Loading...
HomeMy WebLinkAboutItem PFA-3 - Water Revenue BondsFinance and Management Services www.santa-ana.org/finance Item # 3 Santa Ana Public Financing Authority 20 Civic Center Plaza, Santa Ana, CA 92701 Staff Report June 4, 2024 TOPIC: Water Revenue Bonds AGENDA TITLE Resolution of the Santa Ana Public Financing Authority Authorizing the Issuance and Sale of Water Revenue Bonds, Series 2024 RECOMMENDED ACTION 1. Adopt Resolution No. SAPFA 2024-XXX authorizing the Issuance of the Santa Ana Financing Authority's Water of Santa Ana Water Revenue Bonds, Series 2024 ("the Bonds") RESOLUTION NO. SAPFA 2024-XXX entitled RESOLUTION OF THE GOVERNING BOARD OF THE SANTA ANA PUBLIC FINANCING AUTHORITY AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A MASTER INSTALLMENT PURCHASE AGREEMENT, A FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT, AN INDENTURE, AN ESCROW AGREEMENT AND A PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024, AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $47,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS 2. Authorize the execution of and approving a form of the Master Installment Purchase Agreement, First Supplement to the Master Installment Purchase Agreement, Escrow Agreement, Bond Purchase Agreement, Indenture of Trust, and Preliminary Official Statement. GOVERNMENT CODE §84308 APPLIES: No Water Revenue Bonds June 4, 2024 Page 2 EXECUTIVE SUMMARY The recommendation is the Public Financing Authority's final action to approve the sale of Water Revenue Bonds. The financing team is on track to price and close the bonds in late June 2024. The Bonds are being issued to provide funds for the following: • Refund in full the Santa Ana Financing Authority's Water Revenue Refunding Bonds, Series 2014, of which $8,905,000 is currently outstanding. • Finance a portion of the design, acquisition, and construction of certain improvements to the water system of the City. Pay certain costs of issuance of the Bonds. DISCUSSION Background By financing $40 million of water improvements with the issuance of Water Revenue Bonds ('2024 Water Revenue Bonds"), aging infrastructure can be improved, and water meters can be installed sooner. In order to achieve the financing, the City would enter into an Installment Purchase Agreement with the Authority, and the Authority would issue the 2024 Water Revenue Bonds not to exceed a par amount of $47,000,000. Debt service will be repaid by the City from net revenues of the City's water system. Staff has identified $40 million in water improvements that are high priority and that can be implemented within the next three years. 2024 Projects Estimated Cost Advanced Water Meters $15,000,000 Walnut Pump Station Improvements 5,000,000 Washington Well Improvements 6,000,000 Garth Pump Station Improvements 5,000,000 Lg. Water Services Vault & Meter Apparatus Imp. 8,000,000 Citywide Facilities Improvements 1,000,000 Total $40,000,000 The documents approved with this action will allow the Series 2014 Bonds to be refunded at a current interest rate of approximately 3.00%. The reduction in interest rate will reduce debt service payments by an estimated $659,000 and generate approximately $582,000 in net present value savings. The net present value savings represents about 6.5% of the amount of debt being refinanced. This compares favorably to the City's Debt Management Policy and the Government Financing Officers Association (GFOA) target of net present value savings of 3% on municipal refundings. The proposed resolutions approve all documents and actions needed to authorize the delivery and sale of the 2024 Water Revenue Refunding Bonds, including the following form of financing documents together with any changes or additions deemed advisable by the City Attorney or Bond Counsel (BBK) and approved by the City Manager, Water Revenue Bonds June 4, 2024 Page 3 Assistant City Manager, City Treasurer, or the Executive Director of the Finance and Management Services Agency (a "Designated Officer"). 1) Master Installment Purchase Agreement between the City and the Authority under which the Authority agrees to provide financing for the water improvements, and the City agrees to purchase the completed improvements, in consideration of the payment by the City of semiannual installment payments, to be made from the net revenues of the City's water system. 2) First Supplement to Master Installment Purchase Agreement between the City and the Authority to create the payment obligation for this series of bonds and assign the Authority's rights and duties to the Trustee (US Bank) to receive installments and make payments. 3) Escrow Agreement among the City and the Trustee (Bank of New York Mellon Trust Company) to establish an escrow fund to facilitate payment of the 2014 bonds. 4) Bond Purchase Agreement among the City, the Authority, and the underwriter (Ramirez and Co., Inc.), pursuant to the terms and provisions of which the 2024 Water Revenue Bonds will be sold through a negotiated method of sale, such terms and provisions including a true interest cost of the 2024 Water Revenue Bonds not to exceed 4.75% and the underwriter's discount not to exceed 0.34% of the par amount of the 2024 Water Revenue Bonds. 5) Indenture of Trust between the Authority and the Trustee (US Bank) which sets forth the material terms, covenants, and provisions relating to the 2024 Water Revenue Bonds. 6) Preliminary Official Statement that will be distributed to prospective purchasers of the 2024 Water Revenue Bonds that must contain all facts material to the 2024 Water Revenue Bonds and the City's water system and must not omit any material facts. The Authority Board has an obligation to ensure that the Preliminary Official Statement includes all information that would be material to a prospective investor's decision whether to purchase the 2024 Water Revenue Bonds. While the City's legal counsel, consultants, and the underwriter have participated in preparing the document, the City and Authority are ultimately responsible for ensuring that the Preliminary Official Statement is accurate, contains no misleading information, and does not omit any information necessary to make Preliminary Official Statement not misleading to investors. 7) Continuing Disclosure Certificate included as Appendix E of the Preliminary Official Statement that commits the City to providing certain annual reports and Water Revenue Bonds June 4, 2024 Page 4 notices of listed events to investors in order to allow the underwriter to comply with federal securities laws. If the proposed resolutions are adopted by the City Council and the Authority Board, the sale of the 2024 Water Revenue Bonds is expected to be completed on or about the week of June 10, 2024, with a delivery/closing date on or about the week of June 24, 2024, at which time bond proceeds will be available for the water improvements. FISCAL IMPACT In accordance with California Government Code Section 5852.1, good faith estimates are provided below with respect to the 2024 Water Revenue Bonds. The 2024 Water Revenue Bonds are expected to be sold with a premium in order to generate $40 million in project proceeds, $9 million to refinance the Series 2014 Bonds and $348,992 in finance charges. The true interest cost for the 2024 Water Revenue Bonds is estimated to be approximately 3.99%. The final maturity of the bonds will be in 2049, and the total debt service over the 25-year term is estimated to be $78.4 million, with average annual debt service estimated to be $3.1 million. The Discussion section of this report includes the estimated long-term fiscal impact of the proposed refinancing. Debt service on the refunding bonds will begin in Fiscal Year 2024-25. EXHIBIT(S) 1. Public Financing Authority Resolution No. SAPFA 2024-XXX 2. Master Installment Purchase Agreement 3. First Supplement to Master Installment Purchase Agreement 4. Escrow Agreement 5. Bond Purchase Agreement 6. Indenture of Trust 7. Preliminary Official Statement Submitted By: Kathryn Downs, Authority Treasurer Approved By: Alvaro Nunez, Acting Executive Director EXHIBIT 1 RESOLUTION NO. 2024- RESOLUTION OF THE GOVERNING BOARD OF THE SANTA ANA PUBLIC FINANCING AUTHORITY AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A MASTER INSTALLMENT PURCHASE AGREEMENT, A FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT, AN INDENTURE, AN ESCROW AGREEMENT AND A PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024, AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $47,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS BE IT RESOLVED BY THE GOVERNING BOARD OF THE SANTA ANA PUBLIC FINANCING AUTHORITY AS FOLLOWS: SECTION 1. The Governing Board of the Santa Ana Public Financing Authority (the "Authority") hereby finds, determines and declares as follows: A. The City of Santa Ana (the "City") wishes to finance the costs of the acquisition, construction and installation of certain water system capital improvements (the "Project") pertaining to the City's water system (the `Water System"); B. The City and the Santa Ana Public Financing Authority have previously financed costs of the Water System with the issuance of $15,690,000 original principal amount of Santa Ana Financing Authority Water Revenue Refunding Bonds, Series 2014 (the "2014 Bonds"); C. The City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to refinance the 2014 Bonds and finance the Project through the offering and sale of bonds of the Authority, designated "Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024" (the "Bonds"); D. In order to accomplish such refinancing and financing of the Project the City and the Authority desire to enter into a new Master Installment Purchase Agreement (the "Master Installment Agreement") and a First Resolution No. 2024-XXX Page 1 of 5 55394.00068\42111245.3 Supplement to Master Installment Purchase Agreement (the "First Supplement"); E. The Authority and the City desire U.S. Bank Trust Company, National Association, as trustee (the "Trustee") and the Authority enter into an Indenture (the "Indenture") in order to provide for the issuance of the Bonds; F. The Bonds will be issued pursuant to the Marks -Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code; G. Ramirez & Co., Inc., as underwriter (the "Underwriter"), has submitted to the City and the Authority a proposed form of an agreement to purchase the Bonds in the form of a Bond Purchase Agreement (the "Purchase Agreement"); H. A form of the Preliminary Official Statement (the "Preliminary Official Statement") to be distributed in connection with the public offering of the Bonds has been prepared; The City is a member of the Authority and the Project is to be located within the boundaries of the City; J. Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) ("SB 450") requires that the Governing Board obtain from an underwriter, municipal advisor or private lender and disclose, prior to authorization of the issuance of bonds, including debt instruments such as the Bonds, with a term of greater than 13 months, good faith estimates of the following information in a meeting open to the public: (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds, and such information has been provided to the Governing Board in the report of Finance and Management Services Agency; K. The Governing Board has been presented with the form of each document referred to herein relating to the refinancing contemplated hereby, and the Governing Board has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such refinancing; and L. All acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed Resolution No. 2024-XXX Page 2 of 5 55394.00068\42111245.3 precedent to and in connection with the consummation of such refinancing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such refinancing for the purpose, in the manner and upon the terms herein provided. SECTION 2. All of the recitals herein contained are true and correct and the Governing Board so finds. SECTION 3. The forms of Master Installment Agreement and the First Supplement, on file with the Secretary of the Authority, are hereby approved, and the Chair or Vice -Chair of the Authority, or such other member of the Governing Board as the Chair may designate, the Executive Director of the Authority, the Treasurer of the Authority and the Controller of the Authority (the "Authorized Officers") are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Master Installment Agreement and the First Supplement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate amount of the principal components of the installment payments evidenced under the First Supplement shall not exceed $47,000,000 and the true interest cost applicable to the interest components of the installment payments shall not exceed 4.75%. SECTION 4. The form of Indenture, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for arid in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate amount of the Bonds shall not exceed $47,000,000 and the true interest cost applicable to the Bonds shall not exceed 4.75% and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established by the Purchase Agreement as finally executed. SECTION 5. The issuance of not to exceed $47,000,000 aggregate principal amount of the Bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, and for the purpose of financing the Project and refinancing the 2014 Bonds, is hereby authorized and approved. SECTION 6. The form of Purchase Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name arid on behalf of the Authority, to execute and deliver the Purchase Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that Resolution No. 2024-XXX Page 3 of 5 55394.00068\42111245.3 the underwriter's discount for the sale of the Bonds shall not exceed 1.15% of the aggregate principal amount of such Bonds. SECTION 7. The form of Preliminary Official Statement, on file with the Secretary of the Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such Rule). SECTION 8. The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective investors for the Bonds a reasonable number of copies of the Preliminary Official Statement. SECTION 9. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the Authority. SECTION 10. The officers and agents of the Authority are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. SECTION 11. All actions heretofore taken by the officers and agents of the Authority with respect to the transactions set forth above are hereby approved, confirmed and ratified. SECTION 12. This Resolution shall take effect immediately upon its adoption by the Authority, and the Secretary to the Authority shall attest to and certify the vote adopting this Resolution. (Signature page follows) Resolution No. 2024-XXX Page 4 of 5 55394.00068\42111245.3 ADOPTED this 4th day of June, 2024. Valerie Amezcua Chairperson APPROVED AS TO FORM: Sonia R. Carvalho, Authority Counsel Laura Rossini Chief Assistant Authority Counsel AYES: Authoritymembers: NOES: Authoritymembers: ABSTAIN: Authoritymembers: NOT PRESENT: Authoritymembers: CERTIFICATE OF ATTESTATION AND ORIGINALITY I, Jennifer L. Hall, Secretary of the Authority, do hereby attest to and certify the attached Resolution No. 2024- to be the original resolution adopted by the Governing. Board of the Santa Ana Public Financing Authority on June 4, 2024 Date: 12024 Jennifer L. Hall Secretary, Santa Ana Public Financing Authority City of Santa Ana Resolution No. 2024-XXX Page 5 of 5 55394.00068\42111245.3 BBK DRAFT — MAY 13 EXHIBIT 2 MASTER INSTALLMENT PURCHASE AGREEMENT by and between the CITY OF SANTA ANA and the SANTA ANA PUBLIC FINANCING AUTHORITY Dated as of , 2024 Relating to Installment Payments Secured by the Water Revenue Fund of the City of Santa Ana, California 55394.00068\42092413.3 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS.................................................................................................... 2 SECTION 1.02. RULES OF CONSTRUCTION........................................................................ 12 ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.01. REPRESENTATIONS BY THE CITY............................................................ 13 SECTION 2.02. REPRESENTATIONS AND WARRANTIES BY THE AUTHORITY......... 13 ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECT SECTION 3.01. ACQUISITION AND CONSTRUCTION OF PROJECT; COMPONENTS............................................................................................ 14 SECTION 3.02. CHANGES TO THE PROJECT....................................................................... 15 ARTICLE IV INSTALLMENT PAYMENTS SECTION 4.01. PURCHASE PRICE......................................................................................... 15 SECTION 4.02. INSTALLMENT PAYMENTS; RESERVE FUND PAYMENTS .................. 16 ARTICLE V SYSTEM REVENUES SECTION 5.01. COMMITMENT OF THE NET SYSTEM REVENUES ................................. 16 SECTION 5.02. ALLOCATION OF SYSTEM REVENUES .................................................... 17 SECTION 5.03. ADDITIONAL OBLIGATIONS...................................................................... 17 SECTION 5.04. MAINTENANCE AND OPERATION OBLIGATIONS ................................ 18 ARTICLE VI COVENANTS OF THE CITY SECTION 6.01. COMPLIANCE WITH INSTALLMENT PURCHASE AGREEMENT AND ANCILLARY AGREEMENTS........................................................... 19 SECTION 6.02. AGAINST ENCUMBRANCES....................................................................... 19 SECTION 6.03. DEBT SERVICE RESERVE FUND................................................................ 19 SECTION 6.04. AGAINST SALE OR OTHER DISPOSITION OF PROPERTY .................... 20 SECTION 6.05. AGAINST COMPETITIVE FACILITIES....................................................... 20 SECTION 6.06. PROMPT ACQUISITION AND CONSTRUCTION ...................................... 20 55394.00068\42092413.3 TABLE OF CONTENTS (continued) Page SECTION 6.07. MAINTENANCE AND OPERATION OF THE WATER SYSTEM; BUDGETS..................................................................................................... 20 SECTION 6.08. AMOUNT OF RATES AND CHARGES; RATE STABILIZATION FUND............................................................................................................. 20 SECTION 6.09. PAYMENT OF CLAIMS................................................................................. 21 SECTION 6.10. COMPLIANCE WITH CONTRACTS............................................................ 21 SECTION 6.11. INSURANCE.................................................................................................... 21 SECTION 6.12. ACCOUNTING RECORDS; FINANCIAL STATEMENTS AND OTHER REPORTS........................................................................................ 22 SECTION 6.13. PROTECTION OF SECURITY AND RIGHTS OF THE AUTHORITY....... 22 SECTION 6.14. PAYMENT OF TAXES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS......................................................... 22 SECTION 6.15. COLLECTION OF RATES AND CHARGES; NO FREE SERVICE ............ 23 SECTION 6.16. EMINENT DOMAIN PROCEEDS.................................................................. 23 SECTION 6.17. TAX COVENANTS......................................................................................... 23 SECTION 6.18. FURTHER ASSURANCES............................................................................. 23 SECTION 6.19. OPERATE WATER SYSTEM......................................................................... 23 SECTION 6.20. ADDITIONAL COVENANTS......................................................................... 24 ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS SECTION 7.01. PREPAYMENT OF INSTALLMENT PAYMENTS ...................................... 24 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY SECTION 8.01. EVENTS OF DEFAULT AND ACCELERATION OF MATURITIES ......... 24 SECTION 8.02. APPLICATION OF NET SYSTEM REVENUES UPON ACCELERATION......................................................................................... 25 SECTION 8.03. OTHER REMEDIES OF THE AUTHORITY ................................................. 25 SECTION8.04. NON-WAIVER................................................................................................. 25 SECTION 8.05. REMEDIES NOT EXCLUSIVE...................................................................... 26 ARTICLE IX DISCHARGE OF OBLIGATIONS SECTION 9.01. DISCHARGE OF OBLIGATIONS.................................................................. 26 ARTICLE X MISCELLANEOUS SECTION 10.01. LIABILITY OF CITY LIMITED TO SYSTEM REVENUES ...................... 26 -ii- 55394.00068\42092413.3 TABLE OF CONTENTS (continued) Page SECTION 10.02. BENEFITS OF INSTALLMENT PURCHASE AGREEMENT LIMITED TO PARTIES................................................................................ 27 SECTION 10.03. AMENDMENTS............................................................................................ 27 SECTION 10.04. SUCCESSOR IS DEEMED INCLUDED IN ALL REFERENCES TO PREDECESSOR............................................................................................ 28 SECTION 10.05. WAIVER OF PERSONAL LIABILITY........................................................ 28 SECTION 10.06. PARTIAL INVALIDITY............................................................................... 28 SECTION 10.07. ASSIGNMENT............................................................................................... 28 SECTION 10.08. NET CONTRACT.......................................................................................... 28 SECTION 10.09. CALIFORNIA LAW...................................................................................... 28 SECTION 10.10. NOTICES........................................................................................................ 28 SECTION 10.11. EFFECTIVE DATE........................................................................................ 29 SECTION 10.12. EXECUTION IN COUNTERPARTS............................................................ 29 EXHIBIT A - DESCRIPTION OF ENTIRE PROJECT...........................................................A-1 -iii- 55394.00068\42092413.3 MASTER INSTALLMENT PURCHASE AGREEMENT This MASTER INSTALLMENT PURCHASE AGREEMENT, made and entered into as of , 2024, by and between the CITY OF SANTA ANA, a charter city and municipal corporation organized and existing under and by virtue of the Constitution and the laws of the State of California and its Charter (the "City"), and the SANTA ANA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority and public entity duly organized and existing under and by virtue of the State of California (the "Authority"); WITNESSETH: WHEREAS, the City expects to have the need from time to time to finance or refinance the acquisition, construction and installation of improvements to its Water System (capitalized terms used herein shall have the meanings given such terms in Section 1.01); WHEREAS, the Authority desires to assist the City with such financings and refinancings; WHEREAS, in order to accomplish such financings and refinancings, the City will incur obligations payable from net revenues of its Water System; WHEREAS, such obligations may be in the form of bonds of the Authority or may be in the form of installment purchase agreements, leases or other contracts; WHEREAS, the proceeds of such obligations will be used to finance and/or refinance the acquisition, construction, installation and improvement of certain municipal water system facilities of the City, as more fully described in Exhibit A hereof and as may be modified from time to time in conformity with the same (the "Project"); WHEREAS, the City has determined that the Project and the purchase of the Project and/or Components thereof by the City is necessary and proper for City uses and purposes; WHEREAS, the Authority proposes to sell and/or refinance the Project and/or Components thereof from time to time to the City and the City desires to purchase the Project and/or Components thereof from the Authority upon the terms and conditions set forth herein; WHEREAS, concurrently with the prepayment of the Prior Obligations, the City will reacquire the Project and resell the Project to the Authority and then repurchase the Project from the Authority pursuant to a Supplement; WHEREAS, the City and the Authority have duly authorized the execution of this Installment Purchase Agreement; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, Ruin and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement. 1 55394.00068\42092413.3 NOW, THEREFORE, IN CONSIDERATION OF THESE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall, for all purposes of this Installment Purchase Agreement and any Supplement, have the meanings set forth below: "Accountant's Report" means a report signed by an Independent Certified Public Accountant. "Acquisition Fund" means the fund by that name established pursuant to any Issuing Instrument. "Authority" means the Santa Ana Public Financing Authority, a joint exercise of powers authority and public entity duly organized and existing under and by virtue of the laws of the State, or its successors and assigns. "Authorized City Representative" means the Mayor, the City Manager, Assistant City Manager or the Treasurer of the City or such other officer or employee of the City or other person who has been designated as such representative by resolution of the City Council of the City. "Balloon Indebtedness" means, with respect to any Series of Obligations, twenty-five percent (25%) or more of the principal of which matures on the same date or within a 12-month period (with sinking fund payments on Term Obligations deemed to be payments of matured principal), that portion of such Series of Obligations which matures on such date or within such 12-month period; provided, however, that to constitute Balloon Indebtedness the amount of indebtedness maturing on a single date or over a 12-month period must equal or exceed 150% of the amount of such Series of Obligations which matures during any preceding 12-month period. For purposes of this definition, the principal amount maturing on any date shall be reduced by the amount of such indebtedness which is required, by the documents governing such indebtedness, to be amortized by prepayment or redemption prior to its stated maturity date. "Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the validity of, and exclusion from gross income for federal income tax purposes of interest on, bonds issued by states and political subdivisions and duly admitted to practice law before the highest court of any state of the United States and acceptable to the City. "Charter" means the Charter of the City as it now exists or may hereafter be amended, and any new or successor Charter. 2 55394.00068\42092413.3 "City" means the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution, the laws of the State and its Charter. "Code" means the Internal Revenue Code of 1986, and the regulations thereunder, as amended. "Components" means components of the Project specified in a Supplement. "Consultant" means the consultant, consulting firm, engineer, architect, engineering firm, architectural firm, accountant or accounting firm retained by the City to perform acts or carry out the duties provided for such consultant in this Installment Purchase Agreement. Such consultant, consulting firm, engineer, architect, engineering firm or architectural firm shall be nationally recognized within its profession for work of the character required. Accountants or accounting films shall be independent certified public accountants licensed to practice in the State. "Credit Provider" means any municipal bond insurance company, bank or other financial institution or organization which is performing in all material respects its obligations under any Credit Support Instrument for some or all of the Parity Obligations. "Credit Provider Reimbursement Obligations" means obligations of the City to repay, from Net System Revenues, amounts advanced by a Credit Provider as credit or liquidity support for Parity Obligations. "Credit Support Instrument" means a policy of insurance, a letter of credit, a stand-by purchase agreement, revolving credit agreement or other credit arrangement pursuant to which a Credit Provider provides credit or liquidity support with respect to the payment of interest, principal or the purchase price of any Parity Obligations. "Debt Service" means, for any Fiscal Year, the sum of (1) the interest payable during such Fiscal Year on all outstanding Parity Obligations, assuming that all outstanding Serial Parity Obligations are retired as scheduled and that all outstanding Term Parity Obligations are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of sale of any Parity Obligations), (2) that portion of the principal amount of all outstanding Serial Parity Obligations maturing on the next succeeding principal payment date which falls in such Fiscal Year (excluding Serial Obligations which at the time of issuance are intended to be paid from the sale of a corresponding amount of Parity Obligations), and (3) that portion of the principal amount of all outstanding Term Parity Obligations required to be redeemed or paid on any redemption date which falls in such Fiscal Year (together with the redemption premiums, if any, thereon); provided that, (a) as to any Balloon Indebtedness, Tender Indebtedness and Variable Rate Indebtedness, interest thereon shall be calculated as provided in the definition of Maximum Annual Debt Service and principal shall be deemed due at the nominal maturity dates thereof; (b) the amount on deposit in a debt service reserve fund on any date of calculation of Debt Service shall be deducted from the amount of principal due at the final maturity of the Parity Obligations for which such debt service reserve fund was established and in each preceding year until such amount is exhausted; (c) the amount of any interest payable on any Parity Obligation for which there exists a Qualified Swap Agreement shall be the net amount payable by the City as provided in paragraph (iv) or paragraph (viii), as applicable, of the definition of 55394.00068\42092413.3 Maximum Annual Debt Service; and (d) the amount of payments on account of Parity Obligations which are redeemed, retired or repaid on the basis of the accreted value due on the scheduled redemption, retirement or repayment date shall be deemed principal payments, and interest that is compounded and paid as part of the accreted value shall be deemed payable on the scheduled redemption, retirement or repayment date but not before. For purposes of complying with the rate setting covenants contained herein and satisfying the debt service coverage requirements in connection with the issuance or incurring of Parity Obligations, Debt Service shall not include those portions of Parity Obligations to be paid in such period to the extent the interest that is evidenced and represented thereby is capitalized or is reasonably anticipated to be reimbursed to the Authority by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program. "Defaulted Obligations" means Obligations in respect of which an Event of Default has occurred and is continuing. "Engineer's Report" means a report signed by an Independent Engineer. "Event of Default" means an event described in Section 8.01. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period selected and designated as the official Fiscal Year of the City. "Independent Certified Public Accountant" means any firm of certified public accountants appointed by the City, and each of whom is independent pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants. "Installment Payment Date" means any date on which an Installment Payment is due as specified in or determined pursuant to a Supplement. "Installment Payments" means the Installment Payments scheduled to be paid by the City under and pursuant hereto and any Supplement. "Installment Payment Obligations" means Obligations consisting of or which are supported in whole by Installment Payments. "Installment Purchase Agreement" means this Master Installment Purchase Agreement, by and between the City and the Authority, dated as of , 2024, as originally executed and as it may from time to time be amended or supplemented in accordance herewith. "Issuing Instrument" shall mean any indenture, trust agreement or installment purchase agreement including any Supplement under which Obligations are issued or created. The term Issuing Instrument shall not include a Qualified Swap Agreement. "Maintenance and Operation Costs" means the reasonable and necessary costs spent or incurred by the City, for maintaining and operating the Water System, calculated in accordance with generally accepted accounting principles, including (among other things) all costs of water 4 55394.00068\42092413.3 purchased or leased by the City, the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City attributable to the Project and the Installment Purchase Agreement, salaries and wages of employees, payments to employees retirement systems (to the extent paid from System Revenues), overhead, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of the Obligations, including this Installment Purchase Agreement, including any amounts required to be deposited in the Rebate Fund pursuant to the Tax Certificate, and fees and expenses payable to any Credit Provider (other than in repayment of a Credit Provider Reimbursement Obligation), but excluding in all cases (i) depreciation, replacement and obsolescence charges or reserves therefor, (ii) amortization of intangibles or other bookkeeping entries of a similar nature, (iii) costs of capital additions, replacements, betterments, extensions or improvements to the Water System which under generally accepted accounting principles are chargeable to a capital account or to a reserve for depreciation, (iv) charges for the payment of principal and interest on any general obligation bond heretofore or hereafter issued for Water System purposes, and (v) charges for the payment of principal and interest on any debt service on account of any obligation on a parity with or subordinate to the Installment Payments. Payments with respect to Maintenance and Operation Obligations shall be considered Maintenance and Operation Costs if they are incurred in connection with the Maintenance and Operation Costs described in the preceding paragraph. "Maintenance and Operation Obligation" means any contract or lease for the purchase of any facilities, properties, structures, or works, or any loan of credit to or guaranty of debts, claims or liabilities of any other person for the purpose of obtaining any facilities, properties, structures or works, the final payments under which are due more than five years following the effective date thereof; so long as in each case the payments thereunder are to constitute Maintenance and Operation Costs. "Maximum Annual Debt Service" means, at any point in time, with respect to Parity Obligations then Outstanding, the maximum amount of principal and interest becoming due on the Parity Obligations in the then current or any future Fiscal Year, calculated by the City or by an Independent Certified Public Accountant as provided in this definition and provided to the Trustee. For purposes of calculating Maximum Annual Debt Service, the following assumptions shall be used to calculate the principal and interest becoming due in any Fiscal Year: (i) in determining the principal amount due in each year, payments shall (except to the extent a different subsection of this definition applies for purposes of determining principal maturities or amortization) be assumed to be made in accordance with any amortization schedule established for such debt, including the amount of any Parity Obligations which are or have the characteristics of commercial paper and which are not intended at the time of issuance to be retired from the sale of a corresponding amount of Parity Obligations, and including any scheduled mandatory redemption or prepayment of Parity Obligations on the basis of accreted value due upon such redemption or prepayment, and for such purpose, the redemption payment or prepayment shall be deemed a principal payment; in determining the interest due in each year, interest payable at a fixed 5 55394.00068\42092413.3 rate shall (except to the extent subsection (ii) or (iii) of this definition applies) be assumed to be made at such fixed rate and on the required payment dates; (ii) if all or any portion or portions of an Outstanding Series of Parity Obligations constitutes Balloon Indebtedness or if all or any portion of a Series of Parity Obligations or such payments then proposed to be issued would constitute Balloon Indebtedness, then, for purposes of determining Maximum Annual Debt Service, each maturity which constitutes Balloon Indebtedness shall be treated as if it were to be amortized in substantially equal annual installments of principal and interest over a term of 25 years commencing in the year the stated maturity of such Balloon Indebtedness occurs, the interest rate used for such computation shall be determined as provided in subsections (iv) or (v) below, as appropriate, and all payments of principal and interest becoming due prior to the year of the stated maturity of the Balloon Indebtedness shall be treated as described in subsection (i) above; (iii) if any of the Outstanding Series of Parity Obligations constitutes Tender Indebtedness or if Parity Obligations proposed to be issued would constitute Tender Indebtedness, then for purposes of determining Maximum Annual Debt Service, Tender Indebtedness shall be treated as if the principal amount of such Parity Obligations were to be amortized in accordance with the amortization schedule set forth in such Tender Indebtedness or in the Credit Support Instrument established with respect to such Tender Indebtedness, or if no such amortization schedule is set forth, then such Tender Indebtedness shall be deemed to be amortized in substantially equal annual installments of principal and interest over a term of 25 years commencing in the year in which such Series is first subject to tender, and the interest rate used for such computation shall be determined as provided in subsections (iv) or (v) below, as appropriate; (iv) if any Outstanding Parity Obligations constitute Variable Rate Indebtedness (except to the extent subsection (ii) relating to Balloon Indebtedness or subsection (iii) relating to Tender Indebtedness applies), the interest rate on such Parity Obligation shall be assumed to be 110% of the daily average interest rate on such Parity Obligations during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Parity Obligations shall have been Outstanding; provided that in the event that Variable Rate Indebtedness has been issued in connection with a Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Debt Service shall be determined by (x) calculating the annualized net amount paid by the City under such Variable Rate Indebtedness and Qualified Swap Agreement (after giving effect to payments made under the Variable Rate Indebtedness and made and received by the City under the Qualified Swap Agreement) during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Qualified Swap Agreement has been in effect, and (y) dividing the amount calculated in clause (x) by the average daily balance of the related Parity Obligations Outstanding during the 12-month period contemplated by clause (x); (v) if Parity Obligations proposed to be issued will be Variable Rate Indebtedness (except to the extent subsection (ii) relating to Balloon Indebtedness or subsection (iii) relating to Tender Indebtedness applies), then such Parity Obligations shall 0 55394.00068\42092413.3 be assumed to bear interest at 110% of the average of the J.J. Kenny High Grade Index during the prior 12 months ending with the month preceding the date of sale of such additional Parity Obligations, or if that index is no longer published, another similar index selected by the City, or if the City fails to select a replacement index, an interest rate equal to 80% of the yield for outstanding United States Treasury bonds having an equivalent maturity, or if there are no such Treasury bonds having such maturities, 100% of the lowest prevailing prime rate of any of the five largest commercial banks in the United States ranked by assets; provided that in the event that such Variable Rate Indebtedness will be issued in connection with a Qualified Swap Agreement, the interest rate for purposes of computing Maximum Annual Debt Service shall be determined by (a) calculating the net amount to be paid by the City under such Variable Rate Indebtedness and Qualified Swap Agreement after giving effect to payments to be made under the Variable Rate Indebtedness and to be made and received by the City under the Qualified Swap Agreement for the period during which the Qualified Swap Agreement is to be in effect and for this purpose any variable rate of interest agreed to be paid thereunder shall be deemed to be the rate at which the related Parity Obligation shall be assumed to bear interest, and (b) dividing the amount calculated in clause (a) by the average principal amount of the related Parity Obligation to be Outstanding during the first year after the issuance of such Parity Obligation; (vi) if moneys or Permitted Investments have been deposited by the City into a separate fund or account or are otherwise held by the City or by a fiduciary to be used to pay principal and/or interest on specified Parity Obligations, then the principal and/or interest to be paid from such moneys, Permitted Investments or from the earnings thereon shall be disregarded and not included in calculating Maximum Annual Debt Service; (vii) if Parity Obligations are Paired Obligations, the interest thereon shall be the resulting linked rate or effective fixed rate to be paid with respect to such Paired Obligations; and (viii) in the event that an agreement or commitment which, at the time of calculation is a Qualified Swap Agreement is or is to be in effect with respect to a Parity Obligation which is not Variable Rate Indebtedness, the interest rate of such Parity Obligation for purposes of calculating Maximum Annual Debt Service shall be calculated as follows: (a) for such a Qualified Swap Agreement which is in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in subsection (iv) for a Qualified Swap Agreement issued in connection with Variable Rate Indebtedness which is Outstanding on the date of calculation; and (b) for such a Qualified Swap Agreement which is not in effect on the date of calculation, the interest rate shall be calculated in the same manner as is specified in subsection (v) for a Qualified Swap Agreement to be issued in connection with Variable Rate Indebtedness to be Outstanding after the date of calculation, and for this purpose any variable rate of interest agreed to be paid 7 55394.00068\42092413.3 thereunder shall be assumed to be the rate assumed for Variable Rate Indebtedness described in subsection (v). "Maximum Rate" means, on any day, the maximum interest rate allowed by law. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the state of Delaware, and its successors and assigns, and, if such entity shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency (other than S&P) designated by the City. "Net Proceeds" means, when used with respect to any insurance, self insurance or condemnation award, the proceeds from such award remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such proceeds. "Net System Revenues" means, for any Fiscal Year, the System Revenues for such Fiscal Year less the Maintenance and Operation Costs for such Fiscal Year. "Obligations" means (i) obligations of the City for money borrowed (such as bonds, notes or other evidences of indebtedness) or as installment purchase payments under any contract (including Installment Payments), or as lease payments under any financing lease (determined to be such in accordance with generally accepted accounting principles), the principal and interest on which are payable from Net System Revenues; (ii) obligations to replenish any debt service reserve funds with respect to such obligations of the City; (iii) obligations secured by or payable from any of such obligations of the City; and (iv) obligations of the City payable from Net System Revenues under (a) any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, (b) any contract to exchange cash flows or a series of payments, or (c) any contract to hedge payment, currency, rate spread or similar exposure, including but not limited to interest rate swap agreements and interest rate cap agreements. "Outstanding," when used as of any particular time with respect to Obligations, means all Obligations theretofore or thereupon executed, authenticated and delivered by the City or any trustee or other fiduciary, except (i) Obligations theretofore cancelled or surrendered for cancellation; (ii) Obligations paid or deemed to be paid within the meaning of any defeasance provisions thereof; (iii) Obligations owned by the City or the Authority; and (iv) Obligations in lieu of or in substitution for which other Obligations have been executed and delivered. "Owner" means any person who shall be the registered owner of any outstanding Obligation certificate or other evidence of a right to receive Installment Payments directly or as security for payment of the Obligation. "Parity Installment Obligation" means Obligations consisting of or payable from Installment Payments which are not subordinated in right of payment to other Installment Payments. "Parity Obligations" means (i) Parity Installment Obligations, (ii) Obligations the principal and interest of which are payable on a parity with Parity Installment Obligations, and (iii) Qualified Swap Agreements. Notwithstanding the foregoing, any amounts payable with respect to a 55394.00068\42092413.3 Qualified Swap Agreement which represent termination payments or unwinding payments shall not be deemed to be Parity Obligations unless (a) such Qualified Swap Agreement expressly states that such termination payments or unwinding payments are to be considered Parity Obligations and (b) each Rating Agency which currently maintains a rating with respect to any Parity Obligation confirms in writing to the City that the inclusion of such termination payments or unwinding payments as Parity Obligations will not result in a downgrading, withdrawal or suspension of such rating. "Paying Agent" means, with respect to an Installment Payment Obligation or Series of Installment Payment Obligations, the bank, trust company or other financial institution, if any, or other entities designated as the place or entity which shall make payment on such Installment Payment Obligation or a Series of Installment Payment Obligations and/or the interest thereon instead of or in addition to the City Treasurer's office. "Payment Fund" means the fund designated in the Issuing Instrument as the fund into which Installment Payments are to be deposited for the purposes of paying principal or interest on related Obligations. "Permitted Investments" means investments which pursuant to an Issuing Instrument are permissible for the investment of funds received from the sale of Obligations pursuant to the Issuing Instrument or from other funds held pursuant to the Issuing Instrument. "Prior Obligations" means the Santa Ana Financing Authority Water Revenue Bonds, Series 2014 (Payable Solely from Installment Payments Secured by Water System Net Revenues). "Project" means the construction, replacement and improvements to the Water System described in Exhibit A hereto and as modified with respect to Components in conformance with Section 3.02 hereof. "Purchase Price" means the principal amount plus interest thereon owed by the City to the Authority under the terms hereof as provided in Section 4.01 and as specified in a Supplement. "Qualified Swap Agreement" means a contract or agreement, payable from Net System Revenues on a parity with Parity Obligations, intended to place Obligations on the interest rate, currency, cash flow or other basis desired by the City, including, without limitation, any interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract, any contract providing for payments based on levels of, or changes in, interest rates, currency exchange rates, stock or other indices, any contract to exchange cash flows or a series of payments, or any contract, including, without limitation, an interest rate floor or cap, or an option, put or call, to hedge payment, currency, rate, spread or similar exposure, between the City and a counterparty; provided that not less than 30 days prior to the City's execution of such contract or agreement, each Rating Agency which maintains a rating with respect to any Parity Obligation receives notice in writing of the City's pending execution thereof; and provided further that at the time of origination each Rating Agency which maintains a rating with respect to any Parity Obligation confirms in writing to the City that the City's execution and delivery of such contract will not result in a downgrading, withdrawal or suspension of such rating. The counterparty to a Qualified Swap Agreement must have, at the date of execution of the Qualified Swap Agreement, 9 55394.00068\42092413.3 an unsecured, uninsured and nonguaranteed long-term obligation rated not lower than A by Moody's and S&P; provided, that such counterparty may satisfy such rating requirements by providing an insurance policy for its obligations under any such swap agreement from an insurer whose unsecured ratings are in the rating categories required above, or alternatively by providing an unconditional, irrevocable, unsecured, uninsured and nonguaranteed guaranty of any other entity, including an affiliated entity, whose unsecured ratings are in the rating categories required above. "Rating Agencies" means Moody's and S&P, or whichever of them is then rating Parity Obligations. "Rebate Fund" means the fund by that name established pursuant to any Issuing Instrument. "Rebate Requirement" shall have the meaning specified in any Tax Certificate. "Reserve Fund" and "Reserve Account" shall have the meanings given to such terms in any Issuing Instrument or Supplement. "Reserve Requirement" shall have the meaning given to such term in any Issuing Instrument or Supplement. "S&P" means Standard & Poor's Global Ratings, its successors and assigns, and if such entity shall be deemed to refer to any other nationally recognized securities rating agency (other than Moody's) designated by the City. "Serial Parity Obligations" means Serial Obligations which are Installment Payments or are payable on a parity with Parity Installment Obligations. "Serial Obligations" means Obligations for which no sinking fund payments are provided. "Series" means Obligations issued at the same time or sharing some other common term or characteristic and designated in the Issuing Instrument pursuant to which such Obligations were issued as a separate issue or series of Obligations. "State" means the State of California. "Subordinated Obligations" means any Obligations, the payment of principal and interest on which are subordinated in right of payment to Parity Obligations. "Supplement" means a supplement, supplemental to or amendatory of this Installment Purchase Agreement providing for the payment of specific Installment Payments as the Purchase Price for Components of the Project, executed and delivered by the City and the Authority. "System Revenues" means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing, (i) all income, rents, rates, fees, charges (including standby and capacity charges), insurance proceeds or other moneys derived by the City from the water services, facilities, and 10 55394.00068\42092413.3 commodities or byproducts sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, (ii) investment earnings on, and income derived from, the amounts referred to in the preceding clause (i), including investment earnings on the operating reserves, to the extent that the use of such earnings is limited to the Water System by or pursuant to law, and earnings on any Reserve Fund for Obligations but only to the extent that such earnings may be utilized under the Issuing Instrument for the payment of debt service for such Obligations; (iii) the proceeds derived by the City directly or indirectly from the sale or lease of a part of the Water System; and (iv) any amount received from the levy or collection of taxes which are solely available and are earmarked for the support of the operation of the Water System; provided, however, that System Revenues shall not include: (a) customers' deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City; and (b) the proceeds of borrowings. Notwithstanding the foregoing, there shall be deducted from System Revenues any amounts transferred into a Rate Stabilization Fund as contemplated by Section 6.08(b), and there shall be added to System Revenues any amounts transferred out of such Rate Stabilization Fund to pay Maintenance and Operation Costs. System Revenues shall include reimbursements from the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009), or any future similar program); provided, however, for purposes of complying with the rate setting covenants contained herein and satisfying the debt service coverage requirements in connection with the issuance or incurring of Parity Obligations. System Revenues shall not include such other reimbursements from the United States of America. "Tax Certificate" means a certificate relating to the requirements of the Code, signed on behalf of the City and the Authority and delivered in connection with the issuance of Tax -Exempt Installment Payment Obligations. "Tax -Exempt Installment Payment Obligations" means Installment Payment Obligations in respect of which it is intended that the interest component thereof will be excluded from gross income of the holders thereof (other than any holder who is a "substantial user" of facilities financed with such obligations or a "related person" within the meaning of Section 147(a) of the Code) for federal income tax purposes, whether or not such interest in includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax under the Code. "Tender Indebtedness" means any Parity Obligations or portions of Parity Obligations, a feature of which is an option, on the part of the holders thereof, or an obligation, under the terms of such Parity Obligations, to tender all or a portion of such Parity Obligations to the City, a Paying Agent, or other fiduciary or agent for payment or purchase and requiring that such. Bonds or portions of Bonds or that such rights to payments or portions of payments be purchased if properly presented. "Term Parity Obligations" means Term Obligations which are Parity Installment Obligations or are payable on a parity with Parity Installment Obligations. 11 55394.00068\42092413.3 "Term Obligations" means Obligations which are payable on or before their specified maturity dates from sinking fund payments established for that purpose and calculated to retire such Obligations on or before their specified maturity dates. "Trustee" means a financial institution acting in its capacity as Trustee under and pursuant to the Issuing Instrument, and its successors and assigns. "Variable Rate Indebtedness" means any portion of indebtedness evidenced by Parity Obligations the interest rate on which is not established at the time of incurrence of such indebtedness and has not, at some subsequent date, been established at a rate which is not subject to fluctuation or subsequent adjustment, excluding Paired Obligations. "Water Revenue Fund" has the meaning ascribed thereto in Section 5.02 hereof. "Water Service" means the water storage and distribution services made available or provided by the Water System. "Water System" means any and all facilities, properties and improvements at any time owned, controlled or operated by the City as part of the Water Revenue Fund (defined in Section 5.02 hereof) for the collection, treatment, distribution, administration, disposal or reclamation of water. "2014 Master Installment Purchase Agreement" means the Master Installment Purchase Agreement, dated as of August 1, 2014, by and between the City and the Santa Ana Financing Authority. SECTION 1.02. Rules of Construction. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neutral genders. Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include corporations and associations, including districts, agencies and other public bodies, as well as natural persons. Unless otherwise indicated, references herein to subsections, "Sections" and "Articles" are to such subsections, Sections and Articles of this Installment Purchase Agreement. Unless the context requires otherwise, the terms "herein," "hereof," "hereunder" and any similar terms, as used in this Installment Purchase Agreement, shall refer to this Installment Purchase Agreement as a whole and not to any particular provisions of this Installment Purchase Agreement. The term "issue" shall include issuance, creation, incurrence, entering into an agreement or any other act pursuant to which the City may become obligated with respect to an Obligation. 12 55394.00068\42092413.3 ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.01. Representations by the City. The City makes the following representations: (a) The City is a charter city and municipal corporation of the State, duly organized and validly pursuant to the provisions of the Constitution and the laws of the State and its Charter. (b) The City has full legal right, power and authority to enter into this Installment Purchase Agreement and carry out its obligations hereunder and to carry out and consummate all transactions contemplated by this Installment Purchase Agreement, and the City has complied with the provisions of the Constitution and the laws of the State and its Charter in all matters relating to such transactions. The execution and delivery of this Installment Purchase Agreement is not subject to any voter approval requirement contained in Section 602 of the Charter. (c) By proper action, the City has duly authorized the execution, delivery and due performance of this Installment Purchase Agreement. (d) The execution and delivery of this Installment Purchase Agreement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the City is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the City. (e) The City has determined that it is necessary and proper for the City uses and purposes within the terms of the Constitution and the laws of the State and its Charter that the City acquire the Project in the manner provided for in this Installment Purchase Agreement, in order to provide essential services and facilities to the persons residing in the City. SECTION 2.02. Representations and Warranties by the Authority. The Authority makes the following representations and warranties: (a) The Authority is a joint exercise of powers authority and public entity organized and existing under the laws of the State. (b) The Authority has full legal right, power and authority to enter into this Installment Purchase Agreement and to carry out its obligations hereunder and to carry out and consummate all transactions contemplated by this Installment Purchase Agreement. 13 55394.00068\42092413.3 (c) By proper action, the Authority has duly authorized the execution, delivery and due performance of this Installment Purchase Agreement. (d) The execution and delivery of this Installment Purchase Agreement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (e) The interest components of Tax -Exempt Installment Payment Obligations will not be includable in the gross income of the owners of such Obligations for federal income tax purposes. ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECT SECTION 3.01. Acquisition and Construction of Project; Components. The Authority agrees to apply proceeds of its Obligations in accordance with Section 5.02 of the Indenture, and in connection therewith, the Authority hereby agrees to cause the Project or any Component thereof to be constructed, acquired and installed by the City, as agent of the Authority. The City shall enter into contracts and provide for, as agent of the Authority, the complete construction, acquisition and installation of the Project or any Component thereof as may be necessary. The City hereby agrees that it will cause the construction, acquisition and installation of the Project to be diligently performed. It is hereby expressly understood and agreed that, except to the extent of proceeds of Authority Obligations which are deposited in an Acquisition Fund, the Authority shall be under no liability of any kind or character whatsoever for the payment of any cost of the Project or any Components. In the event the proceeds of Authority Obligations deposited in an Acquisition Fund are insufficient to complete the construction, acquisition and installation of the Project or any Components, the City shall cause to be deposited in such Acquisition Fund (or shall otherwise appropriate and encumber) from and to the extent of available amounts on deposit in the Water Revenue Fund (or other lawfully available moneys) an amount equal to that necessary to complete the construction, acquisition and installation of the Project or such Components. The Authority will not undertake to cause any component of the Project to be constructed, acquired or installed unless and until the City and the Authority have entered into a Supplement specifying the components of the Project to be installed or refinanced, the date of completion, the purchase price to be paid by the City hereunder for that component of the Project, and the Installment Payments or the method of calculating Installment Payments. 