Agmt08 South Bayside System Authority AKA Silicon Valley Clean Water

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charges (based on the highest adopted rate which will be in effect for any of the next three Fiscal Years) had been in effect during the whole of such Fiscal Year or other 12-month period; (ii) the amount of Net Revenues may be increased (in an amount not exceeding 20% of Maximum Annual Debt Service) by the amount of the Unencumbered Fund Balance as of the last day of the immediately preceding Fiscal Year; and (iii) the amount of Net Revenues may be increased to take into account any additions or improvements to or extensions of the Sewer Utility System to be financed from the proceeds of such Parity Debt or from any other source but in any case which, during all or any part of such Fiscal Year or other 12-month period, were not in service, in an amount equal to the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first 36-month period in which each addition, improvement or extension is to be in operation, all as shown by the certificate or opinion of a qualified independent engineer or qualified independent financial consultant employed by the City. (c) The City shall comply with all conditions to the issuance of Parity Debt as set forth in the any Parity Debt Documents. Section 9. Issuance of Subordinate Debt. Nothing in Section 7 or in Section 8 limits or affects the ability of the City to issue or incur obligations which are unsecured or which are secured by an interest which is junior and subordinate to the pledge of and lien upon the Net Revenues established hereunder. Section 10. Operation and Insurance of the Sewer Utility System. The City covenants and agrees to operate the Sewer Utility System in an efficient and economical manner and to operate, maintain and preserve the Sewer Utility System in good repair and working order. The City shall at all times maintain with responsible insurers all such insurance on the Sewer Utility System as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to the Sewer Utility System. The City 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 City, the Authority, the Bond Trustee and the Owners of the Bonds. Section 1 1 . Records and Accounts. The City shall keep proper books of record and accounts of the Sewer Utility System in which complete and correct entries are made of all transactions relating to the Sewer Utility System. Said books shall, upon prior written request, be subject to the reasonable inspection of the Authority and the Bond Trustee, or their representatives authorized in writing, upon not less than two business days' prior notice to the City. The City shall cause the books and accounts of the Sewer Utility System to be audited annually by an Independent Accountant not more than nine months after the close of each Fiscal Year, and shall make a copy of such report available for inspection by the Authority and the Bond Trustee. Such report may be part of a combined financial audit or report covering all or part of the City's finances. -5-