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Item 12 - Consideration of Approval of Water Revenue Bonds
~{lW f\)tt/ ,.) -/;--~-:.. ,,-. ) /·, . ~~~ ',, -:-DATE: TO: FROM: CONTACT: SUBJECT: Summary: AG EN DA REPORT City of Poway CITY COUNCIL October 19, 2021 Honorable Mayor and Members of the City Council Honorable Chairman and Members of the Board of Directors of the Poway Public Financing Authority Aaron Beanan, Director of Finance, Authority Treasurer~ Aaron Bea nan, Director of Finance, Authority Treasurer (858) 668-4411 or abeanan@poway.org Approve the Execution and Delivery of an Installment Purchase Agreement for the Purpose of Causing the Issuance of Not to Exceed $15,000,000 Aggregate Principal Amount of Water Revenue Bonds, Series 2021 A, and Approving the Execution and Delivery of Certain Documents in Connection Therewith and Certain Other Matters The City is embarking on a significant Water Infrastructure Improvement Program (Water Program) to improve the reliability, redundancy and resiliency of Poway's water system. The Water Program is comprised of the Clearwell Bypass, the Clearwell Replacement, and the SDCWA Treated Water Connection projects. Preliminary work on these projects has already begun with completion estimated in FY 2025-26, or roughly 5 years from now. The total cost of this program is anticipated to be $69.5M. This staff report recommends the issuance of Series 2021A Water Revenue Bonds in the not-to-exceed amount of $15,000,000 to finance the first phase of the Water Program. Recommended Action: It is recommended that the City Council adopt the Resolution approving the execution and delivery of an Installment Purchase Agreement for the purpose of causing the issuance of not to exceed $15,000,000 aggregate principal amount of Water Revenue Bonds, Series 2021 A, and approving the execution and delivery of certain documents in connection therewith and certain other matters. It is recommended that the Board of Directors of the Poway Public Financing Authority ("Authority") adopt the Resolution approving the sale of its Water Revenue Bonds, Series 2021A, in an aggregate principal amount not to exceed $15,000,000 and approving the execution and delivery of certain documents in connection therewith and certain other matters. IMPORTANT These recommendations authorize the issuance of debt. Council approval of the recommendations will allow staff to issue Series 2021A Bonds in an amount not to exceed $15,000,000 to help fund the Water Program thereby increasing the sustainability and resiliency of the water system. 1 of 228 October 19, 2021, Item #12 Discussion: In the summer of 2019 staff began discussions about combining various individual water system improvements, some of which were already in progress, into a comprehensive water infrastructure improvement program. The goal of these improvements was to increase the sustainability and resiliency of the water system. Three primary projects were discussed: the Clearwell Bypass, the Clearwell Replacement, and the SDCWA Treated Water Connection. In August 2019 the City of Poway formally began discussions with the San Diego County Water Authority (SDCWA) to move these projects forward. These planned improvements have become commonly known as the Water Infrastructure Improvement Program (Water Program). Since the summer of 2019 the Water Program has been discussed at numerous City Council Meetings including March 18, 2020, June 16, 2020, October 20, 2020, November 17, 2020, March 16, 2021, April 20, 2021, June 1, 2021,July 20, 2021, August 17, 2021, and September 7, 2021. Over the course of those meetings, both project details and potential financing options were discussed. At the City Council Meeting on September 7, 2021 staff described the benefits associated with pursuing debt issuances to finance the Water Program. Some benefits described included minimizing the near-term impact to ratepayers and creating intergenerational equity. This staff report will describe the first debt issuance for the Water Program, Series 2021A Water Revenue Bonds ("Bonds"). Series 2021A Water Revenue Bonds As described in previous staff reports, the City has assembled a financing team to support debt issuances for the Water Program. The financing team includes the City's municipal advisor, Fieldman Rolapp & Associates, Inc. ("Fieldman") and the City's bond counsel, Stradling Vacca Carlson & Rauth (Stradling). As the City drew closer to a potential debt issuance the City added its underwriter, Stifel, Nicolaus & Company, Inc. (Stifel), to help finalize details for the first debt issuance. The City and its financing team have determined that, due to prevailing financial market conditions and cashflow timing of the Water Program projects, it is in the best interest of the City to issue bonds at this time. Interest rates are still near historic lows and the first phase of the Water Program has commenced. The Authority is a legal entity originally created in 1991 to allow the City and Poway Redevelopment Agency the ability to finance public improvements. The 1991 Tax Increment Bonds used to finance the Pomerado Business Park public improvements are one example of the Authority being used to issue debt. In the case of the Water Program, the issuance of the bonds by the Authority enables the City to use its power to enter into a contract to acquire water system assets on an installment basis. Without the participation of the Authority, the City would be compelled under State Constitutional principles to execute what are known as "certificates of participation" (reflecting certificated interests in the installment payments payable by the City). The City's municipal advisor and the underwriter for the financing have advised staff that certificates of participation may be subject to a higher interest rate from investors than revenue bonds issued by the Authority. This is counter to one of staffs objectives: minimize impacts to ratepayers. In addition, certificates of participation normally use a nonprofit public benefit corporation as the City's counterparty. The City would have to establish such a corporation and maintain it in good standing until the final maturity of the obligations. This increases the resources directed toward the issuance/long term maintenance and away from other priorities. By contrast, the Authority is already established and has been used on prior City financings. It is for these reasons the Authority is being used. 2 of 228 October 19, 2021, Item #12 Financing Documents: The financing documents included with this staff report are a necessary part of the approval process to issue the Bonds. The forms of the documents for approval along with a brief description are as follows: 1. Indenture of Trust The Indenture of Trust is a contract between the Authority and U.S. Bank National Association as the Trustee for this debt issuance. The indenture specifies the Trustee (i.e. the financial institution charged with carrying out the terms of the indenture), dated date (date interest starts accruing), maturity date(s), interest rate(s), interest payment dates, denominations, forms, registration privileges, manner of executions, place(s) of payment, and terms of redemption, among other things. 2. Installment Purchase Agreement The Installment Purchase Agreement is a contract between the Authority and City under which the Authority agrees to provide financing for the Water Program and to sell the completed Water Program projects to the City in consideration of the payment by the City of semiannual installment payments. These semiannual installment payments are sufficient to provide revenues (hence "water revenue bonds") with which to pay principal of, and interest on, the Bonds when due. 3. Bond Purchase Agreement The Bond Purchase Agreement is a contract between the Authority, the City, and Stifel, as underwriter, whereby the Authority agrees to sell the Bonds to the underwriter and the underwriter agrees to buy the Bonds from the Authority for resale to investors. 4. Preliminary Official Statement The Preliminary Official Statement is the "offering" (i.e. marketing) statement used by the underwriter to inform investors about the terms of the Bonds and contains all relevant information for investors to decide whether to purchase the Bonds. 5. Continuing Disclosure Agreement The form of the Continuing Disclosure Agreement is contained in the Preliminary Official Statement. This certificate requires the City to submit annual disclosure reports and notices of certain listed events to the marketplace as long as the Series 2021 A Bonds are outstanding. U.S. Bank National Association, as dissemination agent, assists the City with this responsibility. The Preliminary Official Statement has been reviewed and approved for transmittal to the City Council members, sitting as the governing body of the Authority, by the financing team. The distribution of the Preliminary Official Statement by the Authority is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the Preliminary Official Statement to include all facts that would be material to an investor in the Bonds. Material information is information that there is a substantial likelihood it would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the Bonds. If the members of the City Council conclude that the Preliminary Official Statement includes all facts that 3 of 228 October 19, 2021, Item #12 would be material to an investor in the Bonds, it may adopt a resolution that authorizes staff to execute a certificate to the effect that the Preliminary Official Statement has been "deemed final." The Securities and Exchange Commission (the "SEC"), the agency with regulatory authority over compliance with federal securities laws, has issued guidance as to the duties of the members of the City Council, sitting as the governing body of the Authority, with respect to its approval of the Preliminary Official Statement. In its "Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors" (Release No. 36761, January 24, 1996), the SEC indicated that, if a member of the governing body has knowledge of any facts or circumstances that an investor would want to know about prior to investing in the Bonds, whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. In the release, the SEC indicated that the steps that a member of the governing body could take include becoming familiar with the Preliminary Official Statement and questioning staff and consultants about the disclosure of such facts. Debt Management Policy: On October 6, 2015 City Council approved the Debt Management Policy to create a formal approach/practices for issuing and managing debt. This policy expanded upon the City's general Financial Policy and included the following objectives: 1. To help maintain the financial stability of the City by ensuring that its long-term financing commitments are affordable and do not create undue risk or burden. 2. To protect the City' high credit rating and minimize the City's borrowing costs. 3. To meet the requirements of state and federal law and regulation, including federal requirements regarding disclosure. 4. To incorporate best practices into the City's issuance and administration of its indebtedness. The Bonds are consistent with the City's Debt Management Policy and its objectives. Standard & Poor's Credit Rating: The City's water enterprise has not previously been rated. As part of the City's effort to reduce the cost of debt and minimize impacts to ratepayers, the City is obtaining an underlying credit rating for the Bonds from Standard & Poor's ("S&P"). S&P is one of the big three credit rating agencies that provides financial research and analysis on stocks, bonds, and commodities. Moody's Investors Service and Fitch Ratings are the other two main credit rating agencies. S&P's credit rating represents their opinion about credit risk which can influence an investor's decision on whether to buy the Bonds. Additionally, the higher the credit rating, the lower the cost of debt, all else being equal, as less of a "risk premium" (i.e. higher rate of interest) is required by investors for holding the debt. On October 7, 2021 the City and its financing team made a credit presentation to S&P. The credit presentation provided key information on the City, water system, rates and customers, policies and financial management, and the proposed debt issuance. This presentation also allowed S&P to ask questions and helped with their credit rating analysis. Typically, S&P takes one to two weeks to return their rating. While staff does not have the rating at the time of the agenda publication on October 12, they do anticipate having it by the time the staff report is presented to the City Council meeting on October 19, 2021. An update will be provided during the meeting if it's available. 4 of 228 October 19, 2021, Item #12 Timeline: These Bonds are part of a proposed comprehensive financing program to fund the Water Program. The proposed debt will be repaid using the proposed water rate increases. As a reminder, the following graphic shows the proposed four-year rate cycle as well as the current schedule for the potential three series of debt to fund the Water Program. Set Public Hearing: Sept. 7, 2021 Potential 2021 Debt Series: ' Nov. 10, 2021 Year 3 Rates Effective: Jan. 1, 2024 Environmental Review: Mail 218 Notice: By Sep. 18, 2021 Year 1 Rates Effective: Jan. 1,2022 Potential 2024 Debt Series: Aug. 2024 Consider Debt: Oct. 19, 2021 ' Year 2 Rates Effective: Jan. 1, 2023 Year 4 Rates Effective: Jan. 1, 2025 Public Hearing: Nov. 2, 2021 Potential 2023 Debt Series: Mar. 2023 This action is not subject to review under the California Environmental Quality Act (CEQA). Fiscal Impact: Principal and interest on the Bonds will be repaid with Water revenues. The Bonds are structured to be level dollar. This means they have similar debt service payments year over year. The average annual debt service is expected to be approximately $768,000. The maximum annual debt service is expected to be approximately $772,000. The final maturity date is expected to be 2051. The proposed four-year water rates under consideration at the November 2, 2021 Public Hearing incorporate the expected annual debt service for the Bonds. As discussed during the September 7, 2021 City Council meeting, the proposed rates have been set to levels projected to be sufficient to cover the entire Water Program using future series of debt issuances. Public Notification: Not applicable. Attachments: A. Resolution of the City of Poway approving the Installment Purchase Agreement B. Resolution of the Poway Public Financing Authority approving the sale of its Water Revenue Bonds, Series 2021A C. Indenture of Trust by and between U.S. Bank National Association, as Trustee, and Poway Public Financing Authority D. Installment Purchase Agreement by and between City of Poway and Poway Public Financing Authority E. Poway Public Financing Authority Water Revenue Bonds, Series 2021A Bond Purchase Agreement 5 of 228 October 19, 2021, Item #12 F. Continuing Disclosure Agreement G. Preliminary Official Statement Reviewed/ Approved By: Assistant City Manager 6 of 228 Reviewed By: Alan Fenstermacher City Attorney Approved By: October 19, 2021, Item #12 RESOLUTION NO. 21-A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY APPROVING THE EXECUTION AND DELIVERY OF AN INSTALLMENT PURCHASE AGREEMENT FOR THE PURPOSE OF CAUSING THE ISSUANCE OF NOT TO EXCEED $15,000,000 AGGREGATE PRINCIPAL AMOUNT OF WATER REVENUE BONDS, SERIES 2021A, AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the City Council (the "City Council") of the City of Poway (the "City"), a municipal corporation that is duly organized and existing under the general laws of the State of California (the "State"), wishes to finance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (collectively, the "2021 Project"); WHEREAS, the City is a member of the Poway Public Financing Authority (the "Authority"), a public entity that is duly organized and existing under a joint exercise of powers agreement and under the Constitution and laws of the State; WHEREAS, the Authority has agreed to issue its Water Revenue Bonds, Series 2021A (the "Bonds") to assist the City in financing the 2021 Project; WHEREAS, the Bonds are to be secured by installment payments to be made by the City pursuant to the Installment Purchase Agreement, which installment payments will be payable from net revenues of the City's water system to the extent set forth in the Installment Purchase Agreement; WHEREAS, the Authority and U.S. Bank National Association, as trustee (the "Trustee"), will enter into an Indenture of Trust (the "Indenture"), to provide for the issuance and security of the Bonds and to provide for the financing of the 2021 Project; WHEREAS, the City desires to execute a Continuing Disclosure Agreement, to be dated the closing date of the Bonds (the "Continuing Disclosure Agreement"), in order to provide updates of certain information relating to the City and its water system while the Bonds are outstanding; WHEREAS, the City desires to execute and deliver a bond purchase agreement (the "Purchase Contract") with the Authority and Stifel, Nicolaus & Company, Incorporated, as underwriter of the Bonds (the "Underwriter"), with respect to the Bonds; WHEREAS, in order to effect a public sale of the Bonds to the Underwriter, the City is required under federal securities laws and regulations to prepare a preliminary official statement (the "Preliminary Official Statement") disclosing material information about the Bonds, the City and the City's water system; and 4832-9203-5832v4/022468-0020 7 of 228 ATTACHMENT A October 19, 2021, Item #12 Resolution No. 21-_ Page 2 WHEREAS, the City wishes to approve the Preliminary Official Statement for the Bonds, which has been prepared by the City and the Authority with the assistance of Stradling Vacca Carlson & Rauth, a Professional Corporation, as disclosure counsel ("Disclosure Counsel"). NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway as follows: SECTION 1: The City Council hereby specifically finds and declares that each of the statements, findings and determinations of the City Council that are set forth in the above recitals and in the preambles of the documents that are approved herein are true and correct and that: (a) the financing of the 2021 Project will result in significant public benefits to the citizens of the City of the type that is described in Section 6586 of the Marks-Roos Local Bond Pooling Act of 1985 (the "Act"), in that having the Authority assist the City with respect to the financing of the 2021 Project through the issuance of the Bonds and related transactions will result in demonstrable savings in effective interest rate to the City and significant reductions in effective user charges levied by the City; and (b) the 2021 Project includes facilities for the production, storage, transmission or treatment of water within the meaning of Section 6586.5(c) of the Act. SECTION 2: The Installment Purchase Agreement is hereby approved in substantially the form on file with the City Clerk and, upon execution as authorized below, made a part hereof as though set forth in full herein. The Mayor, the Deputy Mayor, the City Manager and the Director of Finance (each, a "Designated Officer") or the designee thereof are hereby authorized and directed to execute and deliver such Installment Purchase Agreement with such changes, insertions and omissions as may be recommended by the City Attorney or the law firm of Stradling Yocca Carlson & Rauth, a Professional Corporation ("Bond Counsel"), and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 3: The Continuing Disclosure Agreement is hereby approved in substantially the form on file with the City Clerk and, upon execution as authorized below, made a part hereof as though set forth in full herein. Each Designated Officer or the designee thereof is hereby authorized and directed to execute and deliver such Continuing Disclosure Agreement with such changes, insertions and omissions as may be recommended by the City Attorney or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 4: The Purchase Contract is hereby approved in substantially the form on file with the City Clerk and, upon execution as authorized below, made a part hereof as though set forth in full herein. Each Designated Officer or the designee thereof is hereby authorized and directed to execute and deliver such Purchase Contract with such changes, insertions and omissions as may be recommended by the City Attorney or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval; provided, however, that in no event shall the aggregate principal amount of the Bonds exceed $15,000,000, nor shall the underwriting discount for the Bonds (excluding any net original issue discount) exceed 1.00% of the aggregate principal amount of the Bonds, nor shall the all-in true interest cost of the Bonds exceed 5.00%. 483 2-920 3-5 83 2v 4/022468-002 0 8 of 228 October 19, 2021, Item #12 Resolution No. 21-_ Page 3 SECTION 5: The preparation and distribution of the Preliminary Official Statement in substantially the form on file with the City Clerk is hereby approved. Each Designated Officer is hereby authorized: (i) to sign a certificate pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule") deeming the Preliminary Official Statement substantially final under the Rule, except for the omission of information as permitted by the Rule; and (ii) to execute, approve and deliver the final Official Statement in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as the officer or officers executing said document may require or approve, subject to advice from the City Attorney or Disclosure Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. The Underwriter is directed to deliver copies of the final Official Statement to all actual initial purchasers of the Bonds. SECTION 6: The proceeds of the Bonds shall be deposited as provided in the Indenture and the Installment Purchase Agreement to finance the 2021 Project. SECTION 7: The appointment of U.S. Bank National Association as Trustee under and pursuant to the Indenture, with the powers and duties of said office as set forth therein, is hereby approved. SECTION 8: The City Council hereby authorizes the City Manager or his designee: (i) to solicit bids on a municipal bond insurance policy and/or reserve surety; (ii) to negotiate the terms of such policy or policies; (iii) to finalize, if appropriate, the form of such policy or policies with a municipal bond insurer; and (iv) if it is determined that the policy or policies will result in net savings for the City, to pay the insurance premium of such policy or policies from the proceeds of the issuance and sale of the Bonds. SECTION 9: The Designated Officers or any other proper officer of the City, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Installment Purchase Agreement, the Purchase Contract, the Continuing Disclosure Agreement, bond insurance, a reserve surety and this Resolution, including any reimbursement agreement or other agreement related to bond insurance or a reserve surety. In the event that the Mayor or Deputy Mayor of the City are unavailable to sign any of the agreements described herein, any other member of the City Council may sign such agreement and, in the event that the City Clerk is unavailable or unable to attest or to deliver any of the above-referenced documents, any deputy clerk may validly execute and deliver such document. SECTION 10: The good faith estimates of costs related to the Bonds which are required by Section 5852.1 of the California Government Code are disclosed in Exhibit A hereto and are available to the public at the meeting at which this Resolution is approved. SECTION 11: Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Indenture unless the context otherwise clearly requires. SECTION 12: This Resolution shall take effect from and after the date of its passage and adoption. 4832-9203-5832v4/022468-0020 9 of 228 October 19, 2021, Item #12 Resolution No. 21-_ Page4 SECTION 13: The City Clerk shall certify to the passage and adoption thereof. PASSED, ADOPTED AND APPROVED at a Regular Meeting of the City Council of the City of Poway, California on the 19th day of October, 2021 by the following vote, to wit: AYES: NOES: ABSENT: DISQUALIFIED: ATTEST: Carrie Gallagher, City Clerk 4832-9203-5832v4/022468-0020 10 of 228 Steve Vaus, Mayor October 19, 2021, Item #12 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by Fieldman, Rolapp & Associates, Inc. (the City's "Municipal Advisor") in consultation with Stifel, Nicolaus & Company, Incorporated, the Underwriter of the Bonds. Principal Amount. The Municipal Advisor has informed the City that, based on the City's financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $13,185,000 (the "Estimated Principal Amount"), which excludes approximately $2,037,246 of net premium estimated to be generated based on current market conditions, which together total $15,222,246. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for the bonds is higher than the face value of such bonds. True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 2.90%. Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $322,246. Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $14,900,000. Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $22,704,745. The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect 4832-9203-5832v4/022468-0020 11 of 228 A-1 October 19, 2021, Item #12 thereto may differ from such good faith estimates due to: (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates; (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount; (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates; (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates; (e) other market conditions; or (f) alterations in the City's financing plan, delays in the financing, additional legal work or a combination of such factors and additional finance charges, if any, attributable thereto. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. 4832-9203-5832v4/022468-0020 12 of 228 A-2 October 19, 2021, Item #12 RESOLUTION NO. F-21-_ A RESOLUTION OF THE BOARD OF DIRECTORS OF THE POWAY PUBLIC FINANCING AUTHORITY APPROVING THE SALE OF ITS WATER REVENUE BONDS, SERIES 2021A, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000 AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the Poway Public Financing Authority (the "Authority"), a public entity that is duly organized and existing under a joint exercise of powers agreement and under the Constitution and laws of the State of California (the "State"), has the powers, among others, to issue bonds and to finance water facilities on behalf of its members pursuant to Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, including but not limited to Article 4 thereof, known as the "Marks-Roos Local Bond Pooling Act of 1985," Government Code Section 6584 et seq. (the "Act"); WHEREAS, the City of Poway (the "City"), a municipal corporation that is duly organized and existing under the general laws of the State, and a member of the Authority, desires to finance the acquisition and construction of certain existing improvements, betterments, renovations and expansions of facilities within its water system (collectively, the "2021 Project"); WHEREAS, the Board of Directors of the Authority (the "Board") has determined that it is desirable to issue its Water Revenue Bonds, Series 2021A (the "Bonds") in an aggregate principal amount not to exceed $15,000,000 to assist the City in financing the 2021 Project; WHEREAS, the Bonds are to be secured by installment payments to be made by the City pursuant to an Installment Purchase Agreement (the "Installment Purchase Agreement"), by and between the City and the Authority, which installment payments will be payable from net revenues of the City's water system; WHEREAS, the Board has determined that it is in the best interest of the Authority to enter into the Installment Purchase Agreement with the City, and to approve certain other documents; WHEREAS, the Authority and U.S. Bank National Association, as trustee (the "Trustee"), desire to enter into an Indenture of Trust (the "Indenture"), to provide for the issuance and security of the Bonds and to provide for the financing of the 2021 Project; WHEREAS, pursuant to the Indenture, the Authority will assign to the Trustee the installment payments payable under the Installment Purchase Agreement; and WHEREAS, the Authority desires to execute and deliver a bond purchase agreement (the "Purchase Contract") with the City and Stifel, Nicolaus & Company, Incorporated, as underwriter of the Bonds (the "Underwriter"), with respect to the Bonds; 4821-0596-5 560v3/022468-0020 13 of 228 ATTACHMENT B October 19, 2021, Item #12 Resolution No. F-21-_ Page 2 WHEREAS, in order to effect a public sale of the Bonds to the Underwriter, the Authority is required under federal securities laws and regulations to prepare a preliminary official statement (the "Preliminary Official Statement") disclosing material information about the Bonds, the City, the 2021 Project and the City's water system; and WHEREAS, the Authority wishes to approve the Preliminary Official Statement for the Bonds, which has been prepared by the City and the Authority with the assistance of Stradling Yocca Carlson & Rauth, a Professional Corporation, as disclosure counsel ("Disclosure Counsel"). NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Poway Public Financing Authority as follows: SECTION 1: The Board hereby specifically finds and declares that each of the statements, findings and determinations of the Authority that are set forth in the above recitals and in the preambles of the documents that are approved herein are true and correct and that: (a) the financing of the 2021 Project will result in significant public benefits to the citizens of the City of the type that is described in Section 6586 of the Act, in that having the Authority assist the City with respect to the financing of the 2021 Project through the issuance of the Bonds and related transactions will result in demonstrable savings in effective interest rate to the City and significant reductions in effective user charges levied by the City; and (b) the 2021 Project includes facilities for the production, storage, transmission or treatment of water within the meaning of Section 6586.5(c) of the Act. SECTION 2: The Board hereby authorizes the preparation, sale and delivery of the Bonds in accordance with the terms and provisions of the Indenture in an aggregate principal amount (not in excess of $15,000,000) that is determined by the Executive Director (which shall be the City Manager of the City) or the Treasurer, together with other available funds, as being necessary: (a) to finance the 2021 Project; (b) to pay the costs of issuing the Bonds; and (c) if advisable to reduce the interest rate payable on the Bonds and/or secure a higher credit rating on the Bonds, to establish a reserve fund for the Bonds. SECTION 3: The form of the Bonds, as set forth in the form of the Indenture (as the Indenture may be modified pursuant hereto), is hereby approved; and the Chair and the Secretary are hereby authorized and directed to execute the Bonds by manual or facsimile signature in the name and on behalf of the Authority. SECTION 4: The Installment Purchase Agreement is hereby approved in substantially the form on file with the Secretary and, upon execution as authorized below, made a part hereof as though set forth in full herein. The Chair, the Vice Chair, the Executive Director and the Treasurer of the Authority (each, a "Designated Officer") or the designee thereof is hereby authorized and directed to execute and deliver such Installment Purchase Agreement with such changes, insertions and omissions as may be recommended by General Counsel or Stradling Yocca Carlson & Rauth, a Professional Corporation, as bond counsel ("Bond Counsel") and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 5: The Indenture is hereby approved in substantially the form on file with the Secretary and, upon execution as authorized below, made a part hereof as though set 4821-0596-5560v3/022468-0020 14 of 228 October 19, 2021, Item #12 Resolution No. F-21-_ Page 3 forth in full herein. Each Designated Officer or the designee thereof is hereby authorized and directed to execute and deliver such Indenture with such changes, insertions and omissions as may be recommended by General Counsel or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 6: The Purchase Contract is hereby approved in substantially the form on file with the Secretary and, upon execution as authorized below, made a part hereof as though set forth in full herein. Each Designated Officer or the designee thereof is hereby authorized and directed to execute and deliver such Purchase Contract with such changes, insertions and omissions as may be recommended by General Counsel or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval; provided, however, that in no event shall the aggregate principal amount of the Bonds exceed $15,000,000, nor shall the underwriting discount for the Bonds (excluding any net original issue discount) exceed 1.00% of the aggregate principal amount of the Bonds, nor shall the all-in true interest cost of the Bonds exceed 5.00%. SECTION 7: The preparation and distribution of the Preliminary Official Statement in substantially the form on file with the Secretary is hereby approved. Each Designated Officer is hereby authorized: (i) to sign a certificate pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule") deeming the Preliminary Official Statement substantially final under the Rule, except for the omission of information as permitted by the Rule; and (ii) to execute, approve and deliver the final Official Statement substantially in the form of the Preliminary Official Statement with such changes, insertions and omissions as the officer or officers executing said document may require or approve, subject to advice from the General Counsel or Disclosure Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. The Underwriter is directed to deliver copies of the final Official Statement to all actual initial purchasers of the Bonds. SECTION 8: The proceeds of the Bonds shall be deposited as provided in the Indenture and the Installment Purchase Agreement to finance the 2021 Project. SECTION 9: The appointment of U.S. Bank National Association, as Trustee under and pursuant to the Indenture, with the powers and duties of said office as set forth therein, is hereby approved. SECTION 10: The Board hereby authorizes the Executive Director or his designee: (i) to solicit bids on a municipal bond insurance policy and/or reserve surety; (ii) to negotiate the terms of such policy or policies; (iii) to finalize, if appropriate, the form of such policy or policies with a municipal bond insurer; and (iv) if it is determined that the policy or policies will result in net debt service savings on the Bonds, to pay the insurance premium of such policy or policies from the proceeds of the issuance and sale of the Bonds. SECTION 11: The Designated Officers or any other proper officer of the Authority, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all · acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Installment Purchase Agreement, the Purchase Contract, bond insurance, a reserve surety and this Resolution, including any reimbursement agreement or other agreement related to bond insurance or a reserve surety. In the event that the Chair and 4821-0596-5560v3/022468-0020 15 of 228 October 19, 2021, Item #12 Resolution No. F-21-_ Page 4 Vice Chair of the Board are unavailable to sign any of the agreements described herein, any other member of the Board may sign such agreement. SECTION 12: The good faith estimates of costs related to the Bonds which are required by Section 5852.1 of the California Government Code are disclosed in Exhibit A hereto and are available to the public at the meeting at which this Resolution is approved. SECTION 13: Unless otherwise defined herein, all terms that are used herein and not otherwise defined shall have the meanings given to such terms in the Indenture unless the context otherwise clearly requires. SECTION 14: This Resolution shall take effect from and after the date of its passage and adoption. SECTION 15: The Secretary shall certify to the passage and adoption thereof. PASSED, ADOPTED AND APPROVED at a Regular Meeting of the Board of Directors of the Poway Public Financing Authority on the 19th day of October, 2021 by the following vote, to wit: AYES: NOES: ABSENT: DISQUALIFIED: ATTEST: Carrie Gallagher, Secretary 4821-0596-5 560v3/022468-0020 16 of 228 Steve Vaus, Chairperson October 19, 2021, Item #12 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by Fieldman, Rolapp & Associates, Inc. (the Authority's "Municipal Advisor") in consultation with Stifel, Nicolaus & Company, Incorporated, the Underwriter of the Bonds. Principal Amount. The Municipal Advisor has informed the Authority that, based on the Authority's financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $13,185,000 (the "Estimated Principal Amount"), which excludes approximately $2,037,246 of net premium estimated to be generated based on current market conditions, which together total $15,222,246. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for the bonds is higher than the face value of such bonds. True Interest Cost of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 2.90%. Finance Charge of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $322,246. Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $14,900,000. Total Payment Amount. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $22,704,745. The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect 4821-0596-5560v3/022468-0020 17 of 228 October 19, 2021, Item #12 thereto may differ from such good faith estimates due to: (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates; (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount; (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates; (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates; (e) other market conditions; or (f) alterations in the Authority's financing plan, delays in the financing, additional legal work or a combination of such factors and additional finance charges, if any, attributable thereto. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the Authority based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Authority. 4821-0596-5560v3/022468-0020 18 of 228 October 19, 2021, Item #12 INDENTURE OF TRUST Dated as of November 1, 2021 by and between Stradling Yocca Carlson & Rauth Draft of 9/ 10/21 U.S. BANK NATIONAL ASSOCIATION, as Trustee and POWAY PUBLIC FINANCING AUTHORITY Relating to $ __ POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A 4825-68 l 4-0280v3/022468-0020 19 of 228 ATTACHMENT C October 19, 2021, Item #12 Section 1.01. Section 1.02. Section 1.03. Section 2.01. Section 2.02. Section 2.03. Section 2.04. Section 2.05. Section 2.06. Section 2.07. Section 2.08. Section 3.01. Section 3 .02. Section 3.03. Section 3.04. Section 3.05. Section 4.01. Section 4.02. Section 4.03. Section 4.04. Section 4.05. Section 5.01. Section 5.02. TABLE OF CONTENTS ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS Definitions .............................................................................................................. 3 Content of Certificates and Opinions ...................................................................... 8 Interpretation ........................................................................................................... 9 ARTICLE II THE BONDS Authorization of Bonds ........................................................................................... 9 Terms of the Bonds ................................................................................................. 9 Transfer of Bonds ................................................................................................. 10 Exchange of Bonds ............................................................................................... 11 Registration Books ................................................................................................ 11 Form and Execution of Bonds .............................................................................. 11 Bonds Mutilated, Lost, Destroyed or Stolen ........................................................ 11 Book-Entry System ............................................................................................... 12 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Issuance of the Bonds ........................................................................................... 15 Application of Proceeds of the Bonds .................................................................. 15 Establishment and Application of Costs of Issuance Fund ................................... 15 [Reserved] ............................................................................................................. 15 Validity of Bonds .................................................................................................. 15 ARTICLE IV REDEMPTION OF BONDS Terms of Redemption ........................................................................................... 15 Selection of Bonds for Redemption ...................................................................... 16 Notice of Redemption ........................................................................................... 16 Partial Redemption of Bonds ................................................................................ 17 Effect of Redemption ............................................................................................ 17 ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Pledge and Assignment; Bond Payment Fund ...................................................... 17 Allocation of Authority Revenues ........................................................................ 18 4825-6814-0280v3/022468-0020 20 of 228 October 19, 2021, Item #12 Section 5.03. Section 5.04. Section 5.05. Section 5.06. Section 5.07. Section 5.08. Section 6.01. Section 6.02. Section 6.03. Section 6.04. Section 6.05. Section 6.06. Section 6.07. Section 6.08. Section 6.09. Section 6.10. Section 7.01. Section 7.02. Section 7 .03. Section 7.04. Section 7.05. Section 7.06. Section 7.07. Section 7.08. Section 7 .09. Section 8.01. Section 8.02. Section 8.03. Section 8.04. Section 8.05. Section 8.06. TABLE OF CONTENTS (continued) Application of Interest Account. ........................................................................... 18 Application of Principal Account ......................................................................... 18 Application of Redemption Fund ......................................................................... 19 Investments ........................................................................................................... 19 Rebate Fund .......................................................................................................... 20 Application of Funds and Accounts When No Bonds are Outstanding ............... 21 ARTICLE VI PARTICULAR COVENANTS Punctual Payment ................................................................................................. 21 Extension of Payment of Bonds ........................................................................... 22 Against Encumbrances ......................................................................................... 22 Power to Issue Bonds and Make Pledge and Assignment.. .................................. 22 Accounting Records and Financial Statements .................................................... 22 Tax Covenants ...................................................................................................... 22 Payments Under Installment Purchase Agreement.. ............................................. 23 Waiver of Laws ..................................................................................................... 23 Further Assurances ............................................................................................... 24 Eminent Domain ................................................................................................... 24 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS Events of Default .................................................................................................. 24 Remedies Upon Event of Default ......................................................................... 24 Application of Authority Revenues and Other Funds After Default.. .................. 25 Trustee to Represent Bond Owners ...................................................................... 26 Bond Owners' Direction of Proceedings .............................................................. 26 Suit by Owners ..................................................................................................... 26 Absolute Obligation of the Authority ................................................................... 27 Remedies Not Exclusive ....................................................................................... 27 No Waiver of Default ........................................................................................... 27 ARTICLE VIII THE TRUSTEE Duties, Immunities and Liabilities of Trustee ...................................................... 27 Merger or Consolidation ....................................................................................... 29 Liability of Trustee ............................................................................................... 29 Right to Rely on Documents ................................................................................. 31 Preservation and Inspection of Documents .......................................................... 32 Compensation and Indemnification ...................................................................... 32 11 4825-6814-0280v3/022468-0020 21 of 228 October 19, 2021, Item #12 Section 9.01. Section 9.02. Section 9.03. Section 9.04. Section 10.01. Section 10.02. Section 10.03. Section 10.04. Section 11.01. Section 11.02. Section 11.03. Section 11.04. Section 1 1.05. Section 11.06. Section 11.07. Section 11.08. Section 11. 09. Section 11.10. Section 11.11. Section 11.12. Section 11.13. Section 11.14. Section 11.15. Section 11.16. Signatures Exhibit A TABLE OF CONTENTS (continued) ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Page Amendments Permitted ........................................................................................ 32 Effect of Supplemental Indenture ......................................................................... 34 Endorsement of Bonds; Preparation of New Bonds ............................................. 34 Amendment of Particular Bonds .......................................................................... 34 ARTICLEX DEFEASANCE Discharge of Indenture ... .-..................................................................................... 34 Discharge of Liability on Bonds ........................................................................... 3 5 Deposit of Money or Securities with Trustee ....................................................... 3 5 Payment of Bonds After Discharge of Indenture .................................................. 3 6 ARTICLE XI MISCELLANEOUS Liability of Authority Limited to Authority Revenues ......................................... 36 Successor Is Deemed Included in All References to Predecessor ........................ 36 Limitation of Rights to Parties and Bond Owners ................................................ 3 7 Waiver of Notice; Requirement of Mailed Notice ................................................ 37 Destruction of Bonds ............................................................................................ 3 7 Severability of Invalid Provisions ........................................................................ 3 7 Notices .................................................................................................................. 37 Evidence of Rights of Bond Owners .................................................................... 3 7 Disqualified Bonds ............................................................................................... 38 Money Held for Particular Bonds ......................................................................... 38 Funds and Accounts .............................................................................................. 3 8 Waiver of Personal Liability ................................................................................. 3 8 Execution in Several Counterparts ....................................................................... 39 CUSIP Numbers ................................................................................................... 39 Choice of Law ....................................................................................................... 39 Notice to Rating Agencies .................................................................................... 39 . ........................................................................................................................... S-1 Form ofBond ...................................................................................................... A-1 iii 4825-68 l 4-0280v3/022468-0020 22 of 228 October 19, 2021, Item #12 INDENTURE OF TRUST THE INDENTURE OF TRUST is made and entered into and dated as of November 1, 2021, by and between the POWAY PUBLIC FINANCING AUTHORITY, a joint exercise of powers agency that is duly organized and existing under and by virtue of the laws of the State of California (the "Authority"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association that is duly organized and existing under the laws of the United States of America, as trustee hereunder (the "Trustee"). RECITALS A. The Authority has been created pursuant to the JP A Agreement with the powers, among others, to issue bonds and to finance water facilities on behalf of its members. B. The City of Poway (the "City"), a member of the Authority, has determined that it is in the best interest of the public to finance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its Water System (collectively, the "2021 Project"), as further described in the Installment Purchase Agreement, with the assistance of the Authority. C. The Authority is authorized pursuant to State law, including but not limited to, Section 6588(c) of the Government Code of the State of California (the "Government Code") and pursuant to Sections 4.02 and 4.03 of the JPA Agreement to incur indebtedness to finance such improvements, and is authorized pursuant to State law, including but not limited to Section 6588(m) of the Government Code, to assign and pledge to the repayment of such indebtedness amounts payable to the Authority by its members. D. The Authority hereby finds pursuant to Section 6586 of the Government Code that the issuance of the bonds that are authorized under Section 2.01 hereof (the "Bonds") to finance the 2021 Project will have demonstrable savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs and significant reductions in effective user charges levied by the City. E. In order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof and interest and premium, if any, thereon, the Authority has authorized the execution and delivery of the Indenture. F. The Authority has determined that all acts and proceedings which are required by law and necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute the Indenture a valid and binding agreement for the uses and purposes set forth herein 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. GRANTING CLAUSES The Authority, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, the mutual covenants herein and the purchase and acceptance of the Bonds by 4825-6814-0280v3/022468-0020 23 of 228 October 19, 2021, Item #12 the owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of and the interest and premium (if any) on all Bonds at any time issued and Outstanding under the Indenture, and to secure the performance and observance of all of the covenants and conditions therein and herein set forth, does hereby assign and pledge unto, and grant a security interest in, the following (the "Trust Estate") to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the Authority to the Bond Owners hereinafter set forth: FIRST All right, title and interest of the Authority in and to the Authority Revenues ( as such term is defined herein), including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive and receipt for any Authority Revenues which are payable to or receivable by the Authority under the Constitution of the State, the Government Code and the Indenture and any other applicable laws of this State or otherwise, to bring actions and proceedings thereunder for the enforcement thereof, and to do any and all things which the Authority is or may become entitled to do thereunder, subject to the terms hereof. SECOND All moneys and securities held in funds and accounts of the Indenture, except amounts held in the Rebate Fund, and all other rights of every name and nature from time to time herein or hereafter by delivery or by writing of any kind pledged, assigned or transferred as and for additional security hereunder to the Trustee by the Authority or by anyone on its behalf, or with its written consent, and to hold and apply the same, subject to the terms hereof. THIRD All of the rights, title, and interest of the Authority in the Installment Purchase Agreement, including all rights of the Authority to receive payments thereunder and all rights of the Authority thereunder as may be necessary to enforce compliance with said provisions (including enforcement of payment obligations and rate covenants, if any, contained in the Installment Purchase Agreement) or otherwise to protect the interest of the Owners of the Bonds, subject to the terms hereof, and excepting therefrom any rights to indemnification or to receive notices thereunder. TO HA VE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in trust and assigns forever for the benefit of the Owners, and such pledge shall constitute a lien on and security interest in such Trust Estate; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds issued under and secured by the Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds; PROVIDED, HOWEVER, that if the Authority, its successors or assigns shall well and truly pay, or cause to be paid, the principal of and interest and any redemption premium on the Bonds due or to become due thereon, at the times and in the manner provided in the Bonds according to the true intent and meaning thereof, and shall well and truly keep, perform and observe all of the covenants 4825-68 l 4-0280v3/022468-0020 24 of 228 2 October 19, 2021, Item #12 and conditions pursuant to the terms of the Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such final payments or deposits as herein provided, the Indenture and the rights hereby granted shall cease, terminate and be void; otherwise the Indenture shall remain in full force and effect. It is expressly declared that all Bonds which are issued and secured hereunder are to be issued, authenticated and delivered, and all sold property, rights and interests, including, without limitation, the Authority Revenues, hereby assigned and pledged, are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Authority has agreed and covenanted and 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; CONTENT OF CERTIFICATES AND OPINIONS Section l.O 1. Definitions. Unless the context otherwise requires, the terms that are defined in this Section 1.01 shall, for all purposes of the Indenture and of any indenture supplemental hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. Unless the context otherwise requires, all capitalized terms that are used herein and not defined have the meanings that are ascribed thereto in the Installment Purchase Agreement. Authority. The term "Authority" means the Poway Public Financing Authority, a public body that is duly organized and existing under the JP A Agreement, and under the Constitution and laws of the State of California. Authority Revenues. The term "Authority Revenues" means: (a) all Series 2021 Installment Payments received by the Authority or the Trustee pursuant to or with respect to the Installment Purchase Agreement; and (b) all interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder. Authorized Representative. The term "Authorized Representative" means with respect to the Authority, its Chair, Vice Chair, Executive Director and Treasurer, or any other person designated as an Authorized Representative of the Authority by a Certificate of the Authority signed by its Chair, Vice Chair, Executive Director or Treasurer and filed with the Trustee. Bond Counsel. The term "Bond Counsel" means Stradling, Y occa, Carlson & Rauth, or another firm of nationally recognized attorneys experienced in the issuance of obligations the interest on which is excludable from gross income under Section 103 of the Code. Bond Payment Fund. The term "Bond Payment Fund" means the fund by that name established pursuant to Section 5.0l(c). Bond Year. The term "Bond Year" has the meaning that is given to such term in the Tax Certificate. 4825-68 I 4-0280v3/022468-0020 25 of 228 3 October 19, 2021, Item #12 Bonds. The term "Bonds" means the Water Revenue Bonds, Series 2021 A issued by the Authority and at any time Outstanding pursuant to the Indenture. Business Day. The term "Business Day" means: (i) a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State, or in any other state in which the Office of the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed. Certificate; Direction; Request; Requisition. The terms "Certificate," "Direction," "Request," and "Requisition" of the Authority mean a written certificate, direction, request or requisition signed in the name of the Authority by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02, each such instrument shall include the statements that are provided for in Section 1.02. City. The term "City" means the City of Poway, a municipal corporation that is duly organized and existing under and by virtue of the general laws of the State. Closing Date. The term "Closing Date" means the date on which the Bonds are delivered to the original purchaser thereof. Code. The term "Code" means the Internal Revenue Code of 1986, as amended. Costs of Issuance. The term "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Authority and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, title insurance premiums, letter of credit fees and bond insurance premiums (if any), fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds. Costs of Issuance Fund. The term "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.03. Depository: DTC. The terms "Depository" and "DTC" mean The Depository Trust Company, New York, New York, a limited purpose trust company that is organized under the laws of the State of New York, in its capacity as securities depository for the Bonds. Event of Default. The term "Event of Default" means any of the events that are specified in Section 7.01. Federal Securities. The term "Federal Securities" means any direct, noncallable general obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), or noncallable obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America. Fitch. The term "Fitch" means Fitch Ratings, Inc., or any successor thereto. 