14 55394.00068\42092413.3 SECTION 3.02. Changes to the Proiect. (a) From time to time and at any time, the City may modify or amend the description of the Project, to eliminate any part thereof and/or to substitute another Project or Projects, all without obtaining any consent, by filing an amended Exhibit A with the Authority and the Trustee; provided however, that no such amendment shall substitute a Project or Projects which are not to be owned by the City or shall in any way impair the obligations of the City payable from the Water Revenue Fund and contained in any Supplement executed and delivered prior to any such amendment. (b) The City may substitute other improvements for those listed as Components in any Supplement, but only if the City first files with the Authority and the Trustee a certificate of an Authorized City Representative: (i) identifying the Components to be substituted and the Components they replace; (ii) stating that the substituted Components will be owned by the City and payable from the Water Revenue Fund; and (iii) stating that with respect to Components financed with Tax -Exempt Installment Payment Obligations, the estimated costs of construction, acquisition and installation of the substituted improvements are not less than such costs for the improvements previously planned. Substituted Components may include or consist of an undivided interest in such Components, in which event the costs associated with the substituted Components over and above the undivided interest need not be deposited in the Acquisition Fund (or otherwise appropriated and encumbered); provided that the certificate of an Authorized City Representative specifies that the funds necessary to complete the substituted Components are on deposit in the Acquisition Fund or otherwise appropriated and encumbered. ARTICLE IV INSTALLMENT PAYMENTS SECTION 4.01. Purchase Price. (a) The City will pay the Purchase Price for any Components being purchased as provided in a Supplement. The Purchase Price to be paid by the City to the Authority pursuant to any Supplement hereto, solely from Net System Revenues and from no other sources, is the sum of the principal amount of the City's obligations under such Supplement plus the interest to accrue on the unpaid balance of such principal amount from the effective date thereof over the term thereof, subject to prepayment as provided therein. (b) The principal amount of the Installment Payments to be made by the City under a Supplement shall be paid at least five days prior to the date such Installment Payments are payable as specified in such Supplement or at such other earlier time or times and in the manner or manners as specified in such Supplement. 15 55394.00068\42092413.3 (c) The interest to accrue on the unpaid balance of such principal amount shall be paid at least five days prior to the date such interest is payable as specified in a Supplement or at such other earlier time or times as specified in such Supplement, and shall be paid by the City as and constitute interest paid on the principal amount of the City's obligations thereunder. Interest shall be payable in an amount not exceeding the Maximum Rate, at such intervals and according to such interest rate formulas as shall be specified in a Supplement or by reference to any Issuing Instrument to which such Supplement relates, and shall be payable with such frequency as shall be specified therein. SECTION 4.02. Installment Payments, Reserve Fund Payments. (a) The City may, subject to any rights of prepayment provided for in a Supplement, pay to the Authority, solely from Net System Revenues and from no other sources, the Purchase Price in installment payments over a period not to exceed the maximum period permitted by law, all as specified in a Supplement. In the event that a Trustee notifies the City that the amount on deposit in a Reserve Fund or Reserve Account is less than the Reserve Requirement, the City shall deposit or cause to be deposited, solely from Net System Revenues, in such Reserve Fund or Reserve Account such amounts on a monthly basis as are necessary to increase the amount on deposit therein to the Reserve Requirement in the ensuing six months. (b) The obligation of the City to make the Installment Payments solely from Net System Revenues is absolute and unconditional, and until such time as the Purchase Price shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IX), the City will not discontinue or suspend any Installment Payments required to be made by it under this section when due, whether or not the Project or any Component thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments shall not be subject to reduction whether by offset or otherwise and shall not be conditioned upon the performance or nonperformance by any party of any agreement for any cause whatsoever. ARTICLE V SYSTEM REVENUES SECTION 5.01. Commitment of the Net System Revenues. All Parity Obligations, including Parity Installment Payment Obligations, shall be secured by a prior lien on and pledge of Net System Revenues, and within such lien priority, such Parity Obligations shall be of equal rank without preference, priority or distinction of any Parity Obligations over any other Parity Obligations. The City does hereby grant such prior lien on and pledge of Net System Revenues to secure Parity Obligations. Such lien and pledge shall constitute a first lien on Net System Revenues. This Installment Purchase Agreement constitutes a Parity Obligation under the 2014 Master Installment Agreement. The City hereby represents and states that, except as otherwise stated in the 2014 Master Installment Agreement, it has not previously granted any lien or charge on any of the Net System Revenues except as may be stated in a Supplement; provided, however, 16 55394.00068\42092413.3 that out of Net System Revenues there may be apportioned such sums for such purposes as are expressly permitted by this Article V. SECTION 5.02. Allocation of System Revenues. (a) In order to carry out and effectuate the commitment and pledge contained in Section 5.01, the City agrees and covenants that all System Revenues shall be received by the City in trust and shall be deposited when and as received in the City of Santa Ana Water Revenue Fund (the "Water Revenue Fund") and which fund the City agrees and covenants to maintain so long as any Installment Payments remain unpaid, and all moneys in the Water Revenue Fund shall be so held in trust and applied and used solely as provided herein. The City shall pay (i) directly or as otherwise required all Maintenance and Operation Costs, (ii) to the Trustee, as assignee of the Authority, for deposit in the Payment Fund for Parity Obligations, the amounts specified in any Issuing Instrument, as payments due on account of Parity Obligations. In the event there are insufficient Net System Revenues to make all of the payments contemplated by clause (ii) of the immediately preceding sentence, then said payments should be made as nearly as practicable, pro rata, based upon the respective unpaid principal amounts of said Parity Obligations. (b) After the payments contemplated by paragraph (a) above have been made, any remaining Net System Revenues shall be used to make up any deficiency in the Reserve Funds and Reserve Accounts for Parity Obligations. In the event there are insufficient Net System Revenues to make up all deficiencies in all Reserve Funds and Reserve Accounts for Parity Obligations, such payments into Reserve Funds and Reserve Accounts shall be made as nearly as practicable pro rata based on the respective unpaid principal amount of all Parity Obligations. Any amounts thereafter remaining in the Water Revenue Fund may from time to time be used to pay for capital expenditures for the Water System or any other lawful purpose of the City, including payments on account of Subordinated Obligations, provided the following conditions are met: (1) all Maintenance and Operation Costs are being and have been paid and are then current; and (2) all deposits and payments contemplated by clause (ii) of paragraph (a) above shall have been made in full and no deficiency in any Reserve Fund or Reserve Account for Parity Obligations shall exist. SECTION 5.03. Additional Obligations. (a) The City may not create any Obligations the payments of which are senior or prior in right to the payment by the City of Parity Obligations. (b) Without regard to Section 5.03(c), the City may at any time enter into or create an obligation or commitment which is a Credit Provider Reimbursement Obligation or a Qualified Swap Agreement provided the Obligation to which the Qualified Swap Agreement relates is a Parity Obligation. (c) After the initial issuance of Parity Obligations hereunder, the City may at any time and from time to time issue or create any other Parity Obligations, provided: (1) The City is not in default under the term of this Agreement. 17 55394.00068\42092413.3 (2) (i) Net System Revenues, as certified by the City, for the most recent audited Fiscal Year preceding the date of execution of the Parity Obligations, plus (ii) projected Net System Revenues (as described below) are at least equal to 120% of Maximum Annual Debt Service. The projections described in clause (2)(ii) above may take into account (A) increases in the charges made for service from the Water System which have been adopted by the City prior to the date of issuance or incurrence of such Parity Obligations, but which were not in effect for all or part of such preceding Fiscal Year, and which are scheduled to be effective in the period of Debt Service shown for such Parity Obligations, and (2) an allowance for estimated additional average annual Net System Revenues from any additions or connections to or improvements or extensions of the Water System which have occurred from the end of Fiscal Year preceding the date of execution of the Parity Obligations. (3) Notwithstanding the requirements described above, Parity Obligations may be issued or incurred to refund outstanding Parity Obligations if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Parity Obligations (outstanding on the date of issuance or incurrence of such refunding Parity Obligations, but excluding such refunding Parity Obligations) not being refunded are outstanding. (4) The City may but shall not be required to fund a reserve fund or obtain a reserve fund surety or instrument with respect to any Parity Obligations. If a reserve fund is funded for any Parity Obligations or a qualified reserve fund surety or instrument is obtained with respect to any Parity Obligations, such funded reserve fund or qualified reserve fund surety or instrument shall secure only the related Parity Obligations and shall not support the Bonds or any other Parity Obligations. (5) Subordinate Obligations. The City further covenants that it shall not issue or incur any Subordinate Obligations unless Net System Revenues or projected Net System Revenues, calculated in the same manner as described in paragraph (b) above, are equal to at least 100% of the sum of Debt Service on all Parity Obligations and Subordinate Obligations outstanding immediately subsequent to the incurring of such additional obligations. SECTION 5.04. Maintenance and Operation Obligations. Amounts to be paid by the City with respect to any Maintenance and Operation Obligation shall constitute Maintenance and Operation Costs only if at the time such Obligation is entered into the City shall deliver to each Trustee a Certificate of the City to the effect that (i) the making of payments on such Obligation as Maintenance and Operation Costs will not impair the City's ability to comply with the covenant set forth in Section 6.08(a) hereof during the next five Fiscal Years or five Fiscal Years beyond the commercial operation date of the project being financed with such Obligation, whichever is later, and (ii) the properties, services or commodities to be furnished pursuant to such Obligation can be economically and beneficially utilized by the City. If the amounts to be paid by the City for a Maintenance and Operation Obligation do not constitute Maintenance and Operation Costs, then such amounts shall be paid as Subordinate Obligations, in accordance with Section 5.02(b) hereof 18 55394.00068\42092413.3 unless, at the time such Obligation is initially incurred, the City demonstrates compliance with Section 5.03(c), in which event such amounts may be paid as Parity Obligations, in accordance with Section 5.02(a) hereof. ARTICLE VI COVENANTS OF THE CITY SECTION 6.01. Compliance with Installment Purchase Agreement and Ancillary Agreements. The City will punctually pay Parity Obligations in strict conformity with the provisions hereof and any ancillary agreement, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate the Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, 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 or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. The City will faithfully observe and perform all the agreements, conditions, covenants and terms contained in the Installment Purchase Agreement, including Supplements, and any Issuing Instrument relating to Parity Obligations required to be observed and performed by it, and it is expressly understood and agreed by and between the parties to the Installment Purchase Agreement that, subject to Section 10.07 hereof, each of the agreements, conditions, covenants and terms contained herein and therein is an essential and material term of the purchase of and payment for each Component by the City pursuant to, and in accordance with, and as authorized under the Constitution, laws of the State and the Charter. The City shall be unconditionally and irrevocably obligated, as long as any Installment Payment Obligations remain outstanding and unpaid, to take all lawful action necessary or required to continue to entitle the City to collect and deposit such System Revenues in the Water Revenue Fund for use as provided in this Installment Purchase Agreement, provided however, such obligation does not, in any way, limit the City's ability to undertake any and all legal actions, including any appeals, in the defense of a federal court order dictating a water system configuration other than that approved and adopted by the City. SECTION 6.02. Against Encumbrances. The City will not make any pledge of or place any lien on the Net System Revenues except as otherwise provided or permitted herein. SECTION 6.03. Debt Service Reserve Fund. The City may maintain or cause to be maintained each Reserve Fund and Reserve Account at the applicable Reserve Requirement. In the event the amount in any such fund or account falls below the applicable Reserve Requirement, 19 55394.00068\42092413.3 the City will replenish such fund or account up to the applicable Reserve Requirement pursuant to Section 5.02. SECTION 6.04. Against Sale or Other Disposition of Property. The City will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of the System Revenues, except as provided herein. Further, the City will not, except as otherwise provided herein, enter into any agreement or lease which impairs the operation of the Water System or any part thereof necessary to secure adequate Net System Revenues for the payment of the Parity Obligations or which would otherwise impair the rights of the Authority with respect to the System Revenues or the operation of the Water System. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has become worn out, may be sold if such sale will not materially reduce the Net System Revenues and if the proceeds of such sale are deposited in the Water Revenue Fund. SECTION 6.05. Against Competitive Facilities. The City will not, to the extent permitted by existing law, construct, acquire, maintain or operate and will not, to the extent permitted by existing law and within the scope of its powers, permit any other public or private agency, authority, district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the City any water system competitive with the Water System. SECTION 6.06. Prompt Acquisition and Construction. The City will take all necessary and appropriate steps to construct, acquire and install the Project, as agent of the Authority, with all practicable dispatch and in an expeditious manner and in conformity with law so as to complete the same as soon as possible. SECTION 6.07. Maintenance and Operation of the Water System; Budgets. The City will maintain and preserve the Water System in good repair and working order at all times and will operate the Water System in an efficient and economical manner and will pay all Maintenance and Operation Costs as they become due and payable. The City will adopt and file with the Authority, on or before the effective date hereof, a budget approved by the City Council of the City setting forth the estimated Maintenance and Operation Costs for the period from such date until the close of the then current Fiscal Year. On or before August 1, of each Fiscal Year, the City will adopt, and on or before one hundred and twenty (120) days after the beginning of the Fiscal Year, file with the Authority a budget approved by the City Council of the City setting forth the estimated Maintenance and Operation Costs for such Fiscal Year. Any budget may be amended at any time during any Fiscal Year and such amended budget shall be filed by the City with the Authority. SECTION 6.08. Amount of Rates and Charges; Rate Stabilization Fund. (a) The City hereby covenants to fix, prescribe, revise and collect rates and charges for the services and facilities furnished by the Water System during each Fiscal Year which (together with other funds accumulated from System Revenues and which are lawfully available to the City for payment of any of the following amounts during such Fiscal Year) are at least sufficient, after making allowances for contingencies and errors in estimates, to pay the following amounts in the following order: 20 55394.00068\42092413.3 (i) all Maintenance and Operation Costs of the Water System estimated by the City to become due and payable in such Fiscal Year; (ii) all Debt Service coming due and payable in such Fiscal Year; and (iii) all payments required to meet any other obligations of City which are charges, liens or encumbrances upon, or payable from, the Net System Revenues. The City shall fix, prescribe, revise and collect rates and charges for the services and facilities furnished by the Water System during each Fiscal Year which are sufficient to yield Net System Revenues, at least equal to one hundred and twenty percent (120%) of the amounts payable under the preceding clause (ii) in such Fiscal Year. (b) The City may establish, as a fund within the Water Revenue Fund, a fund denominated the Rate Stabilization Fund. From time to time the City may deposit into the Rate Stabilization Fund, from current System Revenues, such amounts as the City shall determine and the amount of available current System Revenues shall be reduced by the amount so transferred. Amounts may be transferred from the Rate Stabilization Fund solely and exclusively to pay Maintenance and Operation Costs, and any amounts so transferred shall be deemed System Revenues when so transferred. All interest or other earnings upon amounts in the Rate Stabilization Fund may be withdrawn therefrom and accounted for as System Revenues. SECTION 6.09. Payment of Claims. The City will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Net System Revenues or any part thereof or on any funds in the hands of the City or the Trustee might impair the security of the Installment Payments, but the City shall not be required to pay such claims if the validity thereof shall be contested in good faith. SECTION 6.10. Compliance with Contracts. The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts for the use of the Water System and all other contracts affecting or involving the Water System to the extent that the City is a party thereto. SECTION 6.11. Insurance. (a) The City will procure and maintain or cause to be procured and maintained insurance on the Water System with responsible insurers, or provide self insurance reserves, in such amounts and against such risks (including accident to or destruction of the Water System) as are usually covered in connection with water systems similar to the Water System. In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance or self insurance, the Net Proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The City shall begin such reconstruction, repair or replacement promptly after such damage or destruction shall occur, and shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Water System shall be free and clear of all claims and liens unless the City determines that such property or facility is not necessary to the efficient or proper operation of the Water System and therefore 21 55394.00068\42092413.3 determines not to reconstruct, repair or replace such project or facility. If such Net Proceeds exceed the costs of such reconstruction, repair or replacement, then the excess Net Proceeds shall be deposited in the Water Revenue Fund and be available for other proper uses of funds deposited in the Water Revenue Fund. (b) The City will procure and maintain such other insurance which it shall deem advisable or necessary to protect its interests and the interests of the Authority, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with water systems similar to the Water System; provided that any such insurance may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with water systems similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound. All policies of insurance required to be maintained herein shall, to extent reasonably obtainable, provide that the Authority and the Trustee shall be given thirty (30) days' written notice of any intended cancellation thereof or reduction of coverage provided thereby. SECTION 6.12. Accounting Records; Financial Statements and Other Reports. (a) The City will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Water System, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions. (b) The City will prepare and file with the Authority annually within the number of days specified below after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2024) -- (1) within 270 days, financial statements of the Water Revenue Fund for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant's Report thereon; and (2) within 60 days, a detailed report as to all insurance policies maintained and self-insurance programs maintained by the City with respect to the Water System as of the close of such Fiscal Year, including the names of the insurers which have issued the policies and the amounts thereof and the property or risks covered thereby, together with a certification from the City to the Authority and the Trustee that it is in compliance with the insurance requirements hereunder. (c) The City will furnish a copy of the financial statements referred to in (b)(1) above to any Owner of the Bonds requesting a copy thereof. SECTION 6.13. Protection of Security and Rights of the Authority. The City will preserve and protect the security hereof and the rights of the Authority to the Installment Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. SECTION 6.14. Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may 22 55394.00068\42092413.3 hereafter be lawfully imposed upon the Water System or any part thereof or upon the System Revenues when the same shall become due. The City will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Water System or any part thereof, but the City shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith. SECTION 6.15. Collection of Rates and Charges; No Free Service. The City will have in effect at all times rules and regulations for the payment of bills for Water Service. In each case where a bill remains unpaid in whole or in part after it becomes delinquent, the City may disconnect such premises from the water service, and such premises shall not thereafter be reconnected to the water service except in accordance with City operating rules and regulations governing such situations of delinquency. The City will not permit any part of the Water System or any facility thereof to be used or taken advantage of free of charge by any authority, firm or person, or by any public agency (including the United States of America, the State and any city, county, district, political subdivision, public authority or agency thereof). SECTION 6.16. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, then the Net Proceeds thereof shall be applied to the replacement of the property or facilities so taken, unless the City determines that such property or facility is not necessary to the efficient or proper operation of the Water System and therefore determines not to replace such property or facilities. Any Net Proceeds of such award not applied to replacement or remaining after such work has been completed shall be deposited in the Water Revenue Fund and be available for other proper uses of funds deposited in the Water Revenue Fund. SECTION 6.17. Tax Covenants. There shall be included in each Supplement relating to Tax -Exempt Installment Payment Obligations such covenants as are deemed necessary or appropriate by Bond Counsel for the purpose of assuring that interest on such Installment Payment Obligations shall be excluded from gross income under Section 103 of the Code. SECTION 6.18. Further Assurances. The City will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Authority of the rights and benefits provided to it herein. SECTION 6.19. Operate Water System. The City will operate the Water System in an efficient and economical manner, provided that the City may remove from service on a temporary or permanent basis such part or parts of the Water System so long as (a) Net System Revenues are equal to one hundred twenty percent (120%) of the Debt Service for the then current Fiscal Year and for each Fiscal Year thereafter to and including the Fiscal Year during which the last Installment Payment is due as evidenced by an Engineer's Report on file with the City, and (b) the City shall have filed with the Trustee an opinion of nationally recognized Bond Counsel to the effect that the removal of such part or parts of the Water System will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on Tax -Exempt Installment Payment Obligations. 23 55394.00068\42092413.3 SECTION 6.20. Additional Covenants. The City may provide additional covenants pursuant to any Supplement, including covenants relating to any Credit Support obtained for Installment Payment Obligations; provided, however, that such additional covenants do not materially and adversely affect the right of Owners of Outstanding Obligations issued prior to any such Supplement. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS SECTION 7.01. Prepayment of Installment Payments. Provisions may be made in any Supplement for the prepayment of Installment Payments, in whole or in part, in such multiples and in such order of maturity and from funds of any source, and with such prepayment premiums and other terms as are specified in the Supplement. Said Supplement shall also provide for any notices to be given relating to such prepayment. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY SECTION 8.01. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen, that is to say -- (1) if default shall be made in the due and punctual payment of or on account of any Parity Obligation (other than a Qualified Swap Agreement) as the same shall become due and payable; (2) if default shall be made by the City in the performance of any of the agreements or covenants required herein to be performed by it (other than as specified in clause (1) above and other than any such agreements or covenants, if any, arising in connection with any Qualified Swap Agreement), and such default shall have continued for a period of sixty (60) days after the City shall have been given notice in writing of such default by the Authority; (3) if any Event of Default specified in any Supplement or Issuing Instrument shall have occurred and be continuing; or (4) if the City 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 City 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 City or of the whole or any substantial part of its property; then and in each and every such case during the continuance of such Event of Default the Authority shall upon the written request of the Owners of twenty-five percent (25%) or more of the aggregate 24 55394.00068\42092413.3 principal amount of all Series of Parity Installment Obligations Outstanding, voting collectively as a single class, by notice in writing to the City, declare the entire unpaid principal amount thereof and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding; provided, that with respect to a Series of Parity Installment Obligations supported by a Credit Support Instrument, acceleration shall not be effective unless the declaration is consented to by the related Credit Provider. This subsection however, is subject to the condition that if at any time after the entire principal amount of all Series of Parity Installment Obligations and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the City shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of all such Series of Parity Installment Obligations and the unpaid payments of any other Parity Obligations referred to in clause (1) above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments at the rate or rates applicable thereto in accordance with their terms, and the reasonable expenses of the Authority, and any and all other defaults known to the Authority (other than in the payment of the entire principal amount of the unpaid Parity Installment Obligations and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority, by written notice to the City, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. SECTION 8.02. Application of Net System Revenues Upon Acceleration. Subject to the provisions of any Issuing Instrument, all Net System Revenues received after the date of the declaration of acceleration by the Authority as provided in Section 8.01 shall be applied as set forth in such Issuing Instrument. SECTION 8.03. Other Remedies of the Authority. The Authority shall have the right, subject to receipt of consent from any Credit Provider with respect to a particular Series of Parity Installment Obligations— (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the City or any councilmember, officer or employee thereof, and to compel the City or any such councilmember, officer or employee to perform and carry out its or his duties under the Law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the City and its councilmembers, officers and employees to account as the trustee of an express trust. SECTION 8.04. Non -Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the City, which is absolute and unconditional, to pay the 25 55394.00068\42092413.3 Installment Payments to the Authority at the respective due dates or upon prepayment from the Net System Revenues and the other funds herein committed for such payment, or shall affect or impair the right of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Authority 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 the Authority 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 Authority by the Law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority, the City and the Authority shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. SECTION 8.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority 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 in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. ARTICLE IX DISCHARGE OF OBLIGATIONS SECTION 9.01. Discharge of Obligations. If the City shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Installment Payment Obligations of a Series the interest thereon and the principal thereof and the redemption premiums, if any, thereon or if all such Outstanding Obligations shall be deemed to have been paid at the times and in the manner stipulated in the applicable Issuing Instrument, then all agreements, covenants and other obligations of the City hereunder shall thereupon cease, terminate and become void and be discharged and satisfied (but only as to such Series) except for the obligation of the City to pay or cause to be paid all sums due hereunder. ARTICLE X MISCELLANEOUS SECTION 10.01. Liability of City Limited to System Revenues. Notwithstanding anything contained herein, the City shall not be required to advance any moneys derived from any source of income other than the Net System Revenues and the other funds provided herein for the payment of the Installment Payments or for the performance of any other agreements or covenants required to be performed by it contained herein. The City may, however, but in no event shall be 26 55394.00068\42092413.3 obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose. The obligation of the City to make the Installment Payments is a special obligation of the City payable solely from such Net System Revenues and other funds provided for herein, and does not constitute a debt of the City or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. SECTION 10.02. Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the City, the Authority or the assigns of the Authority and any Credit Provider any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the City or the Authority shall be for the sole and exclusive benefit of the other party. SECTION 10.03. Amendments. This Agreement may be amended with respect to a Series of Installment Payment Obligations in writing as may be mutually agreed by the City and the Authority, with the written consent of any Credit Provider which is providing insurance until the final maturity or payment in full of one or more maturities of such Installment Payment Obligations, or any other Credit Provider for such Installment Payment Obligations and the Owners of a majority in aggregate principal amount of such Installment Payment Obligations then Outstanding, provided that no such amendment shall (a) extend the payment date of any Installment Payment, or reduce the amount of any Installment Payment without the prior written consent of the Owner of each Obligation so affected, or (b) reduce the percentage of Installment Payment Obligations the consent of the Owners of which is required for the execution of any amendment of this Installment Purchase Agreement. With the written consent of any Credit Provider, this Agreement and the rights and obligations of the City and the Authority hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution by the City and the Authority, without the written consents of any Owner of Installment Obligations, but only to the extent permitted by law and only upon receipt of an unqualified opinion of nationally recognized Bond Counsel selected by the City and approved by the Authority to the effect that such amendment or supplement is permitted by the provisions of this Agreement and is not inconsistent with this Agreement and does not adversely affect the exclusion of the interest portion of the Installment Payments received by the Owners from gross income for federal income tax purposes, and only for any one or more of the following purposes -- (1) to add to the covenants and agreements of the Authority or the City contained in this Agreement other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the Authority or the City, and which shall not adversely affect the interests of the Owners of the Installment Payment Obligations; (2) to cure, correct or supplement any ambiguous or defective provision contained in this Agreement or in regard to questions arising under this Agreement, as the 27 55394.00068\42092413.3 Authority or the City may deem necessary or desirable and which shall not adversely affect the interests of the Owners of the Installment Payment Obligations; and (3) to make such other amendments or modifications which shall not materially adversely affect the interests of the Owners of the Installment Payment Obligations. SECTION 10.04. Successor Is Deemed Included in all References to Predecessor. Except as otherwise provided herein, whenever either the City or the Authority is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the City or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the City or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 10.05. Waiver of Personal Liability. No official, officer or employee of the City shall be individually or personally liable for the payment of the Installment Payments, but nothing contained herein shall relieve any official, officer or employee of the City from the performance of any official duty provided by any applicable provisions of law or hereby. SECTION 10.06. 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 City or the Authority 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. SECTION 10.07. Assignment. The Installment Purchase Agreement and any rights hereunder may be assigned by the Authority, as a whole or in part, without the necessity of obtaining the prior consent of the City. The assignment of the Installment Purchase Agreement or rights hereunder or under a Supplement to a Trustee is solely in its capacity as Trustee and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Issuing Instrument, SECTION 10.08. Net Contract. The Installment Purchase Agreement shall be deemed and construed to be a net contract, and the City shall pay absolutely net during the term hereof the Installment Payments and all other payments required hereunder, free of any deductions and without abatement, diminution or setoff whatsoever. SECTION 10.09. California Law. The Installment Purchase Agreement shall be construed and governed in accordance with the laws of the State. SECTION 10.10. Notices. All written notices to be given hereunder shall be given by first class mail, postage prepaid, courier or hand delivery to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other party in writing from time to time, namely: If to the City: City of Santa Ana 20 Civic Center Plaza Santa Ana, CA 92701 Attn: Department of Finance 28 55394.00068\42092413.3 If to the Authority: Santa Ana Public Financing Authority 20 Civic Center Plaza Santa Ma, CA 92701 Attn: Executive Director SECTION 10.11. Effective Date. The Installment Purchase Agreement shall become effective as to Installment Payments provided for in a Supplement upon the execution and delivery of such Supplement or as otherwise specified therein, and shall terminate as to such Supplement when the Installment Payments contemplated by such Supplement shall have been fully paid or prepaid (or provision for the payment thereof shall have been made as provided herein). SECTION 10.12. Execution in Counterparts. The Installment Purchase Agreement and each Supplement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. (Signature page follows) 29 55394.00068\42092413.3 IN WITNESS WHEREOF, the parties hereto have executed and attested this Master Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST: Clerk of the Council APPROVED AS TO FORM: ATTEST: City Attorney Secretary APPROVED AS TO FORM: CITY OF SANTA ANA LE City Manager SANTA ANA PUBLIC FINANCING AUTHORITY Executive Director Authority Counsel -Signature Page - Master Installment Purchase Agreement S-1 55394.00068\42092413.3 EXHIBIT A DESCRIPTION OF ENTIRE PROJECT Pursuant to Section 3.02 of the Installment Purchase Agreement, this Exhibit A may be amended from time to time and at any time to modify or amend the description of the Project, to eliminate any part thereof and/or to substitute a Project or Projects, all without obtaining any consent, by filing an amended Exhibit A with the Authority and the Trustee; provided however, that no such amendment shall in any way impair the obligations of the City contained in any Supplement executed and delivered prior to any such amendment. A-1 55394.00068\42092413.3 BBK DRAFT — MAY 14, 2024 EXHIBIT 3 FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT by and between the CITY OF SANTA ANA and the SANTA ANA PUBLIC FINANCING AUTHORITY Dated as of .2024 Relating to Installment Payments Secured by the Water Revenue Fund of the City of Santa Ana, California 55394.00068\42086635.3 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND AMENDMENTS.......................................................... 2 Section1.01. Definitions.................................................................................................... 2 Section 1.02. Definitions in Agreement and Indenture...................................................... 3 ARTICLE II REPRESENTATIONS AND WARRANTIES ................................................ 3 Section 2.01. The City hereby makes the following representations: ................................ 3 Section 2.02. The Authority hereby makes the following representations and warranties:............................................................................................ 4 ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE AUTHORITY; PAYMENT............................................................................. 4 Section 3.01. Purchase and Sale of Project........................................................................ 4 Section3.02. Payment........................................................................................................ 4 ARTICLE IV PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CITY; PAYMENT........................................................................................... 5 Section 4.01. Purchase and Sale of Project........................................................................ 5 Section 4.02. The City agrees to pay as Component Installment Payments, solely from Net System Revenues as provided in the Agreement, the following: ............................................................................................. 5 Section 4.03. The Component Installment Payments specified herein are Parity Installment Obligations........................................................................ 5 ARTICLE V PREPAYMENT AND REDEMPTION.......................................................... 6 Section 5.01. Prepayment and Redemption....................................................................... 6 ARTICLE VI ADDITIONAL COVENANTS....................................................................... 6 Section 6.01. Additional Covenants................................................................................... 6 ARTICLE VII MISCELLANEOUS........................................................................................ 7 Section 7.01. Liability of City Limited.............................................................................. 7 Section 7.02. Limitation of Rights..................................................................................... 7 Section7.03. Assignment.................................................................................................. 7 Section7.04. Notices......................................................................................................... 7 Section 7.05. Waiver of Personal Liability........................................................................ 8 Section 7.06. Article and Section Headings, Gender and References ............................... 8 Section 7.07. Partial Invalidity........................................................................................... 9 Section7.08. Law Governing............................................................................................ 9 Section 7.09. Execution in Counterparts............................................................................ 9 EXHIBIT A — THE PROJECT.................................................................................................. A-1 55394.00068\42086635.3 FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT This FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT, made and entered into as of 1, 2024 (this "Supplement"), by and between the CITY OF SANTA ANA, a charter city and municipal corporation organized and existing under and by virtue of the Constitution and the laws of the State of California and its Charter (the "City"), and the SANTA ANA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority and public entity duly organized and existing under and by virtue of the State of California (the "Authority"); WITNESSETH: WHEREAS, the City previously financed the acquisition, construction and installation of certain improvements to its Water System (the "Project") (capitalized terms used herein shall have the meanings given such teens in Section 1.01) through the incurrence of certain Prior Obligations, defined herein. WHEREAS, the City desires to finance and refinance the Project by prepaying the Prior Obligations; WHEREAS, concurrently with the prepayment of the Prior Obligations, the City will reacquire the Project and will resell the Project to the Authority and then repurchase the Project from the Authority pursuant to this Supplement; WHEREAS, the City and the Authority have heretofore entered into a Master Installment Purchase Agreement, dated as of 1, 2024 (the "Agreement"), pursuant to which the Authority has agreed to provide the Project and any Components thereof to the City and the City has agreed from time to time to purchase the Project and/or Components thereof as are specified in a Supplement, and has declared the conditions and terms upon which obligations such as installment payments (the "Component Installment Payments"), and the interest thereon, are to be incurred and secured; WHEREAS, the Authority proposes to assign without recourse certain of its rights under and pursuant to this Supplement to U.S. Bank Trust Company, National Association, as trustee (the "Trustee"); WHEREAS, in consideration of such assignment and the execution and entering into of the Indenture, dated as of the date hereof, by and between the Trustee and the Authority, the Authority has agreed to issue its Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues) (the "Component Obligation Series 2024"); WHEREAS, a portion of the proceeds of the Component Obligation Series 2024 will be used to provide for the prepayment of the Prior Obligations; and 55394.00068\42086635.3 WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Supplement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Supplement; NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS AND AMENDMENTS SECTION 1.01. Definitions. All of the definitions contained in the Agreement shall apply to this Supplement except as otherwise expressly provided. In addition, the following terms are defined herein. "Closing Date" means , 2024. "Components" means the components of the Project specified in Exhibit A hereto for which the City will be making Installment Payments as hereinafter specified. "Component Installment Payments" means the Installment Payments herein specified which are to pay the Purchase Price of the Components. "Component Obligation Series 2024" means the Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues). "First Supplement" means this First Supplement to Master Installment Purchase Agreement, by and between the City and the Authority, dated as of , 2024, securing the 2024 Bonds. "Indenture" means the Indenture, dated as of , 2024, by and between the Trustee and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. "Person" means an individual, corporation, limited liability company, film, association, partnership, trust or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. "Prior Installment Agreement" means the Master Installment Purchase Agreement, dated as of August 1, 2014, as supplemented by the First Supplement to Master Installment Purchase Agreement, dated as of August 1, 2014, each by and between the City and the Santa Ana Financing Authority and securing the payment of the Prior Obligations. 2 55394.00068\42086635.3 "Prior Obligations" means the Santa Ana Financing Authority Water Revenue Bonds, Series 2014 (Payable Solely from Installment Payments Secured by Water System Net Revenues). "Trustee" means U.S. Bank Trust Company, National Association, and its successors or assigns, or any successor trustee. SECTION 1.02. Definitions in Agreement and Indenture. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Agreement or the Indenture shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein, have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Supplement than under the Agreement or the Indenture, as used herein it shall have the meaning given herein. ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.01. The City hereby makes the following representations: (a) The City is a charter city and municipal corporation of the State, duly organized and validly existing pursuant to the provisions of the Constitution and the laws of the State and its Charter. (b) The City has full legal right, power and authority to enter into this Supplement and carry out its obligations hereunder, to carry out and consummate all transactions contemplated by this Supplement, and the City has complied with the provisions of the Constitution and the laws of the State and its Charter in all matters relating to such transactions. The execution and delivery of this Supplement is not subject to any voter approval requirement contained in Section 602 of the Charter. (c) By proper action, the City has duly authorized the execution, delivery and due performance of this Supplement. (d) The execution and delivery of this Supplement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the City is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the City. (e) The City has determined that it is necessary and proper for the City uses and purposes within the terms of the Constitution and the laws of the State and its Charter and that the City refinance the Project in the manner provided for in this Supplement, in order to provide essential services and facilities to the persons residing in the City. 55394.00068\42086635.3 SECTION 2.02. The Authority hereby makes the following representations and warranties: (a) The Authority is a joint exercise of powers authority and public entity organized and existing under the laws of the State. (b) The Authority has full legal right, power and authority to enter into this Supplement and to carry out its obligations hereunder and to carry out and consummate all transactions contemplated by this Supplement. (c) By proper action, the Authority has duly authorized the execution, delivery and due performance of this Supplement. (d) The execution and delivery of this Supplement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (e) The interest components of Component Installment Payments will not be includable in the gross income of the owners of such Component Installment Payments for federal income tax purposes. ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE AUTHORITY; PAYMENT SECTION 3.01. Purchase and Sale of Project. Upon prepayment of the Prior Obligations and the discharge of the City's obligations under the First Installment Agreement, the City represents and warrants that it is the sole and exclusive owner of the Project. The Authority hereby purchases from the City, and the City hereby sells to the Authority, the Project in accordance with the provisions of this Supplement. All right, title and interest in the Project shall immediately vest in the Authority on the Closing Date without further action on the part of the Authority or the City. SECTION 3.02. Payment. On the Closing Date, the Authority shall pay to the City, as and for the purchase price of the Project, the amount of $ , which amount shall be paid from the proceeds of the Component Obligation Series 2024. 4 55394.00068\42086635.3 ARTICLE IV PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CITY; PAYMENT SECTION 4.01. Purchase and Sale of Project. The City hereby purchases from the Authority, and the Authority hereby sells to the City, the Project in accordance with the provisions of this Supplement. On the Closing Date, immediately subsequent to the vesting of all right, title and interest in the Project in the Authority pursuant to Section 2.01 hereof, all right, title and interest in the Project shall vest in the City without further action on the part of the City or the Authority SECTION 4.02. The City agrees to pay as Component Installment Payments, solely from Net System Revenues as provided in the Agreement, the following: Interest Installment Portion of Payment Date Installment (September 1) Payments Principal Portion of Total Component Installment Installment Payments Payments SECTION 4.03. The Component Installment Payments specified herein are Parity Installment Obligations. 5 55394.00068\42086635.3 ARTICLE V PREPAYMENT AND REDEMPTION SECTION 5.01. Prepayment and Redemption. The City shall have the following rights and duties to prepay Component Installment Payments: The Component Installment Payments payable on or after September 1, are subject to prepayment, at the option of the City, upon at least 45 days prior written notice to the Authority and the Trustee specifying the date and amount of such prepayment, on or after September 1, , at a prepayment price equal to 100% of the Principal Portion of Component Installment Payments to be prepaid plus the unpaid Interest Portion of Component of Installment Payments up to the date fixed for prepayment. ARTICLE VI ADDITIONAL COVENANTS SECTION 6.01. Additional Covenants. In addition to the covenants specified in the Agreement, the following additional covenants are added with respect to the Component Obligation Series 2024: The City will not directly or indirectly use or permit the use of any proceeds of the Component Obligation Series 2024 or any other funds of the City or of the Project or take or omit to take any action that would cause the Component Obligation Series 2024 to be "private activity bonds" within the meaning of Section 141 of the Code, or obligations which are "federally guaranteed" within the meaning of Section 149(b) of the Code. The City covenants that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of the interest represented by the Component Obligation Series 2024 under Section 103 of the Code. The City will not directly or indirectly use or permit the use of any proceeds of the Component Obligation Series 2024 or any other funds of the City, or take or omit to take any action, that would cause the Component Obligation Series 2024 to be "arbitrage bonds" within the meaning of Section 148(a) of the Code. To that end, the City will comply with all requirements of Section 148 of the Code to the extent applicable to the Component Obligation Series 2024. In the event that at any time the City is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on the investment of any moneys held by the Trustee under the Indenture or otherwise, the City shall so instruct the Trustee in writing, and shall cause the Trustee to take such action as may be necessary in accordance with such instructions. Without limiting the generality of the foregoing, the City agrees that there shall be paid from time to time all amounts required to be rebated to the United States of America pursuant to Section 148(f) of the Code and any temporary, proposed or final Treasury Regulations as may be applicable to the Component Obligation Series 2024 from time to time. This covenant shall survive payment in full or defeasance of the Component Obligation Series 2024. The City specifically covenants to pay or cause to be paid to the United States of America at the times and in the amounts 6 55394.00068\42086635.3 determined under this Section the Rebate Requirement, as described in the Tax Certificate and to otherwise comply with the provisions of the Tax Certificate executed by the City in connection with the execution and delivery of the Component Obligation Series 2024. Notwithstanding any provision of this Section, if the City shall provide to the Trustee an opinion of nationally recognized Bond Counsel to the effect that any action required under this Section is no longer required, or to the effect that some further action is required, to maintain the exclusion from gross income of the interest on the Component Obligation Series 2024 pursuant to Section 103 of the Code, the Trustee may rely conclusively on such opinion in complying with the provisions hereof, and the covenants hereunder shall be deemed to be modified to that extent. ARTICLE VII MISCELLANEOUS SECTION 7.01. Liability of City Limited. Notwithstanding anything contained herein, the City shall not be required to advance any moneys derived from any source of income other than Net System Revenues and the other funds provided herein for the payment of the Component Installment Payments, and the interest thereon, and other payments required to be made by it hereunder, or for the performance of any agreements or covenants required to be performed by it contained herein. The City may, however, but in no event shall be obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose. The obligation of the City to pay the Component Installment Payments, and the interest thereon, and other payments required to be made by it hereunder is a special obligation of the City payable, in the manner provided herein, solely from Net System Revenues and other funds provided for herein, and does not constitute a debt of the City or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the City or the State, or any political subdivision thereof, is pledged to the payment of the Component Installment Payments, or the interest thereon, or any other payments required to be made hereunder. SECTION 7.02. Limitation of Rights. Nothing in this Supplement expressed or implied is intended or shall be construed to give to any Person other than the City, the Authority and the Trustee, as assignee of the Authority, any legal or equitable right, remedy or claim under or in respect of this Supplement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the City, the Authority and the Trustee, as assignee of the Authority. SECTION 7.03. Assignment. The City and the Authority hereby acknowledge the transfer, conveyance and assignment by the Authority to the Trustee of all of the Authority's rights, title and interest under this Supplement, including the right to receive Component Installment Payments, and the interest thereon, from the City, pursuant to the Indenture. SECTION 7.04. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be 7 55394.00068\42086635.3 given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the City: City of Santa Ana 20 Civic Center Plaza Santa Ana, CA 92701 Attn: Department of Finance If to the Authority: Santa Ana Public Financing Authority 20 Civic Center Plaza Santa Ana, CA 92701 Attn: Executive Director If to the Trustee: U.S. Bank Trust Company, National Association U.S. Bank Tower 633 West 5t' St., 241h Floor Los Angeles, CA 90071 Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Any notice to be given to or by the Authority hereunder shall, upon the assignment of the Authority's rights hereunder to the Trustee, also be given to or by the Trustee. SECTION 7.05. Waiver of Personal Liability. No official, officer or employee of the City shall be individually or personally liable for the payment of the Component Installment Payments, or the interest thereon, or other payments required to be made by the City hereunder, but nothing contained herein shall relieve any official, officer or employee of the City from the performance of any official duty provided by any applicable provisions of law or hereby. SECTION 7.06. Article and Section Headings, Gender 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, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof, and the words "hereby," "herein," "hereof .. "hereto," "herewith" and other words of similar import refer to this Supplement as a whole and not to any particular Article, Section, subdivision or clause hereof. 8 55394.00068\42086635.3 SECTION 7.07. 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 City or the Authority 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. SECTION 7.08. Law Governing. This Supplement shall be construed and governed in accordance with the laws of the State. SECTION 7.09. Execution in Counterparts. This Supplement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. (Signature page follows) 9 55394.00068\42086635.3 IN WITNESS WHEREOF, the parties hereto have executed and attested this First Supplement to Master Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST: Clerk of the Council APPROVED AS TO FORM: City Attorney ATTEST: Secretary APPROVED AS TO FORM: Authority Counsel CITY OF SANTA ANA City Manager SANTA ANA PUBLIC FINANCING AUTHORITY Executive Director -Signature Page - First Supplement to Master Installment Purchase Agreement S-1 55394.00068\42086635.3 EXHIBIT A THE PROJECT The acquisition, installation, and construction of water facilities of the City. A-1 55394.00068\42086635.3 EXHIBIT 4 ESCROW AGREEMENT by and between the CITY OF SANTA ANA and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. Dated as of , 2024 Santa Ana Financing Authority Water Revenue Bonds, Series 2014 (Payable Solely from Installment Payments Secured by Water System Net Revenues) 55394.00068\42304978.2 ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Escrow Agreement"), executed and entered into as of August 1, 2014, is by and between the CITY OF SANTA ANA (the "City") and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as escrow agent (the "Escrow Agent"). WITNESSETH: WHEREAS, there are currently outstanding Santa Ana Financing Authority Water Revenue Refunding Bonds, Series 2014 (Payable Solely from Installment Payments Secured by Water System Net Revenues) (the "Prior Bonds"), in the original aggregate principal amount of $15,690,000; WHEREAS, the Prior Bonds were issued under the Indenture, dated as of August 1, 2014 (as supplemented and amended, the "Prior Indenture"), by and between The Bank of New York Mellon Trust Company, N.A. (the "Trustee"), and the Authority; WHEREAS, the Prior Bonds are payable from component installment payments (the "2014 Installment Payments") payable by the City under the Master Installment Purchase Agreement, dated as of August 1, 2014 (the "Master Installment Purchase Agreement"), between the City and the Authority, and the First Supplement to Master Installment Purchase Agreement, dated as of August 1, 2014, between the City and the Authority (the "Prior Supplement" and together with the Master Installment Purchase Agreement, the "Prior Installment Purchase Agreement") and pertaining to the City's water system; WHEREAS, the Escrow Agent is the trustee under the Prior Indenture; WHEREAS, the City has determined that a savings will be realized by exercising its option under the Prior Installment Purchase Agreement to prepay said component installment payments, thereby providing the funds necessary to pay, when due, the principal of and interest on the Prior Bonds to and including September 1, 2024 and to redeem the Prior Bonds on September 1, 2024 (the "Redemption Date") at a redemption price (the "Redemption Price") equal to % of the principal amount of the Prior Bonds plus the accrued but unpaid interest on the Prior Bonds, to the Redemption Date; WHEREAS, in order to provide the funds necessary to exercise said option, the Authority has issued $ aggregate principal amount of Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues) (the "Bonds") pursuant to the Indenture, dated as of , 2024 (the "Indenture"), by and between the Trustee and the Authority; WHEREAS, the Prior Bonds are subject to redemption on the Redemption Date and the City has determined to provide for the call for redemption on the Redemption Date of the Prior Bonds outstanding on the Redemption Date; NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the City and the Escrow Agent agree as follows: 1 55394.00068\42304978.2 Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Prior Indenture or, if no meanings are ascribed thereto in the Prior Indenture, such terms shall have the meanings ascribed thereto in the Prior Installment Purchase Agreement. Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow Fund") to be held as an irrevocably pledged escrow by the Escrow Agent, which the Escrow Agent shall keep separate and apart from all other funds of the City and the Escrow Agent and to be applied solely as provided in this Escrow Agreement. Pending application as provided in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged and assigned solely to the payment of (i) the principal of and interest on the Prior Bonds coming due on and prior to the Redemption Date, and (ii) the Redemption Price on the Redemption Date, which amounts shall be held in trust by the Escrow Agent for the Owners of the Prior Bonds. (b) Upon the execution and delivery of the Bonds, the Escrow Agent is hereby directed to deposit in the Escrow Fund $ received from the proceeds of the sale of the Bonds as provided in Section 5.02 of the Indenture, and to transfer $ from the funds and accounts under the Prior Indenture to the Escrow Fund. (c) Upon the deposit of moneys pursuant to Section 2(b), the moneys on deposit in the Escrow Fund will be at least equal to an amount sufficient to purchase the aggregate principal amount of defeasance securities permitted by Section 12.01 of the Prior Indenture ("Defeasance Securities") set forth in Exhibit A hereto (the "Exhibit A Securities"), which principal, together with all interest due or to become due on such Exhibit A Securities, and any uninvested cash held by the Escrow Agent in the Escrow Fund, will be sufficient to make the payments required by Section 4 hereof. Section 3. Investment of Moneys. The Escrow Agent shall not invest the moneys deposited in the Escrow Fund and such sum shall be held as cash in the Escrow Fund. The report of the Verification Agent stating that the moneys deposited into the Escrow Fund are calculated to be in an amount sufficient to pay the principal, redemption premium and interest on the Refunded Bonds and to redeem the Refunded Bonds on September 1, 2024. The Escrow Agent shall hold all such moneys in the Escrow Fund, and shall apply the same only for the purposes and in the manner provided in this Escrow Agreement. Section 4. Payment of Prior Bonds. From the maturing principal of the Defeasance Securities held in the Escrow Fund and the investment income and other earnings thereon and any uninvested money then held in the Escrow Fund, the Escrow Agent shall apply such amounts, as follows: (a) On each interest payment date for the Prior Bonds to and including the Redemption Date, the Escrow Agent shall pay interest on the Prior Bonds in accordance with the terms of the Prior Indenture. 2 55394.00068\42304978.2 (b) On each principal payment date for the Prior Bonds to and including the Redemption Date, the Escrow Agent shall pay the principal of the Prior Bonds in accordance with the terms of the Prior Indenture. (c) On the Redemption Date, the Escrow Agent shall pay the Redemption Price in accordance with the terms of the Prior Indenture. To the extent that the amount on deposit in the Escrow Fund on the Redemption Date is in excess of the amount necessary to make the required payments with respect to the Prior Bonds, as shown in the then applicable escrow verification of the nationally recognized firm of independent certified public accountants, such excess shall be transferred to the Trustee for deposit in the Interest Account established under the Indenture. Section 5. Irrevocable Instructions to Mail Notices. The City hereby irrevocably designates the Prior Bonds for prior redemption on the Redemption Date as indicated in Section 4 hereof and hereby irrevocably instructs the Escrow Agent to give, in accordance with Section 3.02 of the Prior Indenture, mailed notice of redemption of the Prior Bonds. Section 6. Performance of Duties. The Escrow Agent agrees to perform the duties set forth herein and agrees that the irrevocable instructions to the Escrow Agent herein provided are in a form satisfactory to it. Section 7. Escrow Agent's Authority to Make Investments. The Escrow Agent shall have no power or duty to invest any funds held under this Escrow Agreement except as provided in Section 3 hereof. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Escrow Agreement. Section 8. Indemnity. To the extent permitted by law, the City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time (whether or not also indemnified against the same by the City or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of any securities to be purchased pursuant thereto, the retention of such securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Escrow Agreement; provided, however, that the City shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Agent's respective successors, assigns, agents and employees or the material breach by the Escrow Agent of the terms of this Escrow Agreement. In no event shall the City or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Escrow Agreement. 3 55394.00068\42304978.2 Section 9. Responsibilities of Escrow Agent. The Escrow Agent and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Escrow Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of such securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys held hereunder to accomplish the redemption of the Prior Bonds, or any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Escrow Agreement or by reason of any non -negligent act, non -negligent omission or non -negligent error of the Escrow Agent made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the City, and the Escrow Agent assumes no responsibility for the correctness thereof The Escrow Agent makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the redemption of the Prior Bonds pursuant to the Prior Indenture or to the validity of this Escrow Agreement as to the City and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Escrow Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the City. Whenever the Escrow Agent shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally recognized film of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds be proved or established prior to taking, suffering, or omitting any such action, such matter may be established only by a certificate signed by a nationally recognized film of certified public accountants or such opinion of counsel of recognized standing in the field of law relating to municipal bonds. No provision of this Escrow Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. If the Escrow Agent learns that the Department of the Treasury or the Bureau of Public Debt will not, for any reason, accept a subscription of Securities that is to be submitted pursuant to this Escrow Agreement, the Escrow Agent shall promptly request alternative written investment instructions from the City with respect to escrowed funds which were to be invested in securities. The Escrow Agent shall follow such instructions and, upon the maturity of any such alternative investment, the Escrow Agent shall hold funds uninvested and without liability for interest until receipt of further written instructions from the City. In the absence of investment instructions from the City, the Escrow Agent shall not be responsible for the investment of such funds or interest 4 55394.00068\42304978.2 thereon. The Escrow Agent may conclusively rely upon the City's selection of an alternative investment as a determination of the alternative investment's legality and suitability and shall not be liable for any losses related to the alternative investments or for compliance with any yield restriction applicable thereto. Section 10. Amendments. The City and the Escrow Agent may (but only with the consent of the Owners of all of the Prior Bonds and the Bond Insurer, if any, for the Prior Bonds) amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement. Section 11. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the date upon which the Prior Bonds have been paid in accordance with this Escrow Agreement. Section 12. Compensation. The City shall from time to time pay or cause to be paid to the Escrow Agent the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Agent for all of its reasonable advances in the exercise and performance of its duties hereunder; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Agent under this Escrow Agreement or otherwise. Section 13. Severability. if any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the City or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 14. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. Section 15. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. (Signature page follows) 5 55394.00068\42304978.2 IN WITNESS WHEREOF, the parties hereto have executed and attested this Escrow Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST: Secretary APPROVED AS TO FORM: Authority Counsel ATTEST: Clerk of the Council APPROVED AS TO FORM: City Attorney THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS ESCROW AGENT Authorized Officer CITY OF SANTA ANA City Manager -Signature Page - Escrow Agreement S-1 55394.00068\42304978.2 EXHIBIT 5 Stradling Yocca Carlson & Rauth Draft of May 17, 2024 SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 BOND PURCHASE AGREEMENT , 2024 Santa Ana Public Financing Authority c/o City of Santa Ana 20 Civic Center Plaza Santa Ana, California 92701 Attention: Executive Director City of Santa Ana 20 Civic Center Plaza Santa Ana, California 92701 Attention: Acting City Manager Ladies and Gentlemen: Samuel A. Ramirez & Co., Inc. (the "Underwriter"), acting on behalf of itself and not as an agent or fiduciary for you, offers to enter into this Bond Purchase Agreement (this "Purchase Contract") with the Santa Ana Public Financing Authority (the "Authority") and the City of Santa Ana (the "City") with regard to the Bonds described below, which Purchase Contract, upon the acceptance hereof by the Authority and the City, will be binding upon the Authority, the City and the Underwriter. This offer is made subject to the written acceptance of this Purchase Contract by the Authority and the City and the delivery of such acceptance to the Underwriter at or prior to 11:59 p.m., Pacific time, on the date hereof, and, if it is not so accepted, such offer may be withdrawn by the Underwriter upon written notice to the Authority and the City by the Underwriter at any time before its acceptance. Each of the Authority and the City acknowledges and agrees that (i) the purchase and sale of the Bonds (as defined below) pursuant to this Purchase Contract is an arm's-length commercial transaction between the Authority, the City and the Underwriter, (ii) in connection therewith and with the discussions, undertakings, and procedures leading up to the consummation of such transaction, the Underwriter is acting solely as a principal and not as an agent or fiduciary of the Authority or the City, (iii) the Underwriter has not assumed an advisory or a fiduciary responsibility in favor of the Authority or the City with respect to the offering contemplated hereby or the discussions, undertakings, and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Authority or the City on other matters) and the Underwriter has no obligation to the Authority or the City with respect to the offering contemplated hereby except the obligations expressly set forth in this Purchase Contract, and (iv) the Authority and the City have consulted their own legal, financial, and other advisors to the extent they have deemed appropriate. Error! Unknown document property name. 1. Upon the terms and conditions and upon the basis of the representations, warranties, and agreements hereinafter set forth, the Underwriter hereby agrees to purchase from the Authority for reoffering to the public, and the Authority hereby agrees to sell to the Underwriter for such purpose, all (but not less than all) of the $ aggregate principal amount of the Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (the "Bonds"). The purchase price of the Bonds shall be $ (representing the par amount of the Bonds, [plus/less] [net] original issue [premium/discount] of $ , and less an Underwriter's discount of $ ). The Preliminary Official Statement with respect to the Bonds, dated , 2024 (the "Preliminary Official Statement"), as amended to conform to the terms of this Purchase Contract, and dated the date hereof, and with such changes and amendments as are mutually agreed to by the Authority, the City and the Underwriter, including the cover page, the appendices, and all information incorporated therein by reference, is herein collectively referred to as the "Official Statement." The Authority and the City represent that they have deemed the Preliminary Official Statement to be final as of its date, except for either revision or addition of the offering price(s), yield(s) to maturity, selling compensation, aggregate denominational amount and maturity value, denominational amount and maturity value per maturity, delivery date, rating(s), and other terms of the Bonds that depend upon the foregoing as provided in and pursuant to Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Rule"), by delivering a certificate to the Underwriter substantially in the form of Exhibit B attached hereto. 2. The Bonds shall mature on the dates and in the amounts, and will bear interest at the rates, set forth in Exhibit A attached hereto and as further described in the Official Statement. The Bonds shall be issued under and pursuant to the Indenture of Trust, dated as of 1, 2024 (the "Indenture"), between the Authority, U.S. Bank Trust Company, National Association ("U.S. Bank"), as trustee. Capitalized terms used herein without definition shall have the meanings given to such terms in the Indenture. The Bonds are being issued to provide funds (i) to provide funds to refund in full the Authority's Water Revenue Refunding Bonds, Series 2014 (the "Refunded Bonds"), (ii) to finance a portion of the design acquisition and construction of certain improvements to the Water System of the City, and (iii) to pay certain costs of issuance of the Bonds. Public Offering and Establishment of Issue Price. (a) The Underwriter agrees to make a bona fide public offering of the Bonds at the initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A attached hereto and subject to Sections 3(c) and 3(d) hereof, the Underwriter reserves the right to change such initial public offering prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, and to sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices set forth in the Official Statement. A "bona fide public offering" shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. (b) The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at Closing (defined below) an "issue price" or similar certificate, together with copies of supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit C, with such modifications as 2 Error! Unknown document property name. may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel (as defined herein) to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the Authority under this section to establish the issue price of the Bonds may be taken on behalf of the Authority by the Authority's municipal advisor, Urban Futures Incorporated (the "Municipal Advisor") and any notice or report to be provided to the Authority may be provided to the Municipal Advisor. (c) Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Bonds (the "10% test"), identified under the column "10% Test Used" in Exhibit A, is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Contract, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter's reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. (d) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Contract at the offering price or prices (the "initial offering price"), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, identified under the column "Hold the Offering Price Rule Used," as of the date of this Purchase Contract, the maturities, if any, of the Bonds for which the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the "hold -the -offering -price rule"). So long as the hold -the -offering -price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following. (1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. (e) The Underwriter confirms that: (1) any selling group agreement and any third -party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of 3 Error! Unknown document property name. the selling group and each broker -dealer that is a party to such third -party distribution agreement, as applicable: (i) (1) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter, and (2) to comply with the hold -the -offering - price rule, if applicable, if and for so long as directed by the Underwriter, (ii) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related parry to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (iii) to acknowledge that, unless otherwise advised by the dealer or broker -dealer, the Underwriter shall assume that each order submitted by the dealer or broker -dealer is a sale to the public. (2) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a parry to a third -party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker -dealer that is a party to such third -party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold -the -offering -price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (f) The Authority acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (1) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (2) in the event that a third -party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker -dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the Bonds, as set forth in the third -party distribution agreement and the related pricing wires. The Authority further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker -dealer that is a parry to a third -party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering - price rule, if applicable to the Bonds. 4 Error! Unknown document property name. (g) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (1) "public" means any person other than an underwriter or a related Party; (2) "underwriter" means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third -party distribution agreement participating in the initial sale of the Bonds to the public); (3) a purchaser of any of the Bonds is a "related party" to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (4) "sale date" means the date of execution of this Purchase Contract by the Authority and the Underwriter. 4. The Authority and the City hereby authorize the use by the Underwriter of (i) the Indenture, (ii) the Master Installment Purchase Agreement, dated as of 1, 2024 (the "Master Installment Purchase Agreement", between the City and the Authority, as supplemented by a First Supplement to Master Installment Purchase Agreement, dated as of 1, 2024 (the "First Supplement' and, together with the Master Installment Purchase Agreement, the "Installment Purchase Agreement') each by and between the Authority and the City, (iii) the Continuing Disclosure Agreement, dated as of 1, 2024 (the "Continuing Disclosure Agreement') between the City and Urban Futures Incorporated, as dissemination Agent, and (iv) the Official Statement, and any supplements or amendments thereto, and the information contained in each of such documents, in connection with the public offering and sale of the Bonds. The Authority and the City consent to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Authority will deliver to the Underwriter, within seven (7) business days after the date of this Purchase Contract and in sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, copies of the Official Statement in final form (including all documents incorporated by reference therein) and any amendment or supplement thereto in such quantities as the Underwriter may reasonably request in order to comply with the obligations of the Underwriter pursuant to the Rule and the rules of the Municipal Securities Rulemaking Board. As 5 Error! Unknown document property name. soon as practicable following receipt thereof from the Authority, the Underwriter shall deliver the Official Statement to the Municipal Securities Rulemaking Board. 5. At 8:00 a.m., Pacific time, on , 2024, or at such other time or on such other business day as shall have been mutually agreed upon by the Authority and the Underwriter (the "Closing Date"), the Authority will cause U.S. Bank to authenticate and deliver to the Underwriter at the office of The Depository Trust Company ("DTC") in New York, New York, or at such other place as the Authority and the Underwriter may mutually agree upon, the Bonds in fully -registered book -entry form, duly executed and registered in the name of Cede & Co., as nominee of DTC, and, subject to the terms and conditions hereof, the Underwriter will accept such delivery and pay the purchase price of the Bonds by wire transfer payable in immediately available funds to or upon the order of the City at such place in Los Angeles, California, or New York, New York, as shall have been mutually agreed upon by the Authority and the Underwriter. Such delivery of and payment for the Bonds is referred to herein as the "Closing." The Bonds shall be made available for inspection by DTC at least one business day before the Closing. 6. The Authority represents, warrants, and covenants to the Underwriter that: (a) The Authority is a joint powers authority under Article 1 of Chapter 5 of Division 7 of Title 1 of the California Government Code duly organized and validly existing under and by virtue of the Constitution and the laws of the State of California (the "State"). (b) The Authority has the legal right and power to issue and deliver the Bonds and to execute and deliver, and to perform its obligations under, the Indenture, the Installment Purchase Agreement, the Escrow Deposit and Trust Agreement, dated as of 1, 2024 (the "Escrow Agreement") by and among the Authority, the City and U.S. Bank, as escrow agent, and this Purchase Contract (collectively, the "Authority Documents"). The Authority has duly authorized the issuance and delivery of the Bonds and the execution and delivery of, and performance of its obligations under, the Authority Documents and, as of the date hereof, such authorizations are in full force and effect and have not been amended, modified, or rescinded. When executed and delivered by the respective parties thereto, the Authority Documents will constitute legal, valid, and binding obligations of the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws, the application of equitable principles relating to or affecting creditors' rights generally, the exercise of judicial discretion in appropriate cases, and the limitations on legal remedies against joint powers authorities in the State. The Authority has complied, and will at the Closing be in compliance in all respects, with its obligations under the Authority Documents. (c) The Bonds will be issued in accordance with the Indenture and will conform in all material respects to the descriptions thereof contained in the Official Statement. The Indenture creates a valid pledge of, first lien upon, and security interest in, the Revenues. (d) The information in the Official Statement (excluding any information with respect to DTC and the book -entry only system) is true and correct in all material respects, and the information in the Official Statement does not contain any misstatement of any material fact and does not omit any statement necessary to make the statements, in the light of the circumstances in which such statements were made, not misleading. 6 Error! Unknown document property name. (e) The Authority covenants with the Underwriter that for twenty-five days after the Closing Date (the "Delivery Period"), if any event occurs that might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will cooperate with the Underwriter and the City in the preparation of an amendment or supplement to the Official Statement, at the expense of the Authority and the City, in a form and in a manner approved by the Underwriter. (f) The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale, or distribution of the Bonds. (g) If the Official Statement is supplemented or amended, the Official Statement, as so supplemented or amended, as of the date of such supplement or amendment, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) The Authority is not in breach of or in default under any applicable constitutional provision, law, or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, consent, or other agreement to which the Authority is a party, and no event has occurred and is continuing that, with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any of the foregoing. (i) The authorization, execution, and delivery by the Authority of the Authority Documents, and compliance by the Authority with the provisions thereof, do not and will not conflict with or constitute a breach of or default by the Authority under any applicable constitutional provision, law, or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, consent, or other agreement to which it is bound or by which its properties may be affected. 0) No authorization, consent, or approval of, or filing or registration with, any Governmental Authority (as defined below) or court is, or under existing requirements of law will be, necessary for the valid execution and delivery of, or performance by the Authority of its obligations under, the Authority Documents, other than any authorization, consent, approval, filing, or registration as may be required under the Blue Sky or securities laws of any state in connection with the offering, sale, or issuance of the Bonds. All authorizations, consents, or approvals of, or filings or registrations with, any Governmental Authority or court necessary for the valid issuance of, and performance by the Authority of its obligations under, the Bonds will have been duly obtained or made prior to the issuance of the Bonds (and disclosed to the Underwriter). As used herein, the term "Governmental Authority" refers to any legislative body or governmental official, department, commission, board, bureau, agency, instrumentality, body, or public benefit corporation. 7 Error! Unknown document property name. (k) The Authority shall furnish such information, execute such instruments, and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and shall use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the Authority shall not be required to execute a general consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. (1) There is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body, pending or, to the best knowledge of the Authority, threatened (i) in any way questioning the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting, or seeking to prohibit, restrain, or enjoin the issuance of the Bonds or the execution or delivery of any of the Authority Documents, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the Authority Documents or the consummation of the transactions contemplated thereby or any proceeding of the Authority taken with respect to any of the foregoing, or contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the Authority and its authority to pledge the Revenues; (iii) that may result in any material adverse change relating to the Authority that will materially adversely affect the Authority's ability to apply Revenues to pay the Bonds when due; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (m) Other than in the ordinary course of its business or as contemplated by the Official Statement, between the date of this Purchase Contract and the Closing Date the Authority will not, without the prior written consent of the Underwriter, offer or issue any certificates, bonds, notes, or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by a pledge of the Revenues. (n) Any certificate signed by any official or other representative of the Authority and delivered to the Underwriter pursuant to this Purchase Contract shall be deemed a representation and warranty by the Authority to the Underwriter as to the truth of the statements therein made. 7. The City represents, warrants, and covenants to the Underwriter that: (a) The City is a charter city and municipal corporation organized and existing under the Constitution, the laws of the State and its charter. (b) The City has the legal right and power to execute and deliver, and to perform its obligations under, the Indenture, the Installment Purchase Agreement, the Escrow Agreement, the Continuing Disclosure Agreement and this Purchase Contract (together, the "City Documents"). The City has duly authorized the execution and delivery of, and performance of its obligations under, the City Documents and, as of the date hereof, such authorizations are in full force and effect and have not been amended, modified, or rescinded. When executed and delivered by the respective 8 Error! Unknown document property name. parties thereto, the City Documents will constitute legal, valid, and binding obligations of the City in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws, the application of equitable principles relating to or affecting creditors' rights generally, the exercise of judicial discretion in appropriate cases, and the limitations on legal remedies against cities in the State. The City has complied, and will at the Closing be in compliance in all respects, with its obligations under the City Documents. (c) The Bonds will be issued in accordance with the Indenture and will conform in all material respects to the descriptions thereof contained in the Official Statement. The Bonds will be paid from Installment Payments (as such term is defined in the Indenture), which payments have been duly and validly authorized pursuant to applicable law. (d) The Installment Purchase Agreement creates a valid pledge of, first lien upon, Net System Revenues (as such term is defined in the Installment Purchase Agreement). (e) The information in the Official Statement (excluding any information with respect to DTC and the book -entry only system) is true and correct in all material respects, and the information in the Official Statement does not contain any misstatement of any material fact and does not omit any statement necessary to make the statements, in the light of the circumstances in which such statements were made, not misleading. (f) To assist the Underwriter in complying with the Rule, the City will undertake, pursuant to the Continuing Disclosure Agreement, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. The Official Statement describes the incidences during the last five years in which the City has failed to comply with previous undertakings to provide annual continuing disclosure reports and notices of material events. (g) The City covenants with the Underwriter that during the Delivery Period, if any event occurs that might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Authority and the Underwriter in the preparation of an amendment or supplement to the Official Statement, at the expense of the City and the Authority, in a form and in a manner approved by the Underwriter. (h) The City will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter. The City will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale, or distribution of the Bonds. (i) If the Official Statement is supplemented or amended, the Official Statement, as so supplemented or amended, as of the date of such supplement or amendment, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 0 Error! Unknown document property name. 0) The City is not in breach of or in default under any applicable constitutional provision, law, or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, consent, or other agreement to which the City is a party, and no event has occurred and is continuing that, with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any of the foregoing. (k) The authorization, execution, and delivery by the City of the City Documents, and compliance by the City with the provisions thereof, do not and will not conflict with or constitute a breach of or default by the City under any applicable constitutional provision, law, or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, consent, or other agreement to which it is bound or by which its properties may be affected. (1) No authorization, consent, or approval of, or filing or registration with, any Governmental Authority (as defined above) or court is, or under existing requirements of law will be, necessary for the valid execution and delivery of, or performance by the City of its obligations under, the City Documents, other than any authorization, consent, approval, filing, or registration as may be required under the Blue Sky or securities laws of any state in connection with the offering, sale, or issuance of the Bonds. All authorizations, consents, or approvals of, or filings or registrations with, any Governmental Authority or court necessary for the valid issuance of, and performance by the City of its obligations under, the Bonds will have been duly obtained or made prior to the issuance of the Bonds (and disclosed to the Underwriter). (m) The City shall furnish such information, execute such instruments, and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and shall use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City shall not be required to execute a general consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. (n) There is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body, pending or, to the best knowledge of the City, threatened (i) in any way questioning the existence of the City or the titles of the officers of the City to their respective offices; (ii) affecting, contesting, or seeking to prohibit, restrain, or enjoin the issuance of the Bonds or the execution or delivery of any of the City Documents, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the City Documents or the consummation of the transactions contemplated thereby or any proceeding of the City taken with respect to any of the foregoing, or contesting the exclusion of the interest on the Bonds from taxation or under which a determination adverse to the City would have a material adverse effect upon the financial condition of the Water System (as such term is defined in the Installment Purchase Agreement), or which, in any manner, questions or affects the right or ability of the City to use the Net System Revenues for the Installment Payments or in any manner affects the right or ability of the City to collect or pledge the Net System Revenues; (iii) which, except as described in the Official Statement, may result in any material adverse change to the financial condition of the Water System or to the sufficiency of Net System Revenues to pay the Installment Payments when due; or (iv) contesting the completeness or accuracy of the Preliminary 10 Error! Unknown document property name. Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (o) Other than in the ordinary course of its business or as contemplated by the Official Statement, between the date of this Purchase Contract and the Closing Date the City will not, without the prior written consent of the Underwriter, offer or issue any certificates, bonds, notes, or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by a lien on the Net System Revenues superior to or equal to the lien of the Installment Payments on the Net System Revenues. (p) The financial statements of, and other financial information regarding, the City contained in the Official Statement fairly present the financial position and results of the operations of the City as of the dates and for the periods therein set forth, and, to the best of the City's knowledge, (i) the audited financial statements have been prepared in accordance with generally accepted accounting principles consistently applied, (ii) the unaudited financial statements have been prepared on a basis substantially consistent with the audited financial statements included in the Official Statement and reflect all adjustments necessary to that effect, and (iii) the other financial information has been determined on a basis substantially consistent with that of the City's audited financial statements included in the Official Statement. (q) Except as otherwise described in the Official Statement, there shall not have been any material adverse changes in the financial condition of the Water System since June 30, 2023. (r) Any certificate signed by any official or other representative of the City and delivered to the Underwriter pursuant to this Purchase Contract shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein made. 8. The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties, and covenants of the Authority and the City contained herein and in the Authority Documents and City Documents to which each of the Authority or the City, as applicable, is a party, and the performance by the Authority and the City of their respective obligations hereunder, both as of the date hereof and as of the Closing Date. The Underwriter's obligations under this Purchase Contract are and shall be subject to the following further conditions: (a) The representations and warranties of the Authority and the City contained herein shall be true, complete, and correct in all material respects on the date hereof and at and as of the Closing, as if made at and as of the Closing, and the statements made in all certificates and other documents delivered to the Underwriter at the Closing pursuant hereto shall be true, complete, and correct in all material respects at the Closing; the Authority and the City shall be in compliance with each of the agreements made by it in this Purchase Contract (unless such agreements are waived by the Underwriter) and there shall not have occurred an adverse change in the financial position of the City or the Water System that materially adversely affects the ability of the City to make the Installment Payments when due or otherwise perform any of its obligations under the City Documents, and there shall not have occurred an adverse change in the financial position of the Authority that materially adversely affects the ability of the Authority to make payments of principal 11 Error! Unknown document property name. of and interest on the Bonds when due or otherwise perform any of its obligations under the Authority Documents. (b) At the time of the Closing, the Authority Documents and the City Documents shall be in full force and effect, and shall not have been amended, modified, or supplemented (except as may be agreed to in writing by the Underwriter); all actions that, in the opinion of Best Best & Krieger LLP, Irvine, California, Bond Counsel ("Bond Counsel'), shall be necessary in connection with the transactions contemplated hereby shall have been duly taken and shall be in full force and effect; the Authority shall perform or shall have performed its obligations required under or specified in the Authority Documents to be performed at or prior to the Closing; and the City shall perform or shall have performed its obligations required under or specified in the City Documents to be performed at or prior to the Closing. (c) At the time of the Closing, the Official Statement (as amended and supplemented) shall be true and correct in all material respects, and shall not omit any statement or information necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Except as disclosed in the Official Statement or in a schedule delivered to the Underwriter at the Closing, no decision, ruling, or finding shall have been entered by any court or Governmental Authority since the date of this Purchase Contract (and not reversed on appeal or otherwise set aside) that has any of the effects described in Section 8(f) hereof. (e) (i) No default by the Authority or the City shall have occurred and be continuing in the payment of the principal of or premium, if any, or interest on any bond, note, or other evidence of indebtedness issued by the Authority or the City, and (ii) no bankruptcy, insolvency, or other similar proceeding in respect of the Authority or the City shall be pending or, to the knowledge of the Authority or the City, contemplated. (f) The Underwriter may terminate this Purchase Contract by written notification to the Authority and the City if at any time after the date hereof and prior to the Closing: (1) legislation shall have been enacted by the United States or the State or shall have been reported out of committee or be pending in committee, or a decision shall have been rendered by a court of the United States or the Tax Court of the United States, or a ruling shall have been made or a regulation, proposed regulation, or a temporary regulation shall have been published in the Federal Register or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, with respect to Federal or State taxation upon revenues or other income or payments of the general character to be derived by the City or upon interest received on obligations of the general character of the Bonds, which, in the reasonable opinion of the Underwriter (after consultation with, and receipt of advice from, the City), materially adversely affects the market for the Bonds; or (2) in the reasonable opinion of the Underwriter (after consultation with, and receipt of advice from, the City or its municipal advisor), any of the following events materially adversely affects the market for the Bonds: (a) the United States shall have become engaged in hostilities that have resulted in a declaration of war or 12 Error! Unknown document property name. a national emergency or the President of the United States of America shall have committed the armed forces of the United States of America to combat so as to adversely affect the financial markets in the United States of America, (b) any other calamity or crisis in the financial markets of the United States or elsewhere, (c) the sovereign debt rating of the United States is downgraded by any major credit rating agency or a payment default occurs on United States Treasury obligations, or (d) a default with respect to the debt obligations of, or the institution of proceedings under any federal bankruptcy laws by or against, any state of the United States or any city, county, or other political subdivision located in the United States having a population of over 500,000; or (3) there shall have occurred a general suspension of trading on the New York Stock Exchange or other major exchange, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission or any other Governmental Authority having jurisdiction, or a general banking moratorium shall have been declared by Federal, California, or New York authorities having jurisdiction and being in force; or (4) there shall have occurred an adverse change in the financial position, results of operations, or financial condition of the City that, in the reasonable opinion of the Underwriter (after consultation with, and receipt of advice from, the City), materially adversely affects the market for the Bonds; or (5) any legislation, ordinance, rule, or regulation shall be introduced in, or be enacted by, any governmental body, department, or agency of the State, or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered that, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (6) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation, or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be 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 all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (7) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange, which restrictions materially adversely affect the ability of Underwriter to trade obligations of the general character of the Bonds; or 13 Error! Unknown document property name. documents: (8) there shall have occurred or any notice shall have been given of any intended review, downgrading, suspension, withdrawal, or negative change in credit watch status by any national rating service to any of the Authority's or the City's obligations secured in a like manner, which, in the Underwriter's reasonable opinion, materially adversely affects the marketability or market price of the Bonds; or (9) the commencement of any action, suit, or proceeding described in Section 6(1) or 7(n) that, in the judgment of the Underwriter, materially adversely affects the market price of the Bonds; or (10) any event occurring, or information becoming known that, in the reasonable judgment of the Underwriter, makes any statement or information contained in the Official Statement, as of its date, untrue in any material adverse respect, or has the effect that the Official Statement, as of its date, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) At or prior to the Closing, the Underwriter shall receive the following (1) the opinion of Bond Counsel, dated the Closing Date, in substantially the form included in the Official Statement as Appendix C, addressed to the Authority (and accompanied by reliance letters to the Underwriter, the City and U.S. Bank); (2) a supplemental opinion of Bond Counsel, in form and substance satisfactory to the Underwriter, dated the Closing Date, addressed to the Underwriter, to the effect that: (i) the Purchase Contract has been duly executed and delivered by the Authority and the City and (assuming due authorization, execution and delivery by and enforceability against the Underwriter) is valid and binding upon the City, subject to laws relating to bankruptcy, insolvency, reorganization or creditors' rights generally and to the application of equitable principles; (ii) the Bonds are not subject to registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (iii) the statements contained in the Official Statement under the captions "INTRODUCTION," "THE FINANCING PLAN," "THE BONDS," "SECURITY FOR THE BONDS," "TAX MATTERS," "APPENDIX B— SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS" and "APPENDIX C—FORM OF FINAL OPINION OF BOND COUNSEL," insofar as such statements expressly summarize certain provisions of the Indenture, the Installment Purchase Agreement, the Bonds, and the opinion of Bond Counsel concerning certain federal tax matters relating to the Bonds, are accurate in all material respects; and 14 Error! Unknown document property name. (3) an opinion of the City Attorney of the City, in form and substance satisfactory to the Underwriter, dated the Closing Date, addressed to the Authority and the Underwriter, to the effect that: (i) the City is a charter city and municipal corporation organized and existing under the Constitution, the laws of the State and its charter; (ii) the City has full legal power and lawful authority to enter into the City Documents and to perform its obligations thereunder; (iii) the resolution of the City approving and authorizing the execution and delivery of the City Documents (the "City Resolution") was duly adopted at a meeting of the City Council of the City that 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, and the City Resolution is in full force and effect and has not been modified, amended, or rescinded as of the Closing Date; (iv) the City Documents have been duly authorized, executed, and delivered by the City and, assuming due authorization, execution, and delivery by the other parties thereto, such documents constitute the legal, valid, and binding agreements of the City enforceable in accordance with their terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally, the application of equitable principles if equitable remedies are sought, the exercise of judicial discretion in appropriate cases, and the limitations on legal remedies against cities in the State; (v) the execution and delivery by the City of the City Documents, and compliance by the City with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, court decree, resolution, or agreement to which the City is subject to or by which it is bound; (vi) the Official Statement (excluding therefrom financial statements and other statistical data included in the Official Statement, and any information with respect to DTC and the book -entry only system, as to which no view need be expressed) does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (vii) except as otherwise disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body, pending for which the City has been served or, to the best knowledge of such counsel, threatened (a) in any way questioning the existence of the City or the titles of the officers of the City to their respective offices; (b) affecting, contesting, or seeking to prohibit, restrain, or enjoin the issuance of the Bonds or the execution or delivery of any of the City Documents, or the payment or collection of any amounts pledged or to be pledged to pay Installment Payments or the principal of and interest on the Bonds, or in any way 15 Error! Unknown document property name. contesting or affecting the validity of the Bonds or the City Documents or the consummation of the transactions contemplated thereby or any proceeding of the City taken with respect to any of the foregoing, or contesting the exclusion of the interest on the Bonds from taxation or under which a determination adverse to the City would have a material adverse effect upon the financial condition of the Water System, or which, in any manner, questions or affects the right or ability of the City to use the Net System Revenues for the Installment Payments or in any manner affects the right or ability of the City to collect or pledge the Net System Revenues; (c) that may result in any material adverse change relating to the City that will materially adversely affect the City's ability to perform its obligations under the City Documents; or (d) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (viii) no authorization, approval, consent, or other order of the State or any other governmental authority or agency within the State having jurisdiction over the City is required for the valid authorization, execution, and delivery by the City of the City Documents; (4) an opinion of the City Attorney of the City, serving as General Counsel to the Authority, in form and substance satisfactory to the Underwriter, dated the Closing Date, addressed to the City and the Underwriter, to the effect that: (i) the Authority is a joint powers authority under Article 1 of Chapter 5 of Division 7 of Title 1 of the California Government Code duly organized and validly existing under and by virtue of the Constitution and the laws of the State; (ii) the Authority has full legal power and lawful authority to enter into the Authority Documents and to perform its obligations thereunder; (iii) the resolution of the Authority approving and authorizing the execution and delivery of the Authority Documents and approving the Official Statement (the "Authority Resolution") was duly adopted at a regular meeting of the governing board of the Authority that 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, and the Authority Resolution is in full force and effect and has not been modified, amended, or rescinded as of the Closing Date; (iv) 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, such documents constitute the legal, valid, and binding agreements of the Authority enforceable in accordance with their terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally, the application of equitable principles if equitable remedies are sought, the exercise of judicial discretion in appropriate cases, and the limitations on legal remedies against joint powers authorities in the State; 16 Error! Unknown document property name. (v) the execution and delivery by the Authority of the Authority Documents, and compliance by the Authority with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, court decree, resolution, or agreement to which the Authority is subject to or by which it is bound; (vi) except as otherwise disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation at law or in equity, before or by any court, regulatory agency, or public board or body, pending for which the Authority has been served or, to the best knowledge of such counsel, threatened (a) in any way questioning the existence of the Authority or the titles of the officers of the Authority to their respective offices, (b) affecting, contesting, or seeking to prohibit, restrain, or enjoin the issuance of the Bonds or the execution or delivery of any of the Authority Documents, or the payment or collection of any amounts pledged or to be pledged to pay the Installment Payments or the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the Authority Documents or the consummation of the transactions contemplated thereby or any proceeding of the Authority taken with respect to any of the foregoing, or contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the Authority and its authority to make the pledges set forth in the Indenture, (c) that may result in any material adverse change relating to the Authority that will materially adversely affect the Authority's ability to perform its obligations under the Authority Documents, or (d) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (vii) no authorization, approval, consent, or other order of the State or any other governmental authority or agency within the State having jurisdiction over the Authority is required for the valid authorization, execution, and delivery by the Authority of the Authority Documents (5) a letter from Best Best & Krieger LLP, Irvine, California, disclosure counsel to the Authority and the City ("Disclosure Counsel"), dated the Closing Date, addressed to the Underwriter, to the effect that, based upon its participation in the preparation of the Preliminary Official Statement and Official Statement as counsel to the Authority and the City and without having undertaken to determine independently the fairness, accuracy, or completeness of the statements contained in the Preliminary Official Statement and the Official Statement, such counsel has no reason to believe that the Preliminary Official Statement, as of its date, and the Official Statement, as of its date and as of the Closing Date (excluding therefrom the reports, financial and statistical data and forecasts therein, the information with respect to DTC and the book -entry system, as to which no view need be expressed), contained or contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 17 Error! Unknown document property name. (6) a certificate of the City, in form and substance satisfactory to the Underwriter, dated the Closing Date, to the effect that; (i) the representations and warranties of the City contained in this Purchase Contract 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; and (ii) there has been no material adverse change in the financial condition or results of operations of the City or the Water System from the date of the Official Statement to the Closing Date; (7) a certificate of the Authority, in form and substance satisfactory to the Underwriter, dated the Closing Date, to the effect that the representations and warranties of the Authority contained in this Purchase Contract 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; (8) a certificate, dated the date of the Preliminary Official Statement, from the Authority and the City, in the form attached hereto as Exhibit B; (9) an opinion of counsel to U.S. Bank, dated the Closing Date, addressed to the Underwriter and to the City, to the effect that: (i) U.S. Bank is a national banking association duly organized and validly existing under the laws of the United States; (ii) U.S. Bank has duly authorized the execution and delivery of the Indenture and the Escrow Agreement (collectively, the "U.S. Bank Documents"); (iii) the U.S. Bank Documents have been duly entered into and delivered by U.S. Bank and assuming due, valid and binding authorization, execution and delivery by the other parties thereto, constitute the legal, valid and binding obligations of U.S. Bank enforceable against U.S. Bank in accordance with their respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally, or by general principles of equity; (iv) U.S. Bank has duly authenticated and delivered the Bonds in its capacity as trustee under the Indenture; (v) acceptance by U.S. Bank of the duties and obligations under the U.S. Bank Documents and compliance with provisions thereof will not conflict with or constitute a breach of or default under any law or administrative regulation to which U.S. Bank is subject; and (vi) all approvals, consents and orders of any governmental authority or agency having jurisdiction in the matter which would constitute a condition precedent to the performance by U.S. Bank of its duties and obligations under the U.S. Bank Documents have been obtained and are in full force and effect; 18 Error! Unknown document property name. (10) a certificate, dated the Closing Date, signed by a duly authorized officer of U.S. Bank, to the effect that; (i) U.S. Bank is a national banking association organized and existing under and by virtue of the laws of the United States of America, having the necessary power to enter into, accept, and administer the trusts created under U.S. Bank Documents and to authenticate the Bonds; (ii) U.S. Bank Documents have been duly authorized, executed, and delivered by a duly authorized officer of U.S. Bank, and the execution, delivery, and performance of U.S. Bank Documents have been duly authorized by all necessary action of U.S. Bank; (iii) U.S. Bank Documents constitute the legal, valid, and binding obligations of U.S. Bank enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles, if equitable remedies are sought; (iv) the Bonds have been duly authenticated by a duly authorized officer of U.S. Bank; (v) no consent, approval, authorization, or other action by any governmental or regulatory authority having jurisdiction over U.S. Bank that has not been obtained is or will be required for the execution and delivery of U.S. Bank Documents or the performance by U.S. Bank of its duties and obligations under U.S. Bank Documents; (vi) the execution and delivery by U.S. Bank of U.S. Bank Documents and compliance with the terms thereof will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution, or any other agreement or instrument to which U.S. Bank 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 U.S. Bank or any of its activities or properties (except that no representation, warranty, or agreement need be made with respect to any federal or State securities or blue sky laws or regulations); (vii) U.S. Bank's action in executing and delivering U.S. Bank Documents will not contravene the articles or bylaws of U.S. Bank and is in full compliance with, and does not conflict with, any applicable law or governmental regulation currently in effect, and such action does not conflict with or violate any contract to which U.S. Bank is a party or any administrative or judicial decision by which U.S. Bank is bound; and (viii) there is no action, suit, proceeding, or investigation, at law or in equity, before or by any court or governmental agency, public board, or body that has been served on U.S. Bank, or to the best knowledge of U.S. Bank, threatened against U.S. Bank which in the reasonable judgment of U.S. Bank would affect the 19 Error! Unknown document property name. existence of U.S. Bank or in any way contesting or affecting the validity or enforceability of U.S. Bank Documents or contesting the powers of U.S. Bank or its authority to enter into and perform its obligations thereunder; (11) a letter from Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, counsel to the Underwriter ("Underwriter's Counsel"), dated the Closing Date, addressed to the Underwriter, in form and substance acceptable to the Underwriter; (12) certified copies of the City Resolution, the Authority Resolution, and an incumbency resolution of U.S. Bank; (13) copies each of the Authority Documents, the City Documents, and the Official Statement, duly executed and delivered by the respective parties thereto; (14) a tax certificate with respect to the Bonds of the Authority and the City, in form satisfactory to Bond Counsel, signed by appropriate officers of the Authority and the City; (15) evidence that the rating on the Bonds of " " by S&P is in full force and effect on the Closing Date; (16) copies of the statements with respect to the sale of the Bonds required to be delivered to the California Debt and Investment Advisory Commission; (17) evidence that a debt management policy which complies Sections 8855 of the California Government Code has been adopted by the City; (18) a copy of the Blanket Letter of Representations to DTC relating to the Bonds signed by the City; (19) evidence that the federal tax information form 8038-G has been prepared by Bond Counsel for filing; (20) copies of the executed certificates or opinions required to be delivered, if any, as a condition of the execution and delivery of the Installment Purchase Agreement on a parity with the existing Parity Obligations (as such term is defined in the Preliminary Official Statement), each in form and substance satisfactory to Bond Counsel and to Underwriter's Counsel; (21) A verification report related to the refunding of the Refunded Bonds; (22) An opinion of Bond Counsel addressed to the Underwriter and U.S. Bank to the effect that the Refunded Bonds have been legally defeased; and (23) such additional legal opinions, certificates, proceedings, instruments, and other documents as the Underwriter, Underwriter's Counsel, or Bond Counsel may reasonably request to evidence compliance by the City with legal requirements, the accuracy, as of the time of Closing, of the City's representations herein contained, 20 Error! Unknown document property name. and the due performance or satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the City. If the City shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Purchase Contract or if the Underwriter's obligations shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the City nor the Underwriter shall have any further obligation hereunder. 