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HomeMy WebLinkAboutAgenda Packet - EVWD Board of Directors - 08/24/2010East Val ley t"OWater District 3654 HIGHLAND AVE., SUITE 412, HIGHLAND, CA BOARD MEETING August 24, 2010 3:00 P.M. AGENDA ------------------------------------------------------------------- "In order to comply with legal requirements for posting of agenda, only those items filed with the District Secretary by 10:00 a.m. on Wednesday prior to the following Tuesday meeting not requiring departmental investigation, will be considered by the Board of Directors ". ------------------------------------------------------------------ C'ALL TO ORDER PLEDGE OF ALLEGIANCE ---------------------------------------- -- ---------------- - - - - -- Public Comments 2. Approval of Agenda 3. Adjourn to East Valley Water District Financing Authority 4. Reconvene to East Valley Water District Regular Board Meeting CONSENT CALENDAR 5, Approval of August 10, 2010 Board Meeting Minutes 6. Accounts Payable Disbursements: Accounts Payable Checks # 225386 through # 225574 which were distributed during the period of August 4, 2010 through August 16, 2010, in the amount of $810,383.79 and Payroll and benefit contributions for the period ended August 16, 2010 and included checks and direct deposits, in the amount of $224,467.81. Total Disbursement for the period $1,034, 851.60. 7. General Managers Fee's and Expenses OLD BUSINESS 8. Public Meeting to discuss possible formation of Eastwood Farms Assessment District NEW BUSINESS 9. Resolution 2010.18 — Resolution of the Board of Directors of the East Valley Water District approving authorizing the execution and delivery of an installment purchase agreement for the purpose of causing the issuance of approximately $24,000,000 aggregate principal amount of water revenue bonds and approving the execution and delivery of the Escrow Agreement, the Preliminary Official Statement, the Continuing Disclosure Certificate an6 the Official Notice of Sale 10. Resolution 2010.17 — Resolution of the Board of Directors (-.fthe East Valley Water District authorizing the General Manager to sign funding agrcem, n;. amendments, and certifications for funding under the sat, drinking water state revolve _ -nd; authorizing the General Manager to approve claims for reimbursement; authorizint t! e General Manager to execute budget and expenditure summary: authorizing the Gener- \tanager to sign the contractor's release form and the General Manager to sign the renti.: �t'.on of project completion; and dedicating revenues from Lasessment against propery as ii• -- source of revenue to repay said loan 11. Approve amended Directors' expenses for June 2010 REPORTS 12. General Manager / Staff Reports 13. Consultant Reports 14. Committee Reports a. Legislative ( Standi"g ) b. Community Affairs i Standing) c. Policy Committee ( '.d -Hoc) 15. Oral comments from Board of Directors CORRESPONDENCE 16. Letter of appreciation to the District from Albert K. K.unig. California State University, San Bernardino MEETINGS 17. 2010 Water Quality & Regulatory Conference, Doubletree 1 lore], Ontario, November 3 -4, 2010 CLOSED SESSION 18. CONFERENCE WITH LEGAL COUNSEL— ANTICIP A TFI) LITIGATION Significant exposure to litic ation pursuant to Government we Section 54956.9(b) One Potential Case ANOUNCEMENT OF CLOSED SESSION ACTIONS ADJOURN ---------------------------- ----------- -- - - - - -- - I -------------------------- Pursuant to Government Code Section 54954.2(a), any request ':)r a disability - related modification or accommodation, including auxiliar, :ids or services. that is soutl t in order to participate in the above - agendized public meeting should he directed to the District's Admi- .istrative Manager at (909) 885 -4900 at least 72 hours prior to said meeting. 4 EAST VALLEY WATER DISTRICT FINANCING AUTHORITY 3654 E. Highland Avenue Suite 12 August 24, 2010 Highland, California 3:00 p.m. AGENDA CALL TO ORDER Public Participation 2. Resolution 2010.01 — A Resolution of the Board of Directors of the East Valley Water District Financing Authority ratifying its appointment as the Board of Directors of the East Valley Water District Financing Authority; approving and ratifying the By -Laws of the East Valley Water District Financing Authority; and appointing officers. 3. Resolution 2010.02 — Resolution of the Board of Directors of the East Valley Water District Financing Authority approving the sale of its water revenue bonds in the amount of not to exceed $24,000,000; approving the time and place for taking bids, approving the Notice Inviting Bids, approving the Preliminary Official Statement, the Installment Purchase Agreement, the Indenture of Trust and the Official Notice of Sale. 4. Setting the date, time and place of annual meeting. 5. Adjourn to East Valley Water District Board Meeting. RESOLUTION NO. 2010.01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY RATIFYING ITS APPOINTMENT AS THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY; APPROVING AND RATIFYING THE BY -LAWS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY; AND APPOINTING OFFICERS The Board of Directors (the "Board ") of the East Valley Water District Financing Authority (the "Authority ") does hereby find, order and resolve as follows: SECTION 1. Recitals. A. The Authority has been created pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California by that certain Joint Exercise of Powers Agreement, dated as of August 20, 2010 (the "JPA Agreement'), by and between the East Valley Water District and the California Municipal Finance Authority. B. The Board is desirous of ratifying its appointment as the Board of Directors of the Authority, adopting By -Laws for the Authority and appointing officers of the Authority. SECTION 2. Each of the foregoing recitals is true and correct. SECTION 3. The Board hereby ratifies its appointment under the JPA Agreement as the Board of Directors of the Authority. SECTION 4. The Board hereby approves and ratifies the By -Laws of the Authority, copies of which are on file with the Secretary and shall be kept as a part of the permanent records of the Authority. DOCSOC/ 1423276v3/022497-001 I SECTION 5. The follo,.+.ng persons are hereby apnoin.tec tr the offices of the Authority indicated opposite their names, an' each such person is to sere i:- <:cc ordance with the By -Laws of the Authority: Name George E. "Skip" Wilson Matt LeVesque Brian Tompkins Robert Martin Office President Vice President Director of Finance Executive Director .`c 3r tary PASSED, APPROVED, and ADOPTED on August 24. 2610 George E. "S :p' Wilson, President ATTEST: Secretary DOCS OC/ 1423276v3 /022497 -001 1 BY -LAWS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Adopted August 24, 2010 DOCSOC/ 14233070/022497 -0011 ARTICLE I THE AUTHORITY Section 1.1 Name. The official name of the Authornr r.dl be the "East Valley Water District Financing Authority," The I;uthority was created pursuant a :he Joint Exercise of Powers Agreement, dated as of August 20. 2010 (the "Agreement`), bew. cen he East Valley Water District (the "Water District') and the Cal ^ )rnia Municipal Finance 11 ' CMFA "). Section 1.2 Authority Board Members. The Authorir, shall be administered by a governing Board of Directors (the 'Board") that shall consist of the ".>ard of directors of the Water District. The term of office as a member of the Board shall temt -irate when such member of the Board shall cease to hold his or h_; respective office at the Water strict; and the successor to such officer or director of the Water Dt�trict shall become a member i tl:2 Board, upon assuming such office. Section 1.3 Office. -}te business office of the Auth:�r tv shall be the East Valley Administrative Office at 3654 E. Highland Avenue, Suite 18. liig : ;In(!. California 92346, or at such other place as may be designated bv the Board. Section 1.4 Compensation. Members of the Board shall receive per meeting compensation in an amount as ma} be set by the board of directors cf the Water District from time to time; provided, however, that in no event shall the total number of mc_tings paid for any director for the combined attendance at meetings of the Water District and the .`• ut'nority exceed 10 meetings per month or a number otherwise authorized by State law for su: , service to the Water District. Notwithstanding the authorization or per meeting compensation pr:w-ded herein, in the event that a meeting of the Authority is held concurrent with or immediately f, to _: ing a noticed regular meeting of the Water District, no additional compensation for attendance, a ;ie Authority meeting shall be provided. The members of the Board shall be entitled to reimbursement for any expenses actually incurred in connection with ser iru as a member if the Board: pro, ded, however, that the same shall not exceed the reimbursable amounts set by the Water Distnct ' r expenses as the same may be established and/or revised from time to time. All compensation paid pursuant to this Section 1.4 shall be paid by the Water District on behalf of the Authority. Section 1.5 Conflicts of Interest. The Authority shall 1> . io; t the conflict of interest code adopted by the Water District. ARTICLE II OFFICERS Section 2.1 Officers. The Officers of the Authont, ;hall be the President, Vice President, Secretary, Executive Director and Director of Finance. Section 2.2 President. the President of the Authoritv �i al' be the Board member who is the President of the board of direc.ors of the Water District. The to ir of office shall be the same as the term of the President of the ho-,rd of directors of the Water D o—t. t The President shall preside at all meetings of the Authoritx -. and shall submit such inform i u_ and recommendations to the DOCSOC/ 1 423307 v3 /022497 -001 I Board as he or she may consider proper concerning the business, policies and affairs of the Authority. Section 2.3 Vice President. The Vice President shall be the member who is the Vice President of the board of directors of the Water District. The term of office shall be the same as the term of Vice President of the board of directors of the Water District. The Vice President shall perform the duties of the President in the absence or incapacity of the President. In case of the resignation or death of the President, the Vice President shall perform such duties as are imposed on the President, until such time as a new President is selected or appointed. Section 2.4 Secretary. The General Manager of the Water District is hereby designated as the Secretary of the Authority. The Secretary shall keep the records of the Authority, shall act as Secretary at the meetings of the Authority and record all votes, and shall keep a record of the proceedings of the Authority in a journal of proceedings to be kept for such purpose, and shall perform all duties incident to the office. Section 2.5 Executive Director. The General Manager of the Water District is hereby designated the Executive Director of the Authority and shall be responsible for execution and supervision of the affairs of the Authority. Except as otherwise authorized by resolution of the Board, the Executive Director or the Executive Director's designee shall sign all contracts, deeds and other instruments executed by the Authority. Section 2.6 Director of Finance. The Chief Financial Officer of the Water District is hereby designated as Director of Finance of the Authority. Subject to the applicable provisions of any trust agreement, indenture or resolution providing for a trustee or other fiscal agent, the Director of Finance is designated as the public officer or person who has charge of, handles, or has access to any property of the Authority, and shall file an official bond if so required by the Board of the Authority in accordance with these By -Laws and, as such, shall have the powers, duties and responsibilities specified in Section 6505.1 of Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (6500 et seq.), as amended (the "Act "). Section 2.7 Confirmation of Officers. Confirmation of officers shall be the first order of business at the first meeting of the Authority, regular or special, held in each calendar year. Section 2.8 Authority to Bind Authority. No member, officer, agent or employee of the Authority, without prior specific or general authority by a vote of the Board, shall have any power or authority to bind the Authority by any contract, to pledge its credit, or to render it liable for any purpose in any amount. ARTICLE III EMPLOYEES AND AGENTS Section 3.1 Appointment of Employees and Agents. The Authority may from time to time request from the Water District the services of such personnel, counsel or agents, permanent or temporary, as may be necessary to carry out the business and affairs of the Authority. The Board may in addition employ temporary professional and technical personnel on such terms and at such rates of compensation as the Board may determine, for the performance of Authority business and 2 DOCSOC/ 1423307v3/022497 -001 1 affairs, provided that adequate sources of funds are identified fir- payment of such temporary professional and technical service; ARTICLE IV MEETINGS Section 4.1 Regular Meetings. The Board shall hold it regular meetings concurrent with and/or immediately followin the regular meetings of the 'X ncr District and the same shall occur consistent with the schedul- set by resolution of the Water Ia s ict for its regular meetings as to time /place and location. The Board may suspend the holding ol regular meetings so long as there is no need for Authority business, and provided that any action tak c ; ogarding the sale of bonds and any other evidence of indebtedness of the Authority authorised and is,ued pursuant to the Act shall occur by resolution placed on a noticed and posted meeting agende ; onsistent with the requirements for regular meetings under the R�:'nh M. Brown Act (the `Brown c ct "). At all times, each regular meeting of the Authority shall take place pursuant to a 72 hour noti (. and agenda requirement or as otherwise provided by the Brown 4et. The Board may hold spec.. at any time and from time to time in accordance with the Brown Act. Section 4.2 Special Meetings. A special meeting mri, he called at any time by the President or the Executive Director by delivering written notice to oacF. member. Such written notice may be dispensed with as to any Board member who at or prior it the time the meeting convenes files with the Secretary of the Authority a written waiver of notice Such waiver may be given by telegram or telecopy. Such written notice may also be dispensed with as to any member who is actually present at the meeting. Special meetings will be held in ack, ). ('ance with the Brown Act. Section 4.3 Closed Sessions. Nothing contained in these By -Laws shall be construed to prevent the Board from holding closed sessions during a regular :,r s_iecial meeting concerning any matter permitted by law to be considered in a closed session. Section 4.4 Public Hearings. All public hearings he'd 1 y the Board shall be held during regular or special meetings of the Board. Section 4.5 Adjourning Meetings and Continuing Public Hearings to Other Times or Places. The Board may adjourn any meeting to a time anc ;;ace specified in the order of adjournment. Less than a quoru r, may so adjourn from time to :i;ne. If all Board members are absent from any regular meeting or adjourned regular meeting. the Secretary or acting Secretary of the Authority may declare the meeting adjourned to a stated time --.,i :).ace and shall cause a written notice of the adjournment to be given in the same manner as pr-, did for special meetings unless such notice is waived as provided R,r special meetings. A copy of tl e )-der or notice of adjournment shall be conspicuously posted on or near the door of the place ,x 1icrr the meeting was held within 24 hours after the time of the adjournment. When a regular or adjour:;ei regular meeting is adjourned as provided in this section, the resulting adjourned regular meet nc: is a regular meeting for all purposes. When an order of adjournment of any meeting fai < tc state the hour at which the adjourned meeting is to be held, it :hall be held at the hour speci`.wd t( -r regular meetings. Any public hearing being held. or any hearing noticed or ordered to be held at any meeting may by order or notice of continuance be continued or recontinuecl e any subsequent meeting in the same manner and to the same extent set forth herein for the adjour,.ment of the meetings; provided, z DOCSOC/ 1423307v3/022497 -001 t that if the hearing is continued to a time less than 24 hours after the time specified in the order or notice of hearing a copy of the order or notice of continuance shall be posted immediately following the meeting at which the order or declaration of continuance was adopted or made. Section 4.6 Ralph M. Brown Act. The Brown Act applies to all meetings of the Board. Section 4.7 Quorum. A majority of the members of the Board shall constitute a quorum for the purpose of conducting its business and exercising its powers and for all other official purposes, except that less than a quorum may adjourn from time to time until a quorum is obtained. Any action or decision of the Authority shall be on motion duly approved by a majority of a quorum of the Board at a lawfully held meeting. Section 4.8 Order of Business. The President or Executive Director shall prepare or approve the agenda of all meetings. Business will be conducted according to the agenda, except when determined by the Board as permitted by law. Section 4.9 Parliamentary Procedure. The presiding officer at the meeting shall determine the rules of conduct. The presiding officer may be guided by the rules of parliamentary procedure set forth in Robert's Rules of Order, but failure to follow Robert's Rules of Order shall not affect the validity of any action or motion duly taken or adopted by the Board at any lawfully held meeting. ARTICLE V AMENDMENTS Section 5.1 Amendments to By -Laws. These By -Laws may be amended by the Board at any regular or special meeting by majority vote, provided that a description of the proposed amendment to any particular section is included in the notice of such meeting. 4 DOCSOC/ 1423307v3 /022497 -0011 East Valley Water District Board Memorandum No. B36 -2010 From: Robert Martin, General Manager Subject: East Valley Water District Summary and Recommendations Recommendation: Date: August 24, 2010 Approval of Resolution of the Financing Authority Authorizing the Issuance of Bonds and Approving the Installment Purchase Agreement, the Indenture of Trust, the Official Notice of Sale, and the Preliminary Official Statement, and Authorizing the Preparation, Sale and Issuance- of Bonds, Resolution of the District Authorizing the Financing Authority to issue Bonds and Approving the Installment Purchase Agreement, the Escrow Agreement, the Official Notice of Sale, and Preliminary Official Statement, and Authorizing the Preparation, Sale and Issuance of the Bonds, and Resolution of the Facilities Corporation Approving the Escrow Agreement. Background: As discussed in the recent rate - setting process, the recently approved water rates for 2010, 2011 and 2012 were based on funding the Capital Improvement Program (CIP). At this time, East Valley Water District Financing Authority (Financing Authority), on behalf of the District, anticipates issuing approximately $22 million in JPA revenue Bonds (Bonds) to fund $15 million in water system improvements and $6 million to refund the outstanding 2001 Certificates of Participation. This is based on construction costs of $15 million, refunding of the outstanding 2001 Certificates of Participation, funding capitalized interest on the new money through October 1, 2011, as well as paying for cost of issuance related to the financing. Staff recommends that the Board of Directors approve the attached proposed resolutions to approve the legal documents to issue the Bonds, approve the Preliminary Official Statement and authorize the Financing Authority to issue the Bonds. Based on these approvals, staff and the financing team would work to implement the financing transaction and the Bonds would be issued by late September or early October. This timeline will enable District to take advantage: of historically low long -term interest rates. Discussion: Water Improvement Projects Staff has developed a list of water improvement projects that are anticipated to be implemented over the next three years and furded by proceeds from the Bonds, as follows: Project Component Amount Plant 134 Upgrade / Expansion Plant 143 Blending and Air Reduction Tank i �CQ,000 Plant 150 Design - 0,000 Plant 150 Construction - Local Share 1,8 {)0,000 Sixth Street Pipeline - Plant 151 to Plant 40 f:,; X0,000 Sixth Street Pipeline - Plant 150 to Plant 12 3 0,000 Vine /Union /Live Oak Main Replacements )n0,000 Bruce Street Main Replacement 00,000 Plant 40 Boosters +3'0,000 Total $ 15,000,000 The financing documents will provide a substitutinr clause, should alternative projects be developed or priorities change. Structure of Debt Issuance Based on construction costs of $15 million, it is anticipated the par amount would be $22 million, including $6 million for the refunding of the outstanding 2001 Certificates of Participation, funding capitalized +rterest on the new money through October 1, 2011 and paying for cost of issuance. The Bonds would be issued backed by net water system revenues o,r ly. The refunding of 2001 Certificates of Participation will assist in structuring it the new money portion of the financing along with provide cash flow savings r the District. The Bonds will be sold in Mid Septembe- 2010 through a competitiv=- oidding process. Proposed Resolutions and Legal Documents The proposed resolutions will authorize the General Manager to implement the financing process. The proposed resolutions approve the legal documents, the Preliminary Official Statement and authorizes the issuance of the Bonds. The documents referenced for approval are as follows: Installment Purchase Agreement The proposed Installment Purchase Agreement is between the District and the Financing Authority and governs how the District pays installment payments to the Financing Authority. The proposed Agreement includes the technical language about the water system, revenue requirements, payment timing, maintenance of the water operations system and other such items. The proposed Agreement specifies that net water system revenues are pledged for debt service, that net water system revenues will be maintained at 120% of debt service. Indenture of Trust The proposed Indenture of Trust is between the Financing Authority and the Trustee (Union Bank). The Financing Authority will issue and deliver the Bonds to the Trustee, and the Trustee will hold, invest and disburse all payments and monies. The Trustee will provide funds to the Acquisition Fund, the Interest Fund, the Cost of Issuance Fund and other such funds. The Trustee will receive installment payments from District and will make payments to bondholders. The Trustee will also handle arbitrage issues. Escrow Agreement The proposed Escrow Agreement is among the District, the East Valley Public Facilities Corporation and the Escrow Bank (Union Bank). The Escrow Agreement establishes an escrow fund in which a portion of the! proceeds of the Bonds will be used to purchase government securities in an amount that will be sufficient to retire the outstanding 2001 Certificates of Participation on December 1, 2010. Continuing Disclosure Certificate The proposed Continuing Disclosure Certificate provides that the District will provide information on any issues that may affect its debt financing transactions. Official Notice of Sale The proposed Official Notice of Sale is prepared for use by the purchasers of the Bonds and includes the information essential to making an informed investment decision Preliminary Official Statement The proposed Preliminary Official Statement is prepared on behalf of the Authority and the District. The proposed Preliminary Official Statement discloses material information on the bone ssue, the District and its finances. Future Actions: Staff will continue to work with the financing team to obtain a credit rating from Standard & Poor's and Pitch Ratings, monitor market conditions and determine the optimal structure of the financing. The financing ,vill be implemented by late - September /early October 2010. Staff will report b= �k to the Board with the final financial information. Resolution of Intent to Issue Tax Exempt Obligations: At its October 27, 2009 meeting, the Board of Directors approved Resolution No. 2009.21, which will allow the District to use bend proceeds to reimburse the District's reserve funds for expenditures that were or will be incurred before bond proceeds are available. This will cover expenditures for ongoing capital improvement projects made from October 27, 2CO9 to the date when the bond funds are available. RESOLUTION NO. 2010.02 RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY APPROVING THE SALE OF ITS WATER REVENUE BONDS IN THE AMOUNT OF NOT TO EXCEED $24,000,000; APPROVING THE TIME AND PLACE FOR TAKING BIDS, APPROVING THE NOTICE INVITING BIDS, APPROVING THE PRELIMINARY OFFICIAL STATEMENT, THE INSTALLMENT PURCHASE AGREEMENT, THE INDENTURE OF TRUST, AND THE OFFICIAL NOTICE OF SALE WHEREAS, the East Valley Water District Financing Authority (the "Authority "), a public entity 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 refinance and finance water supply and wastewater facilities on behalf of its members; and; WHEREAS, the East Valley Water District (the "District'), a county water district duly organized and existing under and by virtue of the laws of the State, a member of the Authority, proposes to undertake the refinancing of certain facilities within its water system (the "Prior Project') and to undertake the financing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (the "2010 Project," and together with the Prior Project, the "Project "); and WHEREAS, the Board of Directors of the Authority (the "Board ") has determined that it is desirable to issue refunding revenue bonds (the Bonds ") to assist the District in refinancing the Prior Project and financing the 2010 Project; and WHEREAS, the Board of Directors of the Authority deems it proper and the necessity therefor appears that bids be invited for its Water Revenue Bonds (Water Systems Improvement Projects and Series 2001 Refunding), Series 2010 (the "Bonds ") in the amount of not to exceed $24,000,000 and that if bids are satisfactory said Bonds be sold in the manner and at the time and place hereinafter set forth; and WHEREAS, the Bonds are to be secured by Installment Payments to be made pursuant to an Installment Purchase Agreement, dated as of September 1, 2010 by and between the District and the Authority (the "Installment Purchase Agreement') entered into by the parties to provide for the financing of the 2010 Project and the refinancing of the Prior Project, which Prior Project was financed with the proceeds of certain Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001 (the "2001 Certificates ") which are to be refinanced with the proceeds of the Bonds, pursuant to the Installment Purchase Agreement; and WHEREAS, the Board has determined that it is in the best interest of the Authority to enter into the Installment Purchase Agreement with the District, and to approve certain other documents; and DOCSOC /141711 I v3/022497 -0011 WHEREAS, the AuthoritN and Union Bank, N.A.. as - `.ustee, desire to enter into an Indenture of Trust dated as of September 1. 