4825-6814-0280v3/022468-0020 26 of 228 4 October 19, 2021, Item #12 Government Code. The term "Government Code" means the Government Code of the State. Indenture. The term "Indenture" means the Indenture of Trust, dated as of November 1, 2021, by and between the Authority and the Trustee, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture. Information Services. The term "Information Services" means 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 specify in a certificate to the Authority and the Trustee as the Trustee may select. Installment Purchase Agreement. The term "Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of the date hereof, by and between the Authority and the City, as amended from time to time. Interest Account. The term "Interest Account" means the account by that name in the Bond Payment Fund established pursuant to Section 5.01. Interest Payment Date. The term "Interest Payment Date" means June 1 and December 1 of each year, commencing __ 1, 202 _. Investment Agreement. The term "Investment Agreement" means an investment agreement by a provider, supported by appropriate opinions of counsel, provided that any such Investment Agreement shall: (i) be from a provider rated by S&P or Moody's at "A-" or "A3", respectively, or above; (ii) require the Authority or the City to terminate such agreement and immediately reinvest the proceeds thereof in other Permitted Investments if the rating assigned to the provider by S&P or Moody's falls to "BBB" or "Baa2", respectively, or below; and (iii) expressly permit the withdrawal, without penalty, of any amounts necessary at any time to fund any deficiencies on account of debt service requirements with respect to the Bonds, together with such amendments as may be approved by the Authority and the Trustee from time to time. Letter of Representations. The term "Letter of Representations" means the letter of the Authority delivered to and accepted by the Depository on or prior to delivery of the 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 from the Authority delivered to and accepted by the Depository. Moody's. The term "Moody's" means Moody's Investors Service, Inc. or any successor thereto. Nominee. The term "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.08 hereof. Office. · The term "Office" means with respect to the Trustee, the principal corporate trust office of the Trustee at 633 West Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Corporate Trust, Reference: Poway 2021 Water Revenue Bonds, or at such other or additional offices as may be specified in writing by the Trustee to the Authority, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the 4825-68 l 4-0280v3/022468-0020 27 of 228 5 October 19, 2021, Item #12 office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted. Outstanding. The term "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds ( or portions thereof) described in Section 11.1 O; and (iii) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture. Owner; Bond Owner. The terms "Owner" or "Bond Owner," whenever used herein with respect to a Bond, mean the person in whose name the ownership of such Bond is registered on the Registration Books. Participants. The term "Participants" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds book-entry certificates as securities depository. Permitted Investments. The term "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely upon any written Request from the Authority as conclusive certification that the investments described therein are so authorized under the laws of the State): (A) for all purposes, including: (i) as defeasance investments in refunding escrow accounts; and (ii) for the purpose of investing (and receiving premium credit for) accrued and capitalized interest: (1) cash; or (2) Federal Securities; and (B) for all purposes other than: (i) defeasance investments in refunding escrow accounts; and (ii) investing (and receiving credit for) accrued and capitalized interest: (1) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including the Export-Import Bank; Farmers Home Administration; General Services Administration; U.S. Maritime Administration; Small Business Administration; Government National Mortgage Association (GNMA); U.S. Department of Housing & Urban Development (PHAs); and Federal Housing Administration; (2) bonds, notes or other evidences of indebtedness rated "AAA" and "Aaa" by the applicable Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts, demand deposits, including interest bearing money market accounts, trust funds, trust accounts, overnight bank deposits, interest-bearing deposits, other deposit products, certificates of deposit, federal funds and banker's acceptances with domestic commercial banks, which may include the Trustee and its affiliates, which: (I) have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1 +" by S&P and "P-1" by Moody's; or (II) deposits insured by the Federal Deposit Insurance Corporation maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); ( 4) commercial paper which is rated at the time of purchase in the single highest classification, "A-1 +" by S&P and "P-1" by Moody's and which matures not more than 270 days after the date of purchase; (5) investments in a money market 4825-6814-0280v3/022468-0020 28 of 228 6 October 19, 2021, Item #12 fund rated "AAAm," "AAAm-G," "AAm" or "AAm-G" or better by S&P, including funds for which the Trustee or its affiliates receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise; (6) 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 which are rated, based on the escrow, in the highest rating category of S&P and Moody's, or any successor thereto; (7) any Investment Agreement; (8) the Local Agency Investment Fund of the State of California; and (9) any other investment permitted by law. Principal Account. The term "Principal Account" means the account by that name in the Bond Payment Fund established pursuant to Section 5.01. Rating Agencies. The term "Rating Agencies" means S&P, Moody's and Fitch. Rebate Fund. The term "Rebate Fund" means the fund by that name established pursuant to Section 5.07. Record Date. The term "Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th) day of the calendar month preceding such Interest Payment Date, whether or not such day is a Business Day. Redemption Date. The term "Redemption Date" means the date fixed for an optional redemption prior to maturity of the Bonds. Redemption Fund. The term "Redemption Fund" means the fund by that name established pursuant to Section 5.05. Redemption Price. The term "Redemption Price" means, with respect to any Bond ( or portion thereof), the principal amount of such Bond ( or portion) plus the interest accrued to the applicable Redemption Date and the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and the Indenture. Registration Books. The term "Registration Books" means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05. Responsible Officer of the Trustee. The term "Responsible Officer of the Trustee" means any officer within the corporate trust division ( or any successor group or department of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, with responsibility for the administration of the Indenture. S&P. The term "S&P" means S&P Global Ratings, a Standard & Poor's Financial Services LLC business, or any successor thereto. Securities Depositories. The term "Securities Depositories" means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange 4825-6814-0280v3/022468-0020 29 of 228 7 October 19, 2021, Item #12 Commission, such other securities depositories as the Authority may designate in a Request of the Authority delivered to the Trustee. State. The term "State" means the State of California. Supplemental Indenture. The term "Supplemental Indenture" means any indenture that is hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. Tax Certificate. The term "Tax Certificate" means the Tax Certificate dated the Closing Date, concerning certain matters pertaining to the use and investment of proceeds of the Bonds issued by the Authority on the date of issuance of the Bonds, including any and all exhibits attached thereto. Trustee. The term "Trustee" means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, or its successor, as Trustee hereunder as provided in Section 8.01. Section 1.02. Content of Certificates and Opinions. Every certificate or opinion that is provided for in the Indenture, except the certificate of destruction that is provided for in Section 11.05 hereof, with respect to compliance with any provision hereof shall include: (1) a statement that the person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such person he or she has made or caused to be made such examination or investigation as is necessary to enable such person to express an informed opinion with respect to the subject matter referred to in the instrument to which such person's signature is affixed; ( 4) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such person, such provision has been complied with. Any such certificate or opinion that is made or given by an officer of the Authority may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an Independent Certified Public Accountant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an Independent Certified Public Accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Authority) upon a certificate or opinion of or representation by an officer of the Authority, unless such counsel or Independent Certified Public Accountant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person's certificate or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the Authority, or the same counsel or Independent Certified Public Accountant, as the case may be, need not certify to all of the matters that are required to be certified under any provision of the Indenture, but different officers, counsel or Independent Certified Public Accountants may certify to different matters, respectively. 4825-6814-0280v3/022468-0020 30 of 228 8 October 19, 2021, Item #12 Section 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa, and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. ( c) All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Indenture; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to the Indenture as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II THE BONDS Section 2.0 l. Authorization of Bonds. (a) The Authority hereby authorizes the issuance hereunder from time to time of the Bonds, which shall constitute special obligations of the Authority, for the purpose of financing the 2021 Project. The Bonds are hereby designated the "Poway Public Financing Authority Water Revenue Bonds, Series 2021" in the aggregate principal amount of$_. (b) The Indenture constitutes a continuing agreement with the Owners from time to time of the Bonds to secure the full payment of the principal of and interest and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein contained. Section 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds shall mature on June 1 in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: 4825-68 l 4-0280v3/022468-0020 31 of 228 Maturity (June 1) 20 Principal Amount $ 9 Interest Rate % October 19, 2021, Item #12 Interest on the Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee sent by first class mail on the applicable Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books ( except that in the case of an Owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such Owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Owner prior to the Record Date). Principal of and premium (if any) on any Bond shall be paid by check of the Trustee upon presentation and surrender thereof at maturity or upon the prior redemption thereof, at the Office of the Trustee. Both the principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Each Bond shall be dated the date of initial delivery, and shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless: (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) unless it is authenticated on or before 15, 202 _, in which event it shall bear interest from the date of initial delivery; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Bonds shall be calculated on the basis of a 360-day year composed of twelve 30-day months. Section 2.03. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee shall not be required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. 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 authorized denomination or denominations for a like series and aggregate principal amount of the same maturity and series. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge that is required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds that it has received. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under 4825-6814-0280v3/022468-0020 32 of 228 October 19, 2021, Item #12 Section 6045 of the Code, as amended. The Trustee shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information. Section 2.04. Exchange of Bonds. Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee shall not be required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. The Trustee shall require the Bond Owner requesting such exchange to pay any tax or other governmental charge that is required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds that it has received. Section 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, records for the registration and transfer of ownership of the Bonds, which shall upon reasonable notice and at reasonable times be open to inspection during regular business hours by the Authority, the City and the Owners; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as herein before provided. The person in whose name any Bond shall be registered shall be deemed the Owner thereof for all purposes hereof, and payment of or on account of the interest on and principal and Redemption Price of such Bonds shall be made only to or upon the order in writing of such registered Owner, which payments shall be valid and effectual to satisfy and discharge liability upon such Bond to the extent of the sum or sums so paid. Section 2.06. Form and Execution of Bonds. The Bonds shall be in substantially the form set forth in Exhibit A. The Bonds shall be executed in the name and on behalf of the Authority with the manual or facsimile signature of its Chair, attested by the manual or facsimile signature of its Secretary. The Bonds may carry a seal, and such seal may be in the form of a facsimile of the Authority's seal and may be reproduced, imprinted or impressed on the Bonds. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer or officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and any Bonds may be signed and attested on behalf of the Authority by those persons who at the actual date of execution of such Bonds are the proper officers of the Authority although at the nominal date of such Bonds any such person shall not have been such officer of the Authority. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of the Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of the Indenture. Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor, series and authorized denomination in exchange and substitution for the Bonds so mutilated, but only upon surrender to the 4825-6814-0280v3/022468-0020 33 of 228 11 October 19, 2021, Item #12 Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and upon the written request of the Authority 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 Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor, series and authorized denomination in lieu of and in substitution for the Bond so lost, destroyed or stolen ( or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing 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 constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed, or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other Bonds secured by the Indenture. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond for a Bond which has been mutilated, lost, destroyed or stolen and which has matured or has been selected for redemption, the Trustee may make payment of such Bond upon receipt of indemnity satisfactory to the Trustee. Section 2.08. Book-Entry System. (a) Election of Book-Entry System. Prior to the issuance of the Bonds, the Authority may provide that such Bonds shall be initially issued as book-entry Bonds. If the Authority shall elect to deliver any Bonds in book-entry form, then the Authority shall cause the delivery of a separate single fully registered bond (which may be typewritten) for each maturity date of such Bonds in an authorized denomination corresponding to that total principal amount of the Bonds designated to mature on such date. Upon initial issuance, the ownership of each such Bond shall be registered in the Bond Registration Books in the name of the Nominee, as nominee of the Depository, and ownership of the Bonds, or any portion thereof may not thereafter be transferred except as provided in Section 2.08( e ). With respect to book-entry Bonds, 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 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 Registration Books, of any notice with respect to book-entry Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book-entry Bonds to be redeemed in the event that the Authority redeems the Bonds in part; or (iv) the payment by the Depository or any Participant or any other person of any amount of principal of, premium, if any, or interest on book-entry Bonds. The Authority and the Trustee may treat and consider the person in whose name each book-entry Bond is registered in the Bond Registration Books as the absolute Owner of such book-entry Bond for the purpose of payment of principal of, premium and interest on such Bond, 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 and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owner, as shown in the 4825-6814-0280v3/022468-0020 34 of 228 12 October 19, 2021, Item #12 Bond Registration Books, or his or her respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Bond Registration Books, shall receive a Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the Bonds. Upon delivery by the Depository to the Authority and the Trustee 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 the Indenture shall refer to such nominee of the Depository. (b) Delivery of Letter of Representations. In order to qualify the book-entry Bonds for the Depository's book-entry system, the Authority 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 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 Registration Books. In addition to the execution and delivery of a Letter of Representations, the Authority and the Trustee, if necessary, shall take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify book-entry Bonds for the Depository's book-entry program. (c) Selection of Depository. In the event that: (i) the Depository determines not to continue to act as securities depository for book-entry Bonds; or (ii) the Authority determines that continuation of the book-entry system is not in the best interest of the beneficial owners of the Bonds or the Authority, then the Authority will discontinue the book-entry system with the Depository. If the Authority determines to replace the Depository with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate, fully registered Bond for each of the maturity dates of such book-entry Bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection ( e) hereof. If the Authority fails to identify another qualified securities depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in such Bond Registration Books 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 2.03 and 2.04 hereof. ( d) Payments To Depository. Notwithstanding any other prov1s1on of the Indenture to the contrary, so long as all Outstanding Bonds are held in book-entry form and registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and interest on such Bonds and all notices with respect to such Bonds shall be made and given, respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions herein. ( e) Transfer of Bonds to Substitute Depository. (i) The Bonds shall be initially issued as provided in Section 2.01 hereof. Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (A) to any successor of DTC or its nominee, or of any substitute depository designated pursuant to clause (B) of subsection (i) of this Section 2.08( e) (a "Substitute 4825-6814-0280v3/022468-0020 35 of 228 13 October 19, 2021, Item #12 Depository"); provided that any successor of DTC or Substitute Depository shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any Substitute Depository, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the Authority that DTC (or its successor) is no longer able to carry out its functions as depository; provided that any such Substitute Depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (C) to any person as provided below, upon: (1) the resignation of DTC or its successor ( or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the Authority that DTC or its successor ( or Substitute Depository or its successor) is no longer able to carry out its functions as depository. (ii) In the case of any transfer pursuant to clause (A) or clause (B) of subsection (i) of this Section 2.08( e ), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the Authority to the Trustee designating the Substitute Depository, a single new Bond, which the Authority shall prepare or cause to be prepared, shall be issued for each maturity of Bonds then Outstanding, registered in the name of such successor or such Substitute Depository or their Nominees, as the case may be, all as specified in such written request of the Authority. In the case of any transfer pursuant to clause (C) of subsection (i) of this Section 2.08(e), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the Authority to the Trustee, new Bonds, which the Authority shall prepare or cause to be prepared, shall be issued in such denominations and registered in the names of such persons as are requested in such written request of the Authority, subject to the limitations of Section 2.01 hereof, provided that the Trustee shall not be required to deliver such new Bonds within a period of less than sixty (60) days from the date of receipt of such written request from the Authority. (iii) In the case of a partial redemption or an advance refunding of any Bonds evidencing a portion of the principal maturing in a particular year, DTC or its successor ( or any Substitute Depository or its successor) shall make an appropriate notation on such Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of Representations. The Trustee shall not be liable for such Depository's failure to make such notations or errors in making such notations and the records of the Trustee as to the outstanding principal amount of such Bonds shall be controlling. (iv) The Authority and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall have no responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Bonds. Neither the Authority nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the Bonds. 4825-6814-0280v3/022468-0020 36 of 228 14 October 19, 2021, Item #12 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the Bonds. At any time after the execution of the Indenture, the Authority may execute and the Trustee shall authenticate and, upon Request of the Authority, deliver the Bonds in the aggregate principal amount of$_. Section 3.02. Application of Proceeds of the Bonds. The proceeds received by the Trustee from the sale of the Bonds shall be deposited in trust with the Trustee, who shall apply such proceeds as follows pursuant to a Direction of the Authority or the City: (i) the Trustee shall deposit the amount of $ __ in the Costs of Issuance Fund; and (ii) the Trustee shall transfer the amount of $ __ to the City for deposit in the Acquisition Fund. The Trustee may establish temporary funds or accounts in its records to facilitate and record the above transfer of proceeds. Section 3.03. Establishment and Application of Costs oflssuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Requisitions of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred, that such payment is a proper charge against said fund and that payment for such charge has not previously been made. Each such Requisition 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. On the six month anniversary of the Closing Date, or upon the earlier Request of the Authority, all amounts remaining in the Costs of Issuance Fund shall be deposited in the Interest Account and the Costs of Issuance Fund shall be closed. Section 3.04. (Reserved]. Section 3.05. Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority, the City or the Trustee with respect to or in connection with the Installment Purchase Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of the validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption. (a) The Bonds with stated maturities on or after June 1, 20 _ are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 3 5 days ( or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on __ 1, 20 _ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. 4825-6814-0280v3/022468-0020 37 of 228 15 October 19, 2021, Item #12 In the event of a an optional redemption, the Authority shall provide the Trustee with a revised sinking fund schedule giving effect to the optional redemptions so completed. (b) The Bonds with stated maturities on June 1, 20 _ are subject to mandatory sinking fund redemption in part (by lot) on June 1, 20_ and each June 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: * Final Maturity. Redemption Date (June 1) 20 * Principal Amount $ If some but not all of the Bonds maturing on June 1, 20 _ are redeemed pursuant to subsection (a), the principal amount of the applicable Bonds to be redeemed pursuant to this subsection (b) on any subsequent June 1 will be reduced, by $5,000 or an integral multiple thereof, as designated by the Authority in a Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the applicable Bonds redeemed pursuant to subsection (a). Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds for redemption as a whole or in part on any date as directed by the Authority and by lot within each maturity in integral multiples of $5,000 in accordance with Section 4.01 hereof. The Trustee will promptly notify the Authority in writing of the numbers of the Bonds or portions thereof so selected for redemption. Section 4.03. Notice of Redemption. Notice of redemption shall be mailed by first class mail not less than twenty (20) days nor more than sixty ( 60) days before any Redemption Date, to the respective Owners of any Bonds that are designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption shall state the date of notice, the redemption date, the place or places of redemption and the Redemption Price, and shall designate the maturities, CUSIP numbers, if any, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds or parts thereof that are designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof 4825-6814-0280v3/022468-0020 38 of 228 16 October 19, 2021, Item #12 will affect the validity of the redemption of any Bond. Notice ofredemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. With respect to any notice of optional redemption of Bonds, such notice may 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 that are 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. Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate and maturity. Section 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds ( or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds ( or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds ( or portions thereof) 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. The Trustee shall, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the prov1s1ons of this Article shall be canceled upon surrender thereof. ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Bond Payment Fund. (a) All of the Authority Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account that is established pursuant to the Indenture ( except the Rebate Fund) are hereby irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture. Said pledge shall constitute a lien on and security interest in such amounts and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act, and shall be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice hereof. 4825-6814-0280v3/022468-0020 39 of 228 17 October 19, 2021, Item #12 (b) The Authority, for good and valuable consideration in hand received, does hereby irrevocably assign and transfer to the Trustee without recourse, for the benefit of the Owners of the Bonds as set forth herein, all of its rights, title, and interest in all Series 2021 Installment Payments payable by the City pursuant to the Installment Purchase Agreement, including all rights of the Authority thereunder as may be necessary to enforce compliance with said provisions (including enforcement of payment obligations and rate covenants, if any, contained in the Installment Purchase Agreement, or otherwise to protect the interest of the Owners of the Bonds). Such assignment shall be subject to and limited by the terms of the Indenture. ( c) There is hereby established with the Trustee the Bond Payment Fund, which the Trustee covenants to maintain and hold in trust separate and apart from other funds held by it so long as any Series 2021 Installment Payments remain unpaid. Except as directed in Sections 5.06 and 5.08, all Authority Revenues shall be promptly deposited by the Trustee upon receipt thereof into the Bond Payment Fund; except that all moneys received by the Trustee and required hereunder to be deposited in the Redemption Fund shall be promptly deposited therein. All Authority Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. The Trustee shall also create and maintain an Interest Account and a Principal Account within the Bond Payment Fund. Section 5.02. Allocation of Authority Revenues. The Trustee shall transfer from the Bond Payment Fund and deposit into the following respective accounts the following amounts in the following order of priority and at the following times, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Authority Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) Not later than the Business Day preceding each date on which the interest on the Bonds shall become due and payable hereunder, the Trustee shall deposit in the Interest Account that sum, if any, required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all Bonds then Outstanding. (b) Not later than the Business Day preceding each date on which the principal of the Bonds shall become due and payable hereunder, the Trustee shall deposit in the Principal Account that sum, if any, required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such date or subject to mandatory sinking fund redemption on such date. Section 5. 03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or accelerated prior to maturity pursuant to the Indenture). Section 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is 4825-6814-0280v3/022468-0020 40 of 228 18 October 19, 2021, Item #12 payable from the Interest Account) as shall be directed pursuant to a Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Section 5.05. Application of Redemption Fund. There is hereby established with the Trustee, when needed, a special fund designated as the "Redemption Fund." All amounts in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and accrued interest on the Bonds to be redeemed on any Redemption Date pursuant to Section 4.0l(a); provided, however, that at any time prior to selection for redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds 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 directed pursuant to a Request of the Authority, except that the purchase price ( exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Section 5.06. Investments. All moneys in any of the funds or accounts that are established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments, which will, as nearly as practicable, mature on or before the dates when such moneys are anticipated to be needed for disbursement. Such investments shall be directed by the Authority pursuant to a Request of the Authority filed with the Trustee at least two (2) Business Days in advance of the making of such investments. In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments that are described in clause (8)(5) of the definition thereof; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a Direction from the Authority specifying a specific money market fund and, if no such Direction from the Authority is so received, the Trustee shall hold such moneys uninvested. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder ( except for interest or gain derived from the Permitted Investment described in clause (8)(7) of the definition thereof, which shall be retained in such Permitted Investment) shall be deposited in the Interest Account unless otherwise provided in the Indenture. For purposes of acquiring any investments hereunder, the Trustee may commingle funds ( other than the Rebate Fund) held by it hereunder upon the Request of the Authority. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section 5.06. The Authority acknowledges that to the extent that 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 Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request at no additional cost and other trade confirmations may be obtained from the applicable broker. The Trustee will furnish the Authority with periodic cash transaction statements which shall include detail for all investment transactions effected by the Trustee hereunder. Upon the Authority's election, such statements will be delivered via the Trustee's online service and upon electing such service, paper statements will be provided only upon request. 4825-6814-0280v3/022468-0020 41 of 228 19 October 19, 2021, Item #12 The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. The Trustee may rely conclusively upon the investment direction of the Authority as to the suitability and legality of the directed investments. The Authority shall invest, or cause to be invested, all moneys in any fund or accounts established with the Trustee as provided in the Tax Certificate. In determining the market value of Permitted Investments, the Trustee may use and rely conclusively and without liability upon any generally recognized pricing information service (including brokers and dealers in securities) available to it. Section 5.07. Rebate Fund. (a) Establishment. The Trustee shall establish a separate fund designated the "Rebate Fund" when required in accordance herewith. Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest with respect to the Bonds will not be adversely affected, the Authority shall cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the Bonds shall be governed by this Section and the Tax Certificate for the Bonds, unless and to the extent that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds will not be adversely affected, if such requirements are not satisfied. Notwithstanding anything to the contrary herein or in the Tax Certificate, the Trustee: (i) shall be deemed conclusively to have complied with the provisions thereof if it follows all Requests of the Authority; (ii) shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate; (iii) may rely conclusively on the Authority's calculations and determinations and certifications relating to rebate matters; and (iv) shall have no responsibility to independently make any calculations or determinations or to review the Authority's calculations or determinations thereunder. (i) Annual Computation. Within 55 days of the end of each Bond Year (as such term is defined in the Tax Certificate), the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(±)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(t)(4)(B) and the construction expenditures exception of Section 148( t)( 4 )( C) of the Code), and taking into account whether the election pursuant to Section 148(t)(4)(C)(vii) of the Code (the "1½% Penalty") has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1 (b) of the Treasury Regulations (the "Rebatable Arbitrage"). The Authority shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Bond Year, upon the Request of the Authority, an amount shall be deposited to the Rebate Fund by the Trustee from any Authority Revenues legally available for such purpose (as specified by the Authority in the aforesaid Request), if and to the extent required so that the balance in the Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with clause (i) of this subsection (a). In 4825-6814-0280v3/022468-0020 42 of 228 20 October 19, 2021, Item #12 the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon Request of the Authority, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Bond Payment Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Rebate Fund: (A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all of the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations. In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T (prepared by the Authority), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Bonds and the payments described in subsection (a) above being made may be withdrawn by the Authority and utilized in any manner by the Authority. ( c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the Bonds. Section 5.08. Application of Funds and Accounts When No Bonds are Outstanding. On the date on which all Bonds shall be retired hereunder or provision made therefor pursuant to Article X and after payment of all amounts due the Trustee hereunder, all moneys then on deposit in any of the funds or accounts ( other than the Rebate Fund) established with the Trustee pursuant to the Indenture shall be withdrawn by the Trustee and paid to the Authority for distribution in accordance with the Installment Purchase Agreement. ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal and interest to become due in respect of all of the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Authority Revenues and other assets pledged for such payment as provided in the Indenture. 4825-6814-0280v3/022468-0020 43 of 228 21 October 19, 2021, Item #12 Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of the Indenture, except subject to the prior payment in full for the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of Bonds. Section 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrances upon the Authority Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by the Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, including other programs under the JP A Agreement, and reserves the right to issue other obligations for such purposes. Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into the Indenture and to pledge and assign the Authority Revenues and other assets that are pledged and assigned under the Indenture in the manner and to the extent that is provided in the Indenture. The Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Authority Revenues and other assets and all the rights of the Bond Owners under the Indenture against all claims and demands of all persons whomsoever. Section 6.05. Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions that are undertaken by it relating to the proceeds of Bonds, the Authority Revenues and all funds and accounts that have been established by it pursuant to the Indenture. Such books of record and account shall be available for inspection by the Authority and the City upon reasonable prior notice during business hours and under reasonable circumstances. Section 6.06. Tax Covenants. Notwithstanding any other provision of the Indenture or the Installment Purchase Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of the interest on the Bonds will not be adversely affected for federal income tax purposes, the Authority covenants to comply with all applicable requirements of the Code that are necessary to preserve such exclusion from gross income with respect to the Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The Authority will take no action and refrain from taking any action, and the Authority will make no use of the proceeds of the Bonds or of any other moneys or property, which would cause the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code; 4825-6814-0280v3/022468-0020 44 of 228 22 October 19, 2021, Item #12 (b) Arbitrage. The Authority will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, and the Authority will not take any action or refrain from taking any action, which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; (c) Federal Guarantee. The Authority will make no use of the proceeds of the Bonds, and the Authority will not take or omit to take any action, that would cause the Bonds to be "federally guaranteed" within the meaning of Section l 49(b) of the Code; ( d) Information Reporting. The Authority will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149( e) of the Code which is necessary to preserve the exclusion of interest on the Bonds pursuant to Section 103(a) of the Code; ( e) Hedge Bonds. The Authority will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, and the Authority will not take any action or refrain from taking any action, that would cause the Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the Authority takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes; and (t) Miscellaneous. The Authority will not take any action or refrain from taking any action which is inconsistent with its expectations stated in the Tax Certificate executed by the Authority in connection with the issuance of the Bonds and will comply with the covenants and requirements that are stated therein and incorporated by reference herein. This Section and the covenants that are set forth herein shall not be applicable to, and nothing that is contained herein shall be deemed to prevent the Authority from issuing revenue bonds or executing and delivering contracts that are payable on a parity with the Bonds, the interest with respect to which has been determined to be subject to federal income taxation. Section 6.07. Payments Under Installment Purchase Agreement. The Authority shall promptly collect all Series 2021 Installment Payments due from the City pursuant to the Installment Purchase Agreement and, subject to the provisions of Article VIII, shall enforce and take all steps, actions and proceedings which the Authority or the Trustee determines to be reasonably necessary for the enforcement of all of the obligations of the City thereunder. The Authority shall not enter into any amendments to the Installment Purchase Agreement except as permitted therein. The Trustee shall give written consent only if: (a) such amendment, modification or termination will not materially adversely affect the interests of the Bond Owners; or (b) the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding to such amendment, modification or termination. Section 6.08. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. 4825-6814-0280v3/022468-0020 45 of 228 23 October 19, 2021, Item #12 Section 6.09. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture. Section 6.10. Eminent Domain. If all or any part of the Water System shall be taken by eminent domain proceedings ( or sold to a government entity that is threatening to exercise the power of eminent domain), the Net Proceeds therefrom shall be applied in the manner that is specified in Section 6 .16 of the Installment Purchase Agreement. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS Section 7.01. Events of Default. The following events shall be Events of Default hereunder: (a) Default by the Authority in the due and punctual payment of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Default by the Authority in the due and punctual payment of any installment of interest on any Bonds when and as the same shall become due and payable. ( c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such default shall have continued for a period of sixty ( 60) days after written notice thereof specifying such default and requiring the same to be remedied shall have been given to the Authority by the Trustee or by the Owners of not less than a majority in aggregate principal amount of Bonds Outstanding; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such sixty (60) day period, and corrective action is instituted by the Authority within such sixty ( 60) day period and diligently pursued in good faith until the default is corrected, such default shall not be an Event of Default hereunder. ( d) 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 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. Section 7.02. Remedies Upon Event of Default. If any Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee may and, at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, shall in each case, upon notice in writing to the Authority and the City, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall 4825-68 l 4-0280v3/022468-0020 46 of 228 24 October 19, 2021, Item #12 be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary notwithstanding. Nothing contained in the Indenture shall permit or require the Trustee or the Authority to accelerate payments due under the Installment Purchase Agreement if the City, which is a party to such Installment Purchase Agreement, is not in default of its obligation thereunder. Any such declaration is subject to the condition that if, at any time after such declaration, but before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority or the City shall deposit with the Trustee an amount that is sufficient to pay all the principal of and installments of interest on the Bonds the payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable charges and expenses of the Trustee, and any and all other Events of Default known to the Trustee ( other than in the payment of principal of and interest on the Bonds that is 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 shall on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or affect any subsequent Event of Default or impair or exhaust any right or power consequent thereon. Section 7.03. Application of Authority Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Authority Revenues then held or thereafter received by the Trustee and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture ( other than amounts held in the Rebate Fund) shall be applied by the Trustee as follows and in the following order: (a) To the payment of any expenses that are necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and to the payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; and (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of the Indenture, in the following order of priority: First: To the payment to the persons that are entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount that is available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate of eight percent (8%) per annum, and, if the amount that is available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and 4825-68 l 4-0280v3/022468-0020 47 of 228 25 October 19, 2021, Item #12 Third: If there shall exist any remainder after the foregoing payments, such remainder shall be paid to the Authority. Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney in fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds or the Indenture and applicable provisions of any other law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds or the Indenture or any other law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Authority Revenues and other assets pledged under the Indenture, pending such proceedings. All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of the Indenture. Section 7.05. Bond Owners' Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing that are executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conduct in all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Bond Owners who are not parties to such direction. Section 7.06. Suit by Owners. No Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture, the Installment Purchase Agreement, the JP A Agreement or any other applicable law with respect to such Bonds, unless: (a) such Owners shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; ( c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and ( e) no direction which is inconsistent with such written request shall 4825-68 l 4-0280v3/022468-0020 48 of 228 26 October 19, 2021, Item #12 have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Indenture, the Installment Purchase Agreement, the JP A Agreement or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture. Section 7.07. Absolute Obligation of the Authority. Nothing in this Section or in any other provision of the Indenture or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Authority Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. Section 7.08. Remedies Not Exclusive. No remedy herein 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, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Section 7.09. No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. ARTICLE VIII THE TRUSTEE Section 8.01. 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 expressly and specifically set forth in the Indenture, and no implied covenants or duties shall be read into the 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 the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee upon thirty (30) days prior notice, unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee 4825-6814-0280v3/022468-0020 49 of 228 27 October 19, 2021, Item #12 if at any time requested to do so by an instrument or concurrent instruments in writing signed 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 if at any time the Trustee shall cease to be eligible in accordance with subsection ( e) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of 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. The Authority shall promptly appoint a successor Trustee by an instrument in writing. ( c) The Trustee may at any time resign by g1vmg written notice of such resignation to the Authority and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. 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. If no successor Trustee shall have been appointed and have accepted appointment within forty-five ( 45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bond Owner ( on behalf of himself and all other Bond 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 that is appointed under the 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 Request of the Authority or the request 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 of the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property that is 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, the Authority shall mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within fifteen ( 15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. ( e) Any Trustee that is appointed under the prov1s1ons of this Section in succession to the Trustee shall be a trust company, banking association or bank having the powers of a trust company, having a combined capital and surplus of at least Seventy-Five Million Dollars ($75,000,000), and subject to supervision or examination for federal or state authority. If such bank, 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 that is referred to above, then 4825-6814-0280v3/022468-0020 50 of 228 28 October 19, 2021, Item #12 for the purpose of this subsection, the combined capital and surplus of such trust company, banking association or bank 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. Section 8.02. Merger or Consolidation. Any trust company, banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated, any trust company, banking association or bank resulting from any merger, conversion or consolidation to which it shall be a party or any trust company, banking association or bank to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such trust company, banking association or bank shall be eligible under Section 8.0l(e), shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 8.03. Liability of Trustee. (a) The recitals of facts herein and in the Bonds shall be taken as statements of the Authority, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture, the Bonds or the Installment Purchase Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective 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 depository 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 Bond 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 that is made in good faith by a responsible officer, unless it shall be proved that the Trustee was 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 a majority (or such other percentage provided for herein) 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 the 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 the Indenture. ( e) The Trustee shall not be deemed to have knowledge of any default or Event of Default hereunder or under the Installment Purchase Agreement or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder or 4825-6814-0280v3/022468-0020 51 of 228 29 October 19, 2021, Item #12 under the Installment Purchase Agreement unless and until a Responsible Officer of the Trustee shall have actual knowledge of such event or the Trustee shall have been notified in writing, in accordance with Section 11.07, of such event by the Authority or the Owners of not less than twenty-five percent (25%) of the Bonds then Outstanding. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, or under the Installment Purchase Agreement, of any of the documents executed in connection with the Bonds or as to the existence of an Event of Default thereunder or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default thereunder. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral that is given to or held by it. (f) No provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of any of its rights or powers. (g) The Trustee shall be under no obligation to exercise any of the rights or powers that are vested in it by the Indenture at the request or direction of Owners pursuant to the Indenture unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy that is conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (h) Whether or not herein expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VIII. (i) The Trustee shall have no responsibility or liability with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. (j) The immunities that are extended to the Trustee also extend to its directors, officers, employees and agents. (k) The Trustee may execute any of the trusts or powers of the Indenture and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. (1) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced 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, explosions, mob violence, riots, 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 2021 Project, malicious mischief, condemnation and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. 4825-68 l 4-0280v3/022468-0020 52 of 228 30 October 19, 2021, Item #12 (m) The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions ("Instructions") given pursuant to the Indenture and delivered using Electronic Means ("Electronic Means"), which shall mean the following communications methods: 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 Authority 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 Authority whenever a person is to be added or deleted from the listing. If the Authority elects to give the Trustee Instructions using Electronic Means and the Trustee acts upon such Instructions, the Trustee's understanding of such Instructions shall be deemed controlling. The Authority 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 Authority shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority 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 Authority. 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 the fact that such directions conflict or are inconsistent with a subsequent written instruction. The Authority 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 Authority; (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 procedure. (n) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. ( o) The permissive right of the Trustee to do things enumerated herein shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. Section 8.04. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, requisition, request, consent, order, certificate, report, opinion, notes, direction, 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 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. 4825-6814-0280v3/022468-0020 53 of 228 31 October 19, 2021, Item #12 The Trustee may treat the Owners of the Bonds appearing in the Trustee's Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by the 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 is specifically prescribed herein) may be deemed to be conclusively proved and established by a Certificate, Request or Requisition of the Authority, and such Certificate, Request or Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. Section 8.05. Preservation and Inspection of Documents. All documents that are received by the Trustee under the provisions of the Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Section 8.06. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time reasonable compensation for all services that are rendered under the Indenture, and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under the Indenture. The Authority shall indemnify, defend and hold harmless the Trustee, its officers, employees, directors and agents from and against any loss, costs, claims, liability or expense (including fees and expenses of its attorneys and advisors) incurred without negligence or bad faith on its part, arising out of or in connection with the execution of the Indenture, acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall survive removal or resignation of the Trustee hereunder or the discharge of the Bonds and the Indenture. ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Section 9.01. Amendments Permitted. (a) The Indenture and the rights and obligations of the Authority, the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, exclusive of Bonds that are disqualified as provided in Section 11.09, has been filed with the Trustee. No such modification or amendment may: (1) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or 4825-6814-0280v3/022468-0020 54 of 228 32 October 19, 2021, Item #12 extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected; or (2) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Authority Revenues and other assets pledged under the Indenture prior to or on a parity with the lien that is created by the Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by the Indenture on such Authority Revenues and other assets except as permitted herein, without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Authority and the Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency and the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (b) The Indenture and the rights and obligations of the Authority, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Outstanding Bonds, including, without limitation, for any one or more of the following purposes: (I) to add to the covenants and agreements of the Authority contained in the Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds ( or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the Authority may deem necessary or desirable; (3) to modify, amend or supplement the Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereunder in effect, and to add such other terms conditions and provisions as may be permitted by said act or similar federal statute; and (4) to modify, amend or supplement the Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Code. ( c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture that is authorized by subsections (a) or (b) of this Section which materially adversely affects the Trustee's own rights, duties or immunities under the Indenture or otherwise. ( d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and 4825-6814-0280v3/022468-0020 55 of 228 33 October 19, 2021, Item #12 that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of interest on the Bonds from federal income taxation and the exclusion of interest on the Bonds from state income taxation. Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Section 9. 03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his or her Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority, to any modification or amendment that is contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same maturity. Section 9.04. Amendment of Particular Bonds. The provisions of this Article shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Bond Owner. ARTICLEX DEFEASANCE Section 10.0 l. Discharge of Indenture. The Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by paying or causing to be paid the principal of and interest and redemption premiums ( if any) on the Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem all Bonds then Outstanding; or ( c) by delivering to the Trustee, for cancellation by it, all of the Bonds then Outstanding. 4825-6814-0280v3/022468-0020 56 of 228 34 October 19, 2021, Item #12 If the Authority shall also pay or cause to be paid all other sums that are payable hereunder by the Authority, then and in that case, at the election of the Authority (as evidenced by a Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and the Indenture), and notwithstanding that any Bonds shall not have been surrendered for payment, the Indenture and the pledge of Authority Revenues and other assets under the Indenture and all covenants, agreements and other obligations of the Authority under the Indenture shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Request of the Authority, 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, transfer, assign or deliver all moneys or securities or other property held by it pursuant to the Indenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption to the Authority. Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Outstanding Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities that are deposited with the Trustee as aforesaid for their payment, subject however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds that were previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 10.03. Deposit of Money or Securities with Trustee. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and shall be: (a) lawful money of the United States of America in an amount that is equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest and premium, if any, thereon to the redemption date; or (b) Federal Securities the principal of and interest on which when due will, in the written opinion of an Independent Certified Public Accountant filed with the Authority and the Trustee, provide money that is sufficient to pay the principal of and all unpaid interest to maturity, or to the redemption date (with premium, if any), as the case may be, on the Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have 4825-6814-0280v3/022468-0020 57 of 228 35 October 19, 2021, Item #12 been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that: (i) the Trustee shall have been irrevocably instructed (by the terms of the Indenture or by Request of the Authority) to apply such money to the payment of such principal, interest and premium, if any, with respect to such Bonds; and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel addressed to the Authority and the Trustee to the effect that such Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Independent Certified Public Accountant's opinion referred to above). Section 10.04. Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, any moneys which are held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and which remain unclaimed for two (2) years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid (without liability for interest) to the Authority free from the trusts created by the Indenture upon receipt of an indemnification agreement that is acceptable to the Authority and the Trustee indemnifying the Trustee with respect to claims of Owners of Bonds which have not yet been paid, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall at the written direction of the Authority (at the cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. ARTICLE XI MISCELLANEOUS Section 11.0 l. Liability of Authority Limited to Authority Revenues. Notwithstanding anything in the Indenture or the Bonds, the Authority shall not be required to advance any moneys derived from any source other than the Authority Revenues and other moneys pledged under the Indenture for any of the purposes of the Indenture, whether for the payment of the principal of or interest on the Bonds or for any other purpose of the Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. The Bonds are not a debt of the members of the Authority, the State or any of its political subdivisions (other than the Authority) and neither the members of the Authority, said State nor any of its political subdivisions ( other than the Authority) is liable thereon. The City shall have no liability or obligation herein except with respect to Series 2021 Installment Payments payable under the Installment Purchase Agreement. Section 11.02. Successor Is Deemed Included in All References to Predecessor. Whenever in the Indenture either the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all covenants and agreements in the 4825-6814-0280v3/022468-0020 58 of 228 36 October 19, 2021, Item #12 Indenture by or on behalf of the Authority or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 11.03. Limitation of Rights to Parties and Bond Owners. Nothing in the Indenture or in the Bonds, express or implied, is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of the Indenture 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 Authority, the Trustee, the City and the Owners of the Bonds. Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in the Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person who is entitled to receive such notice, and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in the Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. Section 11.05. Destruction of Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall destroy such Bonds as may be allowed by law and upon request deliver a certificate of such destruction to the Authority. Section 11.06. Severability of Invalid Provisions. If any one or more of the prov1s1ons contained in the Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into the Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable. Section 11.07. Notices. Any notice to or demand upon the Authority or the Trustee shall be deemed to have been sufficiently given or served for all purposes by being sent by facsimile or by being deposited, first class mail, postage prepaid, in a post office box, to the Authority at 13325 Civic Center Drive, Poway, California 92064, Attention: City Manager (or such other address as may have been filed in writing by the Authority with the Trustee), or to the Trustee at its Office by first class mail. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee shall not be deemed to have received, and shall not be liable for failing to act upon the contents of, any notice unless and until the Trustee actually receives such notice. Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument that is required or permitted by the Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any 4825-6814-0280v 3/022468-0020 59 of 228 37 October 19, 2021, Item #12 purpose of the Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument 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 Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Authority, or by any other obligor on the Bonds, or by any person that is directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a person that is directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request, the Authority shall certify to the Trustee those Bonds that are disqualified pursuant to this Section 11.09 and the Trustee may conclusively rely on such certificate. Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds ( or portions of Bonds in the case ofregistered Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof, but without any liability for interest thereon. Section 11.11. Funds and Accounts. Any fund or account that is required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. Section 11.12. Waiver of Personal Liability. No member, officer, agent, employee, consultant or attorney of the Authority or the City shall be individually or personally liable for the 4825-68 l 4-0280v3/022468-0020 60 of 228 38 October 19, 2021, Item #12 payment of the principal of or premium or interest on the Bonds or subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent, employee, consultant or attorney from the performance of any official duty provided by law or by the Indenture. Section 11. 13. Execution in Several Counterparts. The 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 11.14. CUSIP Numbers. Neither the Trustee nor the Authority shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Bondholders and that neither the Authority nor the Trustee shall be liable for any inaccuracies in such numbers. Section 11.15. Choice of Law. THE INDENTURE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. Section 11.16. Notice to Rating Agencies. The Trustee shall provide any rating agency rating the Bonds with written notice of each amendment to the Indenture and a copy thereof at least 15 days in advance of its execution. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.} 4825-6814-0280v3/022468-0020 61 of 228 39 October 19, 2021, Item #12 IN WITNESS WHEREOF, the Authority has caused the Indenture to be signed in its name by its Chair and attested by its Secretary, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused the Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. ATTEST: Secretary 4825-6814-0280v3/022468-0020 62 of 228 POWAY PUBLIC FINANCING AUTHORITY By: Chair U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer S-1 October 19, 2021, Item #12 No. EXHIBIT A FORM OF BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE BOND REGISTRAR 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 THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), 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. UNITED STATES OF AMER1CA STATE OF CALIFORNIA POWAY PUBLIC FINANCING AUTHOR1TY WATER REVENUE BONDS, SER1ES 2021A $ ----INTEREST RA TE % MATUR1TY DATE June 1, 20_ OR1GINAL ISSUE DATE November_, 2021 CUSIP REGISTERED OWNER PR1NCIPAL AMOUNT: CEDE&CO. ------------------DOLLARS The POWAY PUBLIC FINANCING AUTHOR1TY, a joint exercise of powers agency that is duly organized and existing under the laws of the State of California (the "Authority"), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the "Registered Owner"), on the Maturity Date specified above ( subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the interest payment date next preceding the date of authentication of this Bond (unless: (i) this Bond is authenticated after the fifteenth day of the calendar month preceding an interest payment date, whether or not such day is a business day, and on or before the following interest payment date, in which event it shall bear interest from such interest payment date; or (ii) this Bond is authenticated on or before __ 15, 20 _, in which event it shall bear interest from the Original Issue Date identified above; provided, however, that if as of the date of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment on this Bond), at the Interest Rate per annum specified above, payable semiannually on June 1 and December 1 in each year, commencing __ 1, 202_, calculated on the basis of a 360 day year composed of twelve 30 day months. Principal hereof and premium, if any, upon early redemption hereof are payable by check of the Trustee upon presentation and 4825-6814-0280v3/022468-0020 63 of 228 A-1 October 19, 2021, Item #12 surrender hereof at the Office (as defined in the hereinafter described Indenture) of U.S. Bank National Association, as trustee (the "Trustee"). Interest hereon is payable by check of the Trustee sent by first class mail on the applicable interest payment date to the Registered Owner hereof at the Registered Owner's address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each interest payment date ( except that in the case of a registered owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such registered owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such registered owner prior to the fifteenth (15th) day of the month preceding such interest payment date). Capitalized terms that are used herein and not defined shall have the meanings that are given to such terms in the Indenture. This Bond is not a debt of the members of the Authority, the State of California, or any of its political subdivisions (other than the Authority), and neither the members of the Authority or said State, nor any of its political subdivisions ( other than the Authority), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Authority Revenues (as such term is defined in the Indenture of Trust, dated as of November 1, 2021 (the "Indenture"), by and between the Authority and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the City of Poway (the "City") to make payments in accordance with the Installment Purchase Agreement ( as such term is defined in the Indenture) is a limited obligation of the City as set forth in the Installment Purchase Agreement and the City shall have no liability or obligation in connection herewith except with respect to such Series 2021 Installment Payments to be made pursuant to the Installment Purchase Agreement. The Bonds do not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the Authority designated as the "Poway Public Financing Authority Water Revenue Bonds, Series 2021A" (the "Bonds"), of an aggregate principal amount of __ Million _ Hundred _ Thousand Dollars ($ __ ), all of like tenor and date ( except for such variation, if any, as may be required to designate varying series, numbers or interest rates) and all issued pursuant to the provisions of the Joint Exercise of Powers Agreement, dated October 8, 1991 the "JP A Agreement"), by and between the City and the Successor Agency to the Poway Redevelopment Agency, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time and the laws of the State of California and pursuant to the Indenture and the resolution authorizing the issuance of the Bonds. Reference is hereby made to the Indenture ( copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Authority Revenues, and the rights thereunder of the Owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority hereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The Bonds have been issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds have been issued by the Authority to finance certain public capital improvements and related costs, as more fully described in the Installment Purchase Agreement. 4825-6814-0280v3/022468-0020 64 of 228 A-2 October 19, 2021, Item #12 This Bond and the interest, premium, if any, hereon and all other Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the Authority, and are payable from, and are secured by a pledge and lien on the Authority Revenues, including all Series 2021 Installment Payments received from the City by the Authority or the Trustee, and any other amounts on deposit in certain funds and accounts created under the Indenture. As and to the extent set forth in the Indenture, all of the Authority Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. The Indenture and the rights and obligations of the Authority and the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time with the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, exclusive of Bonds disqualified as set forth in the Indenture, in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment may: (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected; or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Authority Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the Bonds of the lien created by the Indenture on such Authority Revenues and other assets, except as expressly provided in the Indenture, without the consent of the Owners of all of the Bonds then Outstanding. The Indenture and the rights and obligations of the Authority, the Trustee and the Owners of the Bonds may also be modified or amended for certain purposes described more fully in the Indenture at any time in the manner, to the extent and upon the terms provided in the Indenture by a supplemental indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such supplemental indenture will not materially adversely affect the interests of the Owners of the Outstanding Bonds. The Bonds with stated maturities on or after June 1, 20 _, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 3 5 days ( or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on __ 1, 20_ or any date thereafter at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium. The Bonds with stated maturities on June 1, 20 _ are subject to mandatory sinking fund redemption in part (by lot) on June 1, 20_ and each June 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: 4825-6814-0280v3/022468-0020 65 of 228 A-3 October 19, 2021, Item #12 * Final Maturity. Redemption Date (June 1) 20 * Principal Amount $ As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than twenty (20) days nor more than sixty (60) days prior to the redemption date to the respective Owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither the failure to receive such notice nor any defect in the notice or the mailing thereof shall affect the validity of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the principal of all of the Bonds and the interest accrued thereon may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his or her duly authorized attorney in writing, at said office of the Trustee but only in the manner, subject to the limitations and upon payment of the taxes and charges provided in the Indenture and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds of the same series, of authorized denomination or denominations, for the same aggregate principal amount of the same maturity will be issued to the transferee in exchange therefor. Bonds may be exchanged at said office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations of the same series and same maturity, but only in the manner, subject to the limitations and upon payment of the taxes and charges provided in the Indenture. The Trustee shall not be required to register the transfer or exchange of any Bond during the period in which the Trustee is selecting Bonds for redemption or any Bond that has been selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. 4825-6814-0280v3/022468-0020 66 of 228 A-4 October 19, 2021, Item #12 It is hereby certified that all of the things, conditions and acts that are required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the JP A Agreement, and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit under any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee. IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in its name and on its behalf with the manual or facsimile signature of its Chair and attested to by the manual or facsimile signature of its Secretary, all as of the Original Issue Date specified above. POWAY PUBLIC FINANCING AUTHORITY By: Chair Attest: Secretary of the Board [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within-mentioned Indenture. Dated: November_, 2021 4825-68 l 4-0280v3/022468-0020 67 of 228 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory A-5 October 19, 2021, Item #12 [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Y occa Carlson & Rauth, a Professional Corporation, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. Secretary of the Board of the Poway Public Financing Authority [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within registered Bond and hereby irrevocably constitute(s) and appoint(s) _______ _ ____________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: ------Signature Guaranteed: 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. 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. 4825-6814-0280v3/022468-0020 68 of 228 A-6 October 19, 2021, Item #12 Stradling Yocca Carlson & Rauth Draft o/9/28121 INSTALLMENT PURCHASE AGREEMENT by and between CITY OF POWAY and POWAY PUBLIC FINANCING AUTHORITY Dated as of November 1, 2021 Relating to $ ---POWAY PUBLIC FINANCING AUTHORITY 4815-4294-6296v4/022468-0020 69 of 228 WATER REVENUE BONDS, SERIES 2021A ATTACHMENT D October 19, 2021, Item #12 Section 1.01. Section 2.01. Section 2.02. Section 3.01. Section 3.02. Section 3.03. Section 3.04. Section 3.05. Section 4.01. Section 4.02. Section 5.01. Section 5.02. Section 5.03. Section 5.04. Section 5.05. Section 6.01. Section 6.02. Section 6.03. Section 6.04. Section 6.05. Section 6.06. Section 6.07. Section 6.08. Section 6.09. Section 6.10. Section 6.11. Section 6.12. TABLE OF CONTENTS ARTICLE I DEFINITIONS Page Definitions ................................................................................................................ 1 ARTICLE II REPRESENTATIONS AND WARRANTIES Representations and Warranties of the City ............................................................. 6 Representations and Warranties of the Authority .................................................... 6 ARTICLE III ACQUISITION OF 2021 PROJECT Acquisition and Construction of the 2021 Project.. ................................................. 7 Changes to the 2021 Project .................................................................................... 7 Purchase and Sale of the 2021 Project.. ................................................................... 7 Title .......................................................................................................................... 7 Acquisition Fund ...................................................................................................... 7 ARTICLE IV SERIES 2021 INSTALLMENT PAYMENTS Purchase Price .......................................................................................................... 8 Series 2021 Installment Payments ........................................................................... 8 ARTICLE V SECURITY Pledge of Revenues .................................................................................................. 9 Allocation of Revenues ............................................................................................ 9 Additional Contracts and Bonds ............................................................................ 10 Investments ............................................................................................................ 11 Rate Stabilization Fund .......................................................................................... 11 ARTICLE VI COVENANTS OF THE CITY Compliance with Installment Purchase Agreement and Ancillary Agreements ............................................................................................................ 11 Against Encumbrances ........................................................................................... 12 Against Sale or Other Disposition of Property ...................................................... 12 Against Competitive Facilities ............................................................................... 12 Tax Covenants ....................................................................................................... 12 [Reserved] .............................................................................................................. 13 Maintenance and Operation of the Water System ................................................. 13 Payment of Claims ................................................................................................. 13 Compliance with Contracts .................................................................................... 13 Insurance ................................................................................................................ 13 Accounting Records; Financial Statements and Other Reports ............................. 14 Protection of Security and Rights of the Authority ................................................ 15 4815-4294-6296v4/022468-0020 70 of 228 October 19, 2021, Item #12 Section 6.13. Section 6.14. Section 6.15. Section 6.16. Section 6.17. Section 6.18. Section 6.19. Section 7.01. Section 7 .02. Section 8.01. Section 8.02. Section 8.03. Section 8.04. Section 8.05. Section 9.01. Section 10.01. Section 10.02. Section 10.03. Section 10.04. Section 10.05. Section 10.06. Section 10.07. Section 10.08. Section 10.09. Section 10.10. Section 10.11. Section 10.12. Section 10.13. Section 10.14. Signatures TABLE OF CONTENTS ( continued) Page Payment of Taxes and Compliance with Governmental Regulations .................... 15 Amount of Rates and Charges ............................................................................... 15 Collection of Rates and Charges ............................................................................ 15 Eminent Domain Proceeds ..................................................................................... 15 Further Assurances ................................................................................................. 15 Enforcement of Contracts ...................................................................................... 16 Continued Existence of Authority .......................................................................... 16 ARTICLE VII PREPAYMENT OF SERIES 2021 INSTALLMENT PAYMENTS Prepayment ............................................................................................................ 16 Method of Prepayment ........................................................................................... 16 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Events of Default and Acceleration of Maturities ................................................. 16 Application of Funds Upon Acceleration .............................................................. 17 Other Remedies of the Authority ........................................................................... 18 Non-Waiver ............................................................................................................ 18 Remedies Not Exclusive ........................................................................................ 18 ARTICLE IX DISCHARGE OF OBLIGATIONS Discharge of Obligations ....................................................................................... 19 ARTICLEX MISCELLANEOUS Liability Limited .................................................................................................... 19 Benefits of Installment Purchase Agreement Limited to Parties ........................... 20 Successor Is Deemed Included in all References to Predecessor .......................... 20 Waiver of Personal Liability .................................................................................. 20 Article and Section Headings, Gender and References ......................................... 20 Partial Invalidity ..................................................................................................... 20 Assignment ............................................................................................................ 21 Net Contract ........................................................................................................... 21 California Law ....................................................................................................... 21 Notices ................................................................................................................... 21 Effective Date ........................................................................................................ 21 Execution in Counterparts ...................................................................................... 21 Indemnification of Authority ................................................................................. 21 Amendments Permitted .......................................................................................... 22 . ............................................................................................................................. S-1 11 4815-4294-6296v4/022468-0020 71 of 228 October 19, 2021, Item #12 Exhibit A Exhibit B Exhibit C Exhibit D TABLE OF CONTENTS ( continued) Page Description of the 2021 Project ............................................................................ A-1 Purchase Price ...................................................................................................... B-1 Form of Requisition from Acquisition Fund ........................................................ C-1 Form of Substitution Statement. ........................................................................... D-1 lll 48 l 5-4294-6296v4/022468-0020 72 of 228 October 19, 2021, Item #12 INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT, dated as of November 1, 2021, is entered into by and between the CITY OF POWAY, a municipal corporation that is duly organized and existing under and by virtue of the general laws of the State of California (the "City"), and the POWAY PUBLIC FINANCING AUTHORITY, a joint exercise of powers agency that is duly organized and existing under and by virtue of the laws of the State of California (the "Authority"). RECITALS A. The City proposes to finance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its Water System, as described in Exhibit A ( collectively, the "2021 Project"). B. The Authority has agreed to assist the City in financing the 2021 Project on the terms and conditions that are set forth herein. C. The Authority is authorized by Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, including but not limited to Section 6540 et seq., to finance and refinance the acquisition and construction of property for its members. D. The City is authorized by the laws of the State of California to acquire the 2021 Project. E. The City and the Authority have duly authorized the execution of this Installment Purchase Agreement. F. 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, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement. 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 that are defined in this section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document that is mentioned herein or therein have the meanings that are defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms that are defined herein. All capitalized terms that are used herein and not defined herein shall have the meanings that are ascribed thereto in the Indenture. 4815-4294-6296v4/022468-0020 73 of 228 October 19, 2021, Item #12 Accountant's Report. The term "Accountant's Report" means a report signed by an Independent Certified Public Accountant. Acquisition Fund. The term "Acquisition Fund" means the fund by that name established under Section 3.05. Authority. The term "Authority" means Poway Public Financing Authority, a joint exercise of powers agency that is duly organized pursuant to the JP A Agreement and existing under and by virtue of the laws of the State of California. Bonds. The term "Bonds" means all revenue bonds or notes of the City that are authorized, executed, issued and delivered by the City, the payments of which are payable from Net Revenues on a parity with the Series 2021 Installment Payments and which are secured by a pledge of and lien on Revenues as described in Section 5.01 hereof. City. The term "City" means City of Poway, a municipal corporation that is duly organized and existing under and by virtue of the general laws of the State of California. City Manager. The term "City Manager" means the City Manager of the City, or any other person that is designated by the City Manager to act on behalf of the City Manager. Contracts. The term "Contracts" means all contracts of the City that are authorized and executed by the City, the payments under which are payable from Net Revenues on a parity with the Series 2021 Installment Payments and which are secured by a pledge and lien on Revenues as described in Section 5.01 hereof; but excluding contracts entered into for operation and maintenance of the Water System. Debt Service. The term "Debt Service" means, for any period of calculation, the sum of: (i) the interest accruing during such period on all outstanding Bonds, 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 capitalized or is reasonably anticipated to be reimbursed to the City 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); (ii) those portions of the principal amount of all outstanding serial Bonds maturing in such period; (iii) those portions of the principal amount of all outstanding term Bonds required to be prepaid or paid in such period; and (iv) those portions of the Contracts that are required to be paid during such period (except to the extent that the interest that is evidenced and represented thereby is capitalized or is reasonably anticipated to be reimbursed to the City 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); 48 l 5-4294-6296v4/022468-0020 74 of 228 2 October 19, 2021, Item #12 but less the earnings to be derived from the investment of moneys on deposit in debt service reserve funds established for Bonds or Contracts; provided that, as to any such Bonds or Contracts bearing or comprising interest at other than a fixed rate, the rate of interest used to calculate Debt Service shall, for all purposes, be assumed to be a fixed rate equal to the higher of: ( 1) the then-current variable interest rate borne by such Bonds or Contract plus 1 %; and (2) the highest variable rate borne over the preceding 3 months by outstanding variable rate debt issued by the City or, if no such variable rate debt is at the time outstanding, by variable rate debt of which the interest rate is computed by reference to an index that is comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued; provided further that if any series or issue of such Bonds or Contracts have twenty-five percent (25%) or more of the aggregate principal amount of such series or issue due in any one year, Debt Service shall be determined for the period of determination as if the principal of and interest on such series or issue of such Bonds or Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of thirty (30) years from the date of calculation; and provided further that, as to any such Bonds or Contracts or portions thereof which bear no interest but which are sold at a discount and which discount accretes with respect to such Bonds or Contracts or portions thereof, such accreted discount shall be treated as interest in the calculation of Debt Service; and provided further that if the Bonds or Contracts constitute interest rate swap agreements or other paired obligations, the interest rate on such Bonds or Contracts shall be the resulting linked rate or the effective fixed interest rate to be paid by the City with respect to such paired obligations; and provided further that 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 Bonds and Contracts for which such debt service reserve fund was established and, to the extent that the amount in such debt service reserve fund is in excess of such amount of principal, such excess shall be applied to the full amount of principal due, in each preceding year, in descending order, until such amount is exhausted. Event of Default. The term "Event of Default" means an event that 1s described m Section 8.01. Fiscal Year. The term "Fiscal Year" means the twelve month period beginning on July 1 of each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month period hereafter selected and designated as the official fiscal year period of the City. Indenture. The term "Indenture" means the Indenture of Trust, dated as of the date hereof, by and between the City and the Authority, relating to the 2021 Bonds. Independent Certified Public Accountant. The term "Independent Certified Public Accountant" means any firm of certified public accountants that is 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. 4815-4294-6296v4/022468-0020 75 of 228 3 October 19, 2021, Item #12 Independent Financial Consultant. The term "Independent Financial Consultant" means a financial consultant or firm of such consultants that is appointed by the City, and who, or each of whom: (1) is in fact independent and not under domination of the City; (2) does not have any substantial interest, direct or indirect, with the City; (3) is not connected with the City as an officer or employee of the City, but who may be regularly retained to make reports to the City; and ( 4) is registered as a "municipal advisor," as defined in Section 15B of the Securities Exchange Act of 1934, as amended. Installment Purchase Agreement. The term "Installment Purchase Agreement" means this Installment Purchase Agreement, dated as of November 1, 2021, by and between the City and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance herewith. JPA Agreement. The term "JP A Agreement" means the Joint Exercise of Powers Agreement, dated October 8, 1991, by and between the City and the Successor Agency to the Poway Redevelopment Agency, pursuant to which the Authority is established. Net Proceeds. The term "Net Proceeds" means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such proceeds. Net Revenues. The term "Net Revenues" means, for any Fiscal Year, the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year. When held by the Trustee in any funds or accounts established hereunder, Net Revenues shall include all interest or gain derived from the investment of amounts in any of such funds or accounts. Operation and Maintenance Costs. The term "Operation and Maintenance Costs" means: (1) costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles applicable to governmental agencies, including, but not limited to, the reasonable expenses of management and repair and other expenses that are necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, 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 ( other than debt service payments) required to be paid by it to comply with the terms of the 2021 Bonds or of this Installment Purchase Agreement or any Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds; and (2) all payments under any contract for the purchase of water; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. Purchase Price. The term "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. Rate Stabilization Fund. The term "Rate Stabilization Fund" means the fund by that name held by the City and established pursuant to Section 5.05. 4815-4 294-6296v4/022468-0020 76 of 228 4 October 19, 2021, Item #12 Revenue Fund. The term "Revenue Fund" means the Water Enterprise Fund of the City, together with other accounts that may be created in the future and designated by action of the City Council of the City as a part of the fund called "Revenue Fund" that has been established pursuant to Section 5.02. Revenues. The term "Revenues" means all income, rents, rates, fees, charges and other moneys derived from the ownership of or operation of the Water System, including, without limiting the generality of the foregoing: (1) all in lieu charges (including investment earnings thereon) collected by or on behalf of the City; (2) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the City from the sale, furnishing and supplying of the water, recycled water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System; (3) the earnings on and income derived from the investment of such income, rents, rates, fees, charges, proceeds or other moneys, including City reserves; and ( 4) deposits to the Revenue Fund from amounts on deposit in the Rate Stabilization Fund in accordance with Section 5.05; but excluding in all cases: (w) any Revenues transferred from the Revenue Fund to the Rate Stabilization Fund in accordance with Section 5.02(c); (x) all amounts reasonably anticipated to be reimbursed to the City 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)); (y) customers' deposits or any other deposits or advances that are subject to refund until such deposits or advances have become the property of the City; and (z) proceeds of taxes or benefit assessments restricted by law to be used by the City to pay amounts due on bonds or other obligations hereafter incurred. Series 2021 Installment Payment Date. The term "Series 2021 Installment Payment Date" last Business Day of May and November of each year commencing on ___ , 202 _. Series 2021 Installment Payments. The term "Series 2021 Installment Payments" means the Installment Payments scheduled to be paid by the City under and pursuant to the Installment Purchase Agreement. Trustee. The term "Trustee" means U.S. Bank National Association, acting in its capacity as Trustee under and pursuant to the Indenture, and its successors and assigns. 2021 Project. The term "2021 Project" means the additions, betterments, extensions and improvements to the City's Water System facilities, including real property and buildings, if any, which are described as such in Exhibit A. 2021 Bonds. The term "2021 Bonds" means the Poway Public Financing Authority Water Revenue Bonds, Series 202 lA issued pursuant to the Indenture. Water Service. The term "Water Service" means the potable and recycled water distribution service that is made available or provided by the Water System. Water System. The term "Water System" means the whole and each and every part of the potable and recycled water system serving the City, whether owned or operated by the City or another party, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such water system or any part thereof hereafter acquired or constructed. 4815-4294-6296v4/022468-0020 77 of 228 5 October 19, 2021, Item #12 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.01. Representations and Warranties of the City. The City makes the following representations: (a) The City is a municipal corporation that is duly organized and existing under and pursuant to the general laws of the State of California. (b) The City has full legal right, power and authority to enter into this Installment Purchase Agreement, carry out its obligations hereunder and carry out and consummate all other transactions that are contemplated by this Installment Purchase Agreement, and the City has complied with the provisions of the laws of the State of California in all matters relating to such transactions. ( c) By proper action, the City has duly authorized the execution, delivery and due performance of this Installment Purchase Agreement. ( d) The City will not take or, to the extent within its power, permit any action to be taken which results in the interest that is paid for the installment purchase of the 2021 Project under the terms of this Installment Purchase Agreement being included in the gross income of the Authority or its assigns for purposes of federal or State of California personal income taxation. ( e) The City has determined that it is necessary and proper for City uses and purposes within the terms of the laws of the State of California that the City finance and acquire the 2021 Project in the manner that is provided for in this Installment Purchase Agreement in order to provide essential services and facilities to persons residing in the City. Section 2.02. Representations and Warranties of the Authority. The Authority makes the following representations and warranties: (a) The Authority is a joint exercise of powers agency that is duly organized under the JP A Agreement and in good standing under the laws of the State of California, has full legal right, power and authority to enter into this Installment Purchase Agreement and to carry out and consummate all transactions that are contemplated by this Installment Purchase Agreement and by proper action has duly authorized the execution and delivery and due performance of this Installment Purchase Agreement. (b) The execution and delivery of this Installment Purchase Agreement and the consummation of the transactions that are contemplated herein 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. 4815-4294-6296v4/022468-0020 78 of 228 6 October 19, 2021, Item #12 ( c) The Authority will not take or permit any action to be taken which results in the interest that is paid for the installment purchase of the 2021 Project under the terms of this Installment Purchase Agreement being included in the gross income of the Authority or its assigns for purposes of federal or State of California personal income taxation. ARTICLE III ACQUISITION OF 2021 PROJECT Section 3.01. Acquisition and Construction of the 2021 Project. The Authority hereby agrees to cause the 2021 Project, and any additions or modifications thereto, to be constructed, acquired or installed by the City as its agent, and the City shall enter into contracts and provide for, as agent of the Authority, the complete acquisition of the 2021 Project. The City hereby agrees that it will cause the construction, acquisition and installation of the 2021 Project to be diligently performed after the deposit of funds with the City. pursuant to the Indenture, upon satisfactory completion of design work and compliance with the California Environmental Quality Act and approval by the City Council of the City, unforeseeable delays beyond the reasonable control of the City only excepted. It is hereby expressly understood and agreed that the Authority shall be under no liability of any kind or character whatsoever for the payment of any cost of the 2021 Project and that all such costs and expenses shall be paid by the City, regardless of whether the funds deposited in the Acquisition Fund are sufficient to cover all such costs and expenses. Section 3 .02. Changes to the 2021 Project. The City may substitute other improvements for those listed as components of the 2021 Project in Exhibit A, but only if the City first files with the Trustee a statement of the City in the form set forth in Exhibit D. Section 3 .03. Purchase and Sale of the 2021 Project. In consideration for the Series 2021 Installment Payments as set forth in Section 4.02, the Authority agrees to sell, and hereby sells, to the City, and the City agrees to purchase, and hereby purchases, from the Authority, the 2021 Project at the purchase price specified in Section 4.01 hereof and otherwise in the manner and in accordance with the provisions of this Installment Purchase Agreement. Section 3 .04. Title. All right, title and interest in each component of the 2021 Project shall vest in the City immediately upon acquisition or construction thereof. Such vesting shall occur without further action by the Authority or the City, and the Authority shall, if requested by the City or if necessary to assure such automatic vesting, deliver any and all documents which are required to assure such vesting. Section 3.05. Acquisition Fund. There is hereby established with the City a fund known as the "Acquisition Fund," which the City shall maintain and hold in trust separate and apart from other funds held by it. The moneys in the Acquisition Fund shall be applied to the payment of the costs of acquisition of the 2021 Project and of expenses incidental thereto. Before any payment is made from the Acquisition Fund, the City Manager shall cause to be filed with the Director of Finance of the City a Written Requisition in the form set forth in Exhibit C. Upon receipt of such Written Requisition, the Director of Finance will pay the amount set forth therein. The Director of Finance need not make any such payment if he or she has received notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys so to be paid, which has not been released and will not be released simultaneously with such payment. 4815-4294-6296v4/022468-0020 79 of 228 7 October 19, 2021, Item #12 When the 2021 Project shall have been constructed and acquired in accordance with this Installment Purchase Agreement, a statement of the City stating the fact and date of such acquisition, construction and acceptance and stating that all of such costs of acquisition and incidental expenses have been determined and paid ( or that all of such costs and expenses have been paid less specified claims which are subject to dispute and for which a retention in the Acquisition Fund is to be maintained in the full amount of such claims until such dispute is resolved), shall be delivered to the Director of Finance of the City and the Trustee by the City Manager. Upon the receipt of such statement, the Director of Finance of the City shall transfer any remaining balance in the Acquisition Fund not needed for Acquisition Fund purposes (but less the amount of any such retention, which amount shall be certified to the Director of Finance of the City by the City Manager) to the Trustee, which shall transfer such amounts to the Revenue Fund. ARTICLE IV SERIES 2021 INSTALLMENT PAYMENTS Section 4.01. Purchase Price. (a) The Purchase Price to be paid by the City hereunder to the Authority is the sum of the principal amount of the City's obligations hereunder plus the interest to accrue on the unpaid balance of such principal amount from the effective date hereof over the term hereof, subject to prepayment as provided in Article VII. (b) Exhibit B. The principal amount of the payments to be made by the City hereunder is set forth in ( c) The interest to accrue on the unpaid balance of such principal amount is as specified in Section 4.02 and Exhibit B, and shall be paid by the City as and constitute interest paid on the principal amount of the City's obligations hereunder. Section 4.02. Series 2021 Installment Payments. The City shall, subject to its rights of prepayment provided in Article VII, pay the Authority the Purchase Price in installment payments of interest and principal in the amounts and on the Series 2021 Installment Payment Dates as set forth in Exhibit B. Each Series 2021 Installment Payment shall be paid to the Authority in lawful money of the United States of America. In the event that the City fails to make any of the payments which are required to be made by it under this section, such payment shall continue as an obligation of the City until such amount shall have been fully paid, and the City agrees to pay the same with interest accruing thereon at the rate or rates of interest then applicable to the remaining unpaid principal balance of the Series 2021 Installment Payments if paid in accordance with their terms. The obligation of the City to make the Series 2021 Installment Payments 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 Series 2021 Installment Payment which is required to be made by it under this section when due, whether or not the Water System or any part thereof is operating or operable or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and whether or not the 2021 Project has been completed, and such payments shall not be subject to reduction whether by 4815-4294-6296v4/022468-0020 80 of 228 8 October 19, 2021, Item #12 offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. ARTICLE V SECURITY Section 5.01. Pledge of Revenues. The Revenues, other amounts that are on deposit in the Revenue Fund and any other amounts ( including proceeds of the sale of the 2021 Bonds) which are held in any fund or account that is established pursuant to the Installment Purchase Agreement (including the Rate Stabilization Fund) are irrevocably pledged to the payment of the Series 2021 Installment Payments. Except for the payment of the Operation and Maintenance Costs, the Revenues shall not be used for any other purpose while any of the Series 2021 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted herein. This pledge shall constitute a first lien on Revenues, the Revenue Fund, the Rate Stabilization Fund and the other funds and accounts that are created hereunder for the payment of the Series 2021 Installment Payments and all other Contracts and Bonds in accordance with the terms hereof and of the Indenture. Section 5.02. Allocation of Revenues. In order to carry out and effectuate the pledge and lien contained herein, the City agrees and covenants that all Revenues shall be received by the City in trust hereunder and shall be deposited when and as received in a special fund designated as the "Revenue Fund," which fund is hereby created and which fund the City agrees and covenants to maintain and to hold separate and apart from other funds so long as any Contracts or Bonds remain unpaid. Moneys in the Revenue Fund shall be used and applied by the City as provided in this Installment Purchase Agreement. The City shall, from the moneys in the Revenue Fund, pay all Operation and Maintenance Costs (including amounts which are reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as they become due and payable. All remaining moneys in the Revenue Fund shall be set aside by the City at the following times in the following respective special funds in the following order of priority, and all moneys in each of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this section: (a) Bond Payment Fund. On or before each Series 2021 Installment Payment Date, the City shall, from remaining moneys in the Revenue Fund, transfer to the Trustee for deposit in the Bond Payment Fund an amount that is equal to the interest and principal payable and coming due on the 2021 Bonds on the next succeeding Interest Payment Date. The City shall also, from the moneys in the Revenue Fund, transfer to the applicable trustee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of the Contract, Bond, resolution or indenture relating thereto. Any moneys which are on deposit in the Bond Payment Fund on each Series 2021 Installment Payment Date ( other than amounts that are required for the payment of past due principal or interest with respect to any 2021 Bonds not presented for payment) shall be credited to the payment of the Series 2021 Installment Payments due and payable on such date. No deposit need be made in the Bond Payment Fund as Series 2021 Installment Payments if the amount in the Bond 4815-4294-6296v4/022468-0020 81 of 228 9 October 19, 2021, Item #12 Payment Fund is at least equal to the amount of the Series 2021 Installment Payment that is due and payable on the next succeeding Series 2021 Installment Payment Date. (b) Reserve Funds. On or before each Series 2021 Installment Payment Date, the City shall, from remaining moneys in the Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustee for deposit to reserve funds or accounts established for Bonds or Contracts an amount that is equal to the amount required to be deposited therein. (c) Surplus. Moneys on deposit in the Revenue Fund which are not necessary to make any of the payments which are required above may be expended by the City at any time for any purpose permitted by law, including but not limited to transfers to the Rate Stabilization Fund. Section 5.03. Additional Contracts and Bonds. The City may at any time issue any Bonds or execute any Contract, as the case may be, in accordance herewith; provided that: (a) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, shall have produced a sum equal to at least one hundred twenty percent (120%) of the Debt Service for such Fiscal Year or consecutive 12 month period; and (b) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year or consecutive 12 month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, shall have produced a sum equal to at least one hundred twenty percent ( 120%) of: (i) the Debt Service for such Fiscal Year or consecutive 12 month period; plus (ii) the Debt Service which would have accrued on any then-outstanding Bonds which were issued or any then-outstanding Contracts which were executed since the end of such audited Fiscal Year or consecutive 12 month period, assuming that such Bonds or Contracts had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period; plus (iii) the Debt Service which would have accrued on the proposed additional Bonds or the proposed additional Contract, assuming that such proposed additional Bonds or proposed additional Contract had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period. Notwithstanding the foregoing, Bonds issued or Contracts executed to refund outstanding Bonds or to prepay outstanding Contracts may be delivered without satisfying the conditions set forth above if total Debt Service after such Bonds are issued or Contracts executed is not greater than the total Debt Service which would have been payable prior to the issuance of such Bonds or execution of such Contracts. 4815-4294-6296v4/022468-0020 82 of 228 October 19, 2021, Item #12 Section 5.04. Investments. All moneys which are held by the City in the Revenue Fund, the Rate Stabilization Fund and the Acquisition Fund shall be invested in Permitted Investments, and the investment earnings thereon shall remain on deposit in such fund, except as otherwise provided herein. Section 5.05. Rate Stabilization Fund. There is hereby established with the City a fund to be known as the "Rate Stabilization Fund." The City hereby agrees and covenants to maintain, so long as any 2021 Bonds remain outstanding, the Rate Stabilization Fund. There is $0 on deposit in the Rate Stabilization Fund as of the date of the initial issuance of the 2021 Bonds. The City may deposit amounts therein from time to time in its sole discretion. Amounts in the Rate Stabilization Fund shall be disbursed, allocated and applied by the City solely to the uses and purposes hereinafter described in this Installment Purchase Agreement, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the City. The Rate Stabilization Fund and all amounts on deposit therein are hereby irrevocably pledged to the payment of the Bonds and Contracts as provided herein; provided that amounts on deposit in the Rate Stabilization Fund may be apportioned for such purposes as are expressly permitted herein. This pledge shall constitute a first lien on amounts on deposit in the Rate Stabilization Fund for the payment of Contracts and Bonds in accordance with the terms hereof. The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with Section 5.02 hereof. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to this Section during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations in Sections 5.03 and 6.14 in such Fiscal Year to the extent provided in the definition of "Revenues" in Section 1.01. ARTICLE VI COVENANTS OF THE CITY Section 6.01. Compliance with Installment Purchase Agreement and Ancillary Agreements. The City will punctually pay the Series 2021 Installment Payments in strict conformity with the terms hereof, and will faithfully observe and perform all of the agreements, conditions, covenants and terms contained herein which are 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 2021 Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of California or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term which is contained herein and 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. 48 l 5-4294-6296v4/022468-0020 83 of 228 11 October 19, 2021, Item #12 The City will faithfully observe and perform all of the agreements, conditions, covenants and terms which are required to be observed and performed by it pursuant to all outstanding Contracts and Bonds as such may from time to time be executed or issued, as the case may be. Section 6.02. Against Encumbrances. The City will not make any pledge of or place any lien on Revenues or the moneys in the Revenue Fund or the Rate Stabilization Fund except as provided herein. In addition, the City may at any time, or from time to time, issue evidences of indebtedness or incur other obligations for any lawful purpose which are payable from and secured by a pledge of and lien on Revenues or any moneys in the Revenue Fund as may from time to time be deposited therein (as provided in Section 5.02), provided that such pledge and lien shall be subordinate in all respects to the pledge of and lien thereon provided herein. Section 6.03. Against Sale or Other Disposition of Property. The City will not enter into any agreement or lease which impairs the operation of the Water System or any part thereof which is necessary to secure adequate Revenues for the payment of the Series 2021 Installment Payments, or which would otherwise impair the rights of the Authority hereunder 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 impair the ability of the City to pay the Series 2021 Installment Payments and if the proceeds of such sale are deposited in the Revenue Fund. Nothing herein shall restrict the ability of the City to sell any portion of the Water System if such portion is immediately repurchased by the City and if such arrangement cannot by its terms result in the purchaser of such portion of the Water System exercising any remedy which would deprive the City of or otherwise interfere with its right to own and operate such portion of the Water System. Section 6.04. Against Competitive Facilities. The City will not, to the extent permitted by law, acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, 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 6.05. Tax Covenants. Notwithstanding any other prov1s1on of the Installment Purchase Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of the interest on the 2021 Bonds will not be adversely affected for federal income tax purposes, the City covenants to comply with all applicable requirements of the Code which are necessary to preserve such exclusion from gross income with respect to the 2021 Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The City will take no action and refrain from taking any action, and the City will make no use of the proceeds of the 2021 Bonds or of any other moneys or property, which would cause the 2021 Bonds to be "private activity bonds" within the meaning of Section 141 of the Code; (b) Arbitrage. The City will make no use of the proceeds of the 2021 Bonds or of any other amounts or property, regardless of the source, and the City will not take any action or refrain from taking any action, which will cause the 2021 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; 4815-4294-6296v4/022468-0020 84 of 228 12 October 19, 2021, Item #12 (c) Federal Guarantee. The City will make no use of the proceeds of the 2021 Bonds, and the City will not take or omit to take any action, that would cause the 2021 Bonds to be "federally guaranteed" within the meaning of Section l 49(b) of the Code; ( d) Information Reporting. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149( e) of the Code which is necessary to preserve the exclusion of interest on the 2021 Bonds pursuant to Section 103(a) of the Code; ( e) Hedge Bonds. The City will make no use of the proceeds of the 2021 Bonds or any other amounts or property, regardless of the source, and the City will not take any action and refrain from taking any action, that would cause the 2021 Bonds to be considered "hedge bonds" within the meaning of Section l 49(g) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section l 49(g) of the Code to maintain the exclusion from gross income of interest on the 2021 Bonds for federal income tax purposes; and (f) Miscellaneous. The City will not take any action or refrain from taking any action which is inconsistent with its expectations stated in the Tax Certificate executed by the City in connection with the issuance of the 2021 Bonds and will comply with the covenants and requirements that are stated therein and incorporated by reference herein. This section and the covenants that are set forth herein shall not be applicable to, and nothing that is contained herein shall be deemed to prevent the City from causing the Authority to issue revenue bonds or issuing bonds or executing and delivering contracts that are payable on a parity with the 2021 Bonds, the interest with respect to which has been determined to be subject to federal income taxation. Section 6.06. [Reserved]. Section 6.07. Maintenance and Operation of the Water System. The City will maintain and preserve the Water System in good repair and working order at all times, operate the Water System in an efficient and economical manner and pay all Operation and Maintenance Costs as they become due and payable. Section 6.08. 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 Revenues or the funds or accounts created hereunder or under the Indenture or on any funds in the hands of the City which are pledged to pay the Series 2021 Installment Payments or the Bonds, or which might impair the security of the Series 2021 Installment Payments. Section 6.09. Compliance with Contracts. The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, which are 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 .10. Insurance. (a) The City will procure and maintain or cause to be procured and maintained insurance on the Water System, excluding coverage for earthquake damage or destruction, with responsible 4815-4294-6296v4/022468-0020 85 of 228 13 October 19, 2021, Item #12 insurers in such amounts and against such risks (including accident to or destruction of the Water System) as are usually covered in connection with facilities that are similar to the Water System, so long as such insurance is available at reasonable rates. In the event of any damage to or destruction of the Water System caused by the perils covered by such 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. The City covenants to reconstruct, repair or replace the damaged or destroyed portions of the Water System promptly if a failure to reconstruct, repair or replace such portions would impair or adversely affect the ability of the City to pay the Series 2021 Installment Payments. (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 municipal water systems similar to the Water System. (c) Any insurance that is required to be maintained by paragraph (a) above and, if the City determines to procure and maintain insurance pursuant to paragraph (b) above, 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 which are required to be maintained herein shall provide that the Authority or its assignee shall be given thirty (30) days' written notice of any intended cancellation thereof or reduction of coverage provided thereby. Annually on or before September 1 in each year, the Authority shall provide the Trustee with a Certificate stating that the City is in full compliance with the provisions of this section. The Trustee is entitled to rely on any such Certificate as to the City's compliance with these provisions, and the Trustee has no further duties in that regard. Section 6.11. 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 or its assignee, annually within two hundred seventy (270) days after the close of each Fiscal Year ( commencing with the Fiscal Year end[ ed] June 30, [2021]) financial statements of the City for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant's Report thereon. The Trustee shall have no obligation to review any such financial statements. 