9. The performance by each of the Authority and the City of its obligations is conditioned upon (i) the performance by the Underwriter of its obligations hereunder and (ii) receipt by the Authority, the City, and the Underwriter of opinions and certificates being delivered at the Closing by persons and entities other than Authority and the City. 10. No expenses and costs of the City or the Authority incident to the performance of the Authority's or the City's obligations in connection with the authorization, issuance, and sale of the Bonds to the Underwriter, such as the costs of preparation (including word processing, printing, and reproduction), distribution and delivery of the Preliminary Official Statement, the Official Statement, and this Purchase Contract, in reasonable quantities, fees of rating agencies, fees and expenses of any municipal advisor to the City and fees and expenses of Bond Counsel or Disclosure Counsel for the City, shall be paid by the Underwriter. Except as indicated above, all out-of-pocket expenses of the Underwriter, including the California Debt and Investment Advisory Commission fee, traveling, and other expenses and the fees and expenses of the Underwriter including but not limited to and fees and expenses of Underwriter's Counsel, shall be paid by the Underwriter. 11. Any notice or other communication to be given to the Authority under this Purchase Contract may be given by delivering the same in writing to the Authority, c/o City of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 92701, Attention: Executive Director, or to such other person as the Executive Director may designate in writing. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing to the City of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 92701, Attention: Acting City Manager, or to such other person as the Acting City Manager may designate in writing. Any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to Samuel A. Ramirez & Co., Inc., 633 West Fifth Street, Suite 2693, Los Angeles, California 90071; Attention: Public Finance. The approval of the Underwriter when required hereunder or the determination of its satisfaction as to any document referred to herein shall be in writing signed by the Underwriter and delivered to the Authority and the City. 12. For all purposes of this Purchase Contract, a default shall not be deemed to be continuing if it has been cured, waived, or otherwise remedied. This Purchase Contract shall be governed by and construed in accordance with the laws of the State applicable to contracts made and performed within the State. 13. This Purchase Contract 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 Purchase Contract when accepted by the Authority and the City in writing shall constitute the entire agreement among the City, the Authority, and the Underwriter and is made solely for the benefit of the City, the Authority, and the Underwriter (including the successors or 21 Error! Unknown document property name. assigns of the Underwriter approved by the City and the Authority). No other person shall acquire or have any right hereunder or by virtue hereof. All of the representations, warranties, and agreements of the City and the Authority contained in this Purchase Contract shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of the Underwriter (but, if the Underwriter does discover by its investigation that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Underwriter shall so notify the City and the Authority); (b) the delivery of and payment for the Bonds; and (c) any termination of this Purchase Contract. PAPA Error! Unknown document property name. 15. This Purchase Contract shall not be modified or amended without the prior written consent of the Underwriter, the Authority and the City. Very truly yours, SAMUEL A. RAMIREZ & CO., INC. 1.2 Accepted as of a.m./p.m. SANTA ANA PUBLIC FINANCING AUTHORITY Executive Director CITY OF SANTA ANA Acting City Manager S-1 Authorized Officer Error! Unknown document property name. EXHIBIT A SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 Hold the Offering Maturity 10% Price Date Principal Interest Test Rule (September 1) Amount Rate Yield Price Used Used c Priced to yield to optional redemption date of September 1, 20 at T Term Bond. A-1 Error! Unknown document property name. EXHIBIT B $ x SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that the undersigned is the duly appointed and acting representative of the Santa Ana Public Financing Authority (the "Authority") and the City of Santa Ana (the "City"), and as such is duly authorized to execute and deliver this Certificate on behalf of the Authority and the City, and further hereby certifies and reconfirms on behalf of the Authority and the City as follows: (1) This Certificate is delivered in connection with the offering and sale of the above captioned bonds (the "Bonds") in order to enable the Underwriter of the Bonds to comply with Securities and Exchange Commission Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule"). (2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, setting forth information concerning the Bonds, the Authority and the City (the "Preliminary Official Statement"). (3) As used herein, "Permitted Omissions" means the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all with respect to the Bonds. (4) The Preliminary Official Statement is, except for the Permitted Omissions, deemed final within the meaning of the Rule, and the information therein is accurate and complete except for the Permitted Omissions. Dated: 12024 SANTA ANA PUBLIC FINANCING AUTHORITY By: Executive Director CITY OF SANTA ANA By: Acting City Manager k Preliminary, subject to change. B-1 Error! Unknown document property name. EXHIBIT C FORM OF ISSUE PRICE CERTIFICATE SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 The undersigned, on behalf of Samuel A. Ramirez & Co., Inc. ("Ramirez") hereby certifies as set forth below with respect to the sale and issuance of the above -captioned bonds (the "Bonds"). 1. Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A. 2. [Initial Offering Price of the Hold -the -Offering -Price Maturities. (a) Ramirez offered the Hold -the -Offering -Price Maturities to the Public for purchase at the respective initial offering prices listed in Schedule A (the "Initial Offering Prices") on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B. (b) As set forth in the Bond Purchase Agreement, dated , 2024, by and among Ramirez, the City of Santa Ana and the Issuer, Ramirez has agreed in writing that, (i) for each Maturity of the Hold -the -Offering -Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the "hold -the -offering -price rule"), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker -dealer who is a party to the retail distribution agreement, to comply with the hold -the -offering -price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Hold -the -Offering -Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.] Defined Terms. (a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the "General Rule Maturities." (b) [Hold -the -Offering -Price Maturities means those Maturities of the Bonds listed in Schedule A hereto as the "Hold -the -Offering -Price Maturities." (c) Holding Period means, with respect to a Hold -the -Offering -Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date (, 2024), or (ii) the date on which Ramirez has sold at least 10% of such Hold -the -Offering -Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold -the -Offering -Price Maturity.] (d) Issuer means the Santa Ana Public Financing Authority. C-1 Error! Unknown document property name. (e) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (f) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related party" for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (g) [Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is , 2024. (h) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).] The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Ramirez's interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in a Certificate as to Arbitrage and Tax Compliance Procedures for the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Best Best & Krieger LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. SAMUEL A. RAMIREZ & CO., INC. Name: Dated: 12024 C-2 Error! Unknown document property name. SCHEDULE A SALE PRICES OF THE GENERAL RULE MATURITIES [AND INITIAL OFFERING PRICES OF THE HOLD -THE -OFFERING -PRICE MATURITIES] (Attached) C-3 Error! Unknown document property name. [SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached)] C-4 Error! Unknown document property name. BBK DRAFT — MAY 14, 2024 EXHIBIT 6 INDENTURE between the SANTA ANA PUBLIC FINANCING AUTHORITY and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION as Trustee Dated as of .2024 E11 Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues) 55394.00068\42092121.3 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY............................................................ 2 Section 1.01. Definitions............................................................................................ 2 Section 1.02. Equal Security.................................................................................... 11 Section 1.03. Number, Gender and Variants........................................................... 11 Section 1.04. Articles, Sections, Etc........................................................................ 11 ARTICLE II ISSUANCE OF 2024 BONDS; REGISTRATION AND TRANSFER OFBONDS.................................................................................................... 12 Section 2.01. Authorization and Purpose of 2024 Bonds ........................................ 12 Section 2.02. Execution of 2024 Bonds................................................................... 12 Section 2.03. Transfer and Payment of Bonds......................................................... 12 Section 2.04. Exchange of Bonds............................................................................ 13 Section 2.05. Bond Registration Books................................................................... 13 Section 2.06. Mutilated, Destroyed, Stolen or Lost Bonds ...................................... 13 Section 2.07. Temporary Bonds............................................................................... 14 Section 2.08. Validity of Bonds............................................................................... 14 Section 2.09. Book -Entry System............................................................................ 14 Section 2.10. Procedure for Issuance of 2024 Bonds .............................................. 17 ARTICLE III TERMS OF 2024 BONDS............................................................................ 17 Section 3.01. Terms of 2024 Bonds......................................................................... 17 Section 3.02. Redemption of 2024 Bonds............................................................... 18 Section 3.03. Form of 2024 Bonds.......................................................................... 20 ARTICLE IV ISSUANCE OF ADDITIONAL BONDS ..................................................... 20 Section 4.01. Conditions for the Issuance of Additional Bonds .............................. 20 Section 4.02. Procedure for the Issuance of Additional Bonds ............................... 21 ARTICLE V ESTABLISHMENT OF FUNDS; DEPOSIT AND APPLICATION OFPROCEEDS............................................................................................. 23 Section 5.01. Establishment of Funds and Accounts ............................................... 23 Section 5.02. Application of Proceeds..................................................................... 23 Section 5.03. Use of Moneys in the Acquisition Fund; Costs of Issuance Fund................................................................................................... 23 ARTICLE VI REVENUES................................................................................................... 24 Section 6.01. Pledge of Revenues............................................................................ 24 Section 6.02. Receipt and Deposit of Revenues in the Payment Fund .................... 25 Section 6.03. Establishment and Maintenance of Accounts for Use of Money inthe Payment Fund.......................................................................... 25 Section 6.04. Investment of Moneys in Funds and Accounts .................................. 27 -1- 55394.00068\42092121.3 TABLE OF CONTENTS (continued) Page ARTICLE VII COVENANTS OF THE AUTHORITY........................................................ 27 Section 7.01. Punctual Payment and Performance .................................................. 27 Section 7.02. Tax Covenants; Rebate Fund............................................................. 28 Section 7.03. Eminent Domain................................................................................ 29 Section 7.04. Accounting Records and Reports....................................................... 29 Section 7.05. The City's Budgets............................................................................ 30 Section 7.06. Installment Purchase Agreement and Other Documents ................... 30 Section7.07. Other Liens......................................................................................... 30 Section 7.08. Prosecution and Defense of Suits ...................................................... 31 Section 7.09. Further Assurances............................................................................. 31 Section 7.10. Continuing Disclosure....................................................................... 31 ARTICLE VIII THE TRUSTEE............................................................................................. 31 Section 8.01. Appointment and Acceptance of Duties ............................................ 31 Section 8.02. Duties, Immunities and Liabilities of Trustee .................................... 31 Section 8.03. Merger or Consolidation.................................................................... 33 Section 8.04. Compensation.................................................................................... 33 Section 8.05. Liability of Trustee............................................................................ 34 Section 8.06. Right to Rely on Documents.............................................................. 35 Section 8.07. Preservation and Inspection of Documents ........................................ 35 ARTICLE IX AMENDMENT OF THE INDENTURE....................................................... 36 Section 9.01. Amendment of the Indenture............................................................. 36 Section 9.02. Disqualified Bonds............................................................................. 37 Section 9.03. Endorsement or Replacement of Bonds After Amendment .............. 37 Section 9.04. Amendment by Mutual Consent........................................................ 37 ARTICLE X EVENTS OF DEFAULT AND REMEDIES OF HOLDERS ....................... 37 Section 10.01. Events of Default and Acceleration of Maturities ............................. 37 Section 10.02. Proceedings by Trustee...................................................................... 38 Section 10.03. Effect of Discontinuance or Abandonment ........................................ 39 Section 10.04. Rights of Owners............................................................................... 39 Section 10.05. Restriction on Owners' Action.......................................................... 39 Section 10.06. Power of Trustee to Enforce.............................................................. 40 Section 10.07. Remedies Not Exclusive.................................................................... 40 Section 10.08. Waiver of Events of Default; Effect of Waiver ................................. 40 Section 10.09. Application of Moneys...................................................................... 40 ARTICLE XI DEFEASANCE.............................................................................................. 42 Section 11.01. Discharge of Bonds............................................................................ 42 Section 11.02. Unclaimed Money.............................................................................. 43 -ii- 55394.00068\42092121.3 TABLE OF CONTENTS (continued) Page ARTICLE XII MISCELLANEOUS...................................................................................... 43 Section 12.01. Liability of Authority Limited to Revenues ....................................... 43 Section 12.02. Benefits of Indenture Limited to Parties ............................................ 44 Section 12.03. Successor Is Deemed Included In All References To Predecessor........................................................................................ 44 Section 12.04. Execution of Documents by Owners ................................................. 44 Section 12.05. Waiver of Personal Liability.............................................................. 44 Section 12.06. Acquisition of Bonds by Authority .................................................... 44 Section 12.07. Destruction of Cancelled Bonds ........................................................ 45 Section 12.08. Content of Certificates....................................................................... 45 Section 12.09. Accounts and Funds........................................................................... 45 Section 12.10. Partial Invalidity................................................................................. 45 Section 12.11. Execution in Counterparts.................................................................. 46 Section 12.12. Law Governing.................................................................................. 46 Section12.13. Notices............................................................................................... 46 EXHIBIT A — FORM OF 2024 BOND..................................................................................... A-1 -iii- 55394.00068\42092121.3 INDENTURE THIS INDENTURE, made and entered into as of 1, 2024, by and between the SANTA ANA PUBLIC FINANCING AUTHORITY, a California joint exercise of powers authority and public entity duly organized and existing under and by virtue of the laws of the State of California (the "Authority"), and U.S. Bank Trust Company, National Association, a national banking association organized and existing under and by virtue of the laws of the United States, as trustee (the "Trustee"); WITNESSETH: WHEREAS, the Authority was incorporated to provide financial assistance to the City of Santa Ana (the "City"); WHEREAS, the City desires from time to time to acquire, construct, install and improve its water system as more fully described in Exhibit A to the Master Installment Purchase Agreement, dated as of , 2024 (the "Installment Purchase Agreement"), by and between the City and the Authority, and as modified in accordance with the provisions thereof (the "Project"); WHEREAS, concurrently with the prepayment of the Prior Obligations defined herein, the City will reacquire the Project and will resell the Project to the Authority and then repurchase the Project from the Authority pursuant to the provisions of the Installment Purchase Agreement and First Supplement to Master Installment Purchase Agreement (the "First Supplemental Agreement"), dated as of the date hereof; WHEREAS, to provide funds for the purchase of the Project, in order that the Project or Components thereof may be sold to the City pursuant to the Installment Purchase Agreement, the Authority desires to issue its Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues) (the "2024 Bonds"), in the aggregate principal amount of $ ; WHEREAS, the 2024 Bonds will be secured by the payments to be made by the City pursuant to the Installment Purchase Agreement as supplemented by the First Supplemental Agreement; WHEREAS, in order to provide for the authentication and delivery of the 2024 Bonds and any additional bonds issued hereunder (the 2024 Bonds and any such additional bonds being collectively referred to as 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 thereon, the Authority has authorized the execution and delivery of this Indenture; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when issued and executed by the Authority and authenticated and delivered by the Trustee, 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 55394.00068\42092121.3 in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized. NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure the payment of the principal of, premium, if any, and interest 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 owners thereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall, for all purposes of this Indenture and of any Supplemental Indenture, have the meanings set forth below: "Acquisition Costs" means all costs of acquiring, constructing, installing or improving the Project, including but not limited to: (i) all costs which the Authority or the City shall be required to pay to a manufacturer, vendor or contractor or any other person under the terms of any contract or contracts for the acquisition, construction, installation or improvement of the Project; (ii) obligations of the Authority or the City incurred for labor and materials (including obligations payable to the Authority or the City for actual out-of-pocket expenses of the Authority or the City) in connection with the acquisition, construction, installation or improvement of the Project, including reimbursement to the Authority or the City for all advances and payments made in connection with the Project prior to or after delivery of the Bonds; (iii) the costs of performance or other bonds and any and all types of insurance that may be necessary or appropriate to have in effect during the course of acquisition, construction, installation or improvement of the Project; (iv) all costs of engineering and architectural services, including the actual out- of-pocket costs of the Authority or the City for test borings, surveys, estimates, plans and specifications and preliminary investigations therefor, development fees and sales commissions, and for supervising acquisition, construction, installation and improvement, as well as for the performance of all other duties required by or consequent to the proper acquisition, construction, installation or improvement of the Project; and (v) any sums required to reimburse the Authority or the City for advances made by the Authority or the City for any of the above items or for any other costs incurred and for work 2 55394.00068\42092121.3 done by the Authority or the City which are properly chargeable to the acquisition, construction, installation or improvement of the Project. "Acquisition Fund" means the fund by that name established under Section 5.01(c) hereof. "Additional Bonds" means all revenue bonds of the Authority which are secured by Installment Payments authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Article IV hereof. "Annual Debt Service" means, for any Fiscal Year, the sum of (1) the interest payable on all Outstanding Bonds in such Fiscal Year, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of the sale of any Bonds), (2) the principal amount of all Outstanding Serial Bonds maturing by their terms in such Fiscal Year, and (3) the principal amount of all Outstanding Term Bonds required to be redeemed or paid in such Fiscal Year (together with the redemption premiums, if any, thereon). "Authority" means the Santa Ana Public Financing Authority, a California joint exercise of powers authority and public entity duly organized and existing under and by virtue of the laws of the State, and its successors or assigns. "Authorized Denominations" means $5,000 and any integral multiple thereof. "Beneficial Owners" means those individuals, partnerships, corporations or other entities for whom the Participants have caused the Depository to hold Book -Entry Bonds. "Board" means the Board of Directors of the Authority. "Bond Counsel" means any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the validity of, and exclusion from gross income for federal income tax purposes of interest on, bonds issued by states and political subdivisions and duly admitted to practice law before the highest court of any state of the United States and acceptable to the Authority. "Bonds" means the 2024 Bonds and all Additional Bonds. "Book -Entry Bonds" means any Bonds which are then held in book -entry form by a Securities Depository as provided in Section 2.09. "Business Day" means a day of the year which is not a Saturday or Sunday, or a day on which banking institutions located in California are required or authorized to remain closed, or on which the New York Stock Exchange is closed. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in this Indenture, and, unless otherwise specifically provided this Indenture, no interest shall accrue for the period from and after such nominal date. 55394.00068\42092121.3 "Certificate of Completion" means a Certificate of the City filed with the Trustee, stating that the Components of the Project being financed with the proceeds of Bonds have been acquired, constructed, installed and improved and that all Acquisition Costs have been paid or provided for. "Certificate of the Authority" means an instrument in writing signed by the Chair, the Vice Chair, the Secretary or any Assistant Secretary of the Authority, or by any other officer of the Authority duly authorized by the Authority for that purpose. "Certificate of the City" means an instrument in writing signed by the Mayor, City Manager, Assistant City Manager, or Treasurer of the City, or by any other official of the City duly authorized by the City for that purpose. "Charter" means the Charter of the City as it now exists or may hereafter be amended, and any new or successor Charter. "City" means the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution, the laws of the State and its Charter. "Closing Date" means , 2024. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder, and any successor laws or regulations. "Continuing Disclosure Certificate" means the Continuing Disclosure Certificate, dated as of the date hereof, executed by the Authority, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. "Corporate Trust Office of the Trustee" means the principal corporate trust office of the Trustee in Los Angeles, California or such other or additional offices as may be specified to the Authority by the Trustee in writing. "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the City or the Authority relating to the issuance, sale and delivery of the Bonds and the execution and delivery of this Indenture, the Installment Purchase Agreement and the Supplement, filing and recording costs, settlement costs, printing costs, reproduction and binding costs, initial fees and charges of the Trustee (including legal fees), legal fees and charges, insurance fees and charges, financial and other professional consultant fees, fees and charges of rating agencies and/or for credit ratings and fees in connection with the foregoing. "Costs of Issuance Fund" shall have the meaning given to such term in Section 5.01. "Defeasance Securities" means, to the extent permitted by State law, the following obligations which may be used as permitted investments to defease Outstanding Bonds: (1) Cash deposits (insured at all times by the Federal Deposit Insurance Corporation). 4 55394.00068\42092121.3 (2) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series — "SLGs"). (3) Direct obligations of (including obligations issued or held in book entry form on the books of the Department of Treasury) the United States of America. (4) The interest component of Resolution Funding Corporation (REFCORP) strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form. (5) Pre -refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's Global Ratings. If the issue is rated solely by Standard & Poor's Global Ratings, the pre -refunded bonds must have been pre -refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre -refunded municipal bonds. (6) Obligations of the following federal agencies so long as such obligations are backed by the full faith and credit of the United States of America. a. U.S. Export -Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership b. Farmers Home Administration (FmHA) Certificates of beneficial ownership C. Federal Financing d. General Services Administration Participation certificates e. U.S. Maritime Administration Guaranteed Title XI financing f. U.S. Department of Housiniz and Urban Development Project Notes Local Authority Bonds New Communities Debentures U.S. Public Housing Notes and Bonds "Depository" means the securities depository acting as Depository pursuant to "DTC" means The Depository Trust Company, New York, New York, and its successors. "Escrow Agent" means U.S. Bank Trust Company, National Association, or any successor thereto under the Escrow Agreement. "Escrow Agreement" means that certain Escrow Agreement, dated as of , 2024, by and among the City, the Authority and the Escrow Agent, as the same may be amended from time to time, relating to the Santa Ana Public Financing 5 55394.00068\42092121.3 Authority Water Revenue Bonds, Series 2014 (Payable Solely from Installment Payments Secured by Water System Net Revenues). "Event of Default" shall have the meaning set forth in Section 10.01 hereof. "Financial Newspaper" means The Wall Street Journal or The Bond Buyer or any other newspaper or journal printed in the English language publishing financial news and selected by the Trustee, whose decision shall be final and conclusive. "Fiscal Year" means the fiscal year of the Authority which, as of the date hereof, is the period from July 1 to and including the following June 30. "Indenture" means this Indenture, dated as of 2024, 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. "Information Services" means "EMMA" or the "Electronic Municipal Market Access" system of the Municipal Securities Rulemaking Board; or, in accordance with then -current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Autority delivered to the Trustee. "Installment Payments" means the Installment Payments scheduled to be paid by the City under and pursuant to the Installment Purchase Agreement and any supplement thereto. "Installment Purchase Agreement" means the Master Installment Purchase Agreement, dated as of , 2024, entered into between the Authority, as seller, and the City, as purchaser, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions hereof and thereof. "Interest Account" means the account by that name established under Section 5.01(b) hereof. "Interest Payment Date" means each March 1 and September 1, commencing September 1, 2024. "Letter of Representations" means the letter of the Trustee and Authority delivered to and accepted by the Depository on or prior to the delivery of the 2024 Bonds or any Additional Bonds as Book Entry Bonds setting forth the basis on which the Depository serves as depository for such Book Entry Bonds, as originally executed or as it may be supplemented or revised or replaced by a letter to a substitute Depository. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the state of Delaware, and its successors and assigns, and, if such entity shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency (other than S&P) designated by the Authority. 6 55394.00068\42092121.3 "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.09 hereof. "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 9.02) all Bonds theretofore or thereupon executed by the Authority and authenticated and delivered by the Trustee pursuant hereto, except -- cancellation; 11.01 hereof; (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for (2) Bonds paid or deemed to have been paid within the meaning of Section (3) Bonds beneficially owned by the City or the Authority; and (4) Bonds in lieu of or in substitution for which other Bonds shall have been executed by the Authority and authenticated and delivered pursuant hereto. "Owner" means any person who shall be the registered owner of any Outstanding Bond, as shown on the registration books required to be maintained by the Trustee pursuant to Section 2.05 hereof. "Participants" means those broker dealers, banks and other financial institutions from time to time for which the Depository holds Book Entry Bonds as securities depository. "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Certificate. "Payment Fund" means the fund by that name established under Section 5.01(b) hereof. "Permitted Investments" means any of the following to the extent then permitted by law and Section 6.04 hereof (provided that the Trustee shall be entitled to rely upon any investment directions from the Authority as conclusive certification to the Trustee that the investments described therein are so permitted by law and Section 6.05 hereof): (1) Cash deposits (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in the next paragraph). (2) Direct obligations of (including obligations issued or held in book entry form on the books of the Department of Treasury) the United States of America. In the event these securities are used for defeasance, they shall be non -callable and non -prepayable. (3) Obligations of the following federal agencies so long as such obligations are backed by the full faith and credit of the United States of America. a. U.S. Export -Import Bank (Eximbank) b. Farmers Home Administration (FmHA) C. Federal Financing Bank 7 55394.00068\42092121.3 d. General Services Administration e. U.S. Maritime Administration f. U.S. Department of Housing and Urban Development (PHAs) g. General Services Administration h. Government National Mortgage Association (GNMA) i. Federal Housing Administration Debentures (FHA) (4) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: a. Senior debt obligations rated in the highest long-term rating category by at least two nationally recognized rating agencies issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). b. Senior debt obligations of the Federal Home Loan Bank System. Senior debt obligations of the Student Loan Marketing Association. d. Obligations of the Resolution Funding Corporation (REFCORP). e. Consolidated systemwide bonds and notes of the Farm Credit System. (5) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks (including the Trustee and any of its affiliates) which either (a) have a rating in one of the two highest short-term rating categories of at least two nationally recognized rating agencies, (b) are insured at all times by the Federal Deposit Insurance Corporation, or (c) are collateralized with direct obligations of the United States of America at 102% valued daily. All such certificates must mature no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank). (6) Commercial paper which is rated at the time of purchase in the highest short-term rating category of at least two nationally recognized rating agencies and which matures not more than 270 days after the date of purchase. (7) Investments in (a) money market funds rated in the highest short-term rating category of at least two nationally recognized rating agencies including such funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services or for which the Trustee or an affiliate of the Trustee serves 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; and (b) public sector investment pools operated pursuant to SEC Rule 2a-7 in which the Issuer's deposit shall not exceed 5% of the aggregate pool balance at any time and such pool is rated in one of the two highest short-term rating categories of at least two nationally recognized rating agencies. 8 55394.00068\42092121.3 (8) Pre -refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and a. which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest long-term rating category of at least one nationally recognized rating agencies; or b. (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or direct obligations of the United States of America, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate. (9) General obligations of states or political subdivisions of states with a short- term rating in one of the two highest rating categories and a long-term rating in one of the two highest rating categories of at least two nationally recognized rating agencies. In the event such obligations are variable rate obligations, the interest rate on such obligations must be reset not less frequently than annually. (10) Funds invested in the Local Agency Investment Fund (as that term is defined in Section 16429.1 of the California Government Code, as such section may be amended or recodified from time to time) to the extent deposits and withdrawals may be made by the Trustee. (11) Certificates of deposit secured at all times by collateral described in (2) and/or (3) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks, including the Trustee and its affiliates. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. The value of the above investments, other than cash, shall be determined as follows: "Value," which shall be determined as of the end of the month, means "fair market value," which may be determined using a computer pricing service including any service contained in the Trustee's accounting system, provided that the Trustee shall not be liable for any error made by any such service. 9 55394.00068\42092121.3 "Principal Account" means the account of that name established under Section 5.01(a) hereof. "Prior Obligations" means the $15,690,000 Santa Ana Financing Authority Water Revenue Refunding Bonds, Series 2014. "Rebate Fund" means the fund by that name established under Section 7.02(a) hereof. "Rebate Requirement" shall have the meaning set forth in the Tax Certificate. "Record Date" means the fifteenth (15) day preceding an Interest Payment Date, whether or not such day is a Business Day. "Redemption Account" means the account by that name established under Section 5.01(a) hereof. "Revenues" means all Installment Payments pursuant to the Installment Purchase Agreement, and the interest or profits from the investment of money in any account or fund (other than the Rebate Fund) pursuant to Section 6.05. "S&P" means Standard & Poor's Global Ratings, its successors and assigns, and if such entity shall be deemed to refer to any other nationally recognized securities rating agency (other than Moody's) designated by the Authority. "Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York, 10041-0099, Attn.: Call Notification Department, Fax (212) 855- 7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Certificate of the Authority delivered to the Trustee. "Serial Bonds" means Bonds for which no sinking fund payments are provided. "Sinking Account" means the account by that name established under Sections 5.01(a) and 6.03(b) hereof. "State" means the State of California. "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. "Tax Certificate" means the certificate delivered with respect to the Bonds on which it is intended that interest thereon will be excluded from gross income pursuant to Section 103 of the Code. 10 55394.00068\42092121.3 "Term Bonds" means Bonds which are payable on or before their specified maturity dates from sinking fund payments established for that purpose and calculated to retire such Bonds on or before their specified maturity dates. "Treasurer" means the Treasurer of the City or the Treasurer of the Authority as appropriate. "Trustee" means U.S. Bank Trust Company, National Association, a national banking association organized and existing under and by virtue of the laws of the United States, or any other association or corporation which may at any time be substituted in its place as provided in Section 8.02. 112024 Bonds" means the Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues) authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Section 3.01, and any Bonds issued upon transfer thereof or in exchange therefor or in lieu thereof in accordance with the provisions hereof. "Written Request of the Authority" means an instrument in writing signed by the Chair, the Vice Chair, the Secretary or any Assistant Secretary of the Authority, or by any other officer of the Authority duly authorized by the Authority for that purpose. "Written Request of the City" means an instrument in writing signed by the Mayor, City Manager, Assistant City Manager or City Treasurer, or by any other official of the applicable administrative departments of the City duly authorized by the City for that purpose. SECTION 1.02. Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, the Indenture shall be deemed to be and shall constitute a contract between the Authority and the Trustee for the benefit of the Owners from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the interest on and principal of and redemption premiums, if any, on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority shall be for the equal and proportionate benefit, protection and security of all Owners of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. SECTION 1.03. Number, Gender and Variants. The singular form of any word used herein, including the terms defined in Section 1.01, shall include the plural, and vice versa. The use herein of a word of any gender shall include all genders. The definition of a word or term shall include all variants of such word or term. SECTION 1.04. Articles, Sections, Etc.. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture as originally executed, as such Articles, Sections or subdivisions may be amended and supplemented from time to time in accordance with the provisions hereof, and the words 11 55394.00068\42092121.3 "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof unless the context otherwise requires. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Indenture. ARTICLE II ISSUANCE OF 2024 BONDS; REGISTRATION AND TRANSFER OF BONDS SECTION 2.01. Authorization and Purpose of 2024 Bonds. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the 2024 Bonds and has found, as a result of such review, and hereby finds and determines 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 the 2024 Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized to issue the 2024 Bonds in the form and manner provided herein for the purpose of providing funds to finance or refinance the costs of acquisition, construction, installation and improvement of the Project, and that the 2024 Bonds shall be entitled to the benefit, protection and security of the provisions hereof. SECTION 2.02. Execution of 2024 Bonds. The Chairman of the Authority is hereby authorized and directed to execute each of the 2024 Bonds on behalf of the Authority and the Secretary of the Authority is hereby authorized and directed to countersign each of the 2024 Bonds on behalf of the Authority and to impress the seal of the Authority thereon. The signatures of such Chairman and Secretary may be by printed, lithographed or engraved by facsimile reproduction. In case any officer whose signature appears on the 2024 Bonds shall cease to be such officer before the delivery of the 2024 Bonds to the purchaser thereof, such signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until such delivery of the 2024 Bonds. Only those 2024 Bonds bearing thereon a certificate of authentication and registration in substantially the forms set forth in Exhibit A hereto, executed manually and dated by the Trustee, shall be entitled to any benefit, protection or security hereunder or be valid or obligatory for any purpose, and such certificate of the Trustee shall be conclusive evidence that the 2024 Bonds so authenticated and registered have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit, protection and security hereof. SECTION 2.03. Transfer and Payment of Bonds. 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, at the Corporate Trust Office of the Trustee, of such Bond for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee. 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 of a like aggregate principal amount of the same maturity and series. The Trustee shall require the payment by the 12 55394.00068\42092121.3 Owner 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 Owner of any Bond as the absolute owner of such Bond for the purpose of receiving payment thereof and for all other purposes, whether such Bond 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 Bond shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge liability on such Bond to the extent of the sum or sums so paid. The transfer of any Bond is limited as described in the following Section. SECTION 2.04. Exchange of Bonds. Bonds may be exchanged at the 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 Owner 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 register the transfer or the exchange of any Bond (i) during any period commencing with the close of business on the fifteenth (15) day next preceding any interest payment date and ending on such interest payment date, (ii) during the period established for selection of Bonds for redemption, or (iii) which has been selected for redemption in whole or in part. SECTION 2.05. Bond Registration Books. The Trustee will keep at its office sufficient books for the registration and transfer of the Bonds which shall at all times be open to inspection by the Authority during normal business hours with 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 2.06. Mutilated, Destroyed, Stolen or Lost Bonds. If any Bond shall become mutilated, the Trustee, at the expense of the Owner thereof, shall thereupon authenticate and deliver a new Bond of like series, maturity and Authorized Denomination in exchange and substitution for the Bond so mutilated, but only upon surrender, at the Corporate Trust Office of the Trustee, of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee and delivered to, or upon the order of, the Authority. 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 Owner, shall thereupon authenticate and deliver a new Bond of like series, maturity and Authorized Denomination 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 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 13 55394.00068\42092121.3 Indenture with all other Bonds 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 2.07. 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 in accordance with the terms hereof. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, at the 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 2.08. Validity of Bonds. From and after the issuance of the Bonds the findings and determinations of the Authority respecting the Bonds shall be conclusive evidence of the existence of the facts so found and determined in any action or proceeding in any court in which the validity of the Bonds shall be required to see to the existence of any fact or to the performance of any condition or to the taking of any proceeding required prior to such issuance or to the application of the proceeds of sale of the Bonds. The validity of the issuance of the Bonds shall not be dependent on or affected in any way by the proceedings taken by the Authority for the financing of refinancing of the Project or by any contracts made by the Authority or its agents in connection therewith, and shall not be dependent upon the completion of the acquisition or installation of the Project or upon the performance by any person, firm or authority of his or its obligation with respect thereto. The recital contained in the Bonds that the same are issued pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance, and all Bonds shall be incontestable from and after their issuance. The Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive Bonds (or any temporary Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. SECTION 2.09. Book -Entry System. (a) Prior to the execution and delivery of the 2024 Bonds or any Additional Bonds executed and delivered hereunder, the Authority may provide that such Bonds shall be initially executed and delivered as Book -Entry Bonds, and in such event, the Bonds for each principal payment date of such Bonds shall be in the form of a separate single fully registered Bond (which may be typewritten). Upon initial execution and delivery, the ownership of each such Bond shall be registered in the bond register in the name of the Nominee, as nominee of the Depository. Payment of principal or interest for any Book -Entry Bonds registered in the name of the Nominee shall be made on the payment date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments 14 55394.00068\42092121.3 shall be made to the Nominee at the address which is, on the regular Record Date or special record date, as the case may be, shown for the Nominee in the bond register of the Trustee. (b) With respect to Book -Entry Bonds, the City, the Authority and the Trustee shall have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in such Book -Entry Bonds. Without limiting the immediately preceding sentence, the City, the Authority and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in Book -Entry Bonds, (ii) the delivery to any Participant or any other person, other than an Owner as shown in the bond register, of any notice with respect to Book -Entry Bonds, including any notice of prepayment, (iii) the selection by the Depository and its Participants of the beneficial interests in Book -Entry Bonds to be redeemed in the event the Authority redeems Bonds in part, (iv) the payment to any Participant or any other person, other than an Owner as shown in the bond register, of any amount with respect to principal, premium, if any, or interest evidenced and represented by Book -Entry Bonds, or (v) any consent given or other action taken by the Depository as Owner. (c) The City, the Authority and the Trustee may treat and consider the person in whose name each Book -Entry Bond is registered in the bond register as the absolute Owner of such Book - Entry Bond for the purpose of payment of principal, redemption premium, if any, and interest with respect to such Bond, for the purpose of selecting any Bonds, or portions thereof to be redeemed, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever and the City, the Authority and the Trustee shall not be affected by any notice to the contrary. (d) In the event of a redemption or any other early withdrawal (e.g., tenders made and accepted in response to the Trustee's invitation at the direction of the Authority) necessitating a reduction in aggregate principal amount of Bonds Outstanding, or a redemption of part of the Bonds Outstanding, the Depository, in its discretion, (i) may request the Trustee to execute and deliver a new Bond or (ii) if DTC is the sole owner of the Bonds, shall make an appropriate notation on the Bond indicating the date and amounts of such reduction in principal except in the case of final maturity, in which case the Bond must be presented to the Trustee prior to payment. (e) The Trustee shall pay all principal, premium, if any, and interest evidenced and represented by the Bonds only to the respective Owner, as shown in the bond register, or his or her attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal, redemption premium, if any, and interest evidenced and represented by the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the bond register, shall receive a Bond evidencing the obligation to make payments of principal, redemption premium, if any, and interest evidenced and represented by the Bonds. Upon delivery by the Depository to the Owner, the Trustee, the Authority and the City of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to record dates, the word Nominee in this Indenture shall refer to such nominee of the Depository. 15 55394.00068\42092121.3 (f) In order to qualify the Book -Entry Bonds for the Depository's book -entry system, the Trustee shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Authority, the City or the Trustee any obligation whatsoever with respect to persons having interests in such Book -Entry Bonds other than the Owners, as shown on the bond register of the Trustee. Such Letter of Representations may provide the time, form, content, and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the Trustee, the Authority and the Trustee shall take such other actions, not inconsistent with this Indenture, as are reasonably necessary to qualify Book -Entry Bonds for the Depository's book -entry program. (g) In the event the Authority determines that it is in the best interest of the Beneficial Owners that they be able to obtain certificated Bonds and that such Bonds should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Bonds. In such event, the Trustee shall transfer and exchange certificated Bonds as requested by the Depository and any other Owners in appropriate amounts. In the event (i) the Depository determines not to continue to act as Depository for Book -Entry Bonds, or (ii) the Depository shall no longer so act and gives notice to the Trustee of such determination, then the Authority will discontinue the Book - Entry system with the Depository. If the Authority determines to replace the Depository with another qualified Depository, the Authority shall prepare or direct the preparation of a new single, separate, fully registered Bond for each of the Principal Payment Dates of such Book -Entry Bonds, registered in the name of such successor or substitute qualified Depository or its nominee. If the Authority fails to identify another qualified Depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in such bond register in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such bonds shall designate, in accordance with the provisions of Sections 2.06, 2.07 and 2.08 hereof. Whenever the Depository requests the Authority to do so, the Authority will cooperate with the Depository in taking appropriate action after reasonable notice (i) to make available one or more separate Bonds evidencing the Book -Entry Bonds to any Participant having Book -Entry Bonds credited to its account with the Depository, and (ii) to arrange for another Depository to maintain custody of Bonds evidencing the Book -Entry Bonds. (h) Notwithstanding any other provision of this Indenture to the contrary, so long as any Book -Entry Bond is registered in the name of DTC, or its nominee, all payments with respect to principal, redemption premium, if any, and interest evidenced and represented by such Bond and all notices with respect to such Bonds shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. (i) In connection with any notice or other communication to be provided to Owners pursuant to this Indenture by the Authority or the Trustee, at the direction of the Authority, with respect to any consent or other action to be taken by the Owners, the Authority or the Trustee, as the case may be, shall establish a record date for such consent or other action and give the Depository notice of such record date not less than fifteen (15) calendar days in advance of such record date to the extent possible. Notice to the Depository shall be given only when DTC is the sole Owner of the Bonds. If the Authority determines to invite Owners of Bonds to tender Bonds, and will pay for the same with funds other than moneys in a Sinking Account as hereinafter 16 55394.00068\42092121.3 defined, the Authority shall give the Trustee not less than fourteen (14) days' advance notice of such invitation to tender, together with a copy of the tender notice to be distributed to the Owners. Such notice shall specify the terms of the tender and the publication date of notice of such tender. The Trustee shall send such notice to DTC by a secure means (e.g., legible facsimile transmission, registered or certified mail, overnight express delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the Business Day before the date for mailing of such notice. (The Trustee shall have a method to verify subsequently the use of such means and timeliness of the notice.) The Trustee shall credit any Bonds so tendered against such of the mandatory sinking account payments of the maturity tendered as shall be designated by the Authority. SECTION 2.10. Procedure for Issuance of 2024 Bonds. The Authority may, at any time, execute the 2024 Bonds for issuance hereunder and deliver them to the Trustee, and thereupon the 2024 Bonds shall be authenticated and delivered by the Trustee to the purchasers thereof upon the Written Request of the Authority and upon receipt of payment therefor from the purchasers thereof. ARTICLE III TERMS OF 2024 BONDS SECTION 3.01. Terms of 2024 Bonds. (a) The 2024 Bonds shall be designated "Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely from Installment Payments Secured by Water System Net Revenues)" and shall be in the aggregate principal amount of $ . The 2024 Bonds shall be dated their date of delivery, shall be issued only in fully registered form in Authorized Denominations (not exceeding the principal amount of 2024 Bonds maturing at any one time), and shall mature on the dates and in the principal amounts and shall bear interest at the rates as set forth in the following schedule: Maturity Date Principal Interest (September 1) Amount Rate 17 55394.00068\42092121.3 Subject to the Letter of Representations, the principal of and redemption premiums, if any, on the 2024 Bonds shall be payable in lawful money of the United States of America at the Corporate Trust Office of the Trustee upon presentation and surrender of such 2024 Bonds. (b) (i) The 2024 Bonds shall bear interest at the rates set forth in Section 3.01(a) above, payable on the Interest Payment Dates in each year, commencing on March 1, 2025. Each 2024 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is during the period commencing after a Record Date through and including the next succeeding Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or unless such date of authentication is on or before the first Record Date, in which event it shall bear interest from its date of delivery; provided, however, that if on the date of authentication of any 2024 Bonds, interest is then in default on the Outstanding 2024 Bonds, such 2024 Bonds shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on the Outstanding 2024 Bonds. (ii) Payment of interest on the 2024 Bonds due on or before the maturity or prior redemption thereof shall be made to the person in whose name such 2024 Bonds is registered, as of the Record Date preceding the applicable Interest Payment Date, on the registration books kept by the Trustee pursuant to Section 2.05 hereof, such interest to be paid by check mailed by first class mail on such Interest Payment Date to such Owner at his address as it appears on such books; provided, that in the event the ownership of such 2024 Bonds is no longer maintained in book -entry form by the Depository, such payment shall be made by wire transfer to any Owner of at least $1,000,000 in aggregate principal amount of 2024 Bonds, in immediately available funds to an account in the United States designated in writing by such Owner to the Trustee prior to the applicable Record Date. Interest on the 2024 Bonds shall be payable in lawful money of the United States of America and shall be calculated on the basis of a 360 day year consisting of twelve 30 day months. SECTION 3.02. Redemption of 2024 Bonds. (a) Optional Redemption. 