2010 (the "Indentu , Trust"). to provide for the issuance and security of the Bonds end to provide for the construction of the Project; and WHEREAS, the Authorith kill assign to the Trustee. the '- rstdiment Payments pursuant to the Indenture of Trust; and WHEREAS, a preliminary official statement with respect -, the Bonds (the "Preliminary Official Statement "), has been prer•ared by Bond Counsel, acting a= cis:Josure counsel; and WHEREAS, there has been Presented to this Board of F hectors copies of each of the aforementioned documents and certain other documents relating to fl e i'oregoing; NOW, THEREFORE, THE AUTHORITY'S BOARD Or. DIRECTORS DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Board of Directors hereby specifically fl ds and declares that each of the statements, findings and determinations of the Authority set forth it the above recitals and in the preambles of the documents approved herein are true and car sl and that the financing and refinancing of the 2010 Project will result in significant pubhc ',enefits for the residents of the District. The Board of Directors hereby further finds and deterr, nes that (i) there are significant public benefits to the citizens of :he District of the type described In "�cction 6586(a) of the Marks - Roos Local Bond Pooling Act of '985 (the "Act ") by having the - vuibority assist the District with respect to the financing and refinancing of the Project through the issuance of the Bonds, in that the issuance of the Bonds and related *ransactions will result in demonsu eble savings in effective interest rate to the Authority and significant reductions in effective user cl arges levied by the District, and (ii) the 2010 Project comprises iacilities for the production. MOT 2e. transmission or treatment of water within the meaning of Section 6586.5(c) of the Act. SECTION 2. The Authority hereby approves the sale 710. the Bonds by competitive sale pursuant to and as described in the Official Notice of Sale for the tionds (the "Notice of Sale "), in the form thereof on file with the Secretary together with any ch.,n_es therein or additions thereto approved by the Executive Director upon consultation with Fi:. bran, Rolapp & Associates, the District's Financial Advisor (the "Financial Advisor "). The Bnr%< shall be awarded to the bidder who submits the highest responsi:r're bid to be determined in accnrd<tn e with the Notice of Sale. The Executive Director is. hereby delegated the authority to jc,:ept the highest responsible bid for the purchase of the Bonds, determined in accordance with the ':once of Sale, so long as the true interest cost thereof does not exceed six and one - quarter percem ;r `06) per annum. The Executive Director is hereby authorized and directed to accept such bids, for' and in the name of the Authority, by notice to the successful bidder. In the event two or more bids s -ring forth identical interest rates and premium, if any, are received for the Bonds, the Executi, c '.rirector may exercise his own discretion and judgment in making the award and may award the 3onds on a pro rata basis in such denominations as he shall deterr-me. The Executive Director nra­. n his discretion, reject any and all bids and waive any irregulari, or informality in any bid. The Lxecutive Director shall award the Bonds, or reject all bids not later than 26 hours after the expir:;ro . of the time prescribed for the receipt of proposals unless such time of award is waived by a succ es'bl bidder. 2 DOCSOC/ 14171 1 1 v3/022497 -001 1 SECTION 3. That the Financial Advisor is hereby authorized and directed to publish a notice inviting such sealed proposals by one insertion in The Bond Buyer, a newspaper of general circulation, circulated within the State, said publication to be at least five (5) days prior to the date of opening bids stated in said notice or to be determined by the Executive Director in accordance with California Government Code Section 53692. SECTION 4. The Authority hereby approves the initial draft of the Preliminary Official Statement, and the Financial Advisor is authorized to complete the Preliminary Official Statement and distribute the Preliminary Official Statement to prospective purchasers in the form hereby approved, together with such conforming changes therein and additions thereto as are deemed necessary by the General Manager of the District and the Executive Director to make such Preliminary Official Statement complete and accurate as of its date. The General Manager of the District is hereby authorized to certify that the Preliminary Official Statement is final within the meaning of Rule 15c -2 -12 of the Securities Exchange Act of 1934, as amended. The General Manager of the District and the Executive Director is hereby directed to execute and deliver, for and in the name and on behalf of the District, the final Official Statement relating to the Bonds, which shall be in substantially the form of the Preliminary Official Statement with such changes therein and additions thereto as are deemed necessary by the General Manager of the District, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 5. That the Financial Advisor is hereby authorized and directed to cause to be furnished to prospective bidders copies of the Preliminary Official Statement and the Notice of Sale. The failure, in whole or in part, to comply with this Section 5 and Section 4 hereof shall not in any manner affect the validity of the sale of said Bonds. SECTION 6. Union Bank, N.A. is appointed Trustee under and pursuant to the Indenture of Trust, with the powers and duties of said office as set forth therein. SECTION 7. The Executive Director is authorized to select a municipal bond insurer to insure payments of principal of and interest with respect to the Bonds if the Executive Director determines that a municipal bond insurance policy issued by such insurer will result in a lower interest rate or yield to maturity with respect to Bonds. SECTION 8. The General Manager of the District is hereby authorized to execute a contract with the lowest responsible bidder for the Bonds provided the par amount of the Bonds does not exceed $24,000,000, the interest rate does not exceed 6.25% per annum and the purchaser's discount does not exceed 1.0 %. SECTION 9. The Board hereby authorizes the preparation, sale and delivery of the Bonds in an aggregate principal amount not to exceed $24,000,000 in accordance with the terms and provisions of the Indenture of Trust. The Installment Purchase Agreement, the Indenture of Trust and the Notice of Sale are approved in substantially the form submitted to this Board of Directors with such changes to be made by the President, Vice President, Secretary, Executive Director, General Manager of the District or other authorized officer of the Authority (each, an "Authorized Officer "), such Authorized Officer's execution thereof to be conclusive evidence of such approval as deemed necessary or advisable to carry out the intent of this Resolution. SECTION 10. The President of the Board of Directors, the Vice President of the Board of Directors, the General Manager of the District, the Secretary, and any other proper officer of the 3 DOCSOC /14171 1 1 v3/022497-0011 Authority are hereby authorized and directed, jointly and scN erali:. o execute documents approved in Section 9 hereof and any dec ments related to the defeasan:.r : :nd prepayment of the 2001 Certificates and related documents and to do any and all things and t, execute and deliver any and all documents necessary or proper for arrying out the transactions cnntt n,plated by this Resolution. SECTION 11. This Resolution shall take effect from and z' °cr is date of adoption. ADOPTED, SIGNED AND APPROVED this 24th day of :`- cg - -st. 2010. EAST VALLEY NA— FIR DISTRICT FINANCING AUTHORITY President ATTEST: Secretary, East Valley Water District Financing Authority DOCSOC/141711lv3/022497 -0011 STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN BERNARDINO ) 1, , Secretary of the East Valley Water District Financing Authority, hereby certify that the foregoing is a full, true and correct copy of a Resolution duly adopted at a meeting of the members of said Authority duly and regularly held at the meeting thereof on the 24'h day of August, 2010, of which meeting all of the members of said Authority had due notice and at which a majority thereof was present; and that at said meeting said Resolution was adopted by the following vote: AYES: NOES: ABSENT: 1 further certify that I have carefully compared the foregoing Resolution with the original minute of said meeting on file and of record in my office; that said Resolution is a full, true and correct copy of the original Resolution adopted at said meeting and entered in said minutes; and that said Resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. WITNESS my hand and the seal of the East Valley Water District Financing Authority this day of 2010. Secretary, East Valley Water District Financing Authority 5 DOCSOC /1417111 v3/022497 -0011 `o — a y `o a � U T U � F � v o E w L_ O T m 0 C O C y O `c .2 T O F v, E `o c o` o c o 0 � o o c o ro c E v � _ N � c U V v y E E m E E 'v E O 3 F � o c � ° E a 0 v 4 � Q0. 0 E v, o O L U « U o � N U u U vi O j U O N C " m E .2 � � o y U � � H U ° o A 9 v C G y V L o s ,0 3 E u � o y t 4 T G 'UO E E c E � c . � E U N N C) N O $ F- 0 o E � v E H 0. � G r F t U E— �r Stradling Yocca Carlson & Rauth Draft of 8177110 PRELIMINARY OFFICIAL STATEMENT DATED AUGUST _, 2010 NEW ISSUE - BOOK -ENTRY ONLY RATINGS: S &P; Fitch: In the opinion of Stradling Yocca Carlson & Routh, a Professional Corporation, Special Counsel, under existing statutes, regulations, ridings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described rn this Official Statement. interest (and original issue discouni) 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 and corporations In the further opinion of Stxcial Counsel. interest (and original issue discount) on the Bonds is exemptfrom State of Cal forma personal income tax See the caption "TAX EXEMPTION ". $ EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 Dated: Date of Delivery Due: October 1, as shown on inside front cover The Bonds are being issued in fully registered form and, when issued, will be registered in the time 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 April I and October 1 of each year, commencing April 1, 2011, 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, mandatory redemption, all as more fully described herein. The Bonds we being issued to provide funds: (i) to finance certain improvements for the District's Water System; (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001; (iii) to fund interest due through and including [October 1, 20111 and (iv) to pay costs incurred in connection with the issuance of the Bonds. The Bonds are being delivered pursuant to the Indenture of Trust, dated as of September 1, 2010, by and between the East Valley Water District Financing Authority and Union Bank, N.A., as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 1, 2010, BY AND BETWEEN THE DISTRICT 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 obligation of the District to make the Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District's Water System. The Installment Payments are on a parity with the District's obligation to make payments on $13,2£:6,480 aggregate principal amount of other contracts as more particularly described herein. THE OBLIGATION OF THE DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT'S WATER SYSTEM REMAINING AFTER PAYING OPERATION AND MAINTENANCE COSTS AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT 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) The Bonds are offered when, as and if delivered and received by the Representative, subject to the approval as to the valid and binding nature of the Indenture by Stradling Yocca Carlson & Routh, a Professional Corporation, Special Counsel, and certain other conditions. Certain legal matters will be passed upon for the District and the Authority by Brunick, McElhaney & Beckett, General Counsel 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 September — 2010. Dated: _,2010 " Preliminary, subject to change. DOCSOC/1424854v4/022497 -0011 MATURITY SCHEDULE BASE CUSIP* EAST VALLEY RATER DISTRICT FINANCING nCTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 S Serial Bonds Maturity (October l) Principal Amount Interest Rate Y ela CUSIP* a/o lt. $ % Term Bonds Due October 1, 20 — Veld _ % CUSIP CUSIP is a registered trademark of the Amerrcan Bankers Association. Copyr:gbl' i SY> H 6 Standard & Poor's A Division of the McGraw -Hill Companies, Inc. All rights resenve CUSIP data herein a provided by Smnaa':i : , cr's CUSIP Service Bureau. This data is not intended io create a database and does no: s, -,e m any wav as a substitute for the CL'Sl' 1i.. e Bureau. CUSIP' numbers are provided for convenience of reference only, None of ibe : hsrnu. the Authority or the Underu ntrr i responsibility for the accuracy of such numbers. + Preliminary, subject to change. DOCS OC/ 1424854v4/022497 -0011 EAST VALLEY WATER DISTRICT FINANCING AUTHORITY BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt LeVesque James Morales, Jr. Larry Malmberg EAST VALLEY WATER DISTRICT BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt LeVesque James Morales, Jr. Larry Malmberg DISTRICT STAFF Robert E. Martin, General Manager Brian W. Tompkins, Chief Financial Officer Ron Buchwald, District Engineer SERVICES General Counsel Brunick, McElhaney & Beckett San Bernardino, California Special Counsel Stradling Yocca Carlson & Rauth, A Professional Corporation Newport Beach, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Trustee and Escrow Bank Union Bank, N.A. Los