80A - JOINT - SAFA - WATER SYS BONDS

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The Trustee will establish and maintain a special trust fund to be held by the trustee called the Payment Fund. Within the Payment Fund, the Trustee will establish and maintain the Interest Account, the Principal Account, the Sinking Account and the Redemption Account. Under the Installment Purchase Agreement, the City will pay the Installment Payments out of the Water Revenue Fund to the Trustee for deposit into the Payment Fund. Subject to the provisions of the Indenture, all money in the Payment Fund will be set aside by the Trustee in the following respective special accounts within the Payment Fund in the following order of priority: (i) Interest Account, (ii) Principal Account, and (iii) Redemption Account. A debt service reserve fund has not been established for the Bonds. Application of System Revenues The City has covenanted that all System Revenues, when and as received, will be received and held by the City in trust for the benefit of Bondholders and payments with respect to Parity Obligations, and will be deposited by the City immediately upon receipt in the Payment Fund, which the City has covenanted to establish and maintain throughout the term of the Bonds. All Net System Revenues shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Indenture, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the City. All System Revenues in the Payment Fund shall be set aside by the City and applied in the following order of priority: (1) Operation and Maintenance Costs. The City has covenanted to pay all Operation and Maintenance Costs of the Water System (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs of the Water System, the payment of which is not then immediately required) as they become due and payable. (2) Installment Payments. The City covenants and agrees that all Net System Revenues will be held by the City in the Payment Fund. On or before each Installment Payment Date the City shall withdraw from the Payment Fund and transfer to the Trustee, for deposit in the Bond Fund, an amount which, together with the balance then on deposit in the Interest Account, the Sinking Principal Account and Redemption Account is equal to the aggregate amount of the Installment Payment coming due and payable on the next succeeding hnterest Payment Date. Payment of debt service and all other payments relating to principal and interest on or with respect to Parity Obligations shall be paid in accordance with the terms of the Indenture and of such Parity Obligations without preference or priority, and in the event of any insufficiency of such moneys, ratably without any discrimination or preference. (3) General Expenditures. All System Revenues not required to be withdrawn pursuant to the provisions of (1) and (2) above may be expended by the City at any time for any lawful purpose of the City, including, but not limited to, for payment of any obligation subordinate to the Bonds or 'Parity Obligations. 80A -154 14