code MD 5 032 07 05, Hunt Valley, MD 21031, Attention: Contracts Administration; and

(d) To the District may be given by delivering the same in writing to

Fallbrook Public Utility District, 990 East Mission Road, Fallbrook, California 92088, Attention: General Manager. All notices or communications hereunder by any party shall be given and served upon

each other party. The approval of the Purchaser when required hereunder or the determination of satisfaction as to any document referred to herein shall be in writing signed by the Purchaser and delivered to the party requesting such approval or determination of satisfaction.

10. This Bond Purchase Agreement shall be binding upon and inure solely to the

benefit of each of the parties hereto, and, to the extent set forth herein, persons controlling any of such parties, and their respective officers, employees, agents and personal representatives, successors and assigns, and no other person or firm shall acquire or have any right under or by virtue of this Bond Purchase Agreement. No recourse under or upon any obligation, covenant or agreement contained in this Bond Purchase Agreement shall be had against any officer or director of the District as individuals, except as caused by their bad faith. This Bond Purchase Agreement is made solely for the benefit of each of the parties hereto and except as expressly set forth herein, no other person shall acquire or have any right hereunder or by virtue hereof.

11. The representations, warranties, covenants and agreements herein of the

Authority and the District shall survive the Closing under this Bond Purchase Agreement. All representations, warranties and agreements of the Authority in this Bond Purchase Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Purchaser.

12. The Purchaser represents and warrants to and agrees with the Authority and the State Treasurer that it is authorized to take any action under this Bond Purchase Agreement required to be taken by it and that this Bond Purchase Agreement is a binding contract of the Purchaser enforceable in accordance with its terms except as their enforceability may be limited by reasons of bankruptcy, insolvency, reorganization or other laws generally affecting creditors' remedies, the application of usual equitable principles regardless of whether equitable remedies are sought, by provisions of California law governing claims against public agencies, and by matters of public policy.

13. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

14. This Bond Purchase Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State applicable to contracts made and performed in the State. This Bond Purchase Agreement shall be enforceable in the State and any action arising out of this Bond Purchase Agreement shall be filed with and maintained in Sacramento County Superior Court, Sacramento County, California; provided that the Authority may waive the requirement of venue.

The parties agree that the terms and conditions of this Bond Purchase Agreement supersede those of all previous agreements between the parties related to the subject matter hereof, and that this Bond Purchase Agreement contains the entire agreement between the parties hereto related to the subject matter hereof.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

Very truly yours,

BANC OF AMERICA LEASING & CAPITAL, LLC

By:_a _.:__, _;-=-Q-~_

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Terri J. Preston Vice President

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

Acceptance:

The undersigned hereby accepts the foregoing Bond Purchase Agreement related to the above­referenced Bonds, as of November J.k 2010:

Agreed to and accepted by:

FALLBROOK PUBLIC UTILITY DISTRICT

TREASURER OF THE STATE OF CALIFORNIA

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

Byo ~h::_SJk+ Executive Director

By: __ ~--~~---------------------­General Manager

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CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

Acceptance:

The undersigned hereby accepts the foregoing Bond Purchase Agreement related to the above­referenced Bonds, as of November lfi, 2010:

Agreed to and accepted by:

FALLBROOK PUBLIC UTILIT

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TREASURER OF THE STATE OF CALIFORNIA

By: ___________ _ Deputy Treasurer For California State Treasurer Bill Lockyer

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCEDTRANSPORTATION FINANCING AUTHORITY

By: ___________ _

Executive Director

A-1

EXHIBIT A

FORM OF OPINION OF BOND COUNSEL

[Closing Date]

California Alternative Energy and Advanced Transportation Financing Authority Sacramento, California

Re: California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds

(Fallbrook Public Utility District Solar Project), Series 2010 (Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the California Alternative Energy and Advanced Transportation Financing Authority (the “Authority”) in connection with the issuance of $7,227,000 aggregate principal amount of California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the “Bonds”), issued pursuant to the Indenture, dated as of November 1, 2010 (the “Indenture”), by and between the Authority and Deutsche Bank National Trust Company, as trustee (the “Trustee”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not defined therein, in the Installment Sale Agreement.

In such connection, we have reviewed the Indenture, the Installment Sale Agreement,

dated as of November 1, 2010 (the “Installment Sale Agreement”), by and between the Authority and the Fallbrook Public Utility District (the “District”), the Tax Certificate of the Authority and the District, dated as of the date hereof (the “Tax Certificate”), opinions of counsel to the Authority, the District and the Trustee, certificates of the Authority, the District, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

As to questions of fact material to our opinion, we have relied upon representations of

the District and the Authority contained in the Indenture and the Installment Sale Agreement, and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we

are of the following opinions: 1. The Bonds constitute valid and binding limited obligations of the Authority,

payable solely from Revenues and the other assets pledged therefor under the Indenture. 2. The Indenture and the Installment Sale Agreement have been duly executed and

delivered by, and constitute valid and binding obligations of, the Authority.

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3. The Installment Sale Agreement has been duly executed and delivered by, and

constitutes a valid and binding obligation of, the District. 4. Subject only to the provisions of the Indenture permitting the application thereof

for the purposes and on the terms and conditions set forth therein, the Indenture creates a valid pledge of, lien on and security interest in the Revenues, and any other amounts held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, to secure the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act.

5. The Bonds constitute “qualified energy conservation bonds” within the meaning

of Section 54D of the Internal Revenue Code of 1986 (the “Tax Code”). The Authority has irrevocably elected to apply the provisions of Section 6431(f) of the Tax Code to the Bonds, and the Bonds are specified tax credit bonds (“Qualified Bonds”) eligible for the credits payable by the Federal government to the Authority under Section 6431(f) of the Tax Code (the “Bond Subsidy Payments”), and the interest on the Bonds are not intended to be excluded from gross income of the owners of the Bonds for federal income taxes. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the District comply with all requirements of the Tax Code that must be satisfied subsequent to the execution and delivery of the Bonds in order for the Bonds to be treated as Qualified Bonds and continue to be eligible for the Bond Subsidy Payments. The Authority and the District have covenanted to comply with such requirements. Failure to comply with certain of such requirements may result in a delay or forfeiture of all or a portion of the Bond Subsidy Payments, and may cause the Bonds to cease to be treated as a Qualified Bonds, either prospectively from the date of determination, or retroactively to the date of execution and delivery of the Bonds. We express no opinion regarding the procedures and availability of funds with respect to the payment of the Bond Subsidy Payments by the Federal government, nor do we express any opinion regarding other federal tax consequences arising with respect to the Bonds.

6. Interest on the Bonds is exempt from personal income taxation imposed by the

State of California. 7. The Bond Purchase Agreement dated November 16, 2010, among the Authority,

the District and Banc of America Leasing & Capital, LLC (the “Purchaser”), constitutes a binding, written contract under applicable California law (assuming due authorization, execution and delivery thereof by the Purchaser) for the sale of the Bonds for purposes of Section 54A(b)(3) of the Tax Code.

The rights of the Purchaser and the enforceability of the Installment Sale Agreement and

the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered in law or inequity.

Circular 230 Disclaimer. To ensure compliance with requirements imposed by the

Internal Revenue Service, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Tax Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

A-3-

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

Respectfully submitted, JONES HALL, A Professional Law Corporation

B-1

EXHIBIT B

FORM OF OPINION OF COUNSEL TO THE AUTHORITY

[Closing Date] California Alternative Energy and Advanced Transportation Financing Authority 915 Capitol Mall, Room 457 Sacramento, California 95814

RE: $7,227,000 California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Ladies and Gentlemen:

This opinion is delivered to you in connection with the issuance by the California Alternative Energy and Advanced Transportation Financing Authority (the “Authority”) of its Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 in the aggregate principal amount of $7,227,000 (the “Bonds”). This opinion is delivered to you pursuant to Section 6(e)(8) of a bond purchase agreement, dated October __, 2010 (the “Purchase Contract”), among the Treasurer of the State of California, the Authority, and Banc of America Leasing & Capital, LLC (the “Purchaser”), and approved by the Fallbrook Public Utility District (the “District”).

The Bonds are being issued pursuant to the provisions of the California Alternative

Energy and Advanced Transportation Financing Authority Act, Division 16 of the Public Resources Code (commencing with Section 26000) (the “Act”), and an indenture, dated as of November 1, 2010 (the “Indenture”), by and between the Authority and Deutsche Bank National Trust Company, as trustee (the “Trustee”).

The Bonds are being issued for the purpose of financing the acquisition and installation

of solar energy systems and related appurtenances thereto in Fallbrook, California. The proceeds of the Bonds are being provided by the Authority to the District pursuant to an Installment Sale Agreement, dated as of November 1, 2010 (the “Installment Sale Agreement”), between the Authority and the District.

The Authority’s only sources of payment for the principal of or premium, if any, or

interest on the Bonds are Revenues derived from payments by the District and from certain other limited sources provided for and described in the Indenture, including Federal Subsidy Payments (as defined in the Indenture). The Authority is not obligated to pay the principal of or premium, if any, or interest on the Bonds except from such Revenues and other limited sources. Neither the faith and credit nor the taxing power of the State of California or any subdivision thereof, or any local agency, is pledged to the payment of the principal of or premium, if any, or interest on the Bonds. The Authority has no taxing power with which to provide for payment of the principal of or premium, if any, or interest on the Bonds, nor does it have the power to commit the faith and credit or the taxing power of the State of California or any subdivision thereof, or any local agency, to payment of the principal of or premium, if any, or interest on the Bonds.

As to questions of fact material to this opinion, we have relied upon representations

contained in the Indenture, the Installment Sale Agreement, and the Purchase Contract, and in certain certificates, documents, records, statements, and opinions furnished by, or on behalf of,

B-2

the District, without undertaking to verify such facts by independent investigation. We have assumed compliance with the covenants and agreements contained in the Indenture and the Installment Sale Agreement.

The opinions expressed herein are based on an analysis of existing laws, regulations,

rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof, and we disclaim any obligation to update this opinion. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the fifth paragraph hereof.

Based upon and subject to the foregoing, and in reliance thereon, as of the date hereof,

we are of the opinion that: 1. The Authority is a public instrumentality of the State of California duly

organized and validly existing under the Constitution and laws of the State of California. 2. Resolution No. 2010-001 of the Authority (the “Resolution”), adopted on

October 27, 2010, approving and authorizing the execution and delivery of the Indenture, the Installment Sale Agreement and the Purchase Contract (collectively, the “Authority Documents”), and the Bonds, was duly adopted at a meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout.

3. The Authority has the power to enter into the Authority Documents. 4. There is no action, suit or proceeding pending (with service of process against

the Authority having been accomplished) before any court, governmental agency, public board or body, or to our knowledge threatened, against the Authority to restrain or enjoin the issuance or delivery of the Bonds, the collection of Revenues pledged under the Indenture, the assignment of the Installment Sale Agreement under the Indenture or contesting any authority for the issuance of the Bonds, the validity of the Bonds, or the Authority’s ability to adopt the Resolution or execute the Authority Documents, or contesting the existence or powers of the Authority with respect to the issuance of the Bonds or the security therefor wherein an unfavorable decision, ruling or finding would have a material adverse effect on the transactions contemplated by the Authority Documents or the validity of the Bonds (it being understood that we have made no docket search of state or federal courts nor any other similar inquiry regarding such matters).

5. The execution and delivery of the Bonds and the Authority Documents by the

Authority, and the Authority’s compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not conflict with or constitute on the part of the Authority a breach of or default under any agreement or other instrument known to us to which the Authority is a party or by which it is bound, or under any existing law, regulation, court order or consent decree to which the Authority is subject, which conflict, breach or default would have a material adverse effect on the validity of the Bonds or the Authority Documents; provided that no representation is made regarding compliance with any federal or state securities or “blue sky” laws.

B-3

6. The Authority Documents have been duly authorized, executed, and delivered

by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, are valid and binding obligations of the Authority, and the Bonds have been duly authorized, executed and delivered by the Authority and assuming due authentication by the Trustee, constitute the valid and binding limited obligations of the Authority, payable only from Revenues and from certain other specified funds as set forth in the Indenture, enforceable in accordance with their respective terms, subject to the laws relating to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws related to or affecting creditors’ rights generally and to the application of equitable principles as the court having jurisdiction may impose, regardless of whether such enforceability is considered in a proceeding in equity or law, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State of California. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, severability, or waiver provisions contained in the Authority Documents.

7. The representations of the Authority set forth in Section 3 of the Purchase

Contract are, as to all matters of law, true and accurate in all material respects at and as of the date hereof as though made on this date; and such representations are, as to all other matters, to my knowledge, true and accurate in all material respects at and as of the date hereof as though made on this date.

We are furnishing this letter to you as your counsel. It is being delivered to you as

issuer of the Bonds, is solely for your benefit as such issuer, and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners of the Bonds or by any other party to whom it is not specifically addressed.

Sincerely, STEPAN HAYTAYAN Deputy Attorney General For EDMUND G. BROWN JR. Attorney General

C-1

[LETTERHEAD OF GENERAL COUNSEL TO THE DISTRICT]

November 18, 2010

California Alternative Energy and Advanced Transportation Financing Authority 915 Capitol Mall, Room 457 Sacramento, CA 95814 Banc of America Leasing & Capital, LLC, and successors and assigns 11333 McCormick Road Hunt Valley, MD 21031

Deutsche Bank National Trust Company 101 California Street, 46th Floor San Francisco, CA 94111

OPINION: $7,227,000 California Alternative Energy and Advanced Transportation

Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Ladies and Gentlemen: I act as general counsel to the Fallbrook Public Utility District (the “District”) and as

such have acted as counsel to the District in connection with the issuance and sale of the $7,227,000 Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the “Bonds”) of the California Alternative Energy and Advanced Transportation Financing Authority (the “Authority”). As such counsel I have examined and am familiar with (i) those documents relating to the existence, organization and operation of the District, (ii) the Bond Purchase Agreement, dated November 16, 2010 (the “Purchase Agreement”), among the Authority, the Treasurer of the State of California, and Banc of America Leasing & Capital, LLC, as purchaser (the “Purchaser”) and approved by the District by a Resolution of the Board of directors on October 20, 2010 (the “Resolution”), (iii) all necessary documentation of the District relating to the authorization, execution and delivery of the Installment Sale Agreement, dated as of November 1, 2010 (the “Installment Sale Agreement”), by and between the District and the Authority, and (iv) the Indenture, dated as of November 1, 2010 (the “Indenture”), by and between the Authority and Deutsche Bank National Trust Company, as trustee (the “Trustee”). Terms used herein but not defined herein shall have the meanings assigned to them in the Installment Sale Agreement or the Purchase Agreement.