Angeles, California Verification Agent Causey Demgen & Moore Inc. Denver, Colorado DOCSOC/ 1424854v4/022497 -0011 This Official Statement does not constitute an offering of any sec.:rntn other than the original offering of the Bonds of the District. No dealer. broker, salesperson or other person :ar been authorized by the District or the Authority to give any inforrnztior. or to make any representations: r er than those contained in this Official Statement in connection with the offering made hereby and, if 2ik el r made, such other information or representations must not be relied upon as having been authorized by the "?!strict or the Authority. This Official Statement does rot constitute an offer to sell . or t. - :elicitation of an offer to buy nor shall there be any sale of the Bonds t�: a person in any jurisdiction in vlu:.t s unlawful for such person to make such an offer. solicitation or sale This Official Statement is not to be construed as a contract th :he purchasers of the Bonds. Statements contained in this Officia Statement which involve estimates. forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as su:h auc are not to be construed as a representation of facts. The information and expression of opinions herein a-e ubject to change without notice and neither delivery of this Official Statement nor any sale made here] -d' r shall, under any circumstances, create any implication that there has bean no change in the affairs of the P stri:;t or any other parties described herein since the date hereof. All summaries of the Indenture, Installment Purchase Agreement, or other documents are made subject to the provisions of such documents respe_ -vely and do not purport to be complete statements of any or all of such provisions. Reference is hereby n ;dc to such documents on file with the District for further information in c, nnection therewith. CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL YFATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND "FORWARD -LC OWING STATEMENTS." NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESUL "FS 1?1S. "USSED HEREIN WILL BE ACHIEVED, AND ACTUAL RESt_ LTS MAY DIFFER MATER.IAI LY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RFSPFCT, THE WORDS "ESTIMA F "PROJECT," "ANTICIPATE," "EXPECT," "INTEND," `BELIEVE AND SIMILAR EXPRESSIONS .+RE INTENDED TO IDENTIFY FORWARD - LOOKING STATEMENTS. ALL PROJECTIONS, ( RECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWARD -1 JOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIOP. 1R'% STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. THE BONDS HAVE NOT BEEN REGISTERED UNDER THF. SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN � I CH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIF > I i,WS OF ANY STATE. This Official Statement and the information contained herein are s_ b iect to completion or amendment without notice. These securities maN not be sold nor may an offer -,o t !. ,e accepted prior to the time the Official Statement is delivered in fina form. Under no circumstances �hstll tiis Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there b ::xn sale of these securities in any jurisdiction in which such offer. soli nation or sale would be unlawful n:i :o registration or qualification under the securities laws of any such jurisdiction. IN CONNECTION WITH I HE OFFERING OF THE BON't5. i HE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHE: ',VISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISC; \1 INUED AT ANY TIME. THE UNDERWRITERS MAY OFFER AVD SELL THE BONDS TO CF.R "'a. "N DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER 'HAN THE PUBLIC OFFERING PRICE STATED ON THE INSIDE FRONT COVER PAGE HFREO ahD SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDER "k RJTERS. DOCSOC/ 1424854v4/022497 -0011 The District maintains a website. However, the information presented on such ivebsite is not part of this Official Statement and should not be relied upon in making an investmeni decision with respect to the Bonds. DOCSOC/7424854v4/022497 -0011 TABLE OF CONTEA'TS Page INTRODUCTION......................................................... ............................... . .................. ..............................1 THE2010 PROJECT ........................ . ..................... ............................... ................... ..............................1 THE REFUNDING PLAN .............................................. ............................... ................... ..............................2 Verification of Mathematical Commutations ................... .. ........ ...... . .. _._... ..... .... ................................ 2 ESTIMATED SOURCES AND USES OF FUNDS_ ...................... .. .... _ ... ... ... .............................. ....... ...._... 3 THEBONDS ....................................................................................................................... ..............................3 GeneralProvisions ...................... .................... ............................... ............. ..............................3 Book -Entry Only System ............ ................... ............................... .. .................... ..............................3 Transfers and Exchanges Upon 7 ennitiation of Book -Entry Onh S,stem ._ ................. ..............................4 Redemption.. ............................... ...................... ............................... .. .................... ..............................4 Selection of Bonds for Redemptw.. n ...................... ............................... .. ................... ..............................5 Noticeof Redemption ................. ...................... ............................... ................... ..............................5 Effectof Redemption ...................................... ............................... ................... ..............................5 DEBT SERVICE SCHEDULE ................................ ............................... ................ ..............................6 SECURITY FOR THE BONDS.. ... _ _ ................................ ................ . ................... ..............................6 Installment Payments Payable Fr,,m Net Revenues ........................... . . ................................................ 7 RateCovenant ................................................... ............................... ................... ..............................7 No Reserve Fund ........................ .................. ..............................8 .......................... ............................... Parity Bonds and Additional Contracts ............ ............................... . I I ................... ..............................8 THEDISTRICT ..................................................... ............................... ... .. .................... ..............................9 General........ ............................... .................... ............................... .......................... ..............................9 Governance and Management ............................ ............................... .. ................... ..............................9 DistrictPowers ......................................................................................................... .............................10 Employees and Employee Benefits......................... ............................... .................. .............................10 Defined Benefit Pension Plan..... .......................... ............................... . ................... .............................10 Postretirement Benefits ............................................ ............................... ................... .............................11 BudgetProcess ..................................................... ............................... .. ................... .............................11 DistrictInsurance ................................................... ............................... .. ................... .............................11 Land Use ...... ............................... ............................ ............................... ............... .............................12 THE WATER SYSTEM OF THE DISTRICT. ........................................... . ..................... .............................12 .................................. ............................... . Water Supply ..................... ............... .............................12 Groundwater and Surface Water _ ...................... ............................... ...._...... ....... ............................... ]2 .......................... ............................... Supplemental Water ................... ............... .............................13 ........................... ............................... . The Water System ..................... ................ .............................14 ......................... ............................... . Largest Customers ...................... ................ .............................17 Water System Rates and Charges .......................... ............................... ................... .............................17 Future Water System hnprovements .................. ............................... .. ................... .............................19 SeismicConsiderations ................ ...................... ............................... .. ................. .............................19 Outstanding Water System Indet•tedness ............ ............................... . .. .............................................. 19 OtherObligations ....................... .................... ............................... .. ................ .............................20 Water System Financial Infontta .o n ................ ............................... .... .................... .............................20 Historic Operating Results and Debt Service Coverage ..................... . ................. .............................20 Projected Operating Results and Debt Service Coverage .................. . .................... .............................21 t DOCSOC/ 1424854v4/022497 -001 1 TABLE OF CONTENTS (continued) CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ............ .............................22 ArticleXIlIB ................................................................................................................... .............................22 Proposition218 ................................................................................................................ .............................23 FutureInitiatives .............................................................................................................. .............................24 THEAUTHORITY ................................................................................................................ .............................24 APPROVAL OF LEGAL PROCEEDINGS .......................................................................... .............................25 LITIGATION......................................................................................................................... .............................25 District............................................................................................................................. .............................25 Authority.......................................................................................................................... .............................25 TAXEXEMPTION ................................................................................................................ .............................25 CONTINUINGDISCLOSURE ............................................................................................. .............................27 RATINGS............................................................................................................................... .............................27 FINANCIALADVISOR ........................................................................................................ .............................27 UNDERWRITING................................................................................................................. .............................27 MISCELLANEOUS............................................................................................................... .............................28 APPENDIX A - DISTRICT 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 SPECIAL COUNSEL ............................... ................................... C -1 APPENDIX D - INFORMATION CONCERNING DTC ................................................ ............................... D -1 APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE .................... ............................E -1 -ii- DOCSOC/ 1424854x4/022497 -00 1 1 SUMMARY STATEMENT This summary 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. Purpose. The Bonds are being issued to provide funds: (i) to finance certain improvements for the District's Water System, as described under the caption "THE 2010 PROJECT "; (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, as described under the caption "THE REFUNDING PLAN "; (iii) to fund interest due through and including [October 1, 2011] and (iv) to pay costs incurred in connection with the issuance of the Bonds. Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Installment Payments to be made by the District 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 BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT. The obligation of the District to make Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District's Water System remaining after paying Operation and Maintenance Costs. The Installment Payments are payable on a parity with the District's obligation to make payments on $19,221,480 aggregate principal amount of other contracts as more particularly described herein. See the captions "DEBT SERVICE SCHEDULE" and "The WATER SYSTEM OF THE DISTRICT — Outstanding Water System Indebtedness." The obligation of the District to snake the Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments 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 District will not discontinue or suspend any 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 2010 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 DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. -i- DOCSOC/ 1424854v4/022497 -001 1 Rate Covenant. The Installment Purchase Agreement will req::it _ i ie District, to the fullest extent permitted by law, to fix and prescribe rates and charges for the Winer R<r :c. provided by the water System which will be at least sufficient to vield during each Fiscal Year Net Reve .re, equal to 120% of Debt Service for such Fiscal Year allocable to the '.', ater System, all as more pariculm.} de scribed herein under the caption "SECURITY FOR THE BONDS —R2ie Covenant." Additional Indebtedness. The Installment Purchase Agreement dues not permit the District to make any additional pledge of, or to place ii-iv additional lien. on the Net Rever ces or any portion thereof, which is senior to the pledge and lien securing the payment of the Installment Pa mie its. The Installment Purchase Agreement does permit the District to incur Parity Bonds or Contracts pa:. aile on a parity with the Installment Payments provided that certain cond,tions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the District from entering into obl g it ins which are Operation and Maintenance Costs and, therefore, payable from Revenues prior to the I -�; aliment Payments, or from issuing any bonds or executing contracts tht payments under which are payah;c rcm Net Revenues subordinate to Parity Bonds or Contracts of the Distti t. See the caption "SECURIT' r' ". HE BONDS —Panty Bonds and Additional Contracts." Redemption. The Bonds are subject to optional, mandaton re iemption. See the caption "THE BONDS — Redemption." The District. Encompassing, an area of approximately 30 sq ;:a e miles (the "Service Area "), the District was originally formed in 1954 to provide domestic water servi s 10 the then unincorporated and agriculturally -based communities of Highland and East Highland. The Scr ice Area is now largely urbanized. Approximately 15% of the Service Area is located in the unincorperale' _ reti of San Bernardino County and the remaining 85% is located within the City of San Bernardino and the C`r, of Highland. The Service Area has a service population of approximately 65,000. The District operates a wastewater collection and transmissio ;vstem, but the revenues from the wastewater system are not pledged or available to pay Installment Pa }7ne,ts . M DOCSOC/ 1424854v4/022497 -001 I S EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 INTRODUCTION This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of the East Valley Water District Financing Authority Water Revenue Bonds, (Water System Improvement Projects) Series 2010 (the "Bonds "). Descriptions and summaries of various documents hereinafter set forth 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 document. Capitalized terms used and not otherwise defined herein have the meanings ascribed thereto in Appendix B hereto. The Bonds are being issued pursuant to an Indenture of Trust, dated as of September 1, 2010 (the "Indenture "), by and between the East Valley Water District Financing Authority (the "Authority ") and Union Bank, N.A., Los Angeles, California, as trustee (the "Trustee "). The Bonds are limited obligations of the Authority payable solely from payments (the "Installment Payments ") to be made by the East Valley Water District (the "District ") to the Authority pursuant to an Installment Purchase Agreement (the "Installment Purchase Agreement "), dated as of September 1, 2010, by and between the District and the Authority. The Bonds are being issued to provide funds: (i) to finance certain improvements for the District's Water System (the "Project "), as described under the caption "THE 2010 PROJECT "; (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, as described under the caption "THE REFUNDING PLAN "; (iii) to fund interest due through and including [October 1, 2011 ] and (iv) to pay costs incurred in connection with the issuance of the Bonds. The District regularly prepares a variety of reports, including audits, budgets and related documents. Any Bond Owner may obtain a copy of such report, as available, from the District. THE 2010 PROJECT A brief description of each component of the Project is set forth below. Pursuant to the Installment Purchase Agreement, the District may substitute or add additional projects to the Project. See Appendix B— "DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE" under the caption "Installment Purchase Agreement —Sale and Purchase of the Project —Changes to the Project." The District expects to spend approximately $ of Certificate proceeds to construct a variety of capital improvements to the District Water System during Fiscal Years 2011 through 2014. These improvements include plant upgrade, expansion, design and construction, improvements to the Water System distribution system, water pipeline replacements and other miscellaneous improvements. The District expects to undertake environmental approvals on individual components of the Project prior to commencement of each component. The District expects to comply with all bidding and other permitting requirements for each component of the Project as required by law. All components of the Project are expected to be substantially completed by * Preliminary, subject to change. DOC S OC/ 1424854v4/022497 -001 I THE REFUNDING PLAN A portion of the proceeds from the sale of the Bonds will be u =ed n establish and partially fund an irrevocable escrow to effectuate the defeasance of the 2001 Certificates the 'Escrow Fund "), held by Union Bank. N.A., as escrow bank (the "Escim� Bank ") pursuant to an escroi acrceonent. dated as of September 1, 2010 by and between the District and the Escrow Bank (the "Escrow Ag e..nert "). In addition to the use of a portion of the proceeds from the sale of the Bonds, all money on depc :i . � s of the date of delivery of the Bonds, in the funds and accounts esta�lished under the Trust Agreement c ;rd as of April 1, 2001 (the "2001 Trust Agreement "), by and among the District the East Valley Public 1 ;aril r- Corporation (the "Corporation ") and Union Bank, N.A. (the "2001 T *usice'). as successor -in- interest to Umnn Bank of California, N.A. will be transferred by the 2001 Trustee to the Escrow Bank for deposit in the Fscro v fund. Moneys on deposit in the Escrow Fund will be invested in di -e. t obligations of, or obligations unconditionally guaranteed by, the I sited State Government (the "Esro,e Securities "), the interest and principal payments from which wile secure and provide funds to pa\ :h: 'district's installment purchase payments due under the Amended and Restated Installment Purchase Ag er merit, dated as of April 1, 2001, by and between the District and the Corporation (the "2001 Installment P ^r, h,ise Agreement ") on and prior to December 1. 2010 and the District's optional prepayment on December 1 _.1 10 of the remaining installment purchase payments due under the 2,i01 Installment Purchase Agreern r Said respective moneys will be applied to the principal and interest due with respect to the 2001 Certificab :s due on and prior to December 1, 2010 and on December 1, 2010 to prep--v the outstanding principal of the (: Certificates. Establishment of the Escrosk Fund will operate to defease the 30.01 Certificates. The registered owners of the 2001 Certificates will remain the owners of an undividec interest in the installment purchase payments due under the 2001 Installment Purchase Agreement. Moneys deposited with the Escrow Bank with respect to the Escrow Fund are irre,ocably pledged to secure, as proN d-c in the Escrow Agreements, the payments of the installment purchase payments under the 2001 Installme-o Purchase Agreement as due on and prior to December 1, 2010, and to cause prepayment of the remaining installment purchase payments due under the 2001 Installment Purchase Aereeinent on December 1, 2010. Verification of Mathematical Computations Upon delivery of the Bonds. the arithmetical accuracy of ceriain computations included in the schedules provided by the Underwriter on behalf of the District and the ? alhority relating to the: (i) adequacy of forecasted receipts of principal anal interest on the Escrow Securities and cash to be held pursuant to the Escrow Agreement; (ii) forecasted pa_ ments of principal and interest wtth respect to the 2001 Certificates on and prior to their projected maturity and or redemption dates; and (iii) vie:ds ,vith respect to the Bonds and on the obligations and other securities to be deposited pursuant to the Fscn �k Agreement upon delivery of the Bonds, will be verified by Causey Demgen & Moore, Inc., independent certified public accountants (the `Verification Agent "). Such verification shall be based solely upon inf, r it -ion and assumptions supplied to the Verification Agent by the Under. k vier. The Verification Agent has m ! .nzde a study or evaluation of the information and assumptions on which such computations are based ana. accordingly, has not expressed an opinion on the data used, the reasonab eness of the assumptions or the ac ..� N =bility of the forecasted outcome. -2- DOCSOC/ 1424854v4/022497 -001 1 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: Sources: Principal Amount of Bonds Moneys Released from 2001 Trust Agreement Plus/Less Net Original Issue Premium/Discount Total Sources: Uses: Acquisition Fund Interest Fund Escrow Fund Delivery Cost Fund (2) Underwriter's Discount Total Uses: (' ) Amounts rounded to the nearest dollar. 12) Includes certain legal, financing, rating agency and Trustee fees and printing costs. THE BONDS General Provisions The Bonds will be issued in the aggregate principal amount of $ 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 April 1 and October 1 of each year, commencing April 1, 2011. Interest will be calculated at the rates set forth on the inside front cover page hereof and 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 ( "DTC "). 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" below and Appendix D attached hereto. In the event that the book -entry only system described below is discontinued, the principal of 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 each series of the Bonds in the principal amount of the Bonds of such maturity. It 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. -3- DOCSOC/1424854v4/022497 -0011 The Authority cannot and does not give any assurances that DTC )art'cipants or others will distribute payments with respect to the Bond: received by DTC or its noir.inee s the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they t,i;l ; ) on a timely basis, or that DTC will service and act in the manner de�rribed in this Official Statement. l , r appendix D hereto for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book -Entry Only System In the event the book -entrn system described above is diSCOntn-ed the Bonds will be printed and delivered as provided in the Indenture. Thereafter, any Bond may. in acc cr l i-tce with its terns, be transferred on the Registration Books by the person in whose name it is register �t. :n person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Tnts r -e or cancellation, accompanied by delivery of a written instrument of tra- nsfer, duly executed in a form acce•n +L e to the Trustee. The Trustee is not required to register the transfer of any Bond during the period in Ni h ci the Trustee is selecting Bonds for redemption and any Bond that has beer- selected for redemption. Whenever any Bond or Bond, is surrendered for transfer. the Aurioriry will execute and the Trustee will authenticate and deliver a nev, Fond or Bonds of authorized denorn tt lion or denominations for a like series and aggregate principal amount of the same maturity. The 'fr'. :Stee will require the Bond Owner requesting such transfer to pay any tzx or other governmental charge :ec r: ed to be paid with respect to such transfer. Following any transfer of Bonds. the Trustee will cancel and det.'-ox the Bonds it has received. 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 tcl 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 will require the Bond Owner requesting suci 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 it has received. Redemption Optional Redemption. The Bonds with stated maturities on or after October 1. ? . will be subject to redemption prior to their respective stated maturities, as a whole or in part on any date ;is .iirected by the Authority and by lot within each maturity in integral multiples of $5,000, on or after Ocn&er 1, 20_, at a price equal to the principal amount thereof plus accrued interest thereon to the date fixed for -< demption, without premium. Mandatory Redemption. The Bonds with stated maturities on October 1, 20 are subiect to mandatory sinking fund redemption in part (by lot) on each Ocober 1 on and after October 1. 20___. trr integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest caideneed and represented thereby to the date fixed for redemption, without premium, in accordance with the fclh v, :ng schedule: Redemption Date Principal (February 1) Amount * Final Maturity. -4- DOCSOC/ 1424854v4/022497 -001 1 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. 