2024 Bonds maturing on or after September 1, shall be subject to redemption, at the option of the Authority, upon at least 45 days prior written notice to the Trustee specifying the date and amount of such redemption, in whole or in part, on any date on or after September 1, (by lot within any maturity and among maturities as specified by the Authority) at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest to the date of redemption without premium. (b) Mandatory Sinking Fund Redemption. The 2024 Bonds maturing on September 1, 20_ are subject to mandatory sinking fund redemption prior to maturity, in part, on September 1, 20_, and on each September 1 thereafter to maturity by lot, from sinking fund payments at a redemption price equal to the principal amount of such 2024 Bonds to be redeemed, together with accrued interest to the date of redemption, without premium, as follows: 18 55394.00068\42092121.3 Bonds Maturingoptember 1, 20 Redemption Date (September 1) Sinking Fund Payment (final maturity) The amounts in the foregoing schedule shall be reduced in any manner selected by the Authority, as a result of any prior or partial redemption of the Bonds pursuant to subsections (a) of this section. (c) In lieu of payment at maturity or redemption under this Section 3.02, moneys in the Bond Fund may be used and withdrawn by the Trustee for purchase of Outstanding Bonds, upon the filing with the Trustee of a Certificate of the City requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Certificate of the City may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. (d) Notice of redemption shall be given by the Trustee, not less than 30 nor more than 60 days prior to the redemption date to (i) the respective Owners of the 2024 Bonds designated for redemption at their addresses appearing on the registration books of the Trustee by first class mail and (ii) the Securities Depositories and the Information Services by certified or registered mail or overnight delivery. Each notice of redemption shall state the date of such 2024 Bonds 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 2024 Bonds of such maturity, to be redeemed and, in the case of 2024 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 2024 Bonds thereof and in the case of a 2024 Bond to be redeemed in part only, the specified portion of the principal amount thereof to be redeemed, together with interest 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 2024 Bonds be then surrendered at the address of the Trustee specified in the redemption notice. (e) If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the 2024 Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice 2024 Bonds shall become due and payable, and from and after the date so designated interest on the 2024 Bonds so called for redemption shall cease to accrue, and the Owners of such 2024 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. (f) Failure by the Trustee to give notice pursuant to this Section to any one or more of the Information Services or Securities Depositories, or the insufficiency of any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the Trustee to mail notice of redemption pursuant to this Section to any one or more of the respective Owners of any 2024 19 55394.00068\42092121.3 Bonds designated for redemption shall not affect the of the proceedings for redemption with the Owners to whom such notice was mailed. (g) With respect to any notice of optional redemption of the 2024 Bonds, such notice shall state that such redemption 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 on such 2024 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 2024 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 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. (h) All 2024 Bonds redeemed pursuant to the provisions of this Section or Section 6.03(b) shall be cancelled by the Trustee and shall not be reissued, and the Trustee shall deliver a certificate of cancellation to the Authority. In the event of an optional redemption pursuant to Section 3.02(a), the Authority shall provide the Trustee with a revised sinking fund schedule giving effect to the optional redemption so completed. SECTION 3.03. Form of 2024 Bonds. The 2024 Bonds and the authentication and registration endorsement and assignment to appear thereon shall be substantially in the form set forth on Exhibit A. ARTICLE IV ISSUANCE OF ADDITIONAL BONDS SECTION 4.01. Conditions for the Issuance of Additional Bonds. The Authority may at any time issue Additional Bonds payable from the Revenues as provided herein and secured by a pledge of the Revenues as provided herein equal to the pledge securing the Outstanding Bonds theretofore issued hereunder, but only subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Additional Bonds: (a) The Authority shall be in compliance with all agreements and covenants contained herein and all agreements and covenants contained in the Installment Purchase Agreement. (b) The Authority shall have satisfied the requirements set forth in Section 5.03 of the Installment Purchase Agreement. (c) The issuance of such Additional Bonds shall have been authorized by the Authority and shall have been provided for by Supplemental Indenture which shall specify the following: (1) The purpose for which such Additional Bonds are to be issued; provided that such Additional Bonds shall be applied solely for the purpose of (i) financing or refinancing additional improvements to the Project, including payment 20 55394.00068\42092121.3 of all costs incidental to or connected with such financing or refinancing, and/or (ii) refunding any Bonds then Outstanding; (2) The authorized principal amount and designation of such Additional Bonds; (3) The dated date and the maturity dates of, and the sinking fund payment dates, if any, for such Additional Bonds; (4) The interest payment dates for such Additional Bonds, which shall be Interest Payment Dates; (5) That such Additional Bonds shall be issued only in Authorized Denominations; (6) The redemption premiums, if any, and the redemption terms, if any, for such Additional Bonds; (7) The amount; if any, to be deposited from the proceeds of sale of such Additional Bonds in the Interest Account; (8) The amount, if any, to be deposited from the proceeds of sale of such Additional Bonds in an acquisition fund or construction fund to be established; (9) The Authority may but shall not be required to fund a reserve fund or obtain a reserve fund surety or instrument with respect to any Parity Obligations. If a reserve fund is funded for any Additional Bonds or a qualified reserve fund surety or instrument is obtained with respect to any Additional Bonds, such funded reserve fund or qualified reserve fund surety or instrument shall secure only the related Additional Bonds and shall not support the 2024 Bonds or any other Additional Bonds; (10) The forms of such Additional Bonds; and (11) Such other provisions as are necessary or appropriate and not inconsistent herewith. (d) The Installment Purchase Agreement shall have been amended so as to increase the Installment Payments by the City thereunder by an amount at least sufficient to pay the interest on and principal of such Additional Bonds as the same become due. Nothing contained herein shall limit the issuance of any revenue bonds of the Authority payable from the Revenues and secured by a pledge of the Revenues if after the issuance and delivery of such revenue bonds none of the Bonds theretofore issued hereunder will be Outstanding. SECTION 4.02. Procedure for the Issuance of Additional Bonds. The Authority may, at any time, execute Additional Bonds for issuance hereunder and deliver them to the Trustee, 21 55394.00068\42092121.3 and thereupon such Additional Bonds shall be authenticated and delivered by the Trustee to the purchaser thereof upon the Written Request of the Authority, but only upon receipt by the Trustee of the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Additional Bonds by the Trustee (unless the Authority shall accept any of such documents bearing a prior date): (a) An executed copy of the Supplemental Indenture authorizing the issuance of such Additional Bonds; (b) A Written Request of the Authority as to the delivery of such Additional Bonds; (c) An opinion of Bond Counsel to the effect that (1) the Authority and the Trustee have the right and power to execute and deliver the Supplemental Indenture and the Supplemental Indenture has been duly and lawfully executed and delivered by the Authority and the Trustee, is in full force and effect and is valid and binding upon the Authority and the Trustee and enforceable in accordance with its terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights and by equitable principles) and no other authorization for the execution and delivery thereof is required, (2) the Supplemental Indenture creates the valid pledge of the Revenues which it purports to create as provided therein, subject to the application thereof to the purposes and on the conditions permitted hereby, (3) such Additional Bonds are valid and binding special obligations of the Authority, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights and by equitable principles) and the terms hereof and entitled to the benefits hereof, and such Additional Bonds have been duly and validly authorized, executed, issued and delivered in accordance herewith, (4) the amendment to the Installment Purchase Agreement required by Section 4.01(d) has been duly authorized, executed and delivered and is valid and binding upon the Authority and the City and enforceable in accordance with its terms (except as enforcement may be limited by bankruptcy insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights and by equitable principles), and (5) the issuance of such Additional Bonds will not adversely affect the exclusion from gross income for federal tax purposes of interest on any Outstanding Bonds which purport to bear interest which is excluded from gross income pursuant to Section 103 of the Code; (d) A Certificate of the Authority containing such statements as may be reasonably necessary to show compliance with the conditions for the issuance of such Additional Bonds contained herein; and (e) Such further documents, opinions, money or securities as are required by the provisions of the Supplemental Indenture providing for the issuance of such Additional Bonds. 22 55394.00068\42092121.3 ARTICLE V ESTABLISHMENT OF FUNDS; DEPOSIT AND APPLICATION OF PROCEEDS SECTION 5.01. Establishment of Funds and Accounts. (a) The Trustee shall establish and maintain a special trust fund to be held by the Trustee called the "City of Santa Ana Water System Improvement Project Payment Fund" (the "Payment Fund"). Within the Payment Fund, the Trustee shall establish and maintain an Interest Account (the "Interest Account"), a Principal Account (the "Principal Account"), a Sinking Account (the "Sinking Account"), and a Redemption Account (the "Redemption Account"). (b) The Trustee shall establish and maintain a special trust fund to be held by the Trustee called the "City of Santa Ana Costs of Issuance Fund" (the "Costs of Issuance Fund"). (c) The Authority shall establish and maintain a special trust fund to be held by the Treasurer called the "City of Santa Ana Acquisition Fund" (the "Acquisition Fund"). SECTION 5.02. Application of Proceeds. Upon the receipt of payment for the 2024 Bonds on the Closing Date, the Trustee and the Authority shall apply the proceeds thereof as follows: (i) The Trustee shall transfer $ to the Escrow Agent for deposit in the escrow fund established under the Escrow Agreement; (ii) The Trustee shall transfer to the Treasurer the amount of $ for deposit in the Acquisition Fund; and (iii) The Trustee shall deposit the amount of $ to the Costs of Issuance Fund. For record keeping purposes, the Trustee may establish such accounts as may be necessary to reflect such transfer of proceeds. SECTION 5.03. Use of Moneys in the Acquisition Fund; Costs of Issuance Fund. (a) The Treasurer shall hold the moneys in the Acquisition Fund and shall disburse such moneys therefrom to pay Acquisition Costs. Such disbursements shall be made from time to time upon receipt of a Written Request of the City on behalf of the Authority which: (a) states with respect to each disbursement to be made: (i) the requisition number, (ii) the name and address of the person, firm or authority to whom payment is due, (iii) the amount to be disbursed, and (iv) that each obligation therein has been properly incurred, and is a proper charge against the Acquisition Fund and has not been the basis of any previous disbursement; (b) specifies in reasonable detail the nature of the obligation; and (c) is accompanied by a bill or statement of account for each obligation. 23 55394.00068\42092121.3 (b) If, after payment by the Treasurer of all Written Requests of the City on behalf of the Authority theretofore tendered to the Treasurer under the provisions of this Section and delivery to the Treasurer and the Trustee of a Certificate of Completion, there shall remain any balance of money in the Acquisition Fund, all money so remaining shall be transferred to the Trustee and deposited to the accounts of the Payment Fund as directed by the Authority. (c) The moneys in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance. The Trustee shall disburse moneys in the Costs of Issuance Fund from time to time upon receipt by the Trustee of a Written Request of the Authority which: (a) states with respect to each disbursement to be made: (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be disbursed, and (iv) that each obligation therein has been properly incurred, and is (a) a proper charge against the Costs of Issuance Fund and has not been the basis of any previous disbursement; (b) specifies in reasonable detail the nature of the obligation; and (c) is accompanied by a bill or statement of account for each obligation. Each such Written Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. The Trustee shall hold the moneys in the Costs of Issuance Fund and disburse such moneys therefrom in accordance with this Section. Upon the earlier of the date six months after the Closing Date for the related Series of Bonds or the date of receipt of a Certificate of the Authority stating that all Costs of Issuance have been paid, the Trustee shall transfer any amounts then remaining in the Costs of Issuance Fund to the Acquisition Fund; provided that investment earnings may be transferred to the Rebate Fund as provided in Section 7.02. ARTICLE VI REVENUES SECTION 6.01. Pledge of Revenues. All Revenues and amounts on deposit in the funds and accounts established hereunder (other than amounts on deposit in the Costs of Issuance Fund under Section 5.02 hereof and the Rebate Fund created pursuant to Section 7.02) are hereby irrevocably pledged to the payment of the interest 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 there may be allocated such sums for such purposes as are expressly permitted by Section 6.03. In order to secure the pledge of the Revenues contained in this Section 6.01, the Authority hereby transfers, conveys and assigns to the Trustee, for the benefit of the Owners, all of the Authority's rights under the Installment Purchase Agreement (excepting its right to indemnification thereunder), including the right to receive Installment Payments from the City, the right to receive any proceeds of insurance maintained thereunder or any condemnation award rendered with respect to the Project and the right to exercise any remedies provided therein in the event of a default by the City thereunder. The Trustee hereby accepts said assignment for the benefit of the Owners of the Bonds subject to the provisions of this Indenture. 24 55394.00068\42092121.3 The Trustee shall be entitled to and shall receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. SECTION 6.02. Receipt and Deposit of Revenues in the Payment Fund. In order to carry out and effectuate the pledge contained herein, the Authority agrees and covenants that all Revenues when and as received shall be received in trust hereunder for the benefit of the Owners and shall be deposited when and as received in the Payment Fund. Subject to Section 6.05 hereof, all Revenues shall be accounted for through and held in trust in the Payment 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 set forth in this Article, and shall be accounted for separately and apart from all other accounts, funds, money or other assets of the Authority. SECTION 6.03. Establishment and Maintenance of Accounts for Use of Money in the Payment Fund. Subject to Section 7.02, all money in the Payment Fund shall be deposited by the Trustee in the following respective special accounts within the Payment Fund (each of which is hereby created and each of which the Trustee hereby covenants and agrees to maintain) in the following order of priority: (a) Interest Account, (b) Principal Account, and (c) Redemption 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. (a) Interest Account. On or before each Interest Payment Date, the Trustee shall transfer from the Payment Fund and deposit in the Interest Account that amount of money which, together with any money contained in the Interest Account, is equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need be made in the Interest Account if the amount contained in the Interest Account 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 September 1 of each year, beginning September 1, 2024, the Trustee shall transfer from the Payment Fund and deposit in the Principal Account that amount of money which, together with any money contained in the Principal Account, is equal to the aggregate principal amount of all Outstanding Serial Bonds maturing on such September 1 plus the aggregate principal amount of all sinking 25 55394.00068\42092121.3 fund payments required to be made with respect to Bonds on such September 1. No deposit need be made in the Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal of all Outstanding Serial Bonds maturing by their terms on such September 1 plus the aggregate amount of all sinking fund payments required to be made on such September 1 for all Outstanding Term Bonds. The Trustee shall establish and maintain within the Principal Account a separate subaccount for Bonds of each series and maturity, designated as the "Sinking Account" (the "Sinking Account"), inserting therein the series and maturity (if more than one such subaccount is established for such series) designation of such Bonds. With respect to each Sinking Account, on each mandatory sinking account payment date established for such Sinking Account, the Trustee shall apply the mandatory sinking account payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the series and maturity for which such Sinking Account was established, upon the notice and in the manner provided herein or in the Supplemental Indenture pursuant to which such series of Bonds were issued; provided that, at any time prior to the selection of Bonds for such redemption, at the written direction of the City or the Authority, the Trustee may apply moneys in such Sinking Account to the purchase of Term Bonds of such series and maturity at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be determined by the Authority, except that the purchase price (excluding accrued interest) shall not exceed the redemption price that would be payable for such Bonds upon redemption by application of such mandatory sinking account payment. If, during the twelve month period immediately preceding the selection of Bonds for redemption, the Trustee has purchased Term Bonds of such series and maturity with moneys in such Sinking Account, such Bonds so purchased shall be applied, to the extent of the full principal amount thereof, to reduce said mandatory Sinking Account payment. 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, except that any money in any Sinking Account shall be used and withdrawn by the Trustee only to purchase or to redeem or to pay Term Bonds for which such Sinking Account was created. (c) Redemption Account. In addition to the above accounts, the Trustee shall establish and maintain within the Payment Fund a special account designated the "Redemption Account." All money in the Redemption Account shall be held in trust by the Trustee and shall be applied, used and withdrawn either to redeem bonds pursuant to Article 3 or for the purposes authorized in this subsection (c). Any moneys which, pursuant to Section 7.01 of the Installment Purchase Agreement, are to be used to redeem Bonds shall be deposited by the Trustee in the Redemption Account. The Trustee shall, on the scheduled redemption date, withdraw from the Redemption Account and pay to the Owners entitled thereto an amount equal to the redemption price of the Bonds to be redeemed on such date. (d) Any delinquent Installment Payments with respect to the Project shall be applied first to the Interest Account for the immediate payment of interest payments past 26 55394.00068\42092121.3 due and then to the Principal Account for immediate payment of principal payments past due according to the tenor of any Bond. Any remaining money representing delinquent Installment Payments shall be deposited in the Payment Fund to be applied in the manner provided therein. SECTION 6.04. Investment of Moneys in Funds and Accounts. Moneys in the Acquisition Fund shall be accounted for and invested by the Treasurer in any legally permitted investment. Moneys in the Costs of Issuance Fund and the Payment Fund and any accounts therein shall, upon the Written Request of the City, on behalf of the Authority, be invested by the Trustee in Permitted Investments. In the absence of a Written Request of the City, the Trustee shall hold such funds uninvested pending the receipt of a Written Request of the City. The obligations in which moneys in the said funds and accounts are invested shall mature prior to the date on which such moneys are estimated to be required to be paid out hereunder. Prior to the completion of the acquisition, construction, installation and improvement of the Project, any interest, income or profits from the deposits or investments of all funds and accounts (except the Rebate Fund) shall be retained in such fund or account. After the completion of the acquisition, construction, installation and improvement of the Project, any interest, income or profits from the deposits or investments of all funds and accounts (except the Rebate Fund) shall be deposited to the Interest Account of the Payment Fund. The Trustee shall semiannually, on or about March 1 and September 1 of each year, commencing on September 1, , and at such times as the Authority shall deem appropriate, value the investments in the funds and accounts hereunder. Except as otherwise provided in this Section, Permitted Investments representing an investment of moneys attributable to any fund or account hereunder and all investment profits or losses thereon shall be deemed at all times to be a part of said fund or account. The Trustee may act as principal or agent in the acquisition or disposition of investments. For investment purposes only, the Trustee may commingle the funds and accounts established hereunder, except the Rebate Fund and any fund or account established pursuant to Article 11 hereof. 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 periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. ARTICLE VII COVENANTS OF THE AUTHORITY SECTION 7.01. Punctual Payment and Performance. The Authority will punctually pay 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 contained herein and in the Bonds. 27 55394.00068\42092121.3 SECTION 7.02. Tax Covenants; Rebate Fund. (a) In addition to the other funds and accounts created pursuant hereto, the Trustee shall establish and maintain a fund separate from any other fund or account established and maintained hereunder designated the "Rebate Fund" (the "Rebate Fund"). Within the Rebate Fund, the Trustee shall maintain such accounts or subaccounts as are specified in a Written Request of the City to the Trustee pursuant to the Tax Certificate. The Trustee shall deposit moneys in the Rebate Fund made available by the Authority pursuant to a Written Request of the City. Subject to the transfer provisions provided in paragraph (e) below, 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 (as such term is defined in the Tax Certificate), for payment to the federal government of the United States of America, and none of the City, the Authority, the Trustee nor the Owners of the Bonds shall have any right in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with the provisions of this Section 7.02 and the Tax Certificate if it follows the Written Request of the City, including supplying all necessary information in the manner provided in the Tax Certificate, and except as otherwise expressly provided herein, shall not be required to take any actions hereunder in the absence of written directions by the City, and shall have no liability or responsibility to enforce compliance by the City with the terms of the Tax Certificate or this Section. The Trustee agrees to comply with all Written Requests of the City given in accordance with the Tax Certificate. (b) Upon a Written Request of the City, an amount shall be deposited into the Rebate Fund by the Trustee from deposits by the City, if and to the extent required, so that the balance of the amount on deposit thereto shall be equal to the Rebate Requirement. Computations of the Rebate Requirement shall be furnished by or on behalf of the City in accordance with the Tax Certificate. (c) The Trustee shall have no obligation to rebate any amounts required to be rebated pursuant to this Section, other than from moneys held in the funds and accounts created hereunder or from other moneys provided to it by the City or the Authority. (d) The Trustee shall invest all amounts held in the Rebate Fund in Permitted Investments as directed by a Written Request of the City, which directions shall be subject to the restrictions set forth in the Tax Certificate. Money, including investment earnings, shall not be transferred from the Rebate Fund except as provided in paragraph (e) below. (e) Upon receipt of a Written Request of the City, the Trustee shall remit part or all of the amounts in the Rebate Fund to the United States of America, as so directed. In addition, if the City so directs, the Trustee will deposit moneys into or transfer moneys out of the Rebate Fund from or into such accounts or fund as directed by the Written Request of the City. Any amounts remaining in the Rebate Fund after payment or prepayment of all of the Bonds and payment and satisfaction of any Rebate Requirement, or provision made therefor satisfactory to the Trustee, shall, after payment all fees and expenses of the Trustee, be withdrawn and remitted to the City. 28 55394.00068\42092121.3 (f) Notwithstanding any other provision hereof, including, in particular, Article 12, the obligation to remit the Rebate Requirement to the United States and to comply with all other requirements of this Section and the Tax Certificate shall survive the defeasance or payment in full of the Bonds. (g) The Authority shall not use or permit any proceeds of the 2024 Bonds or any funds of the Authority, directly or indirectly, to acquire any securities or obligations, and shall not take or permit to be taken any other action or actions, which would cause any 2024 Bonds to be an "arbitrage bond" within the meaning of the Code or "federally guaranteed" within the meaning of Section 149(b) of the Code and any such applicable regulations promulgated from time to time thereunder and under Section 103(c) of the Code. The Authority shall observe and not violate the requirements of Section 148 of the Code and any such applicable regulations. The Authority shall comply with all requirements of Sections 148 and 149(b) of the Code to the extent applicable to the 2024 Bonds. (h) The Authority specifically covenants to comply with the provisions and procedures of the Tax Certificate. (i) The Authority shall not use or permit the use of any proceeds of the 2024 Bonds or any funds of the Authority, directly or indirectly, in any manner, and shall not take or omit to take any action that would cause any of the 2024 Bonds to be treated as an obligation not described in Section 103(a) of the Code. 0) Notwithstanding any provisions of this Section 7.02, if the Authority shall provide to the Trustee an opinion of Bond Counsel to the effect that any specified action required under this Section 7.02 is no longer required or that some further or different action is required to maintain the exclusion from gross income for federal income tax purposes of interest with respect to the 2024 Bonds, the Trustee, the Authority and the City may conclusively rely on such opinion in complying with the requirements of this Section and, notwithstanding Article 8 hereof, the covenants hereunder shall be deemed to be modified to that extent. SECTION 7.03. Eminent Domain. If the whole of the Project or so much thereof as to render the remainder unusable for the purposes for which it was used or intended to be used by the City shall be taken under the power of eminent domain, the Installment Purchase Agreement shall cease as of the day that possession shall be so taken. The Authority shall take or cause to be taken such action as is reasonably necessary to obtain compensation at least equal to the value of the Project or portion thereof taken by eminent domain. If less than the whole of the Project shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the City at the time of such taking, then the Installment Purchase Agreement shall continue in full force and effect as to such remainder, and the parties thereto waive the benefits of any law to the contrary. So long as any of the Bonds shall be Outstanding, the net proceeds of any award made in eminent domain proceedings for taking the Project or any portion thereof shall be transferred to the Payment Fund. Any such award made after all of the Bonds have been fully paid and retired and all fees and expenses of the Trustee have been fully paid shall be paid to the City. SECTION 7.04. Accounting Records and Reports. The Authority will keep or cause to be kept proper books of record and accounts in which complete and correct entries shall 29 55394.00068\42092121.3 be made of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Trustee, at reasonable hours and under reasonable conditions. Not more than 270 days after the close of each Fiscal Year, the Authority shall furnish or cause to be furnished to the Trustee a complete financial statement covering receipts, disbursements, allocation and application of Revenues for such Fiscal Year, and including a statement of net position and a statement of net activities. The Authority shall also keep or cause to be kept such other information as is required under the Tax Certificate. SECTION 7.05. The City's Budgets. The Authority will supply to the Trustee, as soon as practicable after the beginning of each Fiscal Year but in any event no later than September 1 of each Fiscal Year, a Certificate of the City certifying that the City has made adequate provision in its annual budget for such Fiscal Year for the payment of all installments due under the Installment Purchase Agreement in such Fiscal Year. If the amounts so budgeted are not adequate for the payment of all installments due under the Installment Purchase Agreement in such Fiscal Year, the Authority will take such action as may be necessary and within its power to cause such annual budget to be amended, corrected or augmented so as to include therein the amounts required to be paid by the City in such Fiscal Year for the payment of all installments due under the Installment Purchase Agreement in such Fiscal Year, and will notify the Trustee of the proceedings then taken or proposed to be by the Authority. SECTION 7.06. Installment Purchase Agreement and Other Documents. The Authority will at all times maintain and vigorously enforce all of its rights under the Installment Purchase Agreement, and will promptly collect all installments due for the purchase of the Project as the same become due under the Installment Purchase Agreement, and will promptly and vigorously enforce its rights against any person who does not pay such installments as they become due under the Installment Purchase Agreement. The Authority will 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 the Installment Purchase Agreement by the purchaser thereunder. SECTION 7.07. Other Liens. The Authority will keep the Project free from judgments, mechanics' and materialmen's liens (except those arising from the acquisition, construction and installation of the Project) and free from all liens, claims, demands and encumbrances of whatsoever prior nature or character to the end that the security for the Bonds provided herein will at all times be maintained and preserved free from any claim or liability which, in the judgment of the Trustee (whose determination shall be final), might hamper the Authority in conducting its business or interfere with the City's operation of the Project, and the Trustee at its option (after first giving the Authority ten days' written notice to comply therewith and failure of the Authority to so comply within such period) may (but shall not be obligated to) defend against any and all actions or proceedings in which the validity hereof is or might be questioned, or may pay or compromise any claim or demand asserted in any such action or proceeding; provided, however, that in defending such actions or proceedings or in paying or compromising such claims or demands the Trustee shall not in any event be deemed to have waived or released the Authority from liability for or on account of any of its agreements and covenants contained herein, or from its liability hereunder to defend the validity hereof and the pledge of the Revenues made herein and to perform such agreements and covenants. 30 55394.00068\42092121.3 SECTION 7.08. Prosecution and Defense of Suits. The Authority will promptly from time to time take or cause to be taken such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Project, whether now existing or hereafter developing, and shall prosecute or cause to be prosecuted all such suits, actions and other proceedings as may be appropriate for such purpose and shall indemnify and hold the Trustee harmless from all loss, cost, damage and expense, including attorney's fees, which it may incur by reason of any such defect, cloud, suit, action or proceeding. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim arising out of the receipt, application or disbursement of any of the Revenues or involving the rights of the Trustee hereunder; provided that the Trustee at its election may appear in and defend any such suit, action or proceeding. SECTION 7.09. Further Assurances. Whenever and so often as requested to do so by the Trustee, 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 Owners all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby. SECTION 7.10. Continuing Disclosure. The Authority will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the Authority to comply with the Continuing Disclosure Certificate shall not constitute an event of default hereunder; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its reasonable satisfaction therefor, shall) or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. ARTICLE VIII THE TRUSTEE SECTION 8.01. Appointment and Acceptance of Duties. The Trustee hereby accepts and agrees to the trusts hereby created to all of which the Authority agrees and the respective owners of the Bonds, by their purchase and acceptance thereof, agree. SECTION 8.02. Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture and no implied duties or obligations shall be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. 31 55394.00068\42092121.3 (b) So long as no Event of Default has occurred and is continuing, the Authority may remove the Trustee at any time and shall remove the Trustee if at any time requested to do so by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or, regardless of the occurrence and continuance of an Event of Default, if at any time the Trustee shall be in breach of the trusts set forth in this Indenture, or shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting, or shall commence a case under any bankruptcy, insolvency or similar law, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take control or charge of the Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee, and thereupon shall appoint a successor Trustee by an instrument in writing. (c) The Trustee may resign by giving written notice of such resignation to the Authority and by giving notice of such resignation by mail, first class postage prepaid, to the Owners at the addresses listed in the bond register. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee; provided that no removal or resignation of the Trustee shall take effect until a successor shall be appointed. If no successor Trustee shall have been appointed and shall have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee, at the expense of the Authority, or any Owner (on behalf of himself and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture shall signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless, at the written request of the Authority or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, such successor Trustee shall mail a notice of the succession of such Trustee to the trusts hereunder by first class mail, postage prepaid, to the Owners at their addresses listed in the bond register. (e) Any Trustee appointed under the provisions of this Indenture shall be a trust company, national banking association or bank having trust powers, having a corporate trust office in California, having (or whose parent holding company shall have) a combined capital and surplus 32 55394.00068\42092121.3 of at least two -hundred million ($200,000,000), subject to supervision or examination by federal or state authority. If such bank, national banking association 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 subsection the combined capital and surplus of such bank, national banking association 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. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e) the Trustee shall resign immediately in the manner and with the effect specified in this Section. (f) No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. (g) The Trustee shall not be responsible for the sufficiency, timeliness or enforceability of the Revenues. (h) The Trustee shall not be accountable for the use or application by the Authority, the City or any other party of any funds which the Trustee has released under this Indenture. (i) The Trustee may employ attorneys, agents or receivers in the performance of any of its duties hereunder and shall not be answerable for the misconduct of any such attorney, agent or receiver selected by it with reasonable care. 0) Notwithstanding any other provision of this Indenture, in determining whether the rights of the Owners will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee shall consider the effect on the Owners as if there were no policy or policies of municipal bond insurance. SECTION 8.03. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business provided such company shall be eligible under subsection (e) of Section 8.02 shall succeed to the rights and obligations of such Trustee without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. SECTION 8.04. Compensation. The Authority shall pay the Trustee, or cause the Trustee to be paid, reasonable compensation for its services rendered hereunder and shall reimburse the Trustee for reasonable expenses incurred by the Trustee in the performance of its obligations hereunder. The Authority agrees, to the extent permitted by law, to indemnify the Trustee and its respective officers, directors, members, employees, attorneys and agents for, and to hold them harmless against, any loss, liability or expense including legal fees and expenses incurred without negligence or willful misconduct on their part arising out of or in connection with the acceptance or administration of the trusts imposed by this Indenture, including performance of their duties hereunder, including the costs and expenses of defending themselves against any claims or liability in connection with the exercise or performance of any of their powers or duties hereunder. Such 33 55394.00068\42092121.3 indemnity shall survive the termination or discharge of the Indenture and resignation or removal of the Trustee. SECTION 8.05. Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Authority, and the Trustee assumes no responsibility for the correctness of the same, and makes no representations as to the validity or sufficiency of this Indenture, the Installment Purchase Agreement or of the Bonds, and shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee and, to the extent permitted by law, may act as depositary for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless the Trustee shall have been negligent in ascertaining the pertinent facts. (c) 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 Owners of not less than 25% in aggregate principal amount of the Bonds at the time Outstanding 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. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, except for actions arising from the negligence or intentional misconduct of the Trustee. The permissive right of the Trustee to do things enumerated hereunder shall not be construed as a mandatory duty. (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof at the Corporate Trust Office of the Trustee. Except as otherwise expressly provided herein, and subject to Section 8.02, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, 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 or thereunder. The Trustee shall not be responsible for the validity or effectiveness of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be responsible for reviewing the contents of any financial statements furnished to the Trustee pursuant to Section 7.04 and may rely conclusively on the certificates provided hereunder to establish compliance with its duties. 34 55394.00068\42092121.3 (f) The Trustee shall not be considered in breach or in default of its obligations hereunder or progress in respect thereto in the event of enforced delay ("unavoidable delay") in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Project, malicious mischief, condemnation and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and or occurrence beyond the control of the Trustee; provided, however, that the Trustee shall provide notice of any such unavoidable delay to the Authority. (g) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. (h) 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 Owners pursuant to the provisions of this Indenture unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. SECTION 8.06. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, requisition, consent, order, certificate, report, opinion, bond, facsimile transmission, electronic mail 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 but need not 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. Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Certificate of the Authority, and such Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. SECTION 8.07. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Authority and any Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. 35 55394.00068\42092121.3 The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions ("Instructions") given pursuant to this Indenture and delivered using Electronic Means ("Electronic Means" shall mean the following communications methods: S.W.I.F.T., e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder); provided, however, that the City shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions ("Authorized Officers") and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee's understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. 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 directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions 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; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures. ARTICLE IX AMENDMENT OF THE INDENTURE SECTION 9.01. Amendment of the Indenture. The Indenture and the rights and obligations of the Authority and of the Owners may be amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 9.02, are filed with the Trustee. No such amendment shall (1) extend the maturity of or reduce the interest rate on or otherwise alter or impair the obligation of the Authority to pay the interest on or principal of or redemption premium, if any, on any Bond at the time and place and at the rate and in the currency provided herein without the express written consent of the Owner of such Bond, (2) except as provided in Sections 4.01 and 4.02 hereof, permit the creation by the Authority of any pledge of the Revenues as provided herein superior to or on a 36 55394.00068\42092121.3 parity with the pledge created hereby for the benefit of the Bonds, or (3) modify any rights or obligations of the Trustee without its prior written assent thereto. The Indenture and the rights and obligations of the Authority and of the Owners may also be amended at any time by a Supplemental Indenture which shall become binding upon adoption without the consent of any Owners, but only to the extent permitted by law and after receipt of an approving opinion of Bond Counsel and only for any one or more of the following purposes: (a) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein regard to questions arising hereunder which the Authority may deem desirable or necessary and not inconsistent herewith and which shall not adversely affect the interests of the Owners; (b) to make any other change or addition hereto which shall not materially adversely affect the interests of the Owners, or to surrender any right or power reserved herein to or conferred herein on the Authority; or (c) to provide for the issuance of any Additional Bonds and to provide the terms of such Additional Bonds, subject to the conditions and upon compliance with the procedure set forth in Article 4. SECTION 9.02. Disqualified Bonds. Bonds owned or held by or for the account of the Authority or the City 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. SECTION 9.03. 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 Owner of any Outstanding Bond and presentation of his Bond for such purpose at the 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 Owner of any Outstanding Bond such new Bonds shall be exchanged at the Corporate Trust Office of the Trustee without cost to each Owner for Bonds then Outstanding upon surrender of such Outstanding Bonds. SECTION 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Bonds owned by him, provided that due notation thereof is made on such Bonds. ARTICLE X EVENTS OF DEFAULT AND REMEDIES OF HOLDERS SECTION 10.01. Events of Default and Acceleration of Maturities. If one or more of the following events (herein called "Events of Default") shall happen, that is to say: 37 55394.00068\42092121.3 (a) failure in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; (b) failure 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) failure by the Authority in the performance of any of the other agreements or covenants required herein to be performed by the Authority, and such default shall have continued for a period of 30 days after the Authority shall have been given notice in writing of such default by the Trustee, or to the Authority and the Trustee by Owners of not less than 25% of the Bonds; or (d) if any event of default shall have occurred and be continuing under Section 8.01 of the Installment Purchase Agreement; or (e) 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; then and in each and every such case during the continuance of such event of default the Trustee may, upon the written request of the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding by notice in writing to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained herein or in the Bonds to the contrary notwithstanding. This subsection is subject to the condition that if at any time after the entire principal amount of the unpaid Bonds and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the City shall deposit with the Trustee a sum sufficient to pay the unpaid principal amount of the Bonds due prior to such declaration and the accrued interest thereon, with interest such overdue installments at the rate or rates applicable thereto in accordance with their terms, and the reasonable fees and expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment the entire principal amount of the unpaid Bonds and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Trustee, by written notice to the City, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. SECTION 10.02. Proceedings by Trustee. Upon the happening and continuance of any Event of Default the Trustee in its discretion may, and at the written request of the Owners of 38 55394.00068\42092121.3 not less than 25% in aggregate principal amount of Bonds Outstanding shall (but only to the extent indemnified to its satisfaction from fees and expenses, including attorneys' fees), do the following: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners and require the Authority to enforce all rights of the Owners of Bonds, including the right to require the Authority to receive and collect Revenues and to enforce its rights under the Installment Purchase Agreement and to require the Authority to carry out any other covenant or agreement with Owners of Bonds and to perform its duties hereunder; (b) bring suit upon the Bonds; (c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners; and (d) as a matter of right, have receivers appointed for the Revenues and the issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. SECTION 10.03. Effect of Discontinuance or Abandonment. In case any proceeding taken by the Trustee on account of any default or Event of Default shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Authority, the Trustee and the Owners shall be restored to their former positions and rights under this Indenture, respectively, and all rights, remedies and powers of the Trustee shall continue as though no such proceeding had been taken. SECTION 10.04. Rights of Owners. Anything in this Indenture to the contrary notwithstanding subject to the limitations and restrictions as to the rights of the Owners in Sections 10.01 and 10.02 above and 10.05 below, upon the happening and continuance of any Event of Default, the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall have the right upon providing the Trustee security and indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby, by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under this Indenture. The Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is prejudicial to rights of other Owners or would subject the Trustee to personal liability. SECTION 10.05. Restriction on Owners' Action. In addition to the other restrictions on the rights of Owners to request action upon the occurrence of an Event of Default and to enforce remedies set forth in this Article 10, no Owner of any of the Bonds shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of any trust under this Indenture, or any other remedy under this Indenture or on said Bonds, unless such Owner previously shall have given to the Trustee written notice of an Event of Default as hereinabove provided and unless the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall have made written request of the Trustee to institute any such suit, action, proceeding or other remedy, after the right to exercise such powers or rights of action, as the case 39 55394.00068\42092121.3 may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers in this Indenture granted, or to institute such action, suit or proceeding in its or their name; nor unless there also shall have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall not have complied with such request within a reasonable time; and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the trusts of this Indenture or for any other remedy under this Indenture; it being understood and intended that no one or more Owners of the Bonds secured by this Indenture shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture, or to enforce any right under this Indenture or under the Bonds, except in the manner in this Indenture provided, and that all proceedings at law or in equity shall be instituted, and maintained in the manner in this Indenture provided, and for the equal benefit of all Owners of Outstanding Bonds. SECTION 10.06. Power of Trustee to Enforce. All rights of action under this Indenture or under any of the Bonds secured by this Indenture which are enforceable by the Trustee may be enforced by it without the possession of any of the Bonds, or the production thereof at the trial or other proceedings relative thereto, and any such suit, action or proceedings instituted by the Trustee shall be brought in its own name, as Trustee, for the equal and ratable benefit of the Owners of the Bonds subject to the provisions of this Indenture. SECTION 10.07. Remedies Not Exclusive. No remedy in this Indenture conferred upon or reserved to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given under this Indenture or now or hereafter existing at law or in equity or by statute. SECTION 10.08. Waiver of Events of Default, Effect of Waiver. The Trustee shall waive any Event of Default hereunder and its consequences and rescind any declaration of acceleration, upon the written request of the Owners of at least a majority in aggregate principal amount of all Outstanding Bonds. If any Event of Default shall have been waived as herein provided, the Trustee shall promptly give written notice of such waiver to the Authority and shall give notice thereof by first class mail, postage prepaid to all Owners of Outstanding Bonds if such Owners had previously been given notices of such Event of Default whether or not exhausted; but no such waiver, rescission and annulment shall extend to or affect any subsequent Event of Default, or impair any right or remedy consequent thereon. No delay or omission of the Trustee or any Owner of the Bonds to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default, or an acquiescence therein; and every power and remedy given by this Article 10 to the Trustee or the Owners of the Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient. SECTION 10.09. Application of Moneys. Any moneys received by the Trustee pursuant to this Article 10, together with any moneys which upon the occurrence of an Event of Default are held by the Trustee in any of the funds and accounts hereunder (other than the Rebate M 55394.00068\42092121.3 Fund and other than moneys held for Bonds not presented for payment) shall, after payment of all fees and expenses of the Trustee, and the fees and expenses of its counsel, be applied as follows: (a) unless the principal of all of the Outstanding Bonds shall be due and payable, FIRST - To the payment of the Owners of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Owners, without any discrimination or privilege; SECOND - To the payment of the Owners of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in the order of their due dates and, if the amount available shall not be sufficient to pay in full the principal of and premium, if any, on such Bonds due on any particular date, then to the payment ratably, according to the amount due on such date, to the Owners without any discrimination; THIRD - To be held for the payment to the Owners as the same shall become due of the principal of, interest, and premium, if any, on the Bonds, which may thereafter become due either at maturity or upon call for redemption prior to maturity and, if the amount available shall not be sufficient to pay in full such principal and premium, if any, due on any particular date, together with interest then due and owing thereon, payment shall be made in accordance with the FIRST and SECOND paragraphs hereof. (b) if the principal of all of the Outstanding Bonds shall be due and payable, to the payment of the principal, and premium, if any, and interest then due and unpaid upon the Outstanding Bonds without preference or priority of any of principal, premium or interest over the others or of any installment of interest, or of any Outstanding Bond over any other Outstanding Bond, ratably, according to the amounts due respectively for principal, premium and interest, to the Owners without any discrimination or preference except as to any difference in the respective amounts of interest specified in the Outstanding Bonds. Whenever moneys are to be applied pursuant to the provisions of this Section 10.09, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. The Trustee shall give, by mailing by first class mail as it may deem appropriate, such notice of the deposit with it of any such moneys. 41 55394.00068\42092121.3 ARTICLE XI DEFEASANCE SECTION 11.01. Discharge of Bonds. (a) If the Authority shall pay or cause to be paid to the Owners of all Outstanding Bonds the interest thereon and the principal thereof and the redemption premiums, if any, thereon at the times and in the manner stipulated herein and therein, then the Owners of such Bonds shall cease to be entitled to the pledge of the Revenues as provided herein, and all agreements, covenants and other obligations of the Authority to the Owners of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the Authority all moneys held by it pursuant hereto which are not required for the payment of the interest on and principal of and redemption premiums, if any, on such Bonds. Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid and if, at the time of such payment, the Authority shall have kept, performed and observed all the covenants and promises in such Bonds and in this Indenture required or contemplated to be kept, performed and observed by the Authority or on its part on or prior to that time, then this Indenture shall be considered to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien of this Indenture and such lien and all covenants, agreements and other obligations of the Authority hereunder shall cease, terminate, become void and be completely discharged as to such Bonds. Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture relating to the maturity of the Bonds, interest payments and dates thereof, tender and exchange provisions, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, remain in effect and shall be binding upon the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of, redemption premium, if any, and interest on the Bonds, to pay to the Owners of Bonds the funds so held by the Trustee as and when such payment becomes due. Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this Indenture contained in Section 8.04 relating to the compensation of the Trustee shall remain in effect and shall be binding upon the Trustee and the Authority. (b) Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) or this Section if (1) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to mail notice of redemption of such Bonds on said redemption date, said notice to be given in accordance with Section 3.02 hereof, (2) there shall have been deposited with the Trustee either (A) money in an amount which shall be sufficient or (B) Defeasance Securities which are 42 55394.00068\42092121.3 not subject to redemption prior to maturity (including any such Defeasance Securities issued or held in book entry form on the books of the Department of the Treasury of the United States of America) or tax exempt obligations of a state or political substitution thereof which have been defeased under irrevocable escrow instructions by the deposit of such money or Defeasance Securities and which are then rated in the highest rating category by the rating agency, the interest on and principal of which when paid will provide money which, together with the money, if any, deposited with the Trustee at the same time, shall, as verified by an independent certified public accountant or other financial consultant acceptable to the Trustee, be sufficient to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and redemption premiums, if any, on such Bonds, and (3) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Owners of such Bonds that the deposit required by clause (2) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with this section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds. SECTION 11.02. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Bonds which remains unclaimed for two years after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for redemption prior to maturity, if such money was held by the Trustee at such date, or for two years after the date of deposit of such money if deposited with the Trustee shall at the Written Request of the Authority be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the Authority for the payment of such Bonds; provided, however, that before being required to make any such payment to the Authority, the Trustee shall, at the expense of the Authority, cause to be published once a week for two successive weeks in a Financial Newspaper, a notice that such money remains unclaimed and that, after a date named in such notice, which date shall not be less than 30 days after the date of the first publication of each such notice, the balance of such money then unclaimed will be returned to the Authority. ARTICLE XII MISCELLANEOUS SECTION 12.01. Liability of Authority Limited to Revenues. Notwithstanding anything contained herein, the Authority shall not be required to advance any money derived from any source of income other than the Revenues as provided herein for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants herein contained. The Authority may, however, advance funds for any such purpose so long as such funds are derived from a source legally available for such purpose without incurring an indebtedness. The Bonds shall be limited obligations of the Authority and shall be payable solely from the Revenues and amounts on deposit in the funds and accounts established hereunder (other than 43 55394.00068\42092121.3 amounts on deposit in the Rebate Fund created pursuant to Section 7.02). The Bonds do not constitute a debt or liability of the City or of the State of California and neither the faith and credit of the City nor of the State are pledged to the payment of the principal of or interest on the Bonds. SECTION 12.02. Benefits of Indenture Limited to Parties. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Authority, the Trustee and the registered Owners of the Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof; and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee and the registered Owners of the Bonds. SECTION 12.03. Successor Is Deemed Included In All References To Predecessor. Whenever herein either the Authority or any member, officer or employee thereof is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the administration, control and management of 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 12.04. Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner 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 office of the Trustee. Any declaration, request or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond with respect to anything done or suffered to be done by the Authority in good faith and in accordance therewith. SECTION 12.05. Waiver of Personal Liability. No member, officer or employee of the Authority shall be individually or personally liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds by reason of their issuance, but nothing herein contained shall relieve any member, officer or employee of the Authority from the performance of any official duty provided by any applicable provisions of law or hereby. SECTION 12.06. Acquisition of Bonds by Authority. All Bonds acquired by the Authority, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. 55394.00068\42092121.3 SECTION 12.07. 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 Trustee shall destroy such Bonds and furnish to the Authority a certificate of such destruction. SECTION 12.08. 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 12.09. Accounts and Funds. 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 sound corporate trust industry practice and with due regard for the protection of the security of the Bonds and the rights of the Owners. SECTION 12.10. 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 Owners shall retain all the benefit, protection and security afforded to them hereunder or any 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. 45 55394.00068\42092121.3 SECTION 12.11. Execution in 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 12.12. Law Governing and Venue. This Indenture shall be governed exclusively by the provisions hereof and by the laws of the State as the same from time to time exist. Venue shall be held exclusively in the County of Orange. SECTION 12.13. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the Authority: Santa Ana Public Financing Authority 20 Civic Center Plaza Santa Ana, CA 92701 Attn: Executive Director If to the City: City of Santa Ana 20 Civic Center Plaza Santa Ana, CA 92701 Attn: Department of Finance If to the Trustee: U.S. Bank Trust Company, National Association 633 West 5t' St., 241h Floor Los Angeles, CA 90071 (Signature page follows) 46 55394.00068\42092121.3 IN WITNESS WHEREOF, the SANTA ANA PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Executive Director and attested by its Secretary and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION 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. ATTEST: Secretary APPROVED AS TO FORM: Authority Counsel SANTA ANA PUBLIC FINANCING AUTHORITY Executive Director U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee Authorized Signatory -Signature Page - Indenture S-1 55394.00068\42092121.3 EXHIBIT A FORM OF 2024 BOND No. $ SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BOND, SERIES 2024 (PAYABLE SOLELY FROM INSTALLMENT PAYMENTS SECURED BY WATER SYSTEM NET REVENUES) INTEREST MATURITY DATED RATE DATE DATE CUSIP REGISTERED OWNER: CEDE & CO. PRINCIPAL SUM: DOLLARS Unless this bond is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. The SANTA ANA PUBLIC FINANCING AUTHORITY, a California joint exercise of powers authority, duly organized and validly existing under and pursuant to the laws of the State of California (the "Authority"), for value received, hereby promises to pay (but only out of the maturity date specified above (subject to any right of prior redemption provided for) the principal sum specified above, together with interest thereon from the interest payment date next preceding the date of authentication hereof (unless such date of authentication is during the period commencing after the fifteenth day preceding an interest payment date (the "Record Date") through and including the next succeeding interest payment date, in which event this Bond shall bear interest from such interest payment date, or unless such date of authentication is on or before the first Record Date, in which event it shall bear interest from , 2024 until the principal hereof shall have been paid at the interest rate per annum specified above, payable on March 1, 2025 and semiannually thereafter on September 1 and March 1 in each year; provided, however, that if on the date of authentication of this Bond, interest is then in default on this Bond, such Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment, or if no interest has been paid, from the date of delivery hereof. A-1 55394.00068\42092121.3 The principal of this Bond shall be payable in lawful money of the United States of America at the corporate trust office of U.S. Bank Trust Company, National Association, as Trustee (the "Trustee") in Los Angeles, California upon presentation and surrender of this Bond. Payment of interest on this Bond due on or before the maturity or prior redemption, thereof shall be made to the person in whose name such Bond is registered, as of the Record Date preceding the applicable interest payment date, on the registration books kept by the Trustee at its corporate trust office, such interest to be paid by check mailed by first class mail (or paid as otherwise specified in the Indenture) on such interest payment date to the registered owner at his address as it appears on such books. Interest on this Bond shall be payable in lawful money of the United States of America and shall be calculated on the basis of a 360 day year consisting of twelve 30 day months. It is hereby certified that all acts and proceedings required by law necessary to make this Bond, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal limited obligation of the Authority have been done and taken, and have been in all respects duly authorized. This Bond is one of a duly authorized issue of bonds of the Authority designated as its "Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (Payable Solely From Installment Payments Secured by Water System Net Revenues)" (the "Bonds") in the aggregate principal amount of $ , all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of an indenture, dated as of , 2024 (the "Indenture"), between the Authority and the Trustee (copies of which are on file at the office of the Secretary of the Authority and at the corporate trust office of the Trustee). The Bonds are issued to provide funds to finance and refinance the cost of constructing and improving certain improvement of the water system (the "Project") of the City of Santa Ana (the "City"). The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from the revenues derived from installment payments paid by the City for the purchase of the Project (the "Revenues"). All the Bonds are equally and ratably secured in accordance with the terms and conditions of the Indenture by a pledge of the Revenues, which Revenues shall be held in trust for the security and payment of the interest on, principal of and redemption premiums, if any, on the Bonds as provided in the Indenture. The Bonds shall be limited obligations of the Authority and shall be payable solely from the Revenues and amounts on deposit in the funds and accounts established under the Indenture (other than amounts on deposit in the Rebate Fund). The Bonds do not constitute a debt or liability of the City or of the State of California and neither the faith and credit of the City nor of the State of California are pledged to the payment of the principal of or interest on the Bonds. Additional revenue bonds payable from the Revenues may be issued which will rank equally as to security with the Bonds, but only subject to the conditions and upon compliance with the procedures set forth in the Indenture. Reference is hereby made to the Indenture and any and all amendments thereof and supplements thereto for a description of the terms under which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the A-2 55394.00068\42092121.3 rights of the registered owners of the Bonds. All of 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. Each registered owner hereof shall have recourse to all of the provisions of the Indenture and shall be bound by all of the terms and conditions thereof. The Authority has agreed and covenanted that, for the payment of the interest on, the principal of and redemption premium, if any, on this Bond and all other Bonds of this issue authorized by the Indenture when due, there has been created and will be maintained by the Trustee a special fund into which all Revenues (other than deposits to the Rebate Fund created by the Indenture) shall be deposited, and the Authority has allocated such Revenues solely to the payment of the interest on and principal of and redemption premiums, if any, on the Bonds, and the Authority will pay promptly when due the interest on and the principal of and redemption premium, if any, on this Bonds and all other Bonds of this issue authorized by the Indenture out of said special fund, all in accordance with the terms and provisions set forth in the Indenture. 2024 Bonds maturing on or after September 1, , shall be subject to redemption, at the option of the Authority, upon at least 45 days prior written notice to the Trustee specifying the date and amount of such redemption, in whole or in part, on any date on or after September 1, (by lot within any maturity and among maturities as specified by the Authority) at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest to the date of redemption without premium. The Bonds maturing on September 1, 20_ are subject to mandatory sinking fund redemption prior to maturity, in part, on September 1, 20_, and on each September 1 thereafter to maturity by lot, from sinking fund payments at a redemption price equal to the principal amount of such Bonds to be redeemed, together with accrued interest to the date of redemption, without premium, as shown in the Indenture. As provided in the Indenture, notice of redemption of this Bond shall be given by first class mail not less than 30 days nor more than 60 days before the redemption date to the registered owner hereof. If notice of redemption has been duly given and money for the payment of the redemption price is held by the Trustee, then on the redemption date designated in such notice, this Bond shall become due and payable, and from and after the date so designated, interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with respect hereto except to receive payment of the redemption price hereof. If an Event of Default (as defined in the Indenture) shall occur, the principal of all outstanding Bonds may be declared immediately 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 by the registered owners of at least a majority in aggregate principal amount of the Bonds then outstanding. This Bond is transferable only on the books required to be kept for that purpose at the office of the Trustee 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 in a form approved by 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 will be issued to the transferee in exchange therefor. The Trustee A-3 55394.00068\42092121.3 shall not be required to register the transfer of or exchange any Bond (1) during the period commencing with the close of business on the fifteenth day next preceding any interest payment date and ending on such interest payment date, (2) during the period commencing 15 days before the mailing of any notice of redemption and ending on the day of such mailing, or (3) which has been selected for redemption in whole or in part. 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. The rights and obligations of the Authority and of the registered owners of the Bonds may be amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such amendment shall (1) extend the maturity of this Bond or reduce the interest rate hereon or otherwise alter or impair the obligation of the Authority to pay the interest hereon or principal hereof at the time and place and at the rate and in the currency provided herein without the express written consent of the registered owner of this Bond, (2) except as otherwise provided in the Indenture, permit the creation by the Authority of any pledge of the Revenues superior to or on a parity with the pledge created by the Indenture for the benefit of the Bonds, and (3) modify any rights or obligations of the Trustee without its prior written assent thereto, all as more fully set forth in the Indenture. If the Authority shall pay or cause to be paid or there shall otherwise be paid to the registered owners of all outstanding Bonds the interest thereon, the principal thereof and the redemption premiums, if any, thereon at the times and in the manner stipulated herein and in the indenture, then the registered owners of such Bonds shall cease to be entitled to the pledge of the Revenues as provided in the Indenture, and all agreements, covenants and other obligations of the Authority to the registered owners of such Bonds under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. 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 and registration hereon endorsed shall have been manually executed and dated by the Trustee. (Balance of this page intentionally left blank.) A-4 55394.00068\42092121.3 IN WITNESS WHEREOF, the Santa Ana Public Financing Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of its Chair and attested to by the facsimile signature of its Secretary, and has caused this Bond to be dated , 2024. SANTA ANA PUBLIC FINANCING AUTHORITY Chair Attest: Secretary A-5 55394.00068\42092121.3 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within -mentioned Indenture which has been authenticated and registered on , 2024. U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee WE Authorized Signatory A-6 55394.00068\42092121.3 [FORM OF ASSIGNMENT] For value received the undersigned do(es) hereby sell, assign and transfer unto. (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute and appoint attorney, to transfer the same on the books of the Trustee, with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular, without alteration or enlargement or any change whatsoever. A-7 55394.00068\42092121.3 EXHIBIT 7 PRELIMINARY OFFICIAL STATEMENT DATED JUNE 2024 NEW ISSUE - FULL BOOK ENTRY ONLY RATING: S&P Global Ratings: " " (See "RATING" herein) In the opinion of Best Best & Krieger LLP, Irvine, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial stated income of certain corporations for purposes of computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS" herein. Dated: Date of Delivery SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 Due: September 1, as shown on inside cover The Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 (the `Bonds") are being issued pursuant to an Indenture of Trust, dated as of June 1, 2024 (the "Indenture") between the Santa Ana Public Financing Authority (the "Authority") and U.S. Bank Trust Company, National Association, Los Angeles, California (the "Trustee"), and will be secured as described in this Official Statement. The Bonds are being issued (i) to refund certain outstanding obligations of the City's Water System,(ii) to finance a portion of the design, acquisition and construction of certain improvements (the "Project") to the water system (the "Water System") of the City of Santa Ana (the "City"), and (iii) to pay certain costs of issuing the Bonds. See "THE PROJECT," "THE FINANCING PLAN" and "ESTIMATED SOURCES AND USES OF FUNDS." The Bonds will be issued in book -entry form, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company ("DTC"), New York, New York. Interest on the Bonds will be payable on March 1 and September 1 of each year, commencing September 1, 20 . Purchasers will not receive certificates representing their interest in the Bonds. Individual purchases will be in integral multiples of $5,000. Payments of principal and interest will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. The Bonds are payable from Revenues of the Authority, consisting principally of Installment Payments by the City pursuant to a Master Installment Purchase Agreement, dated as of June 1, 2024, as supplemented by that First Supplement to the Master Installment Purchase Agreement, dated as of June 1, 2024 (collectively, the "Installment Purchase Agreement") between the City and the Authority. The Authority has assigned, among other things, its right to receive Installment Payments to the Trustee. The Installment Payments are a special limited obligation of the City, payable from and secured by a pledge of and first lien on all Net System Revenues, subject to the parity lien, if any, of outstanding Parity Obligations and any additional Parity Obligations as provided for in the Installment Purchase Agreement, in the Payment Fund held by the City in trust under the Installment Purchase Agreement. The Bonds are subject to redemption prior to maturity as set forth herein. (See "THE BONDS -- Redemption of the Bonds.") THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED UNDER THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE AUTHORITY OR THE CITY, OR ANY OF THE AUTHORITY'S INCOME OR RECEIPTS, EXCEPT THE REVENUES. THE BONDS ARE NOT A DEBT, OBLIGATION OR LIABILITY OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE FULL FAITH AND CREDIT OF THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND NEITHER THE AUTHORITY NOR THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR, AND NEITHER THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled "RISK FACTORS," for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds. The Bonds are offered when, as and if issued by the Authority, and accepted by the Underwriter, subject to the approval of Best Best & Krieger LLP, Irvine, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Underwriter by its counsel, Stradling Yocca Carlson & Rauth, A Professional Corporation, Newport Beach, California, and for the Authority and the City by Best Best & Krieger LLP, Irvine, California. It is anticipated that the Bonds in book -entry form will be available for delivery in New York, New York on [June 27, 2024]. Dated: June, 2024 Preliminary, subject to change. MATURITY SCHEDULE $ ' Serial Bonds (Base CUSIP• ) Maturity Date Principal Interest (September 1) Amount Rate Yield % Term Bonds Due September 1, , Yield CUSIP® %* (CUSIP: ) Preliminary, subject to change. ° CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of American Bankers Association by S&P Capital IQ. Copyright© CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. The Santa Ana Public Financing Authority, the City of Santa Ana and the Underwriters do not take any responsibility for the accuracy of the CUSIP® numbers. SANTA ANA PUBLIC FINANCING AUTHORITY Valerie Amezcua, Chairman Thai Viet Phan, Vice Chairman Benjamin Vazquez, Director Jessie Lopez, Director Phil Bacerra, Director Johnathan Ryan Hernandez, Director David Penaloza, Director CITY OF SANTA ANA, CALIFORNIA COUNCIL MEMBERS Valerie Amezcua, Mayor Thai Viet Phan, Mayor Pro Tem, Ward 1 Benjamin Vazquez, Councilmember, Ward 2 Jessie Lopez, Councilmember, Ward 3 Phil Bacerra, Councilmember, Ward 4 Johnathan Ryan Hernandez, Councilmember, Ward 5 David Penaloza, Councilmember, Ward 6 CITY STAFF Alvaro Nunez, Acting City Manager Sonia Carvalho, City Attorney Jennifer L. Hall, Clerk of the Council Kathryn Downs, Executive Director of Finance & Management Services Nabil Saba, Executive Director, Public Works Cesar Barrera, Water Resources Manager, Public Works SPECIAL SERVICES Bond Counsel and Disclosure Counsel Best Best & Krieger LLP Irvine, California Financial Advisor Urban Futures Incorporated Orange, California Trustee U.S. Bank Trust Company, National Association Los Angeles, California Verification Agent Causey Demgen & Moore P.C. Denver, Colorado GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT No dealer, broker, salesperson or other person has been authorized by the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction where such offer, solicitation or sale would be unlawful. This Official Statement does not constitute a contract between any Bond Owner and the Authority or the Underwriter. The information set forth herein has been obtained from sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation, by the Authority. Neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof. The information and expressions of opinion stated herein are subject to change without notice. Certain statements included or incorporated by reference in this Official Statement constitute "forward -looking" statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the words "expects," "forecasts," "projects," "intends," "anticipates," "estimates," "assumes" and analogous expressions. The achievement of certain results or other expectations contained in such forward -looking statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. No assurance is given that actual results will meet the forecasts of the Authority in any way, regardless of the optimism communicated in the information, and such statements speak only as of the date of this Official Statement. The Authority disclaims any obligation or undertaking to release publicly any updates or revisions to any forward -looking statement contained herein to reflect any changes in the expectations of the Authority with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All summaries of the Indenture and the Installment Purchase Agreement (as defined herein), and of statutes and other documents referred to herein do not purport to be comprehensive or definitive and are qualified in their entireties by reference to each such statute and document. This Official Statement, including any amendment or supplement hereto, is intended to be deposited with one or more depositories. This Official Statement does not constitute a contract between any Owner of a Bond and the Authority. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. While the City maintains an internet website for various purposes, the information provided on that website is not incorporated by reference as part of this Official Statement and none of the information on that website is intended to assist investors in making any investment decision or to provide any continuing information with respect to the Bonds or any other bonds or obligations of the City. While the City maintains an internet website for various purposes, the information provided on that website is not incorporated by reference as part of this Official Statement and none of the information on that website is intended to assist investors in making any investment decision or to provide any continuing information with respect to the Bonds or any other bonds or obligations of the City. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR AFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS INTRODUCTION....................................................................I General............................................................................ I The Authority and the City ..............................................1 Purpose............................................................................ I Security for the Bonds.....................................................2 Parity Obligations............................................................2 Limited Obligations.........................................................2 Forward -Looking Statements..........................................3 Summaries Not Definitive...............................................3 THE FINANCING PLAN.........................................................3 Refunding of Prior Obligations........................................3 TheProject......................................................................4 Environmental Compliance.............................................4 ESTIMATED SOURCES AND USES OF FUNDS .................5 DEBT SERVICE.......................................................................6 THEBONDS............................................................................7 Description of the Bonds.................................................7 Redemption of the Bonds................................................7 Parity Obligations............................................................9 Subordinate Obligations................................................10 Book -Entry Only System...............................................10 Transfer and Exchange of Certificates ...........................10 SECURITY FOR THE BONDS.............................................10 General..........................................................................10 Net System Revenues .................................................... I I Obligations of City Under Installment Purchase Agreement...............................................................12 Rate Covenant...............................................................12 Pledge Under the Indenture...........................................13 Application of System Revenues...................................13 Application of Revenues................................................14 THE AUTHORITY.................................................................16 THECITY..............................................................................16 THE WATER SYSTEM.........................................................16 General; Service Area....................................................16 Organization and Staff...................................................17 WaterSales....................................................................18 LandUse........................................................................18 The Project; Future Water System Improvements..........................................................19 Storage Capacity ............................................................19 Water Sources and Supply; Water Purchases ................19 MWDSupplies..............................................................24 Water Demand, Deliveries and Sales Revenues ............24 Water System Rates and Charges..................................25 Collection Procedures....................................................27 Outstanding Water System Indebtedness .......................28 Largest Customers.........................................................28 Historic Operating Results and Debt Service Coverage.................................................................29 RISKFACTORS.....................................................................29 Water System Demand and Growth..............................29 Water System Expenses.................................................30 Parity Obligations..........................................................30 Proposition 218..............................................................30 Constitutional Limit on Appropriations, Fees andCharges.............................................................31 Limited Recourse on Default.........................................31 No Debt Service Reserve Account................................31 -1- Limitations on Remedies Available; Bankruptcy............................................................. 31 No Obligation or Ability to Tax .................................... 32 Changein Law.............................................................. 32 Geologic and Topographic ............................................ 32 Cybersecurity................................................................ 32 Drought Measures......................................................... 33 ClimateChange............................................................ 34 Environmental Regulation ............................................ 35 Risks Associated with OCWD and MWD.................... 35 Impact of State Budget ................................................. 35 Secondary Market for Bonds ........................................ 35 Federal Tax -Exempt Status of the Bonds ...................... 36 IRS Audit of Tax -Exempt Issues .................................. 36 Taxpayer Protection and Government Accountability Act Initiative .................................. 36 Global Health Emergencies and Considerations; Infectious Disease Outbreak................................................................. 36 TAX MATTERS.................................................................... 37 CONTINUING DISCLOSURE ............................................. 38 NO LITIGATION.................................................................. 39 RATING 39 FINANCIAL ADVISOR........................................................ 39 PROFESSIONAL FEES ........................................................ 39 APPROVAL OF LEGALITY ................................................ 39 UNDERWRITING................................................................. 39 ADDITIONAL INFORMATION .......................................... 40 APPENDIX A — CITY OF SANTA ANA GENERAL DEMOGRAPHIC INFORMATION .......................... A-1 APPENDIX B — SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS........................................................... B-1 APPENDIX C — FORM OF FINAL OPINION OF BOND COUNSEL ..................................................... C-1 APPENDIX D — FORM OF CONTINUING DISCLOSURE AGREEMENT .................................. D-1 APPENDIX E — BOOK ENTRY PROVISIONS ................E-1 APPENDIX F - COMPREHENSIVE AUDITED FINANCIAL REPORT ............................................... F-1 MAP OFFICIAL STATEMENT SANTA ANA PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2024 INTRODUCTION General The purpose of this Official Statement of the Santa Ana Public Financing Authority (the "Authority") is to furnish information regarding the issuance and sale of the Authority's $ * principal amount of Water Revenue Bonds, Series 2024 (the "Bonds") pursuant to the provisions of an Indenture, dated as of June 1, 2024 (the "Indenture") between the Authority and U.S. Bank Trust Company, National Association (the "Trustee"). The Bonds will be issued pursuant to the Marks -Roos Local Bond Pooling Act of 1985 (Article 4, Chapter 5, Division 7, Title 1 of the California Government Code) (the "Bond Law"). The Authority and the City The Authority was established pursuant to a Joint Exercise of Powers Agreement dated May 8, 2024, between the City of Santa Ana (the "City") and the Santa Ana Housing Authority (the "Housing Authority"). The Authority was created for the purpose of providing financing for public capital improvements owned and operated by the City and/or the Housing Authority. The City of Santa Ana, county seat of Orange County and one of the oldest communities in Southern California, is located 35 miles southeast of Los Angeles, 20 miles east of the Ports of Los Angeles and Long Beach, ten miles inland from the Pacific Ocean and 90 miles north of San Diego. The City encompasses an area of approximately 27 square miles and lies on generally level land at an elevation approximately 115 feet above sea level. The City provides traditional city services, including fire protection services contracted with the Orange County Fire Authority (192 sworn personnel with ten stations) and police protection (384 sworn officers). The City, has over 1,400 employees. The Water System provides water service through the municipal water department to over 45,401 accounts. There are three library locations and 47 parks in the City. Public education for grades K-12 is provided by the Santa Ana Unified School District, the Garden Grove Unified School District, the Orange Unified School District and the Tustin Unified School District. The City has served as the county seat since the formation of Orange County in 1889. Numerous government offices have taken advantage of the City's central location and position as county seat. City, county, state and federal offices are conveniently located in the multi -government civic center in the heart of the City. The City has an industrial base which supports the local economy. The City Council is composed of six members, in addition to the Mayor. The City Council is elected biannually by ward to four-year terms, in addition to the Mayor, who is directly elected at large for two-year terms. The Mayor and Mayor Pro -Tern are selected by the City Council. The City has a council/manager form of government. The City Manager is appointed by the City Council to manage the daily affairs of the City and to implement policies established by the Council. For other selected information concerning the City, see "APPENDIX A - CITY OF SANTA ANA GENERAL DEMOGRAPHIC INFORMATION." Purpose The Bonds are being issued (i) to provide funds to refund in full the Santa Ana Financing Authority's Water Revenue Refunding Bonds, Series 2014, delivered in the initial principal amount of $15,690,000, of which $8,905,000 is currently outstanding (the "Prior Obligations"), (ii) to finance a portion of the design acquisition * Preliminary, subject to change. and construction of certain improvements (the "Project") to the water system (the "Water System") of the City, and (iii) to pay certain costs of issuance of the Bonds. The Prior Obligations were issued to refinance outstanding obligations of the Water System and to finance the acquisition and construction of additional improvements to the Water System. See "THE FINANCING PLAN" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. See "THE WATER SYSTEM" herein for a description of the City's water system. Security for the Bonds The Bonds are payable from Revenues, consisting of Installment Payments made by the City pursuant to a Master Installment Purchase Agreement dated as of June 1, 2024 (the "Master Installment Purchase Agreement"), between the City and the Authority, as supplemented by that First Supplement to Master Installment Purchase Agreement, dated as of June 1, 2024 (the "First Supplement," and together with the Master Installment Purchase Agreement the "Installment Purchase Agreement") and funds and accounts held under the Indenture (excluding the Rebate Fund and the Cost of Issuance Fund). Pursuant to the Indenture the Authority has assigned to the Trustee, among other things, its right to receive Installment Payments. The Installment Payments are a special limited obligation of the City, payable from and secured by a pledge of and first lien on all Net System Revenues in the Payment Fund held by the City under the Installment Purchase Agreement subject to the parity lien of outstanding Parity Obligations and additional obligations as provided for in the Installment Purchase Agreement. See "SECURITY FOR THE BONDS." The Installment Payments are calculated to be an amount sufficient to permit the Authority to pay all scheduled debt service on the Bonds when due. See "APPENDIX B — SUMMARY OF DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS." Parity Obligations The Water Enterprise currently has two installment sale agreements between the City and the California State Water Resources Control Board which are on a parity with the City's obligation under the Installment Purchase Agreement, one in the amount of $10,117,365 for the Automated Metering Infrastructure Project ("AMI"), and one for $13,761,712 for the Well 32 Rehabilitation Project. Both projects have an interest rate of 1.1%; the AMI Project loan has a 20-year repayment period, and the Well 32 Rehabilitation Project loan has a 30- year repayment period. The Water Enterprise, with the issuance of the Prior Obligations, refinanced its 2004 Water Revenue Bonds. The Prior Obligations will refinanced in connection with the issuance of the Bonds, as described herein. (See "INTRODUCTION - Security for the Bonds" and "THE FINANCING PLAN"). Limited Obligations THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED UNDER THE INDENTURE. THE BONDS ARE NOT A DEBT, LIABILITY OR OBLIGATION OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE FAITH AND CREDIT OF THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF PRINCIPAL OR INTEREST ON THE BONDS AND NEITHER THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR, NOR HAS LEVIED ANY TAXES THEREFOR NOR IS OBLIGATED TO LEVY ANY TAXES THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. 0► Forward -Looking Statements This Official Statement contains forward -looking statements, including (i) statements containing projections of Net System Revenues and other financial items, (ii) statements of future economic performance of the Water System, and (iii) statements of the assumptions underlying or relating to statements described in (i) and (ii) above, (collectively, the "Forward -Looking Statements"). All statements other than statements of historical facts included in this Official Statement, including without limitation statements under "THE WATER SYSTEM" and "SECURITY FOR THE BONDS" regarding the financial position, capital resources and status of the City and the Water System are Forward -Looking Statements. Although the City believes that the expectations reflected in such Forward -Looking Statements are reasonable, no assurance can be given that such expectations will prove to be correct. Important factors which could cause actual results to differ materially from expectations of the City (collectively, the "Cautionary Statements") are disclosed in this Official Statement. All Forward -Looking Statements attributable to the City or the Authority are expressly qualified in their entirety by the Cautionary Statements. Summaries Not Definitive Definitions of certain capitalized terms herein are contained in Appendix B hereto, and are incorporated herein by reference. Definitions of certain terms used in this Official Statement, and the summaries of and references contained herein to the Indenture, the Bonds, the Installment Purchase Agreement, the Continuing Disclosure Agreement, statutes and other documents do not purport to be comprehensive or definitive and are qualified by reference to each such document, instrument or statute. Additional copies of this Official Statement and copies of the Indenture and the Installment Purchase Agreement may be obtained from the Trustee or the City, 20 Civic Center Plaza, Santa Ana, California 92502. THE FINANCING PLAN Refunding of Prior Obligations The Authority is selling the Bonds to provide, among other things, the moneys (together with other available funds) necessary to refund in whole the Prior Obligations. A portion of the proceeds of the Bonds, along with certain remaining funds from the Prior Obligations, will be used to establish an escrow fund (the "Escrow Fund") for the Prior Obligations to be held in trust by U.S. Bank Trust Company, National Association, acting as escrow bank for the Prior Obligations (the "Escrow Bank') under an Escrow Deposit and Trust Agreement between the City and the Escrow Bank, dated as of June 1, 2024 (the "Escrow Agreement"). Proceeds deposited into the Escrow Fund will be used to pay the debt service on the Prior Obligations on September 2, 2024 and to pay the redemption price, as specified in the Escrow Agreement. Upon deposit of such proceeds and other moneys into the Escrow Fund, the Prior Obligations will no longer be deemed outstanding and will no longer have a claim on Net System Revenues. Moneys deposited in the Escrow Fund are not available to pay principal of or interest on the Bonds. The Project The Project consists of numerous public improvements which are identified as follows: (a) installation of advanced water meters, improvements to the Walnut Pump Station and Garthe Pump Station, improvements to the Washington Well, Large Water Services Vault and Meter Apparatus improvements, Washington Well improvements and improvements to citywide facilities to include electrical motor control centers and variable frequency drives. The total cost of construction of the Project is estimated by the City to be approximately $45,000,000. Amounts not funded from proceeds of the Bonds are expected to be funded from excess Net Revenues. The City commenced installation of the advanced water meter replacements and construction of the Garthe Pump Station improvements. Design of the improvements to the Walnut Pump Station, Large Water Services Vault and Meter Apparatus and Washington Well has commenced. Planning for the citywide facilities improvements to include electrical motor control centers and variable frequency drives is underway. Estimated costs and completion dates of the Project components are as follows: Anticipated Facili 0) Estimated Cost Completion Period Advanced Water Meters $15,000,000 December 2025 Walnut Pump Station PFAS Improvements 5,000,000 March 2026 Garthe Pump Station Improvements 5,000,000 December 2026 Large Water Services Vault and Meter Apparatus Improvements 8,000,000 December 2026 Washington Well Improvements 6,000,000 September 2026 Citywide Facilities Electrical Improvements 6,000,000 March 2027 The City may replace these improvements with other improvements or betterments to the Water System. See "THE WATER SYSTEM — The Projects, Future Water System Improvements" for additional improvements. Environmental Compliance The Project and its various components are subject to the California Environmental Quality Act ("CEQA"). Under CEQA, a project which may have a significant effect on the environment and which is to be carried out or approved by a public agency must comply with a comprehensive environmental review process, including the preparation of an Environmental Impact Report ("EIR"). Contents of an EIR include a detailed statement of the proj ect's significant environmental effects; any such effects which cannot be avoided if the project is implemented; mitigation measures proposed to minimize such effects; alternatives to the proposed project; any significant irreversible environmental changes which would result from the project; the project's growth -inducing impacts; and a brief statement setting forth the agency's reasons for determining that certain effects are not significant and hence do not require discussion in an EIR. If the agency determines that the project itself will not have a significant effect on the environment, it may adopt a negative declaration to that effect and need not prepare an EIR. The City has determined that the components of the Project are either categorically exempt from CEQA or have adopted a Mitigated Negative Declaration. 4 1*111IUI:rID)M111111:Z6i0W- RelBa .y11.Y0aluelM The proceeds received from the sale of the Bonds are to be applied as follows: Sources of Funds: Principal Amount of Bonds $ Original Issue Premium/Discount Amount Relating to Prior Obligations TOTAL SOURCES $ Uses of Funds: Transfer to Escrow Fund $ Deposit in Project Fund Costs of Issuance') TOTAL USES $ a) Includes fees and expenses of Bond Counsel and Disclosure Counsel, the Financial Advisor and the Trustee, rating agency fee, Underwriters' discount, and other costs of issuing the Bonds. 111Ol1.1ILI01:1T/[yy The Installment Purchase Agreement requires the City to make Installment Payments on or before each March 1 and September 1, beginning September 1, 20 , and continuing until the end of the term of the Installment Purchase Agreement. The following is an annualized schedule of debt service on the Bonds for each Bond Year until maturity, assuming no redemption other than sinking fund redemption. Period Ending (September 1) Principal 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 Interest Total Debt Service R1 I111DoOWIGi. Description of the Bonds The Bonds shall be delivered in the form of fully registered Bonds, without coupons, in integral multiples of $5,000, and shall be dated the date of initial delivery. The Bonds will mature on the dates and in the amounts set forth on the inside front cover of this Official Statement. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC"). So long as DTC, or Cede & Co. as its nominee, is the registered owner of all Bonds, all payments on the Bonds will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined in APPENDIX E hereto) will be the responsibility of the DTC Participants, as more fully described hereinafter. See "Book -Entry System" below. Interest on the Bonds shall become payable on March 1 and September 1 of each year, commencing September 1, 20_, and continuing to and including the date of maturity or prior redemption, whichever is earlier. Principal of the Bonds shall become payable on September 1 in each of the years and in the amounts set forth on the inside cover page of this Official Statement. Principal and premium, if any, of the Bonds shall become payable upon presentation and surrender thereof at the corporate trust office of the Trustee. Interest on the Bonds shall be based on a 360-day year composed of twelve 30-day months. Payment of interest on any Bond on any Interest Payment Date or Redemption Date will be made to the person appearing on the registration books of the Trustee as the Owner as of the Record Date immediately preceding such Interest Payment Date or Redemption Date, as the case may be, such interest to be paid by check mailed by first class mail on the Interest Payment Date to such Owner at his address as it appears on such registration books; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the continental United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Trustee prior to the applicable Record Date. Moneys due on any Interest Payment Date which is not a Business Day shall be paid on the immediately following Business Day, without the accrual of additional interest thereon. See "— Book -Entry Only System." Any Bond may be transferred upon presentation of such Bond to the Trustee by the person in whose name it is registered, in person or by his duly authorized attorney. Upon surrender, together with a duly executed instrument of transfer in form acceptable to the Trustee, and payment of a sum sufficient to cover any tax or other governmental charge, the Trustee shall execute and deliver a new Bond or Bonds of the same maturity, for a like aggregate principal amount. The Trustee shall not be required to transfer any Bond during the period established by the Trustee for selection of Bonds for redemption, nor shall the Trustee be required to transfer any Bond or portion thereof selected for redemption. Bonds may be exchanged at the corporate trust office of the Trustee for a like aggregate principal amount represented by such Bonds of other authorized denominations of the same maturity. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Redemption of the Bonds* Optional Redemption. The Bonds maturing on or after September 1, shall be subject to redemption, at the option of the Authority, upon at least 45 days prior written notice to the Trustee specifying the date and amount of such redemption, in whole or in part on any date (by lot within any maturity and among maturities as * Preliminary, subject to change. 7 specified by the Authority) on or after September 1, 20 at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed together with accrued interest to the date of redemption without a premium. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, , are subject to mandatory sinking fund redemption prior to maturity on September 1, , and on each September 1 thereafter to maturity by lot; from sinking fund payments at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium as follows: Bonds Maturing September 1, Redemption Date Sinking Fund (September 1) Pavment (final maturity) The Bonds maturing on September 1, , are subject to mandatory sinking fund redemption prior to maturity on September 1, , and on each September 1 thereafter to maturity by lot; from sinking fund payments at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium as follows: Bonds Maturing September 1, Redemption Date Sinking Fund (September 1) Pavment (final maturity) Purchase of Bonds. In lieu of payment at maturity or redemption, moneys in the Bond Fund may be used and withdrawn by the Trustee for purchase of Outstanding Bonds, upon the filing with the Trustee of a Certificate of the City requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Certificate of the City may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. Notice of Redemption; Conditional Notice. Notice of redemption shall be given by the Trustee, not less than 30 nor more than 60 days prior to the redemption date to (i) the respective Owners of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee by first class mail and (ii) the Securities Depositories and the Information Services by certified or registered mail or overnight delivery. Each notice of redemption shall state the date of such Bonds 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 the Bonds to be redeemed in part only, the respective portions of the principal amount to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds and in the case of a Bond to be redeemed in part only, the specified portion of the principal amount to be redeemed, together with interest accrued to the redemption date, and that from and after such redemption date interest shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. With respect to any notice of optional redemption of the Bonds, such notice shall state that such redemption 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 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 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. Effect of Redemption. The Bonds so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Failure by the Trustee to give notice pursuant to this paragraph to any one or more of the Information Services or Securities Depositories, or the insufficiency of any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the Trustee to mail notice of redemption pursuant to this paragraph to any one or more of the respective Owners of any Bonds designated for redemption shall not affect the proceedings for redemption with the Owners to whom such notice was mailed. Parity Obligations (a) The City may not create any Obligations the payments of which are senior or prior in right to the payment by the City of Parity Obligations. (b) Without regard to the conditions stated below in subsection (c), the City may at any time enter into or create an obligation or commitment which is a Credit Provider Reimbursement Obligation or a Qualified Swap Agreement provided the Obligation to which the Qualified Swap Agreement relates is a Parity Obligation. (c) The City may at any time and from time to time issue or create Parity Obligations, provided: (1) The City is not in default under the term of the Installment Purchase Agreement. (2) (i) Net System Revenues, as certified by the City, for the most recent audited Fiscal Year preceding the date of execution of the Parity Obligations, plus (ii) projected Net System Revenues (as described below) are at least equal to 120% of Maximum Annual Debt Service. The projections described in (2)(ii) above may take into account (A) increases in the charges made for service from the Water System which have been adopted by the City prior to the date of issuance or incurrence of such Parity Obligations, but which were not in effect for all or part of such preceding Fiscal Year, and which are scheduled to be effective in the period of Debt Service shown for such Parity Obligations, and (B) an allowance for estimated additional average annual Net System Revenues from any additions or connections to or improvements or extensions of the Water System which have occurred from the end of the Fiscal Year preceding the date of execution of the Parity Obligations. (3) Notwithstanding the requirements described above, Parity Obligations may be issued or incurred to refund outstanding Parity Obligations if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Parity Obligations (outstanding on the date of issuance or incurrence of such refunding Parity Obligations, but excluding such refunding Parity Obligations) not being refunded are outstanding. (4) The City may but shall not be required to fund a reserve fund or obtain a reserve fund surety or instrument with respect to any Parity Obligations. If a reserve fund is funded for any Parity Obligations or a qualified reserve fund surety or instrument is obtained with respect to any Parity Obligations, such funded reserve fund or qualified reserve fund surety or instrument shall secure only the related Parity Obligations and shall not support the Bonds or any other Parity Obligations. M Subordinate Obligations The City further covenants that it shall not issue or incur any Subordinate Obligations unless Net System Revenues or projected Net System Revenues, calculated in the same manner as described in paragraph (b) above, are equal to at least 100% of the sum of Debt Service on all Parity Obligations and Subordinate Obligations outstanding immediately subsequent to the incurring of such additional obligations. Book -Entry Only System DTC will act as securities depository for the Bonds. The Bonds will be issued as fully -registered Bonds registered in the name of Cede & Co., as nominee of DTC, and will be available to actual purchasers of the Bonds (the `Beneficial Owners") in the denominations set forth above, under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants (as defined in this Official Statement) as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See APPENDIX F — "BOOK -ENTRY ONLY SYSTEM." If the book -entry only system is no longer used with respect to the Certificates, the Bonds will be registered and transferred in accordance with the Indenture, as described below. Transfer and Exchange of Certificates While the Bonds are subject to DTC's book -entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See "APPENDIX E — BOOK -ENTRY PROVISIONS." During any period in which the Certificates are not subject to DTC's book -entry system, their exchange and transfer will be governed by provisions of the Trust Agreement. See "APPENDIX B — SUMMARY OF CERTAIN DEFINED TERMS AND OF PRINCIPAL LEGAL DOCUMENTS." The Authority, the City and the Trustee cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium on the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Authority, the City and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. SECURITY FOR THE BONDS General THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED UNDER THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE AUTHORITY OR THE CITY, OR ANY OF THE AUTHORITY'S INCOME OR RECEIPTS, EXCEPT THE REVENUES. THE BONDS ARE NOT A DEBT, LIABILITY OR OBLIGATION OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE FAITH AND CREDIT OF THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND NEITHER THE AUTHORITY NOR THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION, AND NEITHER THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE BONDS, NOR IN ANY EVENT ALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. IN "Revenues" consist of Installment Payments paid by the City to the Authority pursuant to the Installment Purchase Agreement and deposits in the funds and accounts held under the Indenture (excluding the Rebate Fund and the Cost of Issuance Fund). The Authority shall pay to the Trustee all Revenues, which the Trustee shall deposit in the Bond Fund to be used: first, for payment of debt service (including mandatory sinking fund redemptions), and second, for replenishment of the Reserve Account in the event its balance is less than the Reserve Requirement, as and to the extent required by the Indenture, see "APPENDIX B." The Authority, pursuant to the Indenture, has assigned to the Trustee its right to receive all Installment Payments from the City under the Installment Purchase Agreement and, effective immediately on default by the City under the Installment Purchase Agreement and without any further act on the part of the Authority, any and all of the other rights of the Authority under the Installment Purchase Agreement as may be necessary to enforce payment of such Installment Payments when due or otherwise to protect the interests of the Owners of the Bonds. All Net System Revenues (defined below) are irrevocably pledged by the City to the payment of the Installment Payments and debt service on Parity Obligations as provided in the Installment Purchase Agreement, and the Net System Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided, however, that out of the Net System Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Installment Purchase Agreement, including payment of debt service on any Parity Obligations. This pledge shall constitute a first lien on the Net System Revenues for the payment of the Installment Payments and debt service on any Parity Obligations in accordance with the Installment Purchase Agreement. The Bonds are not secured by a direct lien on the assets of the Water System or any other property of the City. In the Installment Purchase Agreement, the City covenants that, so long as any Bonds are outstanding, the City will not issue or incur any obligations payable from Net System Revenues superior to the payment of the Installment Payments. The City is authorized to issue additional Parity Obligations secured by Net System Revenues with a lien on a parity basis with the lien of Installment Payments, provided it complies with certain provisions in the Installment Purchase Agreement. See "THE BONDS --Issuance of Parity Obligations." The City is also authorized to issue subordinate debt secured by Net System Revenues. Net System Revenues Net System Revenues are System Revenues less Maintenance and Operation Costs of the Water System. "System Revenues" are defined in the Installment Purchase Agreement to mean all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing, (i) all income, rents, rates, fees, charges (including standby and capacity charges), insurance proceeds or other moneys derived by the City from the water services, facilities, and commodities or byproducts sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, (ii) investment earnings on, and income derived from, the amounts referred to in the preceding clause (i), including investment earnings on the operating reserves, to the extent that the use of such earnings is limited to the Water System by or pursuant to law, and earnings on any Reserve Fund for Obligations but only to the extent that such earnings may be utilized under the Issuing Instrument for the payment of debt service for such Obligations; (iii) the proceeds derived by the City directly or indirectly from the sale or lease of a part of the Water System; and (iv) any amount received from the levy or collection of taxes which are solely available and are earmarked for the support of the operation of the Water System; provided, however, that System Revenues shall not include: (a) customers' deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City; and (b) the proceeds of borrowings. Notwithstanding the foregoing, there shall be deducted from System Revenues any amounts transferred into a Rate Stabilization Fund as contemplated by Section 6.08(b), and there shall be added to System Revenues any amounts transferred out of such Rate Stabilization Fund to pay Maintenance and Operation Costs. System Revenues shall include reimbursements from the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111- 5, 23 Stat. 115 (2009), enacted February 17, 2009), or any future similar program); provided, however, for purposes of complying with the rate setting covenants contained in the Installment Purchase Agreement and satisfying the debt service coverage requirements in connection with the issuance or incurring of Parity Obligations, System Revenues shall not include such reimbursements from the United States of America. 11 "Maintenance and Operations Costs" is the reasonable and necessary costs spent or incurred by the City, for maintaining and operating the Water System, calculated in accordance with generally accepted accounting principles, including (among other things) all costs of water purchased or leased by the City, the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City attributable to the Project and the Installment Purchase Agreement, salaries and wages of employees, payments to employees retirement systems (to the extent paid from System Revenues), overhead, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of the Obligations, including this Installment Purchase Agreement, including any amounts required to be deposited in the Rebate Fund pursuant to the Tax Certificate, and fees and expenses payable to any Credit Provider (other than in repayment of a Credit Provider Reimbursement Obligation), but excluding in all cases (i) depreciation, replacement and obsolescence charges or reserves therefor, (ii) amortization of intangibles or other bookkeeping entries of a similar nature, (iii) costs of capital additions, replacements, betterments, extensions or improvements to the Water System which under generally accepted accounting principles are chargeable to a capital account or to a reserve for depreciation, (iv) charges for the payment of principal and interest on any general obligation bond heretofore or hereafter issued for Water System purposes, and (v) charges for the payment of principal and interest on any debt service on account of any obligation on a parity with or subordinate to the Installment Payments. Payments with respect to Maintenance and Operation Obligations shall be considered Maintenance and Operation Costs if they are incurred in connection with the Maintenance and Operation Costs described in the preceding paragraph. "Maintenance and Operation Obligation" means any contract or lease for the purchase of any facilities, properties, structures, or works, or any loan of credit to or guaranty of debts, claims or liabilities of any other person for the purpose of obtaining any facilities, properties, structures or works, the final payments under which are due more than five years following the effective date thereof; so long as in each case the payments thereunder are to constitute Maintenance and Operation Costs. See "APPENDIX B — SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS." Obligations of City Under Installment Purchase Agreement Pursuant to the Installment Purchase Agreement, the City commits, absolutely and unconditionally, to make Installment Payments to the Authority solely from Net System Revenues until such time as to the purchase price for the Project has been paid in full (or provision for the payment thereof has been made pursuant to the Indenture). The City will not discontinue or suspend any Installment Payments whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or in part, and such Installment Payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or non-performance by any party of any agreement for any cause whatsoever. Rate Covenant The City hereby covenants to fix, prescribe, revise and collect rates and charges for the services and facilities furnished by the Water System during each Fiscal Year which (together with other funds accumulated from System Revenues and which are lawfully available to the City for payment of any of the following amounts during such Fiscal Year) are at least sufficient, after making allowances for contingencies and errors in estimates, to pay the following amounts in the following order: (i) all Maintenance and Operation Costs of the Water System estimated by the City to become due and payable in such Fiscal Year; (ii) all Debt Service coming due and payable in such Fiscal Year; and (iii) all payments required to meet any other obligations of the City which are charges, liens or encumbrances upon, or payable from, the Net System Revenues. 12 The City shall fix, prescribe, revise and collect rates and charges for the services and facilities furnished by the Water System during each Fiscal Year which are sufficient to yield Net System Revenues, at least equal to 120% of the amounts payable under the preceding clause (ii) in such Fiscal Year. The City may establish, as a fund within the Water Revenue Fund, a fund denominated the Rate Stabilization Fund. From time to time the City may deposit into the Rate Stabilization Fund, from current System Revenues, such amounts as the City shall determine and the amount of available current System Revenues shall be reduced by the amount so transferred. Amounts may be transferred from the Rate Stabilization Fund solely and exclusively to pay Maintenance and Operation Costs, and any amounts so transferred shall be deemed System Revenues when so transferred. All interest or other earnings upon amounts in the Rate Stabilization Fund may be withdrawn therefrom and accounted for as System Revenues. Pledge Under the Indenture Pursuant to the Indenture, the Authority has irrevocably pledged all Revenues and amounts on deposit in the funds and accounts established under the Indenture (other than amounts on deposit in the Rebate Fund and the Cost of Issuance Fund) to the payments of principal and interest on the Bonds. The Indenture defines the term "Revenues" to mean all Installment Payments paid by the City pursuant to the Installment Purchase Agreement, including interest or profits from the investment of money in any account or fund (other than the Rebate Fund). In order to secure the pledge of the Revenues, the Authority has transferred, conveyed and assigned to the Trustee, for the benefit of the Owners, all of the Authority's rights under the Installment Purchase Agreement (excluding its right to indemnification thereunder), including the right to receive Installment Payments from the City, the right to receive any proceeds of insurance maintained thereunder or any condemnation award rendered with respect to the Project and the right to exercise any remedies provided therein in the event of a default by the City thereunder. 