4815-4294-6296v4/022468-0020 86 of 228 14 October 19, 2021, Item #12 Section 6.12. 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 Series 2021 Installment Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. Section 6.13. Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Water System or any part thereof, or upon the 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 6.14. Amount of Rates and Charges. (a) The City shall, to the fullest extent permitted by law, fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to one hundred twenty percent (120%) of the Debt Service in such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the requirements of this section. (b) So long as the City has complied with its obligations set forth in subsection (a) above, the failure of Net Revenues to meet the thresholds set forth in subsection (a) above shall not constitute a default or an Event of Default hereunder or under the Indenture. Section 6.15. Collection of Rates and Charges. The City will have in effect at all times bylaws, rules and regulations requiring each customer to pay the rates and charges applicable to the Water Service to such customer's land and providing for the billing thereof and for a due date and a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the City may discontinue such service from the Water System, and such service shall not thereafter be recommenced except in accordance with City bylaws or rules, regulations and the laws of the State of California governing such situations of delinquency. Section 6.16. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds thereof shall be applied either to additions, betterments, extensions or improvements to the Water System or, if the City elects not to apply such Net Proceeds to such capital items or if such Net Proceeds are not fully expended for such purposes, such Net Proceeds which are not required by the City for such purposes will be deposited in the Revenue Fund. Section 6.17. 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. 4815-4 294-6296v4/022468-0020 87 of 228 15 October 19, 2021, Item #12 Section 6.18. Enforcement of Contracts. So long as any of the 2021 Bonds are outstanding, the City will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or hereafter entered into if such rescission or amendment would in any manner impair or adversely affect the ability of the City to pay principal of and interest on the 2021 Bonds. Section 6.19. Continued Existence of Authority. The City and the Authority will take or cause to be taken all actions reasonably necessary to continue the Authority's existence until such time as the 2021 Bonds are no longer Outstanding under the Indenture, including but not limited to the addition of one or more new members to the Authority and execution of the JPA Agreement pursuant to which the Authority was created by such new members. ARTICLE VII PREPAYMENT OF SERIES 2021 INSTALLMENT PAYMENTS Section 7.01. Prepayment. (a) The City may prepay the Series 2021 Installment Payments as a whole, or in part, on the Business Day prior to __ 1, 20 _ or any date thereafter in the order of payment date as directed by the City, at a prepayment price equal to the principal amount of the Series 2021 Installment Payments to be prepaid, together with accrued interest thereon to the date of prepayment, without premium. (b) Notwithstanding any such prepayment, the City shall not be relieved of its obligations hereunder, including its obligations under Article IV, until the Purchase Price shall have been fully paid ( or provision for payment thereof shall have been provided to the written satisfaction of the Authority). Section 7.02. Method of Prepayment. Before making any prepayment pursuant to Section 7.01, the City shall, within five ( 5) days following the event permitting the exercise of such right to prepay or creating such obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be paid, which date shall be not less than sixty ( 60) ( or such shorter number of days as is acceptable to the Trustee) days from the date that such notice is given. 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: (a) if default shall be made by the City in the due and punctual payment of any Series 2021 Installment Payment or any Contract or Bond when and as the same shall become due and payable; (b) if default shall be made by the City in the performance of any of the agreements or covenants which are required herein to be performed by it, and such default shall have continued for 4815-4294-6296v4/022468-0020 88 of 228 16 October 19, 2021, Item #12 a period of sixty ( 60) days after the City shall have been given notice in writing of such default by the Authority; provided, however, that if in the reasonable opinion of the City the default stated in the notice can be corrected, but not within such sixty (60) day period, and corrective action is instituted by the City within such sixty ( 60) day period and diligently pursued in good faith until the default is corrected, such default shall not be an Event of Default hereunder; ( c) 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; or ( d) if payment of the principal of any Contract or Bond is accelerated in accordance with its terms; then and in each and every such case during the continuance of an Event of Default, the Authority shall, by notice in writing to the City, declare the entire principal amount of the unpaid Series 2021 Installment Payments 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. This section, however, is subject to the condition that if at any time after the entire principal amount of the unpaid Series 2021 Installment Payments and the accrued interest thereon shall have been so declared due and payable, but 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 an amount that is sufficient to pay the unpaid principal amount of the Series 2021 Installment Payments or the unpaid payment of any other Contract or Bond referred to in clause (a) above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments, at the rate or rates applicable to the remaining unpaid principal balance of the Series 2021 Installment Payments or such Contract or Bond if paid 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 Series 2021 Installment Payments 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 affect any subsequent default or impair or exhaust any right or power consequent thereon. Section 8.02. Application of Funds Upon Acceleration. Upon the date of the declaration of acceleration as provided in Section 8.01, all Revenues thereafter received by the City shall be applied in the following order: First, to the payment, without preference or priority, and in the event of any insufficiency of such Revenues ratably without any discrimination or preference, of the fees, costs and expenses of the Trustee and its assigns and thereafter to the Authority, as the case may be, in carrying out the provisions of this article, including reasonable compensation to their respective accountants and counsel; 48 l 5-4294-6296v4/022468-0020 89 of 228 17 October 19, 2021, Item #12 Second, to the payment of the Operation and Maintenance Costs; and Third, to the payment, on a pro rata basis, of the entire principal amount of the unpaid Series 2021 Installment Payments and the unpaid principal amount of all Bonds and Contracts and the accrued interest thereon, with interest on the overdue installments at the rate or rates of interest applicable to the Series 2021 Installment Payments and such Bonds and Contracts if paid in accordance with their respective terms. Section 8.03. Other Remedies of the Authority. The Authority shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the City or any director, officer or employee thereof, and to compel the City or any such director, officer or employee to perform and carry out its or his or her duties under the laws of the State of California and the agreements and covenants required to be performed by it or him or her 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 directors, officers and employees to account as the trustee of an express trust. Notwithstanding anything contained herein, the Authority shall have no security interest in or mortgage on the 2021 Project, the Water System or other assets of the City and no default hereunder shall result in the loss of the 2021 Project, the Water System or other assets of the City. 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 Series 2021 Installment Payments to the Authority at the respective due dates or upon prepayment from the Net Revenues, the Revenue Fund, the Rate Stabilization Fund and the other funds herein pledged 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 em bodied 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 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 that is conferred upon the Authority by the laws of the State of California 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 that is conferred upon or reserved to the Authority herein 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 4815-4294-6296v4/022468-0020 90 of 228 18 October 19, 2021, Item #12 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 the laws of the State of California or any other law. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.01. Discharge of Obligations. When: (a) all or any portion of the Series 2021 Installment Payments shall have become due and payable in accordance herewith or a written notice of the City to prepay all or any portion of the Series 2021 Installment Payments shall have been filed with the Trustee; and (b) there shall have been deposited with the Trustee at or prior to the Series 2021 Installment Payment Date or dates specified for prepayment, in trust for the benefit of the Authority or its assigns and irrevocably appropriated and set aside to the payment of all or any portion of the Series 2021 Installment Payments, sufficient moneys or a combination of sufficient cash and non-callable Permitted Investments that are described in clause (A) of the definition thereof, the principal of and interest on which Permitted Investments when due will provide (together with any cash) money that is sufficient in the opinion of an Independent Certified Public Accountant to pay all principal, prepayment premium, if any, and interest of such Series 2021 Installment Payments to their respective Series 2021 Installment Payment Dates, as the case may be; and ( c) provision shall have been made for paying all fees and expenses of the Trustee, then and in that event, the right, title and interest of the Authority herein and the obligations of the City hereunder shall, with respect to all or such portion of the Series 2021 Installment Payments as have been so provided for, thereupon cease, terminate, become void and be completely discharged and satisfied ( except for the right of the Trustee and the obligation of the City to have such moneys and such Permitted Investments applied to the payment of such Series 2021 Installment Payments). In such event, upon request of the City, the Trustee shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and shall execute and deliver to the City all such instruments as may be necessary or desirable to evidence such total or partial discharge and satisfaction, as the case may be, and, in the event of a total discharge and satisfaction, the Trustee shall pay over to the City, after payment of all amounts due the Trustee pursuant to the Indenture, as an overpayment of Series 2021 Installment Payments, all such moneys or such Permitted Investments held by it pursuant hereto, other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Series 2021 Installment Payments, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the payment of the Series 2021 Installment Payments and shall be applied by the Trustee to the payment of the Series 2021 Installment Payments of the City. ARTICLEX MISCELLANEOUS Section 10.01. Liability Limited. Notwithstanding anything contained herein, the City shall not be required to advance any moneys derived from any source of income other than the Revenues, the Revenue Fund, the Rate Stabilization Fund and the other funds provided herein for the payment 4815-4294-6296v4/022468-0020 91 of 228 19 October 19, 2021, Item #12 of amounts due hereunder or for the performance of any agreements or covenants that are required to be performed by it contained herein. The City may, however, 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 Series 2021 Installment Payments is a special obligation of the City payable from the Net Revenues and does not constitute a debt of the City or of the State of California or of any political subdivision thereof in contravention 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 and the Authority any right, remedy or claim under or pursuant hereto, and any agreement or covenant that is 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. Successor Is Deemed Included in all References to Predecessor. 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 which are 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 10.04. Waiver of Personal Liability. No member, officer or employee of the City shall be individually or personally liable for the payment of the Series 2021 Installment Payments, but nothing contained herein shall relieve any member, officer or employee of the City from the performance of any official duty provided by any applicable provisions of law or hereby. Section 10.05. 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 subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof and the words "hereby," "herein," "hereof," "hereto," "herewith" and other words of similar import refer to the Installment Purchase Agreement as a whole and not to any particular article, section, subdivision or clause hereof. 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. The City and the Authority hereby declare that they would have executed the Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof 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. 4815-4294-6296v4/022468-0020 92 of 228 20 October 19, 2021, Item #12 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. In addition to the rights and remedies assigned by the Authority to the Trustee, to the extent that the Indenture and the Installment Purchase Agreement confer upon or give or grant to the Trustee any right, remedy or claim under or by reason of the Indenture or the Installment Purchase Agreement, the Trustee is hereby explicitly recognized as being a third party beneficiary hereunder and may enforce any such right, remedy or claim conferred given or granted. 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 Series 2021 Installment Payments and all other payments required hereunder, free of any deductions and without abatement, diminution or set-off whatsoever. Section 10.09. California Law. THE INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.10. Notices. All written notices to be given hereunder shall be given by mail 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: If to the Authority: If to the Trustee: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager Poway Public Financing Authority 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Reference: Poway 2021 Water Revenue Bonds Section 10.11. Effective Date. The Installment Purchase Agreement shall become effective upon its execution and delivery, and shall terminate when the Purchase Price shall have been fully paid ( or provision for the payment thereof shall have been made to the written satisfaction of the Authority). Section 10.12. Execution in Counterparts. The Installment Purchase Agreement 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. Section 10.13. Indemnification of Authority. The City hereby agrees to indemnify and hold harmless the Authority and its assigns and its officers and directors if and to the extent permitted by law, from and against all claims, advances, damages and losses, including legal fees and expenses, 4815-4 294-6296v4/022468-0020 93 of 228 21 October 19, 2021, Item #12 arising out of or in connection with the acceptance or the performance of its duties hereunder and under the Indenture; provided that no indemnification will be made for willful misconduct, negligence or breach of an obligation hereunder or under the Indenture by the Authority. Section 10.14. Amendments Permitted. (a) This Installment Purchase Agreement and the rights and obligations of the Authority and the City and of the Owners of the 2021 Bonds and of the Trustee may be modified or amended at any time by an amendment hereto which shall become binding upon the written consents of the Owners of a majority in aggregate principal amount of the 2021 Bonds then Outstanding, exclusive of 2021 Bonds disqualified as provided in Section 11.09 of the Indenture. No such modification or amendment may: ( 1) extend the fixed maturity of any 2021 Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each 2021 Bond so affected; or (2) reduce the aforesaid percentage of 2021 Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Installment Purchase Agreement prior to or on a parity with the lien created by the Installment Purchase Agreement except as permitted herein, or deprive the Owners of the 2021 Bonds of the lien created by the Indenture on such Revenues and other assets except as permitted herein, without the consent of the Owners of all of the 2021 Bonds then Outstanding. (b) This Installment Purchase Agreement and the rights and obligations of the Authority and the City and of the Owners of the 2021 Bonds may also be modified or amended at any time by an amendment hereto which shall become binding upon adoption, without the consent of the Owners of any 2021 Bonds, but only to the extent permitted by law and only for any one or more of the following purposes: ( 1) to add to the covenants and agreements of the City contained in the Installment Purchase Agreement other covenants and agreements thereafter to be observed, to pledge or assign additional security for the 2021 Bonds ( or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the City; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Installment Purchase Agreement, or in regard to matters or questions arising under the Installment Purchase Agreement, as the City may deem necessary or desirable; and (3) to modify, amend or supplement the Installment Purchase Agreement in such manner as to cause interest on the 2021 Bonds to remain excludable from gross income under the Code. No amendment without consent of the Owners may modify any of the rights or obligations of the Trustee without the written consent thereto. [RE:MAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 4815-4294-6296v4/022468-0020 94 of 228 22 October 19, 2021, Item #12 IN WITNESS WHEREOF, the parties hereto have executed and attested this Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST: City Clerk ATTEST: Secretary 4815-4294-6296v4/022468-0020 95 of 228 CITY OF POWAY By: Mayor POWAY PUBLIC FINANCING AUTHORITY By: Chair S-1 October 19, 2021, Item #12 EXHIBIT A DESCRIPTION OF THE 2021 PROJECT Clearwell Bypass Project Planning, Design and Construction of Temporary Steel Tanks for Water Storage Planning, Design and Installation of Temporary Pump Station to Pump Water to Temporary Steel Tanks at a Higher Elevation Planning Design and Installation of Pipelines and a Pressure Reducing Station to Convey Flow and Reduce Pressure Other Miscellaneous Capital Improvements Associated with Clearwell Bypass in order to enable Construction ofNew Clearwell Study, Design and Planning Costs Associated with Decommissioning of Existing Clearwell and Construction ofNew Clearwell Total Estimated Capital Cost: $14,800,000 4815-4294-6296v4/022468-0020 96 of 228 A-1 October 19, 2021, Item #12 EXHIBITB PURCHASE PRICE 1. The principal amount of payments to be made by the City hereunder is $ __ . 2. The Series 2021 Installment Payments of principal and interest are payable in the amounts and on the Series 2021 Installment Payment Dates as follows: Series 2021 Installment Payment Amount Amount Date (Business Day Attributable to Attributable to Prior to) Principal Interest 6/1/2022 $ $ 12/1/2022 6/1/2023 12/1/2023 6/1/2024 12/1/2024 6/1/2025 12/1/2025 6/1/2026 12/1/2026 6/1/2027 12/1/2027 6/1/2028 12/1/2028 6/1/2029 12/1/2029 6/1/2030 12/1/2030 6/1/2031 12/1/2031 6/1/2032 12/1/2032 6/1/2033 12/1/2033 6/1/2034 12/1/2034 6/1/2035 12/1/2035 6/1/2036 12/1/2036 6/1/2037 12/1/2037 6/1/2038 12/1/2038 6/1/2039 12/1/2039 6/1/2040 12/1/2040 6/1/2041 12/1/2041 4815-4294-6296v4/022468-0020 97 of 228 B-1 Total $ October 19, 2021, Item #12 Series 2021 Installment Payment Date (Business Day Prior to) TOTAL 4815-4294-6296v4/022468-0020 98 of 228 Amount Attributable to Principal $ B-2 Amount Attributable to Interest $ Total $ October 19, 2021, Item #12 EXHIBIT C FORM OF REQUISITION FROM ACQUISITION FUND $ __ POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A REQUISITION NO. _ FOR DISBURSEMENT FROM ACQUISITION FUND The undersigned hereby states and certifies: (i) that the undersigned is the duly appointed, qualified and acting City Manager of the City of Poway, a municipal corporation that is organized and existing under the general laws of the State of California (the "City"), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that, pursuant to Section 3.05 of that certain Installment Purchase Agreement, dated as of November 1, 2021 (the "IPA"), by and between the City and the Poway Public Financing Authority, the undersigned hereby requests the Director of Finance of the City to disburse this date the following amounts from the Acquisition Fund established under the IP A to the payees designated on the attached Exhibit A; (iii) that each obligation mentioned herein has been incurred by the City and is a proper charge against the Acquisition Fund; (iv) that any approval required under the California Environmental Quality Act, as amended (Division 13 of the California Public Resources Code), prior to the expenditure of such amount for the purpose set forth on the attached Exhibit A has been received and is final; and (v) that there has not been filed with or served upon the City notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on the attached Exhibit A, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen's or mechanics' liens accruing by mere operation of law. Dated: 20 _________ ...._ __ 4815-4294-6296v4/022468-0020 99 of 228 CITY OF POWAY By: City Manager C-1 October 19, 2021, Item #12 EXHIBIT A ACQUISITION FUND DISBURSEMENTS Item Number Payee Name and Address Purpose of Obligation 4815-4294-6296v4/022468-0020 100 of 228 C-2 Amount October 19, 2021, Item #12 EXHIBITD FORM OF SUBSTITUTION STATEMENT U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Reference: Poway 2021 Water Revenue Bonds The undersigned ___ of the City of Poway (the "City") hereby states pursuant to Section 3.02 of the Installment Purchase Agreement, dated as of November 1, 2021 (the "IPA"), by and between the City and the Poway Public Financing Authority, that each component of the 2021 Project (as such term is defined in the IPA) described in the first column of Exhibit A attached hereto, with an estimated cost set forth in the second column of Exhibit A, will be replaced by the corresponding improvement described in the third column of Exhibit A with an estimated cost set forth in the fourth column of Exhibit A. Dated: ,20_ 48 l 5-4294-6296v4/022468-0020 101 of 228 D-1 October 19, 2021, Item #12 Components of 2021 Project to be Replaced 48 l 5-4294-6296v4/022468-0020 102 of 228 EXHIBIT A Cost of Each Component of 2021 Project to be Replaced D-2 Improvements to be Substituted Cost of Each Improvement to be Substituted October 19, 2021, Item #12 $[PAR] POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A BOND PURCHASE AGREEMENT Poway Public Financing Authority 13325 Civic Center Drive Poway, California 92064 City of Poway 13325 Civic Center Drive Poway, California 92064 Ladies and Gentlemen: [Pricing Date] Jones Hall Draft 9-16-2021 Stifel, Nicolaus & Company, Incorporated (the "Underwriter") offers to enter into this Bond Purchase Agreement (this "Purchase Agreement") with the Poway Public Financing Authority (the "Authority") and the City of Poway (the "City"). This offer is made subject to the Authority's and the City's acceptance by execution of this Purchase Agreement and delivery of the same to the Underwriter on or before 11 :59 p.m. Pacific Standard Time on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Authority and the City at any time prior to such acceptance. Upon the Authority's and the City's acceptance hereof, the Purchase Agreement will be binding upon the Authority, the City and the Underwriter. The Authority and the City acknowledge and agree that: (i) the purchase and sale of the Bonds (as hereinafter defined) pursuant to this Purchase Agreement 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 and has been acting solely as principal and is not acting as agent or Municipal Advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and has not assumed any advisory or fiduciary responsibility in favor of the Authority or the City with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter has advised or is currently advising the Authority or the City on other matters); (iii) the only obligations the Underwriter has to the Authority and the City with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement; (iv) the Authority and the City have consulted their own legal, financial, accounting, tax and other advisors to the extent each has deemed appropriate; (v) the Underwriter has financial interests that differ from and may be adverse to those of the City and the Authority; and (vi) the Underwriter has provided the Authority and the City with certain disclosures required under the rules of the Municipal Securities Rulemaking Board (the "MSRB"). The Authority and the City acknowledge and represent that they have engaged Fieldman, Rolapp & Associates, Inc. (the "Municipal Advisor") as their municipal advisor (as defined in Securities and Exchange Commission Rule l 5Ba 1) and will rely on the financial advice of the Municipal Advisor with respect to the Bonds. 103 of 228 ATTACHMENT E October 19, 2021, Item #12 Capitalized terms used in this Purchase Agreement and not otherwise defined herein will have the respective meanings set forth for such terms in the Indenture ( as hereinafter defined). Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations set forth in this Purchase Agreement, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell and deliver to the Underwriter, all (but not less than all) of the Authority's Water Revenue Bonds, Series 2021A (the "Bonds") at a purchase price of $ _____ (being an amount equal to the principal amount of the Bonds ($[PAR].00),plus original issue premium of$ _____ , and less an underwriter's discount of $ ____ ~Series 2021. The obligation of the Underwriter to purchase, accept delivery of and pay for the Bonds will be conditioned on the sale and delivery of all of the Bonds by the Authority to the Underwriter at Closing (hereinafter defined). Section 2. Bond Terms; Purpose; Security. (a) Bond Terms and Authorization. The Bonds will be dated their date of delivery and will mature and bear interest as shown on Exhibit A. The Bonds will be as described in, and will be issued and secured under, an Indenture of Trust, dated as of November 1, 2021 (the "Indenture"), by and between the Authority and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are payable and subject to redemption as shown in Exhibit A. 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, the Authority Resolution (as hereinafter defined) and the City Resolution (as hereinafter defined). (b) Purpose. The Authority is issuing the Bonds to provide funds to: (i) finance certain capital improvements to the City's municipal water system (the "Water System"), and (ii) pay costs incurred in connection with the issuance of the Bonds. (c) Security. Under the Indenture, the Bonds will be secured by and payable from "Authority Revenues" and amounts on deposit in certain funds and accounts established by the Indenture. Authority Revenues includes installment payments (the "Series 2021 Installment Payments") received by the Authority or the Trustee pursuant to or with respect to an Installment Purchase Agreement, dated as of November 1, 2021 (the "Installment Purchase Agreement"), by and between the City and the Authority. Under the Installment Purchase Agreement, the Series 2021 Installment Payments are to be secured by an irrevocable pledge of "Revenues" (as defined therein) which generally consists ofrevenues of the City's Water System, as more particularly described in the Installment Purchase Agreement. Section 3. Public Offering. The Underwriter agrees to make an initial bona fide public offering of all of the Bonds, at not in excess of the initial public offering yields or prices set forth on Exhibit A. Following the initial public offering of the Bonds, the offering prices may be changed from time to time by the Underwriter, provided that the Underwriter shall not change any of the principal amounts or the interest rates set forth on Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The Bonds are subject to redemption as set forth in Exhibit A. Section 4. Official Statement; Continuing Disclosure. (a) The Authority and the City have delivered to the Underwriter the Preliminary Official Statement dated [POS Date] (the "Preliminary Official Statement") and will deliver to the Underwriter a final official statement dated the date of 2 104 of 228 October 19, 2021, Item #12 this Purchase Agreement (as amended and supplemented from time to time pursuant to Section 5(i) of this Purchase Agreement, the "Official Statement"). Subsequent to its receipt of the Authority's and the City's 15c2-12 Certificate, in substantially the form attached hereto as Exhibit B, deeming the Preliminary Official Statement final for purposes of Rule 15c2-12 of the Securities and Exchange Commission, as amended ("Rule 15c2-12"), the Underwriter has distributed copies of the Preliminary Official Statement. The Authority and the City hereby ratify the use by the Underwriter of the Preliminary Official Statement and authorize the Underwriter to use and distribute in printed and/or electronic format the Official Statement (including all information previously permitted to have been omitted by Rule l 5c2-12, and any supplements and amendments thereto as have been approved by the Authority and the City as evidenced by the execution and delivery of such document by an officer of the Authority and the City), the Indenture, the Installment Purchase Agreement, this Purchase Agreement, the Continuing Disclosure Agreement (hereinafter defined), and all information contained therein, and all other documents, certificates and written statements furnished by the Authority and the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the MSRB through the Electronic Municipal Marketplace Access website of the MSRB on or before the date of the Closing and otherwise to comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. The Authority and the City agree to deliver to the Underwriter as many copies of the Official Statement as the Underwriter will reasonably request as necessary to comply with paragraph (b )( 4) of Rule 15c2-12. The Authority and the City agree to deliver the final Official Statement within seven business days after the execution hereof, or such earlier date identified by the Underwriter to be necessary to allow the Underwriter to meet its obligations under Rule 15c2-12 and Rule G-32 of the MSRB. (b) The Underwriter agrees to: ( 1) provide the Authority with final pricing information on the Bonds on a timely basis prior to the Closing and (2) take any and all other actions necessary to comply with applicable Securities and Exchange Commission rules and MSRB rules governing the offering, sale and delivery of the Bonds to ultimate purchasers. ( c) In connection with issuance of the Bonds, and in order to assist the Underwriter with complying with the provisions of Rule l 5c2-l 2, the City will enter into a Continuing Disclosure Agreement (the "Continuing Disclosure Agreement") with U.S. Bank National Association, in its capacity as dissemination agent (in such capacity, the "Dissemination Agent"), under which the City will undertake to provide certain financial and operating data as required by Rule 15c2-12. The form of the Continuing Disclosure Agreement is attached as an appendix to the Preliminary Official Statement and will be attached as an appendix to the final Official Statement. Section 5. Representations, Warranties and Covenants of the Authority. The Authority hereby represents, warrants and agrees with the Underwriter that: (a) The Authority is a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "State") and has all necessary power and authority to adopt the Authority Resolution, to enter into and perform its duties under the Indenture, the Installment Purchase Agreement, and this Purchase Agreement (collectively, the "Authority Agreements") and, when executed and delivered by the respective parties thereto, each Authority Agreement will constitute legal, valid and binding obligation of the Authority enforceable in accordance with its respective terms. 3 105 of 228 October 19, 2021, Item #12 (b) The Board of Directors (the "Board") of the Authority has taken official action by a resolution adopted on [October 19, 2021] (the "Authority Resolution") adopted by a majority of the members of the Board at a regular meeting duly called, noticed and conducted, at which a quorum was present and acting throughout, authorizing the execution, delivery and due performance of the Authority Agreements and the Official Statement and the taking of any and all such action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated hereby. ( c) By all necessary official action, the Authority has duly authorized the preparation and delivery of the Preliminary Official Statement and the preparation, execution and delivery of the Official Statement, has duly authorized and approved the execution and delivery of, and the performance of its obligations under, the Bonds and the Authority Agreements, and the consummation by it of all other transactions contemplated by the Authority Resolution, the Authority Agreements, the Preliminary Official Statement and the Official Statement. When executed and delivered by the respective parties thereto, the Authority Agreements (assuming due authorization, execution and delivery by and enforceability against the other parties thereto) will be in full force and effect and each will constitute legal, valid and binding agreements or obligations of the Authority, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors rights generally, the application of equitable principles, the exercise of judicial discretion and the limitations on legal remedies against public entities in the State. ( d) The statements and information contained in the Official Statement relating to the Authority and the Bonds ( other than information relating to The Depository Trust Company ("DTC") and its book-entry only system) are correct and complete in all material respects, and the information contained in the Official Statement ( other than information relating to DTC and its book-entry only system) does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading. ( e) As of the date hereof, there is no action, suit, proceeding or investigation before or by any court, public board or body pending against the Authority or, to the best knowledge of the Authority, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the Authority, or the titles of its members or officers; (ii) in any way question or affect the validity or enforceability of Authority Agreements or the Bonds, or (iii) in any way question or affect the Authority Agreements or the transactions contemplated by the Authority Agreements, the Official Statement, or any other agreement or instrument to which the Authority is a party relating to the Bonds. (f) There is no consent, approval, authorization or other order of, or filing or registration with, or certification by, any regulatory authority having jurisdiction over the Authority required for the execution and delivery of this Purchase Agreement or the consummation by the Authority of the other transactions contemplated by the Official Statement or the Authority Agreements. (g) Any certificate signed by any official of the Authority authorized to do so will be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein. 4 106 of 228 October 19, 2021, Item #12 (h) Except as previously disclosed to the Underwriter, the Authority is not in default, and at no time has the Authority defaulted in any material respect, on any bond, note or other obligation for borrowed money or any agreement under which any such obligation is or was outstanding. (i) ( 1) If between the date of this Purchase Agreement and the date which is 25 days following the End of the Underwriting Period (as defined below), any event will occur which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority will immediately notify the Underwriter, 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 at its expense supplement or amend the Official Statement in a form and in a manner approved by the Underwriter. "End of the Underwriting Period" will mean the later of: (i) the date of the Closing, and (ii) the date the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public, provided that unless the Underwriter notifies the Authority on or prior to the date of the Closing that it retains, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public, the End of the Underwriting Period will be deemed to have occurred on the date of the Closing. (2) After the Closing, the Authority will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter reasonably objects in writing or which is disapproved by Underwriter's Counsel (hereinafter defined). If any event relating to or affecting the Authority occurs as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Authority will use its best efforts to assist the Underwriter in preparing (at the expense of the Authority for 90 days after the date of the Closing, and thereafter at the expense of the Underwriter) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an 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 existing at the time the Official Statement is delivered to a purchaser, not misleading. For the purposes of this subsection, the Authority will furnish such information with respect to itself as the Underwriter may from time to time reasonably request. (j) Except as disclosed in the Official Statement, the Authority has not previously failed to comply in all material respects with any undertakings under Rule l 5c2-l 2 during the past five years. Section 6. Representations, Warranties and Covenants of the City. The City hereby represents, warrants and agrees with the Underwriter that: (a) The City is a general law city and municipal corporation that is duly organized and existing under and by virtue of the Constitution and laws of the State and has all necessary power and authority to adopt its resolution adopted on [October 19, 2021] (the "City Resolution"), to enter into 5 107 of 228 October 19, 2021, Item #12 and perform its duties under the Installment Purchase Agreement, the Continuing Disclosure Agreement, and this Purchase Agreement ( collectively, the "City Agreements") and, when executed and delivered by the respective parties thereto, the City Agreements will constitute legal, valid and binding obligations of the City enforceable in accordance with their respective terms. (b) The city council (the "City Council") of the City has taken official action by adopting the City Resolution by a majority of the members of the City Council at a meeting duly called, noticed and conducted, at which a quorum was present and acting throughout, authorizing the execution, delivery and due performance of the City Agreements and the Official Statement and the taking of any and all such action as may be required on the part of the City to carry out, give effect to and consummate the transactions contemplated hereby. ( c) By all necessary official action, the City has duly adopted the City Resolution, has duly authorized the preparation and delivery of the Preliminary Official Statement and the preparation, execution and delivery of the Official Statement, has duly authorized and approved the execution and delivery of, and the performance of its obligations under, the City Agreements, and the consummation by it of all other transactions contemplated by the City Resolution, the City Agreements, the Preliminary Official Statement and the Official Statement. When executed and delivered by the respective parties thereto, the City Agreements (assuming due authorization, execution and delivery by and enforceability against the other parties thereto) will be in full force and effect and each will constitute legal, valid and binding agreements or obligations of the City, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors rights generally, the application of equitable principles, the exercise of judicial discretion and the limitations on legal remedies against public entities in the State. (d) At the time of the City's acceptance hereof and at all times subsequent thereto up to and including the time of the Closing, the information and statements in the Official Statement ( other than any information concerning the Authority, DTC and the book-entry system for the Bonds or provided by the Underwriter) do not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. ( e) As of the date hereof, there is no action, suit, proceeding or investigation before or by any court, public board or body pending against the City or, to the best knowledge of the City, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the City, or the titles of its members or officers; (ii) in any way question or affect the validity or enforceability of City Agreements or the Bonds, or (iii) in any way question or affect the Purchase Agreement or the transactions contemplated by the Purchase Agreement, the Official Statement, or any other agreement or instrument to which the City is a party relating to the Bonds. ( t) There is no consent, approval, authorization or other order of, or filing or registration with, or certification by, any regulatory authority having jurisdiction over the City required for the execution and delivery of this Purchase Agreement or the consummation by the City of the other transactions contemplated by the Official Statement or the City Agreements. (g) Any certificate signed by any official of the City authorized to do so will be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. 6 108 of 228 October 19, 2021, Item #12 (h) Except as previously disclosed to the Underwriter, the City is not in default, and at no time has the City defaulted in any material respect, on any bond, note or other obligation for borrowed money or any agreement under which any such obligation is or was outstanding. (i) ( 1) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially adverse change in the financial condition of the City since [June 30, 2020], and there has been no occurrence or circumstance or combination thereof that is reasonably expected to result in any such materially adverse change. (2) If between the date of this Purchase Agreement and the date which is 25 days following the End of the Underwriting Period, any event will occur which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City will immediately notify the Underwriter, 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 at its expense supplement or amend the Official Statement in a form and in a manner approved by the Underwriter. (3) After the Closing, the City will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter reasonably objects in writing or which is disapproved by Underwriter's Counsel. If any event relating to or affecting the City occurs as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the City will use its best efforts to assist the Underwriter in preparing (at the expense of the City for 90 days after the date of the Closing, and thereafter at the expense of the Underwriter) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an 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 existing at the time the Official Statement is delivered to a purchaser, not misleading. For the purposes of this subsection, the City will furnish such information with respect to itself as the Underwriter may from time to time reasonably request. U) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, the City has not previously failed to comply in all material respects with any undertakings under Rule 15c2-12 in the past five years. The report of Lumesis, Inc. dated as of __ , 2021 (the "Continuing Disclosure Due Diligence Reports") identify all of the issues for which the Authority and the City were obligated to provide continuing disclosure under Rule l 5c2-12 during the past five years and all of the material event filings that were required with respect to such issues during the five-year period. (k) The City does not need the consent of its auditor to include its comprehensive annual financial report for the fiscal year ended [June 30, 2020] as an appendix to the Official Statement. 7 109 of 228 October 19, 2021, Item #12 (I) The City covenants with the Underwriter that the City will cooperate with the Underwriter (at the cost and written directions of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdiction of the United States as the Underwriter may reasonably request; provided, however, that the City shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The City consents to the use by the Underwriter of the City Agreements, the Preliminary Official Statement and the Official Statement in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions related to the offering and sale of the Bonds. Section 7. The Closing. (a) At 8:30 A.M., California time, on [Closing Date], or on such earlier or later time or date as may be agreed upon by the Underwriter, the Authority and the City (the "Closing"), the Authority will deliver the Bonds to the Underwriter, through the book-entry system of OTC. Prior to the Closing, the Authority and the City will deliver, at the offices of Stradling, Y occa, Carlson & Rauth, a Professional Corporation ("Bond Counsel") in Newport Beach, California, or such other place as is mutually agreed upon by the Underwriter and the Authority, the other documents described in this Purchase Agreement. On the date of the Closing, the Underwriter will pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Agreement in immediately available funds to the order of the Trustee. (b) The Bonds will be issued in fully registered form and will be prepared and delivered as one Bond for each maturity registered in the name of a nominee of OTC. It is anticipated that CU SIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto will constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase Agreement. Section 8. Conditions to Underwriter's Obligations. The Underwriter has entered into this Purchase Agreement in reliance upon the representations and warranties of the Authority and the City contained herein and to be contained in the documents and instruments to be delivered on the date of the Closing, and upon the performance by the Authority and the City of their respective obligations to be performed hereunder and under such documents and instruments to be delivered at or prior to the date of the Closing. The Underwriter's obligations under this Purchase Agreement are and will also be subject to the sale, issuance and delivery of the Bonds as well as the following conditions: (a) The representations and warranties of the Authority and the City contained in this Agreement will be true and correct in all material respects on the date of this Purchase Agreement and on and as of the date of the Closing as if made on the date of the Closing; (b) As of the date of the Closing, the Official Statement may not have been amended, modified or supplemented, except in any case as may have been agreed to by the Underwriter; ( c) (i) As of the date of the Closing, the Authority Resolution, the City Resolution, the Authority Agreements and the City Agreements will be in full force and effect, and will not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter, (ii) the Authority will perform or have performed all of its obligations required under or specified in the Authority Resolution, the Authority Agreements and this Purchase Agreement to be performed at or prior to the date of the Closing; and (iii) the City will perform or have performed all of its obligations required under or specified in the City Resolution, the City Agreements and this Purchase Agreement to be performed at or prior to the date of the Closing; 8 110 of 228 October 19, 2021, Item #12 ( d) As of the date of the Closing, all necessary official action of the Authority relating to the Authority Agreements, the Authority Resolution and the Official Statement, and all necessary official action of the City relating to the City Agreements, the City Resolution, and the Official Statement, will have been taken and will be in full force and effect and will not have been amended, modified or supplemented in any material respect, except as may have been agreed to by the City and Underwriter; and ( e) As of or prior to the date of the Closing, the Underwriter will have received each of the following documents: (1) Certified copies of the Authority Resolution and the City Resolution. (2) Duly executed copies of the Indenture, the Installment Purchase Agreement, the Continuing Disclosure Agreement, and this Purchase Agreement. (3) The Preliminary Official Statement and the Official Statement, with the Official Statement duly executed on behalf of the Authority and the City. ( 4) An approving opinion of Bond Counsel, dated as of the Closing, as to the validity of the Bonds, the exclusion of interest on the Bonds from federal gross income and on the Bonds from State income taxation addressed to the Authority and the City substantially in the form attached as an appendix to the Official Statement, and a reliance letter with respect thereto addressed to the Underwriter and the Trustee. (5) effect that: A supplemental opinion of Bond Counsel, addressed to the Underwriter, to the 111 of 228 (i) The Purchase Agreement has been duly executed and delivered by the Authority and the City and is valid and binding upon the Authority and the City, subject to laws relating to bankruptcy, insolvency, reorganization or creditors' rights generally and to the application of equitable principles; (ii) The Continuing Disclosure Agreement has been duly executed and delivered by the City and 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; (iii) The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended (the "Securities Act"), 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 on the cover and under the headings "INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS," "TAX MATTERS," in "APPENDIX B -DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE" and "APPENDIX C -FORM OF OPINION OF BOND COUNSEL," insofar as such statements purport to describe certain provisions of the Bonds, the Indenture, the Installment Purchase Agreement, or to state legal conclusions and the opinion of Bond Counsel regarding the tax-exempt 9 October 19, 2021, Item #12 nature of the Bonds from Federal and State income taxes, present a fair and accurate summary of the provisions thereof. ( 6) An opinion of Stradling, Y occa, Carlson & Rauth, a Professional Corporation, as disclosure counsel to the City, addressed to the Underwriter, to the effect that: During the course of our work on this matter, no facts have come to our attention that cause us to believe that the Preliminary Official Statement as of its date and the date of the pricing of the Bonds and the Official Statement as of its date and the Closing Date ( excluding from the Preliminary Official Statement and the Official Statement, the financial statements, any financial or statistical data, or forecasts, charts, numbers, estimates, projections, assumptions or expressions of opinion included in the Preliminary Official Statement and the Official Statement and the appendices to the Preliminary Official Statement and the Official Statement) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (7) An opinion or opinions of the City Attorney, dated as of the Closing addressed to the Authority, the City, the Trustee and the Underwriter, in form and substance acceptable to the Underwriter, to the effect that: 112 of 228 (i) The City is a municipal corporation and general law city duly organized and existing under and by virtue of the general laws of the State. The City Council is the governing body of the City. (ii) The City has all necessary power and authority to adopt the City Resolution, to enter into and perform its duties under the City Agreements, and, when executed and delivered by the respective parties thereto, the City Agreements will each constitute a legal, valid and binding obligation of the City enforceable in accordance with its respective terms, except as such enforcement may be limited by bankruptcy, moratorium and the exercise of equitable principles where equitable remedies are sought. (iii) The City Resolution was duly adopted at a meeting of the City Council, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the City Resolution is in full force and effect and has not been modified, amended or rescinded since the date of its adoption. (iv) The execution and delivery by the City of the City Agreements, the Official Statement and the other instruments contemplated by any of such documents to which the City is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound in a manner which could materially adversely affect the City's performance under the City Agreements. October 19, 2021, Item #12 113 of 228 (v) All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which could constitute a condition precedent to, or the absence of which could materially adversely affect, the performance by the City of its obligations under the City Agreements have been obtained and are in full force and effect. (vi) To the best of the City Attorney's knowledge, after due inquiry, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, is pending or threatened in any way against the City (A) affecting the existence of the City or the titles of its City Council members or its officers to their respective offices, (B) seeking to restrain or to enjoin the issuance or sale of the Bonds, (C) in any way contesting or affecting the validity or enforceability of the City Resolution or the City Agreements, (D) in any way contesting the powers of the City to issue or sell the Bonds or its authority with respect to the City Resolution or the City Agreements, (E) in any way contesting or affecting any of the rights, powers, duties or obligations of the City with respect to the money or property pledged or to be pledged under the Installment Purchase Agreement or (F) in any way questioning the accuracy of the statements in the Preliminary Official Statement or the Official Statement. (vii) The Authority is a joint exercise of powers authority organized and validly existing under the laws of the State. The Board of Directors of the Authority is the governing body of the Authority. (viii) The Authority has all necessary power and authority to adopt the Authority Resolution, to enter into and perform its duties under the Authority Agreements and, when executed and delivered by the respective parties thereto, the Authority Agreements will each constitute legal, valid and binding obligation of the Authority enforceable in accordance with its respective terms, except as such enforcement may be limited by bankruptcy, moratorium and the exercise of equitable principles where equitable remedies are sought. (ix) The Authority Resolution was duly adopted at a regular meeting of the Authority's Board of Directors, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Authority Resolution is in full force and effect and has not been modified, amended or rescinded since the date of its adoption. (x) To the best of the City Attorney's knowledge, after due inquiry, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, is pending or threatened in any way against the Authority (A) affecting the existence of the Authority or the titles of its Board members or its officers to their respective offices, (B) seeking to restrain or to enjoin the issuance or sale of the Bonds, (C) in any way contesting or affecting the validity or enforceability of the Authority Resolution or the Authority Agreements, (D) in any way contesting the powers of the Authority to issue or sell the Bonds or its authority with respect to the Authority Resolution or the Authority Agreements, (E) in any way contesting or affecting any of the rights, powers, duties or obligations of the Authority with respect to the money or property pledged or to be pledged under the Indenture or (F) in any 11 October 19, 2021, Item #12 way questioning the accuracy of the statements in the Preliminary Official Statement or the Official Statement. (xi) The execution and delivery by the Authority of the Authority Agreements, the Official Statement and the other instruments contemplated by any of such documents to which the Authority is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Authority is a party or is otherwise subject or bound in a manner which would materially adversely affect the Authority's performance under the Authority Agreements. (xii) All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Authority of its obligations under the Authority Agreements have been obtained and are in full force and effect. (8) A letter of Jones Hall, A Professional Law Corporation ("Underwriter's Counsel"), addressed to the Underwriter, in form and substance acceptable to the Underwriter. (9) An executed certificate of the Authority and the City, dated as of the date of the Preliminary Official Statement, in the form attached as Exhibit B. (10) An executed closing certificate of the Authority, dated as of the Closing, in the form attached as Exhibit C. (11) An executed closing certificate of the City, dated as of the Closing, in the form attached as Exhibit D. (12) The opinion of counsel to U.S. Bank National Association (the "Bank"), as Trustee and Dissemination Agent, dated as of the Closing, addressed to the Authority, the City and the Underwriter to the effect that: 114 of 228 (i) The Bank is a national banking association duly organized and validly existing under the laws of the jurisdiction of its organization, and has the corporate power to execute and deliver, and to perform its obligations under, the Indenture and the Continuing Disclosure Agreement; (ii) The Indenture and the Continuing Disclosure Agreement have been duly authorized, executed and delivered by the Bank, and, assuming due authorization, execution and delivery by the other parties thereto, the Indenture and the Continuing Disclosure Agreement constitute the valid and legally binding agreements of the Bank enforceable in accordance with their terms, subject to laws relating in bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought; 12 October 19, 2021, Item #12 (iii) Authority; The Trustee has duly authenticated the Bonds upon the order of the (iv) The Trustee's actions in executing and delivering the Indenture and the Continuing Disclosure Agreement are in full compliance with, and do not conflict with any applicable law or governmental regulation and, to the best of such counsel's knowledge, after reasonable inquiry with respect thereto, do not conflict with or violate any contract to which the Trustee is a party or any administrative or judicial decision by which the Trustee is bound; (v) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the banking or trust powers of the Trustee that has not been obtained is or will be required for the execution and delivery of the Bonds or the consummation by the Trustee of its obligations under the Indenture and the Continuing Disclosure Agreement; and (vi) There is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or public body pending or, to the best of such counsel's knowledge, threatened against or affecting the Trustee, which would materially adversely impact the Trustee's ability to complete the transactions contemplated by the Indenture. (13) A certificate of the Bank, as Trustee and Dissemination Agent, dated as of the Closing, in the form attached as Exhibit E. ( 14) A tax certificate duly signed on behalf of the Authority and the City in form and substance acceptable to Bond Counsel and the Underwriter. ( 15) Evidence of required filings with the California Debt and Investment Advisory Commission. (16) A copy of the executed Blanket Issuer Letter of Representations by and between the Authority and DTC relating to the book-entry system. ( 1 7) Evidence that the Bonds have received the ratings described in the Official Statement. (18) A certificate of the Municipal Advisor in substantially the form attached hereto as Exhibit F. ( 19) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Authority and the City with legal requirements, the truth and accuracy, as of the date of the Closing, of the representations of the Authority and the City herein contained and of the Official Statement and the due performance or satisfaction by the Authority and the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority and the City. 13 115 of 228 October 19, 2021, Item #12 All of the opinions, letters, certificates, instruments and other documents mentioned in this Purchase Agreement will be deemed to be in compliance with the provisions of this Purchase Agreement if, but only if, they are in form and substance satisfactory to the Underwriter. If the Authority and the City are unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Purchase Agreement or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds will be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement will terminate and neither the Underwriter, the Authority nor the City will be under further obligations hereunder, except that the respective obligations of the Authority, the City and the Underwriter set forth in Section 12 of this Purchase Agreement will continue in full force and effect. Section 9. Conditions to Authority's and City's Obligations. The performance by the Authority and the City of their respective obligations under this Purchase Agreement are conditioned upon: (i) the performance by the Underwriter of its obligations hereunder and (ii) receipt by the Authority and the City of opinions addressed to the Authority and the City, and receipt by the Underwriter of opinions addressed to the Underwriter, and the delivery of certificates being delivered on the date of the Closing by persons and entities other than the Authority and the City. Section 10. Establishment of Issue Price. (a) 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 an "issue price" or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit G, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) 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") is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, 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 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 date of the Closing 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. ( c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement 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, as of the date of this Purchase Agreement, 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-14 116 of 228 October 19, 2021, Item #12 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. ( d) The Underwriter confirms that: (i) 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 the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) 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 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 date of the Closing may be at reasonable periodic intervals or otherwise upon request of the Underwriter, and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who 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), and (C) 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. (ii) 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 party 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 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 date of the Closing may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-15 117 of 228 October 19, 2021, Item #12 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. ( e) The Authority acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (i) 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 (ii) 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 party 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. (f) 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: 118 of 228 (i) "public" means any person other than an underwriter or a related party, (ii) "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), (iii) 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 (A) 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), (B) 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 (C) 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 16 October 19, 2021, Item #12 (iv) "sale date" means the date of execution of this Purchase Agreement by all parties. Section 11. Termination Events. The Underwriter will have the right to terminate the Underwriter's obligations under this Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds by notifying the Authority and the City of its election to do so if, after the execution hereof and prior to the Closing, any of the following events occurs: (a) the marketability of the Bonds or the market price thereof, in the opinion of the Underwriter, has been materially and adversely affected by any decision issued by a court of the United States (including the United States Tax Court) or of the State, by any ruling or regulation (final, temporary or proposed) issued by or on behalf of the Department of the Treasury of the United States, the Internal Revenue Service, or other governmental agency of the United States, or any governmental agency of the State, or by a tentative decision or announcement by any member of the House Ways and Means Committee, the Senate Finance Committee, or the Conference Committee with respect to contemplated legislation or by legislation enacted by, pending in, or favorably reported to either the House of Representatives or either House of the Legislature of the State, or formally proposed to the Congress of the United States by the President of the United States or to the Legislature of the State by the Governor of the State in an executive communication, affecting the tax status of the Authority or the City, its property or income, its bonds (including the Bonds) or the interest thereon or any tax exemption granted or authorized by the Internal Revenue Code of 1986, as amended; (b) the United States becomes engaged in hostilities that result in a declaration of war or a national emergency, or any other outbreak of hostilities occurs, or a local, national or international calamity or crisis occurs, financial or otherwise, the effect of such outbreak, calamity or crisis being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds; ( c) there occurs a general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, 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 SEC or any other governmental authority having jurisdiction; (d) a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission is issued or made to the effect that the issuance, offering or sale of the Bonds is or would be in violation of any provision of the Securities Act of 1933, as then in effect, or of the Securities Exchange Act of 1934, as then in effect, or of the Trust Indenture Act of 1939, as then in effect; ( e) legislation is enacted by the House of Representatives or the Senate of the Congress of the United States of America, or a decision by a court of the United States of America is rendered, or a ruling or regulation by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter is made or proposed to the effect that the obligations of the general character of the Bonds, including the Bonds, are not exempt from registration, qualification or other similar requirements of the Securities Act of 193 3, as then in effect, or of the Trust Indenture Act of 193 9, as then in effect; 17 119 of 228 October 19, 2021, Item #12 (f) in the reasonable judgment of the Underwriter, the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, might be materially and adversely affected because additional material restrictions not in force as of the date hereof is imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (g) the Comptroller of the Currency, The New York Stock Exchange, or other national securities exchange, or any governmental authority, imposes, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, or financial responsibility requirements of the Underwriter; (h) a general banking moratorium is established by federal, New York or State authorities; (i) any legislation, ordinance, rule or regulation is introduced in or be enacted by any governmental body, department or agency in the State or a decision of a court of competent jurisdiction within the State is rendered, which, in the opinion of the Underwriter, after consultation with the Authority and the City, materially adversely affects the market price of the Bonds; (j) any federal or State court, authority or regulatory body takes action materially and adversely affecting the payment or receipt of the Series 2021 Installment Payments under the Installment Purchase Agreement; (k) any withdrawal, downgrading or placement on credit watch negative of any underlying rating of any securities of the City by a national municipal bond rating agency that, in the opinion of the Underwriter, adversely affects the market price of the Bonds; (1) an event occurs which in the reasonable opinion of the Underwriter requires a supplement or amendment to the Official Statement and: (i) the Authority or the City refuse to prepare and furnish such supplement or amendment; or (ii) in the reasonable judgment of the Underwriter, the occurrence of such event materially and adversely affects the marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (m) additional material restrictions that are not in force as of the date hereof shall have been imposed upon trading in securities generally by any domestic governmental authority or by any domestic national securities exchange, which are material to the marketability of the Bonds; (n) the commencement of any action, suit or proceeding that is described in Section 5(e) or 6(e); or ( o) any change, which in the reasonable opinion of the Underwriter, materially adversely affects the marketability of the Bonds or, the financial condition of the Water System. 