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 provisions set forth above under the caption "— Redemption." 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 30 days before any Redemption Date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services; provided that, in the case of notice of optional redemption not related to an advance or current refunding, such notice may be given only if sufficient funds have been deposited with the Trustee to pay the applicable Redemption Price of the Bonds to be redeemed, provided that such notice may be cancelled by the Authority upon written request delivered to the Trustee not less than 5 days prior to such Redemption Date. Each notice of redemption will state the date of notice, the redemption date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all Bonds of any such maturity are to be redeemed, the serial numbers of the Bonds of such maturity to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, have been called for redemption 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 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 ceases 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 will 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 -5- DOC SOC/ 1424854v4/022497 -0011 Trustee will, upon surrender for pa}inent of any of the Bonds to be redeemed en their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuaro to the provisions of the Indennue -,l.il] be canceled upon surrender thereof. DEBT SERVICE SCHEDULE Set forth below is a schedule of the District's payment obligahaos Frith respect to a portion of the Installment Payments and Parity Contract payments for each annual per d ending on June 30 of the years indicated. See the caption "THE ',k ATER SYSTEM OF THE DISIR IC 1'— Outstanding Water System Indebtedness" for further information + ith respect to the Parity Contract P__ n- ants. Installment Payments Fiscal Year Ending Pain June 30 Ainnyal Interest Connae Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 'total "' Parity Contracts include the 2001 Instzllirmi Payments, 2004 Installment Payments,'-('Of I istz threat Payments, Plant 134 SRF Loan and Plant 150 SRF Loan described under :h_ caption "THE WATER SYSTEV: Ut '1t DISTRICT -0utstanding Water System Indebtedness.' SECURITY FOR THE BONDS Each Bond is a special limited obligation of the Authority pa�aHe solely from Authority Revenues (the "Authority Revenues "), which consist of Installment Payments 0' to nade by the District under the Installment Purchase Agreement, and from certain other funds and amounts established pursuant to the Indenture. NEITHER THE FULL FAITH AND CREDIT NOR ANY 0' 1: R REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE ',f. Y DENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKI PA's MENTS OF PRINCIPAL AND -6- DOCS OC/ 1424854x4/022497 -001 1 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 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 Installment Payments and its rights as may be necessary to enforce payment of the Installment Payments when due. 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 subject only to the provisions of the Indenture permitting the terms and conditions set forth therein. 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 District to pay Installment Payments is payable from Net Revenues on a parity with the obligation of the District to make payments under the 2004 Installment Sale Agreement, the 2006 Installment Sale Agreement and the State Loans described under the caption "THE WATER SYSTEM OF THE DISTRICT — Outstanding Water Indebtedness." In order to carry out and effectuate such pledge and lien, the District has agreed and covenanted that all Revenues (as such term is defined in the Installment Purchase Agreement) will be received by the District in trust and deposited when and as received in a special fund designated as the "Revenue Fund," which fund has been established and which fund the District has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any Parity Bonds or Contracts remain unpaid. Moneys in the Revenue Fund will be used and applied by the District as provided in the Installment Purchase Agreement. Notwithstanding anything contained in the Installment Purchase Agreement, the District is not required to advance any moneys derived from any source of income other than the Revenues and the Revenue Fund for the payment of amounts due under the Installment Purchase Agreement or for the performance of any agreements or covenants required to be performed by it contained therein. The District 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 District for such purpose. THE OBLIGATION OF THE DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT'S WATER SYSTEM REMAINING AFTER PAYING OPERATION AND MAINTENANCE COSTS AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA (THE "STATE ") OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Rate Covenant The Installment Purchase Agreement requires the District, to the fullest extent permitted by law, to fix and prescribe rates and charges for the Water Service provided by the Water System which will be at least -7- DOC SOC/ 1424854 v4 /022497 -001 1 sufficient to yield during each Fiscal Year Net Revenues equal to 120°, Debt Service for such Fiscal Year allocable to the Water System. The District may make adjustments from time to time in such rE, t s and charges and may make such classification thereof as it deems nec;<.sary, but will not reduce the rates . emd charges then in effect unless the Net Revenues from such reduced rate­ and charges will at all times be sid is ent to meet the above - described requirements. No Reserve Fund Neither the Installment Purchase Agreement nor the Indenture establishes a reserve fund for the Bonds. Parity Bonds and Additional Conn acts The District may at any time issue any Parity Bonds or execute a no Contract, as the case may be, in accordance with the Installment Purchase Agreement; provided: (a) The Net Revenues for the most recent audited Fiscal Yea- preceding the date of adoption by the Board of Directors of the District (the "Board ") of the resolution autl or zing the issuance of such Parity Bonds or the date of the execution o such Contract, as the case may bc, as evidenced by both a calculation prepared by the District and a special report prepared by an Independem C citified Public Accountant or an Independent Financial Consultant on such calculation on file with the Distr.c: produces a sum equal to at least 120% of the Debt Service for such Fiscal Year; and (b) The Net Revenues for the most recent audited Fiscal Ye.tr preceding the date of the execution of such Contract or the date of adoption by the Board of the resolution aut icrizing the issuance of such Parity Bonds, as the case may be, including adjustments to give effect as of' the Erst day of such Fiscal Year to increases or decreases in rates and charges for the Water Service anp.-wco and in effect as of the date of calculation, as evidenced by a calculation prepared by the District, produ� es a sum equal to at least 120% of the Debt Service for such Fiscal Year plus the Debt Service which wot.ld have accrued on any Contracts executed or Parity Bonds issued since the end of such Fiscal Year assurr r e such Contracts had been executed or Parity Bonds had been issued at the beginning of such Fiscal Year plus :he Debt Service which would have accrued had such Contract been executed or Parity Bonds been issued at tl.! beginning of such Fiscal Year; and (c) The estimated Net Revenues for the then current F wal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest U, re of Operation of any uncompleted Parity Project, as evidenced by a certificate of the General Manager o: the District on file with the District, including (after giving effect to the completion of all such uncompleter rarity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any in i e� %e in the income, rents, fees, rates and charges estimated to be fixed. prescribed or received for the W ate - `evice and which are economically feasible and reasonably considered necessary based on projected operations : >r such period, as evidenced by a certificate of the General Manager on file with the District, shall produce a sum equal to at least one hundred twenty percent (120 %) of the estimated Debt Service for each of such � rcei Years, after giving effect to the execution of all Contracts and the issuance of all Parity Bonds estimated c be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects wnl in such Fiscal Years, assuming that all such Contracts and Parity Boncs have maturities, interest rates anl proportionate principal repayment provisions similar to the Contract last executed or then being executed : -the Parity Bonds last issued or then being issued for the purpose of acqui -mg and constructing any of such ur cnm.Dleted Parity Projects. Notwithstanding the foregoing. Parity Bonds or Contracts ma: be issued or incurred to refund outstanding Parity Bonds or Contracts if, after giving effect to the applic a, on of the proceeds thereof, total -R- DOCSOC/ 1424854v4/022497 -001 I Debt Service will not be increased in any Fiscal Year in which Parity Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Parity Bonds or Contracts, but excluding such refunding Parity Bonds or Contracts) not being refunded are outstanding. THE DISTRICT General The Board of Supervisors of San Bernardino County approved a petition in writing for the formation of the East Valley Water District (formerly, East San Bernardino County Water District) under Division 12 of the Water Code of the State of California and ordered an election held January 12, 1954. The formation of the District was approved through the electors, and the Board of Supervisors approved the formation of the District. Incorporation of the District was approved by the State of California on February 1, 1954. Encompassing an area of approximately 30 square miles, the District was originally formed to provide domestic water service to the then unincorporated and agriculturally -based communities of Highland and East Highland. The Service Area is now largely urbanized. Approximately 15% of the Service Area is located in the unincorporated area of San Bernardino County and the remaining 85% is located within the City of San Bernardino and the City of Highland. The Service Area has a service population of approximately 65,000. The District holds a majority of the voting stock of two mutual water companies in the City of Highland, the North Fork Water Company ( "North Fork ") and City Creek Water Company ( "City Creek "). The District's ownership interests allow it to take certain quantities of water and to use the mutual water companies' existing distribution systems. During Fiscal Years 2009 and 2008, the District paid annual assessments of $58,295 and $58,295, respectively, to North Fork and City Creek. In April 2009, the District and North Fork completed construction of a water canal replacement project (the "North Fork FEMA Project "). North Fork FEMA Project costs totaled $4,987,184 with $3,784,614 paid from the proceeds of a Federal Emergency Management Agency Grant, and the remaining $1,202,570 divided evenly between the District and North Fork, each of which will hold a 50% interest in the North Fork FEMA Project. The District operates a wastewater collection and transmission system, but revenues from the wastewater system are not pledged to or available to pay Installment Payments. The District does not own or operate a wastewater treatment plant, but instead contracts with the City of San Bernardino for the treatment of wastewater delivered to the District's wastewater system. Governance and Management The District is governed by a five member Board of Directors. The Directors are elected by the registered voters of the District and serve staggered four -year terms. The current directors, their occupations and the expiration dates of their terms are set forth below. Expiration Director of Term Occupation George E. "Skip" Wilson, President November 2011 Retired director of water agency Matt LeVesque November 2013 President of engineering and construction company Larry Malmberg November 2011 President of security consulting company James Morales, Jr. November 2013 Legislative analyst Kip E. Sturgeon November 2011 Former Navy reserve equipment operator -9- DOCSOC/ 1424854v4/022497-001 I District Powers The District has broad genera: powers over the use of water and v astewater collection within District boundaries, including the right of eminent domain and the authont acgaire, control, distribute, store, spread, sink, treat, purify, reclaim, pr Bess and salvage any water for her e "c it use, to provide sewer service, to sell treated or untreated water. t- contract with the United States, e;hrr political subdivisions, public utilities, and other persons, and, subject to certain constitutional limits. to le v :axes on lands. Employees and Employee Benefits There are currently 68 full time employees working for the District. rf whom 33 are devoted to water service, 3 are devoted to sewer ser.,tce and 32 are devoted to adminkt-auon and support services. The employees of the District are represented by union under a contract which expired on July 2, 2010 which was extended for one year with no changes through June 30, 2011. The non -r, is €!ement employees of the District have never conducted a strike against the District. Day -to -day management of the District is delegated to the General Manager (the "General Manager "), Robert E. Martin. Mr. Martin has served as the District's General 'Nana ,e- since 1990. Before becoming General Manager, Mr. Martin served as the District Engineer for six year: Prior to