The Installment Sale Agreement, the Indenture, the Purchase Agreement and the Bonds

shall be collectively referred to herein as the “Legal Documents.” Based upon the foregoing, it is my opinion that: 1. The District is a public utility district, validly existing under the Constitution and

laws of the State of California.

California Alternative Energy and Advanced Transportation Banc of America Leasing & Capital, LLC, and successors and assigns Deutsche Bank National Trust Company November 18, 2010 Page 2

C-2

2. The Resolution was duly adopted at a meeting of the Board, which meeting was

called and held pursuant to the law and with all public notice required by law, and at such meeting a quorum was present and acting throughout.

3. To the best of my knowledge, but without having undertaken any independent

investigation, (i) the District is not in breach of or default under any applicable law or administrative regulation of the State or the United States or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument to which the District is a party or is otherwise subject which would in any way materially impair the performance of its obligations under the Legal Documents; and (ii) the execution and delivery of the Legal Documents to which the District is a party, and compliance with the provisions thereof, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, note, resolution, indenture, agreement or other instrument to which the District is a party or is otherwise subject.

4. To the best of my knowledge, but without having undertaken any independent

investigation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or threatened against the District which (i) affects the existence of the District or the titles of its officials to their respective offices, (ii) seeks to prohibit, restrain or enjoin the execution or delivery of the Legal Documents to which the District is a party or the pledge of revenues or assets of the District pledged or to be pledged to pay principal of and interest on the Bonds, (iii) contests in any way or affects the validity or enforceability of the Resolution, the Legal Documents, or (iv) contests the powers of the District as to its authority for the execution and delivery of such documents; wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Legal Documents.

Respectfully submitted

D-1

EXHIBIT D

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BONDS (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

1. Date of the Bonds – November 18, 2010 2. Maturity Date– November 18, 2027 3. Payment Dates, principal (sinking fund) payments, interest payments, tax credit rate and interest rate:

Tax Credit Rate Interest Rate

QECB Principal Amount

$7,227,000 5.56%1 5.74%

Financing Term (yrs.) 17 Funding/Closing Date Nov. 18, 2010

Pmt. No.

Payment Date

Principal Amount2

Interest Amount

Total Payment Amount

1 11/18/11 $207,681.23 $414,829.80 $622,511.03 2 5/18/12 276,377.68 201,454.45 477,832.13 3 11/18/12 286,548.85 193,522.41 480,071.26 4 5/18/13 289,196.56 185,298.46 474,495.02 5 11/18/13 295,386.56 176,998.52 472,385.08 6 5/18/14 298,115.93 168,520.92 466,636.86 7 11/18/14 304,588.66 159,964.99 464,553.65 8 5/18/15 307,403.06 151,223.30 458,626.36 9 11/18/15 314,168.54 142,400.83 456,569.37

10 5/18/16 317,071.46 133,384.20 450,455.65 11 11/18/16 134,592.93 124,284.24 258,877.18 12 5/18/17 135,836.57 120,421.43 256,258.00 13 11/18/17 143,324.21 116,522.92 259,847.13 14 5/18/18 144,648.52 112,409.51 257,058.04 15 11/18/18 152,436.55 108,258.10 260,694.65 16 5/18/19 153,845.06 103,883.17 257,728.23 17 11/18/19 161,944.71 99,467.82 261,412.53 18 5/18/20 163,441.08 94,820.00 258,261.09 19 11/18/20 171,864.00 90,129.25 261,993.25 20 5/18/21 173,452.03 85,196.75 258,648.77 21 11/18/21 182,210.28 80,218.68 262,428.95

1 Federal Subsidy Payments will be calculated at 70% of the Tax Credit Rate, or 3.892%. 2 Principal Payments under the Installment Sale Agreement are sinking fund payments on the Bonds.

D-2

Pmt. No.

Payment Date

Principal Amount2

Interest Amount

Total Payment Amount

22 5/18/22 183,893.90 74,989.24 258,883.14 23 11/18/22 192,999.99 69,711.49 262,711.47 24 5/18/23 194,783.30 64,172.39 258,955.69 25 11/18/23 204,250.17 58,582.11 262,832.28 26 5/18/24 206,137.45 52,720.13 258,857.57 27 11/18/24 215,978.52 46,803.98 262,782.50 28 5/18/25 217,974.16 40,605.40 258,579.56 29 11/18/25 228,203.35 34,349.54 262,552.89 30 5/18/26 230,311.95 27,800.10 258,112.05 31 11/18/26 240,943.65 21,190.15 262,133.80 32 5/18/27 243,169.97 14,275.07 257,445.04 33 11/18/27 254,219.11 7,296.09 261,515.20

INSTALLMENT SALE AGREEMENT

by and between the

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

and the

FALLBROOK PUBLIC UTILITY DISTRICT

relating to the 2010 SOLAR PROJECT

Dated as of November 1, 2010

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TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS

Section 1.01. Definitions .................................................................................................................................2

ARTICLE II PURPOSE AND TERM; REPRESENTATIONS

Section 2.01. Acquisition of Project; Purchase and Sale; Title ..................................................................7 Section 2.02. Term of Installment Sale Agreement.....................................................................................7 Section 2.03. Findings of the Authority .......................................................................................................7 Section 2.04. Representations of the Authority...........................................................................................7 Section 2.05. Representations and Warranties of the District...................................................................8

ARTICLE III INSTALLMENT PAYMENTS

Section 3.01. Installment Payments ............................................................................................................10 Section 3.02. Special Obligation of the District .........................................................................................10 Section 3.03. Pledge of Pledged Revenues; Application of Gross Revenues........................................11 Section 3.04. Rate Covenant.........................................................................................................................12 Section 3.05. Limitations on Future Obligations Secured by Net Revenues and Gross Revenues ...12 Section 3.06. Payment Provisions ...............................................................................................................13 Section 3.07. Prepayment .............................................................................................................................14 Section 3.08. Additional Payments .............................................................................................................15

ARTICLE IV USE OF FUNDS; ACQUISITION AND INSTALLATION OF THE

PROJECT Section 4.01. Use of Proceeds.......................................................................................................................16 Section 4.02. Tax Covenants ........................................................................................................................16 Section 4.03. Agreement To Acquire and Install the Project; Modifications of the Project ................18 Section 4.04. Disbursements From the Project Fund; Disbursements From the Costs of

Issuance Fund .........................................................................................................................18 Section 4.05. Establishment of Completion Date; Obligation of District to Complete........................19 Section 4.06. Investment of Moneys in Funds...........................................................................................19

ARTICLE V EQUIPMENT MAINTENANCE AND CHANGES

Section 5.01. Maintenance and Utilities .....................................................................................................21 Section 5.02. Changes to the Equipment....................................................................................................21

ARTICLE VI INSURANCE; RISK OF LOSS

Section 6.01. Insurance .................................................................................................................................22 Section 6.02. Risk of Loss .............................................................................................................................22 Section 6.03. Surety Bonds; District to Pursue Remedies Against Contractors and Sub-

Contractors and Their Sureties.............................................................................................22

ARTICLE VII DEFAULTS AND REMEDIES

Section 7.01. Breach and Remedies.............................................................................................................24 Section 7.02. Waiver......................................................................................................................................26 Section 7.03. Agreement to Pay Attorneys’ Fees and Expenses .............................................................26 Section 7.04. No Prevailing Party Costs.....................................................................................................26

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ARTICLE VIII COVENANTS

Section 8.01. Right of Entry and Inspection ..............................................................................................27 Section 8.02. Prohibition Against Encumbrance or Sale of Equipment ................................................27 Section 8.03. Liens .........................................................................................................................................27 Section 8.04. Quiet Enjoyment.....................................................................................................................27 Section 8.05. Net Contract............................................................................................................................27 Section 8.06. Compliance with Installment Sale Agreement ..................................................................28 Section 8.07. Federal Subsidy Payments....................................................................................................28 Section 8.08. Additional Covenants of the District ..................................................................................28

ARTICLE IX [RESERVED]

ARTICLE X

MISCELLANEOUS Section 10.01. Authority Not Liable .............................................................................................................31 Section 10.02. Disclaimer of Warranties.......................................................................................................31 Section 10.03. Indemnification and Expenses .............................................................................................31 Section 10.04. No Merger ...............................................................................................................................32 Section 10.05. Law Governing; Venue .........................................................................................................32 Section 10.06. Notices .....................................................................................................................................32 Section 10.07. Validity and Severability.......................................................................................................33 Section 10.08. Section Headings....................................................................................................................33 Section 10.09. Execution .................................................................................................................................33 Section 10.10. Survival of Fee Obligation ....................................................................................................33 Section 10.11. Liability of Authority Limited to Revenues .......................................................................33 Section 10.12. Waiver of Personal Liability .................................................................................................34 Section 10.13. Binding Effect..........................................................................................................................34

ARTICLE XI ASSIGNMENT

Section 11.01. Assignment .............................................................................................................................35 EXHIBIT A DESCRIPTION OF THE PROJECT ......................................................................................... A-1 EXHIBIT B THE EQUIPMENT ......................................................................................................................B-1 EXHIBIT C FORM OF ADDITIONAL EQUIPMENT CERTIFICATE .................................................... C-1 EXHIBIT D INSTALLMENT PAYMENT SCHEDULE ............................................................................. D-1 EXHIBIT E FINAL PROJECT COMPLETION CERTIFICATE..................................................................E-1 EXHIBIT F COMPLIANCE CERTIFICATE .................................................................................................F-1

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INSTALLMENT SALE AGREEMENT

This Installment Sale Agreement (the “Installment Sale Agreement”), dated as of

November 1, 2010, by and between the CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY, a public instrumentality of the State of California (the “Authority”), and FALLBROOK PUBLIC UTILITY DISTRICT, a public utility district organized and existing under Sections 15501 et. seq. of the Public Utilities Code of the State of California;

W I T N E S S E T H:

WHEREAS, the Authority is a public instrumentality of the State of California, created

by the California Alternative Energy and Advanced Transportation Financing Authority Act (constituting Division 16 of the Public Resources Code of the State of California as now in effect and as it may from time to time hereafter be amended or supplemented) (the “Act”) and authorized to lend financial assistance to any participating party (as defined in the Act) and to enter installment sale contracts for a project as defined in the Act; and

WHEREAS, the District has duly caused an application to be filed with the Authority for

financial assistance to acquire and install photovoltaic solar energy systems and related appurtenances thereto, located in Fallbrook, California, as more particularly described in Exhibit A hereto (the “Project”), which activities qualify as a “project” under the Act; and

WHEREAS, the Authority, after due investigation and deliberation, has adopted its

resolution authorizing the financing of the Project during the term of the Bonds (described below); and

WHEREAS, the Authority proposes to issue its California Alternative Energy and

Advanced Transportation Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the “Bonds”), in the aggregate principal amount of $7,227,000, to finance the cost of acquiring and installing the Project upon the terms and conditions set forth herein; and

WHEREAS, the Authority will enter into an Indenture, dated as of November 1, 2010

(the “Indenture”), with Deutsche Bank National Trust Company, as trustee (the “Trustee”), pursuant to which the Bonds will be issued; and

WHEREAS, the Authority is authorized pursuant to the Act to purchase the Project

from the District and sell back the Project to the District, and the District is authorized pursuant to the laws of the State of California to sell the Project to the Authority and purchase back the Project from the Authority, for the purposes set forth herein; and

WHEREAS, pursuant to this Installment Sale Agreement, the District is obligated to

make scheduled installment payments (the “Installment Payments”) and additional payments (the “Additional Payments”) to the Authority for the purchase of the Project; and

NOW, THEREFORE, for and in consideration of the premises and the material

covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows:

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ARTICLE I DEFINITIONS

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

this section shall for all purposes hereof and of any amendment hereof have the meanings defined herein. Capitalized terms that are not defined herein shall have the meanings ascribed to them in the Indenture.

“Act” means the California Alternative Energy and Advanced Transportation Financing

Authority Act (Chapter 1 (commencing with Section 26000) of Division 16 of the California Public Resources Code), as now in effect and as it may from time to time hereafter be amended or supplemented.

“Additional Payments” means those amounts payable by the District as provided in

Section 3.08. “Authority” means the California Alternative Energy and Advanced Transportation

Financing Authority created pursuant to, and as defined in, the Act, and any board, commission, department, or officer succeeding to the functions thereof, or to which the powers conferred thereupon by the Act are given.

“Available Project Proceeds” means (i) the proceeds from the sale of the Bonds, (ii) less

costs of executing and delivering the Bonds paid from proceeds of the sale of the Bonds (not exceeding 2% of the proceeds of the sale of the Bonds), plus (iii) investment earnings on the difference between (i) - (ii).

“Bonds” means the California Alternative Energy and Advanced Transportation

Financing Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010 that are issued pursuant to the Indenture in the aggregate principal amount of seven million two hundred twenty-seven thousand dollars ($7,227,000).

“Business Day” means a day, other than a Saturday or Sunday or a day on which State

offices or banking institutions located in the State of California are required or authorized to remain closed, on which the Trustee is open for business at its Principal Corporate Trust Office.

“Certification” or “Certificate” or “Request” means, with respect to the District, an

instrument in writing signed on behalf of the District by the General Manager or the Administrative Services Manager/Treasurer of the District, or by any other officer of the District duly authorized by the General Manager of the District to sign documents on its behalf hereunder and, with respect to the Authority, an instrument in writing signed on behalf of the Authority by the Executive Director of the Authority or any individual or individuals at the time designated to act on behalf of the Authority by a written certificate signed by the Executive Director of the Authority, furnished to the Trustee and the District.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations

issued thereunder. “Commencement Date” means November 18, 2010. “County” means the County of San Diego.

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“Debt” means this Installment Sale Agreement, any Parity Debt, and any Subordinate Debt.

“Debt Service” means for any period in question and with respect to Debt, an amount

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

“District” means the Fallbrook Public Utility District, a public utility district organized

and existing under the laws of the State of California. “Equipment” means (a) the equipment and other personal property identified in Exhibit

B hereto, and in supplements to such Exhibit B by each Additional Equipment Certificate (in the form of Exhibit C), and (b) any property acquired with the proceeds of the Bonds deposited to the Project Fund or in substitution, renewal, repair or replacement for or as additions, improvements, accessions and accumulations to any of such equipment. Whenever reference is made in this Installment Sale Agreement to Equipment, such reference shall be deemed to include all such replacements, repairs, restorations, modifications and improvements of or to such Equipment.

“Event of Default” means any of the events described in Section 7.01 hereof as an “Event

of Default.” “Expenditure Period” means the “expenditure period” defined in Section 54A(d)(2)(B)(ii)

of the Code and consists of the period beginning on the date the Bonds are issued (the “Closing Date”) and ending on the later of the date 3 years after the Closing Date or such later date, if any, as permitted by the Internal Revenue Service in response to a request to extend the Expenditure Period.