18 120 of 228 October 19, 2021, Item #12 Section 12. Payment of Expenses. (a) The Underwriter will be under no obligation to pay, and the City will pay the following expenses incident to the performance of the Authority's and the City's obligations hereunder: (i) the fees and disbursements of the City's municipal advisor and of Bond Counsel and Disclosure Counsel; (ii) the cost of printing and delivering the Bonds, the Preliminary Official Statement and the Official Statement (and any amendment or supplement prepared pursuant to Sections 5 and 6 of this Purchase Agreement); (iii) the fees and disbursements of accountants, advisers and of any other experts or consultants retained by the Authority or the City; and (iv) any other expenses and costs of the Authority and the City incident to the performance of their respective obligations in connection with the authorization, issuance and sale of the Bonds, including out-of-pocket expenses and regulatory expenses, and any other expenses agreed to by the parties. (b) The City and the Authority will be under no obligation to pay, and the Underwriter will pay, any fees of the California Debt and Investment Advisory Commission, the cost of obtaining CUSIP numbers, the cost of preparation of any "blue sky" or legal investment memoranda and this Purchase Agreement; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds ( except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of Underwriter's Counsel, meals, transportation and lodging (but not entertainment expenses), and any advertising expenses in connection with the public offering of the Bonds. Section 13. Notices. Any notice or other communication to be given to the Authority or the City under this Purchase Agreement may be given by delivering the same in writing to the Authority and the City at the addresses set forth on the first page of this Purchase Agreement, and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, One Montgomery Street, 35th Floor, San Francisco, California 94104, Attention: Sara Oberlies Brown. Section 14. Survival of Representations, Warranties, Agreements. All of the Authority's and the City's representations, warranties and agreements contained in this Purchase Agreement will remain operative and in full force and effect regardless of: (a) any investigations made by or on behalf of the Underwriter; or (b) delivery of and payment for the Bonds pursuant to this Purchase Agreement. The agreements contained in this Section and in Section 12 will survive any termination of this Purchase Agreement. Section 15. Benefit; No Assignment. This Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including its successors and assigns), and no other person will acquire or have any right hereunder or by virtue hereof. The rights and obligations created by this Purchase Agreement are not subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto. 19 121 of 228 October 19, 2021, Item #12 Section 16. Severability. In the event that any provision of this Purchase Agreement is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision of this Purchase Agreement. Section 17. Counterparts. This Purchase Agreement may be executed in any number of counterparts, all of which taken together will constitute one agreement, and any of the parties hereto may execute the Purchase Agreement by signing any such counterpart. Section 18. Governing Law. This Purchase Agreement will be governed by the laws of the State. [Signature Page Follows On Next Page] 20 122 of 228 October 19, 2021, Item #12 Section 19. Effectiveness. This Purchase Agreement will become effective upon the execution of the acceptance hereof by an authorized officer of the Authority and the City, and will be valid and enforceable as of the time of such acceptance. Accepted: POWAY PUBLIC FINANCING AUTHORITY By: ____________ _ Authorized Representative Very truly yours, STIFEL, NICOLAUS & COMPANY, IN CORPORA TED, as Underwriter By:-------------Authorized Officer Time of Execution: _______ California time CITY OF POWAY By:-------------Authorized Representative Time of Execution: California time -------S-1 123 of 228 October 19, 2021, Item #12 Maturity (June 1) Principal Amount Interest Rate EXHIBIT A MATURITY SCHEDULE Yield Price C: Priced to optional redemption date of June I, 20 _, at par 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The-Offering-Pri ce Rule • At the time of execution of this Purchase Agreement and assuming orders are confirmed immediately after the execution of this Purchase Agreement. REDEMPTION Optional Redemption. The Bonds with stated maturities on or after June 1, 20 _, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on __ 1, 20_ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds with stated maturities on June 1, 20_ are subject to mandatory sinking fund redemption in part (by lot) on June 1, 20 _ and each June 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: * Final Maturity. 124 of 228 Redemption Date (June 1) 20 A-1 Principal Amount $ October 19, 2021, Item #12 If some but not all of the Bonds maturing on June I, 20 _ are redeemed as described under the subcaption "-Optional Redemption," the principal amount of the applicable Bonds to be redeemed pursuant to the Indenture on any subsequent June I will be reduced, by $5,000 or an integral multiple thereof, as designated by the Authority in a Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions may not exceed the aggregate amount of the applicable Bonds redeemed. A-2 125 of 228 October 19, 2021, Item #12 EXHIBITB POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that they are the duly appointed and acting representative of the City of Poway (the "City") and the Poway Public Financing Authority (the "Authority"), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the City and the Authority as follows: (I) This Certificate is delivered in connection with the offering and sale of the bonds captioned above (the "Bonds") in order to enable the underwriter of the Bonds to comply with Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (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 Rule 15 c2-l 2, and the information therein is accurate and complete except for the Permitted Omissions. Dated: [POS Date] B-1 126 of 228 CITY OF POWAY By: ____________ _ Authorized Officer POWAY PUBLIC FINANCING AUTHORITY By:-------------Authorized Officer October 19, 2021, Item #12 EXHIBIT C POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A CLOSING CERTIFICATE OF THE AUTHORITY The undersigned hereby certifies and represents that he or she is the duly appointed and acting representative of the Poway Public Financing Authority (the "Authority"), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the Authority as follows: (i) The representations, warranties and covenants of the Authority contained in the Bond Purchase Agreement dated [Pricing Date], among the Authority, the City of Poway and Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Purchase Agreement"), are true and correct and in all material respects on and as of the date of the Closing with the same effect as if made on the date of the Closing. (ii) The Authority Resolution is in full force and effect at the date of the Closing and has not been amended, modified or supplemented. (iii) The Authority has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the date of the Closing. (iv) Subsequent to the date of the Official Statement and on or prior to the date of such certificate, there has been no material adverse change in the condition (financial or otherwise) of the Authority, whether or not arising in the ordinary course of the operations of the Authority, as described in the Official Statement. (v) The Preliminary Official Statement and the Official Statement, under the heading "THE AUTHORITY," do not contain any untrue or misleading statement of a material fact and do not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading. Capitalized terms used but not defined herein have the meanings given in the Bond Purchase Agreement. Dated: [Closing Date] 127 of 228 C-1 POWAY PUBLIC FINANCING AUTHORITY By:-------------Authorized Officer October 19, 2021, Item #12 EXHIBITD POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A CLOSING CERTIFICATE OF THE CITY The undersigned hereby certifies and represents that he or she is the duly appointed and acting representative of the City of Poway (the "City"), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the City as follows: (i) The representations, warranties and covenants of the City contained in the Bond Purchase Agreement dated [Pricing Date], among the City, the Poway Public Financing Authority and Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Purchase Agreement"), are true and correct and in all material respects on and as of the date of the Closing with the same effect as if made on the date of the Closing. (ii) The City Resolution is in full force and effect at the date of the Closing and has not been amended, modified or supplemented. (iii) The City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the date of the Closing. (iv) Subsequent to the date of the Official Statement and on or prior to the date of such certificate, there has been no material adverse change in the condition ( financial or otherwise) of the City, whether or not arising in the ordinary course of operations, as described in the Official Statement. (v) The Preliminary Official Statement as of its date and the date of the Purchase Agreement and the Official Statement as of its date and the date of the Closing ( other than any information it contains concerning the Authority, DTC and the book-entry system for the Bonds or provided by the Underwriter) do not contain any untrue or misleading statement of a material fact and do not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading. Capitalized terms used but not defined herein have the meanings given in the Purchase Agreement. Dated: [Closing Date] 128 of 228 D-1 POWAY PUBLIC FINANCING AUTHORITY By:-------------Authorized Officer October 19, 2021, Item #12 EXHIBITE POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A CLOSING CERTIFICATE OF U.S. BANK NATIONAL ASSOCIATION The undersigned hereby certifies and represents that he or she is the duly appointed and acting representative of U.S. Bank National Association (the "Bank"), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the Bank as follows: (i) the Bank has all necessary power to enter into the following documents (collectively, the "Documents"): (A) the Indenture of Trust, dated as of November I, 2021, by and between the Poway Public Financing Authority (the "Authority"), and the Bank, as trustee (the "Indenture"); and (B) the Continuing Disclosure Agreement, dated [Closing Date], by and among the City, the Authority, and the Bank, as dissemination agent; (ii) The Documents have been duly authorized, executed and delivered by the Bank, and the Documents constitute the legal, valid and binding obligations of the 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; (iii) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Bank that has not been obtained is or will be required for the execution and delivery of the Bank or the performance by the Bank of its duties and obligations under the Documents; (iv) The execution and delivery by the Bank of the Documents and compliance with the terms thereof will not conflict in any material respect with, or result in a violation or breach of, or constitute a default under, any material agreement or material instrument to which the 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 the Bank or any of its activities or properties ( except that no representation, warranty or agreement need be made by such counsel with respect to any federal or State securities or blue sky laws or regulations); and (v) To the knowledge of the Bank, after due inquiry, 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 pending, or threatened against the Bank which in the reasonable judgment of the Bank would affect the existence of the Bank or in any way contesting or affecting the validity or enforceability of the Documents or contesting the powers of the Bank or its authority to enter into and perform its obligations thereunder. E-1 129 of 228 October 19, 2021, Item #12 Capitalized terms used but not defined herein have the meanings given in the Bond Purchase Agreement dated [Pricing Date], among the City, the Authority and Stifel, Nicolaus & Company, Incorporated, as underwriter. Dated: [Closing Date] E-2 130 of 228 U.S. BANK NATIONAL ASSOCIATION, as Trustee and Dissemination Agent By: __________ _ Authorized Officer October 19, 2021, Item #12 EXHIBITF POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A CERTIFICATE OF MUNICIPAL ADVISOR The undersigned hereby states and certifies: (i) that the undersigned is an authorized officer of Fieldman, Rolapp & Associates, Inc. (the "Municipal Advisor"), which has acted as municipal advisor to the Poway Public Financing Authority (the "Authority") in connection with the issuance of the above-referenced bonds (the "Bonds"), and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same; (ii) that the Municipal Advisor has reviewed the Preliminary Official Statement dated [POS Date] (the "Preliminary Official Statement") and the final Official Statement dated [Pricing Date] (the "Official Statement") relating to the Bonds; and (iii) that nothing has come to the attention of the Municipal Advisor which would lead it to believe that the Preliminary Official Statement as of the date of the pricing of the Bonds or its date or the Official Statement as of its date or the date hereof contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Dated: [Closing Date] F-1 131 of 228 FIELDMAN, ROLAPP & ASSOCIATES, INC., as Municipal Advisor By:-------------Authorized Officer October 19, 2021, Item #12 EXHIBIT G $[PAR] POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A FORM OF ISSUE PRICE CERTIFICATE The undersigned, Stifel, Nicolaus & Company, Incorporated ("Stifel"), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the "Bonds"). I. Bond Purchase Agreement. On [Pricing Date] (the "Sale Date"), Stifel and the Issuer executed a Bond Purchase Agreement (the "Purchase Agreement") in connection with the sale of the Bonds. Stifel has not modified the Purchase Agreement since its execution on the Sale Date. 2. Price. (a) As of the date of this Certificate, for each [Maturity] [[of the General Rule Maturities] of the Bonds, the first price at which at least 10% of each such Maturity of the Bonds was sold to the Public (the" 10% Test") was the respective price for such Maturity listed in Schedule A attached hereto. (b) [Stifel 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. ( c) As set forth in the Bond Purchase Agreement, Stifel 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.] (d) [** With respect to each of the General Rule Maturities of the Bonds: 132 of 228 ( 1) As of the date of this Certificate, Stifel has not sold at least 10% of the Bonds of these Maturities at any single price. (2) As of the date of this Certificate, Stifel reasonably expects that the first sale to the Public of Bonds of these Maturities will be at or below the respective price or prices listed on the attached Schedule A as the "Reasonably Expected Sale Prices for U nderso Id Maturities." F-1 October 19, 2021, Item #12 (3) Stifel will provide actual sales information (substantially similar to the information contained on Schedule B) as to the price at which the first 10% of each such Maturity (i.e., the Undersold Maturity or Maturities) is sold to the Public. ( 4) On the date the 10% Test is satisfied with respect to all Maturities of the Bonds, Stifel will execute a supplemental certificate substantially in the form attached hereto as Schedule C with respect to any remaining Maturities for which the 10% Test has not been satisfied as of the Closing Date.**] 3. 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 m 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, or (ii) the date on which Stifel 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 Poway Public Financing Authority. ( 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. (t) "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) "Unde-rwriter" 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). 4. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Stifel' 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 the Tax Certificate of the Issuer dated [Closing Date] and with respect to compliance with the federal income tax rules affecting the Bonds, and by Bond Counsel, in connection with rendering its opinion that the interest on the Bonds is F-2 133 of 228 October 19, 2021, Item #12 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. Dated: [Closing Date] F-3 134 of 228 STIFEL, NICOLAUS & COMPANY, INCORPORATED By: ___________ _ Managing Director By: ___________ _ Director October 19, 2021, Item #12 SCHEDULE A TO ISSUE PRICE CERTIFICATE [Schedules to be updated at pricing in the event there are Hold-the-Offering-Price-Maturities] Actual Sales Information as of Closing Date Maturity/CUSIP Coupon Date Sold Time Sold Par Amount Sale Price [**Reasonably Expected Sales Prices for Undersold Maturities as of Closing Date Maturity/CUSIP Coupon Par Amount Offering Prices **) G-1 135 of 228 October 19, 2021, Item #12 [**SCHEDULE B TO ISSUE PRICE CERTIFICATE Actual Sales for Undersold Maturities as of the Closing Date Maturity/CUSIP Date Sold Time Sold Par Amount Sale Price **] G-2 136 of 228 October 19, 2021, Item #12 [**SCHEDULE C TO ISSUE PRICE CERTIFICATE SUPPLEMENTAL ISSUE PRICE CERTIFICATE OF UNDERWRITER $[PAR] POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A The undersigned, Stifel, Nicolaus & Company, Incorporated ("Stifel"), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the "Bonds"). l. Issue Price. (a) Stifel sold at least 10% of the ___ Maturities of the Bonds to the Public at the price or prices shown on the Issue Price Certificate dated as of the Closing Date (the "10% Test"). With respect to each of the ___ Maturities of the Bonds, Stifel had not satisfied the 10% Test as of the Closing Date (the "Undersold Maturities"). (b) As of the date of this Supplemental Certificate, Stifel has satisfied the 10% Test with respect to the Undersold Maturities. The first price or prices at which at least 10% of each such Undersold Maturity was sold to the Public are the respective prices listed on Exhibit A attached hereto. 2. Defined Terms. (a) "Issuer" means the Poway Public Financing Authority. (b) "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. ( c) "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. ( d) "Underwriter" means ( 1) 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 (2) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause ( 1) 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). 3. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Stifel' 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. G-3 137 of 228 October 19, 2021, Item #12 The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate of the Issuer dated (Closing Date] and with respect to compliance with the federal income tax rules affecting the Bonds, and by Bond Counsel, 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. Dated: [Closing Date] 138 of 228 STIFEL, NICOLAUS & COMPANY, INCORPORATED By: _____________ _ [Title] By: _____________ _ [Title] G-4 October 19, 2021, Item #12 139 of 228 EXHIBIT A TO SUPPLEMENTAL ISSUE PRICE CERTIFICATE**] G-5 October 19, 2021, Item #12 Stradling Yocca Carlson & Rauth Draft of 10/5/21 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by and between the City of Poway (the "City") and U.S. Bank National Association, in its capacity as dissemination agent (the "Dissemination Agent"), in connection with the issuance of the Poway Public Financing Authority Water Revenue Bonds, Series 202 lA in an aggregate principal amount of$ __ (the "Bonds"). The Bonds are being issued by the Poway Public Financing Authority (the "Authority") pursuant to the provisions of that certain Indenture of Trust, dated as of November 1, 2021 (the "Indenture"), by and between the City and U.S. Bank National Association, as trustee (the "Trustee"). The City and the Dissemination Agent hereby certify, covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the parties hereto for the benefit of the holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized terms 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 City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Annual Report Date" shall mean each April 1 after the end of the City's fiscal year, the end of which, as of the date of this Disclosure Agreement, is June 30. "Beneficial Owner" shall mean any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. "Dissemination Agent" shall mean, initially, U.S. Bank National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent that is so designated in writing by the City and has filed with the then-current Dissemination Agent a written acceptance of such designation. "Financial Obligation" shall mean a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term "Financial Obligation" shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. "Listed Events" shall mean any of the events listed in Sections 5(a) and (b) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Official Statement" shall mean the Official Statement dated October_, 2021, relating to the Bonds. 4843-7218-7902v 1/022468-0020 140 of 228 ATTACHMENT F October 19, 2021, Item #12 "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" shall mean Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. "SEC" shall mean the Securities and Exchange Commission. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2022 with the Annual Report for fiscal year 2020-21, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than 15 calendar days prior to such date, the City shall provide its Annual Report to the Dissemination Agent, if the Dissemination Agent is a different entity than the City. The Annual Report must be submitted in an electronic format as prescribed by the MSRB, accompanied by such identifying information as is prescribed by the MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that any audited financial statements of the City may be submitted separately from the balance of the Annual Report, and not later than the date required above for the filings of the Annual Report. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a). The City 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 City and shall have no duty or obligation to review such Annual Report. (b) If the City is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the City in a timely manner shall send to the MSRB a notice in an electronic format as prescribed by the MSRB, accompanied by such identifying information as prescribed by the MSRB. ( c) The Dissemination Agent shall: 1. provide any Annual Report received by it to the MSRB by the date required in subsection (a); 2. file a report with the City and the Trustee (if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement and stating the date it was provided; and 3. take any other actions as are mutually agreed upon between the Dissemination Agent and the City. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements of the City for the prior fiscal year prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If such audited financial statements 4843-7218-7902v 1/022468-0020 141 of 228 2 October 19, 2021, Item #12 are not available at the time that the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. ( c) An update of the information for the prior fiscal year in substantially the form set forth in the following tables in the Official Statement under the caption "THEW ATER SYSTEM": 1. Table 1 -Historical Water Supply; 2. Table 2 -Historical Water System Deliveries in Acre Feet; 3. Table 3 -Historical Water System Connections; 4. Table 4 -Historical Water System Sales Revenues; and 5. Table 5 -Ten Largest Water System Customers. ( d) An update of the information for the prior fiscal year in substantially the form set forth in the following table in the Official Statement under the caption "WATER SYSTEM FINANCIAL INFORMATION": I. Table 13 -Historical Water System Operating Results and Debt Service Coverage Fiscal Year Ended June 30. 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 City or related public entities, that are available to the public on the MSRB's Internet website or filed with the SEC. If the document included by reference is a final official statement, it must be available from the MSRB. The City 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 City shall give, or shall cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten ( I 0) Business Days after the event: 1. Principal and interest payment delinquencies. 2. Unscheduled draws on debt service reserves reflecting financial difficulties. 3. Unscheduled draws on credit enhancements reflecting financial difficulties. 4. Substitution of credit or liquidity providers, or their failure to perform. 5. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB). 6. Tender offers. 4843-7218-7902v 1/022468-0020 142 of 228 3 October 19, 2021, Item #12 7. Defeasances. 8. Rating changes. 9. Bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governmental 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 obligated person. 10. Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the City, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten ( 10) Business Days after occurrence: 1. Unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds. 2. Modifications to the rights of Bondholders. 3. Bond calls. 4. Release, substitution or sale of property securing repayment of the Bonds. 5. Non-payment related defaults. 6. The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, 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. 7. Appointment of a successor or additional trustee or the change of the name of a trustee. 8. Incurrence of a Financial Obligation of the City, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the City, any of which affect security holders. 4843-7218-7902v 1 /022468-0020 143 of 228 4 October 19, 2021, Item #12 ( c) If the City determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. ( d) If the City determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. ( e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall not be responsible for determining whether the City's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Termination of Reporting Obligation. The obligations of the City and the Dissemination Agent specified in 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 City shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). Section 7. Dissemination Agent. The City 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. If at any time there is not any other designated Dissemination Agent, the City shall act as Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to annual or event information to be provided hereunder, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the City or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and ( c) the proposed amendment or waiver: (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders; or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interest of Bond owners. The City shall describe any amendment to this Disclosure Agreement in the next Annual Report filed after such amendment takes effect. 4843-7218-7902v 1/022468-0020 144 of 228 5 October 19, 2021, Item #12 If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City 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 City 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 City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provisions of this Disclosure Agreement, any Participating Underwriter or any holder or Beneficial Owner of the Bonds, or the Trustee on behalf of the holders of the Bonds (after receiving indemnification to its satisfaction), may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed to be a default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City 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 City agrees to indemnify and save the Dissemination Agent, 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 as described hereunder, if any, 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 City under this Section shall survive resignation or removal of the Dissemination Agent and payment 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 City pursuant to this Disclosure Agreement. The City shall pay the reasonable fees and expenses of the Dissemination Agent for its duties as described hereunder. Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given to the Dissemination Agent (if other than the City) and to the City as follows: 4843-7218-7902v 1/022468-0020 145 of 228 6 October 19, 2021, Item #12 City: Dissemination Agent: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Reference: Poway 2021 Water Revenue Bonds Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Trustee, the Participating Underwriter and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 14. Counterparts. This Disclosure Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Date: November_, 2021 4843-72 l 8-7902v 1/022468-0020 146 of 228 CITY OF POWAY By: City Manager U.S. BANK NATIONAL ASSOCIATION as Dissemination Agent By: Authorized Signatory 7 October 19, 2021, Item #12 Stradling Yocca Carlson & Rauth Draft of I 0/5/21 PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER_, 2021 NEW ISSUE -BOOK-ENTRY ONLY Rating: S&P: L] See the caption "RATING" In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption "TAX MATTERS. " $ __ POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A Dated: Date of Delivery Due: June 1, as shown on inside front cover page The Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in denominations of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership in the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds is payable on June 1 and December 1 of each year, commencing June 1, 2022. Payment of the principal of and interest on the Bonds is to be made to Cede & Co., which is to disburse said payments to the Beneficial Owners of the Bonds through their nominees. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity, all as more fully described herein. The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the City's municipal water system; and (ii) to pay costs incurred in connection with the issuance of the Bonds. The Bonds are being issued pursuant to the Indenture of Trust, dated as of November 1, 2021, by and between the Poway Public Financing Authority and U.S. Bank National Association, as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF SERIES 2021 INSTALLMENT PAYMENTS TO BE MADE BY THE CITY TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2021, BY AND BETWEEN THE CITY AND THE AUTHORITY, AND FROM CERTAIN OTHER FUNDS AND ACCOUNTS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds. The City may incur additional obligations payable from Net Revenues on a parity with the obligation to pay Series 2021 Installment Payments, subject to the terms and conditions of the Installment Purchase Agreement, as more fully described herein. No such parity obligations are currently outstanding. THE OBLIGATION OF THE CITY TO MAKE SERIES 2021 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION 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 MAKE THE SERIES 2021 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES OF THE CITY'S WATER SYSTEM AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. MATURITY SCHEDULE (See inside front cover page) The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the Bonds by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, and certain other conditions. Certain matters will be passed upon for the City and the Authority by the City Attorney, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San * Preliminary, subject to change. 4846~l<P-f4~~;o2246s-0020 ATTACHMENT G October 19, 2021, Item #12 Francisco, California, and for the Trustee by its counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about November I 0, 2021. STIFEL Dated: October_, 2021 4846t1fcf->!4~AA102246&-0020 October 19, 2021, Item #12 Maturity (June 1) 20 $ __ POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A Principal Amount $ MATURITY SCHEDULE BASE CUSIPt Interest Rate % Yield % Price CUSJPt $ ____ %Term Bonds due June 1, 20 _,Yield: __ %, Price: __ , CUSIPt _ * Preliminary, subject to change. f CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright© CUSIP Global Services. All rights reserved. CUSJP® data herein is provided by CUSJP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. 4 846-6 54 9-24 72v 5/022468-002 0 149 of 228 October 19, 2021, Item #12 POWAY PUBLIC FINANCING AUTHORITY BOARD OF DIRECTORS Steve Vaus, Chair Barry Leonard, Vice Chair Dave Grosch, Director John Mullin, Director Caylin Frank, Director CITY OF POWAY CITY COUNCIL Steve Vaus, Mayor Barry Leonard, Deputy Mayor, Councilmember, District 2 Dave Grosch, Councilmember, District 1 John Mullin, Councilmember, District 3 Caylin Frank, Councilmember, District 4 STAFF Chris Hazeltine, City Manager Aaron Beanan, Director of Finance Eric Heidemann, Director of Public Works SPECIAL SERVICES City Attorney Rutan & Tucker LLP Irvine, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Bond Counsel and Disclosure Counsel Stradling Y occa Carlson & Rauth, a Professional Corporation Newport Beach, California 4846-6549-2472v5/022468-0020 150 of 228 Irvine, California Trustee U.S. Bank National Association Los Angeles, California October 19, 2021, Item #12 No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. 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 a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. 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 a 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. This Official Statement and the information that is contained herein are subject to completion or amendment without notice, and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties that are described herein since the date hereof. These securities may not be sold, nor may an offer to buy them be accepted, prior to the time that the Official Statement is delivered in final form. This Official Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Certain statements which are 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 terminology used, such as "plan," "expect," "estimate," "project," "budget," "intend" or similar words. Such forward-looking statements include, but are not limited to, certain statements contained under the captions "THE CITY," "THE WATER SYSTEM" AND "WATER SYSTEM FINANCIAL INFORMATION." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT 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. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THE BONDS HA VE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. The City maintains a website; however, information presented on such website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. 4846-6549-2472v5/022468-0020 151 of 228 October 19, 2021, Item #12 TABLE OF CONTENTS Page INTRODUCTION ................................................................................................................................................ 1 THE 2021 PROJECT ............................................................................................................................................ 2 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 2 THEBONDS ........................................................................................................................................................ 3 General Provisions ......................................................................................................................................... 3 Book-Entry Only System ............................................................................................................................... 3 Transfers and Exchanges Upon Termination of Book-Entry Only System ................................................... 3 Redemption .................................................................................................................................................... 4 Selection of Bonds for Redemption ............................................................................................................... 5 Notice of Redemption .................................................................................................................................... 5 Effect of Redemption ..................................................................................................................................... 5 DEBT SERVICE SCHEDULE ............................................................................................................................. 6 SECURITY FOR THE BONDS ........................................................................................................................... 6 General ........................................................................................................................................................... 6 Series 2021 Installment Payments Payable From Net Revenues ................................................................... 7 Rate Covenant ................................................................................................................................................ 8 No Reserve Fund ............................................................................................................................................ 9 Rate Stabilization Fund .................................................................................................................................. 9 Additional Parity Bonds and Contracts .......................................................................................................... 9 THE CITY .......................................................................................................................................................... 10 General ......................................................................................................................................................... 10 Land Use and Service Area .......................................................................................................................... 10 Seismic Considerations ................................................................................................................................ 11 Governance and Management. ..................................................................................................................... 12 Employees .................................................................................................................................................... 14 Budget Process ............................................................................................................................................. 15 City Insurance .............................................................................................................................................. 15 No Outstanding Senior or Parity Obligations .............................................................................................. 16 Financial Statements .................................................................................................................................... 16 COVID-19 Outbreak .................................................................................................................................... 17 THE WATER SYSTEM ..................................................................................................................................... 19 General ......................................................................................................................................................... 19 Lester J. Berglund Water Treatment Plant ................................................................................................... 20 Water Quality ............................................................................................................................................... 20 Water Supply ............................................................................................................................................... 21 Drought Declarations ................................................................................................................................... 26 Historical Water System Supply .................................................................................................................. 28 Historical Water System Deliveries ............................................................................................................. 29 Historical Water System Connections ......................................................................................................... 30 Historical Water System Sales Revenues .................................................................................................... 30 Largest Water System Customers ................................................................................................................ 31 Water System Rates and Charges ................................................................................................................ 31 Water System Collection Procedures ........................................................................................................... 34 Future Water System Improvements ............................................................................................................ 35 Projected Water System Supply ................................................................................................................... 36 Projected Water System Deliveries .............................................................................................................. 36 4846-6549-2472v5/022468-0020 152 of 228 October 19, 2021, Item #12 TABLE OF CONTENTS (continued) Page Projected Water System Connections .......................................................................................................... 37 Projected Water System Sales Revenues ..................................................................................................... 37 WATER SYSTEM FINANCIAL INFORMATION .......................................................................................... 38 Historical Operating Results and Debt Service Coverage ............................................................................ 38 Projected Operating Results and Debt Service Coverage ............................................................................ 39 Employee Benefits ....................................................................................................................................... 40 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 46 Article XIIIB ................................................................................................................................................ 46 Proposition 218 ............................................................................................................................................ 46 Proposition 26 .............................................................................................................................................. 48 Future Initiatives .......................................................................................................................................... 48 CERTAIN RISKS TO BONDHOLDERS .......................................................................................................... 48 Limited Obligations ..................................................................................................................................... 48 Accuracy of Assumptions ............................................................................................................................ 49 Water System Demand ................................................................................................................................. 49 System Expenses .......................................................................................................................................... 49 Limited Recourse on Default ....................................................................................................................... 50 Rate-Setting Process under Proposition 218 ................................................................................................ 50 Statutory and Regulatory Compliance ......................................................................................................... 50 Natural Disasters .......................................................................................................................................... 50 Limitations on Remedies ............................................................................................................................. 51 Loss of Tax Exemption ................................................................................................................................ 51 Secondary Market ........................................................................................................................................ 52 Parity Obligations ........................................................................................................................................ 52 Climate Change ............................................................................................................................................ 52 Cyber Security ............................................................................................................................................. 52 Rate Covenant Not a Guarantee ................................................................................................................... 53 THE AUTHORITY ............................................................................................................................................ 53 APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 53 LITIGATION ..................................................................................................................................................... 54 City ............................................................................................................................................................... 54 Authority ...................................................................................................................................................... 55 TAX MATTERS ................................................................................................................................................. 55 CONTINUING DISCLOSURE .......................................................................................................................... 56 RATING ............................................................................................................................................................. 57 MUNICIPAL ADVISOR ................................................................................................................................... 57 UNDER WRITING ............................................................................................................................................. 58 FINANCIAL INTERESTS ................................................................................................................................. 58 MISCELLANEOUS ........................................................................................................................................... 59 4846-6549-2472v5/022468-0020 153 of 228 -ii-October 19, 2021, Item #12 TABLE OF CONTENTS (continued) Page APPENDIX A-CITY FINANCIAL STATEMENTS .................................................................................... A-1 APPENDIX B -DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE .......................... B-1 APPENDIX C -FORM OF OPINION OF BOND COUNSEL. ...................................................................... C-1 APPENDIX D -INFORMATION CONCERNING DTC ............................................................................... D-1 APPENDIX E -FORM OF CONTINUING DISCLOSURE AGREEMENT ................................................. E-1 4846-6549-24 72v5/022468-0020 154 of 228 -iii-October 19, 2021, Item #12 SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms that are used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement. Purpose. The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the City's Water System, as described under the caption "THE 2021 PROJECT;" and (ii) to pay costs incurred in connection with the issuance of the Bonds. See the caption "ESTIMATED SOURCES AND USES OF FUNDS." Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2021 Installment Payments to be made by the City to the Authority pursuant to the Installment Purchase Agreement and amounts on deposit in certain funds and accounts established by the Indenture. Neither the full faith and credit nor any other revenues or funds of the Authority are pledged to or available for the payment of debt service on the Bonds. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. The obligation of the City to make Series 2021 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City's Water System, which consist of Revenues of the Water System remaining after payment of Operation and Maintenance Costs of the Water System. See the caption "SECURITY FOR THE BONDS." The obligation of the City to make the Series 2021 Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments that are required thereunder have been paid in full ( or provision for the payment thereof has been made as provided for in the Installment Purchase Agreement), the City will not discontinue or suspend any Series 2021 Installment Payments required to be made by it under the Installment Purchase Agreement when due, whether or not the Water System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and whether or not the 2021 Project has been completed, and such payments will not be subject to reduction whether by offset or otherwise and will not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. THE OBLIGATION OF THE CITY TO MAKE SERIES 2021 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION 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 MAKE THE SERIES 2021 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAY ABLE SOLELY FROM NET REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. No Reserve Fund. No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds. Rate Stabilization Fund. The City has agreed and covenanted to maintain, so long as any Bonds remain outstanding, a Rate Stabilization Fund. There is $0 on deposit in the Rate Stabilization Fund as of the 4846-6549-2472v5/022468-0020 155 of 228 -1-October 19, 2021, Item #12 date of the initial issuance of the Bonds. The City may deposit amounts therein from time to time in its sole discretion. The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Parity Bonds and Contracts as provided herein. The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Installment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations under the additional debt test and the rate covenant under the Installment Purchase Agreement in such Fiscal Year to the extent provided in the definition of "Revenues" in the Installment Purchase Agreement. See the caption "SECURITY FOR THE BONDS-Rate Stabilization Fund." Rate Covenant. The City will, to the fullest extent permitted by law, fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service in such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements. See the caption "SECURITY FOR THE BONDS-Rate Covenant." No Parity Obligations. The City currently has no outstanding obligations which are payable from Net Revenues of the Water System on a parity with the Bonds. Additional Indebtedness. The Installment Purchase Agreement does not permit the City to make any additional pledge of, or to place any additional lien on, the Revenues, or any portion thereof, which is senior to the pledge and lien securing the payment of the Series 2021 Installment Payments. The Installment Purchase Agreement does permit the City to incur Parity Bonds and Contracts payable on a parity with the Series 2021 Installment Payments provided that certain conditions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the City from entering into obligations which are Operation and Maintenance Costs and, therefore, payable from Revenues prior to the Series 2021 Installment Payments, or from issuing any bonds or executing any contracts the payments under which are payable from Net Revenues on a subordinate basis to the Series 2021 Installment Payments, Parity Bonds and Contracts of the City. See the caption "SECURITY FOR THE BONDS-Additional Parity Bonds and Contracts." Redemption. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See the caption "THE BONDS-Redemption." The City and the Water System. The City is located in central San Diego County, approximately 23 miles northeast of downtown San Diego. The City had a population of approximately 48,936 as of January 1, 2021 and covers approximately 39 square miles. The City was incorporated in 1980 and is a general law city operating under a council/manager form of government. Land use in the City is primarily residential, with areas of commercial and industrial development. See the caption "THE CITY." The City supplies: (i) potable water to approximately 12,529 single family residential customers, 152 multi-family residential customers and 503 commercial customers; and (ii) potable and recycled water to approximately 844 industrial, government, irrigation, agricultural and other customers. The City has three sources of water: (i) untreated water that is imported from the San Diego County Water Authority, a member agency of The Metropolitan Water District of Southern California, and treated at the City's Lester J. Berglund Water Treatment Plant; (ii) rainfall that is impounded at Lake Poway, the City's 4846-6549-2472v5/022468-0020 156 of 228 -ii-October 19, 2021, Item #12 storage reservoir; and (iii) recycled water that the City purchases from the City of San Diego. See the caption "THE WATER SYSTEM-Water Supply" for a detailed description of the City's various water sources. The Water System includes the storage reservoir at Lake Poway, which holds approximately 3,300 acre feet of water, one 10 million gallon clearwell ( as discussed further under the caption "THE 2021 PROJECT''), approximately 294 miles of water pipelines (including 12 miles of recycled water pipelines), 2,345 fire hydrants and 5,044 valves, 18 pressure zones, 21 pressure reducing stations, 14 pump stations and 18 treated water storage tanks. 4846-6549-2472v5/022468-0020 157 of 228 -iii-October 19, 2021, Item #12 $ __ POWAY PUBLIC FINANCING AUTHORITY WATER REVENUE BONDS, SERIES 2021A INTRODUCTION This Official Statement, including the front cover page, the inside front cover page and the appendices, provides certain information concerning the sale and delivery of the Poway Public Financing Authority Water Revenue Bonds, Series 2021A (the "Bonds"). Descriptions and summaries of various documents that are set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document. Capitalized terms that are used and not otherwise defined in this Official Statement have the meanings ascribed thereto in Appendix B. The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the City's Water System, as described under the caption "THE 2021 PROJECT;" and (ii) to pay costs incurred in connection with the issuance of the Bonds. See the caption "ESTIMATED SOURCES AND USES OF FUNDS." The Bonds are being issued pursuant to an Indenture of Trust, dated as of November 1, 2021 ( the "Indenture"), by and between the Poway Public Financing Authority (the "Authority") and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are limited obligations of the Authority payable solely from Authority Revenues, which consist of payments (the "Series 2021 Installment Payments") to be made by the City of Poway (the "City") to the Authority pursuant to an Installment Purchase Agreement, dated as of November 1, 2021 (the "Installment Purchase Agreement"), by and between the City and the Authority, and amounts on deposit in certain funds and accounts established by the Indenture. The obligation of the City to make Series 2021 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City's Water System, which consist of Revenues of the City's Water System remaining after payment of Operation and Maintenance Costs of the City's Water System. See the caption "SECURITY FOR THE BONDS." The term "Water System" is defined in Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT-DEFINITIONS" and includes the City's potable water and recycled water systems. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See the caption "THE BONDS-Redemption." The City is permitted to incur obligations payable on a parity with the Series 2021 Installment Payments provided that certain conditions are satisfied as described herein. See the caption "SECURITY FOR THE BONDS-Additional Parity Bonds and Contracts." No senior or parity obligations are currently outstanding. No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds. The City has undertaken to provide annual reports to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System ("EMMA") pursuant to a continuing disclosure agreement. See the caption "CONTINUING DISCLOSURE" and Appendix E. * Preliminary, subject to change. 4846-6549-2472v5/022468-0020 158 of 228 -1-October 19, 2021, Item #12 THE 2021 PROJECT As described under the caption "THE WATER SYSTEM-Water Supply-Imported Water," the City's imported water supply consists of untreated water which is treated prior to delivery to customers. The City's water treatment facility is called the Lester J. Berglund Water Treatment Plant (the "WTP"). See the caption "THE WATER SYSTEM-Lester J. Berglund Water Treatment Plant" for a detailed description of the WTP. The WTP includes a 10 million gallon clearwell, a large storage reservoir in which the treated water produced by the WTP is stored following the filtration and disinfection processes. From the clearwell, treated water goes into the water distribution system for delivery to customers. The City intends to decommission and replace the existing clearwell within the next three years. See the caption "THE WATER SYSTEM-Future Water System Improvements." However, in order to ensure that the City can continue to serve treated water to Water System customers while the clearwell is being rebuilt, it is necessary to construct a temporary bypass system, including temporary storage tanks that will enable water flowing through the WTP to bypass the existing clearwell. The City intends to construct and install two bolted steel tanks to serve as a temporary clearwell, as well as a temporary pump station and a pressure reducing station that will allow the City to pump water into the steel tanks. The City also intends to incur study, design and planning costs associated with: (i) the decommissioning of the existing clearwell and the construction of a new clearwell; and (ii) the Treated Water Project (as discussed under the caption "THE WATER SYSTEM-Water Supply-Future Water Supplies"). The foregoing projects, together with the installation of associated pipelines and other improvements for the benefit of the temporary clearwell, are collectively referred to herein as the "2021 Project." The City intends to apply proceeds of the Bonds to pay for the costs of the 2021 Project. The City expects to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2021 Project as required by law, and to complete the 2021 Project by late 2022. Pursuant to the Installment Purchase Agreement, the City may substitute or add additional projects to the 2021 Project. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT-ACQUISITION OF 2021 PROJECT-Changes to the 2021 Project." ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds in connection with the issuance of the Bonds: SourcesCI) Principal Amount of Bonds Plus/Less Net Original Issue Premium/Discount Total Sources Uses<1) Acquisition Fund Costs of Issuance<2) Total Uses {I) Amounts rounded to the nearest dollar. Totals may not add due to rounding. 4846-6549-2472v5/022468-0020 159 of 228 -2-$ $ $ $ October 19, 2021, Item #12 <2> Includes certain legal, municipal advisory, financing, rating agency and Trustee fees, Underwriter's discount and printing costs. THE BONDS General Provisions The Bonds will bear interest from and be dated the date of initial issuance, and will be payable upon maturity on the dates set forth on the inside front cover page hereof. Interest on the Bonds will be payable on June 1 and December 1 of each year, commencing June 1, 2022. Interest will be calculated at the rates set forth on the inside front cover page hereof on the basis of a year of 360 days comprised of twelve 30 day months. The Bonds will be delivered only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("OTC"). DTC will act as securities depository for the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 or any integral multiple thereof. See the caption "-Book-Entry Only System" and Appendix D. In the event that the book-entry only system that is described below is discontinued, the principal of and interest on any Bond will be payable by check or draft of the Trustee upon presentation and surrender thereof at maturity or upon prior redemption at the Office of the Trustee in Los Angeles, California. Such principal and interest will be payable in lawful money of the United States of America. Book-Entry Only System One fully-registered Bond will be issued for each maturity of the Bonds in the principal amount of the Bonds of such maturity. Each such Bond will be registered in the name of Cede & Co. and will be deposited with DTC. As long as the ownership of the Bonds is registered in the name of Cede & Co., the term "Owner" as used in this Official Statement will refer to Cede & Co. and not to the actual purchasers of the Bonds (the "Beneficial Owners"). The Authority may decide to discontinue use of the system of book-entry transfers through DTC ( or a successor securities depository). In that event, the Bonds will be printed and delivered and will be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer. The Authority cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis. See Appendix D for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book-Entry Only System In the event that the book-entry system that is described above is discontinued, the Bonds will be printed and delivered as provided in the Indenture. Thereafter, any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee is not required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond is surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new Bond or Bonds of authorized denomination or denominations for a like series 4846-6549-2472v5/022468-0020 160 of 228 -3-October 19, 2021, Item #12 and aggregate principal amount of the same maturity and series. The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds that it has received. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Code, as amended. The Trustee shall conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee is not required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption or any Bond that has been selected for redemption. The Trustee will require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds that it has received. Redemption Optional Redemption. The Bonds with stated maturities on or after June 1, 20 _, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days ( or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on __ 1, 20_ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds with stated maturities on June 1, 20_ are subject to mandatory sinking fund redemption in part (by lot) on June 1, 20_ and each June 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: * Final Maturity. Redemption Date (June 1) 20 Principal Amount $ If some but not all of the Bonds maturing on June 1, 20 are redeemed as described under the subcaption "-Optional Redemption," the principal amount of the applicable Bonds to be redeemed pursuant to the Indenture on any subsequent June 1 will be reduced, by $5,000 or an integral multiple thereof, as designated by the Authority in a Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions may not exceed the aggregate amount of the applicable Bonds redeemed. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate and maturity. 4846-6549-24 72v5/022468-0020 161 of 228 -4-October 19, 2021, Item #12 Selection of Bonds for Redemption Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds for redemption as a whole or in part on any date as directed by the Authority and by lot within each maturity in integral multiples of $5,000 in accordance with the Indenture. The Trustee will promptly notify the Authority in writing of the numbers of the Bonds or portions thereof so selected for redemption. Notice of Redemption Notice of redemption will be mailed by first class mail not less than 20 days nor more than 60 days before any Redemption Date, to the respective Owners of any Bonds that are designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption will state the date of notice, the redemption date, the place or places of redemption and the Redemption Price, and will designate the maturities, CUSIP numbers, if any, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the redemption date there will become due and payable on each of said Bonds or parts thereof that are designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with, interest accrued thereon to the redemption date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such redemption date interest thereon will cease to accrue, and will require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any Bond. Notice of redemption of Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. With respect to any notice of optional redemption of Bonds, such notice may state that such redemption will 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 have not been so received, said notice will be of no force and effect and the Trustee will 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 will not be made, and the Trustee will 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 Notice of redemption having been duly given as described above under the caption "-Notice of Redemption," and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds ( or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds ( or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, said Bonds ( or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee will, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the provisions of the Indenture will be canceled upon surrender thereof. 4846-6549-2472v5/022468-0020 162 of 228 -5-October 19, 2021, Item #12 DEBT SERVICE SCHEDULE Set forth below is a schedule of debt service on the Bonds, which equals the Series 2021 Installment Payments for each annual period ending on June 30 in the years indicated. The below table assumes that there are no optional redemptions of the Bonds. Source: Underwriter. General Period Ending June30 2022 2023 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 2050 2051 2052 TOTAL Principal Interest Total $ $ $ $ $ $ SECURITY FOR THE BONDS Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2021 Installment Payments to be made by the City under the Installment Purchase Agreement and certain other funds and accounts established pursuant to the Indenture. NEITHER THE FULL FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE 4846-6549-2472v5/022468-0020 163 of 228 -6-October 19, 2021, Item #12 OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. The Authority has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee pursuant to the Indenture, for the benefit of the Owners of the Bonds, including its right to receive Series 2021 Installment Payments and its rights as may be necessary to enforce payment of the Series 2021 Installment Payments when due. Series 2021 Installment Payments Payable From Net Revenues All of the Authority Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture ( except the Rebate Fund) have been irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture. Such pledge constitutes a lien on and security interest in such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act, and will be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice hereof. The obligation of the City to make the Series 2021 Installment Payments is payable solely from Net Revenues of the City's Water System, which consist of Revenues of the City's Water System remaining after the payment of Operation and Maintenance Costs of the City's Water System. All Revenues (as such term is defined below) of the City's Water System, other amounts that are on deposit in the Revenue Fund and any other amounts (including proceeds of the sale of the Bonds) which are held in any fund or account that is established pursuant to the Installment Purchase Agreement (including the Rate Stabilization Fund) have been irrevocably pledged to the payment of the Series 2021 Installment Payments as provided in the Installment Purchase Agreement. The Revenues will not be used for any other purpose while any of the Series 2021 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement, including but not limited to the payment of Operation and Maintenance Costs of the Water System. Such pledge, together with the pledge created by all other Bonds and Contracts ( as such terms are defined in Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT-Definitions" and referred to in the forepart of this Official Statement as "Parity Bonds and Contracts" or "Parity Bonds or Contracts," as applicable), constitutes a first lien on Revenues and, subject to application of Revenues and all amounts on deposit in the Revenue Fund as permitted in the Installment Purchase Agreement, the Revenue Fund, the Rate Stabilization Fund and other funds and accounts created thereunder for the payment of the Series 2021 Installment Payments and all other Parity Bonds and Contracts in accordance with the terms thereof and of the Indenture. The term "Revenues" means all income, rents, rates, fees, charges and other moneys derived from the ownership of or operation of the Water System, including, without limiting the generality of the foregoing: (1) all in-lieu charges (including investment earnings thereon) collected by or on behalf of the City; (2) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the City from the sale, furnishing and supplying of the water, recycled water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System; (3) the earnings on and income derived from the investment of such income, rents, rates, fees, charges, proceeds or other moneys, including City reserves; and (4) deposits to the Revenue Fund from amounts on deposit in the Rate Stabilization Fund in accordance with the Installment Purchase Agreement; but excluding in all cases: (w) any Revenues transferred from the Revenue Fund to the Rate Stabilization Fund in accordance 4846-6 54 9-24 72v 5/022468-002 0 164 of 228 -7-October 19, 2021, Item #12 with the Installment Purchase Agreement; (x) all amounts reasonably anticipated to be reimbursed to the City 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)); (y) customers' deposits or any other deposits or advances that are subject to refund until such deposits or advances have become the property of the City; and (z) proceeds of taxes or benefit assessments restricted by law to be used by the City to pay amounts due on bonds or other obligations hereafter incurred. The term "Operation and Maintenance Costs" means: (1) costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles applicable to governmental agencies, including, but not limited to, the reasonable expenses of management and repair and other expenses that are necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, 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 ( other than debt service payments) required to be paid by it to comply with the terms of the Bonds or of the Installment Purchase Agreement or any Contract or of any resolution or indenture authorizing the issuance of any Parity Bonds or Contracts or of such Parity Bonds or Contracts; and (2) all payments under any contract for the purchase of water; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. Notwithstanding anything contained in the Installment Purchase Agreement, the City is not required to advance any moneys derived from any source of income other than the Revenues, the Revenue Fund and the Rate Stabilization for the payment of amounts due under the Installment Purchase Agreement or for the performance of any agreements or covenants that are required to be performed by it contained therein. The City may, however, 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 SERIES 2021 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION 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 MAKE THE SERIES 2021 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAY ABLE SOLELY FROM NET REVENUES OF THE CITY'S WATER SYSTEM 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. Rate Covenant The City will, to the fullest extent permitted by law, fix and prescribe, at the commencement of each fiscal year of the City ending June 30 (each, a "Fiscal Year"), rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service in such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements. So long as the City has complied with its obligations set forth in the prior paragraph, the failure of Net Revenues to meet the thresholds set forth in the prior paragraph will not constitute a default or an Event of Default under the Installment Purchase Agreement or the Indenture. 4846-6549-2472v5/022468-0020 165 of 228 -8-October 19, 2021, Item #12 No Reserve Fund No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds. Rate Stabilization Fund There has established with the City a fund to be known as the "Rate Stabilization Fund." The City has agreed and covenanted in the Installment Purchase Agreement to maintain, so long as any Bonds remain outstanding, the Rate Stabilization Fund. There will be $0 on deposit in the Rate Stabilization Fund as of the date of the initial issuance of the Bonds. The City may deposit amounts therein from time to time in its sole discretion. Amounts in the Rate Stabilization Fund will be disbursed, allocated and applied by the City solely to the uses and purposes described in the Installment Purchase Agreement, and will be accounted for separately and apart from all other accounts, funds, money or other resources of the City. The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Bonds and Parity Bonds and Contracts as provided in the Installment Purchase Agreement; provided that amounts on deposit in the Rate Stabilization Fund may be apportioned for such purposes as are expressly permitted therein. The foregoing pledge constitutes a first lien on amounts on deposit in the Rate Stabilization Fund for the payment of Contracts and Bonds in accordance with the terms of the Installment Purchase Agreement. The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Installment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Installment Purchase Agreement during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations under the additional debt test or the rate covenant in such Fiscal Year to the extent provided in the definition of "Revenues." See the captions "-Rate Covenant" and "-Additional Parity Bonds and Contracts." Additional Parity Bonds and Contracts The City may at any time issue or execute, as applicable, any Parity Bonds or Contracts, as the case may be, in accordance herewith; provided that: (a) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of the Debt Service for such Fiscal Year or consecutive 12 month period; and (b) The Net Revenues for either the most recent audited Fiscal Year or a consecutive 12 month period within the 18 months preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year or consecutive 12 month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of: (i) the Debt Service for such Fiscal Year or consecutive 4846-6549-2472v5/022468-0020 166 of 228 -9-October 19, 2021, Item #12 12 month period; plus (ii) the Debt Service which would have accrued on any then-outstanding Parity Bonds which were issued or any then-outstanding Contracts which were executed since the end of such audited Fiscal Year or consecutive 12 month period, assuming that such Parity Bonds or Contracts had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period; plus (iii) the Debt Service which would have accrued on the proposed additional Parity Bonds or the proposed additional Contract, assuming that such proposed additional Parity Bonds or proposed additional Contract had been issued or executed, as applicable, on the first day of such audited Fiscal Year or consecutive 12 month period. Notwithstanding the foregoing, Parity Bonds issued or Contracts executed to refund outstanding Parity Bonds or to prepay outstanding Contracts may be delivered without satisfying the conditions set forth above if total Debt Service after such Parity Bonds are issued or Contracts executed is not greater than the total Debt Service which would have been payable prior to the issuance of such Parity Bonds or execution of such Contracts. THE CITY General The City is located in central San Diego County (the "County"), approximately 23 miles northeast of downtown San Diego. The City had a population of approximately 48,936 as of January 1, 2021 and covers approximately 39 square miles. The City was incorporated in 1980 and is a general law city operating under a council/manager form of government. Land use in the City is primarily residential, with areas of commercial and industrial development. See the caption "-Land Use and Service Area." The City provides fire protection, street construction and maintenance and planning and building services, as well as parks and recreational programs and water service. The City also provides arts, cultural and social programs, including at the City-owned Poway Center for the Performing Arts, an 809-seat theater and events center, and the Mickey Cafagna Community Center, which opened in spring 2021 and includes a community swimming pool, skate park, picnic areas, athletic fields, playgrounds and a dog park. The City contracts with the San Diego County Sheriffs Department for police services and with the City of San Diego for wastewater services. The City supplies: (i) potable water to approximately 12,529 single family residential customers, 152 multi-family residential customers and 503 commercial customers; and (ii) potable and recycled water to approximately 844 industrial, government, irrigation, agricultural and other customers. The City has three sources of water: (i) untreated water that is imported from the San Diego County Water Authority ("SDCWA"), a member agency of The Metropolitan Water District of Southern California ("MWD"), and treated at the WTP; (ii) rainfall that is impounded at Lake Poway, the City's storage reservoir; and (iii) recycled water that the City purchases from the City of San Diego. See the caption "THE WATER SYSTEM-Water Supply" for a detailed description of the City's various water sources. The Water System includes the storage reservoir at Lake Poway, which holds approximately 3,300 acre feet of water, one 10 million gallon clearwell ( as discussed further under the caption "THE 2021 PROJECT''), approximately 294 miles of water pipelines (including 12 miles of recycled water pipelines), 2,345 fire hydrants and 5,044 valves, 18 pressure zones, 21 pressure reducing stations, 14 pump stations and 18 treated water storage tanks. Land Use and Service Area The Water System provides retail water service to the majority of the City's territory, excluding the easternmost territory within City limits (known as East Poway), residents of which are served by privately 4846-6549-24 72v5/022468-0020 167 of 228 -10-October 19, 2021, Item #12 owned groundwater wells. Although approximately 29% of the City's territory is located in East Poway, residents of East Poway make up less than 1% of the City's population. The City is known as "the city in the country" and maintains a semi-rural, predominantly residential character, with many large residential parcels and neighborhoods of relatively low density. Due to the City's varied topography, the Water System's 18 distribution service zones range in elevation from 420 feet to 1,420 feet above sea level. Over 30% of the City's territory (approximately 7,000 acres) has been dedicated as preserved natural open space. The City has over 232 acres of parkland and 78 miles of hiking, biking and horseback riding trails. The City has the lowest crime rate of any incorporated city in the County. Commercial and light industrial development has increased significantly in the City since the mid-1990s, primarily due to development of the South Poway Business Park (the "Business Park"), a 900 acre complex that offers tenants high-quality infrastructure, numerous amenities and open space in keeping with the City's rural surroundings. The Business Park has over 9 million square feet of available leasing space and currently houses nearly 500 businesses that collectively employ over 18,000 people. Major tenants include General Atomics Aeronautical Systems (a defense contractor), Delkin Devices (a manufacturer of flash storage solutions for industrial applications) and Geico (an insurance provider). Recent development at the Business Park includes two industrial buildings with a total footprint of 535,000 square feet which were leased to a major tenant, Amazon.com, for a logistics and distribution center upon their completion in 2020. A small number of parcels remain available for development within the Business Park, but significant additional development is not expected in the future. Landscaping in the Business Park is irrigated with recycled water that the City purchases from the City of San Diego, which is delivered through a dedicated meter and distribution system. See the caption "THE WATER SYSTEM-Water Supply-Recycled Water." Currently, the City does not have any recycled water customers other than those in the Business Park. See the caption "THE WATER SYSTEM-Water Supply-Future Water Supply Projects." The City is largely built out and San Diego Association of Governments projections reflect an increase of approximately 2,100 residents (or 4% based on the City's current population) by 2045. New residents and businesses in the Water System service area are required to connect to the Water System. Seismic Considerations The City is located in a seismically active region. Significant faults include the Rose Canyon, Coronado Bank, Elsinore and San Jacinto faults. There is potential for destructive ground shaking during the occurrence of a major seismic event. In addition, land along fault lines may be subject to liquefaction during the occurrence of such an event. In the event of a severe earthquake, there may be significant damage to both property and infrastructure within the City, including the Water System. The City has an emergency operations center that would be activated under such circumstances. The City operates a dam at Lake Poway to impound the water held therein. See the caption "THE WATER SYSTEM-Water Supply-Local Water." The dam not been determined to be seismically unsound by the State Division of Safety of Dams. However, the City does not maintain earthquake insurance coverage for the dam, as discussed under the caption "--City Insurance." There can be no assurance that the dam will not be susceptible to damage in the event of an earthquake. Such damage is not expected to be covered by insurance, and seismic activity could subject areas of the City to widespread flooding in the event of a failure of Lake Poway Dam. Newer Water System facilities are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The City has also undertaken a vulnerability assessment of critical Water System facilities. The vulnerability assessment ranks Water System infrastructure by importance, builds redundancy into existing operations and includes contingency 4846-6549-2472v5/022468-0020 168 of 228 -11-October 19, 2021, Item #12 plans in the event of damage to City assets and succession plans for critical staff. The impact of lesser magnitude events is expected by the City to be temporary, localized and repairable. The Water System has never sustained major damage to its facilities or experienced extended incidences of service interruptions as a result of seismic disturbances. The City does not maintain earthquake insurance on Water System facilities. See the captions "--City Insurance" and "CERTAIN RISKS TO BONDHOLDERS-Natural Disasters." However, the City is a participant in a regional project to provide an emergency source of water supply in the event of a natural disaster that damages or disrupts the City's transmission and distribution network. See the caption "THE WATER SYSTEM-General." Governance and Management General. The City operates under a council-manager form of government. Councilmembers are elected by district and the Mayor is elected at large for four-year alternating terms. The City Manager, appointed by the City Council, serves as the City's chief administrative officer and is responsible for overseeing the daily operations of City departments and efficient management of all City business. Functions of the City Manager's Office include coordination of the implementation of City Council policies and programs; providing overall direction to the departments that administer City programs and services; coordinating intergovernmental relations and legislative advocacy; and administration of the City's communications, media relations and public information programs. Chris Hazeltine has over 30 years of local government experience and has served as the City Manager since May 2019. In this capacity he leads the daily operation of City government. Prior to coming to the City, Mr. Hazeltine served as the Parks and Recreation Director of Carlsbad, California and Encinitas, California. Mr. Hazeltine has a Bachelor's degree in Recreation Administration from San Diego State University and a Master's degree in Organizational Leadership from Point Loma Nazarene University. Other key personnel responsible for management of the Water System include the Director of Finance and the Director of Public Works. In addition, the City Attorney provides legal services to the City and the Authority. Aaron Beanan has over 15 years oflocal government experience and has served as the City's Director of Finance since July 2019. Prior to coming to the City, Mr. Beanan served as the Finance Manager for the City of Carlsbad, California. He has a Bachelor's degree in Business Administration from California State University, San Marcos, and is a member of the California Society of Municipal Finance Officers. Eric Heidemann has over 25 years of local government experience and has served as the Director of Public Works of the City since November 2019. Mr. Heidemann has been with the City since 2009 and previously served as the Assistant Director of Public Works and Operations Manager. Prior to coming to the City, Mr. Heidemann served as the Assistant Town Manager and Director of Community Development for the Town of Avon, Colorado, and as a Senior Planner for the County of Pima, Arizona. Mr. Heidemann has a Bachelor's degree in Business/Regional Development and a Master's degree in Urban Planning, both from the University of Arizona. Alan Fenstermacher, Esq., of the law firm of Rutan & Tucker LLP, has over a decade of local government experience and has been City Attorney since January 1, 2018. Mr. Fenstermacher has been an attorney for over a decade in private practice specializing in municipal law. He has a Bachelor's degree from the University of Southern California and a Juris Doctorate degree from Washington University. Rutan & Tucker has continuously represented government agencies since its founding in 1940, with dozens of attorneys specializing in all areas of government and regulatory law. 4846-6549-2472v5/022468-0020 169 of 228 -12-October 19, 2021, Item #12 Management Policies. The City has adopted several policies which are designed to ensure the prudent and effective management of City operations, including a Debt Management Policy, an Investment Policy, a General Fund Reserve Policy and a Financial Policy. Further information about these policies is set forth below. Debt Management Policy. The City has adopted a Debt Management Policy in accordance with California Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the City and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy: • The purposes for which debt may be incurred; • The types of debt that may be issued; • The relationship of the debt to, and integration with, the City's capital improvement program or budget; • Policy goals related to the City's planning goals and objectives; and • Debt management practices, including the investment of proceeds and post-issuance compliance. Investment Policy. The City invests its funds in accordance with the City's investment policy (the "Investment Policy"), which was most recently reviewed and revised by the City Council on August 4, 2020. The Investment Policy: (a) describes the policies and procedures to be utilized in the City's investment management system; (b) establishes guidelines for the prudent investment of the City's funds, and (c) lists and describes suitable investments. The goals of the City's investment policy and investment management function are compliance with law, enhancement of the economic status of the City and protection of the City's funds by limiting credit and market risks. In accordance with Section 53600 et seq. of the California Government Code, idle cash management and investment transactions are the responsibility of the Director of Finance, who serves as the City Treasurer. Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the California State Treasurer, the County Investment Pool, the Investment Trust of California (also known as CalTrust), mortgage-backed securities and asset-backed securities ( each limited to 5-year maximum maturities and 20% of the portfolio), local agency bonds (limited to 5-year maximum maturities and 30% of the portfolio), money market mutual funds (limited to 20% of the portfolio), medium-term corporate notes (limited to 5-year maximum maturities and 30% of the portfolio), United States Treasury bills, notes and bonds (limited to 5-year maximum maturities), obligations issued by United States Government agencies (limited to 5-year maximum maturities and 75% of the portfolio), FDIC-insured or negotiable certificates of deposit (limited to 5-year maximum maturities and 30% of the portfolio), banker's acceptances (limited to 180-day maximum maturities and 40% of the portfolio) and commercial paper (limited to 270-day maximum maturities and 25% of the portfolio). Funds are invested in the following order of priority: • Safety of Principal; • Liquidity; and • Return on Investment. The Director of Finance is required to provide a quarterly report to the City Council showing the type of investment, date of maturity, amount invested, current market value, rate of interest and other such information as may be requested by the City Council. 4846-6549-2472v5/022468-0020 170 of 228 -13-October 19, 2021, Item #12 Approximately $12,686,954 (10%) of the City's total investment portfolio as of June 30, 2021 was attributed to the Water Enterprise Fund. General Fund Reserve Policy. The City Council has adopted a General Fund Reserve Policy that is intended to ensure consistent, uninterrupted municipal services and facilities in the wake of potential risk events, such as a major economic downturn or natural disaster ( e.g., wildfires, winter storms or earthquakes) and to protect the City's credit quality and reduce its cost of borrowing. Under the General Fund Reserve Policy, the City seeks to maintain reserves in an amount that is equivalent to 45% of budgeted annual General Fund operating expenditures, including: (i) a 10% reserve for revenue volatility ( designed to serve as a hedge against swings in revenue from economic conditions, State actions and other adverse conditions, particularly changes in sales tax, property tax and other fee-based revenue); (ii) a 5% reserve for expenditure volatility ( designed to serve as a hedge against unanticipated costs such as major litigation, a spike in pension contributions resulting from market volatility or unplanned capital expenditures); and (iii) a 30% reserve for extreme events and public safety (designed to serve as a hedge against natural disasters, other public safety emergencies and unexpected infrastructure repairs and replacements). The 45% General Fund Reserve Policy target will be adjusted annually as part of the City's budget process, with excess funds programmed to specific uses at the City Council's direction or (if funds do not meet the 45% target) a plan developed to increases reserves to the target amount within a 5-year period. Moneys in the General Fund reserve can be used only at City Council direction, or by the City Manager upon a declaration of an emergency by the City Council. The City must develop a plan to replenish moneys that are withdrawn from the reserve within 60 days of withdrawal. Financial Policy. The City's Financial Policy sets forth the City's commitment to the following fiscal policies and practices: (i) maintenance of a balanced operating budget, including ongoing tracking of revenues and expenditures and achieving ending fund balances that meet City needs; (ii) the establishment of a citizen's budget committee (the Budget Review Committee) to advise City leaders on budget recommendations and offer citizen input; (iii) review of the City's fiscal condition at the midpoint of each Fiscal Year; (iv) maintenance of a diversified and stable revenue base to protect the City from short-term fluctuations in any one source of revenue, with one-time and non-sustainable revenues excluded as funding sources for ongoing programs, debt service or other long-term obligations and City fees reviewed and updated annually in a master fee schedule; and (v) maintenance of a competitive procurement policy, including reviewing the benefits of outsourcing where appropriate. With respect to the Water System, the City's Financial Policy calls for the City to maintain a minimum working capital balance equivalent to between 90 and 120 days of Water System operating expenditures (excluding capital improvement project costs). In addition, Water System fees and rates must fully cover direct and indirect costs, including operations, capital outlay, long-term maintenance and debt service, and the Water Enterprise Funds will not be subsidized by the General Fund. Employees As of June 30, 2021, the City had 228.37 full-time equivalent employees, of which 18 worked exclusively for the Water System, 29 worked in the Public Works Department with responsibility for the Water System and other public works functions and 13 worked in general government services, including finance. City employees who work on behalf of the Water System are represented by the Teamsters Local 911 union (the "Union"), which represents approximately 104 employees Citywide. Relations between the City and the Union are governed by a memorandum of understanding that expires on June 30, 2027. A total of approximately 84 management and confidential employees are exempt from collective bargaining. Salaries for 4846-6549-24 72v5/022468-0020 171 of 228 -14-October 19, 2021, Item #12 exempt employees are set by the City Council. The City has never experienced a strike, slowdown or work stoppage. Budget Process The City prepares and adopts a balanced budget for each Fiscal Year which includes proposed expenditures and the means of financing such expenditures. See the caption "--Governance and Management-Management Policies-Financial Policy." The City's budget cycle begins in or about December of each year with an inter-departmental meeting of City departments to discuss guidelines, assumptions and priorities for the next Fiscal Year. Departments develop and submit their budget requests for the next Fiscal Year in February of each and meet with Finance Department staff to discuss such requests. In or about March of each year, the budget is drafted, incorporating projections into the forecast, followed by the compilation of the full budget and continued review. In or about May of each year, a proposed budget is submitted to the City Council-appointed Budget Review Committee, a citizen's advisory committee. See the caption "--Governance and Management-Management Policies-Financial Policy." In or about June of each year, the budget is submitted to the City Council for review and approval. Prior to June 30 of each year, public hearings are conducted to obtain public comments and the budget is legally enacted through the passage of a resolution. The City Manager is authorized to transfer budgeted amounts between line items within a department or activity provided that the total appropriation does not exceed the budgeted amount. Most other budget amendments require authorization by the City Council. The City Manager and affected department heads are mutually responsible for controlling expenditures within budgeted appropriations. The City Council adopted the budget for Fiscal Year 2022 on June 15, 2021. City Insurance The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The City is a member of the California Joint Powers Insurance Authority (the "JPIA"), a joint powers authority that is comprised of over 100 California agencies to arrange and administer programs for the pooling of self-insured losses and to purchase excess insurance from commercial insurers. Through the JPIA, the City maintains the following coverages: • Liability (general, automobile and professional: $50,000,000 of first dollar coverage, with a limit of $50,000,000 per occurrence); • Workers Compensation (statutory limits, including employer's liability of $10,000,000 per occurrence); • Property (replacement costs coverage, $500,000,000 pooled limit, with a $10,000 deductible for scheduled City assets); • Pollution Legal Liability ($5,000,000 limit per incident and coverage up to $20,000,000 in aggregate, with a $250,000 deductible); and • Crime ( coverage up to $1,000,000, with a $2,500 deductible). Certain portions of the Water System, including pipelines that are not in the vicinity of the WTP, are not covered by the City's property insurance. In addition, the City does not maintain insurance coverage for 4846-6549-24 72v5/022468-0020 172 of 228 -15-October 19, 2021, Item #12 earthquake damage to Water System facilities and Lake Poway Dam is not covered by any earthquake insurance policy. See the caption "CERTAIN RISKS TO BONDHOLDERS-Natural Disasters." No assurance can be given as to the adequacy of the insurance maintained now or in the future by the City to fund necessary repairs or replacement of any portion of the Water System, and the City does not have any obligation under the Installment Purchase Agreement to maintain earthquake coverage or other coverage in the current coverage amounts. Significant damage to the Water System could affect the City's ability to generate sufficient Net Revenues to pay the Bonds. See the caption "RISK FACTORS-Natural Disasters." The City has not settled any claims that exceeded its insurance coverage in the past three years. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT-COVENANTS OF THE CITY-Insurance" for a description of insurance coverages that are required to be maintained while the Bonds are outstanding. No Outstanding Senior or Parity Obligations The City has no outstanding obligations that are payable from Net Revenues of the Water System on a senior or parity basis to the Bonds. The City is permitted to incur additional obligations that are payable from Net Revenues on a parity with the Bonds in the future upon satisfaction of the conditions that are described under the caption "SECURITY FOR THE BONDS-Additional Parity Bonds and Contracts." Financial Statements A copy of the most recent audited financial statements of the City prepared by Davis Farr LLP, Irvine, California (the "Auditor") is set forth in Appendix A. The Auditor's letter dated December 23, 2020 is located at the beginning of the Financial Section therein. The summary operating results that are contained under the caption "WATER SYSTEM FINANCIAL INFORMATION-Historical Operating Results and Debt Service Coverage" are derived from these financial statements and audited financial statements for prior Fiscal Years ( excluding certain non-cash items and after certain other adjustments), and are qualified in their entirety by reference to such statements, including the notes thereto. The City accounts for moneys received and expenses paid in accordance with GAAP. Generally, the City recognizes revenues and expenses on the full accrual basis of accounting, meaning that revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred, regardless of when the related cash flows take place. However, in certain cases, GAAP requires or permits moneys that are collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses that are paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Note 1.B to the financial statements that are set forth in Appendix A. Except as otherwise expressly noted herein, all financial information that has been derived from the City's audited financial statements reflects the application of GAAP. The Water Enterprise Fund of the City has a separate set of self-balancing accounts and is accounted for as a proprietary fund type ( enterprise fund) using the economic resources measurement focus. In governmental accounting, enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs ( expenses, including depreciation) of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges, or where periodic determination of revenues earned, expenses 4846-6549-2472v5/022468-0020 173 of 228 -16-October 19, 2021, Item #12 incurred and/or net income is deemed appropriate for capital maintenance, public policy, management control, accountability or other purposes. COVID-19 Outbreak The spread of the novel strains of coronavirus collectively called SARS-Co V-2, which cause the disease known as COVID-19 ("COVID-19"), and local, State and federal actions in response to COVID-19, have impacted the City's operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization has declared the COVID-19 outbreak to be a pandemic and, on March 4, 2020, as part of the State's response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. The City also declared a local emergency on March 18, 2020 in response to the COVID-19 outbreak. Many school districts across the State temporarily closed some or all school campuses (including schools within the City) in response to local and State directives or guidance. On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter-in-place order applicable to all non-essential services. Certain aspects of the shelter-in-place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County also declared a state of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re-open under new modifications and guidance provided by the State. A phased re-opening of various sectors was underway since mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of the economy on June 15, 2021. Although pursuant to the re-opening plan certain restrictions on activities were eased, restrictions were also re-imposed in various jurisdictions (including Los Angeles County to the north of the City) as local conditions warranted, and such restrictions may be renewed as the pandemic continues. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the "CARES Act") which provides, among other measures, $150 billion in financial aid to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments are eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The City received a total reimbursement of $1,495,251 under the CARES Act. The funds received by the City under the CARES Act are not available for payment of the Bonds and cannot be used to backfill any City revenue losses related to COVID-19. On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the "ARP Act"), a $1.9 trillion economic stimulus package designed to help the United States' economy recover from the adverse impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the City, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half following in 2022. The City has been allocated a total of approximately $6.1 million under the ARP Act, of which approximately half was received in spring 2021. This funding is available for a broad range of uses, including responding directly to the health emergency, addressing its negative economic impacts with assistance to households and small businesses, restoring government services that were reduced in response to pandemic-related revenue losses and making certain necessary infrastructure improvements. The City has not yet determined how the ARP Act funds that it has received and expects to receive will ultimately be spent, but planning efforts are underway. 4846-6549-24 72v 5/022468-0020 174 of 228 -17-October 19, 2021, Item #12 The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. Volatility in the financial markets caused the California Public Employees Retirement System's ("CalPERS") earnings to fall below its investment targets in Fiscal Year 2020, which could result in increases in the City's unfunded pension liability and future pension costs commencing in Fiscal Year 2023. See the caption "WATER SYSTEM FINANCIAL INFORMATION-Employee Benefits-Pension Obligations." The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County. Potential impacts to the City associated with the COVID-19 outbreak include, but are not limited to, increasing costs and challenges to the public health system in and around the City, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in the City's revenues, including as a result of reduced water use (particularly among commercial and hotel establishments). In addition, the Governor has suspended utility service shutoffs and the collection ( although not the imposition) of late fees and penalties for residential customers (including Water System customers) through December 31, 2021. The City extended its shutoff moratorium to all water ratepayers, including non-residential customers. The City also waived late fees through June 30, 2021, which the Governor's order did not require to be forgiven. The imposition of late fees (although not yet their collection) resumed on July 1, 2021. As a result of the foregoing actions, the City has written off the collection of approximately $232,000 in late fees for delinquent Water System accounts that would otherwise have accrued between March 18, 2020 and June 30, 2021. See the caption "THE WATER SYSTEM-Water System Collection Procedures." In response to the COVID-19 outbreak, the City proclaimed a local state of emergency on March 13, 2020, declared the Water System to be an essential service, modified its operations to implement remote work opportunities for employees and provide City services online, closed many City facilities to the public, cancelled many programs, rentals and community events and deferred several non-essential capital improvement projects. In order to transition City employees to working from home, the City procured additional hardware, established secure access to City computer systems and remote access to City telephone systems and deployed tele-conferencing applications. With improvements in local case rates, the City has phased in the resumption of normal operations and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. Large gatherings of City personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders. City Council and other board meetings occurred via teleconference, and public comment and participation for City Council meetings was also conducted via teleconference and electronic means. The City also established the Poway Emergency Assistance Recovery Loan Program, a $2,000,000 million program to complement State and federal assistance programs for local small businesses. The City has not experienced and does not at this time foresee a future negative impact on the execution of City services as a result of the COVID-19 outbreak. The City has worked diligently to provide its employees with personal protective equipment and voluntary access to screening and vaccinations. However, there can be no assurance that absences of employees or City leadership due to COVID-19 will not adversely impact City operations. The City also moved Water System employees to multiple locations in order to prevent large gatherings of personnel at any one time and maintain their health and the operations of the Water System. In addition, on-site personnel are wearing masks and practicing social distancing while working. 4846-6549-2472v5/022468-002O 175 of 228 -18-October 19, 2021, Item #12 The City reports that Fiscal Year 2020 and 2021 Water System revenues and expenses were not materially affected by the COVID-19 outbreak. The City's customer base is primarily residential and its water rate structure consists of variable and fixed rate components, which partially mitigates the effect of any reduced water usage by non-residential customers. See the captions "THE WATER SYSTEM-Historical Water System Connections" and "THE WATER SYSTEM-Water System Rates and Charges." To date, the City has not experienced and does not at this time foresee a future negative impact on Water System operations as a result of the COVID-19 outbreak. The projected Water System operating results which are set forth under the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage" include the following assumptions based on the trends that the City has seen since the beginning of the outbreak: (i) projected water sales for Fiscal Year 2022 are assumed to remain at levels below Fiscal Year 2019 levels (prior to the onset of the pandemic) to account for decreased commercial water usage since the implementation of stay-at-home orders; and (ii) Water System write-offs for Fiscal Year 2022 are projected to total approximately $25,000 (roughly the same as the City experienced in Fiscal Year 2021) to account for increased delinquencies. The COVID-19 outbreak is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of CO VID-19 on the operations and finances of the City and the Water System is unknown. The City continues to actively monitor Water System usage, payment delinquencies, revenues and expenditures so that any further impacts of the COVID-19 pandemic can be anticipated. The City does not currently expect that the COVID-19 outbreak will have a material adverse effect on the City's ability to repay the Bonds. THE WATER SYSTEM General The City currently supplies: (i) potable water to approximately 12,529 single family residential customers, 152 multi-family residential customers and 503 commercial customers; and (ii) potable and recycled water to approximately 844 industrial, government, irrigation, agricultural and other customers. All water service connections are metered. The City has three sources of water: (i) untreated water that is imported from SDCW A, a member agency of MWD, and treated at the WTP; (ii) rainfall that is impounded at Lake Poway, the City's storage reservoir; and (iii) recycled water that the City purchases from the City of San Diego. See the caption "-Water Supply" for a detailed description of the City's various water sources. The Water System includes the storage reservoir at Lake Poway, which holds approximately 3,300 acre feet of water, one 10 million gallon clearwell ( as discussed further under the caption "THE 2021 PROJECT'), approximately 294 miles of water pipelines (including 12 miles of recycled water pipelines), 2,345 fire hydrants and 5,044 valves, 18 pressure zones, 21 pressure reducing stations, 14 pump stations and 18 treated water storage tanks. In order to provide sufficient emergency water storage to supply water to member agencies for an extended period, SDCWA implemented the Emergency Carryover and Storage Project (the "ESP") in 2014. The ESP is a system of interconnected reservoirs, pipelines, pump stations and other conveyance facilities that are intended to improve the County's regional water storage capacity and allow stored emergency water to be delivered to SDCW A member agencies during a prolonged regional interruption. See the captions "THE CITY-Seismic Considerations" and "-Water Supply-Imported Water." By providing interconnections within regional facilities, the ESP is designed to make water available to the region during catastrophic conditions when there is an interruption in imported water deliveries. 4846-6549-2472v5/022468-0020 176 of 228 -19-October 19, 2021, Item #12 Lester J. Berglund Water Treatment Plant The City purchases untreated imported water from SDCW A which is stored at Lake Poway and treated at the adjacent WTP prior to delivery to customers. The WTP is a conventional water filtration plant with a peak design capacity of 24 million gallons of water per day ("mgd"). The WTP was built in the 1970s concurrently with the construction of the Lake Poway reservoir. WTP influent has consisted of approximately 85% -93% raw imported water purchased from SDCW A in recent years, with the remainder comprised of precipitation and surface water runoff into Lake Poway. The raw water that is delivered to the WTP from SDCWA has historically been a blend of 60% Colorado River water and 40% State Water Project water. This blend dilutes the high salt concentration of the Colorado River water and the high nutrient content of the State Water Project water. However, the composition of water purchased from SDCW A has changed significantly in recent years to include desalinated water. See the caption "-Water Supply-Imported Water." The City has experienced water quality challenges due to low flows in water pipes and lack of turnover in storage tanks, in both instances primarily due to substantial reductions in water use, especially during periods of drought. Water System operators have worked to modify the WTP's operations to maintain water quality standards during periods of low usage. Water Quality General. The City's primary water source is untreated imported water which is supplied by SDCWA. Such supplies are treated to potable water standards at the WTP prior to delivery to customers. See the caption "-Lester J. Berglund Water Treatment Plant." The City of Poway employs two methods of disinfection: (i) chlorination, which eliminates water-borne diseases from the water supply; and (ii) chloramination, in which a combination of chlorine and ammonia is introduced into the water supply to improve quality and reduce the formation of disinfection byproducts. The disinfection process chemically deactivates and physically removes bacteria, viruses and other contaminants. The City's recycled water supplies, which are purchased from the City of San Diego, are suitable for landscape irrigation under Title 22 of the California Code of Regulations. On November 30, 2019, at the State's direction, the City issued a precautionary "boil water" advisory following a heavy rain event that caused stormwater overflow into the WTP's clearwell, resulting in discoloration of the water and complaints from Water System customers. The advisory was purely precautionary, as contamination was not detected in the Water System despite the stormwater overflow. Customers were notified of the advisory through the County's reverse 911 system and multiple other channels, including an alert to business customers in the Water System billing database. The County Department of Environmental Health also issued closure notices to food establishments in the City. The City set up two distribution points to provide bottled water to customers and distributed 117,850 gallons of water. The boil water advisory ended on December 6, 2019 when water samples over each of the prior seven days confirmed that the presence of contaminants did not exceed regulatory thresholds at any time while the advisory was in place. The outlet of the storm drain that overflowed during the rainstorm was secured to eliminate any future backflow occurrences. The City also flushed the water distribution system to ensure that all pipelines were in proper condition. See the caption "LITIGATION-City-Water System Litigation" for a discussion of certain litigation arising out of the above-described events. 