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 Water Revenue 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) Maintenance and Operation Costs. The City has covenanted to pay all Maintenance and Operations Costs (including all Maintenance and Operation Obligations as both terms are defined in the Master Installment Purchase Agreement) of the Water System, including (among other things) amounts reasonable and necessary for maintaining and operating the Water System, all costs of water purchased or leased, reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City attributable to the Project and the Installment Purchase Agreement, as they become due and payable. 13 (2) Installment Payments. The City covenants and agrees to pay to the Trustee, as assignee of the Authority, for deposit in the Payment Fund for Parity Obligations, the amounts specified in any Issuing Instrument, as payments due on account of Parity Obligations. In the event there are insufficient Net System Revenues to make all of the payments contemplated by this clause of the immediately preceding sentence, then said payments should be made as nearly as practicable, pro rata, based upon the respective unpaid principal amounts of said Parity Obligations. (3) Reserve Funds and Reserve Accounts for Parity Obligations. After the payments contemplated above have been made, any remaining Net System Revenues shall be used to make up any deficiency in the Reserve Funds and Reserve Accounts for Parity Obligations. In the event there are insufficient Net System Revenues to make up all deficiencies in all Reserve Funds and Reserve Accounts for Parity Obligations, such payments into Reserve Funds and Reserve Accounts shall be made as nearly as practicable pro rata based on the respective unpaid principal amount of all Parity Obligations. Any amounts thereafter remaining in the Water Revenue Fund may from time to time be used to pay for capital expenditures for the Water System or any other lawful purpose of the City, including payments on account of Subordinated Obligations, provided the following conditions are met: (1) all Maintenance and Operation Costs are being and have been paid and are then current; and (2) all deposits and payments contemplated by clause (2) above shall have been made in full and no deficiency in any Reserve Fund or Reserve Account for Parity Obligations shall exist. Application of Revenues Establishment and Maintenance of Accounts for Use of Money in the Payment Fund. Subject to the provision of the Indenture, all money in the Payment Fund shall be deposited by the Trustee in the following respective special accounts within the Payment Fund (each of which is hereby created and each of which the Trustee hereby covenants and agrees to maintain) in the following order of priority: (a) Interest Account, (b) Principal Account, and (c) Redemption 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. (a) Interest Account. On or before each Interest Payment Date, the Trustee shall transfer from the Payment Fund and deposit in the Interest Account that amount of money which, together with any money contained in the Interest Account, is equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need be made in the Interest Account if the amount contained in the Interest Account 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 September 1 of each year, beginning September 1, 20 , the Trustee shall transfer from the Payment Fund and deposit in the Principal Account that amount of money which, together with any money contained in the Principal Account, is equal to the aggregate principal amount of all Outstanding Serial Bonds maturing on such September 1 plus the aggregate 14 principal amount of all sinking fund payments required to be made with respect to Bonds on such September 1. No deposit need be made in the Principal Account if the amount contained therein is at least equal to the aggregate amount of the principal of all Outstanding Serial Bonds maturing by their terms on such September I plus the aggregate amount of all sinking fund payments required to be made on such September 1 for all Outstanding Term Bonds. The Trustee shall establish and maintain within the Principal Account a separate subaccount for Bonds of each series and maturity, designated as the "Sinking Account" (the "Sinking Account"), inserting therein the series and maturity (if more than one such subaccount is established for such series) designation of such Bonds. With respect to each Sinking Account, on each mandatory sinking account payment date established for such Sinking Account, the Trustee shall apply the mandatory sinking account payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the series and maturity for which such Sinking Account was established, upon the notice and in the manner provided herein or in the Supplemental Indenture pursuant to which such series of Bonds were issued; provided that, at any time prior to the selection of Bonds for such redemption, at the written direction of the City or the Authority, the Trustee may apply moneys in such Sinking Account to the purchase of Term Bonds of such series and maturity at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be determined by the Authority, except that the purchase price (excluding accrued interest) shall not exceed the redemption price that would be payable for such Bonds upon redemption by application of such mandatory sinking account payment. If, during the twelve month period immediately preceding the selection of Bonds for redemption, the Trustee has purchased Term Bonds of such series and maturity with moneys in such Sinking Account, such Bonds so purchased shall be applied, to the extent of the full principal amount thereof, to reduce said mandatory Sinking Account payment. 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, except that any money in any Sinking Account shall be used and withdrawn by the Trustee only to purchase or to redeem or to pay Term Bonds for which such Sinking Account was created. (c) Redemption Account. In addition to the above accounts, the Trustee shall establish and maintain within the Payment Fund a special account designated the "Redemption Account." All money in the Redemption Account shall be held in trust by the Trustee and shall be applied, used and withdrawn either to redeem bonds pursuant to Article 3 of the Indenture or for the purposes authorized in this subsection (c). Any moneys which, pursuant to Section 7.01 of the Installment Purchase Agreement, are to be used to redeem Bonds shall be deposited by the Trustee in the Redemption Account. The Trustee shall, on the scheduled redemption date, withdraw from the Redemption Account and pay to the Owners entitled thereto an amount equal to the redemption price of the Bonds to be redeemed on such date. (d) Any delinquent Installment Payments with respect to the Project shall be applied first to the Interest Account for the immediate payment of interest payments past due and then to the Principal Account for immediate payment of principal payments past due according to the tenor of any Bond. Any remaining money representing delinquent Installment Payments shall be deposited in the Payment Fund to be applied in the manner provided therein. 15 The Authority was established pursuant to a Joint Exercise of Powers Agreement dated May 8, 2024 (the "Agreement"), between the City and the Housing Authority. The Authority was created for the purpose of providing financing for refinancing of public capital improvements to be owned and/or operated by the City and/or the Housing Authority. The Agreement was entered into pursuant to the provisions of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "JPA Act"). The Authority is governed by a seven -member Board of Directors which consists of the members of the City Council of the City. The Mayor acts as the President of the Authority and the Mayor Pro Tern as its Vice President. THE CITY The City of Santa Ana, county seat of Orange County and one of the oldest communities in Southern California, is located 35 miles southeast of Los Angeles, 20 miles east of the Ports of Los Angeles and Long Beach, ten miles inland from the Pacific Ocean and 90 miles north of San Diego. The City encompasses an area of approximately 27 square miles and lies on generally level land at an elevation approximately 135 feet above sea level. The City was founded in 1869. The City was incorporated on June 1, 1886 and reorganized under a City Charter in 1888. In 1952, the voters approved a charter which established a council-manager form of government. The charter was modified by an election in 1986 to provide for the mayor to be elected by the voters. A 1988 redistricting resulted in a six -member City Council, in addition to the Mayor. The City Council is elected biannually by ward for four-year terms and the Mayor is directly elected at large for two-year terms. The City provides traditional city services, including police protection (384 sworn personnel). Fire services are provided by the Orange County Fire Authority. There are three library locations and 47 parks in the City. Public education for grades K-12 is provided by the Santa Ana Unified School District, the Garden Grove Unified School District, the Orange Unified School District and the Tustin Unified School District. The City has served as the county seat since the formation of Orange County in 1889. Numerous government offices have taken advantage of the City's central location and position as county seat. City, county, state and federal offices are conveniently located in the multi -government civic center in the heart of the City. The City has an industrial base which supports the local economy. For other selected information concerning the City, see "APPENDIX A — CITY OF SANTA ANA GENERAL DEMOGRAPHIC INFORMATION." THE WATER SYSTEM General; Service Area The City is the primary provider of water service for residential, commercial, agricultural and industrial enterprises within the City and also serves 45 customers outside the City limits bordering the City of Orange. The City's current population is approximately 308,189, which is also the estimated population served by the Water System. The Water System currently includes a total of approximately 45,376 potable water connections, including approximately 39,704 residential service connections, approximately 5,672 non-residential connections, and 25 recycled water connections. The primary facilities comprising the Water System, as of April 1, 2024, includes 21 active groundwater wells, 7 connections to The Metropolitan Water District of Southern California ("MWD") transmission mains, 7 pump stations, 10 reservoirs totaling 55 million gallons (MG) of storage, and a network of nearly 480 miles of transmission and distribution pipelines. The general age of the Water System is approximately 60-70 years. The main lines of the Water System were constructed in the decade of 1910. The majority of the water distribution infrastructure was developed over a twenty-year period between 1950 and 1970 to accommodate the City's development. The water distribution infrastructure accounts for 60% of the Water System. Most of the water wells and storage reservoirs were developed during the last 50 years and some of these are only 25 years old. The City purchases and pumps untreated water. The City uses sodium hypochlorite as a mean to treat its groundwater. An average of 0.6 mg/L of chlorine residual is maintained throughout the distribution system and in the storage reservoirs to effectively disinfect the water. All well facilities have a sodium hypochlorite treatment system on site. The water chlorination treatment takes place at the wellhead prior to being delivered and distributed into the Water System. Organization and Staff The City's Water System is under the direction of the following individuals: Acting City Manager, Alvaro Nunez, Executive Director of Finance & Management Services, Kathryn Downs, Public Works Director Nabil Saba, and the Water Resources Manager, Cesar Barrera. Alvaro Nunez, Acting City Manager of the City of Santa Ana. Mr. Nunez has served the City in various capacities for over 30 years. His professional journey began as an intern in the City's Planning and Building Agency, paving the way for a progression through various roles, including Code Enforcement Officer, Code Enforcement Manager, and most recently, Assistant Director of the Planning and Building Agency. Mr. Nunez has a degree in Political Science from the University of California, Irvine, studied Public Policy & Administration / Chicano Studies at California State University, Long Beach, and holds certificates in Property Maintenance and Housing Inspections, Zoning, and Code Enforcement from the International Code Council, and is a Certified Code Enforcement Officer through the California Association for Code Enforcement Officers. Kathryn Downs, Executive Director of Finance and Management Services. Ms. Downs has served as the Executive Director of Finance and Management Services since October 2018. Ms. Downs has worked over 24 years in local government. Ms. Downs previously served as the Director of Finance for the City of Carson prior to being appointed the City's Executive Director of Finance and Management Services in 2018. Prior to that, Ms. Downs worked for the City of Rancho Palo Verdes for 15 years. Ms. Downs began her career as a financial statement auditor, and holds a California CPA license and Bachelor of Business Administration with a major in accounting and a minor in management from Eastern Michigan University. Nabil Saba, has over 33 years of experience in all aspects of water resources operations, engineering, and management. For the past 4 years, he has served as Director of Public Works for the City of Santa Ana. Prior to that Mr. Saba served as the Deputy Public Works Director - Water Resources Manager for 6 years and as the Water Production Principal Civil Engineer for 6 years for the City. Mr. Saba is certified in water treatment and distribution and is registered Professional Civil Engineer in the State of California. Mr. Saba has a Bachelor of Science degree in Chemical Engineering from the California State Polytechnic University at Pomona and a Master in Science in Civil and Environmental Engineering from Loyola Marymount University in Los Angeles. Cesar Barrera, Deputy Public Works Director and Water Resources Manager, has over 27 years of experience in all aspects of water resources operations, engineering, and management. For the past three years, he has served as Water Resources Manager for the City of Santa Ana. Prior to that Mr. Barrera served as the Water Production Principal Civil Engineer for 10 years for the City. Mr. Barrera is certified in water treatment and distribution and is registered Professional Civil Engineer in the State of California. Mr. Barrera has a Bachelor of Science degree in Civil Engineering from the California State University at Fullerton and a Master in Science in Civil Engineering from Loyola Marymount University in Los Angeles. The Water Department is operated by a staff of 76 full-time employees. The following Table 1 summarizes certain operating statistics of the Water System for the past five Fiscal Years. Certain information for the 2023-24 Fiscal Year is estimated. 17 Water Sales Service connections in the Water System range in diameter from 5/8-inch to 8-inches. All water production and consumption is metered. The City currently projects that service connections will increase 0.5% a year for the current and next four fiscal years. Based on projected build -out, the anticipated total water system demand is estimated to remain static for the foreseeable future due to water conservation efforts. The following tables present a summary of water sales by type of customer for the past three fiscal years. TABLE 1 City of Santa Ana Water Sold by Type of Customer (Fiscal Year ending June 30) (in Thousands of Gallons) 2019 2020 2021 2022 2023 Type of Customer Residential 7,004,926.5 6,928,365.0 7,299,518.8 7,012,001.8 6,433,512.8 Commercial 2,084,082.8 1,933,951.0 1,868,058.2 1,945,509.1 1,832,659.8 Industrial 337,978.6 319,945.8 653,152.1 655,057.3 525,102.7 Wholesale food 111,505.1 126,488.3 124,643.0 118,849.7 116,764.3 Government 212,388.6 200,024.1 260,122.2 257,119.8 221,737.1 Others0) 761,244.8 686,484.5 470,696.2 497,282.4 437,531.4 Total 10,512,126.4 10,195,258.7 10,676,190.5 10,485,820.1 9,567,308.1 Total Tier 1 direct rate per unitM $3.02 $2.03 $2.17 $2.31 $2.36 (1) Others include: churches, construction use, medical, schools, vacant lots, and reclaim water (2) A unit is 748 gallons. Source: City of Santa Ana. TABLE 2 City of Santa Ana Water Sold by Type of Customer (Fiscal Year ending June 30) (in Dollars) 2019 2020 2021 2022 2023 Type of Customer Residential $32,609,900 $34,567,073 $41,906,802 $43,550,933 $41,523,434 Commercial 11,981,288 11,732,174 11,370,471 12,422,055 12,253,582 Industrial 1,711,487 1,698,147 1,873,630 2,002,107 1,738,990 Wholesale food 461,059 595,259 760,441 778,918 780,190 Government 1,135,133 1,174,382 2,563,882 2,809,538 2,753,574 OthersM 3,899,177 3,755,379 4,501,418 4,943,464 4,505,374 Total $51,798,044 $53,522,414 $62,976,644 $66,507,015 $63,555,144 Others include: churches, construction use, medical, schools, reclaim, vacant lots, recycled water and water delivered outside of the City. Source: City of Santa Ana. Land Use The City is responsible for land use policy for most of the area served by the Water System (as the Water System also serves small areas of the cities of Garden Grove and Orange, and unincorporated Orange County). Relatively little undeveloped land exists within the City. A condition of new or in -fill development is that the developer provide infrastructure sufficient to provide water service for each lot in the proposed development. The IV City anticipates servicing these customers from the purchase of additional supplies from its resources described in "Water Sources and Supply; Water Purchases" below. The Project; Future Water System Improvements The City established its Water Master Plan (the "Water Master Plan") in 2017 to document a multi -year capital improvement program for a planning period which covers fiscal years 2017-18 through 2039-40. The Water Master Plan established a capital improvement program ("CIP") to assist the City with future improvements and replacement of existing facilities to maintain the City's Water System. The CIP consists of, amongst other things, regularly scheduled repairs and replacements to the Water System including, but not limited to, the rehabilitation and refurbishment of wells, reservoirs, MWD connections, pump stations and appurtenances; drilling new or replacement wells, replacement of cast iron pipes, valves, and connections, improvements to wellhead treatment facilities, pressure regulating stations, service meter upgrades, supervisory control and data acquisition communications and instrumentation upgrades, sustainable energy improvements, and emergency power systems. These projects are ongoing and included in each year's the City's budgeting process. While the City has an ongoing CIP with respect to repair and replacement of facilities as needed, it does anticipate new major capital improvements in the next five years which are eligible to be financed by the proceeds of the Bonds. See "THE FINANCING PLAN — The Project" herein for a description of the improvements to the Water System anticipated to be financed by the proceeds of the Bonds. Storage Capacity The City's existing 55 million gallons of storage capacity provides the Water System with one day (based on average daily use) of emergency supplies. The City also maintains interconnections with the cities of Orange, Fountain Valley and Tustin, and with the Mesa Water District, which serve adjacent areas that could provide water in the event of an emergency. Water Sources and Supply; Water Purchases For Fiscal Year 2024-25, the City estimates 85% of its water supply to be sourced from local groundwater, which it receives under the jurisdiction of the Orange County Water District ("OCWD")The City owns and operates a total of 21 wells located within the City limits. Total capacity is 32,000 gallons per minute ("GPM"), or 46 million gallons per day ("MGD"). In addition, the City is a charter member of Metropolitan Water District of Southern California ("MWD"). As such, it has rights to the water supply of MWD on a parity basis with other member agencies of MWD. The City relies on MWD for approximately 15% of its water supply at the present time. The cost of purchasing MWD water represents 27% of the City's water supply costs. The table below shows a summary of water supply for Fiscal Years 2018-19 through 2022-23. 19 TABLE 3 City of Santa Ana Summary of Water Supply (Fiscal Year ending June 30) 2019 2020 2021 2022(4) 2023(4) Water Pumped(') 25,418 25,581 26,081 25,259 22,557 MWD(2) 7,742 7,649 7,738 7,621 7,897 Total 33,160 33,230 33,819 32,880 30,454 Potable Water Sold(') 31,999 31,141 32,525 31,392 29,527 Change from previous year') -1,241 -858 1,384 -1,133 -1,865 Population 337,716 310,227 310,227 310,217 308,189 Cost ofMWD Water $/a-�3) $1,033 $1,078 $1,104 $1,143 $1,209 (1) In acre-feet. Pumped from OCWD. (2) In acre feet. Pursuant to agreement with MWD. (3) Average cost. (4) State mandated water conservation protocols resulted in reduced water sales. Source: City of Santa Ana. Groundwater. Orange County Water District Groundwater Basin. The lower Santa Ana River groundwater basin, from which the City pumps its water, is under the jurisdiction of the OCWD. The City is a member of OCWD, along with other Orange County cities and water districts which overlie the groundwater basin. OCWD has a comprehensive ground -water replenishment system that includes the injection of highly treated wastewater into the groundwater basin to prevent seawater intrusion and to replenish the basin by spreading at the Anaheim forebay. In the past, sea water intrusion has been a problem in portions of the basin. The member cities of OCWD, including the City, are each allocated a portion of the cost of the groundwater recharge program, depending on a number of factors. The groundwater basin has been relatively stable during this current drought, and the City does not anticipate any curtailment of its ability to pump local groundwater for its service needs. The following information regarding OCWD has been obtained from OCWD and sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy or completeness hereof. Additional information about OCWD may be obtained from OCWD's website at www.ocwd.com. No information contained in such website is incorporated herein by reference. The OCWD is the agency responsible for managing the Orange County groundwater Basin, which is Santa Ana's major source of water. OCWD is governed by a ten -member board of directors, which has the power to establish and adjust the annual Basin Production Percentage ("BPP"), the Basin Equity Assessment (the "BEA") and the Replenishment Assessment ("RA"). Basin Production Percentage and Basin Equity Assessment. The BPP is defined as the proportion of total water production that can be extracted from groundwater withdrawals without incurring an additional assessment, known as the BEA. The amount of groundwater that an agency can pump without incurring the additional assessment is calculated by multiplying the total water use of such agency by the BPP (the `BPP formula"). Between Fiscal Years 2013-14 and 2023-24, the BPP varied from 62% to 85%. OCWD board of directors set the BPP at 85% for Fiscal Year 2024-25.Currently, OCWD calculates total water use for the purpose of the BPP without considering recycled water sales to customers. This methodology reduces the amount of groundwater that recycled water sellers such as the District may pump from the Orange County groundwater basin without incurring additional assessments. See the caption "-Complaint against OCWD" for a discussion of a lawsuit filed against OCWD in June 2016 with respect to this issue. The BEA is an additional assessment incurred by an agency that pumps non-exempt groundwater above the limit established by the BPP. The BEA is established annually by OCWD for every acre foot of groundwater M11 produced from the Orange County groundwater basin above the BPP formula (with exemptions described further below for pumping that OCWD determines will provide water quality and other benefits) and is intended to increase the cost of producing groundwater in amounts above the BPP formula so that it equals the cost of importing water, thereby encouraging groundwater pumping agencies to supplement their groundwater production with imported water for the portion of their water use that exceeds the BPP. The BEA is a surcharge to discourage, yet still allow for, the production of groundwater in excess of the BPP formula. The BEA for Fiscal Year 2024- 25 is equal to an additional $599 per acre foot for groundwater pumped in excess of the BPP formula Despite the financial disincentive of the BEA, the fact that the City has the ability to pump as much groundwater as the Water System can accommodate provides a reliable source of alternate water supply in the event that MWD water purchases are disrupted. Based on OCWD's methodology, the City paid approximately $11.8 million for Fiscal Year 2018-19, $12.5 million for Fiscal Year 2019-20, $12.7 million for Fiscal Year 2020-21, $12.8 million for Fiscal Year 2021- 22, $12.7 million for Fiscal Year 2022-23, and $16.5 million for Fiscal Year 2023-24 and is projected to be $18.5 million for Fiscal Year 2024-25. Replenishment Assessment. In addition to adjusting the BPP and the BEA annually, OCWD also annually increases the pump tax or Replenishment Assessment (the "RA"), which is the cost that groundwater producers must pay to pump water from the Basin. The RA provides OCWD with the necessary revenue to construct capital improvement projects to enhance Basin production, to protect the water quality of the Basin's supply, and to purchase replenishment water from MWD when available. The RA for Fiscal Year 2023-24 is set at $624 per acre-foot, and for Fiscal Year 2024-25 it is estimated to be approximately $688 per acre-foot. With the energy costs and operational maintenance costs for pumping the groundwater added to the OCWD RA costs, the City pays approximately $1,500 for each acre-foot of groundwater produced. OCWD faces various challenges in managing the Orange County groundwater basin. A description of these challenges, as well as a variety of other operating information with respect to OCWD, is included in certain disclosure documents prepared by OCWD. OCWD periodically prepares official statements and other disclosure documents in connection with its bonds and other obligations. OCWD has also entered into certain continuing disclosure agreements pursuant to which OCWD is contractually obligated for the benefit of owners of certain of its outstanding obligations to file certain annual reports, including audited financial statements and notice of certain events, pursuant to Rule 15c2-12. Such official statements, other disclosure documents, annual reports and notices (collectively, the "OCWD Information") are filed with EMMA at http://emma.msrb.org. The OCWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. OCWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE SERIES 2024 BONDS TO PROVIDE OCWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE SERIES 2024 BONDS. OCWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO OCWD. OCWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE SERIES 2024 BONDS UNDER RULE 15c2-12. PFAS Miti ag tion. By 2023, the City detected perfluoroalkyl substances ("PFAS") in 16 of the City's groundwater production wells. Impacted Wells are 16, 18, 21, 24, 26, 27, 28, 29, 31, 33, 35, 36, 38, 39, 40, and 41. The levels of PFAS detected in the Impacted Wells were above and below the respective notification and response levels established by the State Water Resources Control Board's Division of Drinking Water ("DDW") at the time. The wells that had detections above the response level were placed on operational standby and the City is currently pursuing the installation of wellhead treatment facilities at six (6) locations. The City, along with other Orange County cities and water districts initiated lawsuits against certain manufacturers over the contamination of water resources with PFAS and is currently involved in multidistrict 21 PFAS litigation in federal court in South Carolina and California. Settlement agreements with defendants Dupont, 3M and Tyco/ChemGuard have been granted final approval. At this time, the specific amount of the award to the City, if any, has not yet been determined in any of the settlements. Sustainable Groundwater Management Act. On September 16, 2014, the California Governor signed Assembly Bill No. 1739 and Senate Bill Nos. 1168 and 1319 (collectively, the "Sustainable Groundwater Management Act," or "SGMA") into law. The SGMA constitutes a legislative effort to regulate groundwater on a Statewide basis. Pursuant to the SGMA, the California Department of Water Resources ("DWR") has designated the Orange County Groundwater Basin as a medium priority basin for purposes of groundwater management. By January 31, 2017, local Groundwater Producers were required to establish or designate an entity (referred to as a groundwater sustainability agency, or "GSA"), subject to DWR's approval, to manage each high and medium priority groundwater basin. Each GSA is tasked with submitting a groundwater sustainability plan for DWR's approval by January 31, 2020. Alternatively, an existing groundwater management agency can submit a groundwater management plan under Part 2.75 of the California Water Code or an analysis for DWR's review demonstrating that a groundwater basin has operated within its sustainable yield for at least 10 years. Such alternative plans were required to be submitted by January 1, 2017 and updated every five years thereafter. The SGMA specifically allows the OCWD to develop an alternative plan under the California Water Code to manage those portions of the basin that are within the OCWD's boundaries. In order for the OCWD to submit an alternative plan, the entire groundwater basin (as mapped by DWR) must be included. Areas adjoining and adjacent to the Orange County Groundwater Basin include the La Habra/Brea Management Area ("MA"), the Santa Ana River Canyon MA and the Southeast Basin MA. On May 4, 2016, the OCWD sent letters to thirteen agencies located in the La Habra/Brea, Santa Ana River Canyon and Southeast Basin MAs requesting that such agencies participate in the development of an alternative plan. The Southeast MA and Santa Ana River Canyon MA are directly adjacent to the OCWD and little to no management or additional monitoring is expected to be required. The La Habra/Brea MA may seek to form a separate GSA, which requires the development of a groundwater sustainability plan and the execution of a coordination agreement with the OCWD. The OCWD submitted its alternative plan to DWR on December 22, 2016, and the alternative plan has been approved by DWR. Purchased Water. The City is a charter member of MWD Water District of Southern California ("MWD"). As such, it has rights to the water supply of MWD on a parity basis with other member agencies of MWD. The City relies on MWD for approximately 15% of its water supply at the present time. In Fiscal Year 2023, the City purchased 7,894 acre feet of water imported from the Colorado River and northern California by MWD. MWD supplies water through its member agencies. The cost of treated and untreated imported water from MWD as of June 30, 2023 is $1,209 per acre foot and $855 per acre foot, respectively, rising to $1,256 per acre foot and $903 per acre foot, respectively, on January 1, 2024. The City currently pays a fixed charge to MWD in the form of readiness to serve, capacity reservation and service connection charges. In Fiscal Year 2023, the readiness to serve and capacity reservation charges were paid in October 2022 in the amount of $372,557 and in April 2023 in the amount of $382,188. Composition of MWD. MWD was created in 1928 by vote of the electorates of a number of Southern California cities to provide a supplemental supply of water for domestic and municipal uses at wholesale to its member agencies. The MWD service area comprises approximately 5,200 square miles and includes portions of the six counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura. There are 26 member agencies of MWD, consisting of 14 cities, 11 municipal water districts (including the District) and one county water authority (SDCWA). MWD is governed by a Board of Directors, currently numbering 38 members. Each member agency has at least one representative on the MWD Board. Representation and voting rights are based upon each member agency's assessed valuation. The City has one representative on the MWD Board. The total population of the MWD service area is approximately 19 million. MWD Scheduling. a�perations. MWD member agencies request water from MWD at various delivery points within MWD's service area and pay for such water at uniform rates established by the MWD Board for each class of service. For planning purposes, each MWD member agency advises MWD annually in December MA of its anticipated delivery requirements for each of the five following fiscal years. Charges for water delivered are billed monthly and payable by the end of the second month following delivery. MWD Revenues. MWD revenues are primarily derived from water sales. Water rates are established by majority vote of the MWD Board and are not subject to regulation by the California Public Utilities Commission or by any other local, State of California or federal agency. Rates must be uniform for any class of service, and no water may be provided free of charge. Under the Metropolitan Water District Act, California Statutes 1969, Chapter 209, as amended (the "MWD Act"), MWD is required, so far as practicable, to fix such rate or rates for water as will result in revenue which, together with revenue from any water standby or availability charge or assessment, will pay the operating expenses of MWD, provide for repairs and maintenance, provide for payment of the purchase price or other charges for property or services or other rights acquired by MWD and provide for the payment of the interest and principal of the bonded debt of MWD, subject to the applicable provisions of the MWD Act authorizing the issuance and retirement of such bonds. The same water rate is charged for water provided from the Colorado River and the State Water Project. MWD is also empowered to impose an annual water standby or availability service charge, to be allocated among MWD's member agencies as determined by the MWD Board based on, among other factors: historical water deliveries by MWD; contracted or projected water service demands by member agencies; service connection capacity; acreage; property parcels; population; and assessed valuation. The charge may be collected from the member agencies or from individual parcels or may be converted into a benefit assessment. MWD imposes a water standby charge ranging from $1.65 to $14.20 for each acre or parcel less than an acre within MWD's service area, subject to specific exempt categories. Standby charges are assessments under the terms of Proposition 218. A majority of the MWD Board can approve a higher rate. Different rates may be established for parcels situated within different member agencies. The following table sets forth MWD's rates for treated and untreated water from January 1, 2020 to January 1, 2024. TABLE 4 City of Santa Ana THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA Summary of Water Rates in Dollars per Acre Foot Full Service Domestic Rates Effective Beginning Treated Untreated January 1, 2020 Tier 1 $1,078 $ 755 January 1, 2020 Tier 2 1,165 842 January 1, 2021 Tier 1 1,104 777 January 1, 2021 Tier 2 1,146 819 January 1, 2022 Tier 1 1,143 799 January 1, 2022 Tier 2 1,185 841 January 1, 2023 Tier 1 1,209 855 January 1, 2023 Tier 2 1,418 1,064 January 1, 2024 Tier 1 1,256 903 January 1, 2024 Tier 2 1,455 1,102 Source: The City. MWD levies ad valorem taxes upon all of the property that is taxable for MWD purposes in the MWD service area, including the District's service area. Between July 1, 1990 and June 30, 2013, in accordance with the MWD Act, MWD has limited its tax levy to the amount that is needed to pay: (i) the general obligation bond debt service of MWD; and (ii) that portion of MWD's payment obligation under its water supply contract with the State of California attributable to debt service on certain State of California general obligation water bonds. The MWD tax levy amount has remained at the Fiscal Year 2013 level since Fiscal Year 2013. Taxes will cease to be levied when the general obligation bonds of MWD and the State of California general obligation water bonds 23 are fully paid, although the MWD Act permits the MWD Board to continue to levy taxes upon a declaration of fiscal necessity. MWD Supplies As discussed above, approximately 15% of City's water supply is imported from MWD. In Fiscal Year 2023, MWD supplied the City with approximately 7,894 acre feet of water. MWD member agencies, which use MWD water to supplement their own local water supplies, can be expected to increase their purchases of MWD water if their local water supplies are reduced. MWD reports that it had approximately 3.40 million acre feet of water in storage as of January 1, 2024, compared to approximately 2.99 million acre feet on January 1, 2023, 3.36 million acre feet on January 1, 2022, and 3.91 million acre feet on January 1, 2021. MWD faces various challenges in the continued supply of imported water to the City. A description of these challenges as well as a variety of other operating information with respect to MWD is included in certain disclosure documents prepared by MWD. MWD periodically prepares official statements and other disclosure documents in connection with its bonds and other obligations. MWD has also entered into certain continuing disclosure agreements pursuant to which MWD is contractually obligated for the benefit of owners of certain of its outstanding obligations to file certain annual reports, including audited financial statements and notice of certain events, pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"). Such official statements, other disclosure documents, annual reports and notices (collectively, the "MWD Information") are filed with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA") at http://emma.msrb.org. The MWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. MWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE SERIES 2024 BONDS TO PROVIDE MWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE SERIES 2024 BONDS. MWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO MWD. MWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE SERIES 2024 BONDS UNDER RULE 15c2-12. Water Demand, Deliveries and Sales Revenues The City records the volume of water delivered by the Water System. Over the past five years, the City has delivered, on average, 32,727 acre-feet of potable water. For 2023, the average daily demand is approximately 83.4 acre-feet. The following table summarizes treated water deliveries and the City's annual Water System Revenues for the most recent five Fiscal Years and the projection for Fiscal Year 2023-24. 24 City of Santa Ana Historic Potable Water Deliveries(') (Fiscal Year ending June 30) Total Water Fiscal Year Delivered 2020 33,231 2021 33,819 2022 32,880 2023 30,454 2024(2) 33,412 Percent of Ten Year Average Water Sale Revenue(3) 97% $41,046,190 99% 39,978,977 96% 40,563,188 89% 37,376,555 - 41,219,335 (1) In acre-feet. Includes potable water which is discarded. (2) Estimated, unaudited. (3) Excludes fixed meter charges. Source: City of Santa Ana. See Table 5 herein for a description of historical water deliveries. During Fiscal Year 2022-23, residential uses comprised approximately 68.2% of total consumption while commercial/industrial uses constituted approximately 20.1%. The City has factored this anticipated increase in sales in its revised rate schedules (discussed below). On April 5, 2022 the City adopted Ordinance No. NS-3016, which amended the City's water conservation standards, including increased conservation measures based on the level of water shortages. These measures involve limitations on time and duration of landscape irrigation, commercial and industrial water usage restrictions and other measures to reduce waste consistent with and in compliance of California Water Code Section 10632, the City's updated 2020 Urban Water Management Plan, and the 2020 Water Shortage Contingency Plan. Water System Rates and Charges General. In accordance with California law, the City may, from time to time, fix, alter or change fixed monthly system access fees, commodity charges and other fees related to the Water System. Consequently, the City periodically reviews water rates. In accordance with California law, the City reviews such charges and fees to determine if they are sufficient to cover Maintenance and Operations Costs, capital improvement expenditures and debt service requirements. Such charges and fees are set by the City for the services provided by the Water System after a public hearing is held, generally at the time of adoption of the annual budget. Neither the City nor the Water System is subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body in connection with the establishment of charges and fees related to the Water System. See "RISK FACTORS — Proposition 218" for a discussion of the treatment of the City's rates and charges in light of Proposition 218. The City staff periodically determines the accuracy of the Water System rate structure after full consideration of expected operations, maintenance and capital costs. The following table discloses the current schedule of water rates and charges of the City effective as of July 1, 2020 through July 1, 2024. Any future changes to the rates and charges will require the City to conduct Proposition 218 proceedings to set rates and charges. In addition, the City is authorized to pass -through increases PQ to charges and other supply costs imposed by MWD, over which the City has no control. In Fiscal Year 2023-24 these pass -through charges are not projected to result in any increases. TABLE 6 City of Santa Ana Water System Rates and Charges (Effective as of July 1 of Corresponding Fiscal Year) Monthly Meter Charge (Fiscal Year ending June 30) Meter Size 2020 2021 2022 2023 2024 5/8" x 3/4" $ 20.51 $ 21.94 $ 23.37 $ 23.84 $ 24.31 3/4" 30.76 32.91 35.05 35.75 36.47 1" 51.27 54.85 58.42 59.59 60.78 1-1/2" 102.53 109.70 116.83 119.17 121.55 2" 164.04 175.52 186.93 190.67 194.48 3" 358.84 383.96 408.92 417.10 425.44 4" 645.91 691.12 736.04 750.76 765.78 6" 1,332.83 1,426.12 1,518.82 1,549.20 1,580.18 8" 2,460.60 2,632.84 2,803.97 2,860.05 2,917.25 Source: City of Santa Ana. Variable Consumption Charge (Fiscal Year ending June 30) Category 2020 2021 2022 2023 2024 Tier 1 $2.03 $2.17 $2.31 $2.36 $2.41 Tier 2 4.76 5.09 5.42 5.53 5.64 Recycled Water 2.15 2.30 2.45 2.50 2.55 Source: City of Santa Ana The following table presents the current capacity fees levied by the City. TABLE 7 City of Santa Ana Water System Capacity Fees (as of July 1, 2023) Meter Size Connection Fee 5/8" x 3/4" $ 963.00 3/4" 1,395.00 1" 2,325.00 1 1/2" 4,650.00 2" 7,440.00 3" 16,275.00 4" 30,496.00 6" 62,928.00 8" N/A Source: City of Santa Ana PT11 The table below sets forth a comparison of average monthly bill for a single family residential unit with a 5/8-inch meter in the City to those of surrounding communities (utilizing 18,700 gallons of water per month): TABLE 8 City of Santa Ana Monthly Bill Comparison (As of April 1, 2024) Community Monthly Residential Bill Irvine Ranch WD $55.60 Moulton Niguel WD 72.99 La Palma, City of 79.64 Huntington Beach, City of 82.32 Buena Park, City of 86.41 El Toro WD 98.63 Brea, City of 103.09 Santa Margarita WD 103.91 Anaheim, City of 105.35 Garden Grove, City of 106.28 Santa Ana, City of 112.42 Tustin, City of 114.12 Westminster, City of 116.64 Orange, City of 117.80 Fountain Valley, City of 119.47 South Coast WD 121.42 Fullerton, City of 122.55 Yorba Linda WD 125.86 Newport Beach, City of 131.09 Seal Beach, City of 137.35 East Orange CWD Retail Zone 144.03 La Habra, City of 146.03 Golden State WC 161.21 Serrano WD 167.44 Mesa WD 173.70 Laguna Beach CWD 265.56 Emerald Bay Serv. Distr. 265.56 Source: City of Santa Ana. Collection Procedures The City is on a bi-monthly billing cycle for water charges. Payment is due within 30 days, and is considered delinquent if not paid by that date. If payment is not received by due date, a 7 day urgent delinquent notice is sent, after which time water service is disconnected. The City has not had any material charges considered uncollectible in the past several years. If services are shut-off, a re-establishment fee of $72.00 or $54.00 for low-income qualified residential accounts, is charged. If such re-establishment is required after hours, the fee to re-establish service includes payment of all delinquent fees plus the re-establishment fee of $179.00 or $161.00 for low-income qualified residential accounts. In 2019, the California Legislature adopted Senate Bill 998, the Water Shutoff Protection Act, codified under Health and Safety Code section 116900 et seq., increasing protections for residents facing termination of residential water service due to non-payment. The Water Shutoff Protection Act requires residential water accounts, among other requirements, to be at least 60 days delinquent before the water service can be shutoff for nonpayment. There are other procedural and substantive requirements that water suppliers must comply with 27 pursuant to the Water Shutoff Protection Act. Although water providers were required to comply with the Water Shutoff Protection Act beginning in 2020, the Governor of California issued Executive Order N-42-20 on April 2, 2020 due to the COVID-19 emergency, which temporarily prohibited the disconnection of residential water service for nonpayment of a water bill. The COVID-19 emergency moratorium on residential water shutoffs expired in January 2022. The provisions of the Water Shutoff Protection Act remain in effect. On May 21, 2024, the Treasury & Customer Service Division of Finance will introduce and conduct the first reading of an Ordinance to bring the Santa Ana Municipal Code to compliance with the State's Water Shutoff Protection Act. The Ordinance is scheduled for adoption at the next City Council Meeting on June 4, 2024. If the Ordinance is adopted, it would go into effect July 4, 2024, and the City would begin delinquency noticing due to nonpayment in August 2024. Should the Ordinance amendment be approved, billing due dates, delinquency notifications and service disconnections will follow the adopted language in Chapter 39 of the City's Municipal Code. Outstanding Water System Indebtedness The Water Enterprise currently has two State Revolving Fund loans, one in the amount of $10,117,365 for the Automated Metering Infrastructure Project ("AMI"), and one for $13,761,712 for the Well 32 Rehabilitation Project. Both projects have an interest rate of 1.1%; the AMI Project loan has a 20-year repayment period, and the Well 32 Rehabilitation Project loan has a 30-year repayment period. The Bonds are being issued on a parity basis with the outstanding State Revolving Fund loans. Largest Customers The following are the ten largest potable water customers of the Water System based on estimated consumption as of June 30, 2023. The ten largest potable water users accounted for approximately 4.98% of total water consumption, and approximately 3.96% of revenues, in Fiscal Year 2022-23. TABLE 9 City of Santa Ana Largest Water Customers (Fiscal Year Ending June 30, 2023) Percentage of Total Total Water Water Water Customer Classification Charges Revenues Adohr Farms Inc Wholesale Food $ 563,285 0.89% Chroma Systems Industrial 463,242 0.73 Fairview Villas Apartments 254,155 0.40 Rp/Essex Skyline Holding Inc. Apartments 197,586 0.31 Warwick Square Assoc. Inc. Apartments 127,886 0.20 Power Circuits Inc. Industrial 270,050 0.42 Far West Management Corp Apartments 114,634 0.18 Western Medical Center Hospital 189,175 0.30 County of Orange Government 226,161 0.36 Mac Arthur Village Apartments 106,846 0.17 Totals $ 2,512,020 3.96 Total Fiscal Year Revenues $66,478,509 100.00% Source: City of Santa Ana Comprehensive Audited Financial Report f►M Historic Operating Results and Debt Service Coverage The following Table 10 describes the City's historic operating results, debt service coverage and excess revenues for the Water System for the Fiscal Years ending June 30, 2019 through 2023. The auditor has not reviewed such statements in connection with their inclusion in this Official Statement, nor has the City requested such a review. Selected information from the aforementioned audited financial statements has been used to prepare the following four-year comparative summary of revenues and expenses. The results presented in the following summary are qualified in their entirety by reference to the respective annual consolidated audited financial statements of the City. Copies of the audited financial statements for the City can be obtained at the office of the City's Finance Director. Table 10 is the City's historical debt service coverage based upon "System Revenues" and "Maintenance and Operation Costs" as defined in the Installment Purchase Agreement. TABLE 10 City of Santa Ana Historic Operating Results and Debt Service Coverage (Fiscal Year Ended June 30) 2019 2020 2021 2022 2023 Operating Revenues: Charges for Services $54,969,763 $56,665,706 $63,513,177(') $66,622,643(3) $66,027,622 Lease Revenues - - 237,826 237,826 Miscellaneous 1,257,430 396,034 531,444 38,587 213,061 Total Operating Revenues $56,227,193 $57,061,740 $64,044,621 $66,661,230 $66,478,509 Operating Expenses: Personal Services $ 6,613,837 $ 6,872,423 $ 7,051,066 $ 7,669,572 $ 9,504,772(4) Contractual Services(7) 19,200,248 19,859,140 24,289,548(2) 23,928,584 25,813,812(5) Materials and Supplies(') 10,905,575 11,424,668 11,526,983 11,445,307 13,612,2360) Administrative Charges 9,088,288 10,258,676 9,382,529 11,264,633 11,457,436 Total Operating Expenses $45,807,948 $48,414,907 $52,250,126 $54,308,096 $60,388,256 Operating Income (Loss) $10,419,245 $ 8,646,833 $11,794,495 $12,353,134 $ 6,090,253 Non -Operating Revenues: Intergovernmental - - - - $ 1,971,763 Investment Earnings $ 746,956 $ 821,458 $ 384,332 $ 394,948 328,672 Total Non -Operating Revenues (Expenses) $ 746,956 $ 821,458 $ 384,332 $ 394,948 $ 2,300,435 Net revenues $11,166,201 $ 9,468,291 $12,178,827 $12,748,082 $ 8,390,688 Prior Obligations Debt Service $ 1,355,075 $ 1,353,700 $ 1,355,450 $ 1,350,325 $ 1,353,200 Total debt service $ 1,355,075 $ 1,353,700 $ 1,355,450 $ 1,350,325 $ 1,353,200 Debt Service coverage 824% 699% 899% 944% 620% Remaining revenues $ 9,811,126 $ 8,114,591 $10,823,377 $11,397,757 $ 7,037,488 0) Increase due to first full fiscal year of new rate structure. (2) Increase in wholesale water costs (OCWD), implementation of new SCADA system, and staff augmentation utilizing contract employees. 0) Water rate increase was 6.5% from previous FY, so a realized revenue increase of 4.9% is expected. (4) Increase due to negotiated 3% increase, step increases for large percentage of employees, and filling of vacancies. (5) Main driver for increase due to additional costs for maintenance and repair of equipment at water production facilities. 0) Main drivers for increased costs are the imported water (MWD) cost increases and purchase of materials and equipment that had been unavailable due to supply chain issues during the COVID-19 pandemic. (7) Includes OCWD RA charges. M Includes MWD charges. Source: City of Santa Ana Comprehensive Audited Financial Reports. RISK FACTORS The following factors, along with other information in this Official Statement, should be considered by potential investors in evaluating the risks in the purchase of the Bonds. Water System Demand and Growth There can be no assurance that the local demand for the services provided by the Water System will be maintained at levels described in this Official Statement under the heading "THE WATER SYSTEM." Reduction in the level of demand due to conservation efforts of the City and MWD, or other factors, could require an increase in rates or charges in order to produce Net System Revenues sufficient to comply with the City's rate covenant in 29 the Installment Purchase Agreement. Such rate increases could increase the likelihood of nonpayment, and could also further decrease demand. There can be no assurance that any other entity with regulatory authority over the Water System will not adopt further restrictions on operation of the Water System. Water System Expenses There can be no assurance that the City's expenses for the Water System will be consistent with the levels described in this Official Statement. Changes in technology, new regulatory requirements, inflation, including increases in the cost of energy, supplies, and other expenses would reduce Net System Revenues, and could require substantial increases in rates or charges in order to comply with the rate covenant. Additionally, the cost of purchasing water from MWD continues to increase. Such rate increases could increase the likelihood of nonpayment, and could also decrease demand. Parity Obligations Although the City has covenanted not to issue additional obligations payable from Net System Revenues senior to the Installment Payments, the Installment Purchase Agreement permits the issuance by the City of certain indebtedness which may have a lien upon the Net System Revenues which is on a parity basis to the lien which secures the Installment Payments, if certain coverage tests are met (see "THE BONDS — Issuance of Parity Obligations" herein). These coverage tests involve, to some extent, projections of Net System Revenues. If such indebtedness is issued or incurred, the debt service coverage for the Installment Payments securing the Bonds will be diluted below what it otherwise would be subject to under the coverage tests. Moreover, there is no assurance that the assumptions which form the basis of such projections, if any, will be actually realized subsequent to the date of such projections. If such assumptions are not realized, the amount of future Net System Revenues may be less than projected, and the actual amount of Net System Revenues may be insufficient to provide for the payment of the Installment Payments and such additional indebtedness. Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, the "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. Proposition 218 also extends the initiative power to reducing or repealing any local taxes, assessments, fees and charges. This extension of the initiative power is not limited to taxes, assessments, fees and charges imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees or charges, except those which are pledged to the repayment of debt. If such a repeal or reduction in City fees or charges were to occur, and it was held that any such taxes, assessments, fees or charges were not pledged to any debt repayment, the City's ability to make Installment Payments could be adversely affected. hi addition, while the matter is not free from doubt, Proposition 218 imposed restrictions on the levy of charges for "property -related services." In July 2006 the California Supreme Court confirmed that a public agency's charges for ongoing water delivery are "fees and charges" within the meaning of Proposition 218. As a result, voters within the boundaries of the City could adopt an initiative measure that reduced or repealed water rates and charges levied by the City, although it is not clear (and has not been determined by State courts) whether such action would be enforceable where such fees and charges are pledged to the repayment of indebtedness. The City's current fees for water service were adopted in accordance with the requirements of Proposition 218. The City believes that its fees for water service will not be adversely affected by the application of the procedural requirements of Proposition 218, and that Proposition 218 would not have any immediate adverse effect on its ability to operate its Water System. However, there can be no assurance of the availability of remedies to protect fully the interest of the holders of the Bonds. In addition, Proposition 218 affects the levy of rates and charges of certain public agency customers of the City. 30 Constitutional Limit on Appropriations, Fees and Charges If a portion of the Water System rates or connection charges were determined by a court to exceed the reasonable costs of providing service, any fee which the City charges may be considered to be a "special tax," which under Articles XIIIA or XIIID of the California Constitution must be authorized by a two-thirds vote of the affected electorate. This requirement is applicable to the City's rates for service provided by the Water System. The reasonable cost of service provided by the Water System has been determined by the State Controller to include depreciation and allowance for the cost of capital improvements. In addition, the State courts have determined that fees such as connection fees (capacity charges) will not be special taxes if they approximate the reasonable cost of constructing Water System improvements contemplated by the local agency imposing the fee. Such court determinations have been codified in the Government Code of the State of California (Section 66000 et seq.). Under Article XIIIB of the California Constitution, state and local government entities have an annual "appropriations limit" which limits their ability to spend certain moneys called "appropriations subject to limitation," which consists of tax revenues, certain state subventions and certain other moneys, including user charges to the extent they exceed the costs reasonably borne by the entity in providing the service for which it is levying the charge. In general terms, the "appropriations limit" is to be based on certain Fiscal Year 1978-79 expenditures, and is to be adjusted annually to reflect changes in the consumer price index, population and services provided by these entities. Among other provisions of Article XIIIB, if an entity's revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. The City is of the opinion that the rates and use charges imposed by the City in connection with the Water System do not exceed the costs it reasonably bears in providing such services. Limited Recourse on Default If the City defaults on its obligation to make Installment Payments, the Trustee, as assignee of the Authority, has the right to accelerate the total unpaid principal amounts of the Installment Payments. However, in the event of a default and such acceleration there can be no assurance that the City will have sufficient Net System Revenues to pay the accelerated Installment Payments. No Debt Service Reserve Account The Authority is not funding a debt service reserve account for the Bonds. In the event of a failure by the City to pay Installment Payments when due and the Authority to timely pay debt service on the Bonds, no other source of funds will be available to make such payments while the Trustee pursues available remedies under the Indenture. Limitations on Remedies Available; Bankruptcy The enforceability of the rights and remedies of the Owners and the obligations of the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; equitable principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercising of powers by the federal or State government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. 31 No Obligation or Ability to Tax The obligation of the City to pay the Installment Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Installment Payments does not constitute a debt or indebtedness of the City, the State or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restriction. The Authority has no taxing power. Change in Law In addition to the other limitations described herein, the State electorate or Legislature could adopt a constitutional or legislative reallocations of property taxes or an initiative with the effect of reducing revenues payable to or collected by the City. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations that could have the effect of reducing the Net System Revenues and adversely affecting the security of the Bonds. Geologic and Topographic The value of the Water System, and the ability to generate System Revenues, is contingent upon the ability of the City to deliver water to its customers. The financial stability of the City can be adversely affected by a variety of factors, particularly those which may affect infrastructure and other public improvements and private improvements and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions (such as earthquakes), topographic conditions (such as earth movements and floods) and climatic conditions (such as droughts and tornadoes). The City is in an active geological area. Engineering standards require that some of these factors be taken into account, to a limited extent, in the design of improvements, including the Water System. Some of these factors may also be taken into account, to a limited extent, in the design of other infrastructure and public improvements neither designed nor subject to design approval by the City. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously -designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of protection and the future costs of lack of protection, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should it occur. Conditions may occur which may result in damage to improvements in varying degrees, and such damage may entail significant repair or replacement costs, and there can be no assurance that such repair or replacement will occur. Under any of these circumstances, the public and private improvements within the City in general may well depreciate or disappear, notwithstanding the establishment of design criteria for any such condition. The area encompassed by the City, like that in much of California, may be subject to unpredictable seismic activity. Occurrence of earthquakes could cause an interruption of deliveries of water to and from the City until repairs could be effected, thus possibly diminishing the value of the Water System and the amount of Net System Revenues. Cybersecurity The City relies on computers and technology to conduct its operations. This City and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of technology attacks. Recently, there have been significant cybersecurity incidents affecting municipal agencies, including ransomware attacks targeting Los Angeles Unified School District and the San Bernardino County Sheriff's Department, a freeze affecting computer systems of the City of Atlanta, and attack on the City of Baltimore's 911 system, an attack on the Colorado Department of Transportation's computers, an attack that resulted in the temporary closure of the Port of Los Angeles' largest terminal, and an attack on a water treatment facility in Oldsmar, Florida. 32 The City's Information Technology Department employs a multi -level cyber protection strategy that includes firewalls, anti -virus software, anti-spam/malware software, intrusion protection, intrusion detection, identity management, lateral movement detection, log monitoring, and other security measures. The City contracts with third -party vendors to perform external audits of its network and to perform similar internal audits. The City has also established a security operations center with third -party vendors to monitor and augment internal and external monitoring of the City's computer systems 24 hours a day, 7 days a week. The City conducts cybersecurity training for all staff and regularly simulates phishing campaigns. Email is inspected inbound and outbound by a cloud email filtering service, and measures are in place to protect against spoofing internal addresses. The City also employs domain name system filtering and endpoint protection on its servers and desktops to catch and prevent cyberattacks. The City practices the principle of lease privilege across all of its systems. It maintains regular, redundant, online and offline backups to minimize damage and to allow for quick recovery in the event of an attack. The City also practices ongoing training, education, and actively monitors security bulletins for all emerging threats and vulnerabilities enabling it to adapt and continually evolve its digital defenses. To date, the City has not experienced a successful attack against its networks or its servers. However, there can be no assurance that a future attack or attempted attack would not result in disruption of City operations. The City expects that any such disruptions would be temporary in nature due to its backup/restore procedures, utilization of third -party incident response teams and disaster recovery planning. Drought Measures State Orders. California is subject to droughts, and over the past several decades the State faced water shortfalls and reduced snowpack. On January 17, 2014, the California Governor declared a drought state of emergency (the "State Declaration") with immediate effect which included orders that encouraged local urban water supplies to (a) implement their local water shortage contingency plans; (b) update their urban water management plans to prepare for extended drought conditions; (c) directed the California Department of Water Resources ("DWR") and the State Water Resources Control Board (the "SWRCB") to expedite the processing of water transfers; (d) directed the SWRCB to put water rights holders on notice that they may be required to cease or reduce water diversions in the future; (e) directed the SWRCB to consider modifying requirements for reservoir releases or diversion limitations; and (f) directed the DWR to take necessary actions to protect water quality and supply in the Sacramento -San Joaquin River Delta/San Francisco Bay Estuary. Subsequently, the SWRCB periodically adopted additional emergency regulations which, amongst other things, limited outdoor irrigation to two days per week, extending certain measures previously set for restricting outdoor irrigation and prohibited restaurants from serving water to customers unless requested. On April 1, 2015, the California Governor issued an executive order (the "2015 Executive Order") extending the measures set forth in the State Declaration and adopting additional orders to (i) restrict potable urban water usage; (ii) requiring urban water suppliers to provide monthly water usage, conservation and enforcement information; (iii) requiring service providers to monitor groundwater basin levels in accordance with California Water Code § 10933; and (iv) permitting agencies are required to prioritize approval of water infrastructure and supply projects. On April 7, 2017, the California Governor issued an executive order (the "2017 Executive Order") which terminates the January 17, 2014 executive order discussed above (except with respect to certain counties within the State) and rescinds the 2015 Executive Order. The 2017 Executive Order continues to require the SWRCB to develop standards for urban water suppliers to set water use efficiency targets and restrict wasteful water use, as provided in the 2015 Executive Order. On April 21, 2021, the California Governor declared a drought state of emergency in 41 of the State's 58 counties, primarily in the northern portion of the State and in the Central Valley, which was expanded on May 10, 2021 and July 8, 2021, and was expanded to include all counties in the State on October 19, 2021, and called for Californians to voluntarily reduce water use by 15%. Additionally, he issued Executive Orders N-10-21, N-7-22 (March 28, 2022), N-3-23 (February 13, 2023), and N-4-23 (March 10, 2023). Due to "atmospheric rivers" of 33 rain during 2022 and 2023, snowfall has greatly improved with indications of record high snow water equivalent levels for this time of year. Due to the improved drought conditions, on March 24, 2023, the California Governor issued Executive Order N-5-23 (the "2023 Executive Order"), easing drought emergency provisions that are no longer necessary while maintaining certain requirements that are still needed in parts of the State. The 2023 Executive Order included termination of the voluntary reduction of water usage, while retaining the state of emergency in all State counties to allow for drought response and recovery efforts to continue. hi response to the State's drought proclamations and regulations, the City has adopted a water shortage contingency plan ("WSCP") in compliance with State guidelines for such plans. The WSCP calls for the City to respond to water shortages in stages or "shortage levels" as described in the WSCP. The City Council has the authority to declare a water shortage and establish the mandatory measures to be taken pursuant to the WSCP. In the event of water shortages and mandatory reduction measures, the City will experience a reduction in revenue due to reduced water sales. Throughout this period of time, expenditures may increase or decrease with varying circumstances. Expenditures may increase in the event of significant damage to the Water System, resulting in emergency repairs. Expenditures may also decrease as less water is pumped through the system, resulting in lower power costs. Water shortage mitigation actions will also impact revenues and require additional costs for drought response activities such as increased staff costs for tracking, reporting, and communications. The City receives water revenue from a service charge and a commodity charge. The service charge recovers costs associated with providing water to the serviced property. The service charge does not vary with consumption and the commodity charge is based on water usage. Rates have been designed to recover the full cost of water service in the charges. Therefore, the total cost of purchasing water would decrease as the usage or sale of water decreases. In the event of a drought emergency, the City will impose excessive water use penalties on its customers, which may include additional costs associated with reduced water revenue, staff time taken for penalty enforcement, and advertising the excessive use penalties. The excessive water use penalties are further described in the City's Municipal Code, Chapter 39, Article VI — Water Shortage Contingency Plan. Reference to the City's Municipal Code is provided here for convenience and no information contained in such Municipal Code is incorporated herein by such reference. There are significant fixed costs associated with maintaining a minimal level of service. The City will monitor projected revenues and expenditures should the WSCP be implemented impacting water sales for an extended period of time. To overcome potential revenue losses and/or expenditure impacts, the City may use its reserve funds to offset the lost revenue from water sales. If necessary, the City may reduce expenditures by delaying implementation of its capital improvement program and equipment purchases to reallocate funds to cover the cost of operations and critical maintenance, adjust the work force, implement a drought surcharge, and/or make adjustments to its water rate structure. Climate Change Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise, extreme temperatures will become more common and extreme weather events will become more frequent and more intense as a result of increasing global temperatures attributable to atmospheric pollution. The Fifth National Climate Assessment, published by the U.S. Global Change Research Program in November 2023 (NCA5), finds that rising temperatures, sea level rise, and more frequent and intense extreme weather and climate -related events, as well as changes in average climate conditions, are expected to continue to increasingly disrupt and damage infrastructure, ecosystems, social systems, property, and regional economies and industries that depend on natural resources and favorable climate conditions. Beyond the direct adverse material effect of global climate change itself, present, pending and possible regulations aimed at curbing the effects of climate change may directly or indirectly materially adversely affect 34 the Water System and the ability or willingness of property owners to pay Water System -related charges when due. The City cannot predict the affect climate change, or any related regulations, may have on the Water System. Environmental Regulation The kind and degree of water operations which is effected through the Water System is regulated, to a large extent, by the federal government and the State of California. Treatment standards set forth in federal and State law control the operations of the Water System and mandate its use of technology. In the event that the federal government, acting through the Environmental Protection Agency, or the State of California, acting through the Department of Health Services, or additional federal or State legislation, should impose stricter water quality standards upon the City, the Water System's maintenance and operations costs could increase accordingly, and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction which federal or state regulation will take with respect to drinking water quality standards, although it is likely that both levels of government will impose more stringent standards with attendant higher costs. Risks Associated with OCWD and MWD The operation and physical conditions of the MWD and OCWD facilities are subject to a number of risk factors that could adversely affect the reliability of such water supply and corresponding water deliveries to the City, or increase the operating expenses of OCWD and MWD, which could increase the City's Maintenance and Operation Costs. See certain risks associated with OCWD and MWD described in "THE WATER SYSTEM" above. Additionally, MWD faces continuing litigation with respect to endangered species protected under federal and state law which is not enumerated in this Official Statement. OCWD and MWD face various challenges in the continued supply of imported water to Orange County. A description of these challenges as well as a variety of other operating information with respect to OCWD and MWD is included in certain disclosure documents prepared, respectively, by OCWD and MWD. Both OCWD and MWD have entered into certain continuing disclosure agreements pursuant to which they are contractually obligated, for the benefit of owners of certain of their respective outstanding obligations, to file certain annual reports, notices of certain material events as defined under Rule 15c2-12 of the Exchange Act ("Rule 15c2-12") and annual audited financial statements with certain information repositories. Neither OCWD nor MWD have entered into any contractual commitment with the Authority, the City, the Trustee or the Owners of the Bonds to provide information to the Authority, the City, the Trustee or the Owners of the Bonds. Neither OCWD or MWD have reviewed this Official Statement and have made no representations or warranties with respect to the accuracy or completeness of the information contained or incorporated herein, including information with regard to OCWD or MWD. Impact of State Budget The State has experienced budgetary shortfalls in recent fiscal years, and is currently facing a budget deficit for Fiscal Year 2023-24. The City cannot predict what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures, and it is possible that future legislation will impact revenues of local agencies. These developments at the State level will most likely adversely affect local governments. However, the City does not currently anticipate that the State budget problems will materially adversely impact the operation of the City's Water System. Secondary Market for Bonds There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that any Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then -prevailing circumstances. Such prices could be substantially different from the original purchase price. 35 Federal Tax -Exempt Status of the Bonds The Internal Revenue Code of 1986, as amended (the "Code") imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of Bond proceeds, limitations on the investment earnings on Bonds proceeds prior to expenditure, a requirement that certain investment earnings on the Bond proceeds be paid periodically to the United States and a requirement that the issuers file an information report with the Internal Revenue Service (the "IRS"). The Authority and the City have covenanted in certain of the documents referred to herein that they will comply with such requirements. Failure to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Bonds as taxable, retroactively to the date of issuance of such Bonds. IRS Audit of Tax -Exempt Issues The IRS has initiated an expanded program for the auditing of tax-exempt issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar obligations). Taxpayer Protection and Government Accountability Act Initiative A voter initiative, designated as Initiative 1935 and otherwise known as "The Taxpayer Protection and Government Accountability Act" ("Initiative 1935"), has been determined to be eligible for the State's November 5, 2024 statewide general election, and, unless withdrawn by its proponent prior to June 27, 2024, or removed pursuant to the emergency petition for writ of mandate filed by the Governor of California seeking such removal, will be certified as qualified for the ballot in such election. If it were to be approved by the voters in the election, Initiative 1935 would amend Article XIIIC of the State Constitution to, among other things, provide that every levy, charge or exaction of any kind imposed by a local government after January 1, 2022 is either a tax or an exempt charge. Charges for government services provided directly to the payor would be "taxes" subject to voter approval unless the local government can prove by clear and convincing evidence that the charge is reasonable and does not exceed the "actual cost" of providing the service or product to the payor. "Actual cost" is defined in Initiative 1935 to mean "(i) the minimum amount necessary to reimburse the government for the cost of providing the service or product to the payor and (ii) where the amount charged is not used by the government for any purpose other than reimbursing that cost." Initiative 1935 further states that "[i]n computing "actual cost" the maximum amount that may be imposed is the actual cost less all other sources of revenue including, but not limited to taxes, other exempt charges, grants, and state or federal funds received to provide such service or product." Initiative 1935 would also amend Article XIIIC to state that any tax or exempt charge adopted after January 1, 2022, but prior to the effective date of Initiative 1935, which was not adopted in compliance with the requirements of Initiative 1935 is void 12 months after the effective date of Initiative 1935, if adopted, unless the tax or exempt charge is reenacted in compliance with the provisions of Initiative 1935. Initiative 1935 would require an exempt charge to be imposed by ordinance of the local government's governing body. The City's rates are currently adopted by the City Council to be reasonable and follow cost of service. Accordingly, the City's rate structure would still be subject to the exemptions provided for charges that are not subject to voter approval. However, the City Council would now be required to adopt the rates for service by a 2/3 majority. Additionally, the new scope of exempt charges as limited to recover "actual" costs and the heightened burden of proof to demonstrate the applicability of an exemption, would place greater burden on the City in defending litigation challenging the validity of its rates and charges. If submitted to, and approved by the voters, Initiative 1935 would be subject to judicial interpretation. Global Health Emergencies and Considerations; Infectious Disease Outbreak Global health emergencies, such as COVID-19 pandemic, can negatively affected economic activity throughout the world, including the United States and the State of California. The initial impacts of the stay at home orders globally was unprecedented, with commerce, travel, asset values, and financial markets experiencing 36 disruptions worldwide. The negative effects of the COVID-19 pandemic and its aftermath on global, national, and local economies may continue at least for some period of time. Future pandemics and other widespread public health emergencies may arise from time -to -time and can impact broader economic conditions in the affected region and potentially worldwide. Reduced economic activity and its associated impacts, including as a result of the outbreak of infectious disease, such as job losses, income losses, business closures and housing foreclosures or vacancies, and any prolonged recession that may occur, could have a variety of adverse effects on the City, the Water System operations, and the region. Non-payment of utility bills and generalized reduced water usage from customers resulting from the economic disruption may negatively affect the City and the Water System operations. A protracted disruption in the manufacturing and processing of supplies and equipment may affect supply chains or delay construction schedules for, or the implementation of, Water System capital improvement programs and projects, and may increase the costs of such projects or programs or the Water System's operations. Future pandemic and other widespread public health emergencies may arise from time -to -time and can impact broader economic conditions in the affected region. Reduced economic activity and its associated impacts, including as a result of the outbreak of infectious disease, such as job losses, income losses, business closures and housing foreclosures or vacancies, and any prolonged recession that may occur, could have a variety of adverse affects on City and in the region. Declines in assessed valuations in City service area and/or increases in property tax delinquencies or non-payment resulting from the economic disruption may negatively affect property tax collections and reduce tax levy receipts. Economic conditions affect aggregate levels of retail water use and may reduce demands in the region and City's water transactions and revenues. A protracted disruption in the manufacturing or construction industry may affect supply chains or delay construction schedules for, or the implementation of, City's capital improvement programs and projects, and may increase the costs of such projects or program or City's operations. A sustained deterioration in global stock market values may impact the market value of assets held in fund City's pension and other post -employment benefit plans, which could result in future increases in required plan contributions. The City cannot predict whether another national or localized outbreak of highly contagious or epidemic disease in the future could negatively impact the City's operations and finances and/or the economy of the regions it serves. TAX MATTERS In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, provided however, that for the purpose of calculating federal corporate alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Authority has covenanted to comply with certain restrictions designed to insure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. For example, legislative proposals are announced from time to time which generally would limit the exclusion from gross income of interest on obligations like the Bonds to some extent 37 for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of fixture legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Certain requirements and procedures contained or referred to in the Indenture, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to the exclusion from gross income of interest on any Bond if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than Best Best & Krieger LLP. The IRS has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds). Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bond Owner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bond Owner's other items of income or deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C. CONTINUING DISCLOSURE The City has covenanted, pursuant to a Continuing Disclosure Agreement, dated as of June 1, 2024, for the benefit of holders and beneficial owners of the Bonds to provide, or cause to be provided, certain financial information and operating data relating to the City by not later than 270 days following the end of the City's Fiscal Year (which currently would be June 30), commencing with the report for the Fiscal Year ended June 30, 2024 (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and notices of material events will be filed by the City with the Municipal Securities Rulemaking Board's (the "MSRB") Electronic Municipal Market Access system ("EMMA"), or any successor assigned by the MSRB or the Securities and Exchange Commission. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized below under the caption "APPENDIX D - Form of Continuing Disclosure Agreement." These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the "Rule"). [In the past five years the City and its related entities have failed on one occasion to comply with their respective prior continuing disclosure undertakings: the City failed to file notice of a rating upgrade on its Gas Tax Revenue Certificates of Participation (2007 Local Street Improvement Project) (the "2007 COPS") that occurred on November 7, 2019. A notice of rating upgrade was subsequently pastel. The 2007 COPs were prepaid in their entirety on December 23, 2019.1 In order to ensure ongoing compliance by the City and Authority with their continuing disclosure undertakings, (i) the City has instituted procedures to ensure compliance and coordination between the City and the Authority; and (ii) the City has contracted with a consultant to assist the City in filing accurate, complete and timely disclosure reports on behalf of the City and the Authority. Wei MMY[e N11130 There is no proceeding or litigation of any nature now pending to restrain or enjoin the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds, the proceedings of the Authority taken with respect to the issuance or sale thereof, the pledge or application of any moneys or securities provided for the payment of the Bonds, the existence or powers of the Authority or the title of any officers of the Authority to their respective positions. A certificate of the Authority to this effect will be delivered on the date of delivery of the Bonds. RATING In connection with the issuance and delivery of the Bonds, Standard & Poor's Rating Services ("S&P") has assigned their municipal bond rating of " " to the Bonds. Such rating reflects only the view of such organization and any desired explanation of the significance of such rating should be obtained from S&P. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that any rating will continue for any given period of time for the Bonds or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of such rating agency, circumstances so warrant. The Authority undertakes no responsibility either to bring to the attention of the Owners of the Bonds any proposed change in or withdrawal of a rating or to oppose any downward revision or withdrawal of any rating obtained. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. FINANCIAL ADVISOR The Authority has retained Urban Futures Incorporated, Los Angeles, California, as Financial Advisor for the sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness of fairness of the information contained in this Official Statement. Urban Futures Incorporated is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. PROFESSIONAL FEES In connection with the execution of the Bonds, fees payable to Urban Futures Incorporated, as Financial Advisor and U.S. Bank Trust Company, National Association as Trustee are contingent upon the execution and delivery of the Bonds. APPROVAL OF LEGALITY Best Best & Krieger LLP, Irvine, California, Bond Counsel, will render an opinion with respect to the validity and enforceability of the Indenture, and as to the validity of the Bonds. Certain matters will be passed upon for the Authority and City by the City Attorney, and by Best Best Best & Krieger LLP, Irvine, California, Disclosure Counsel. UNDERWRITING The Bonds are being sold to (the "Underwriter"). The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the Authority at a purchase price of $ (being the principal amount of the Bonds, less an Underwriter's discount of $ , plus/less original issue premium of $ . The obligations of the Underwriter are subject to certain conditions precedent, and they will be obligated to purchase all such Bonds if any such Bonds are purchased. The Underwriter intends to offer the Bonds to the public initially at the prices and/or yield set forth on the inside cover page of this Official Statement, which prices or yields may subsequently change without any requirement of prior notice. 39 The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may re -allow any such discounts on sales to other dealers. hi reoffering Bonds to the public, the Underwriter may over -allocate or effect transactions which stabilize or maintain the market prices for Bonds at levels above those which might otherwise prevail. Such stabilization, if commenced, may be discontinued at any time. ADDITIONAL INFORMATION Any statements in this Preliminary Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Bonds. The execution and delivery of this Official Statement have been authorized by the members of the Authority. SANTA ANA PUBLIC FINANCING AUTHORITY By: President CITY OF SANTA ANA By: City Manager E9] I:1 a Ole 111►:t1 CITY OF SANTA ANA GENERAL DEMOGRAPHIC INFORMATION The following material is descriptive of the City of Santa Ana and the surrounding areas of Orange County (the "County"). It has been prepared by or excerpted from sources as noted herein, and has not been independently verified by Bond Counsel, Disclosure Counsel, or the Underwriter. The Bonds are payable solely from the sources described herein (see "SECURITY FOR THE BONDS"). General Santa Ana is a vibrant community with a youthful population, a diverse economic base and home to approximately 30,000 businesses (as measured by business licenses issued). Notable Fiscal Year 2022-2023 City demographics include: • Taxable Sales of $5.1 Billion • Population — 308,771 • Median Household Income- $77,283 • Labor Force of 156,600 • Low unemployment rate of 3.3% • Building Activity of $465 Million • Assessed Valuations of $30.4 Billion Overall, the City has a diverse economy, which is helpful during economic downturns. The top 25 businesses generate about 30% of the City's total sales tax revenue. The City's solid retail segment is anchored by Bristol Street Business Corridor, Main Place Mall, and the Santa Ana Auto Mall. Santa Ana also features a historic downtown with many independent restaurants surrounding a cultural artist village. Three of the City's most popular attractions are the Santa Ana Zoo at Prentice Park, the world-renowned Bowers Museum, and the Discovery Cube. The Zoo hosts a variety of exhibits such as the Colors of the Amazon, the Zoofari, and the Fifty - Monkey Ferris Wheel. As the largest and one of the oldest museums in Orange County, Bowers has been voted `Best Museum' in Orange County for the past 30 years by OC Register Readers (2023). The Discovery Cube is a nonprofit interactive science museum and exhibit with a mission to educate and inspire children. The City's diverse economic base includes transportation, general retail, business to business, food industry, and construction. Transportation and general retail comprise about approximately half of the City's sales tax base. However, the top five sales tax segments in the City are restaurants, auto sales, service stations, building materials, and drug stores. In December 2017, Santa Ana received a Federal Opportunity Zone designation of eleven census tracts encompassing 25% of the City. The designation includes areas projected for future development, including the Santa Ana Regional Transportation Center (SARTC) and the route of the Orange County Transportation Authority's (OCTA) Street Car. These zones have the potential to boost the local economy if developers seize the opportunity to use the federal tax incentives by December 2028 and support the City's role in creating a business -friendly, safe, and attractive environment. Each new business results in new jobs, increased sales tax revenue and property values. City Council appropriations of resources are budgeted expenditures. For the 2023-2024 Fiscal Year, citywide appropriations across all funds was $764.1 million. General Fund revenue is unrestricted, meaning it can be used for any lawful purpose. Of the citywide appropriations, General Fund revenue accounts for 52% of total appropriations, which is typical for a municipality. Sales tax and property tax continue to be the primary revenue sources for the General Fund, accounting for more than 60% of the General Fund budget. To help protect city service levels in the event of a recession, City Council adopted a policy to ensure at least 18% of recurring General Fund revenue is set aside as a reserve at all times. Population The following table illustrates population estimates of the City for the last ten fiscal years. Employment CITY OF SANTA ANA Population (As of May 2023) Calendar Year Population 2023 308,189 2022 308,771 2021 310,227 2020 332,318 2019 331,912 2018 332,627 2017 333,765 2016 333,417 2015 333,431 2014 308,189 Source: U.S. Census Bureau CITY OF SANTA ANA Principal Employers (Fiscal Year 2023) 2023 Number of Percent of Total EmWoyer Employees Emyloymenfl) County of Orange 16,380 10.80% Santa Ana Unified School District 5,078 3.30 Santa Ana College 3,521 2.26 KPC Healthcare (formerly Integrated Healthcare Holdings) 1,693 1.09 City of Santa Ana 1,565 1.01 United States Postal Service (3 locations) 1,393 0.90 Allied Universal 1,200 0.80 First American Title 1,084 0.70 Superior Court of CA — County of Orange 760 0.49 Johnson & Johnson 554 0.36 (1) "Total Employment' as used above represents the total employment of all employers within the City limits. Source: City of Santa Ana Audited Comprehensive Financial Report dated as of June 30, 2023. FEW ANAHEIM-SANTA ANA-IRVINE MWD STATISTICAL AREA LABOR FORCE INDUSTRY EMPLOYMENT ANNUAL AVERAGES LAST FIVE FISCAL YEARS (in thousands) Title 2019 2020 2021 2022 2023 Civilian Labor Force 1,613,900 1,563,800 1,557,200 1,579,300 1,588,900 Civilian Employment 1,568,400 1,424,300 1,464,100 1,528,500 1,532,400 Civilian Unemployment 45,500 139,500 93,100 50,700 56,500 Civilian Unemployment Rate 2.8% 8.9% 6.0% 3.2% 3.6% Total, All Industries 1,677,200 1,534,600 1,589,800 1,667,700 1,683,600 Total Farm 1,900 1,900 2,000 1,700 1,700 Total Nonfarm 1,675,300 1,532,700 1,587,800 1,666,100 1,681,900 Mining and Logging 107,100 102,100 102,900 105,900 105,200 Construction 106,100 101,300 102,200 105,300 104,600 Manufacturing 160,100 150,100 149,800 155,400 156,500 Trade, Transportation, and Utilities 261,400 244,100 252,000 258,300 262,100 Information 26,000 24,100 24,000 24,300 22,600 Financial Activities 117,600 115,900 117,100 112,300 104,100 Professional & Business Services 328,400 309,200 321,700 331,500 321,400 Educational & Health Services 233,100 225,800 237,300 249,300 264,300 Leisure & Hospitality 227,700 161,800 180,400 217,900 229,600 Other Services 52,000 44,100 47,500 53,100 55,300 Government 162,500 156,100 155,700 158,200 161,200 Source: California Economic Development Department Regional Economy The local economy declined during the COVID-19 pandemic but has shown improvement in recent years with the broader recovery of the California economy. The unemployment rate for the City of Santa Ana is 3.3% as of 2022, a reduction from peak unemployment of 9.3% in 2020. Despite the challenges caused by the COVID- 19 pandemic, the City continued to support the governmental activities of the City and has developed a budgeting plan to enhance the City's general fund reserves over time. A-3 Assessed Valuation Assessed valuation in the City has increased steadily over all in the past ten years. CITY OF SANTA ANA Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (in thousands of dollars) Fiscal Year Taxable Ended Assessed June 30 Secured Unsecured Value(') 2023 $30,723,826 $1,748,007 $32,325,355 2022 28,865,226 1,676,091 30,393,150 2021 27,590,592 1,489,607 28,930,804 2020 26,373,249 1,570,712 27,791,434 2019 25,027,024 1,493,217 26,366,912 2018 23,719,049 1,513,465 25,076,707 2017 22,436,846 1,449,280 23,728,394 2016 21,528,909 1,484,318 22,853,500 2015 20,432,992 1,642,391 21,914,119 2014 19,579,938 1,539,745 20,955,423 (1) Taxable Assessed Value totals includes deductions for property tax exemptions not illustrated herein. Source: City of Santa Ana Audited Comprehensive Financial Report dated as of June 30, 2023. Largest Property Taxpayers Principal property owners in Fiscal Year ending June 30, 2023 amounted 5.00% of the total assessed value in the City. The table below shows the top 10 property taxpayers in the City. CITY OF SANTA ANA Principal Property Tax Payers Fiscal Year 2023 Percentage of Total City Taxable Taxable Principal Property Tax Pave (1) Assessed Value Rank Assessed Value Main Place Shoppingtown $ 343,869,523 1 1.07% Bre OC Griffin LLC 240,461,846 2 0.75 RP/Essex Skyline Holdings 152,350,555 3 0.47 First American Title 141,445,558 4 0.44 MDC Coastal 13 LLC 120,758,820 5 0.37 APG OCIC LLC 116,546,455 6 0.36 Centerpoint 2701 Harbor LLC 114,025,000 7 0.35 Cadigan 1901 First LLC 105,463,775 8 0.33 Rexford Industrial — 1800 St 105,300,000 9 0.33 Adagio 366 LLC 104,995,718 10 0.33 TOTAL $1,545,217,250 4.80% (1) Presented in order of highest to lowest estimated property tax revenue paid to the City. Source: City of Santa Ana Audited Comprehensive Financial Report dated as of June 30, 2023 Commercial Activity The following table sets forth information regarding taxable sales in the City for Calendar Years 2019 through 2023. The County of Orange has a 7.75% tax rate. The Santa Ana residents approved Measure X, the City's transactions and use tax on November 6, 2018. Measure X increased the City's sales tax by one and one- half (1.5) cents until 2029, then it reduces to one (1) cent until 2039. CITY OF SANTA ANA Taxable Sales by Category Last Five Fiscal Years (in thousands of dollars) Cateeory 2023 2022 2021 2020 2019 General Retail $1,125,656 $1,198,512 $1,053,321 $ 892,136 $ 987,259 Food Products 951,935 899,763 748,869 749,169 811,103 Transportation 1,334,415 1,292,315 979,352 890,337 982,554 Construction 633,543 567,508 508,109 445,367 466,522 Business to Business 1,055,587 1,109,496 1,005,516 926,200 1,148,295 Miscellaneous(') 59,509 50,144 41,171 29,665 38,693 Total $5,160,645 $5,117,739 $4,336,338 $3,932,874 $4,434,427 Miscellaneous category includes health & government. Source: City of Santa Ana Audited Comprehensive Financial Report dated as of June 30, 2023. City's Pension Plans The City contributes to the California Public Employees Retirement System ("PERS"), a multiple - employer, public employee defined benefit plan, which acts as a common investment and administrative agent for participating public entities within the State. The City's membership is reported as miscellaneous and safety members. The Authority's employees are eligible to participate in the City's miscellaneous plan. The City allocates approximately 1.94% of the City's net pension liability and pension -related transactions to the Authority. For Fiscal Year 2022-23, the Water System is responsible for approximately $7,451,957 in PERS pension costs (unfunded actuarial liability). PERS issues a separate comprehensive annual financial report, and annual actuarial reports for the City's retirement plans. Copies of PERS' annual financial report may be obtained from their executive office at 400 "P" Street, Sacramento, California 95814, or at their website at http://www.calpers.ca.gov. The foregoing reference to an internet website is made for reference and convenience only; the information contained within the website has not been reviewed by the City or the Authority and is not incorporated in this Official Statement by reference. All Authority personnel are eligible to participate in PERS upon becoming vested after five years of service. Members with five years of total service are eligible to retire at age 50 to 62 with statutorily reduced benefits. For employees hired on or before December 31, 2012 ("classic" employees), the benefits are calculated at the highest consecutive 12 months for miscellaneous employees and safety employees multiplied by a total number of years employed. For new (PEPRA) members, hired January 1, 2013 or later, final compensation is the average annual pensionable compensation for a 36-consecutive-month period of employment. Monthly retirement benefits are payable for life in an amount equal to a specified percentage as follows: Hire Date Benefit formula Benefit vesting schedule Benefit payments Retirement age Required employee contribution rate Required employer contribution rate Miscellaneous Risk Pool Classic Plan PEPRA Misc. Plan On or Before On or After 31-Dec-12 1-Jan-13 2.0% to 2.7% 1.0% to 2.5% 5 years of service 5 years of service Monthly for life Monthly for life 50 52 - 67 8.00% 7.00% 11.90% 11.90% For employees hired on or before December 31, 2012, required employee contributions to PERS are 8.00% of compensation for miscellaneous employees. Under the California Public Employees' Pension Reform Act of 2013 (PEPRA), for new employees hired on or after January 1, 2013, the required employee contributions to PERS is 7.00% of compensation for miscellaneous employees. The City is required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted by the PERS Board of Administration. PERS uses a modification of the entry age normal actuarial cost method, which is a projected benefit cost method. That is, it takes into account those benefits that are expected to be earned in the future as well as those already accrued. The City's contributions to PERS for the fiscal years ended June 30, 2023, 2022 and 2021 were $48,070,659, $70,625,739, and $68,197,329, respectively and are estimated to be $45,680,970 for the fiscal year ending June 30, 2024. The Water System was responsible for $927,875, $1,505,712, and $1,462,642 for fiscal years ended June 30, 2023, 2022 and 2021, respectively and are estimated to be $906,505 for fiscal year ending fund 30, 2024. Contribution rates for each participating employer are determined based on the benefit structure established. The funded status of each plan as of June 30, 2022, on an actuarial value of assets basis is as follows (dollar amounts in thousands): Market Actuarial Accrued Value of Liability (AAL) Unfunded Funded Ratio Covered Assets (MVA) Entry Age AAL (UAAL) (MVA / AAL) Pavroll Miscellaneous $883,342,083 $1,073,796,340 $190,454,257 82.3% $73,234,214 Source: PERS June 30, 2023 actuarial valuations. The actuarial studies referenced above incorporate recent changes in actuarial methods and assumptions. In the PERS' June 30, 2022 actuarial valuations, PERS used the new actuarial methods for the calculation of the projected contribution rates. PERS states that `projected results reflect the adopted changes to the discount rate... Actuarial Methods and Assumptions. The projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages in the projections below do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers. " The projected rates for each plan as of June 30, 2022, the most recent actuarial valuation, are as follows: Projected Future Employer Contribution Rates(') 2024-25 2025-26 Miscellaneous 12.22% 11.9% 0) Assume 6.8% return for Fiscal Year 2022-23. Source: PERS June 30, 2022, actuarial valuations. 2026-27 2027-28 2028-29 2029-30 11.6% 11.3% 11.0% 10.7% The Authority cannot anticipate accuracy of the projections above or to what extent the contribution requirements of the Authority will increase in future years. Other Post -Employment Benefits ("OPEB") The City provides a single -employer defined benefit healthcare plan to retirees through PERS under the California Public Employees Medical & Hospital Care Act ("PEMHCA"). Employees are eligible for PEMHCA benefits if they retire from the City on or after age 50 for all Classic Members and age 52 for PEPRA Miscellaneous Members with at least five years of PERS service credit or an approved disability retirement, and a eligible for a PERS pension. The City paid $151 for calendar year 2023 per active safety & miscellaneous employee and retirees for PEMHCA minimum. The Ca1PERS Board of Administration approves the employer contribution rate and plan changes annually based on Government Code section 22892. As of June 30, 2023, the City's total liability for post -employment healthcare benefits consisted of the following: o7 Net OPEB OPEB Plan Liabili Retiree Benefits Plan $42,713,299 Deferred Outflows of Resources OPEB Expense $6,874,118 $159,332 Source: City of Santa Ana Annual Comprehensive Financial Reports for Fiscal Year ending June 30, 2023. Membership in the health benefit plan consisted of the following on June 30, 2022, the date of the latest actuarial valuation: Number of Participant Type Participants Inactive participants currently receiving benefits 430 Inactive participants entitled to but not yet receiving benefit payments 52 Active plan member 625 Total 1,107 Source: City of Santa Ana Annual Comprehensive Financial Reports for Fiscal Year ending June 30, 2023. The City's net OPEB liability as of June 30, 2023 was $42,713,299. The Authority's share of such net liability is $2,956,433. Additionally, the Water Department is responsible for $1,506,103 for compensated absences liability. For additional details on the City's OPEB liability, see APPENDIX F — "COMPREHENSIVE AUDITED FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2023 (Note 4)." Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. A-7 SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS The following is a collective summary of certain provisions of the Indenture, Master Installment Purchase Agreement and First Supplement to Master Installment Purchase Agreement (each an `Agreement') and which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the respective agreements for a full and complete statement ofprovisions thereof. Unless the context otherwise requires, the terms defined below shall for all purposes of this summary and of any report or other document mentioned below having the meanings defined below, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined. All capitalized terms used below and not defined below shall have the meanings ascribed thereto in the applicable Agreement. INDENTURE [To Come] MASTER INSTALLMENT PURCHASE AGREEMENT [To Come] FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT [To Come] I:1» 01►117 ►: 14 FORM OF FINAL OPINION OF BOND COUNSEL [Closing Date] Santa Ana Public Financing Authority 20 Civic Center Plaza Santa Ana, CA 92702 Re: $ * Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 Ladies and Gentlemen: We have reviewed the Constitution and the laws of the State of California and certain proceedings taken by the City of Santa Ana (the "City") and the Santa Ana Public Financing Authority (the "Authority") in connection with the issuance by the Authority of its $ * Revenue Bonds, Series 2024 (the "Bonds"). The Bonds have been issued under that certain Indenture of Trust, dated as of June 1, 2024 (the "Indenture"), by and between the Authority and U.S. Bank Global Corporate Trust Services, as trustee and pursuant to the provisions of Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law"). The City Council adopted its resolution approving the issuance of the Bonds on [June 4], 2024 (the "Resolution"). The proceeds of the Bonds have been applied by the Authority to refinance certain improvements to the Water System. All terms not defined herein have their meaning ascribed to those terms in the Indenture. In such connection, we have reviewed the Indenture, the tax certificate of the Authority for the Bonds dated the date hereof (the "Tax Certificate"), certificates of the Authority and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. 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 events come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. 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 assumed, without undertaking to verify, 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 second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to ensure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against cities and their subordinate 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, waiver or severability provisions contained in the documents * Preliminary, subject to change. C-1 mentioned in the preceding sentence. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Bonds and express no opinion with respect thereto. Based upon the foregoing, we are of the opinion, under existing law, that: 1. The Bonds have been duly and validly authorized by the Authority and are legal, valid, and binding limited obligations of the Authority. The Bonds are secured and payable solely from sources provided therefor in the Indenture. 2. The Indenture has been duly authorized by the Authority, and constitutes the valid and legally binding obligation of the Authority enforceable against the Authority in accordance with its terms, as such enforcement may be limited by bankruptcy, insolvency, moratorium, transfer or conveyance or other laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases; provided, however, that we express no opinion with respect to any indemnification, contribution, choice of law or waiver provisions contained therein. 3. The Indenture creates a valid pledge of that which the Indenture purports to pledge, subject to the provisions of the Indenture, except to the extent that the enforceability of the Indenture may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases. 4. Under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax imposed on individual and corporations, however, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations. Although the interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds, or any portion thereof, may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Interest on the Bonds is exempt from State of California personal income tax. Respectfully submitted, C-2 E ' ' 01►111 kle C FORM OF CONTINUING DISCLOSURE AGREEMENT Upon issuance of the Bonds, the Authority proposes to enter into a Continuing Disclosure Agreement in substantially the following form: THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of June 1, 2024, is executed and delivered by the Santa Ana Public Financing Authority (the "Authority") and Urban Futures, Inc., as dissemination agent (the "Dissemination Agent"), in connection with the issuance by the Authority of $ aggregate principal amount of the Santa Ana Public Financing Authority Revenue Bonds, Series 2024 (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust, dated as of June 1, 2024 (the "Indenture"), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee. The Authority and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority and the Dissemination Agent for the benefit of the owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Annual Report Date" shall mean the date in each year not later than April 1 following the end of the Authority's fiscal year, the end of which, as of the date of this Disclosure Agreement, is June 30. "Dissemination Agent" shall mean, initially, Urban Futures Inc., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent that is so designated in writing by the Authority and which has filed with the then current Dissemination Agent a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Official Statement" shall mean the Official Statement relating to the Bonds. "Participating Underwriters" shall mean Samuel A. Ramirez & Company, Inc., the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) The Authority shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2025, provide to MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) calendar days prior to each such Annual Report Date, the Authority shall provide its Annual Report to the Dissemination Agent, if such D-1 Dissemination Agent is a different entity than the Authority. The Annual Report must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as is prescribed by MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Authority (which include information regarding the funds and accounts of the Authority), if any, may be submitted separately from and later than the balance of the Annual Report if they are not available by the applicable Annual Report Date. If the Authority's fiscal year changes, the Authority shall provide written notice of such change in the same manner as for a Listed Event under Section 5(c). The Authority shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished hereunder. The Dissemination Agent may conclusively rely upon such certification of the Authority and shall have no duty or obligation to review such Annual Report. (b) If the Authority is unable to provide to MSRB an Annual Report by the date required in subsection (a), the Authority shall, in a timely manner, send to MSRB a notice in substantially the form attached hereto as Exhibit A. Such notice must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as prescribed by MSRB. (c) The Dissemination Agent shall: (i) provide any Annual Report received by it to MSRB by the date required in subsection (a); and (ii) file a report with the Authority certifying that the Annual Report has been provided to MSRB pursuant to this Disclosure Agreement, and stating the date the Annual Report was so provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements of the Authority, which include information regarding the funds and accounts of the Authority, if any, for the most recent fiscal year of the Authority then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Authority in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Authority shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Authority may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Authority shall modify the basis upon which its financial statements are prepared, the Authority shall provide a notice of such modification to MSRB, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis. (b) To the extent not contained in the audited financial statements filed pursuant to the preceding clause (a), the Annual Report shall contain information showing the following: (i) Summary of Operations (for such Fiscal Year only) (Table 1); (ii) Ten Largest Water Customers (for such Fiscal Year only) (Table 9); (iii) Historical Debt Service Coverage (for such Fiscal Year only) (Table 11); and (iv) Any changes in Water System rates and charges in such Fiscal Year. D-2 (c) hi addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Authority or related public entities, which are available to the public on MSRB's Internet web site or filed with the Securities and Exchange Commission. The Authority shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds: (i) difficulties; (iv) financial difficulties; (v) principal and interest payment delinquencies; non-payment related defaults, if material; unscheduled draws on any reserve fund for the Bonds reflecting financial unscheduled draws on any credit enhancements securing the Bonds reflecting substitution of any credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; material; (vii) modifications to the rights of owners of the Bonds, if material; (viii) Bond calls, if material, and tender offers for the Bonds; (ix) defeasances; (x) any release, substitution, or sale of property securing repayment of the Bonds, if (xi) rating changes; (xii) any bankruptcy, insolvency, receivership, or similar event of the Authority. This Listed Event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Authority in a proceeding under the Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Authority, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Authority; (xiii) the consummation of a merger, consolidation, or acquisition involving the Authority or the sale of all or substantially all of the assets of the Authority, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; D-3 (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material; (xv) the incurrence of a financial obligation of the Authority, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Authority, any of which affect security holders, if material; and (xvi) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the Authority, any of which reflect financial difficulties. (b) Upon and after the occurrence of a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), (a)(xiii), (a)(xiv), (a)(xv) or (a)(xvi) above, the Authority shall as soon as possible determine if such event would be material under applicable federal securities laws. If the Authority determines that knowledge of the occurrence of such Listed Event would be material under applicable federal securities laws, the Authority shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) below. (c) Upon and after the occurrence of any Listed Event (other than a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), (a)(xiii), (a)(xiv), (a)(xv) or (a)(xvi) above), the Authority shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) below. (d) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with MSRB not in excess of ten (10) business days after the occurrence of such Listed Event. Such notice must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as prescribed by MSRB. Notwithstanding the foregoing, notice of a Listed Event described in subsection (a)(viii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds pursuant to the Indenture. The Authority hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Authority and that the Trustee or the Dissemination Agent shall not be responsible for determining whether the Authority's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Termination of Reporting Obli ag tion. The obligations of the Authority, the Trustee, and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days' written notice to the Authority and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Authority. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Authority in a timely manner and in a form suitable for filing. If at any time there is no designated Dissemination Agent, the Authority shall act as Dissemination Agent. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority and the Dissemination Agent may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if the Authority has received an opinion of counsel knowledgeable in federal securities laws to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of the occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Authority to comply with any provision of this Disclosure Agreement, any Owner of a Bond, Participating Underwriters, or Trustee may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties, Immunities, and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Authority agrees to indemnify and save the Dissemination Agent and its officers, directors, employees, and agents, harmless against any loss, expense and liabilities that it may incur arising out of or in the exercise or performance of its duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Authority under this section shall survive resignation or removal of the Dissemination Agent and payment of all of the Bonds. The Dissemination Agent shall not be responsible in any manner for the format or content of any notice or Annual Report prepared by the Authority pursuant to this Disclosure Agreement. The Authority shall pay the reasonable fees and expenses of the Dissemination Agent for its duties hereunder. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Trustee, the Dissemination Agent, the Participating Underwriters, and Owners from time to time of the Bonds, and shall create no rights in any other person or entity. D-5 Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Date: .2024 CITY OF SANTA ANA Title: URBAN FUTURES INCORPORATED Authorized Signatory I:r0VETOIMyIWIN W.1 NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Santa Ana Public Financing Authority Name of Issue: Santa Ana Public Financing Authority Water Revenue Bonds, Series 2024 Date of Issuance: June , 2024 NOTICE IS HEREBY GIVEN that the City of Santa Ana has not provided an Annual Report with respect to the above -referenced Bonds as required by the Continuing Disclosure Agreement dated as of June 1, 2024 between the City and Urban Futures Incorporated, as Dissemination Agent. The City anticipates that the Annual Report will be filed by Dated: cc: Issuer Dissemination Agent CITY OF SANTA ANA Authorized Signatory D-7 09WBiel 11k1l0 BOOK ENTRY PROVISIONS The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Bonds, payment of principal of, premium, if any, and interest on the Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Bonds, and other related transactions by and between the Depository Trust Company ("DTC"), New York, NY, Participants and Beneficial Owners, is based on information furnished by DTC which the Authority believes to be reliable, but the Authority does not take responsibility for the completeness or accuracy thereof. The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners either (a) payments of principal, premium, if any, and interest with respect to the Bonds or (b) certificates representing ownership interests in or other confirmation of ownership interests in the Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. The DTC will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered bond will be issued for each maturity (and each individual yield in the case of bifurcated maturities) of the Bonds, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has an S&P Global Ratings rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com; provided that nothing contained in such website is incorporated into this Official Statement. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. E-1 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Indenture. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit will agree to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable dates in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. The Authority may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC. NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR REDEMPTION. DTC (or a successor securities depository) may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority. The Authority, in its sole discretion and without the consent of any other person, may terminate the services of DTC (or a successor securities depository) with respect to the Bonds. The Authority undertakes no obligation to investigate matters that would enable the Authority to make such a determination. In the event that the book -entry system is discontinued as described above, the requirements of the Indenture will apply. E-2 THE AUTHORITY AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS OF PRINCIPAL, INTEREST OR PREMIUM, IF ANY, WITH RESPECT TO THE BONDS PAID TO DTC OR ITS NOMINEE AS THE REGISTERED OWNER, OR WILL DISTRIBUTE ANY REDEMPTION NOTICES OR OTHER NOTICES, TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE AUTHORITY AND THE UNDERWRITER ARE NOT RESPONSIBLE OR LIABLE FOR THE FAILURE OF DTC OR ANY PARTICIPANT TO MAKE ANY PAYMENT OR GIVE ANY NOTICE TO A BENEFICIAL OWNER WITH RESPECT TO THE BONDS OR AN ERROR OR DELAY RELATING THERETO. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Authority deems reliable, but the Authority takes no responsibility for the accuracy thereof. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered as described in the Indenture. The Authority may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered as described in the Indenture and payment of interest to each Owner who owns of record $1,000,000 or more in aggregate principal amount of Bonds may be made to such Owner by wire transfer to such wire address within the United States that such Owner may request in writing for all Interest Payment Dates following the 15th day after the Trustee's receipt of such request. E-3 I:19wBiel 11 W411a COMPREHENSIVE AUDITED FINANCIAL REPORT F-1