“Federal Subsidy Payments” means, with respect to the Bonds, the amounts which are

paid by the Federal government under Section 6431 of the Code with respect to the Bonds, which the Authority has elected to receive under Section 6431(f)(2) of the Code.

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

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

“Gross Revenues” means: (1) all gross charges (including surcharges, if any) received for,

and all other gross income and receipts derived by the District from, the ownership and operation of the Sewer System and the Recycled Water System or otherwise arising from the Sewer System and the Recycled Water System, including but not limited to (a) connection charges, (b) rebates or incentives paid to the District as a result of installed renewable energy generation projects or energy efficiency measures that benefit the operation of the Sewer System or the Recycled Water System, and (c) investment earnings on amounts held in the Sewer Fund or in any other fund established with respect to the Sewer System and the Recycled Water System; and (2) Tax Revenues.

Gross Revenues does not include (i) refundable deposits made to establish credit, and

(ii) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the District for the purpose of paying special assessment

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bonds or special tax obligations of the District relating to the Sewer System and the Recycled Water System.

“Improvement District “S” means the improvement district formed by the District

pursuant to #4 of the Terms and Conditions set forth in the San Diego County LAFCO Certificate of Dissolution (the “Certificate of Dissolution”), recorded as Document #1994-0718682 on December 19, 1994, Official Records of the San Diego County Recorder’s Office, the boundaries of which are coterminous with the boundaries of the Fallbrook Sanitary District, which was dissolved and merged into the District by the Certificate of Dissolution.

“Installment Payments” means the Installment Payments payable by the District under

Section 3.01. “Installment Sale Agreement” means this Installment Sale Agreement dated as of

November 1, 2010, by and between the Authority and the District, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance herewith.

“Indenture” means that certain Indenture, dated as of November 1, 2010, between the

Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Indentures executed pursuant to the provisions thereof.

“Installment Payments” means all amounts payable by the District as Installment

Payments under Section 3.01 due hereunder relating to the Bonds. “Interest Payment Date” means a date on which the interest component of the Installment

Payments is due, being November 18 and May 18 of each year to which reference is made, commencing on November 18, 2011.

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

greatest amount required in the then current or any single future Fiscal Year to pay the Debt Service on the obligation or obligations in question.

“Net Proceeds” means, when used with respect to any condemnation award or any

insurance proceeds received pursuant to Section 6.02 hereof, the amount of such condemnation award or such insurance proceeds remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such award or such proceeds.

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

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

“1998 Installment Sale Agreement” means Installment Sale Agreement #98-138, dated as of

October 26, 1998, between Municipal Leasing Associates and the District, executed and delivered on November 5, 1998 in the original principal amount $1,211,000.

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

expenses paid by the District to maintain and operate the Sewer System and the Recycled Water System, including but not limited to (a) costs of treating wastewater, (b) costs of electricity and other forms of energy supplied to the Sewer System and the Recycled Water System, (c) the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the Sewer System and the Recycled Water System in good repair and working order, and (d) the reasonable administrative costs of the District attributable to the

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operation and maintenance of the Sewer System and the Recycled Water System. Operation and Maintenance Costs does not include (i) Debt Service payable on obligations incurred by the District with respect to the Sewer System and the Recycled Water System, (ii) depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a similar nature.

“Opinion of Bond Counsel” means a written opinion of counsel of recognized national

standing in the field of law relating to municipal bonds, retained by the District and approved by the Authority.

“Outstanding Parity Debt” means the 1998 Installment Sale Agreement and the 2007 Loan

Agreement. “Parity Debt” means the Outstanding Parity Debt and any other bonds, notes, leases,

installment sale agreements or other obligations of the District payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity with the Installment Payments, entered into or issued under and in accordance with Section 3.05(b) of this Installment Sale Agreement.

“Principal Corporate Trust Office” means the corporate trust office of the Trustee located

in San Francisco, California or such other office or offices as the Trustee shall designate from time to time.

“Principal Payment Date” means a date on which the principal component of the

Installment Payments is due, being November 18 and May 18 of each year to which reference is made, commencing November 18, 2011.

“Project” means, the acquisition and installation of photovoltaic facilities and systems

that produce electricity from solar energy and related appurtenances thereto, including Equipment, all as more particularly described in Exhibit A hereto.

“Recycled Water System” means the portion of the system of the District for the collection,

storage, treatment, disposal, distribution and furnishing of recycled water that is part of and related to the Sewer System, including but not limited to all facilities, properties, lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the District.

“Retained Rights” means the right of the Authority to receive certain payments, if any,

with respect to fees, expenses and indemnification under Section 10.03 of this Installment Sale Agreement, or to enforce its rights under Sections 3.08, 7.01 (solely in respect of other Retained Rights), 8.01 and 10.03 of this Installment Sale Agreement and the rights expressly granted to the Authority under the Indenture and this Installment Sale Agreement to indemnification, inspection, consent and receipt of certificates, notices and opinions.

“Revenue Fund” means the fund by that name established pursuant to the Indenture and

held by the Trustee. “Sewer Fund” means the fund or funds established and held by the District with respect

to the Sewer System for the receipt and deposit of Gross Revenues, as such fund is further described in Section 3.03(b) hereof.

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

treatment, disposal of wastewater within the service area of the District, including but not

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limited to all facilities, properties, lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the District.

“State” means the State of California. “Subordinate Debt” means indebtedness or other obligations (including but not limited to

leases and installment sale agreements) hereafter issued or incurred pursuant to Section 3.05(c) and secured by a pledge of and lien on Net Revenues subordinate to the pledge and lien on Net Revenues securing the Installment Payments.

“Tax Revenues” means, from and after the date the 2007 Loan Agreement is fully retired

or defeased, the amount of property tax revenues (as defined in Section 95 of the Revenue and Taxation Code of the State of California) apportioned, allocated and paid by the County Tax Collector to the District with respect to Improvement District “S” pursuant to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code of the State of California, as amended from time to time.

“Term” means the term of this Installment Sale, as provided in Section 2.02. “Trustee” means Deutsche Bank National Trust Company, or any other association,

corporation, bank or trust company which may at any time be substituted in its place as provided in the Indenture.

“Water System” means the existing water system of the District, comprising all facilities

for the obtaining, conserving, treating, distributing, storing and supplying of water for domestic use, irrigation, sanitation, industrial use, fire protection, recreation, or any other public or private uses.

“Vendor” means the manufacturer, installer or supplier of the Equipment or any other

person as well as the agents or dealers of the manufacturer, installer or supplier with whom the District arranged the acquisition, installation, maintenance and/or servicing of the Equipment.

“Vendor Agreement” means any contract entered into by the District and any Vendor for

the acquisition, installation, maintenance and/or servicing of the Equipment. “2007 Loan Agreement” means that certain Loan Agreement, dated as of June 1, 2007,

between Municipal Finance Corporation and the District, executed and delivered on June 20, 2007 in the original principal amount of $5,780,840.

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ARTICLE II PURPOSE AND TERM; REPRESENTATIONS

Section 2.01. Acquisition of Project; Purchase and Sale; Title. (a) Acquisition of Project. The District hereby sells, bargains and conveys to the

Authority, and the Authority hereby purchases from the District, the Project purchased by the District with funds made available to it by the Authority under the Indenture for such purpose.

(b) Purchase and Sale of Project. The Authority hereby sells, bargains and conveys

the Project to the District, and the District hereby purchases the Project from the Authority, upon the terms and conditions set forth in this Installment Sale Agreement.

(c) Title. Title to the Project shall be vested in the District on the Closing Date and

simultaneously upon each subsequent acquisition of Equipment by the District from the Vendor of such Equipment as part of the Project, without conditions precedent. The Authority shall take all reasonable actions necessary to vest in the District all of the Authority's rights in and title to the Project. The District shall hold such title for the term of this Agreement.

Section 2.02. Term of Installment Sale Agreement. The Term of this Installment Sale

Agreement shall commence as of the Closing Date hereof and shall end on November 18, 2027 (provided the District has paid all Installment Payments and other amounts due hereunder through such date), unless such term is extended or sooner terminated as hereinafter provided.

Section 2.03. Findings of the Authority. The Authority makes the following findings: (a) (i) The District is a “participating party” as such term is defined in the Act; (ii)

the Project is a “project” as such term is defined in the Act; (iii) the financing of the Project with the proceeds of the Bonds will promote the purposes of the Act by providing funds to finance the acquisition and installation of the Project; and (iv) financing the project is in the public interest, serves the public purposes and meets the requirements of the Act.

(b) No member of the Authority, or any officer or employee of the Authority who

participated in the making of this Installment Sale Agreement, is financially interested (within the meaning of Government Code Section 1090) in the District, in this Installment Sale Agreement, or the Indenture.

Section 2.04. Representations of the Authority. The Authority makes the following

representations as the basis for its undertakings herein contained: (a) The Authority is a public instrumentality of the State of California. Under the

provisions of the Act, the Authority has the power to enter into the transactions contemplated by this Installment Sale Agreement and the Indenture and to carry out its obligations hereunder. By proper action, the Authority has duly authorized the execution, delivery and this Installment Sale Agreement and the Indenture and the performance of its obligations thereunder. On October 27, 2010, the Authority adopted its resolution approving financing of the Project.

(b) The representations of the Authority in the Tax Certificate are true and correct as

of the date hereof (subject to the qualifications set forth, and in reliance upon the sources of information described, in the Tax Certificate).

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(c) The Authority will issue the Bonds under, and the Bonds will be secured by, the Indenture, pursuant to which the Authority’s interest in this Installment Sale Agreement (except for the Authority’s Retained Rights) will be pledged to the Trustee as security for payment of the principal of, premium, if any, and interest, if any, on the Bonds as provided in the Indenture.

(d) The Authority has not pledged and will not pledge its interest in this Installment

Sale Agreement for any purpose other than as provided in the Indenture. (e) The Authority is not in default under any of the provisions of the laws of the

State of California, which default would affect its existence or its powers referred to in subsection (a) of this Section 2.04.

Section 2.05. Representations and Warranties of the District. The District makes the

following representations and warranties as the basis for its undertakings herein contained: (a) The District is a public utility district duly organized and existing under the laws

of the State of California, has duly authorized, by proper action, the execution and delivery of this Installment Sale Agreement and all other documents contemplated hereby to be executed by the District, and has the power to enter into and consummate the transactions contemplated by this Installment Sale Agreement and all other documents contemplated hereby to be executed by the District. This Installment Sale Agreement has been duly authorized, executed and delivered by the District. This Installment Sale Agreement, when assigned to the Trustee pursuant to the Indenture, will constitute the legal, valid and binding agreement of the District enforceable against the District by the Trustee in accordance with its terms for the benefit of the Holders of the Bonds, and any rights of the Authority and obligations of the District not so assigned to the Trustee constitute the legal, valid, and binding agreement of the District enforceable against the District by the Authority in accordance with their terms; except in each case as enforcement may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity and by public policy.

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

consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions hereof, conflicts with or results in a breach of any of the terms, conditions or provisions of any material actions or of any material agreement or instrument to which the District is now a party or by which it is bound, or constitutes a default (with due notice or the passage of time or both) under any of the foregoing.

(c) No consent or approval of any trustee or holder of any indebtedness of the

District or any guarantor of indebtedness of or other provider of credit or liquidity of the District, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority (except (i) with respect to any state securities or “blue sky” laws or (ii) for the use or operation of the Project which are expected by the District to be obtained prior to the use or operation of the Project) is necessary in connection with the execution and delivery of this Installment Sale Agreement, or the consummation of any transaction herein or therein contemplated, or the fulfillment of or compliance with the terms and conditions hereof or thereof, except as have been obtained or made and as are in full force and effect.

(d) There is no action, suit, proceeding, inquiry or investigation, before or by any

court or federal, state, municipal or other governmental authority, pending, or to the knowledge of the District, after reasonable investigation, threatened, against or affecting the

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District or the assets, properties or operations of the District which, if determined adversely to the District or its interests, would have a material adverse effect upon the consummation of the transactions contemplated by, or the validity of, this Installment Sale Agreement, and the District, to the best of its knowledge after reasonable inquiry, is not in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Installment Sale Agreement. The District enjoys the peaceful and undisturbed possession of all of the premises upon which it is operating the Project.

(e) The Costs of the Project are as set forth in the Tax Certificate dated the date of

delivery of the Bonds, and have been determined in accordance with standard engineering/construction and accounting principles. All the information and representations in the Tax Certificate are true and correct as of the date thereof.

(f) Upon completion, the Project will consist of the Equipment described in Exhibit

B. (g) The District has fee title to the real property and the improvements thereon

relating to the Project. No portion of the Project will be installed on any property not owned in its entirety by the District.

(h) All certificates, approvals, permits and authorizations of applicable local

governmental agencies, the State of California and the federal government which are necessary prior to the commencement of the use or operation of the Project either have been obtained and continue in force or are expected by the District to be obtained prior to the use or operation of the Project.

(i) No event has occurred and no condition exists which would constitute an Event

of Default (as defined in the Indenture) or which, with the passing of time or with the giving of notice or both would become such an Event of Default.

(j) To the best of the knowledge of the District, no member, officer, or other official

of the Authority has any financial, ownership or managerial interest in the District, any affiliate of the District, this Installment Sale Agreement or the Indenture, or in the transactions contemplated by this Installment Sale Agreement or the Indenture.

(k) The Project constitutes a “project” and the District is a “participating party,” as

such terms are defined in the Act. (l) No lease, rental agreement, lease-purchase agreement, payment agreement or

contract for purchase to which the District has been a party at any time has been terminated by the District as a result of insufficient funds being appropriated in any fiscal year. No event has occurred which would constitute an event of default under any debt, revenue bond or obligation which the District has issued during the past ten (10) years.

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ARTICLE III INSTALLMENT PAYMENTS

Section 3.01. Installment Payments. (a) Obligation to Pay. The District agrees to pay to the Authority, its successors and

assigns, as the purchase price of the Project, the Installment Payments, consisting of components of principal and interest, on the Installment Payment Dates and in the amounts specified in Exhibit D hereto, except there shall be credited against the interest components of an Installment Payment any amounts (including any Federal Subsidy Payments received by the Trustee) on deposit in the Revenue Fund on the related Installment Payment Date. The Installment Payments shall be payable solely from Net Revenues as hereinafter provided.

(b) Reduction Upon Partial Prepayment. In the event the District prepays less than

all of the remaining principal components of the Installment Payments pursuant to Section 3.07 hereof, the amount of such prepayment shall be applied to the outstanding principal component of the Installment Payments, on a proportional basis.