Mr. Martin's employment with the District, he was employed as a private civil engineer. Mr. Manic l o:. is a Bachelor of Science Degree in Civil Engineering and is a Registered Professional Civil Engineer in Cal oriia. Brian W. Tompkins serves as Chief Financial Officer of the District. Mr. Tompkins has been with the District since January of 2002. Before coming to the District, Mr. Tompkins was employed by Rogers, Anderson, Malody and Scott, LLP, Certified Public Accountants. Mr. Tompkins holds a Bachelor of Science Degree in Business Administration and is a Certified Public Accountant. Ron Buchwald has served as District Engineer for the District since June 2006. Prior to his appointment as District Engineer, Mr. Buchwald served as Assistant Distrc Hngineer for 4 years. The District has employed Mr. Buchwald since 1999. Before coming to the Distnel. p -t -. Buchwald was employed as a civil engineer with a private company for nine years. Mr. Buchwald ho'd< a Bachelor of Science Degree in Civil Engineering and is a Registered Professional Civil Engineer in Calif ,rii . Defined Benefit Pension Plan The District contributes to the California Public Employees Retirement System ( "CalPERS "), an agent multiple - employer public employee defined benefit pension plan. CaIPFR.i; provides retirement and disability benefits, annual cost -of- living adjustments and death benefits to plan irci fibers and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State. Benefit provisions and all other requirements are established by state stania and the resolutions of the District. All full -time District employees are eligible to participate in PFRS with benefits vesting after five years of service. District employees xho retire at age 55 are entitled to an ai:nual retirement benefit, payable monthly for life, in increasing percentaee increments up to 2.7% of their r. �raee full -time monthly pay rate for the highest 12 consecutive months for each year of credited services. Participants are required to contribute 8% of their annual covered salary. The District makes the contributions required of District employees on their behalf and for thei- acz. unt. The District is required to contribute at an actuarially determined rate; the contribution rate for Fis_i 1 `.'ear 2011 is 16.656% of annual covered payroll. Benefit provisions & id all other requirements are estab ished by State statute and District ordinance. For the Fiscal Year ended hue 30, 2010, the amount contril- er by the District on behalf of the employees was $762,700, which eras equal to the District's required co ^t ibution. The required contribution _10_ DOC SOC/ 1424854v4/022497 -001 I was determined as part of the June 30, 2007, actuarial valuation using the entry age normal actuarial cost method. The three -year trend infonnation for the annual pension costs of the District is as follows: CalPERS recently announced significant investment losses. The District expects that its annual pension cost will increase in future years as a result of such investment losses. The District cannot predict at this time the magnitude of such increases, but does not expect such increases to have a material adverse effect on the District's obligation to make payments under the Installment Purchase Agreement. Postretirement Benefits In addition to a pension plan, substantially all the employees of the District and surviving spouses may become eligible for certain health care benefits if they reach normal retirement age while working for the District. As of June 30, 2010, four retirees receive full benefits of up to $550 per month and another 4 retirees, having reached Medicare age, receive a reduced benefit of approximately $109 per month. Governmental Accounting Standards Board Statement No. 45 ( "GASB 45 ") requires governmental agencies that fund post - employment benefits on a pay -as- you -go basis, such as the District, to account for and report the outstanding obligations and commitments related to such post employment benefits in essentially the same manner as for pensions. For the District, the reporting obligation began with the Fiscal Year ending June 30, 2009. Based on a preliminary report dated May 29, 2009 prepared by The Epler Company (the "Actuarial Consultant "), the Actuarial Consultant concluded that, as of June 30, 2009, the District's unfunded actuarial accrued liability for post - employment benefits based upon a 3.00% discount rate was $1,290,086. The Actuarial Consultant also concluded that the District's annual required contribution (the actuarial value of benefits earned during Fiscal Year 2009 plus costs to amortize the unfunded actuarial accrued liability, or "ARC ") is $163,799. While requiring the District to disclose the unfunded actuarial accrued liability and the ARC in its financial statements, GASB 45 does not require the District to fund the ARC. In Fiscal Years 2009 and 2010, the District paid expenses with respect to post - employment benefits of $45,886 and $26,105, respectively. For Fiscal Year 2011, the District has budgeted $172,000 of post. employment benefits including direct payments to retirees and contributions to the post - employment benefits trust. The District does not expect that any increased funding of post - employment benefits will have a material adverse affect on the ability of the District to make payments under the Installment Purchase Agreement. Budget Process The operating budget takes the form of a one -year financial plan which is adopted by the District Board. The budgetary process begins each year in January, with final approval generally occurring in June. The District adopted its Fiscal Year 2011 budget on July 27, 2010. District Insurance The District's insurance coverage for general liability, automobile liability, public official's liability, property and fidelity is provided through a self - insurance program under the Special District Risk Management Authority (the "Authority"). The Authority is a risk - pooling self - insurance authority created under the DOCSOC/1424854v4/022497 -0011 Annual Percentage of Net Pension Fiscal Year Pension Cost (APC) APC Contributed Obligation 2007 $601,748 100% $0 2008 736,225 100 0 2009 940,107 100 0 CalPERS recently announced significant investment losses. The District expects that its annual pension cost will increase in future years as a result of such investment losses. The District cannot predict at this time the magnitude of such increases, but does not expect such increases to have a material adverse effect on the District's obligation to make payments under the Installment Purchase Agreement. Postretirement Benefits In addition to a pension plan, substantially all the employees of the District and surviving spouses may become eligible for certain health care benefits if they reach normal retirement age while working for the District. As of June 30, 2010, four retirees receive full benefits of up to $550 per month and another 4 retirees, having reached Medicare age, receive a reduced benefit of approximately $109 per month. Governmental Accounting Standards Board Statement No. 45 ( "GASB 45 ") requires governmental agencies that fund post - employment benefits on a pay -as- you -go basis, such as the District, to account for and report the outstanding obligations and commitments related to such post employment benefits in essentially the same manner as for pensions. For the District, the reporting obligation began with the Fiscal Year ending June 30, 2009. Based on a preliminary report dated May 29, 2009 prepared by The Epler Company (the "Actuarial Consultant "), the Actuarial Consultant concluded that, as of June 30, 2009, the District's unfunded actuarial accrued liability for post - employment benefits based upon a 3.00% discount rate was $1,290,086. The Actuarial Consultant also concluded that the District's annual required contribution (the actuarial value of benefits earned during Fiscal Year 2009 plus costs to amortize the unfunded actuarial accrued liability, or "ARC ") is $163,799. While requiring the District to disclose the unfunded actuarial accrued liability and the ARC in its financial statements, GASB 45 does not require the District to fund the ARC. In Fiscal Years 2009 and 2010, the District paid expenses with respect to post - employment benefits of $45,886 and $26,105, respectively. For Fiscal Year 2011, the District has budgeted $172,000 of post. employment benefits including direct payments to retirees and contributions to the post - employment benefits trust. The District does not expect that any increased funding of post - employment benefits will have a material adverse affect on the ability of the District to make payments under the Installment Purchase Agreement. Budget Process The operating budget takes the form of a one -year financial plan which is adopted by the District Board. The budgetary process begins each year in January, with final approval generally occurring in June. The District adopted its Fiscal Year 2011 budget on July 27, 2010. District Insurance The District's insurance coverage for general liability, automobile liability, public official's liability, property and fidelity is provided through a self - insurance program under the Special District Risk Management Authority (the "Authority"). The Authority is a risk - pooling self - insurance authority created under the DOCSOC/1424854v4/022497 -0011 provisions of State Government Code Section 6500 et seq. The Aucherit} is governed by a board consisting of a representative from each member agency. The board controls the npeiat.nns of the Authority including selection of management and apprm 3i of operating budgets. The relat.ni s't:p between the District and the Authority is such that the Authority is not a component unit of the District n i Financial reporting purposes. The purpose of the Authority is to arrange and administer prog -a:ns of insurance for the pooling of self- insured losses and to purchase , -xcess insurance coverage. The A._thority provides joint protection coverage for losses in excess of the member districts' individually specife self- insurance retention levels. Individual claims (and aggregate pub'.ic liability and property claims) in et:es; of specified levels are covered by excess insurance policies purchased from commercial insurance carries. See Note 10 to Appendix A— "DISTRICT FINANCIAL STATEME"+TS" for a description of coverage li nils as of June 30, 2009. Land Use Land use within the District is primarily residential with some c.- nrnercial/industrial, park/landscape and agricultural uses. According to 1 e District, approximately 93.6% o''the District's metered customers are residential (91.2% single - family and 2.4% multi- family). The Districts _ommercial customers account for approximately 4.9% of the total metered services. The District's park l nc landscape customers represent approximately 1.5% of the current metered services. Agriculture users rec; iN irrigation water from the Santa Ana River via the North Fork Canal and therefore account for zero percent of t he current metered services. THE WATER SYSTEM OF THE DISTRICT Water Supply The District's water supply is obtained from 21 active deep groundwater wells, (10 of which are not used, and are temporarily off -line) that provide a combined capacity of al proximately 36 million gallons per day ( "mgd "). The District's average daily production of water during the 1 is „al Years 2006 through 2010 has varied from 19.5 mgd to 24.3 mgd. Tic water is of high quality and gen_r 11, does not require treatment. The District also has a surface water treatment plant with a capacity of 4 it of «fiich will be expanded to 8 mgd (see — "Future Water System Improvements" below). The District takes relivery of flow from the Santa Ana River surface water rights to portions of the flows in the Santa Ana 1 +i e• and City Creek by virtue of its ownership of stock in a mutual water company. The District currently pumps approximately 85% of water supplied to customers from the Bunker Hill Groundwater Basin (the "Basin ") and obtains approximately 15% of :,arcs supplied to customers from the Santa Ana River. During dry years. when water supplies are short, the ) strict has the option of obtaining supplemental water from the State Water Project through the San Bernard nr Valley Municipal Water District ( "SBVMWD "). During wet years. �khen there is excess water available. the District works with the San Bernardino Valley Water Conservation District to transport surplus water 'o man -made spreading grounds, areas with porous soil where surface w ater can easily percolate into the Bas it and be stored for future use. The amount of groundwater and purchased v,ater varies from year to year bas cc ct climatic and other conditions. Groundwater and Surface Water The District currently pumps approximately 19,400 acre -feet of groundwater per year from the Basin and approximately 3,300 acre -feet from the Santa Ana River. The Ba•ein i- estimated to have a total storage capacity of approximately 5,000,000 ccre -feet at an average depth of 1.1 0 ) feet. In accordance with the terms of the Western Judgment (Case No. 7S426 – County of Riverside) entered it 1969 and currently still in force, the District has no limitations on the amount of groundwater it produces :<, s !rve its customers. The District is not required to obtain a permit for groundwater production. Total maxnru:n daily pumping from the Basin is approximately 29 mgd gallons and is currently sufficient to supply 85 !', of water demand within the District. -12- DOC SOC/ 1424854v4/022497 -001 I The District also takes surface water from the Santa Ana River which flows through the Basin. Four tributaries to the Santa Ana River provides surface flows within the District. The District holds rights to direct delivery of native surface water through