4846-6549-2472v5/022468-0020 177 of 228 -20-October 19, 2021, Item #12 PFAS. In 2019, the State of California Water Resources Board's Division of Drinking Water (the "Division") lowered the Notification Levels (the "NLs") for Perfluorooctanoic acid ("PFOA") and Perfluorooctanesulfonic acid ("PFOS") to 5.1 and 6.5 parts per trillion ("PPT"), respectively. NLs are non-regulatory, precautionary health-based measures for concentrations of chemicals in drinking water that warrant notification and further monitoring and assessment. In 2020, the Division lowered the Response Level (the "RL'') for PFOA and PFOS from 70 PPT, combined, to 10 and 40 PPT, respectively. RLs are non-regulatory, precautionary health-based measures that are set at higher levels than NLs and represent thresholds at which the Division recommends that water systems remove a water source from use or treat it. PFOA and PFOS are fluorinated organic chemicals which are part of a family of synthetic compounds referred to as per-and polyfluoroalkyl substances ("PF AS"). PF AS are water and lipid resistant substances that were previously used in a variety of manufacturing processes and industrial applications. They are often present in water supplies which are impacted by wastewater treatment plant effluent or active or former military installations. The City understands that recent technological advances have enabled water agencies to detect PF AS compounds at very low concentrations. The City is not required to test its water supplies for PFAS. However, the City's goal is to ensure that all drinking water served to customers meets or exceeds all applicable State and federal water quality standards, including those related to PF AS. Imported water that SDCW A purchases from MWD has been tested for PFAS by MWD since 2013. MWD has not detected PFAS in such supplies. The City does not anticipate that implementation of the lowered PF AS RL by the Division will have a material adverse effect on the operation of the Water System or the costs thereof. The projected operating results which are set forth under the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage" do not assume significant increases in water treatment or other Water System operating costs to meet State regulations relating to PFAS. Water Supply The City has three sources of water: (i) untreated water that is imported from SDCWA, a member agency of MWD, and treated at the WTP, as discussed under the subcaption "-Imported Water" below; (ii) rainfall that is impounded at Lake Poway, the City's storage reservoir, as discussed under the subcaption "-Local Water" below; and (iii) recycled water which the City purchases from the City of San Diego, as discussed under the subcaption "-Recycled Water" below). See the captions "-Historical Water System Supply" and "-Projected Water System Supply" for historical and projected information with respect to the City's sources of water supply. Imported Water. Approximately 95.6% (11,150 acre feet) of the Water System's total water supply in Fiscal Year 2021 was imported water that the City purchased from SDCW A. SDCWA water supplies include: (i) untreated water purchased from MWD; (ii) desalinated water that SDCWA purchases from the Claude "Bud" Lewis Carlsbad Desalination Plant (the "Desalination Plant"), which is located in the City of Carlsbad northwest of the City along the Pacific Ocean; the City notes that none of the raw water that is delivered to the WTP and Lake Poway is currently derived from the Desalination Plant; (iii) Colorado River water purchased from Imperial Irrigation District ("11D"); and (iv) conserved water from projects that line the All-American and Coachella Canals. Each of these sources is described in greater detail below. SDCWA is a member agency of MWD. The imported water that is delivered to SDCWA by MWD consists of untreated State Water Project water from northern California. 4846-6549-2472v5/022468-0020 178 of 228 -21-October 19, 2021, Item #12 As an SDCW A member, the City is entitled but not obligated to purchase water from SDCW A when available at rates that are determined by SDCWA's governing board. The City currently has one representative and approximately 2.147% of the voting entitlement on SDCWA's governing board. SDCWA's rates are designed to recover SDCWA's water supply, storage and conveyance costs, as well as SDCWA's debt service payments and certain settlement obligations. SDCWA's rates are largely determined by SDCWA's own costs to purchase water from MWD. The City's practice is to recover the costs of water purchased from SDCWA through the rates that the City charges Water System customers. See the caption"-Water System Rates and Charges-General." During a prolonged drought in the late 1980s and early 1990s, MWD and SDCW A stated that reductions in deliveries due to a drought would not exceed 20% at any time. Although reduced supplies during the last Statewide drought (as discussed under the caption "-Drought Declarations") did not exceed such threshold, there can be no assurance that reductions will not exceed this threshold during future drought conditions. In the event of prolonged drought conditions, supply constraints could result in restrictions on water available to be purchased by the City, with resulting impacts on Net Revenues. SDCW A has also undertaken projects to reduce the potential for a major water shortage through a series of investments in new facilities that are part of the ESP. See the caption "-General." The ESP is a system of reservoirs, interconnected pipelines and pumping stations which are designed to make water available to the San Diego region in the event of an interruption in imported water deliveries. Projects include: (1) the Lake Hodges Projects, which connect the City of San Diego's Hodges Reservoir to SDCW A's Olivenhain Reservoir, providing 20,000 acre feet of water in Hodges Reservoir for emergency use; (2) the Olivenhain Dam and Reservoir, with a storage capacity of 24,000 acre feet of water; (3) the San Vicente Pipeline, which delivers water from San Vicente Reservoir in the eastern portion of the County to water agencies in the central and southern half of the County during emergencies; ( 4) the San Vicente Pumping Facilities, which will move up to 300 million gallons of water per day from the San Vicente Reservoir through the San Vicente Pipeline to SDCWA's water delivery system in the event of a water supply emergency; and ( 5) the San Vicente Dam Raise, which increased the height of the San Vicente Dam by 117 feet, enabling the reservoir to impound an additional 152,000 acre feet of water. Many members of SDCWA (not including the City) are developing their own local supplies, which could reduce their dependence on SDCWA supplies and thereby increase the availability of water to the City. 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 ofMWD, consisting of 14 cities, 11 municipal water districts and one county water authority (SDCWA). MWD is governed by a Board of Directors (the "MWD Board"), which currently has 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. SDCWA is MWD's largest customer and has four representatives on the MWD Board. The total population of the MWD service area is approximately 19 million. MWD member agencies request water from MWD at various delivery points within MWD's service area and pay for such water at uniform rates that are established by the MWD Board for each class of service. For planning purposes, each MWD member agency advises MWD annually in December 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's principal sources of water are Colorado River supplies which are imported through the Colorado River Aqueduct and supplies from the Lake Oroville watershed in northern California which are 4846-6549-2472v5/022468-0020 179 of 228 -22-October 19, 2021, Item #12 imported through the State Water Project. The same water rate is charged for water provided from each source. MWD's water rates are established by majority vote of the MWD Board and are not subject to regulation by the California Public Utilities Commission or any other local, State 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. MWD and SDCW A face various challenges in the continued supply of imported water to the City, including reductions in water deliveries through the State Water Project. In March 2021, the State of California Department of Water Resources ("DWR"), which operates the State Water Project, announced that allocations for water year 2020-21 would be limited to 5% of requested supplies. Allocations represent the amount of State Water Project water that DWR will deliver for the year. Allocations are reviewed monthly based on several factors, including water in storage, environmental requirements and rain and snow runoff projections. For water year 2019-20, the final State Water Project allocation was 20%. [To date, neither MWD nor SDCWA have announced supply cutbacks based on the DWR allocation announcement for water year 2020-21, although there can be no assurance that they will not do so later this year, nor has the City Council considered imposing any restrictions on water use by Water System customers.] A description of the supply challenges faced by MWD and SDCW A, as well as a variety of other operating information with respect to MWD and SDCW A, is included in certain disclosure documents prepared by MWD and SDCWA, respectively. MWD and SDCWA periodically prepare official statements and other disclosure documents in connection with their respective bonds and other obligations. MWD and SDCW A have also entered into certain continuing disclosure agreements pursuant to which they are contractually obligated for the benefit of owners of certain of their outstanding obligations to file certain annual reports, including audited financial statements and notice of certain events, pursuant to Rule l 5c2-12 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"). Such official statements, other disclosure documents, annual reports and notices are filed with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA") at http://emma.msrb.org. Such information is not incorporated herein by reference thereto, and the City makes no representation as to the accuracy or completeness of such information. NEITHER MWD NOR SDCW A HA VE ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE AUTHORITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS. MWD AND SDCWA HAVE NOT REVIEWED THIS OFFICIAL STATEMENT AND HAVE NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION THAT IS CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO MWD OR SDCWA. MWD AND SDCWA ARE NOT CONTRACTUALLY OBLIGATED, AND HAVE NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE BONDS UNDER RULE 15c2-12. Desalination Plant. SDCW A blends MWD supplies with desalinated ocean water produced at the 50 mgd capacity Desalination Plant. Although none of the raw water that is delivered to Lake Poway is currently derived from the Desalination Plant, this could change depending upon SDCW A operations and infrastructure improvements in the future, and SDCW A's purchases from the Desalination Plant provide 4846-6549-24 72v5/022468-0020 180 of 228 -23-October 19, 2021, Item #12 SDCW A and its members (including the City) with supply reliability benefits. In 2016, upon the commencement of the Desalination Plant's operations, SDCWA entered into a 30-year "take or pay" Water Purchase Agreement with the Desalination Plant's developer and owner, Poseidon Water, under which SDCW A agreed to purchase up to 56,000 acre feet of water per year. SDCW A has the option to purchase the Desalination Plant after 10 and 30 years of operation. Under the Water Purchase Agreement, the total price for the desalinated water, including related upgrades to SDCWA's pipelines and treatment facilities, is approximately $2,400 per acre foot, depending on how much water is purchased annually. Poseidon Water may only adjust the water price for inflation and in certain predefined circumstances. The Desalination Plant is located on the Pacific coast of the City of Carlsbad, northwest of the City, on six acres next to the Encina Power Station, a natural gas-fired power plant. Both the power station and the land on which the Desalination Plant sits are currently owned by NRG, a Fortune 200 energy company. NRG is in the process of shutting down and decommissioning the power station, and the Desalination Plant will operate as a standalone facility upon the shutdown of the power station. It is the first desalination plant to comply with the 2015 California Ocean Plan Amendment to advance ocean water as a reliable supplement to traditional water supplies while protecting marine life and water quality. IID. IID is an irrigation district that has senior water rights to Colorado River water. Its service area is located east of the City in Imperial County. In 1998, SDCW A entered into a transfer agreement with IID to purchase conserved agricultural water. Under the agreement, SDCWA will receive 200,000 acre feet of water in 2021, which is the maximum total annual volume that will be transferred during the remaining 53-year term of the agreement. In addition, as part of an agreement known as the Quantification Settlement Agreement which aims to reduce the State's overall reliance on Colorado River water, SDCWA also receives 77,700 acre feet of water per year for 110 years. The source of such water is supplies that are conserved from lining the All-American and Coachella Canals. SDCWA's cost of water from IID is based on the annual increase in the Gross Domestic Product Implicit Price Deflator as published by the Bureau of Economic Analysis of the United States Department of Commerce applied to the prior year price per acre foot; the 2020 price was $475 per acre foot. Beginning in 2035, if certain criteria are met, SDCW A or IID can elect a market price through a formula described in certain SDCWA-IID agreements. In addition, a shortage premium price can be imposed under certain conditions after 2035. IID faces various challenges in the continued supply of imported water to SDCW A. A description of these challenges, as well as a variety of other operating information with respect to IID, is included in certain disclosure documents prepared by IID. IID periodically prepares official statements and other disclosure documents in connection with its bonds and other obligations. IID has also entered into certain continuing disclosure agreements pursuant to which it 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 are filed with EMMA. Such information is not incorporated herein by reference thereto, and the City makes no representation as to the accuracy or completeness of such information. IID HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE AUTHORITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS. IID HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION THAT IS CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO IID. IID IS NOT CONTRACTUALLY OBLIGATED, AND HAS 4846-6549-2472v5/022468-0020 181 of 228 -24-October 19, 2021, Item #12 NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE BONDS UNDER RULE 15c2-12. Local Water. Less than 1 % (11 acre feet) of the Water System's total water supply in Fiscal Year 2021 consisted of precipitation and surface water runoff that was collected in Lake Poway. Lake Poway and Lake Poway Dam were originally completed by the Poway Municipal Water District in 1972, prior to the incorporation of the City. The dam is an earth-filled dam with a height of 165 feet. Its spillway consists of a 100-foot wide concrete span on the east side of the dam. The reservoir has a surface area of approximately 60 acres and a capacity of approximately 3,300 acre feet and serves the City as a raw water storage reservoir and regional park and recreation facility. See the captions "THE CITY-Seismic Considerations" and "THE CITY-City Insurance" for a discussion of insurance coverage for Lake Poway Dam; such insurance does not include coverage for damage as a result of seismic events. Lake Poway is normally maintained at a water surface elevation of between 930 and 933 feet, which is a few feet below the spillway, except during summer months when it is drawn down for operational purposes. It is estimated that, depending on the volume of water in the lake, the season and conservation levels, Lake Poway would have adequate water to supply the City for up to six months. Minimal surface runoff occurs in the 1,200 acre watershed upstream of Lake Poway. The City of San Diego has water rights in this watershed. The WTP typically only treats surface water from Lake Poway for a period of four to six consecutive weeks beginning in early June. By agreement, 50% of seasonal stream flow into Lake Poway must be passed on to the City of San Diego unless the City of San Diego's Hodges Reservoir overflows. In May 2010, the City identified the presence of Quagga mussels in Lake Poway. Quagga mussels are an invasive species that present a hindrance to water facilities throughout the western United States. Some of MWD' s and SDCW A's facilities have also been impacted by Quagga mussels. While Quagga mussels do not negatively impact water quality, they can be highly destructive to water system infrastructure and may require eradication and control measures to avoid reductions in water supplies. Currently, the City is monitoring the presence of the Quagga mussels in Lake Poway and submitting annual monitoring reports to the California Department of Fish and Wildlife ("CDFW") to remain compliant with CDFW regulations. However, in the future, more significant operational adjustments to mitigate Quagga mussels may be required. Although the City is unable to quantify the cost of such measures at this time, they are not expected to have a significant negative impact on the City's ability to generate Net Revenues in amounts that are sufficient to pay the Bonds. Because local water comprises such a small percentage of the City's total potable water supply, it is not considered a reliable source and is not incorporated into the City's water supply forecasts for planning purposes. Recycled Water. The City purchased approximately 499 acre feet of recycled water for delivery to approximately 213 recycled water customers in Fiscal Year 2021. The City's source of recycled water is treated wastewater produced by the City of San Diego at its North City Water Reclamation Plant, which is the facility at which the majority of the City's wastewater is treated. Under the City's agreement with the City of San Diego, the City can purchase up to 650 acre feet of recycled water per year. Currently, recycled water is delivered only to customers in the Business Park for landscape irrigation purposes. See the caption "THE CITY-Land Use and Service Area" above and the subcaption "-Future Water Supplies" below. The City's recycled water distribution system includes 12 miles of pipelines. Sales of recycled water to retail customers are on a metered basis, reducing the amount of potable water that the City is required to supply in order to meet overall demand. The City's average charge to recycled water customers was $4.25 per 100 cubic feet (748 gallons) in 2021. 4846-6549-24 72v5/022468-0020 182 of 228 -25-October 19, 2021, Item #12 Currently, recycled water demand exceeds the amount of the recycled water that can be supplied to the City by the City of San Diego. As a result, the City periodically blends potable water into recycled water deliveries to its customers, selling such water at recycled water rates. See Tables 2 and 3 under the caption "-Historical Water System Supply" and "-Historical Water System Deliveries." The City is exploring investments in alternative recycled water supply sources. See the subcaption "-Future Water Supplies" below. Future Water Supplies. The City has requested that SDCWA establish a treated water connection to the Water System from SDCWA's Ramona Aqueduct northeast of the City (the "Treated Water Project"). SDCW A's governing board approved this request in spring 2021, and the City is currently working on designing such a connection (including a pump station, pipeline and forebay tank at the WTP's clearwell), with construction expected to be completed in or about 2025 at an estimated remaining cost of approximately $26.8 million, to be financed by an additional series of Parity Bonds. See the caption "-Future Water System Improvements." The connection is expected to provide an additional source between a required minimum of 1.6 mgd and potential maximum of up to 15.5 mgd of potable water to the City and ensure water supply reliability. Those portions of the Water System service area which are not currently served by recycled water are located far from recycled water supplies and would require expensive infrastructure to connect to the City's recycled water system. However, the City may consider serving these areas in the future. Potential opportunities to expand recycled water use include: (i) full buildout of the Business Park, which is expected to occur within the next 15 years; (ii) extension of the recycled water system from the Business Park along Community Road into the central area of the City, where the City has identified 24 existing dedicated irrigation meters that could be connected and converted to recycled water supplies for a combined annual potable water savings of approximately 85 acre feet per year; and (iii) extension of the recycled water system from the Business Park along Pomerado Road into the western area of the City, where the City has identified several large customers (the City's Landscape Maintenance District, Arbolitos Park and other City-owned facilities and Poway Unified School District), that could be connected and converted to recycled water supplies for a combined annual potable water savings of approximately 92 acre feet per year. In addition to the expansion of the City's existing recycled water system, the City Council has expressed support for a conceptual recycled water project called the North County One Water Program. This project involves the expansion of the San Elijo Water Reclamation Facility to the west of the City in order to construct an advanced water purification facility that could produce between 18,000 and 25,000 acre feet of purified recycled water per year by 2035, including between 400 acre feet and 3,100 acre feet per year for the benefit of the City; the City has expressed interest in purchasing up to 2,000 acre feet per year. Such water would be suitable for potable reuse. The facility currently has key assets available for production of purified water, including an ocean outfall, available land for advanced treatment, treated secondary effluent and technically proficient staf£ Other agencies that are expected to participate in this project include the City of Carlsbad, Olivenhain Municipal Water District, San Dieguito Water District, Santa Fe Irrigation District, Vallecitos Water District, the Encina Wastewater Authority and the San Elijo Joint Powers Authority. There can be no assurance that the above-described projects will be constructed, or as to the cost or timeline for doing so. None of the projects are expected to be commenced within the next five years. Accordingly, no revenues or costs associated with such projects are included in the projected operating results of the Water System that are set forth herein. See the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage." Drought Declarations State Orders. On January 17, 2014, the Governor declared a drought state of emergency (the "Declaration") with immediate effect. The Declaration included an order encouraging local urban water suppliers, including the City, to implement their local water shortage contingency plans; the City's plan is 4846-6549-24 72v5/022468-0020 183 of 228 -26-October 19, 2021, Item #12 discussed under the subcaption "--City Response to Drought." On April 7, 2017, after significant improvement in water supply conditions across California, the Governor issued Executive Order B-40-17, which rescinded mandatory conservation measures for most California counties (including the County). In 2018, the California Governor signed Senate Bill 606 and Assembly Bill 1668 into law. These bills relate to water conservation and drought planning and empower DWR and the State of California Water Resources Control Board to adopt long-term standards for the following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined as 55 gallons per person per day ("GPCD") until January 2025; the standard will decrease over time to 50 GPCD in January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water budgets, based on these standards, for their service areas. The City is unable to predict the effect on the Water System of the implementation of Senate Bill 606 and Assembly Bill 1668 or any future legislation with respect to water conservation. However, the City believes that it will be able to meet the 55 GPCD standard for indoor water use, along with annual State-mandated water use efficiency standards, based on the City's current water demands and ongoing efforts to encourage conservation, as described below under the subcaption "--City Response to Drought." The City also has a tiered rate structure for residential customers that further promotes water use efficiency by charging a higher rate for water use in excess of maximum amounts within each tier. See the caption "-Water System Rates and Charges---Current Rates and Charges." On April 21, 2021, the Governor directed State agencies to take immediate action to bolster drought resilience and prepare for impacts on communities, businesses and ecosystems should dry conditions which have existed since 2019 continue. In addition, on July 8, 2021, the Governor declared a drought state of emergency in 50 counties in northern and central California (not including the County) and requested that all water users voluntarily reduce water use by 15%. There can be no assurance that subsequent declarations will not extend to the Water System service area should dry conditions persist in 2021 or future years. In August 2021, the federal government declared a water shortage at Lake Mead, which is a major storage reservoir on the Colorado River. As discussed under the caption "-Water Supply-Imported Water-MWD," Colorado River supplies are among the water sources for MWD, which provides water to the City's water wholesaler, SDCW A. The water shortage declaration triggered cuts in water allocations for water users in Arizona and Nevada, although not for MWD or other users in California. There can be no assurance that subsequent declarations will not extend to MWD should dry conditions persist in 2021 or future years. Water Shortage Contingency Plan. The City's water shortage contingency plan, which is referred to as the Water Conservation Plan and which meets State guidelines for such plans, calls for the City to respond to a water shortage in stages as follows: Level 1 is intended to effect a reduction in water use of up to 10% through voluntary measures. Under Level 1, wasteful use of water (including using hoses without shutoff nozzles, irrigating landscaping between the hours of 10:00 a.m. and 6:00 p.m. and washing down paved areas) is discouraged. In addition, restaurants are encouraged to offer water to customers only if requested and operators of lodging establishments are encouraged to provide guests with the option not to have linens and towels laundered daily. Level 2 is intended to effect a reduction in water use of up to 20%. Under Level 2, the Level 1 restrictions are in place, landscape irrigation is limited to scheduled times and with time limits, covers are required for pools and spas and water leaks must be repaired within 72 hours of notification by the City. Level 3 is intended to effect a reduction in water use of up to 40%. Under Level 3, the Level and 2 restrictions are in place, landscape irrigation is further limited, the washing of vehicles except at 4846-6549-2472v5/022468-0020 184 of 228 -27-October 19, 2021, Item #12 commercial car washes is prohibited and water leaks must be repaired within 48 hours of notification by the City. Level 4 is intended to effect a reduction in water use of over 40%. Under Level 4, the Level 1, 2 and 3 restrictions are in place, landscape irrigation is prohibited except for commercial growers and nurseries and water leaks must be repaired within 24 hours of notification by the City. The City is empowered to enforce its water shortage contingency plan with successively increasing fines, the installation of flow restriction devices and the termination of water service. The projected Water System operating results that are set forth under the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage" do not reflect the implementation of mandatory levels of the Water Conservation Plan. The City does not currently expect that the implementation of the Water Conservation Plan in the future will have a material adverse effect on its ability to pay the Bonds from Net Revenues. As discussed under the caption "-Water System Rates and Charges," the City's rate structure consists of variable and fixed rate components. Decreased water consumption is partially offset by a decrease in related variable costs, while fixed water charges largely cover the Water System's fixed operating and maintenance costs. In addition, the City has covenanted to set Water System rates and charges in amounts that it expects to be sufficient to pay the Bonds from Net Revenues. See the caption "SECURITY FOR THE BONDS-Rate Covenant." If a water shortage should arise again in the future, legal issues exist as to whether different California Water Code provisions or State regulations will be invoked to manage the allocation of water. Any curtailment pursuant to State orders could necessitate an increase in the City's water rates to Water System customers. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES-Proposition 218" for a discussion of certain restrictions on the City's ability to raise water rates. Historical Water System Supply The following table shows sources of supply for the Water System for the last five Fiscal Years. Table 1 City of Poway Historical Water Supply Fiscal Year Percentage Ended Imported Local Recycled Increase/ June30 Water Water Water Total (Decrease) 2017 8,165 572 494 9,231 NIA% 2018 10,751 43 473 11,267 22.06 20190) 8,844 30 387 9,261 (17.80) 2020<2) 8,795 79 411 9,285 0.26 2021 (3) 11,150 11 499 11,660 25.58 (I) Decrease reflects wet hydrological year. C2l Decrease reflects reductions in water use by commercial and industrial customers as a result of temporary business closings during the COVID-19 outbreak (as discussed under the caption "THE CITY-COVID-19 Outbreak"), as well as reduced outdoor water use as a result of mild weather conditions. (3) Increase in imported water reflects a scheduled temporary shutdown of the SDCW A aqueduct for maintenance in May 2021. Lake Poway and the City's storage tanks were filled in April 2021 to provide the City an extra 10 day supply of water during the planned shutdown. Source: City. 4846-6549-2472v5/022468-0020 185 of 228 -28-October 19, 2021, Item #12 Historical Water System Deliveries The following table shows potable and recycled water deliveries to Water System customers for the last five Fiscal Years. Table 2 City of Poway Historical Water System Deliveries in Acre Feet<1> Fiscal Year Recycled Percentage Ended Residential Commercial Other Water Increase/ June30 Customers Customers Customers<2> Customers<3> Total (Decrease) 2017 6,026 857 888 498 8,269 NIA% 2018 6,984 983 1,015 586 9,568 15.71 2019(4) 6,073 897 876 467 8,313 (13.12) 2020(5) 5,978 878 858 519 8,233 (0.96) 2021 6,801 849 1,070 604 9,324 13.25 Ol Differences between water deliveries and water supplies set forth under the caption "-Historical Water System Supply" reflect unaccounted for water, including water losses and inaccuracies in water meter readings. <2l Reflects potable water deliveries to industrial, government, irrigation, agricultural and other customers. Recycled water deliveries to such customers are reflected in the Recycled Water Customers column. <3l Potable water is periodically added to recycled water deliveries because the City of San Diego cannot provide enough recycled water to meet the demands of the City's customers. As such, deliveries to recycled water customers shown in the table exceed recycled water supplies set forth in Table 2. See the captions "-Water Supply-Recycled Water" and"-Water Supply-Future Water Supplies." (4l Decrease reflects wet hydrological year. <5l Decrease reflects reductions in water use by commercial and industrial customers as a result of temporary business closings during the COVID-19 outbreak (as discussed under the caption "THE CITY-COVID-19 Outbreak"), as well as reduced outdoor water use as a result of mild weather conditions. As shown below under the caption "-Historical Water System Sales Revenues," Revenues increased in Fiscal Year 2020 despite the reduction in water deliveries as a result of a rate increase. Source: City. Historical water deliveries reflect connections to the Water System as well as water demand, which can be affected by weather conditions, State mandates and other factors. 4846-6549-2472v5/022468-0020 186 of 228 -29-October 19, 2021, Item #12 Historical Water System Connections The following table shows the number of connections to the Water System for the last five Fiscal Years. Table 3 City of Poway Historical Water System Connections Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Connection Type 2017 2018 2019 2020 2021 Residential 12,631 12,662 12,673 12,659 12,681 Commercial 495 500 509 510 503 Other<1> ___fill ___fil§ ____m ~ _____M1 TOTAL 13,938 13,978 14,003 13,993 14,028 Percentage Increasel(Decrease) NIA 0.29% 0.18% (0.07)% 0.25% (t) Includes industrial, government, irrigation, agricultural and other customers that receive both potable and recycled water. Source: City. Historical Water System Sales Revenues The following table shows the sales revenues of the Water System for the last five Fiscal Years. Connection fees are not included in the below numbers. Table 4 City of Poway Historical Water System Sales Revenues Fiscal Year Recycled Percentage Ended Residential Commercial Other Water Increase/ June30 Customers Customers Customers<1> Customers Total (Decrease) 2017 $16,019,629 $2,412,338 $1,855,152 $1,061,001 $21,348, 120 NIA% 2018<2> 18,839,330 2,689,160 2,549,760 1,267,277 25,345,527 18.72 2019<3) 17,096,630 2,549,035 2,168,856 1,087,864 22,902,385 (9.64) 2020 18,171,834 2,687,661 2,392,584 1,337,683 24,589,762 7.37 2021 (4) 21,259,272 2,627,069 3,226,726 1,442,032 28,555,099 16.13 (I) Reflects potable water sales revenues from industrial, government, irrigation, agricultural and other customers. Recycled water sales revenues from such customers are reflected in the Recycled Water Customers column. Increase in Fiscal Year 2021 reflects the findings of the City's 2019 Cost of Service Study and a significant increase in the volumetric rate for Government customers. <2) Increase reflects imposition of drought surcharges. See the caption "-Water System Rates and Charges-Adopted Rates and Charges." <3) Decrease reflects wet hydrological year. (4) Reflects unaudited actual results based on available information to date. Source: City. Water System sales revenues reflect water deliveries as well as adopted rates and charges. See the captions "-Historical Water System Deliveries" and "-Water System Rates and Charges." 4846-6549-2472v5/022468-0020 187 of 228 -30-October 19, 2021, Item #12 Largest Water System Customers The following table shows the largest Water System customers for the Fiscal Year ended June 30, 2021, as determined by annual payments. The below table reflects information for both potable and recycled water customers of the Water System. Table 5 City of Poway Ten Largest Water System Customers Customer Customer Type General Atomics ASI Commercial Poway Medians and Parks<2) Other Poway Unified School District Other City of Poway Landscape Management District 19-1 <3) Other Heritage Custom Estates Recycled Country View Condo Association Residential Hometown Poway Royal Estates Residential Poway Community Services Lake Poway Other Vineland Hills HOA Recycled Pomerado Hospital Commercial Total (I) Reflects unaudited actual results based on available information to date. <2l These water costs are paid by the City's General Fund. Annual PaymentJ> $ 545,672 442,850 420,088 296,138 278,092 211,271 192,964 175,441 166,718 141A40 $2,870,674 Percentage of Total Water System Sales RevenuesO> 1.90% 1.54 1.46 1.03 0.97 0.74 0.67 0.61 0.58 0.49 10.00% <3l These water costs are paid by assessments on property owners in the Business Park. See the caption "THE CITY-Land Use and Service Area." Source: City. These customers accounted for approximately 10.00% of total Water System sales revenues and service charges of $28,696,436 (based on unaudited actual results) in Fiscal Year 2021. Water System Rates and Charges General. The Water System's rates and charges are set by the City Council and are not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body. The City is, however, required to comply with the notice, hearing and majority protest provisions of Article XIIID of the State Constitution, which is popularly known as Proposition 218, as to Water System rates and charges. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES-Proposition 218" for further information with respect to Proposition 218. The City annually determines the adequacy of the charge structure for water service in the service area after full consideration of expected operations, maintenance, capital costs and capital repayment obligations of the Water System. The City Council sets water rates and charges at a level that it determines is sufficient to pay all Operation and Maintenance Costs of the Water System, to make debt service payments and to maintain appropriate reserves for the Water System. On March 3, 2020, the City Council adopted rates for calendar years 2020 and 2021 (the "Rate Plan") in accordance with the provisions of Proposition 218. The adopted Rate Plan remains in place as of the date hereof. There can be no assurance that the City Council will not repeal or modify the rates that are set forth in the Rate Plan in the future or that the City's ratepayers will not approve an initiative to repeal or modify any increase in water rates and charges approved by the City Council. 4846-6549-2472v5/022468-0020 188 of 228 -31-October 19, 2021, Item #12 City staff, together with a rate consultant, are currently developing proposed Water System rates for calendar years 2022 through 2025, with a public hearing on such rates currently scheduled for November 2, 2021. Although the rate study is ongoing as of the date of this Official Statement, it is anticipated that the proposal will call for water rate increases of approximately 10% in January 2022, 9% in January 2023, 8% in January 2024 and 8% in January 2025, with the proportion of the customer bill from fixed charges increasing each year by approximately 1 %. The projected operating results which are set forth under the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage" assume Water System rate increases as described in the preceding paragraph, as well as a rate increase of approximately 6% on January 1, 2026 which is not the subject of the currently ongoing rate study. None of such rate increases have been adopted by the City Council and there can be no assurance that Water System rates will be increased as projected herein. In the event that the City Council does not adopt such rate increases as currently contemplated, Water System operating results could be materially different from the projections in this Official Statement. Adopted Rates and Charges. The City's water rates and charges include: (1) a commodity rate; and (2) a fixed bimonthly charge. ( 1) Commodity Rates. The City imposes commodity rates for residential customers on a tiered basis per hundred cubic feet of water ("HCF") used in each billing cycle. Tier 1 (0-20 HCF per bimonthly billing cycle for single family residential customers) generally reflects essential indoor use and Tier 2 (21-56 HCF per bimonthly billing cycle for single family residential customers) generally reflects average bi-monthly summer outdoor use, while Tier 3 (57+ HCF per bimonthly billing cycle) generally reflects use greater than the average bi-monthly summer outdoor use. Current commodity rates are set forth below. Source: City. 4846-6549-24 72v5/022468-0020 189 of 228 Table 6 City of Poway Water Commodity Rates per HCF Water Use Type Rate Single Family Residential Tier 1 $4.80 Single Family Residential Tier 2 5.60 Single Family Residential Tier 3 7.79 Multi-Family Residential 4.91 Landscape Irrigation 6.82 Non-Residential 5.22 Recycled 4.25 City Rate 5 .22 -32-October 19, 2021, Item #12 (2) Fixed Bimonthly Charge. The City imposes the following fixed bimonthly water service charges based on water meter size: Source: City. Table 7 City of Poway Fixed Bimonthly Water Service Charges Meter Size Potable Water Recycled Water 5/8" $ 43.00 $ 43.00 3/4" /1" fire 58.13 58.13 1" 88.39 88.39 1 ½" 164.03 164.03 2" 254.80 254.80 3" 542.25 542.25 4" 965.85 965.85 6" 1,979.46 1,979.46 8" 3,643.63 3,643.63 (3) Drought Surcharge. During the prior Statewide drought (as discussed under the caption"-Drought Declarations-State Orders"), the City imposed a drought surcharge of $0.75 per HCF of water usage in order to ensure the stability of Water System finances as customers conserved water. The surcharge was imposed from January 2016 through December 2018. There can be no assurance that the City Council will approve the imposition of drought surcharges in the future during periods of Statewide water shortages. The projected operating results which are set forth under the caption "WATER SYSTEM FINANCIAL INFORMATION-Projected Operating Results and Debt Service Coverage" do not reflect the receipt of additional Revenues from drought surcharges in the current or next four Fiscal Years. Connection Fees. The City charges a connection fee to customers for connecting to the Water System. Current connection fees are as follows: City of Poway Water System Capacity Fees Meter Size 5/8" 3/4" & /1" fire 1" 1 ½" 2" 3" 4" 6" 8" Potable Water $ 0.00 3,026.00 5,448.00 8,474.00 13,619.00 24,211.00 41,159.00 84,739.00 156,767.00 Comparison to Nearby Service Providers. The table below sets forth a comparison of the City's typical water bill (monthly equivalent) for a single family residential user to those of certain nearby water purveyors. Information for agencies other than the City is as of calendar year 2021 where available, while information for the City is as of the date of this Official Statement. 4846-6549-2472v5/022468-0020 190 of 228 -33-October 19, 2021, Item #12 Table 8 City of Poway Water Rate Comparison Water Service Provider Padre Dam Municipal Water District City of Del Mar Fallbrook Public Utility District City of Escondido Ramona Municipal Water District Rincon del Diablo Municipal Water District City of San Diego Valley Center Municipal Water District Rainbow Municipal Water District Helix Water Authority Vista Irrigation District City of Oceanside Olivenhain Municipal Water District San Dieguito Water District Sweetwater Authority City of Poway Otay Water District Yuima Municipal Water District Vallecitos Water District City of Carlsbad Santa Fe Irrigation District Lakeside Water District 3/4" Meter Bi-Monthly Fixed Rate<1J $ 86.46 112.76 137.30 94.42 76.94 N/AC2l 54.18 93.60 134.18 53.84 92.24 44.50 86.84 54.07 N/AC3l 58.13 71.26 80.94 73.10 68.88 82.85 25.26 Rate per HCF1) $7.02 5.40 6.83 7.10 6.56 7.63 5.42 5.61 3.89 5.27 4.44 5.41 3.39 3.26 4.99 4.80 3.38 4.25 3.77 4.13 2.48 4.56 Total Bi-Monthly Water BillOl $369.19 330.92 327.93 321.85 319.66 314.53 310.69 301.16 282.53 273.58 271.10 254.68 253.02 252.44 251.31 249.33 241.54 238.15 237.09 230.82 205.85 196.23 (I) Based on 3 7 units of water use and ¾" meter size. All rates reflect first tier usage only for agencies that have a tiered rate structure, including the City. Bimonthly rate equivalent is shown for agencies that bill on a monthly basis. <2) No ¾" meter rate. 5/8" meter rate is $38.30 per month (or $76.60 on a bimonthly basis) and represents the most common residential meter. <3l No¾" meter rate. 5/8" meter rate is $27.96 per bimonthly billing period and represents the most common residential meter. Source: City. Water System Collection Procedures The City is on a bimonthly billing cycle for Water System customers. A consolidated bill which includes wastewater and other utility charges is sent to customers every second month for services rendered in the prior two months. All accounts that remain unpaid on the 34th day following the delivery of an invoice incur a penalty of the lesser of 10% of the amount due or $50, and a notice is mailed to the billing address requiring payment within 14 business days. If payment is not received by the 73rd day following the original delivery of an invoice, a two-day notice of shutoff is posted at the billing address. If payment is not received by the second day following the posting of the shutoff notice, service is shut off. Accounts that have service discontinued are not reconnected without full payment of the bill and all penalties, a tagging fee, a reinstatement fee and certain other charges. As of September 1, 2021, less than 1.60% of the Water System's customers are delinquent in the payment of their bills, which is slightly higher than historical averages of approximately 0.53%. The higher delinquencies are likely the result of the COVID-19 outbreak and the suspension of water shutoffs during the outbreak. This figure reflects an aging report and reflects the total of all bills not paid during prior Fiscal Years, including amounts shown as delinquent prior to the COVID-19 outbreak. The City reports that most customers pay their bills in full, including late charges, prior to shutoff. 4846-6549-2472v5/022468-0020 191 of 228 -34-October 19, 2021, Item #12 See the caption "THE CITY---COVID-19 Outbreak" for a discussion of the suspension of water shutoffs through December 31, 2021. The suspension has prevented the City from shutting off delinquent accounts as described in the preceding paragraph, and the City Council has also waived late fees through June 30, 2021. The imposition oflate fees (although not yet their collection) resumed on July 1, 2021. As a result of the foregoing actions, the City has written off the collection of approximately $232,000 in late fees for delinquent Water System accounts that would otherwise have accrued between March 18, 2020 and June 30, 2021. Considering the continuing potential impacts of the pandemic, the City anticipates that its allowance for the write-off of uncollectible accounts will trend similar to Fiscal Year 2021, or approximately $25,000 for Fiscal Year 2022, representing approximately 0.08% of projected Water System Revenues. The City plans to offer delinquent customers longer-term payment arrangements and, if delinquencies are higher than projected, to make grant funds available to cover write-offs. Future Water System Improvements The City projects total capital improvements to the Water System of approximately $71.5 million during Fiscal Years 2022 through 2026, including: (i) the 2021 Project (as discussed under the caption "THE 2021 PROJECT"); (ii) the replacement of the existing clearwell with two concrete tanks; this project also includes the replacement of the clearwell's overflow structure, inlet, outlet and drain valves; (iii) the Treated Water Project (as discussed under the caption "-Water Supply-Future Water Supplies"); and (iv) miscellaneous water line repairs and replacements. Such capital improvements are expected to be financed by a combination of the Bonds, Water System reserves, Revenues remaining after the payment of debt service on the Bonds and two additional series of bonds which are expected to be issued in 2023 in the aggregate principal amount of approximately $30 million (the "2023 Bonds") and in 2024 in the aggregate principal amount of $25 million (the "2024 Bonds"). There can be no assurance that the City will issue the 2023 Bonds or the 2024 Bonds as currently contemplated, or at all. 4846-6549-24 72v5/022468-0020 192 of 228 -35-October 19, 2021, Item #12 Projected Water System Supply The following table shows the sources of supply for the Water System projected by the City for the current and next four Fiscal Years. Table 9 City of Poway Projected Water Supply in Acre Feet Fiscal Year Percentage Ending Imported Local Recycled Increase/ June JO Water WaterO) Water Total (Decrease) 2022 9,299 0 427 9,726 (16.59)%(2) 2023 9,562 0 434 9,996 2.78 2024 9,824 0 442 10,266 2.71 2025 10,087 0 450 10,537 2.64 2026 10,138 0 450 10,588 0.48 (IJ Because local water has historically comprised such a small percentage of the City's total potable water supply (as shown under the caption "-Historical Water System Supply"), it is not considered a reliable source and is not incorporated into the City's water supply forecasts for planning purposes. <2l Projected decrease from Fiscal Year 2021 supplies reflects a temporary increase in water supplies in Fiscal Year 2021 during a period when the City's connection to SDCWA was temporarily shut down for scheduled repairs. See Footnote (3) to Table 1 under the caption "-Historical Water System Supply." Source: City. Projected Water System Deliveries The following table shows Water System deliveries projected by the City for the current and next four Fiscal Years. Table 10 City of Poway Projected Water System Deliveries in Acre Feet Fiscal Year Recycled Percentage Ending Residential Commercial Other Water Increase/ June JO Customers Customers Customers(!) Customers Total (Decrease) 2022 6,740 614 1,945 427 9,726 4.31% 2023 6,931 631 2,000 434 9,996 2.78 2024 7,121 648 2,055 442 10,266 2.71 2025 7,311 666 2,110 450 10,537 2.64 2026 7,348 669 2,121 450 10,588 0.48 (Il Reflects projected potable water deliveries to industrial, government, irrigation, agricultural and other customers. Projected recycled water deliveries to such customers are reflected in the Recycled Water Customers column. Source: City. Water System deliveries can be affected by a number of factors, including connections to the Water System, State mandates and weather conditions. See the caption "-Projected Water System Connections" below. 4846-6549-2472v5/022468-0020 193 of 228 -36-October 19, 2021, Item #12 Projected Water System Connections The following table shows the number of retail connections to the Water System projected by the City for the current and next four Fiscal Years. Table 11 City of Poway Projected Water System Connections Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Connection Type 2022 2023 2024 2025 2026 Residential 12,756 12,831 12,906 12,982 13,058 Commercial 503 503 503 503 503 Other<1) ~ ~ ~ ~ ~ TOTAL 14,103 14,178 14,253 14,329 14,405 Percentage Increase/(Decrease) 0.53% 0.53% 0.53% 0.53% 0.53% (I) Includes industrial, government, irrigation, agricultural and other customers that receive both potable and recycled water. Source: City. Projected increases in connections reflect expectations of development within the Water System service area. Projected Water System Sales Revenues The following table shows the sales revenues of the Water System projected by the City for the current and next four Fiscal Years. The projections: (i) are based on the increases in projected water deliveries that are described under the caption "-Projected Water System Deliveries;" and (ii) assume Water System rate increases of approximately 10% in January 2022, 9% in January 2023, 8% in January 2024, 8% in January 2025 and 6% in January 2026 which have not yet been adopted by the City Council. All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no assurance that rate increases which are projected in calendar years 2022 through 2026 will be approved. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES-Proposition 218." Table 12 City of Poway Projected Water System Sales Revenues Fiscal Year Recycled Percentage Ending Residential Commercial Other Water Increase/ June30 Customers Customers Customers<1) Customers Total (Decrease) 2022 $21,916,472 $3,241,502 $2,885,619 $1,613,337 $29,656,930 3.86% 2023 25,158,654 3,721,030 3,312,499 1,852,004 34,044,187 14.79 2024 27,379,263 4,049,464 3,604,875 2,015,470 37,049,072 8.84 2025 29,665,936 4,387,668 3,905,948 2,183,798 40,143,350 8.35 2026 31,834,001 4,708,331 4,191,405 2,343,396 43,077,133 7.31 (I) Reflects projected potable water sales revenues from industrial, government, irrigation, agricultural and other customers. Projected recycled water sales revenues from such customers are reflected in the Recycled Water Customers column. Source: City. 4846-6549-24 72v5/022468-0020 194 of 228 -37-October 19, 2021, Item #12 WATER SYSTEM FINANCIAL INFORMATION Available Cash As of June 30, 2021, the Water System had approximately $14,642,782 in available cash and investments (including $10,873,584 in reserves and funds that are restricted for capital expenditures). Historical Operating Results and Debt Service Coverage The following table is a summary of operating results of the Water System for the last five Fiscal Years. These results have been derived from the audited financial statements of the City and ( for Fiscal Year 2021, unaudited numbers), but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non-cash items and include certain other adjustments. Table 13 City of Poway Historical Water System Operating Results and Debt Service Coverage Fiscal Year Ended June 30 2017 2018 2019 2020 Revenues Charges for Services(! 1 $ 21,348,120 $ 25,345,527 $ 22,902,385 $ 24,589,762 Connection Fees 101,944 238,054 82,015 142,174 Interest Revenue 31,358 113,720 378,093 469,724 Other(21 2 030 465 3 202 843 1 268 966 419 507 Total Revenues $ 23,511,887 $ 28,900,144 $ 24,631,459 $ 25,621,167 Operation and Maintenance Costs Personnel Services $ 2,352,080 $ 4,716,874 $ 5,253,694 $ 4,713,926 Maintenance and OperationsC3l 4,642,113 4,408,472 3,900,397 4,909,110 Cost of Purchased Water 12 490 034 14 852 123 13 280 941 13849989 Total Operation and Maintenance Costs $ 19,484,227 $ 23,977,469 $ 22,435,032 $ 23,473,025 Net Revenues $ 4,027,660 $ 4,922,675 $ 2,196,427 $ 2,148,142 2021<4) $ 28,555,099 149,293 139,936 1264 199 $ 30,108,527 $ 4,663,018 5,502,159 15 745 328 $ 25,910,505 $ 4,198,022 (I) (2) Includes revenues from commodity rates and fixed bimonthly charges. Decrease in Fiscal Year 2019 reflects wet hydrological year. Includes drought recovery surcharge revenues, which the City collected through December 2018 (as discussed under the caption "-Water System Rates and Charges-Adopted Rates and Charges"), insurance settlements and grant revenues. Fiscal Year 2021 amount includes refunded amount of$1,167,915 received from SDCWA in March 2021 as part of the resolution of certain litigation between MWD and SDCWA. (3) Includes pumping and utility costs. Such costs were reflected in a separate line item entitled "Administrative Expenses" in the City's audited financial statements in Fiscal Years 2018 and 2019. <41 Reflects unaudited actual results based on available information to date. Source: City. 4846-6549-2472v5/022468-0020 195 of 228 -38-October 19, 2021, Item #12 Projected Operating Results and Debt Service Coverage Estimated projected operating results for the Water System for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances (including those set forth in the footnotes to the table and the projected impacts of the COVID-19 pandemic as discussed under the caption "THE CITY-COVID-19 Outbreak"), are set forth below. All of such assumptions are material in the development of the City's financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. Table 14 City of Poway Projected Water System Operating Results and Debt Service Coverage Fiscal Year Ending June 30 2022(!) 2023 2024 2025 Revenues Charges for ServicesC2i $ 29,656,930 $ 34,044,187 $ 37,049,072 $ 40,143,350 Connection Fees<3l 363,851 871,680 82,318 135,825 Interest RevenueC4l 291,472 223,709 221,233 146,993 Otherl5l 5 800 5 800 5 800 5 800 Total Revenues $ 30,318,053 $ 35,145,376 $ 37,358,423 $ 40,431,968 Operation and Maintenance Costs Personnel ServicesC6l $ 6,910,959 $ 7,922,460 $ 8,389,153 $ 8,881,330 Maintenance and OperationsC7l 5,242,124 6,009,371 6,363,369 6,736,697 Cost of Purchased Waterl8l 16 001 862 16 443 329 17 221 469 18 049 072 Total Operation and Maintenance Costs $ 28,154,945 $ 30,375,160 $ 31,973,991 $ 33,667,099 Net Revenues $ 2,163,108 $ 4,770,216 $ 5,384,432 $ 6,764,869 Debt Service Bonds* $ 412,745 $ 767,200 $ 767,400 $ 767,200 2023 Bonds<9l 274,800 1,564,200 1,560,600 2024 BondsC9l 1124167 Total Debt Service $ 412,745 $ 1,042,000 $ 2,331,600 $ 3,451,967 Remaining Net Revenues $ 1,750,363 $ 3,728,216 $ 3,052,832 $ 3,312,902 Debt Service Coverage 5.24 4.58 2.31 1.96 Cil Reflects budgeted amounts with certain adjustments. 2026 $ 43,077,133 135,825 159,076 5 800 $ 43,377,834 $ 9,401,568 7,131,309 18 925 922 $ 35,458,799 $ 7,919,035 $ 771,600 1,556,400 I 345 000 $ 3,673,000 $ 4,246,035 1.87 (ZJ Includes projected revenues from commodity rates and fixed bimonthly charges. Assumes adoption of rate increases of approximately 10% in January 2022, 9% in January 2023, 8% in January 2024, 8% in January 2025 and 6% in January 2026. All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no assurance that rate increases which are projected in calendar years 2022 through 2026 will be approved. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES-Proposition 218." Also reflects projected impacts of COVID-19 pandemic, including projected write-offs of $25,000 as a result of increased delinquencies. See the caption 'THE CITY-COVID-19 Outbreak." <3l Reflects projected development within the City. <4J Reflects projected interest on Water System reserves at the rate of 1.0% per annum. C5> Includes service reconnection fees and other miscellaneous revenues. Projected to remain at Fiscal Year 2021 budgeted amount. (6> Projected to increase by approximately 14.6% in Fiscal Year 2023 and 5.9% per annum thereafter. <7l Projected to increase by approximately 14.6% in Fiscal Year 2023 and 5.9% per annum thereafter. (SJ Includes projected payments to SDCW A. See the captions "THE WATER SYSTEM-Water Supply-Imported Water" and "THE WATER SYSTEM-Projected Water System Supply." (9l See the caption "THE WATER SYSTEM-Future Water System Improvements." Source: City. * Preliminary, subject to change. 4846-6549-2472v5/022468-0020 196 of 228 -39-October 19, 2021, Item #12 Employee Benefits Pension Obligations. Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by GASB Statement No. 68 ("GASB 68"). GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer's balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer's actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the City's accounting and reporting requirements, but it does not change the City's pension plan funding obligations. The City participates in a Miscellaneous Plan to fund pension benefits for employees that serve the Water System. The City's pension plan is administered by CalPERS. CalPERS administers agent multiple-employer public employee defined benefit pension plans for all of the City's full-time and certain part-time employees. CalPERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and administrative agent for participating public entities within the State, including the City. CalPERS plan benefit provisions and all other requirements are established by State statute and the City Council. City employees are subject to different benefit levels based on their hire date. Current benefit provisions for City employees are set forth below. Table 15 City of Poway CalPERS Miscellaneous Plan -Summary of Benefit Provisions Employees Hired On Employees or After January 1, Employees Hired On or Hired Before 2011 and Before After January 1, 2013 (Not January 1, 2011 January 1, 2013 Prior Ca/PERS Members) Benefit Formula 2.0%@age 55 2.0%@age 60 2.0%@age 62 Benefit Vesting 5 years of 5 years of service 5 years of service service Benefit Payments Monthly for life Monthly for life Monthly for life Minimum Retirement Age 50-63 50-63 52-67 Monthly Benefits as % of 3.0% 1.092% -2.418% 1.0%-2.5% Eligible Compensation Employee Normal Cost 7.0%(l) 7.0%(l) 6.25%(l) Employer Normal Cost Rate 8.74%(2) 8.74%(2) 8.74%(2) <1> Employees are required to make the full employee contribution themselves. The City does not make any portion of the employee contribution. <2> The Employer Normal Cost Rate shown is a blended rate for all benefit groups in the plan. For a breakout of the normal cost by benefit group, refer to the most recent actuarial valuation. Source: City. Contributions to the City's pension plan consist of: (a) contributions from plan participants (i.e., employees); and (b) contributions by the City. City employees who were hired on or after January 1, 2013 and who were not previously CalPERS members receive benefits based on 2.0% at age 62 formula. Such employees are required to make the full 4846-6549-2472v5/022468-0020 197 of 228 -40-October 19, 2021, Item #12 amount of required employee contributions themselves under the California Public Employees' Pension Reform Act of 2013 ("AB 340"), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income as noted below. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non-qualified service credit. Table 16 City of Poway Pensionable Income Caps for Calendar Year 2021 (AB 340 and Non-AB 340 Employees) Maximum Pensionable Income Maximum Pensionable Income if also Participating in Social Security Source: City. Employees Hired Before January 1, 2013 (Non-AB 340 Employees) $290,000 NIA Employees Hired On or After January 1, 2013 (AB 340 Employees) $153,671 $128,059 Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the City's unfunded pension lability and potentially reduce City contribution levels in the long term. The City is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the CalPERS actuary and are effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The total minimum required employer contribution is the sum of: (i) the plan's employer normal cost rate, which funds pension benefits for current employees for the upcoming Fiscal Year ( expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees (billed monthly). For Fiscal Year 2021, required employer normal cost rates as a percentage of payroll were 9.241% for Miscellaneous Plan employees. For Fiscal Year 2022, required employer normal cost rates as a percentage of payroll are 8.74% for Miscellaneous Plan employees. For Fiscal Year 2021, the total required employer payment of the unfunded accrued liability for the City's Miscellaneous Plan was $2,038,345. For Fiscal Year 2022, the total required employer payment of the unfunded accrued liability for the City's Miscellaneous Plan is $2,093,354. Beginning in Fiscal Year 2018, CalPERS began collecting employer contributions toward a pension plan's unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only. Contributions toward a pension plan's unfunded liability will continue to be collected as set dollar amounts. The City's required contributions to CalPERS fluctuate each year and, as noted, include a normal cost component and a component that is equal to an amortized amount of the unfunded liability. Many assumptions 4846-6549-2472v5/022468-0020 198 of 228 -41-October 19, 2021, Item #12 are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City's required contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City's required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2011 through 2021 report investment gains of approximately 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City. The City notes that CalPERS' earnings in Fiscal Year 2020 were below its investment targets as a result of stock market declines in the wake of the CO VID-19 outbreak, which could increase future contribution rates for plan participants, including the City. See the caption "THE CITY----COVID-19 Outbreak." On December 21, 2016, the CalPERS Board of Administration voted to lower its discount rate from 7.50% to 7.00% over a three period. For public agencies such as the City, the new discount rate took effect July 1, 2017. Lowering the discount rate means that employers which contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 will also see their contribution rates rise under AB 340. The reduction of the discount rate will result in average employer rate increases of approximately 1 % to 3% of normal cost as a percentage of payroll for most retirement plans such as the City's plans. Additionally, many employers will see a 30% to 40% increase in their current unfunded accrued liability payments (relative to the unfunded accrued liability payments projected in the June 30, 2015 valuation report) for pension plans. These payments are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the long-term. The announcement on July 12, 2021 that CalPERS achieved an investment return of21.3% for Fiscal Year 2021 could cause the CalPERS Board of Administration to lower CalPERS' discount rate from 7 .00% to 6.80% in accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then-current discount rate by two or more percentage points. There can be no assurance as to whether or when the CalPERS Board of Administration will consider lowering the discount rate. Portions of the above disclosures are primarily derived from information that has been produced by Ca/PERS, its independent accountants and its actuaries. The City has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CalP ERS. The comprehensive annual financial reports of CalP ERS are available on CalP ERS' Internet website at www.calpers.ca.gov. The Ca/PERS website also contains Ca/PERS' most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City, the Authority and the Underwriter cannot guarantee the accuracy of such information. Actuarial assessments are "forward-looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The City's Miscellaneous Plan had a total net pension liability of $37,937,485 for Fiscal Year 2021 ( as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The City's total pension assets include funds that are held by CalPERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020, the City incurred Miscellaneous Plan pension expenses of$3,324,147. 4846-6549-2472v5/022468-0020 199 of 228 -42-October 19, 2021, Item #12 A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2021 is shown below. Table 17 City of Poway Actuarial Assumptions for CalPERS Miscellaneous Plan Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Entry Age Normal in accordance with the requirements ofGASB 68 Market Value of Assets Discount Rate Inflation 7.15% 2.625% Varies by entry age and service Salary Increases Investment Rate of Return 7.25% net of pension plan investment and administrative expenses; includes projected inflation rate of 2.625% Mortality Rate Table(!) Derived using CalPERS' membership data for all funds (I) The mortality table used was developed based on CalPERS-specific data from a 2017 actuarial experience study for the period from 1997-2015. Source: City. Changes in the net pension liability for the City's pension plans in Fiscal Year 2021 were as follows: Table 18 City of Poway Changes in CalPERS Miscellaneous Plan Net Pension Liability Balance at June 30, 2019 Balance at June 30, 2020 Net Changes for period from July 1, 2019 through June 30, 2020 Source: City. Total Pension Liability $ 121,097,015 123,709,519 $ 2,612,504 Increase I (Decrease) Plan Fiduciary Net Position $ 84,198,605 85,772,034 $ 1,573,429 Net Pension Liability I (Asset) $ 36,898,410 37,937,485 $ 1,039,075 The table below presents the net pension liability of the City's pension plans, calculated using the discount rate applicable to Fiscal Year 2021 (7 .15% ), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower ( 6.15%) or 1 percentage point higher (8.15%) than the Fiscal Year 2020 rate: Table 19 City of Poway Sensitivity of CalPERS Miscellaneous Plan Net Pension Liability to Changes in the Discount Rate Discount Rate -1 % Plan's Net Pension Liabilityl(Asset) (6.15%) Miscellaneous Plan $53,469,914 Source: City. 4846-6549-2472v5/022468-0020 200 of 228 -43-Applicable Discount Rate (7.15%) $37,937,485 Discount Rate + 1 % (8.15%) $25,029,869 October 19, 2021, Item #12 In August 2021, the City Council approved the issuance of pension obligation bonds, the proceeds of which, if issued, would be applied to pay a portion of the City's CalPERS Miscellaneous pension plan liability, among other things. The pension obligation bonds are currently the subject of a judicial validation proceeding and there can be no assurance that such bonds will be issued, or as to the timing or amount of any such issuance. If issued, the pension obligation bonds would not be payable from Revenues of the Water System. For additional information relating to the City's CalPERS Miscellaneous pension plan, see Note 8 to the City's audited financial statements set forth in Appendix A. PARS Retirement Enhancement Plan. The City also provides a supplemental retirement benefit plan that is administered by Public Agency Retirement Services (the "PARS Plan") to employees who operate the Water System and who began working for the City prior to January 10, 2012. The PARS Plan is an agent, single-employer supplemental defined benefit plan that provides a benefit which is equal to the difference between the Public Agency Retirement Services 2.7% at age 55 plan benefit and the CalPERS 2.0% at age 55 plan benefit, multiplied by each employee's final compensation for all years of covered service. Should an eligible employee die before receiving benefits, the PARS Plan benefits are payable to surviving spouses as an annuity as if the employee had retired. Employees are not required to contribute to the PARS Plan. For Fiscal Years 2020 and 2021, the City incurred pension expenses of $913,514 and $1,104,660 (not including GASB 68 adjustments) for the PARS Plan. Current benefit provisions for under the PARS Plan are set forth below. Table 20 City of Poway PARS Plan -Summary of Benefit Provisions Benefit Formula Benefit Vesting Benefit Payments Minimum Retirement Age Monthly Benefits as % of Eligible Compensation Employee Normal Cost Source: City. Employees Hired Before January 10, 2012 2.7%@ age 55 less CalPERS 2.0% at age 55 From date of hire Life only Annuity 55 13.54% None A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2021 is shown below. 4846-6549-2472v5/022468-0020 201 of 228 Table 21 City of Poway Actuarial Assumptions for PARS Plan -44-October 19, 2021, Item #12 Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Entry Age Normal in accordance with the requirements of GASB 68 NIA Discount Rate Inflation 6.50% 2.50% 3.40% -9.10% 6.50% Salary Increases Investment Rate of Return Mortality Rate Table(l) Derived using CalPERS' Miscellaneous Non-Industrial Rates Source: City. Changes in the net pension liability for the City's pension plans in Fiscal Year 2021 were as follows: Table 22 City of Poway Changes in PARS Plan Net Pension Liability Balance at June 30, 2019 Balance at June 30, 2020 Net Changes for period from July 1, 2019 through June 30, 2020 Source: City. Total Pension Liability $ 19,523,219 20,223,866 $ 700,647 Increase I (Decrease) Plan Fiduciary Net Position $ 16,946,740 17,220,704 $ 273,964 Net Pension Liability I (Asset) $ 2,576,479 3,003,162 $ 426,683 The table below presents the net pension liability of the City's pension plans, calculated using the discount rate applicable to Fiscal Year 2020 ( 6.50% ), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.50%) or 1 percentage point higher (7.50%) than the Fiscal Year 2020 rate: Table 23 City of Poway Sensitivity of PARS Plan Net Pension Liability to Changes in the Discount Rate Discount Rate -1 % Plan's Net Pension Liability/(Asset) (5.50%) Miscellaneous Plan $4,934,041 Source: City. Applicable Discount Rate (6.50%) $3,003,162 Discount Rate + 1 % (7.50%) $984,894 For additional information relating to the City's PARS Plan, see Note 9 to the City's audited financial statements set forth in Appendix A. No Post-Employment Benefits. The City does not currently provide post-retirement health benefits to any of its employees. 4846-6549-2472v5/022468-0020 202 of 228 -45-October 19, 2021, Item #12 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority, special district or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The "base year" for establishing such appropriation limit is the 1978-79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or ( c) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent that such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts that are permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit, including payments of indebtedness that were existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters, and payments that are required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly. The City is of the opinion that its charges for Water Service do not exceed the costs that it reasonably bears in providing such service and therefore are not subject to the limits of Article XIIIB. See the caption "SECURITY FOR THE BONDS-Rate Covenant" for a description of the City's covenant to set rates and charges for the Water Service. Proposition 218 General. An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the "Title and Summary" of the Initiative prepared by the State Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Article XI/ID. Article XIIID defines the terms "fee" and "charge" to mean "any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property-related service." A "property-related service" is defined as "a public service having a direct relationship to property ownership." Article XIIID further provides that reliance by an agency on any parcel map (including an assessor's parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership. Article XIIID requires that any agency which imposes or increases any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or 4846-6549-2472v5/022468-0020 203 of 228 -46-October 19, 2021, Item #12 charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, because fees for water service are a "fee" or "charge" as defined in Article XIIID, the local government's ability to increase such fees or charges may be limited by a majority protest. In addition, Article XIIID includes a number of limitations that are applicable to existing fees and charges, including provisions to the effect that: ( a) revenues that are derived from the fee or charge may not exceed the funds which are required to provide the property-related service; (b) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; ( c) the amount of a fee or charge that is imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and ( d) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted. Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water and wastewater services that are "primarily based on the amount consumed" (i.e., metered water or wastewater rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The State Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the "Bighorn Case"), however, that fees for ongoing water service through an existing connection were property-related fees and charges. The State Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The City complies with the notice, hearing and protest procedures in Article XIIID, as further explained by the State Supreme Court in the Bighorn Case, with respect to water rate increases. On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the "SJC Case") upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage, including the capital costs of improvements to provide additional increments of water. The opinion included a finding that the City of San Juan Capistrano did not make any attempt to calculate the actual costs of providing water at various tier levels. The City's current residential water rate structure includes tiered rates based on usage. The City has reviewed the SJC Case decision and does not expect the decision to affect its rate structure. The City believes that its current water rates comply with the requirements of Proposition 218 because they are tied to the cost of service and capital improvements, and expects that any future water rate increases will comply with Proposition 218' s procedural and substantive requirements to the extent applicable thereto. Article XII/C. Article XIIIC provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does not define the terms "local tax," "assessment," "fee" or "charge," so it was unclear whether the definitions set forth in Article XIIID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the State Supreme Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. On August 3, 2020, the State Supreme Court issued an opinion in Wilde v. City of Dunsmuir (Cal. S. Ct. S252915) holding that taxpayers do not have the right under Proposition 218 to challenge water rates by referendum, and the City does not believe that Article XIIIC grants to the voters within the City the power (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under 4846-6549-2472v5/022468-0020 204 of 228 -47-October 19, 2021, Item #12 Article XIIIC) to repeal or reduce rates and charges for the Water Service in a manner that would interfere with the contractual obligations of the City or the obligation of the City to maintain and operate the Water System. However, there can be no assurance as to the availability of particular remedies adequate to protect the Beneficial Owners of the Bonds. Remedies that are available to Beneficial Owners of the Bonds in the event of a default by the City are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. So long as the Bonds are held in book-entry form, DTC ( or its nominee) will be the sole registered owner of the Bonds and the rights and remedies of the Bond Owners will be exercised through the procedures of DTC. Proposition 26 On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of "tax" to include "any levy, charge, or exaction of any kind imposed by a local government" except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; ( c) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; ( d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; ( e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 applies to charges imposed or increased after November 2, 2010 and provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity. The City believes that its water rates and charges meet the exception that is described in clause (g) above and are not taxes under Proposition 26. Future Initiatives Articles XIIIB, XIIIC and XIIID and Proposition 26 were adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiatives could be proposed and adopted affecting the City's revenues or ability to increase revenues. CERTAIN RISKS TO BONDHOLDERS The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal of or interest on the Bonds. Limited Obligations The obligation of the City to pay the Series 2021 Installment Payments is a limited obligation of the City and is not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of 4846-6549-24 72v5/022468-0020 205 of 228 -48-October 19, 2021, Item #12 its income or receipts, except Revenues of the Water System. The obligation of the City to pay the Series 2021 Installment Payments does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Accuracy of Assumptions To estimate the Net Revenues available to pay the Series 2021 Installment Payments, the City has made certain assumptions with regard to various matters, including but not limited to future development within the City and increases in revenues resulting therefrom, the rates and charges to be imposed in future years, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The City believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the Series 2021 Installment Payments will, in all likelihood, be less than those projected herein. The City may choose, however, to maintain compliance with the rate covenant that is set forth in the Indenture in part by means of contributions from the Rate Stabilization Fund or other available reserves or resources. In such event, Net Revenues may generate amounts which are less than 120% of Debt Service in any given Fiscal Year. See the captions "SECURITY FOR THE BONDS-Rate Covenant," "SECURITY FOR THE BONDS-Rate Stabilization Fund" and "WATER SYSTEM FINANCIAL INFORMATION-Projected Water System Operating Results and Debt Service Coverage." Water System Demand There can be no assurance that the demand for Water Service will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE BONDS-Rate Covenant." Demand for Water Service could be reduced or may not occur as projected by the City as a result of reduced levels of development in the City's service area, hydrological conditions, an economic downturn (including as a result of the COVID-19 outbreak that is discussed under the caption "THE CITY-COVID-19 Outbreak"), voluntary conservation efforts or mandatory State conservation orders in response to drought conditions and other factors. System Expenses There can be no assurance that the City's expenses will be consistent with the descriptions in this Official Statement. Operation and Maintenance Costs may vary with labor costs (including costs related to pension liabilities and the costs of retaining qualified personnel with the proper certifications to operate Water System treatment and other facilities), water treatment costs, energy costs, regulatory compliance costs, increased imported water purchase costs (including as a result of drought restrictions) and other factors. Much of the City's water supply is sold to the City by SDCWA, which in turn purchases a large portion of its water from MWD. Increases in SDCW A or MWD costs or changes in such agencies' operations over which the City has no control could impact the City's cost of water to supply its customers. See the caption "THE WATER SYSTEM-Water Supply-Imported Water." In addition, continued drought conditions and State or federal orders in response thereto could increase the cost of water for MWD and/or SDCWA, which increases would be expected to be passed on to the City. See the caption "THE WATER SYSTEM-Drought Declarations." Increases in Operation and Maintenance Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE BONDS-Rate Covenant." Rate increases are subject to the provisions of Proposition 218 and there can be no assurance that the City will be able to increase rates as needed to address increases in Water System expenses. See the caption "-Rate-Setting Process under Proposition 218." 4846-6549-24 72v5/022468-0020 206 of 228 -49-October 19, 2021, Item #12 Limited Recourse on Default If the City defaults on its obligation to pay the Series 2021 Installment Payments, the Trustee, as assignee of the Authority, has the right to declare the total unpaid principal amount of the Series 2021 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, in the event of a default and such acceleration, there can be no assurance that the City will have sufficient funds to pay such accelerated amounts from Net Revenues. Rate-Setting Process under Proposition 218 Proposition 218, which added Articles XIIIC and XIIID to the State Constitution, affects the City's ability to maintain existing Water System rates and impose rate increases, and no assurance can be given that future proposals to increase Water System rates will not encounter majority protest opposition or be challenged by initiative action authorized under Proposition 218. In the event that future proposed Water System rate increases cannot be imposed as a result of majority protest or initiative, the City might thereafter be unable to generate Net Revenues in the amounts required by the Installment Purchase Agreement to pay the Series 2021 Installment Payments. The City believes that its current Water System rates approved by the City Council were effected in accordance with the public hearing and majority protest provisions of Proposition 218. See the caption "CONSTITUTIONAL LIMIT A TIO NS ON APPROPRIATIONS AND CHARGES-Proposition 218." Statutory and Regulatory Compliance Laws and regulations governing treatment and delivery of water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase. Claims against the Water System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Water System and constitute Operation and Maintenance Costs or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for municipal water systems such as that operated by the City may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders can also impose substantial additional costs on the City. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the City to generate Net Revenues in amounts that are sufficient to pay the Bonds. Natural Disasters The occurrence of any natural disaster in the City, including, without limitation, earthquake, wildfire, drought, high winds, landslide or flood, could have an adverse material impact on the economy within the City and the revenues available for the payment of the Bonds and result in substantial damage to and interference with the operations of the Water System. Significant earthquake faults are located in the region surrounding the City. See the caption "THE WATER SYSTEM-Seismic Considerations." Seismic activity could subject areas of the City to widespread flooding in the event of a failure of Lake Poway Dam. See the caption "THE WATER SYSTEM-Water Supply-Local Water." In addition, several wildfires have burned structures in and near the City in recent years. The Installment Purchase Agreement does not require the City to maintain earthquake insurance and the City currently does not maintain such insurance. The City maintains liability insurance for the Water System and property casualty insurance ( for losses other than from seismic events) for certain portions of the 4846-6549-2472v5/022468-0020 207 of 228 -50-October 19, 2021, Item #12 Water System. See the caption "THE CITY-City Insurance." However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Furthermore, significant portions of the Water System, including underground pipelines, are not covered by property casualty insurance. Damage to such portions of the Water System as a result of natural disasters would result in uninsured losses to the City. Limitations on Remedies The ability of the City to comply with its covenants under the Installment Purchase Agreement and to generate Net Revenues in amounts that are sufficient to pay the Series 2021 Installment Payments may be adversely affected by actions and events that are outside of the control of the City and may be adversely affected by actions taken ( or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. See the caption "CONSTITUTIONAL LIMIT A TIO NS ON APPROPRIATIONS AND CHARGES-Proposition 218." Furthermore, the remedies that are available to the owners of the Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. In addition, usual equity principles may limit the specific enforcement under State law of certain remedies, as may 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 serving a significant and legitimate public purpose. Bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium proceedings and other laws relating to or affecting creditors' rights, or the exercise of powers by the federal or State government, if initiated, could subject the Beneficial Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights. Remedies may be limited because the Water System serves an essential public purpose. The opinion to be delivered by Bond Counsel concurrently with the issuance of the Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the Series 2021 Installment Payments, which secure the payments of principal of and interest on the Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the Bonds. Loss of Tax Exemption In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the City have covenanted in the Indenture and the Installment Purchase Agreement, respectively, to comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code"), and not to take any action or fail to take any action if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds thereunder. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of such Bonds as a result of acts or omissions of the Authority or the City in violation of this or other covenants in the Indenture or the Installment Purchase Agreement. The Bonds are not subject to redemption or any increase in interest rates should an event of taxability occur and will remain outstanding until maturity or prior redemption in accordance with the provisions contained in the Indenture. See the caption "TAX MATTERS." 4846-6549-2472v5/022468-0020 208 of 228 -51-October 19, 2021, Item #12 Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the 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 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. Parity Obligations The Installment Purchase Agreement permits the City to enter into Parity Bonds and Contracts payable from Net Revenues on a parity with the Series 2021 Installment Payments, which secure the Bonds, subject to the terms and conditions set forth therein. The entry into of Parity Bonds and Contracts could result in reduced Net Revenues available to pay the Series 2021 Installment Payments. The City has covenanted to maintain coverage of at least 120% of Debt Service, as further described under the caption "SECURITY FOR THE BONDS-Additional Parity Bonds and Contracts." Climate Change The State has historically been susceptible to wildfires and hydro logic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the City is difficult to predict, but it could be significant and it could have a material adverse effect on the Water System's finances by requiring greater expenditures to counteract the effects of climate change, by changing the business and activities of Water System customers or by increasing the cost or decreasing the availability of water supplies from MWD and/or SDCWA. See the captions "-System Expenses" and "THE WATER SYSTEM-Drought Declarations." Cyber Security The City relies on computers and technology to conduct its operations. The 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 cyber security incidents affecting municipal agencies, including a freeze affecting computer systems of the City of Atlanta, an 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. The City's Information Technology Department employs a multi-level cyber protection scheme that includes firewalls, anti-virus software, anti-spam/malware software, intrusion protection, intrusion 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 also contracts with third party vendors to monitor and augment internal and external monitoring of the City's computer systems. The City's network topology employs firewalls at the core of its network to inspect, categorize and accept or reject all traffic between its internal and external virtual local area networks and networks. The City also contracts with a third-party vendor for cybersecurity training for all staff as well as conducting regular simulated phishing campaigns. In 2017, the City implemented redundant, machine learning, next generation firewalls that perform deep packet inspection of Transport Layer Security/Secure Socket Layer encrypted traffic both inbound and outbound. All traffic must also pass through devices managed by a third party security vendor to further inspect all inbound and outbound traffic. Email is inspected inbound and outbound by a cloud email filtering service, and there are measures in place to protect against spoofing internal addresses. These 4846-6549-2472v5/022468-0020 209 of 228 -52-October 19, 2021, Item #12 measures prevent most malicious email traffic from ever traversing the City's Internet links. To further protect against the specific threat of file/Server Message Blocking-based attacks such as crypto viruses, the City employs numerous file screens and filtering on its servers and desktops to catch and prevent this class of attack before it is able to cause damage. The City also practices the principle of least privilege across all of its systems and maintains regular, redundant, on and offline backups to minimize damage and allow for quick recovery in the event of an attack. The City has not experienced a successful attack against its network and servers since the above security measure have been put in place. Over six years ago, the City experienced a successful ransomware attack that affected a small number of files. The City was able to immediately isolate the issue and recover. 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 and disaster recovery planning. Rate Covenant Not a Guarantee The Series 2021 Installment Payments, which secure the Bonds, are payable from Net Revenues of the Water System. See the caption "SECURITY FOR THE BONDS." The City's ability to pay the Series 2021 Installment Payments depends on its ability to generate Net Revenues at the levels required by the Installment Purchase Agreement. Although the City has covenanted in the Installment Purchase Agreement to impose rates and charges as more particularly described under the caption "SECURITY FOR THE BONDS-Rate Covenant," and although the City expects that sufficient Revenues will be generated through the imposition and collection of such rates and charges, there is no assurance that the imposition and collection of such rates and charges will result in the generation of Net Revenues in amounts that are sufficient to pay the Series 2021 Installment Payments. Among other matters, the availability of and demand for water and changes in law and government regulations could adversely affect the amount of Revenues realized by the City. The failure to generate sufficient Revenues to pay the Series 2021 Installment Payments does not constitute a default or Event of Default under the Installment Purchase Agreement or the Indenture, provided that the City has set rates and charges at levels that it reasonably expects will generate sufficient Revenues at the beginning of each Fiscal Year. THE AUTHORITY The Authority is a public body that is duly organized and existing under the Joint Exercise of Powers Agreement, dated October 8, 1991 (the "JPA Agreement"), by and between the City and the Successor Agency to the Poway Redevelopment Agency (the "Successor Agency"), and under the Constitution and laws of the State. The Authority was formed for the purpose of assisting in the financing and refinancing of capital improvement projects of the City and related entities and to finance working capital for the City by exercising the powers referred to in the JP A Agreement, including the power to issue bonds to pay the costs of public improvements. Neither the City nor the Successor Agency is responsible for repayment of the obligations of the other. The members of the Board of Directors of the Authority are the Mayor and members of the City Council of the City. APPROVAL OF LEGAL PROCEEDINGS The valid, legal and binding nature of the Bonds is subject to the approval of Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach, California, acting as Bond Counsel. The form of such legal opinion is set forth in Appendix C, and such legal opinion will be attached to each Bond. Certain matters will be passed upon for the City and the Authority by Rutan and Tucker LLP, Irvine, California, as City Attorney and General Counsel to the Authority, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California, and for the Trustee by its counsel. 4846-6549-24 72v5/022468-0020 210 of 228 -53-October 19, 2021, Item #12 LITIGATION City General. At the time of delivery of and payment for the Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the City, threatened against the City affecting the existence of the City or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that could have a material adverse effect on the City's ability to pay the Series 2021 Installment Payments, in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement or any action of the City contemplated by any of said documents, in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto or contesting the powers of the City or its authority with respect to the Bonds or any action of the City contemplated by any of said documents, nor to the knowledge of the City, is there any basis therefor. Water System Litigation. As discussed under the caption "THE WATER SYSTEM-Water Quality-General," the City issued a precautionary "boil water" advisory for a one-week period following a heavy rain event that caused stormwater overflow into the WTP's clearwell. Two lawsuits were filed in connection with the advisory, one a class action seeking damages for lost profits on behalf of local restaurants that closed during the period that the advisory was in effect (Pina Smoothies, LLC, et al. v. City of Poway, Superior Court of San Diego, Case No. 37-2020-00018626) and one asserting that contaminants in the City's water caused personal injury to an individual and damages to approximately 20 local restaurants (DCVE CORP., et. al. v. City of Poway, Superior Court of San Diego, Case No. 37-2020-00042487). These cases have been consolidated for the purposes of setting a trial date, with DYCE CORP. case as the lead case. The City believes that it has meritorious legal arguments against the plaintiffs' claims, but can provide no assurance as to as to how the court will ultimately rule on the claims or as to the timing thereof. The City estimates that the potential liability could be up to several million dollars, plus attorneys' fees. Both cases are currently in discovery, with no trial date set nor dispositive motions filed. The City's prior pollution insurance carrier, Tokio Marine Specialty Insurance Company, is defending the City in these matters, with a full reservation of rights. In addition, three complaints have been filed in federal court against the City in the matter of Kelly v. City of Poway, District Court for the Southern District of California, Case Nos. 3:18-cv-02615, 3:19-cv-1803 & 3:21-cv-00611. Two of the complaints have been consolidated, with the third currently subject to a pending motion to stay. The plaintiff, an individual property owner in the City, has alleged violations of the Clean Water Act and Endangered Species Act, as well as a supplemental state trespass claim, relating to damage to the plaintiffs property and alleged discharges into Lake Poway. The plaintiff seeks an order compelling the City to buy his property for $2,850,000 and undertake a wetlands improvement project, as well as civil penalties and attorneys' fees. Although the litigation could become costly and discovery-intensive if not disposed of during the initial pleading stage, the City believes that the plaintiffs claims are without merit and has filed a motion to dismiss the actions. The motion has been fully briefed and pending for well over a year and the City is unable to estimate when the court will issue a ruling thereon. In the event that the City does not prevail, the plaintiff could be entitled to a large attorneys' fees award. The City's former pollution insurance carrier, Tokio Marine Specialty Insurance Company, is defending the City in these matters, with a full reservation of rights, and therefore the City is currently incurring very limited costs with respect thereto. At this time, the City does not believe that an adverse outcome in the above-described matters would have a material adverse effect on the City's ability to make the Series 2021 Installment Payments from Net Revenues. 4846-6549-2472v5/022468-0020 211 of 228 -54-October 19, 2021, Item #12 Authority At the time of delivery of and payment for the Bonds, the Authority will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the Authority, threatened against the Authority affecting the existence of the Authority or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that could have a material adverse effect on the Authority's ability to pay the Bonds, in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement or any action of the Authority contemplated by any of said documents, in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto or contesting the powers of the Authority or its authority with respect to the Bonds or any action of the Authority contemplated by any of said documents, nor to the knowledge of the Authority, is there any basis therefor. TAX MATTERS In the opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the Authority, the City and others and is subject to the condition that the Authority and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority and the City have covenanted to comply with all such requirements. In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Bond. The amount of original issue discount that accrues to the Beneficial Owner of a Bond is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals, and is exempt from State of California personal income tax. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity ( or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax-exempt interest received with respect to the Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the 4846-6549-24 72v5/022468-0020 212 of 228 -55-October 19, 2021, Item #12 original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. 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 similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code ( or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS, INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Y occa Carlson & Rauth, a Professional Corporation. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the City continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. Should interest (and original issue discount) on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture. A copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C. CONTINUING DISCLOSURE The City has covenanted in a Continuing Disclosure Agreement, dated the date of issuance of the Bonds (the "Continuing Disclosure Agreement"), for the benefit of the Owners and Beneficial Owners of the 4846-6549-2472v5/022468-0020 213 of 228 -56-October 19, 2021, Item #12 Bonds, to provide certain financial information and operating data relating to the City by not later than each April 1 following the end of the City's Fiscal Year (currently its Fiscal Year ends on June 30) (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the City with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12. [DISCLOSURE RE PAST COMPLIANCE TO COME]. In order to assure compliance with its continuing disclosure obligations going forward, the City has appointed U.S. Bank National Association as its dissemination agent to assist it with the submission of continuing disclosure filings under the Continuing Disclosure Agreement. In addition, the City's debt management policy includes continuing disclosure compliance policies and procedures. See the caption "THE CITY-Governance and Management-Management Policies-Debt Management Policy." RATING The City expects that S&P Global Ratings, a Standard & Poor's Financial Services LLC business ("S&P"), will assign the Bonds the rating of "[_J". Future events, including the impacts of the COVID-19 pandemic that is described under the caption "THE CITY----COVID-19 Outbreak," could have an adverse impact on the rating of the Bonds, and there is no assurance that any credit rating that is given to the Bonds will be maintained for any period of time or that the rating may not be qualified, downgraded, lowered or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such qualification, downgrade, lowering or withdrawal of the rating may have an adverse effect on the market price of the Bonds. The rating reflects only the views of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, a rating agency bases its ratings on the information and materials furnished to it (which may include information and material from the City that is not included in this Official Statement) and on investigations, studies and assumptions of its own. The City has covenanted in the Continuing Disclosure Agreement to file notices of any rating changes on the Bonds with EMMA. See the caption "CONTINUING DISCLOSURE" and Appendix E. Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from the rating agencies prior to the time that such information is provided to the City and prior to the date by which the City is obligated to file a notice of rating change. Purchasers of the Bonds are directed to the rating agencies and their respective websites and official media outlets for the most current ratings with respect to the Bonds after the initial issuance of the Bonds. In providing a rating on the Bonds, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology, which may not reflect the provisions of the Indenture. The City and the Authority make no representations as to any such calculations, and such calculations should not be construed as a representation by the City or the Authority as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose. MUNICIPAL ADVISOR The City has retained Fieldman, Rolapp & Associates, Inc., Irvine, California (the "Municipal Advisor") as its municipal advisor in connection with the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. 4846-6549-24 72v5/022468-0020 214 of 228 -57-October 19, 2021, Item #12 UNDERWRITING The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the "Underwriter") pursuant to a purchase agreement, dated the date hereof, by and among the Authority, the City and the Underwriter. The Underwriter will purchase the Bonds from the Authority at an aggregate purchase price of $ ___ , representing the principal amount of the Bonds, plus/less $__ of net original issue premium/discount and less$ __ of Underwriter's discount. The initial public offering prices stated on the inside front cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. FINANCIAL INTERESTS The fees being paid to the Underwriter, Bond Counsel, Disclosure Counsel and counsel to the Underwriter are contingent upon the issuance and delivery of the Bonds. 4846-6549-2472v5/022468-0020 215 of 228 -58-October 19, 2021, Item #12 MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds. The execution and delivery of this Official Statement have been duly authorized by the Authority and the City. 4846 .. 6549-2472v5/022468-0020 216 of 228 POWAY PUBLIC FINANCING AUTHORITY By: _______________ _ Chair CITY OF POWAY By:. _______________ _ City Manager -59-October 19, 2021, Item #12 4846-6549-2472v5/022468-0020 217 of 228 APPENDIX A CITY FINANCIAL STATEMENTS A-1 October 19, 2021, Item #12 APPENDIXB DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE The following is a summary of certain provisions of the Installment Purchase Agreement and the Indenture that are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the applicable document for a full and complete statement of the provisions thereof [TO COME FROM BOND COUNSEL] 4846-6549-2472v5/022468-0020 218 of 228 B-1 October 19, 2021, Item #12 APPENDIXC FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: November_, 2021 Poway Public Financing Authority c/o City of Poway 13325 Civic Center Drive Poway, California 92064 Re: $ ___ Poway Public Financing Authority Water Revenue Bonds, Series 2021A Members of the Board of Directors: We have acted as Bond Counsel to the Poway Public Financing Authority (the "Authority") in connection with the issuance of$ __ aggregate principal amount of Poway Public Financing Authority Water Revenue Bonds, Series 2021A (the "Bonds"). The Bonds have been issued by the Authority pursuant to the terms of the Indenture of Trust, dated as of November 1, 2021 (the "Indenture"), by and between the Authority and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are limited obligations of the Authority payable solely from payments to be made by the City of Poway (the "City") to the Authority pursuant to an Installment Purchase Agreement, dated as of November 1, 2021 (the "Installment Purchase Agreement"), by and between the City and the Authority, and from certain funds and accounts established under the Indenture. In connection with our representation, we have examined a certified copy of the proceedings relating to the Bonds. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigations. Based upon the foregoing and after examination of such questions of law as we have deemed relevant in the circumstances, but subject to the limitations set forth herein, we are of the opinion that: 1. The proceedings of the Authority show lawful authority for the issuance and sale by the Authority of the Bonds under the laws of the State of California (the "State") now in force, and the Indenture has been duly authorized, executed and delivered by the Authority. Assuming due authorization, execution and delivery by the Trustee, as appropriate, the Bonds and the Indenture are valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms. 2. The obligation of the Authority to make the payments of principal and interest on the Bonds from Authority Revenues (as such term is defined in the Indenture) is an enforceable obligation of the Authority and does not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limit or restriction. 3. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. 4. Interest (and original issue discount) on the Bonds is exempt from State personal income tax. 4846-6549-24 72v5/022468-0020 219 of 228 C-1 October 19, 2021, Item #12 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such 2020 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond Owner's basis in the applicable Bond. The amount of original issue discount that accrues to the Bond Owner is excluded from the gross income of such Bond Owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals or corporations and is exempt from State personal income tax. 6. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code"); such amortizable Bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions that are expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the City and the Authority and are subject to the condition that the City and the Authority comply with all requirements of the Code that must be satisfied subsequent to issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City and the Authority have covenanted to comply with all such requirements. The opinions that are expressed herein may be affected by actions taken ( or not taken) or events occurring ( or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Bonds terminates on the date of their issuance. The Indenture, the Installment Purchase Agreement and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Bonds. Our opinion is limited to matters governed by the laws of the State and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. The opinions that are expressed herein are based upon our analysis and interpretation of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture, the Installment Purchase Agreement and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the Owners of the Bonds with respect to matters contained in the Official Statement. 4846-6549-24 72v5/022468-0020 220 of 228 C-2 Respectfully submitted, October 19, 2021, Item #12 APPENDIXD INFORMATION CONCERNING DTC The information in this section concerning DTC and DTC 's book-entry only system has been obtained from sources that the Authority, the City and the Underwriter believe to be reliable, but none of the Authority, the City or the Underwriter takes any responsibility for the completeness or accuracy thereof The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company ("DTC"), New York, NY, 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 annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, 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 17 A 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 a Standard & Poor's 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. 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 tum 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 the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 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 effect 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 4846-6549-2472v5/022468-0020 221 of 228 D-1 October 19, 2021, Item #12 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 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed 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 a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity 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 date 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. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as 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 depository is not obtained, physical certificates are required to be printed and delivered. 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, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 4846-6549-24 72v5/022468-0020 222 of 228 D-2 October 19, 2021, Item #12 APPENDIXE FORM OF CONTINUING DISCLOSURE AGREEMENT Upon the issuance of the Bonds, the City proposes to enter into a Continuing Disclosure Agreement in substantially the following form: This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by and between the City of Poway (the "City") and U.S. Bank National Association, in its capacity as dissemination agent (the "Dissemination Agent"), in connection with the issuance of the Poway Public Financing Authority Water Revenue Bonds, Series 2021A in an aggregate principal amount of$ __ (the "Bonds"). The Bonds are being issued by the Poway Public Financing Authority (the "Authority") pursuant to the provisions of that certain Indenture of Trust, dated as of November 1, 2021 (the "Indenture"), by and between the City and U.S. Bank National Association, as trustee (the "Trustee"). The City and the Dissemination Agent hereby certify, covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the parties hereto for the benefit of the holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized terms 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 City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Annual Report Date" shall mean each April 1 after the end of the City's fiscal year, the end of which, as of the date of this Disclosure Agreement, is June 30. "Beneficial Owner" shall mean any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. ''Dissemination Agent" shall mean, initially, U.S. Bank National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent that is so designated in writing by the City and has filed with the then-current Dissemination Agent a written acceptance of such designation. "Financial Obligation" shall mean a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term "Financial Obligation" shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. "Listed Events" shall mean any of the events listed in Sections 5(a) and (b) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board. "Official Statement" shall mean the Official Statement dated October_, 2021, relating to the Bonds. "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" shall mean Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. E-1 4846-6549-2472v5/022468-0020 223 of 228 October 19, 2021, Item #12 "SEC" shall mean the Securities and Exchange Commission. Section 3. Provision of Annual Reports. ( a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2022 with the Annual Report for fiscal year 2020-21, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than 15 calendar days prior to such date, the City shall provide its Annual Report to the Dissemination Agent, if the Dissemination Agent is a different entity than the City. The Annual Report must be submitted in an electronic format as prescribed by the MSRB, accompanied by such identifying information as is prescribed by the MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that any audited financial statements of the City may be submitted separately from the balance of the Annual Report, and not later than the date required above for the filings of the Annual Report. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a). The City 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 City and shall have no duty or obligation to review such Annual Report. (b) If the City is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the City in a timely manner shall send to the MSRB a notice in an electronic format as prescribed by the MSRB, accompanied by such identifying information as prescribed by the MSRB. (c) The Dissemination Agent shall: I. 2. 3. Section 4. the following: provide any Annual Report received by it to the MSRB by the date required in subsection (a); file a report with the City and the Trustee (if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement and stating the date it was provided; and take any other actions as are mutually agreed upon between the Dissemination Agent and the City. Content of Annual Reports. The Annual Report shall contain or incorporate by reference ( a) Audited financial statements of the City for the prior fiscal year prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If such audited financial statements are not available at the time that the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. ( c) An update of the information for the prior fiscal year in substantially the form set forth in the following tables in the Official Statement under the caption "THE WATER SYSTEM": 1. Table 1 -Historical Water Supply; 2. Table 2 -Historical Water System Deliveries in Acre Feet; 3. Table 3 -Historical Water System Connections; 4. Table 4-Historical Water System Sales Revenues; and 4846-6549-2472v5/022468-0020 224 of 228 E-2 October 19, 2021, Item #12 5. Table 5 -Ten Largest Water System Customers. ( d) An update of the information for the prior fiscal year in substantially the form set forth in the following table in the Official Statement under the caption "WATER SYSTEM FINANCIAL INFORMATION": 1. Table 13 -Historical Water System Operating Results and Debt Service Coverage Fiscal Year Ended June 30. 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 City or related public entities, that are available to the public on the MSRB's Internet website or filed with the SEC. If the document included by reference is a final official statement, it must be available from the MSRB. The City 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 City shall give, or shall cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: 1. Principal and interest payment delinquencies. 2. Unscheduled draws on debt service reserves reflecting financial difficulties. 3. Unscheduled draws on credit enhancements reflecting financial difficulties. 4. Substitution of credit or liquidity providers, or their failure to perform. 5. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations oftaxability or Notices of Proposed Issue (IRS Form 5701 TEB). 6. Tender offers. 7. Defeasances. 8. Rating changes. 9. Bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. 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 obligated person, or if such jurisdiction has been assumed by leaving the existing governmental 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 obligated person. 10. Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the City, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) Business Days after occurrence: 4846-6549-2472v5/022468-0020 225 of 228 E-3 October 19, 2021, Item #12 1. Unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds. 2. Modifications to the rights of Bondholders. 3. Bond calls. 4. Release, substitution or sale of property securing repayment of the Bonds. 5. Non-payment related defaults. 6. The consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, 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. 7. Appointment of a successor or additional trustee or the change of the name of a trustee. 8. Incurrence of a Financial Obligation of the City, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the City, any of which affect security holders. ( c) If the City determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the City, the City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. ( d) If the City determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. ( e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall not be responsible for determining whether the City's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Termination of Reporting Obligation. The obligations of the City and the Dissemination Agent specified in 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 City shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). Section 7. Dissemination Agent. The City 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. If at any time there is not any other designated Dissemination Agent, the City shall act as Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. Section 8. Amendment; Waiver. Notwithstanding any other prov1s1on of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: 4846-6549-24 72v5/022468-0020 226 of 228 E-4 October 19, 2021, Item #12 (a) if the amendment or waiver relates to annual or event information to be provided hereunder, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the City or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver: (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders; or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interest of Bond owners. The City shall describe any amendment to this Disclosure Agreement in the next Annual Report filed after such amendment takes effect. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City 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 City 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 City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provisions of this Disclosure Agreement, any Participating Underwriter or any holder or Beneficial Owner of the Bonds, or the Trustee on behalf of the holders of the Bonds (after receiving indemnification to its satisfaction), may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed to be a default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City 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 City agrees to indemnify and save the Dissemination Agent, 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 as described hereunder, if any, 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 City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the format or content of 4846-6549-2472v5/022468-0020 227 of 228 E-5 October 19, 2021, Item #12 any notice or Annual Report prepared by the City pursuant to this Disclosure Agreement. The City shall pay the reasonable fees and expenses of the Dissemination Agent for its duties as described hereunder. Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given to the Dissemination Agent (if other than the City) and to the City as follows: City: Dissemination Agent: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Reference: Poway 2021 Water Revenue Bonds Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Trustee, the Participating Underwriter and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 14. Counterparts. This Disclosure Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Date: November_, 2021 4846-6549-2472v5/022468-0020 228 of 228 CITY OF POWAY By: City Manager U.S. BANK NATIONAL ASSOCIATION as Dissemination Agent By: Authorized Signatory E-6 October 19, 2021, Item #12