(c) Rate on Overdue Payments. In the event the District should fail to make any of

the payments required in this Section 3.01 on or before the due date therefor, the Installment Payment in default shall continue as an obligation of the District until the amount in default shall have been fully paid and the District agrees to pay the same with interest thereon, to the extent permitted by law, from the date thereof at the rate of interest used in computing the Installment Payments.

(d) Unavailability of Federal Subsidy Payments. The District acknowledges and

agrees that the unavailability or non-payment of any Federal Subsidy Payment shall not relieve the District of its obligation to pay Installment Payments or any other obligation under this Installment Sale Agreement.

Section 3.02. Special Obligation of the District. The District's obligation to pay the

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

The obligations of the District to make the Installment Payments from Net Revenues and

to perform and observe the other agreements contained herein shall be absolute and unconditional in all events, and shall not be subject to any defense or any right of set-off, counterclaim, deduction, abatement, diminution or recoupment arising out of any breach by the District or the Authority of any obligation to the District or otherwise with respect to the Project or the Sewer System, whether hereunder or otherwise, or out of any indebtedness or other liability at any time owing to the District by the Authority, or as to any failure of the Equipment to perform, or as to disputes and other events with respect to the Vendor. Until such time as all of the Installment Payments shall have been fully paid or prepaid, the District (a) will not suspend, abate, or discontinue any payments provided for in Section 3.01 hereof, (b) will perform and observe all other agreements contained in this Installment Sale Agreement, and (c) will not terminate this Installment Sale Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Project or the Sewer System, the taking by eminent domain of title to or temporary use of any or

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all of the Project or the Sewer System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either thereof, any failure of the Authority to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Sale Agreement.

Section 3.03. Pledge of Net Revenues; Application of Gross Revenues. (a) Pledge of Net Revenues. All of the Net Revenues are hereby irrevocably pledged

to the punctual payment of the Installment Payments and the interest and principal on or represented by Parity Debt outstanding under the documents pursuant to which such Parity Debt was delivered or issued, and the Net Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid, except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by this Section 3.03. This pledge shall constitute a first and prior lien on all of the Net Revenues for the payment of the Installment Payments and Parity Debt in accordance with the terms hereof and thereof, provided, that the Outstanding Parity Debt also shall be equally and ratably secured by said pledge and lien without priority of any of the Installment Payments, any Parity Debt, the Outstanding Parity Debt over any of the others. This Installment Sale Agreement and the Installment Payments have been designated as and qualify as Parity Debt under the Outstanding Parity Debt documents.

(b) Receipt and Deposit of Gross Revenues. In order to carry out and effectuate the

pledge contained in subsection (a) of this Section 3.03, the District agrees and covenants that all Gross Revenues shall be received by the District in trust and shall be deposited when and as received in a special fund (the “Sewer Fund”) that the District agrees and covenants to maintain so long as any Installment Payments remain unpaid. The Authority and the District agree that the revenue fund created and maintained by the District under the terms of the Outstanding Parity Debt shall also constitute the Sewer Fund for the purpose of this Installment Sale Agreement. All moneys in the Sewer Fund shall be so held in trust and applied and used solely as provided herein. All such Gross Revenues shall be disbursed, allocated and applied solely to the uses and purposes hereinafter set forth in this Section 3.03, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District.

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

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

(1) Operation and Maintenance Costs. Operation and Maintenance Costs

shall be paid from time to time as they arise. Following the payment or provision for payment of amounts referenced in (1)

above: (2) Debt Repayment (Installment Payments and other Parity Debt). To the

payment of Installment Payments and payments relating to Debt Service on Parity Debt in accordance with the terms of such Parity Debt, without preference or priority, and in the event of any insufficiency of such moneys, ratably based on the respective principal amounts (including any accreted value) without any discrimination or preference.

(3) Reserve Accounts (Parity Debt). To make payments required with respect

to Parity Debt to replenish reserve accounts established therefor in accordance with the terms of such Parity Debt, without preference or priority, and in the event of any

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insufficiency of such moneys, ratably based on the respective principal amounts (including any accreted value) without any discrimination or preference. Notwithstanding the provisions of this Section 3.03(c)(3), in the event there are not sufficient funds to make Installment Payments under this Agreement, any amounts included in a reserve account established to secure payments of principal of and interest on any Parity Debt shall be made available to pay such Parity Debt prior to any Net Revenues available for such Parity Debt so long as such insufficiency shall continue or until such reserve account is depleted.

(4) Debt Repayment (Subordinate Debt). To the payment of installment

payments and payments relating to principal and interest on or with respect to Subordinate Debt in accordance with the terms of such Subordinate Debt, without preference or priority, and in the event of any insufficiency of such moneys, ratably based on the respective principal amounts (including any accreted value) without any discrimination or preference.

(5) General District Purposes. For any lawful purpose of the District,

including, but not limited to, any costs of capital improvements to the Sewer System. Section 3.04. Rate Covenant. (a) The District shall fix, prescribe, revise and collect rates, fees and charges for the

services and facilities furnished by the Sewer System during each Fiscal Year, which are at least sufficient, after making allowances for contingencies and error in the estimates, to yield Gross Revenues, which will be sufficient to pay the following amounts in the following order of priority:

(1) All Operation and Maintenance Costs estimated by the District to become

due and payable in such Fiscal Year; (2) All payments of principal of and interest on any Debt as they become due

and payable during such Fiscal Year, without preference or priority; (3) All payments, including but not limited to payments required to meet

any other obligations of the District which are charges, liens, encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues during such Fiscal Year.

(b) In addition, the District shall fix, prescribe, revise and collect rates, fees and

charges for the services and facilities furnished by the Sewer System during each Fiscal Year which are sufficient to yield Net Revenues: (i) at least equal to 115% of Debt Service due on Parity Debt during said Fiscal Year; and (ii) at least equal to 100% of Debt Service due on Parity Debt and Subordinate Debt coming due during said Fiscal Year.

Section 3.05. Limitations on Future Obligations Secured by Net Revenues and Gross

Revenues. (a) No Senior Debt; No Debt Secured by Combined Pledge. (i) The District hereby covenants that, so long as the Installment Sale

Agreement is outstanding, the District shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which are in

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any case secured by a lien on all or any part of the Net Revenues which is senior to the lien established hereunder for the security of the Installment Payments and any Parity Debt.

(ii) No Additional Debt Secured by Combined Water and Sewer Revenues.

The District hereby covenants that, so long as the Installment Sale Agreement is outstanding, the District shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which are in any case secured by a lien on all or any part of the revenues of both the Water System and the Sewer System, or by a lien on all or any part of the Tax Revenues.

(b) Parity Debt. The District may issue Parity Debt during the Term hereof, if it

meets the following requirements: (i) No Event of Default has occurred and is continuing; and (ii) The Net Revenues, calculated in accordance with sound accounting

principles, as shown by the books of the District for the most recent completed Fiscal Year for which audited financial statements of the District are available, or for any more recent consecutive 12 month period selected by the District, in either case verified by a Financial Consultant or shown in the audited financial statements of the District, less seventy percent (70%) of connection fees which are part of Net Revenues, shall at least equal 115% of Maximum Annual Debt Service (taking into account the Parity Debt then proposed to be issued). (c) Subordinate Debt. The District may issue Subordinate Debt during the Term

hereof, if it meets the following requirements:

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

principles, as shown by the books of the District for the most recent completed Fiscal Year for which audited financial statements of the District are available, or for any more recent consecutive 12 month period selected by the District, in either case verified by a Financial Consultant or shown in the audited financial statements of the District, shall at least equal 100% of Maximum Annual Debt Service (taking into account the Subordinate Debt then proposed to be issued).

The District shall not be restricted by the provisions of this Installment Sale

Agreement in the issuance or incurrence of any Subordinate Debt for any legal purpose of the District. (d) No Debt Secured by Gross Revenues. The District hereby covenants that, so

long as the Installment Sale Agreement is outstanding, the District shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which are in any case secured by a lien on all or any part of the Gross Revenues.

Section 3.06. Payment Provisions. Each Installment Payment payable hereunder shall

be paid in lawful money of the United States of America to or upon the order of the Trustee, as the Authority’s assignee at the Principal Corporate Trust Office of the Trustee, and each installment of Additional Payments payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at its Principal Office or as indicated by the Authority and to or upon the order of the Trustee at its Principal Corporate Trust Office, or as indicated by the Trustee. Any Installment Payment or Additional Payments

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accruing hereunder which shall not be paid when due shall, to the extent permitted by law, bear interest at a rate equal to the rate of interest (if any) on the respective principal components to which such Installment Payment relates or with respect to Additional Payments at the highest rate on any principal component of the Installment Payment due, plus five percent (5%) per annum from the date when the same is due hereunder until the same shall be paid. All such delinquent Installment Payments and the interest thereon shall be deposited in the Revenue Fund and all such delinquent installments of Additional Payments and interest thereon shall be paid to the order of the Authority and the Trustee, with respect to the amounts owed to each of them by the District. Notwithstanding any dispute between the Authority and the District, the District shall make all installment payments when due hereunder without deduction, abatement, diminution, defense or offset of any kind, for any reason, including, without limitation, any failure of the Equipment or any defects, malfunctions, breakdowns or infirmities or any accident or unforeseen circumstances, and shall not withhold any installment payments pending the final resolution of such dispute. In the event of a determination that the District was not liable for such installment payments or any portion thereof, such payments or excess of payments, as the case may be, shall be credited against subsequent installment payments due hereunder. All Installment Payments received shall be applied first to the interest components, if any, of the Installment Payments due hereunder and then to the principal components of the Installment Payments due hereunder, but no such application of any payments which are less than the total Installment Payments due and owing shall be deemed a waiver of any default hereunder.

Section 3.07. Prepayment. (a) The District shall prepay, from Net Proceeds received pursuant to Section 6.02

and not applied to repair or replace the Equipment, the principal components of Installment Payments then unpaid, in whole or in part on any date, so that the aggregate annual amounts of principal components of Installment Payments which shall be payable after such prepayment date shall be as nearly proportional as practicable to the aggregate annual amounts of principal components of Installment Payments then unpaid, at a prepayment price equal to the sum of the principal components prepaid, without premium, plus any accrued interest thereon to the date of prepayment.

(b) The District shall have the option to prepay, in whole only, on any Interest

Payment Date occurring on or after November 18, 2011, upon having given the Trustee at least thirty (30) days prior notice, the unpaid principal components of the Installment Payments, as set forth in Exhibit D attached hereto, at a prepayment price equal to the principal component prepaid, plus any accrued interest on such principal component to the date of prepayment, plus: (1) a premium equal to 3% of the principal amount prepaid if such prepayment occurs on an Interest Payment Date occurring between November 18, 2011 and May 18, 2015; (2) a premium equal to 2% of the principal amount prepaid if such prepayment occurs on an Interest Payment Date occurring between November 18, 2015 and May 18, 2020; and (3) thereafter, a premium equal to 1% of the principal amount being prepaid. The District shall designate which Installment Payments, and the dates thereof, which it is choosing to prepay. The District agrees that if following such prepayment the Equipment is damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Installment Payments and shall not be entitled to any reimbursement of such Installment Payments.

(c) The District shall prepay the principal components of the Installment Payments

at the expiration of the Expenditure Period, from proceeds of the Bonds remaining on deposit in the Project Fund established under the Indenture at the expiration of the Expenditure Period, such prepayments to be applied to the redemption of the Bonds pursuant to Section 2.03(d) of

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the Indenture. In the event of a partial prepayment, such prepayment shall be applied so that the aggregate amount of the principal components of Installment Payments which shall be payable after such prepayment date shall be as nearly proportional as practicable to the aggregate annual amounts of principal components of the Installment Payments then unpaid.

(d) Before making any prepayment pursuant to this Section, the District shall (and in

the case of the use of Net Proceeds, within thirty (30) days following the receipt of Net Proceeds by the District), give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be made, which date shall be not less than forty-five (45) nor more than seventy-five (75) days from the date such notice is given to the Authority and the Trustee.

Section 3.08. Additional Payments. The District shall pay to the Authority or the

Trustee, as the case may be, as Additional Payments hereunder (i) the annual fee of the Trustee for its ordinary services rendered as trustee and its ordinary expenses incurred under the Indenture, as and when the same become due, (ii) the reasonable fees, charges and expenses (including reasonable legal fees and expenses) of the Trustee, as bond registrar and paying agent, the reasonable fees of any other paying agent on the Bonds as provided in the Indenture, as and when the same become due, (iii) the reasonable fees, charges and expenses of the Trustee for the necessary extraordinary services rendered by it and extraordinary expenses (including, but not limited to reasonable attorneys’ fees and expenses) incurred by it under the Indenture, as and when the same become due, (iv) the cost of printing any Bonds required to be furnished by the Authority at the expense of the Authority, (v) the Authority’s Administrative Fee (as described in the Tax Certificate) either at the date of delivery or from time to time, thereafter, as set forth in the Tax Certificate, and (vi) the Authority’s Administrative Fees and Expenses. The Trustee’s compensation shall not be limited by any provision of law regarding the compensation of a Trustee of an express trust.

Such Additional Payments shall be billed to the District by the Authority or the Trustee,

as the case may be, from time to time, together with a statement certifying that the amount so billed constitutes one or more of the items above described, or that such amount is then payable, and all amounts so billed shall be due and payable by the District to or upon the order of the Authority or the Trustee, as the case may be, within forty-five (45) days after receipt of the bill by the District.

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ARTICLE IV USE OF FUNDS; ACQUISITION AND INSTALLATION OF THE PROJECT

Section 4.01. Use of Proceeds. The parties hereto agree that the net proceeds of the

Bonds in the amount of: (i) $144,540.00 shall be deposited in the Costs of Issuance Fund, and applied to pay Costs of Issuance, and (ii) $7,082,460.00 shall be deposited in accordance with the Indenture to the Project Fund, and applied to acquire and install the Project pursuant hereto and the Indenture. In addition, the District agrees to deposit $33,460 into the Costs of Issuance Fund, resulting in a total deposit to the Costs of Issuance Fund of $178,000.

Section 4.02. Tax Covenants. (i) District Covenants. At all times during the Term of this Installment Sale Agreement,

the District will comply with the following covenants as required to ensure that the Bonds constitute “qualified energy conservation bonds” under and as defined in Sections 54A and 54D(a) of the Code (and all references herein to the “Bonds” shall include the Installment Sale Agreement and proceeds thereof):

(a) Qualified Conservation Purpose. The District will assure that all of the Available

Project Proceeds will be used for a Qualified Conservation Purpose or Purposes in accordance with section 54D(f) of the Code.

(b) Three Year Expenditure of Proceeds. The District reasonably expects to expend

100% of the Available Project Proceeds of the Bonds on a Qualified Energy Conservation Project within the Expenditure Period. To the extent that less than 100% of the Available Project Proceeds of the Bonds are expended for a Qualified Energy Conservation Project by the end of the Expenditure Period, the portion of the Bonds determined to be a “nonqualified bond” (as determined under Section 142 of the Code) will be prepaid within 90 days of the end of the Expenditure Period, all in accordance with the requirements of Section 54A(d)(2) of the Code, in the time and manner prescribed by the Code, Section 3.07(d) hereof, and Section 3.03 and Section 2.03(d) of the Indenture.

(c) Arbitrage and Rebate Compliance. The District shall not take, or permit or suffer

to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be “arbitrage bonds” within the meaning of section 148 of the Code as modified by Section 54A(d)(4) of the Code, including the Treasury Regulations with respect thereto. The Issuer shall take any and all actions necessary to assure compliance with Section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds. For purposes of this paragraph, investments of Available Project Proceeds during the Expenditure Period are deemed to comply with the requirements and limitations of Section 148 of the Code.

(d) Limitation on Private Activity Bonds. At least 70 percent (70%) of the proceeds of

the Bonds will be used in a manner that does not satisfy the private business tests of Section 141(b) of the Code or the private loan financing test of the Section 141(c) of the Code. For this purpose, bonds issued for the purpose of providing loans, grants, or other repayment mechanisms for capital expenditures to

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implement green community programs shall not be treated as private activity bonds.

(e) Binding Commitment to Spend Available Project Proceeds. The District

reasonably expects that, within 6 months of the Closing Date, it will enter into a binding commitment with a third party to spend at least ten percent (10%) of the Available Project Proceeds of the Bonds for a Qualified Conservation Purpose.

(f) Limitation on Issuance Costs. No proceeds of the Bonds and investment earnings

thereon, in an amount in excess of two percent (2%) of the proceeds of the sale of the Bonds, will be used to pay costs of issuing the Bonds. If the fees of the Assignee are retained as a discount on the purchase of the Bonds, such retention will be deemed to be an expenditure of proceeds of the Bonds for said fees.

(g) Limitation on Reserve Funds. No fund the proceeds of which are pledged to, or

are reasonably expected to be used directly or indirectly to pay, principal or interest on the Bonds or are reserved or otherwise set aside such that there is a reasonable assurance that such amounts will be available to pay principal or interest on the Bonds will be funded with respect to the Bonds except as follows: (i) the fund is funded at a rate not more rapid than equal annual installments, (ii) such fund is funded in a manner reasonably expected to result in an amount not greater than an amount necessary to repay the issue, and (iii) the yield on the fund is not greater than the rate determined under 54A(d)(5)(B) of the Code.

(h) Acquisition, Disposition and Valuation of Investments. Except as otherwise

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

(i) Prohibition on Financial Conflicts of Interest. The District hereby covenants and

agrees to comply with all State and local law requirements governing conflicts of interest as such requirements may relate, directly or indirectly, to this Installment Sale Agreement. The District hereby covenants and agrees to comply with any conflict of interest rules prescribed by the IRS or United States Department of Treasury governing the appropriate Member of Congress, Federal, State, and local officials, and their spouses as such rules may apply to this Installment Sale Agreement or the Bonds.

(j) Davis-Bacon Act Requirements. The District hereby covenants and agrees to

comply with the wage rate requirements of Title 40, Subtitle II, Part A, Chapter 31, Subchapter IV of the United States Code as such requirements relate to the proceeds of the Bonds.

(ii) Authority Representations and Covenants. (a) Designation of Bonds. The Authority has designated the Bonds for purposes of

Section 54D(a)(3) of the Code as Qualified Energy Conservation Bonds.

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(b) Election to Receive Refundable Credits. The Authority has irrevocably elected to treat the Bonds as “Specified Tax Credit Bonds” within the meaning of Section 6431(f) of the Code such that the Authority or the Trustee will be eligible to receive direct payment by the federal government of the Federal Subsidy Payments that are equal to the lesser of (1) the amount of interest which would be payable if the interest on the Bonds were determined at 70% of the tax credit rate applicable to the Bonds or (2) 100% of the interest rate on the Bonds.

Section 4.03. Agreement To Acquire and Install the Project; Modifications of the Project.

The District agrees that it will acquire and install the Project, and will, in accordance with the description of the Project prepared by the District and approved by the Authority, including any and all supplements, amendments and additions or deletions thereto or therefrom. The District further agrees to proceed with due diligence to complete the Project and expend the proceeds of the Bonds deposited in the Project Fund by the end of the Expenditure Period.

Section 4.04. Disbursements From the Project Fund; Disbursements From the Costs of

Issuance Fund. (a) Prior to any payment being made from the Project Fund (including any account

established therein), there shall be filed by the District with the Trustee and the Purchaser (with a copy to the Authority) a sequentially numbered Qualified Energy Conservation Bond Disbursement Request/Certificate (in the form attached to the Indenture as Exhibit E) that shall be approved by the Purchaser (which approval shall not be unreasonably withheld so long as such request conforms to the Installment Sale Agreement). Accompanying such disbursement request shall be an Additional Equipment Certificate of the District in the form attached hereto as Exhibit C. Such disbursement request shall specify with respect to each payment made and the Equipment in connection therewith:

(1) the request number; (2) the name and address of the Person to whom payment was made; (3) the purpose for which such payment was made; (4) the amount paid; (5) that each obligation mentioned therein was properly incurred and was a

proper charge against the Project Fund; (6) that none of the items for which payment was made has been previously

reimbursed from the Project Fund; (7) that each item for which payment was made was necessary in connection

with the acquisition and installation of the Project; (8) that the amount requisitioned, together with all amounts requisitioned to

date, have in the aggregate been used to pay for expenditures properly allocable to Costs of the Project pursuant to the Tax Certificate (excluding Costs of Issuance); and

(9) that an invoice evidencing each item paid is attached thereto.

Each such Certificate of the District shall be sufficient evidence of the facts stated therein

and the Trustee and the Purchaser shall have no duty to confirm the accuracy of such facts. The

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Trustee and the Authority may at any time request copies of accounting records from the District reflecting investment and disbursement of funds in the accounts under its control or those on behalf of the District which are under the control of the Controller of the State.

(b) The District will authorize and direct the Trustee, upon compliance with Section

3.04 of the Indenture, to disburse the moneys in the Costs of Issuance Fund only for Costs of Issuance. Each of the payments referred to in this Section 4.04(b) shall be made upon receipt by the Trustee of a written requisition in the form prescribed by Section 3.04 of the Indenture, signed by an Authorized Representative of the District.

Section 4.05. Establishment of Completion Date; Obligation of District to Complete. (a) Upon the final disbursement from the Project Fund, an Authorized

Representative of the District, on behalf of the District, shall evidence the Completion Date by providing a Final Project Completion Certificate, substantially in the form attached hereto as Exhibit E, which shall be provided to the Trustee and the Authority.

At the time such certificate is delivered to the Trustee, moneys remaining in the Project

Fund (other than moneys relating to provisional payments permitted by Section 4.04), including any earnings resulting from the investment of such moneys, shall be used as provided in subsection (b) below.

In the event the moneys in the Project Fund available for payment of the Costs of the

Project should be insufficient to pay the costs thereof in full, the District agrees to pay directly, or to deposit in the Project Fund, moneys sufficient to pay, any costs of completing the Project in excess of the moneys available for such purpose in such Project Fund. The Authority makes no express or implied warranty that the moneys deposited in the Project Fund and available for payment of the Costs of the Project, under the provisions of this Installment Sale Agreement, will be sufficient to pay all the amounts which may be incurred for such Costs of the Project. The District agrees that if, after exhaustion of the moneys in the Project Fund, the District should pay, or deposit moneys in the Project Fund for the payment of, any portion of the Costs of the Project pursuant to the provisions of this Section, it shall not be entitled to any reimbursement therefor from the Authority, the Trustee, the Purchaser or the Holders of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable under Section 3.04 hereof.

(b) Upon the receipt by the Trustee of a certificate conforming with the requirements

of subsection (a) above, and after payment of costs payable from the Project Fund or provision having been made for payment of such costs not yet due by retaining such costs in the Project Fund or otherwise as directed in such certificate, the District shall transfer any remaining balance in the Project Fund to the Trustee for deposit into the Surplus Account.

In the event of redemption of all of the Bonds pursuant to Section 3.07 hereof or an

Event of Default which causes acceleration of the Bonds, any moneys then remaining in the account within the Project Fund relating to such Bonds shall be transferred by the District to the Trustee for deposit into the Surplus Account and such moneys shall be applied in accordance with the Indenture.

Section 4.06. Investment of Moneys in Funds. Any moneys in any fund or account held

by the Trustee shall, at the written request of an Authorized Representative of the Authority or the District, be invested or reinvested by the Trustee as provided in the Indenture. Such investments shall be held by the Trustee and shall be deemed at all times a part of the fund or

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account from which such investments were made, and the interest accruing thereon, and any profit or loss realized therefrom, shall be credited or charged to such fund or account.

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ARTICLE V EQUIPMENT MAINTENANCE AND CHANGES

Section 5.01. Maintenance and Utilities. During the term hereof, all maintenance, both

ordinary and extraordinary, of the Equipment shall be the sole responsibility of the District, which shall at all times maintain or otherwise arrange for the maintenance of the Equipment for the purposes intended, and the District shall pay for or otherwise arrange for the payment of all utility services supplied to the Equipment. The District hereby agrees to operate, maintain and preserve, or cause to be operated, maintained and preserved, the Equipment in good repair and working order and will operate, or cause the Equipment to be operated, in an efficient and economical manner, all in a manner no less than that recommended by the manufacturer of the Equipment. The District covenants to improve the Equipment to the extent necessary to comply with building or safety codes governing the Equipment. The District shall procure all permits and licenses, if any, necessary for the installation and operation of the Equipment.

Section 5.02. Changes to the Equipment. The District shall, at its sole cost, have the right

during the term hereof to make improvements to the Equipment or to attach any fixtures, structures or signs to the Equipment if such improvements, fixtures, structures or signs are necessary or beneficial for the use of the Equipment by the District for public purposes; provided, that such actions by the District shall not materially adversely affect the operation of the Equipment for the purpose intended or any applicable warranty or affect the qualification of the Project as a Qualified Energy Conservation purpose under Section 54D of the Code.

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ARTICLE VI INSURANCE; RISK OF LOSS

Section 6.01. Insurance. The District shall at all times maintain with responsible

insurers (which may include joint powers authorities or other programs providing pooled insurance) all such insurance on the Sewer System, including the Project, as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to such works or properties. If any useful part of the Sewer System shall be damaged or destroyed, such part shall be restored to use. All amounts collected from insurance against accident to or destruction of any portion of the Sewer System, including the Project, shall be applied as provided in Section 6.02. The District shall also maintain with responsible insurers worker’s compensation insurance and insurance against public liability and property damage to the extent reasonably necessary to protect the District. The Trustee shall be named as loss payee on such insurance. The District shall furnish to the Trustee evidence of any such insurance upon Trustee’s request although the Trustee is not obligated hereby to monitor the District’s obligation to maintain insurance hereunder. The District shall not cancel or modify such insurance without providing the Trustee at least 30 days’ written notice in advance.

Section 6.02. Risk of Loss. All risk of loss, damage, theft or destruction to each item of

Equipment shall be borne by the District. No such loss, damage, theft or destruction of the Equipment, in whole or in part, shall impair the obligations of the District hereunder (including, but not limited to, the obligation to pay Installment Payments when due), all of which shall continue in full force, and effect subject to the terms of this Installment Sale Agreement. If (a) the Equipment or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty, or (b) title to, or the temporary use of, the Equipment or any part thereof is taken under the exercise of the power of eminent domain, the District shall immediately notify the Authority. The District shall cause the Net Proceeds of any insurance claim or condemnation award to be applied, at the District's option, so long as the District is not in default, to either (i) the prompt repair, restoration, modification or replacement of the Equipment or (ii) to redeem the Outstanding Bonds, to the extent possible and in accordance with Section 3.07(a) herein and Section 2.03(a) of the Indenture, but only if the Installment Payments due after such redemption would be sufficient to retire the Bonds then outstanding in accordance with their terms. Any balance of Net Proceeds remaining after completion of such work or payment of such prepayment amount shall be paid promptly to the District. If the Net Proceeds are insufficient to pay the costs of such repair, restoration, modification or replacement , the District shall use other funds of the District to complete the work.

Section 6.03. Surety Bonds; District to Pursue Remedies Against Contractors and Sub-

Contractors and Their Sureties. The District shall secure from each Vendor directly employed by the District in connection with the acquisition, construction, installation, improvement or equipping of the Equipment, a payment and performance bond (“Surety Bond”) executed by a surety company rated “A” or better by A.M. Best and authorized to do business in the State, satisfactory to the initial purchaser of the Bonds and naming the Trustee as a co-obligee in a sum equal to the entire amount to become payable under each Vendor Agreement. Each bond shall be conditioned on the completion of the work in accordance with the plans and specifications for the Equipment and upon payment of all claims of subcontractors and suppliers. The District shall cause the surety company to add the Trustee as a co-obligee on each Surety Bond, and shall deliver a certified copy of each Surety Bond to the Trustee promptly upon receipt thereof by the District, although the Trustee is not obligated hereby to monitor the District’s compliance with this Section 6.03. Any proceeds from a Surety Bond shall be applied first to amounts due the Authority under this Installment Sale Agreement, and any remaining amounts shall be payable to the District.

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In the event of a material default of any Vendor under any Vendor Agreement in

connection with the acquisition, construction, maintenance and/or servicing of the Equipment or in the event of a material breach of warranty with respect to any material workmanship or performance guaranty with respect to the Equipment, the District will promptly proceed to exhaust its remedies against the Vendor in default. The District shall advise Authority and the Purchaser of the steps it intends to take in connection with any such default. Any amounts received by the District in respect of damages, refunds, adjustments or otherwise in connection with the foregoing shall be paid to the Authority and applied against the District's obligations hereunder.

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ARTICLE VII DEFAULTS AND REMEDIES

Section 7.01. Breach and Remedies. (a) If (i) default shall be made by the District in the payment of Installment

Payments or Additional Payments hereunder when the same is due and payable and required to be deposited with the Trustee, time being expressly declared to be of the essence, or (ii) the District shall fail to maintain insurance as required herein, or (iii) the District shall fail in the observance or performance of any other agreement, condition, covenant or term contained herein required to be observed or performed by it for a period of thirty (30) days after notice of the same has been given to the District by the Authority or the Trustee or for such additional time as is reasonably required, in the sole discretion of the Trustee to correct the same, or (iv) upon the happening of any of the events specified in subsection (b) of this section, or any default occurs under any other agreement for borrowing money, lease financing of property or otherwise receiving credit under which the District is an obligor, if such default consists of (1) the failure to pay any indebtedness when due or (2) the failure to perform any other obligation thereunder and gives the holder of the indebtedness the right to accelerate the indebtedness, or (v) any statement, representation or warranty made by the District in or pursuant to this Installment Sale Agreement or its execution, delivery or performance shall prove to have been false, incorrect, misleading, or breached in any material respect as of the date of execution of this Installment Sale Agreement (in each case an “Event of Default”), then it shall be lawful for the Authority to exercise any and all remedies available or granted to it pursuant to law or hereunder.

Immediately upon the occurrence of an Event of Default, any one or any combination of

the following remedial steps may be taken:

(1) Authority may declare the principal components of all Installment Payments due hereunder to be immediately due and payable, whereupon the same shall become immediately due and payable, in such amount as shall be sufficient to pay all principal and accrued interest due and payable on the Bonds pursuant to Article VIII of the Indenture;

(2) Authority may exercise any option and pursue any remedy which may be exercised and pursued by the Trustee under the Indenture.

(3) Authority may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due or to become due or to enforce any of its rights hereunder. The Authority shall also be entitled to exercise any or all rights and remedies that the

Authority may have at law or in equity, including the exercise of any rights and remedies to which the Authority is entitled with respect to the Project Fund and hereunder.

No right or remedy herein conferred upon or reserved to the Authority is exclusive of

any right or remedy herein or at law or in equity or otherwise provided or permitted, but each shall be cumulative of every other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise, and may be enforced concurrently therewith or from time to time.

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No waiver of or delay or omission in the exercise of any right or remedy herein provided or otherwise available to the Authority shall impair, affect or be construed as a waiver of its rights thereafter to exercise the same. Any single or partial exercise by the Authority of any right hereunder shall not preclude any other or further exercise of any right hereunder.

(b) In addition to any default resulting from breach by the District of any agreement,

condition, covenant or term hereof, if (1) the District’s interest herein or any part thereof be assigned, sublet or transferred without the written consent of the Authority, either voluntarily or by operation of law; or (2) the District or any assignee shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the District asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the District shall make a general or any assignment for the benefit of its creditors, or if an order, judgment or decree shall be entered by any court of competent jurisdiction, approving a petition or appointing a receiver, trustee, custodian or liquidator of the District or of all or a substantial part of the assets of the District, in each case without its application, approval or consent, and such order, judgment or decree shall continue unstayed and in effect for any period of 30 consecutive days; or (3) the District shall abandon or vacate the Equipment or any part thereof; then in each and every such case the District shall be deemed to be in default hereunder.

(c) Except for obligations under Section 7.01(a)(i) and (ii)), the District shall in no

event be in default in the performance of any of its obligations hereunder unless and until it shall have failed to perform such obligation within thirty (30) days or such additional time as is reasonably required to correct any such default after notice by the District to it properly specifying wherein it has failed to perform such obligation.

(d) In addition to the remedies set forth in this section, upon the occurrence of an

Event of Default as defined herein, the Authority shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Installment Sale Agreement by such appropriate judicial proceeding as the Authority shall deem most effectual, either by suit in equity or by action at law, whether for the specific performance of any covenant or agreement contained herein or to enforce any other legal or equitable right vested in the Authority by this Installment Sale Agreement or by law. The provisions of this Installment Sale Agreement and the duties of the District and of its supervisors, officers or employees shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority shall have the right to bring the following actions:

(1) Accounting. By action or suit in equity to require the District and its

supervisors, officers and employees and its assigns to account as the trustee of an express trust.

(2) Injunction. By action or suit in equity to enjoin any acts or things which

may be unlawful or in violation of the rights of the Authority. (3) Mandamus. By mandamus or other suit, action or proceeding at law or

in equity to enforce the Authority’s rights against the District (and its officers and employees) and to compel the District to perform and carry out its duties and

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obligations under the law and its covenants and agreements with the Authority as provided herein. (e) Upon the occurrence of an Event of Default, the Trustee shall have the remedies

of a secured party under the UCC including, without limitation, the right to take immediate and exclusive possession of the Equipment, or the proceeds thereof, or any part thereof, and for that purpose may enter upon any place where the Equipment, or the proceeds thereof, or any part thereof may be situated and remove the same therefrom, and the Trustee shall be entitled to hold, maintain, preserve and prepare the Equipment, and the proceeds thereof, for sale until disposed of, or may retain such property subject to the right of redemption of the District, if any, in satisfaction of the obligations of the District, all as provided in the UCC; provided, however, that if the Purchaser is the sole Holder of the Bonds, the Trustee shall not pursue any such remedy or take any such action without the prior written consent of the Purchaser.

Section 7.02. Waiver. The waiver by the Authority or the Trustee of any breach by the

District of any agreement, condition, covenant or term hereof shall not operate as a waiver of any subsequent breach of the same or any other agreement, condition, covenant or term hereof. Any such waiver shall be in writing and delivered to each of the Authority, the District and the Trustee.

Section 7.03. Agreement to Pay Attorneys’ Fees and Expenses. In the event the District

should default under any of the provisions of this Installment Sale Agreement and the Authority or the Trustee should employ attorneys or incur other expenses for the collection of the payments due under this Installment Sale Agreement or the enforcement of performance or observance of any obligation or agreement on the part of the District herein contained (other than litigation of disputes between the parties hereto), the District agrees to pay and indemnify the Authority or the Trustee for the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Authority or the Trustee or such attorneys.

Section 7.04. No Prevailing Party Costs. Nothing in this Installment Sale Agreement

shall be construed to provide for award of attorneys’ fees and costs to the Authority or the District for the enforcement of this Installment Sale Agreement as described in Section 1717 of the Civil Code. Nothing in this Section affects the rights of the Trustee provided herein or in the Indenture.

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ARTICLE VIII COVENANTS

Section 8.01. Right of Entry and Inspection. The Authority, its members, officers and

agents shall have the right to enter the Equipment during reasonable business hours (and in emergencies at all times) for any purpose connected with the Authority’s rights or obligations hereunder and for all other lawful purposes.

Section 8.02. Prohibition Against Encumbrance or Sale of Equipment. Except as

permitted under this Agreement and the Indenture, the District shall not create, incur, assume or permit to exist any mortgage, pledge, lien, security interest, charge or other encumbrance of any nature whatsoever on the Equipment or any part thereof, any of the real estate or improvements thereon where the Equipment is or will be located, or sell, otherwise dispose of or enter into any agreement to sell or assign or enter into any sale/leaseback arrangement of such Equipment, real estate or improvements without the prior written consent of the Trustee or all Bondholders; provided, that if the Trustee or all Bondholders are furnished with a waiver of interest in the Equipment acceptable to the Trustee or all Bondholders in their respective discretion from any party taking an interest in any such real estate prior to such interest taking effect, such consent shall not be unreasonably withheld. In addition, except as permitted under this Agreement and the Indenture, the Authority shall not create, incur or assume any mortgage, pledge, lien, security interest, charge or other encumbrance of any nature whatsoever on the Equipment or any part thereof.

Section 8.03. Liens. In the event the District shall at any time during the term hereof

cause any improvements to the Equipment to be constructed or materials to be supplied in or upon or attached to the Equipment, the District shall pay or cause to be paid when due all sums of money that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the District in, upon, about or relating to the Equipment and shall keep the Equipment free of any and all liens against any portion of the Equipment or the Authority’s interest therein except as expressly permitted herein. In the event any such lien attaches to or is filed against any portion of the Equipment or the Authority’s interest therein, the District shall cause each such lien or attempted or purported lien that a third party files against the Equipment to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the District desires to contest any such lien it may do so. If any such lien shall be reduced to final judgment and such judgment or any process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the District shall forthwith pay or cause to be paid and discharged such judgment. The District shall own and maintain all real property and improvements thereto upon which any portion of the Project is located free and clear of all liens the remedies with respect to which would include the foreclosure of such property or other divestiture of the District’s fee title interest in such property.

Section 8.04. Quiet Enjoyment. The parties hereto mutually covenant that the District,

so long as it observes and performs the agreements, conditions, covenants and terms required to be observed or performed by it contained herein and is not in default hereunder, shall at all times during the term hereof peaceably and quietly have, hold and enjoy the Equipment, without suit, trouble or hindrance from the Authority.

Section 8.05. Net Contract. It is the purpose and intent of the Authority and the District

that Installment Payments hereunder shall be absolutely net to the Authority so that this Installment Sale Agreement is a “net-net-net obligation” and shall yield to the Authority the

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Installment Payments and Additional Payments, free of any charges, assessments, or impositions of any kind charged, assessed or imposed on or against the Equipment, and without counterclaim, deduction, defense, deferment or set-off by the District, except as herein specifically otherwise provided. The Authority shall not be expected or required to pay any such charge, assessment or imposition, or be under any obligation or liability hereunder except as herein expressly set forth, and all costs, expenses and obligations of any kind relating to the maintenance and operation of the Equipment which may arise or become due during the term of this Installment Sale Agreement shall be paid by the District.

Section 8.06. Compliance with Installment Sale Agreement. The District and the

Authority hereby agree faithfully to observe and perform their respective covenants, conditions and requirements herein. The District shall not suffer or permit any default to occur hereunder, nor do or permit to be done in, upon or about the Equipment or any part thereof, anything that might in any way impair the obligation of the District to make installment payments hereunder. The District shall not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of this Installment Sale Agreement.

Section 8.07. Federal Subsidy Payments. The District has directed the Trustee, pursuant

to the terms of the Calculation Agency Agreement, to file Form 8038-CP or any successor form designated by the federal government, requesting payment of the Federal Subsidy Payments with respect to the interest component of the next Installment Payment within the 45-day period beginning on the date that is 90 days before the next Interest Payment Date. The District shall not terminate the Calculation Agency Agreement during the Term hereof, unless it shall have entered into a substantially identical agreement governing the filing of the necessary forms required to assure timely payment of the Federal Subsidy Payments on each Interest Payment Date.

Section 8.08. Additional Covenants of the District. (a) During the Term of this Agreement, the Equipment will be used by the District

only for the purpose of performing essential governmental or proprietary functions of the District consistent with the permissible scope of the District's authority. The District does not intend to sell or otherwise dispose of the Equipment or any interest therein prior to the expiration of this Agreement.

(b) The District has kept, and throughout the Term of this Agreement shall keep, its

books and records in accordance with generally accepted accounting principles and practices consistently applied, and shall deliver to the Purchaser (i) annual audited financial statements (including (1) a balance sheet, (2) statement of revenues, expenses and changes in fund balances for budget and actual, (3) statement of cash flows, (4) footnotes, schedules and attachments to the financial statements) and (5) separate audited statements of revenues and expenses for each of the Water System and the Sewer System within 210 days of its fiscal year end, (ii) such other financial statements and information as the Purchaser may reasonably request, and (iii) its annual budget for the following fiscal year when approved but not later than thirty (30) days prior to its current fiscal year end. The financial statements described in subsection (i) shall be accompanied by an unqualified opinion of the District's auditor and shall include a schedule detailing the operating revenues and the operating and nonoperating expenses of the District's various enterprises, including the Sewer System, the Water System and the Recycled Water Systems in the format currently included in the District's audited financial statements and labeled as “Schedule of Revenues and Expenses – Operating Department[,] for the Year Ended

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June 30, 2009.” Credit information relating to the District may be disseminated among the Purchaser and any of its affiliates and any of their respective successors and assigns.

(c) The District shall additionally deliver to the Purchaser, simultaneously with the

delivery of the financial statements referred to in subsection (b) above, a certificate, in the form attached hereto as Exhibit F, signed by the General Manager of the District, stating that the District is in compliance with Section 3.04 hereof.

(d) The District has an immediate need for the Equipment and expects to make

immediate use of the Equipment. The District's need for the Equipment is not temporary and the District does not expect the need for any item of the Equipment to diminish during the Term of this Agreement.

(e) The District shall prepay or defease the Outstanding Parity Debt within 120 days

after the Commencement Date. (f) The District shall continue to account for each of the Water System and the

Sewer System separately and in accordance with generally accepted accounting principles and practices.

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ARTICLE IX

[RESERVED]

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ARTICLE X MISCELLANEOUS

Section 10.01. Authority Not Liable. The Authority shall not be liable to the District or

to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on, about or relating to the Equipment.

The Authority shall not be obligated to pay the principal of, or premium, if any, or

interest, if any, on the Bonds, except from Revenues. The District hereby acknowledges that the Authority’s sole source of moneys to repay the Bonds will be provided by the payments made by the District pursuant to this Installment Sale Agreement, together with other Revenues, including investment income on certain funds and accounts held by the Trustee under the Indenture, and hereby agrees that if the payments to be made hereunder shall ever prove insufficient to pay all principal of, and premium, if any, and interest, if any, on the Bonds as the same shall become due (whether by maturity, redemption, acceleration or otherwise), then upon notice from the Trustee, the District shall pay such amounts as are required from time to time to prevent any deficiency or default in the payment of such principal, premium or interest, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or malfeasance on the part of the Trustee, the District, the Authority or any third party.

Section 10.02. Disclaimer of Warranties. THE AUTHORITY MAKES NO AGREEMENT,

WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR FITNESS FOR USE OF THE EQUIPMENT, OR WARRANTY WITH RESPECT THERETO. THE DISTRICT ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF THE EQUIPMENT OR A DEALER THEREIN, THAT THE DISTRICT PURCHASES THE EQUIPMENT AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE DISTRICT. In no event shall the Authority and Trustee be liable for any incidental, indirect, special or consequential damage in connection with or arising out of this Installment Sale Agreement or the existence, furnishing, functioning or the District’s use of any item or products or services provided for in this Installment Sale Agreement.

Section 10.03. Indemnification and Expenses. The District releases the Authority and

the Trustee from, and covenants and agrees that neither the Authority nor the Trustee shall be liable for, and covenants and agrees, to the extent permitted by law, to indemnify and hold harmless the Authority and the Trustee and their members, officers, employees and agents from and against, any and all losses, claims, damages, liabilities or expenses (including, without limitation, reasonable attorneys’ fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments), of every conceivable kind, character and nature whatsoever (including, without limitation, federal and state securities laws) arising out of, resulting from or in any way connected with (1) the Project, or the conditions, occupancy, use, possession, conduct or management of, or work done in or about the Project or the other facilities of the District or its affiliates, or from the planning, design, acquisition, construction, rehabilitation, renovation, improvement, installation or equipping of the Project or any part thereof; (2) the issuance, sale or resale of any Bonds or any certifications or representations made in connection therewith, the execution and delivery of this Installment Sale Agreement, the Indenture or the Tax Certificate or any amendment thereto and the carrying out of any of the transactions contemplated by the Bonds, the Indenture and this Installment Sale Agreement; (3) the Trustee’s acceptance or administration of the trusts or provisions under the Indenture, or the exercise or performance of any of their powers or duties under the Indenture or this Installment Sale Agreement; (4) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact required to be stated or

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necessary to make the statements made, in light of the circumstances under which they were made, not misleading, in any official statement or other offering circular utilized by the Authority or any underwriter or placement agent in connection with the sale or remarketing of any Bonds or in any disclosure made by District to comply with the requirements of S.E.C. Rule 15c2-12; (5) any violation of any Environmental Regulations or the release of any Hazardous Substance from, on or near the Project or any other facilities of the District or its affiliates; (6) the defeasance and/or redemption, in whole or in part, of the Bonds; or (7) any declaration that the Bonds have lost their status, or failed to qualify as QECBs, or allegations that the Bonds have lost their status, or failed to qualify as QECBs or any regulatory audit or inquiry regarding whether the Bonds qualify as QECBs; provided that with respect to indemnification of the Authority and its members, officers, employees and agents, such indemnity shall not be required for damages that result from the gross negligence or willful misconduct on the part of the party seeking such indemnity and with respect to any other indemnified party, such indemnity shall not be required for damages that result from the negligence or willful misconduct on the part of the party seeking such indemnity. The District further covenants and agrees, to the extent permitted by law, to pay or to reimburse the Authority and the Trustee and their members, officers, employees and agents for any and all costs, reasonable attorneys fees and expenses, liabilities or other expenses incurred in connection with investigating, defending against or otherwise in connection with any such losses, claims, damages, liabilities, expenses or actions, except to the extent that the same arise out of the gross negligence or willful misconduct of the Authority and its members, officers, employees and agents claiming such payment or reimbursement or out of the negligence or willful misconduct of the Trustee and their members, officers, employees and agents claiming such payment or reimbursement. The provisions of this Section and Section 3.08 shall survive any resignation or removal of the Trustee, the retirement of the Bonds and the termination of this Installment Sale Agreement.

The District covenants and agrees to pay and to indemnify the Authority and the

Trustee against all costs and charges, including reasonable fees and disbursements of attorneys, accountants, consultants and other experts, incurred in good faith in connection with this Installment Sale Agreement, the Bonds or the Indenture; provided, without limiting any indemnity provided hereunder, nothing in this Installment Sale Agreement shall be construed to require, in any action on this Installment Sale Agreement or that attorney’s fees and costs which are incurred to enforce this Installment Sale Agreement, be awarded to any party to this Installment Sale Agreement.

Section 10.04. No Merger. The parties hereto intend that there shall be no merger of any

estate or interest created by this Installment Sale Agreement with any other estate or interest in the Equipment, or any part thereof, by reason of the fact that the same party may acquire or hold all or any part of the estate or interest in the Equipment created by this Installment Sale Agreement as well as another estate or interest in the Equipment.

Section 10.05. Law Governing; Venue. This Installment Sale Agreement shall be

construed in accordance with and governed by the Constitution and laws of the State applicable to contracts made and performed in the State. This Installment Sale Agreement shall be enforceable in the State, and any action arising out of this Installment Sale Agreement shall be filed and maintained in the Sacramento County Superior Court, Sacramento, California, unless the Authority waives this requirement.

Section 10.06. Notices. All approvals, authorizations, consents, demands, designations, notices, offers, requests, statements or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States of America registered or certified mail, return receipt requested, postage prepaid, addressed to the Authority, the District or the Trustee, as

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the case may be, as follows, and such communications shall also be deemed sufficiently given to the Trustee if sent by facsimile with confirmed receipt:

To the Authority: California Alternative Energy and Advanced

Transportation Financing Authority 915 Capitol Mall, Room 457 Sacramento, CA 95814 Attn: Executive Director To the District: Fallbrook Public Utility District 990 East Mission Road Fallbrook,CA 92088-2290 Attn: General Manager To the Trustee: Deutsche Bank National Trust Company 101 California Street, 46th Floor San Francisco, CA 94111 Attn: Corporate Trust Section 10.07. Validity and Severability. If for any reason this Installment Sale

Agreement or any part thereof shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the District, all of the remaining terms hereof shall nonetheless continue in full force and effect.

Section 10.08. Section Headings. All section headings contained herein are for

convenience of reference only and are not intended to define or limit the scope of any provision hereof.

Section 10.09. Execution. This Installment Sale Agreement may be executed and entered

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

Section 10.10. Survival of Fee Obligation. The right of the Authority and the Trustee to

receive any fees or be reimbursed for any expenses incurred pursuant to this Installment Sale Agreement, and the right of the Authority and the Trustee to be protected from any liability as provided in this Installment Sale Agreement, shall survive the retirement of the Bonds and the termination of this Installment Sale Agreement.

Section 10.11. Liability of Authority Limited to Revenues. Notwithstanding anything in

this Installment Sale Agreement or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under the Indenture for any of the purposes in the Indenture mentioned, whether for the payment of the principal of or any interest on the Bonds or for any other purpose of the Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF OR ANY LOCAL AGENCY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST, IF ANY, ON THE BONDS. The Authority shall not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reason of or in connection with this Installment Sale Agreement, the Bonds or the Indenture, except only to the extent amounts are received for the payment thereof from the District under

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this Installment Sale Agreement; provided the District shall not be required to pay the fees and expenses of the Authority’s counsel incurred in connection with the issuance of the Bonds.

The District hereby acknowledges that the Authority’s sole source of moneys to repay

the Bonds will be provided by the payments made by the District to the Trustee pursuant to this Installment Sale Agreement, together with investment income on certain funds and accounts held by the Trustee under the Indenture, and hereby agrees that if the payments to be made hereunder shall ever prove insufficient to pay all principal (or redemption price) and interest on the Bonds as the same shall become due (whether by maturity, redemption, acceleration or otherwise), then upon notice from the Trustee, the District shall pay such amounts as are required from time to time to prevent any deficiency or default in the payment of such principal (or redemption price) or interest, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or malfeasance on the part of the Trustee, the District, the Authority or any third party, subject to any right of reimbursement from the Trustee, the Authority or any such third party, as the case may be, therefor.

Section 10.12. Waiver of Personal Liability. No member, officer, agent or employee of

the Authority or any director, officer, agent or employee of the District shall be individually or personally liable for the payment of any principal (or redemption price) or interest on the Bonds or any sum hereunder or under the Indenture be subject to any personal liability or accountability by reason of the execution and delivery of this Installment Sale Agreement; but nothing herein contained shall relieve any such member, director, officer, agent or employee from the performance of any official duty provided by law or by this Installment Sale Agreement.

Section 10.13. Binding Effect. This Installment Sale Agreement shall inure to the benefit

of and shall be binding upon the Authority, the District and their respective successors and assigns.

ARTICLE XI ASSIGNMENT

Section 11.01. Assignment. This Installment Sale Agreement (except for Retained Rights has been assigned on the date hereof to the Trustee pursuant to the Indenture and the District consents to such assignment.

IN WITNESS WHEREOF, the parties hereto have executed and entered into this Installment Sale Agreement by their officers thereunto duly authorized as of the day and year first above written.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

By Bill Lockyer, Chairman

Deputy Treasurer

By: _C~k--=-=+-& b~·· SJL--=------..Lov.:::.....__ Executive Director

FALLBROOK PUBLIC UTILITY DISTRICT

By: ______ ~--~--------------General Manager

[Signature page to Installment Sale Agreement, dated as of November 1, 2010]

ARTICLE XI ASSIGNMENT

Section 11.01. Assignment. This Installment Sale Agreement (except for Retained Rights has been assigned on the date hereof to the Trustee pursuant to the Indenture and the District consents to such assignment.

IN WITNESS WHEREOF, the parties hereto have executed and entered into this Installment Sale Agreement by their officers thereunto duly authorized as of the day and year first above written.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

By Bill Lockyer, Chairman

By: ___________ _ Deputy Treasurer

By:-----------­Executive Director

FALLBROOK PUBLIC UTILITY DISTRICT

By•~ General M ager

[Signature page to Installment Sale Agreement, dated as of November 1, 2010]

A-1

EXHIBIT A

THE PROJECT The Project consists of the acquisition and installation of photovoltaic solar generating facilities consisting of a 1 MW solar electric system to provide clean renewable energy for consumption, and to be located, at the District’s Wastewater Treatment Plant, located at 1425 Alturas Road in San Diego County, CA.

B-1

EXHIBIT B

THE EQUIPMENT

The Equipment consists of solar photovoltaic panels and equipment that are to be located at the District’s wastewater treatment plant located at 1425 Alturas Road in San Diego County, more particularly described below: The District (FPUD) will use 9.5 acres of existing open and available land at its Alturas Road Waste Water Treatment Plant (WWTP) in Fallbrook to install a 1MW solar electric system which will offset approximately 76% of the WWTP’s current electricity demand with 100% clean renewable energy. The turnkey solar power plant installation will use a high efficiency, high reliability, single-axis tracking system that will follow the sun each day to produce optimum energy production (approximately 2.4M kWh/yr with a minor energy production degradation of 0.5%/yr). The Photovoltaic modules are supported by a manufacturer’s 25-year warranty, and FPUD plans to purchase a system O&M agreement. The project scope includes all site assessment, design and engineering, site preparation, all permits, equipment, construction, system commissioning, start-up, operations training, and two years of comprehensive O&M. Following the acquisition of all necessary permits, overall project schedule (design/build/commission) is expected to take six to nine months. The system size (capacity) is derived by optimizing available open land area, while maximizing the CSI (California Solar Initiative) cash rebate capacity cap (1MW ac) without exceeding the current peak electricity demand for the WWTP. This project will create local “green” jobs, and provide significant long term energy cost savings for FPUD’s WWTP and beneficial environmental benefits to the community of Fallbrook. The District has contracted with SunPower Corporation to construct and operate the Project. The Project is expected to be commissioned in the Second Quarter of 2011. Following are the key assumptions relating the Project and a table of budgeted costs: • Technology: Single-axis Tracking System, with Tilted structure (20 degrees, due South), with the use of high efficiency PV modules (minimum 19% efficiency rating) • System Size: 1,138kW (dc), 1MW (ac) • Expected 1st Year Output: 2,400,204 kWh • Expected Annual Degradation Rate: 0.5% • Estimated Turnkey Design/Build Price: $ 7,227,000 • Current Average Cost of SDG&E electricity: $0.125/kWh • Average annual energy cost inflation: 3% • CSI rebate: $0.32/kWh for five years • Renewable Energy Credits (RECs) ownership status: Retained by FPUD

B-2

Project Cost Breakdown

Project Cost Breakdown

Engineering & Design Costs 126,473$ Permitting Costs 72,270$ PV Equipment Costs 3,938,715$

PV Modules 3,577,365$ Inverter 361,350$

Construction & Installation Costs (labor & materials) 1,788,683$ Interconnection Costs - Electric 686,565$ Sales Tax 343,283$ Metering Costs 126,473$ Cost of Issuance 144,540$

TOTAL PROJECT COSTS: 7,227,000$

C-1

EXHIBIT C

FORM OF ADDITIONAL EQUIPMENT CERTIFICATE Pursuant to the foregoing Request No. __ and in accordance with the Installment Sale Agreement, the undersigned Authorized Representative of the District hereby certifies and represents to, and agrees with the Authority as follows: 1. All of the Equipment (as such term is defined in the Installment Sale Agreement) listed below has been delivered, installed and accepted on the date hereof. 2. The District has conducted such inspection and/or testing of the Equipment listed below as it deems necessary and appropriate and hereby acknowledges that it accepts the Equipment for all purposes. 3. The District is currently maintaining the insurance coverage required by Section 6.01 of the Installment Sale Agreement. 4. No event or condition that constitutes, or with notice or lapse of time, or both, would constitute, an Event of Default (as defined in the Installment Sale Agreement) exists at the date hereof. 5. The District reaffirms that the representations, warranties and covenants contained in the Installment Sale Agreement are true and correct as of the date hereof.

FALLBROOK PUBLIC UTILITY DISTRICT By: General Manager

D-1

EXHIBIT D

INSTALLMENT PAYMENT SCHEDULE

Installment Payment Due

Date*

Principal Component

Interest Component

Total Intallment Payment

11/18/11 $207,681.23 $414,829.80 $622,511.03 5/18/12 276,377.68 201,454.45 477,832.13

11/18/12 286,548.85 193,522.41 480,071.26 5/18/13 289,196.56 185,298.46 474,495.02

11/18/13 295,386.56 176,998.52 472,385.08 5/18/14 298,115.93 168,520.92 466,636.86

11/18/14 304,588.66 159,964.99 464,553.65 5/18/15 307,403.06 151,223.30 458,626.36

11/18/15 314,168.54 142,400.83 456,569.37 5/18/16 317,071.46 133,384.20 450,455.65

11/18/16 134,592.93 124,284.24 258,877.18 5/18/17 135,836.57 120,421.43 256,258.00

11/18/17 143,324.21 116,522.92 259,847.13 5/18/18 144,648.52 112,409.51 257,058.04

11/18/18 152,436.55 108,258.10 260,694.65 5/18/19 153,845.06 103,883.17 257,728.23

11/18/19 161,944.71 99,467.82 261,412.53 5/18/20 163,441.08 94,820.00 258,261.09

11/18/20 171,864.00 90,129.25 261,993.25 5/18/21 173,452.03 85,196.75 258,648.77

11/18/21 182,210.28 80,218.68 262,428.95 5/18/22 183,893.90 74,989.24 258,883.14

11/18/22 192,999.99 69,711.49 262,711.47 5/18/23 194,783.30 64,172.39 258,955.69

11/18/23 204,250.17 58,582.11 262,832.28 5/18/24 206,137.45 52,720.13 258,857.57

11/18/24 215,978.52 46,803.98 262,782.50 5/18/25 217,974.16 40,605.40 258,579.56

11/18/25 228,203.35 34,349.54 262,552.89 5/18/26 230,311.95 27,800.10 258,112.05

11/18/26 240,943.65 21,190.15 262,133.80 5/18/27 243,169.97 14,275.07 257,445.04

11/18/27 254,219.11 7,296.09 261,515.20

* Installment Payments are payable fifteen (15) days before the dates indicated above.

E-1

EXHIBIT E

FINAL PROJECT COMPLETION CERTIFICATE To: Deutsche Bank National Trust California Alternative Energy and Company Advanced Transportation Financing 101 California Street, 46th Floor Authority San Francisco, CA 94111 915 Capitol Mall, Room 457 Attn: Corporate Trust Sacramento, CA 95814 Attn: Executive Director RE: Final Project Completion Certification

This Final Project Completion Certification is being provided to you pursuant to the requirements of the Installment Sale Agreement between the Authority and the Fallbrook Public Utility District (the “District”), whereon upon completion of the below referenced Project (as defined in the Installment Sale Agreement), the District shall have an Authorized Representative of the District, on behalf of the District, evidence the Completion Date of the Project by providing a Certificate of the District, which shall be approved by the Purchaser (if applicable), to the Trustee and the Authority stating the Costs of the Project and the components of Project as described in Exhibit A of the Installment Sale Agreement (see attached). The completed Project information is provided below. BOND INFORMATION District Name: Fallbrook Public Utility District Project Name(s): See Exhibit B to the Installment Sale Agreement, as such exhibit has

been amended or supplemented by Exhibit C of the Installment Sale Agreement

Bond Name and Series: California Alternative Energy and Advanced Transportation Financing

Authority Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Bond Closing Date: November 18, 2010 Bond Amount Issued: $7,227,000 PROJECT INFORMATION Project Address: (From Exhibit B of the Installment Sale Agreement) Project Commencement Date: Project Completion Deadline: (Contemplated) Completion Date: (Actual)

B-2

Project Cost by Item Amount Amount (From the Tax Certificate and Agreement) TOTAL: $ $ Amount of Bond Proceeds remaining in the Project Fund $_________ The acquisition, equipping, rehabilitation, improvement and construction have been completed substantially in accordance with the plans, specifications and work orders therefore, and all labor, services, materials and supplies used in the acquisition, equipping, rehabilitation, improvement and construction have been paid or provided for. All other facilities necessary in connection with the Project have been acquired, equipped, rehabilitated, improved, constructed and installed in accordance with the plans and specifications and work orders therefor and all costs and expenses incurred in connection therewith have been paid or provided for. The public benefits as presented to the Authority Board at the approval of the Resolution have been realized as a result of the completion of this Project. The District certifies that the Project was completed substantially in accordance with Exhibit A of the Installment Sale Agreement, with any amendments or supplements. Any variances from the Project as described in Exhibit A are described below: PROJECT VARIANCES (If Any): This certificate is given without prejudice to any rights of the District against third parties for any claims or for the payment of any amount not then due and payable which obligation as been incurred at the date of this certificate or which may subsequently be incurred. District’s Authorized Representative(s) Purchaser’s Authorized Representative (if applicable) Attachments [Photos of completed project(s)]

F-1

EXHIBIT F

COMPLIANCE CERTIFICATE

Pursuant to Section 8.08(c) of the Installment Sale Agreement, dated as of November 1, 2010 (the “Agreement”), by and between the California Alternative Energy and Advanced Transportation Financing Authority and the Fallbrook Public Utility District (the “District”), the undersigned General Manager of the District certifies as follows:

1. Attached hereto as Exhibit A are calculations evidencing compliance with the rate covenants of the Agreement, including those set forth in Section 3.04 of the Agreement.

2. No event or condition that constitutes, or with notice or lapse of time, or both, would constitute, an Event of Default (as defined in the Agreement) exists at the date hereof.

3. The District reaffirms that the representations, warranties and covenants contained in the Installment Sale Agreement are true and correct as of the date hereof.

4. Capitalized terms used and not defined herein shall have the meaning given them in the Agreement.

[Remainder of page intentionally left blank; signature page follows.]

F-2

Dated: ________ __, 20__

By: Name: Title:

F-3

EXHIBIT A

[Calculations Demonstrating Compliance with Section 3.04 of the Installment Sale Agreement]

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY QUALIFIED ENERGY CONSERVATION REVENUE BOND

(FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010 ***Page 1of 4***

UNITED STATES OF AMERICA STATE OF CALIFORNIA

NO BOND SHALL BE TRANSFERRED EXCEPT TO A QUALIFIED INSTITUTIONAL

BUYER OR ACCREDITED INVESTOR IN AUTHORIZED DENOMINATIONS, AND SUCH OTHER LIMITATIONS SET FORTH IN THE INDENTURE. EACH REGISTERED OWNER OR BENEFICIAL OWNER OF A BOND AGREES BY PURCHASE OF THE BOND TO ABIDE BY THESE LIMITATIONS. IN ADDITION, UNDERWRITERS SHALL NOT DEPOSIT THE BONDS IN ANY TRUST OR ACCOUNT UNDER ITS CONTROL AND SELL ANY SHARES, PARTICIPATORY INTERESTS OR CERTIFICATES IN SUCH TRUST OR ACCOUNT, AND ANY INITIAL PURCHASER OF THE BONDS FROM UNDERWRITERS SHALL NOT DEPOSIT THE BONDS IN ANY TRUST OR ACCOUNT UNDER ITS CONTROL AND SELL ANY SHARES, PARTICIPATORY INTERESTS OR CERTIFICATES IN SUCH TRUST OR ACCOUNT EXCEPT TO QUALIFIED INSTITUTIONAL BUYERS IN AUTHORIZED DENOMINATIONS. No. R- 1 $7,227,000

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BOND (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF OR ANY LOCAL AGENCY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST, IF ANY, ON THIS BOND. MATURITY DATE: DATED DATE: INTEREST RATE November 18, 2027 November 18, 2010 5.74% REGISTERED OWNER: BANC OF AMERICA LEASING & CAPITAL, LLC PRINCIPAL SUM: ***SEVEN MILLION TWO HUNDRED TWENTY-SEVEN THOUSAND

DOLLARS***

The CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY, a public instrumentality of the State of California (the “Authority”), for value received hereby, promises to pay (but only out of the Revenues hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal sum from the Interest Payment Date next preceding the date of authentication of this Bond (unless this Bond is authenticated as of an Interest Payment Date, in which event it shall bear interest, if any, from that date, or unless this Bond is authenticated on or before November 3, 2011, in which event it shall bear interest

SPECIMEN

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY QUALIFIED ENERGY CONSERVATION REVENUE BOND

(FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010 ***Page 2of 4***

(if any) from the dated date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on November 18, 2011, and semi-annually thereafter on each May 18 and November 18. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed by first class mail to the registered owner hereof, or by wire pursuant to instructions on file with the Trustee. The principal hereof is payable in lawful money of the United States of America at the Principal Corporate Trust Office of Deutsche Bank National Trust Company, as trustee (the “Trustee”).

This Bond represents the duly authorized issue of bonds of the Authority designated as

its “Qualified Energy Conservation Revenue Bonds (Fallbrook Public Utility District Solar Project), Series 2010” (the “Bonds”) in the aggregate principal amount of Seven Million Two Hundred Twenty-Seven Thousand Dollars ($7,227,000), and is issued under and pursuant to the provisions of the Division 16 of the California Public Resources Code as amended and supplemented (the “Act”) and under and pursuant to the provisions of a Indenture, dated as of November 1, 2010 (the “Indenture”), between the Authority and the Trustee (copies of which are on file at the Principal Corporate Trust Office of the Trustee).

The Bonds are issued to provide funds to finance the cost of the acquisition and

installation of solar energy systems and related appurtenances thereto for the Fallbrook Public Utility District (the “District”). The Bonds are limited obligations of the Authority and are payable, as to interest thereon (if any) and principal thereof, solely from certain proceeds of the Bonds held in certain funds and accounts pursuant to the Indenture and the revenues (the “Revenues”) derived from Installment Payments and other payments made by the District pursuant to an Installment Sale Agreement (as more fully defined in the Indenture, the “Installment Sale Agreement”), by and between the Authority and the District, and the Authority is not obligated to pay interest (if any) on and principal of the Bonds except from the Revenues. All Bonds are equally and ratably secured in accordance with the terms and conditions of the Indenture by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of the Bonds as provided in the Indenture. The general fund of the Authority is not liable, and the full faith and credit of the Authority and the District are not pledged, for the payment of the interest on or principal of the Bonds. No tax shall ever be levied or collected to pay the interest on or principal of the Bonds, except for Tax Revenues (as defined in the Installment Sale Agreement). The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues, and neither the payment of the interest on nor principal of the Bonds is a debt, liability or general obligation of the Authority. Reference is hereby made to the Act and to the Indenture and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, security for payment of the Bonds, remedies upon default and limitations thereon, and amendment of the Indenture (with or without consent of the registered owners of the Bonds); and all the terms of the Indenture are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond, by acceptance hereof, agrees and consents.

The Bonds are subject to redemption by the Authority on the terms and conditions set forth in the Indenture.

SPECIMEN

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY QUALIFIED ENERGY CONSERVATION REVENUE BOND

(FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010 ***Page 3of 4***

If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture; except that the Indenture provides that in certain events such declaration and its consequences may be rescinded under the circumstances as provided therein.

This Bond is transferable by the registered owner hereof in person or by his duly

authorized attorney upon payment of the charges provided in the Indenture and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount in authorized denominations will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of this Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid.

This Bond shall not be entitled to any benefit, protection or security under the Indenture

or become valid or obligatory for any purpose until the certificate of authentication attached hereto shall have been executed and dated by the Trustee.

It is hereby certified that all acts, conditions and things required by law to exist, to have

happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Indenture.

IN WITNESS WHEREOF, the California Alternative Energy and Advanced

Transportation Financing Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of its Chairman, all as of the above date.

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

By Chairman

SPECIMEN

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY QUALIFIED ENERGY CONSERVATION REVENUE BOND

(FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010 ***Page 4of 4***

CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within mentioned Indenture which has been authenticated on November 18, 2010.

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee By Authorized Officer By Authorized Officer

* * * * * * * * * * * * * * *

ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto ___________________________ (Tax ID No._______________) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: __________ Note: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: ___________________________ Notice: Signature must be guaranteed by an eligible guarantor institution

SPECIMEN

SPECIMENJONES HALL

November 18, 2010

California Alternative Energy and Advanced Transportation Financing Authority

Sacramento, California

650 California Street

18th Floor

San Francisco, CA 94108

t. 415.391.5780

f. 415.391.5784

OPINION: $7,227,000 California Alternative Energy and Advanced Transportation Financing Autho_rity Qualified Energy Conservation Bonds (Fallbrook Public Utility District Solar Project), Series 2010

Ladies and Gentlemen:

We have acted as bond counsel to the California Alternative Energy and Advanced Transportation Financing Authority (the "Authority") in connection with the issuance of $7,227,000 aggregate principal amount of California Alternative Energy and Advanced Transportation Financing Authority Qualified Energy Conservation Bonds (Fallbrook Public Utility District Solar Project), Series 2010 (the "Bonds"), issued pursuant to the Indenture, dated as of November 1, 2010 (the "Indenture"), by and between the Authority and Deutsche Bank National Trust Company, as trustee (the "Trustee"). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not defined therein, in the Installment Sale Agreement.

In such connection, we have reviewed the Indenture, the Installment Sale Agreement, dated as of November 1, 2010 (the "Installment Sale Agreement"), by and between the Authority and the Fallbrook Public Utility District (the "District"), the Tax Certificate of the Authority and the District, dated as of the date hereof (the "Tax Certificate"), opinions of counsel to the Authority, the District and the Trustee, certificates of the Authority, the District, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

As to questions of fact material to our opinion, we have relied upon representations of the District and the Authority contained in the Indenture and the Installment Sale Agreement, and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute valid and binding limited obligations of the Authority, payable solely from Revenues and the other assets pledged therefor under the Indenture.

A PROFESSIONAL LAW CORPORATION www.joneshall.com

SPECIMENCa!ifomio Altcmotivc Encrt.;IJ and Ad;•onccd

Transportation Financins 'riutliority Novc111hcr 18, 2010 Pagt' 2

2. The Indenture and the Installment Sale Agreement have been duly executed and delivered by, and constitute valid and binding obligations of, the Authority.

3. The Installment Sale Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, the District.

4. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, the Indenture creates a valid pledge of, lien on and security interest in the Revenues, and any other amounts held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, to secure the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act.

5. The Bonds constitute "qualified energy conservation bonds" within the meaning of Section 54D of the Internal Revenue Code of 1986 (the "Tax Code"). The Authority has irrevocably elected to apply the provisions of Section 6431(f) of the Tax Code to the Bonds, and the Bonds are specified tax credit bonds ("Qualified Bonds") eligible for the credits payable by the Federal government to the Authority under Section 6431(f) of the Tax Code (the "Bond Subsidy Payments"), and the interest on the Bonds is not intended to be excluded from gross income of the owners of the Bonds for federal income taxes. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the District comply with all requirements of the Tax Code that must be satisfied subsequent to the execution and delivery of the Bonds in order for the Bonds to be treated as Qualified Bonds and continue to be eligible for the Bond Subsidy Payments. The Authority and the District have covenanted to comply with such requirements. Failure to comply with certain of such requirements may result in a delay or forfeiture of all or a portion of the Bond Subsidy Payments, and may cause the Bonds to cease to be treated as Qualified Bonds, either prospectively from the date of determination, or retroactively to the date of execution and delivery of the Bonds. We express no opinion regarding the procedures and availability of funds with respect to the payment of the Bond Subsidy Payments by the Federal government, nor do we express any opinion regarding other federal tax consequences arising with respect to the Bonds.

6. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.

7. The Purchase Agreement created on the date of its execution, a binding, written contract under applicable California law (assuming due authorization, execution and delivery thereof by the Purchaser) for the sale of the Bonds for purposes of Section 54A(b)(3) of the Tax Code.

The rights of the Purchaser and the enforceability of the Installment Sale Agreement and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered in law or inequity.

Circular 230 Disclaimer. To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Tax Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

A PROFESSIONAL LAW CORPORATION

SPECIMENCa/if(lmia Altcmatic>c Eucrs;y aud Adc>auccd Tmnsportotiou Fiuaucius :\utltority

Noch'llthcr 18, 2010 Pose 3

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to retlect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

Respectfully submitted,

~~lk f\ Professional Law Corporation

A PROFESSIONAL LAW CORPORATION

CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED TRANSPORTATION FINANCING AUTHORITY

QUALIFIED ENERGY CONSERVATION REVENUE BOND (FALLBROOK PUBLIC UTILITY DISTRICT SOLAR PROJECT), SERIES 2010

MATURITY SCHEDULE PRINCIPAL AMOUNT MATURITY DATE: DATED DATE: INTEREST RATE

$7,227,000 November 18, 2027 November 18, 2010 5.74%