majority stock ownership in North Fork. The District currently has Santa Ana River water rights of 4 mgd with the ability to expand to over 6.5 mgd with conversion of remaining agricultural properties and water shares of stock. The surface water is conveyed to the Surface Water Treatment Plant No. 134 with a capacity of 4 mgd. Water Treatment Agreement. In October 2008, the District and Basin Water, Inc. (`Basin Water ") signed an agreement (the "Nitrate Removal Agreement ") under which Basin Water agreed to maintain treatment facilities at two District wells (Well 107 and Well 27) contaminated by nitrates through June 16, 2018. Under the Nitrate Removal Agreement, the District will pay Basin Water a $480 /acre -foot treatment fee for up to 2,000 acre -feet (the "Base Quantity") of water delivered by the District and a $360 /acre -foot treatment fee for any water delivered for treatment in excess of 2,000 acre -feet. The per acre -foot treatment fee ($480) times the Base Quantity (2,000 acre -feet) equal $960,000, which represents the minimum payable annually under the Nitrate Removal Agreement. Perchlorate Treatment. During Fiscal Year 2008, District crews and contractors completed work on the site preparation for, and installation of, a mobile perchlorate treatment unit at the District's Plant 27, and site preparation, demobilization and remobilization of a mobile perchlorate treatment from District Plant 132 to Plant 107. Contamination Clean -Up Responsibilities. The District has been included on a list of parties responsible for the clean up of a hazardous waste disposal site in Bakersfield, California. The District's relationship to the site was established in 1991 when the District was clearing contaminated soil from land it had purchased from the State of California. The contaminated soil was hauled to the site, and the site owners were paid by the District to properly dispose of the soil. In 2000, the State of California discovered that the site owners had abandoned the site and that none of the contaminants accepted there had actually been disposed of The State then contacted all of the parties that had used the site, including the District (the "Gibson Group "), and informed them that they were now responsible for clean up of the hazardous waste. As of September 2009, the Gibson Group have made contributions toward the site clean -up totaling $7.6 million. In addition the Gibson Group's management committee has been successful in collecting almost $10 million in settlements from non -group members, offsetting some of the financial responsibility that would have otherwise been home by Gibson Group members. The District paid contributions totaling $16,118.62. With the site cleaned up, the property has now been sold, and the risk of liability transferred, to Environmental Liability Transfer, Inc. of Mississippi. A third amendment to the participation agreement entered into by the Gibson Group members has been drafted and with it a plan to distribute Gibson Group Trust assets to the Gibson Group members. The District's share of this distribution based on its share of contributions is approximately $1,680. Supplemental Water During dry years, District purchases supplemental water from the State Water Project ( "SWP ") through SBVMWD which in turn purchases SWP water through the California Department of Water Resources ( "DWR "). The water SBVMWD provides to the District is treated at Plant 134. The treatment process for all surface water includes flocculation, coagulation, sedimentation, filtration and chlorination. The District does not own or operate any treatment facilities or any pipelines for transmission and distribution of SBVMWD imported water. SBVMWD faces various challenges in the continued supply of imported water to the District and other member agencies. A description of these challenges as well as a variety of other operating information with respect to SBVMWD is included in certain disclosure documents prepared by SBVMWD, respectively. SBVMWD has entered into certain continuing disclosure agreements pursuant to which SBVMWD is 13- DOCSOC/ 1424854v4/022497 -0011 contractually obligated for the benefit Of owners of certain of its outstandine obligations, to file certain annual reports, notices of certain material events as defined under Rule 15c2 , W the Securities Exchange Act of 1934 ( "Rule 15c2 -12 "), as amended. and annual audited financial slatem : t, ('Disclosure Information ") with the Municipal Securities Rulemakire. Board's Electronic Municipal Nia he_ Access System for municipal securities disclosures, maintained on t!;e Internet at http: /emma.msrb ora . `! VMWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DIS'- R_ICT. THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE DISCLOSURE T's i't 0 MATION TO THE DISTRICT, THE TRUSTEE OR THE OWNERS II)F THE CERTIFICATES. SWP reliability has been negatively affected due to the State � inability to complete the SWP as contracted. Despite efforts, it is unbkely that the full 4.2 million acre -fee per year design delivery capacity will ever be reached due to environmental limitations. Currently the ax: num delivery capability for the SWP is somewhat less than 3.5 million acre -feet. In most years 4as amount cannot be delivered due to infrastructure limitations and environmental restrictions. The Department of Water Resources ( "DWR ") faces various cha lcages in the continued supply of SWP water to the District. A description of these challenges as well as a , a -te. % of other operating information with respect to DWR is included in certain disclosure documents prepared by DWR. DWR has entered into certain continuing disclosure agreements pursuant to which DWR is coninctually obligated for the benefit of owners of certain of their outstanding obligations, to file certain anrua.:eports, notices of certain material events as defined under Rule 15c2 -12 and annual audited financial statements. DWR HAS NOT ENTERED INTO A CONTRACTUAL COMMITMENT WITH THE DISTRICT. IiF TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE SWP INFORMATION TO 'Tli -= ')ISTRICT OR THE OWNERS OF THE CERTIFICATES. NONE OF DWR OR SBVMNVD HAVE REVIEWED THIS OFFICIAL STATEMENT AND NONE HAVE MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO DP'R, THE SWP OR SBVMWD. NONE OF DWR OR SBVMM D ARE CONTRACTUALLY OBLIGATED, AND NONE HAVE UNDERTAKEN, TO UPDATE DISCLOSURE INFORMATION OR SWP INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE CERTIFICATES UNDER RULE 15c2- 12. The Water System General. The District owns and operates 292 miles of waterlines ranging in size from 4 inches to 30 inches in diameter. Eighteen active reservoirs provide storage of approxinwte.N 28.6 million gallons of water. The District has approximately 21,654 billed water connections as of the cat: `ereof. Water Quality. The District's .rater meets all current requirem( -t� f the Safe Drinking Water Law and the regulations of the California Department of Health and Services (J-:e 'Health Department "). Water supplied by the District meets all state and federal standards for safe, potahl • - ater. The District is required to perform frequent sample monitoring and testing, with independent water analysis also performed by State certified laboratories. Resulted are sub t,itted to the Health Department. -14- DOCSOC/ 1424854v4/022497 -001 I Historic Water Production, Accounts and Sales Revenues. The following table shows the water production of the District for the five most recent Fiscal Years: t-) Reflects unaudited actual Fiscal Year 2010 results. t �1 Imported water in Fiscal Years 2008 and 2009 was not used to supplement water supply, but rather to replace surface water from the Santa Ana River when there was interruption in availability of North Fork intake canal between river and plant, i.e., during canal replacement. See "THE DISTRICT — General" above. Source: District. The following table shows a history of billed water connections of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Number of Billed Water Connections(') Fiscal Year Connections EAST VALLEY WATER DISTRICT 21,951 2009 21,806 2008 Historic Water Production 2007 21,899 2006 21,698 (In acre -feet per year) Fiscal Groundwater & % Increase/ % Increase/ Year Surface Water (Decrease) SBVMWDa) (Decrease) Total 2006 24,079 —% 0 —% 22,826 2007 27,252 11.6 0 22,826 2008 23,612 (15.4) 1,549.7 21,375 2009 23,353 (1.1) 347.3 (77.6) 21,382 2010") 21,792 (7.2) 0 (100.0) 19,803 t-) Reflects unaudited actual Fiscal Year 2010 results. t �1 Imported water in Fiscal Years 2008 and 2009 was not used to supplement water supply, but rather to replace surface water from the Santa Ana River when there was interruption in availability of North Fork intake canal between river and plant, i.e., during canal replacement. See "THE DISTRICT — General" above. Source: District. The following table shows a history of billed water connections of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Number of Billed Water Connections(') Fiscal Year Connections 2010") 21,951 2009 21,806 2008 21,826 2007 21,899 2006 21,698 t01 Includes connections for both residential and commercial customers. t2t Reflects unaudited actual Fiscal Year 2010 results. Source: District. -15- DOC SOC/ 1424854x4/022497 -001 1 The following table shows his�oric sales revenues of the Water 5;vte:[7 of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICI Actual Sales Revenues(" Fiscal Residential and % Increase/ Year Commercial (De rease) 2010''' S14,853,424 �).' 2 )% 2009 14,870,655 ').r.1 2008 13,444,479 _ 9 2007 13,105,269 Projected Water Production 2006 11,807,046 Fiscal "' Includes water revenues for both residential and commercial customers. 12) Reflects unaudited actual Fiscal Year 2010 results. Source: District. Projected Water Production, Connections and Water Revenues. The following table shows water production of the District for the current and next four Fiscal Years as prre :ted by the District. (Drc. ease) 2011 EAST VALLEY WATER DISTRICI 2012 23,005 Projected Water Production 2013 23,025 Fiscal % Increase/ % Increase/ 0.18 Year Groundwater (Decrease) SBVMWD (Decrease) Total 2011 21,000 (4.0)% 0 "/0 21,000 2012 21,900 4.3 500 22,400 2013 22,500 2.7 0 ;100.0) 22,500 2014 23,000 2.2 1,000 0 24,000 2015 25,000 8.6 0 1 00.0) 25,000 Source: District The following table shows the projected water accounts for the ,:u:Te a and next four Fiscal Years as projected by the District. EAST VALLEY WATER DISTRICT Projected Water Connections"" Fiscal Residential and %Increase/ Year Commercial (Drc. ease) 2011 22,985 2012 23,005 2013 23,025 0.C8 2014 23,045 0.18 2015 23,065 Source: District. -16- DOCS OC/ 1424854v4/02249 7 -00 1 1 The following table shows the sales revenues from the Water System for the current and next four Fiscal Years as projected by the District. EAST VALLEY WATER DISTRICT Projected Sales Revenues Fiscal Residential and %Increase/ Year Commercial (Decrease) 2011 $15,516,914 118,414 2012 16,454,808 6.04% 2013 17,666,440 7.36 2014 19,273,555 9.10 2015 20,455,256 3.02 Source: District. Projected sales revenues assume average precipitation, no increase in customer accounts and adoption of the projected rate increases described under the caption " —Water System Rate and Charges" below. Largest Customers The following table sets forth the ten largest customers of the Water System of the District as of June 30, 2010, as determined by the amount of their respective payments. EAST VALLEY WATER DISTRICT Largest Customers — Fiscal Year 2010 Customer SBCUSD Patton State Hospital San Manual Mission Indians San Manuel Indian Bingo Casino Stubblefield Construction Co. East Highland Ranch Valencia Lea Mobile Home Park Safety Investment Eastwood Fartnsltl Highland Palms Homeowners TOP TEN TOTAL TOTAL SYSTEM 1) Mutual water company being taken over by the District. (2) Sales to customers. Source: District. Revenue % of Totat" $ 351,276 3.00% 302,280 2.58 185,203 1.58 118,414 1.01 87,744 0.75 83,878 0.72 82,860 0.71 69,078 0.59 67,448 0.58 59.841 0.51 $ 1,408,022 12.02% $11,710,000(" These ten customers accounted for approximately 12.02% of total revenues from sales to customers for the year ended June 30, 2010. Water System Rates and Charges General. Water revenues of the District may be derived from three sources: (a) water sales (consumption charge); (b) system charges (meter availability charge); and (c) connection charges. The District -17- DOCSOG 1424854v4/022497 -001 1 Board has rate setting authority as prodded under the Act. The District .s not subject to the jurisdiction of, or regulation by, the California Puhi c Utilities Commission. See ;he caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES" for ee-, ii 'imitations of the rate setting authority of the District Board. The District annually deiennlnes the adequacy of the \rate: vstem rate structure after full consideration of expected operations, naintenance and capital costs. kk n,r rates are currently $1.20 per 100 cubic feet (which will increase to $1.4Q per 100 cubic feet effective Octobe 20 10) plus a minimum monthly charge that varies with the size of lie metered services as described ae o.. Historically, the District has increased certain water rates. The historic increases in water rates are hste2 below. EAST VALLEY WATER DISTRU Water Rate History 2005 -2010 "' Effective October 1, 2010 through Sepiemhe. =0. 2011 Source: District. The District Board has approved raising retail and commercial rites m Fiscal Year 2010, Fiscal Year 2011 and Fiscal Year 2012. Comparative Water Rates. Set forth below is a schedule of comparative rates effective for areas near to the District as of June 2010. Table I1 EAST VALLEY "'ASTER DISTRICT WATER SYSTEM Comparative Rates(l) Agency Per Elsinore Valle} Municipal Water District S1 '!.?5 Western Municipal Water District X, I City of Riverside 5 4-: 4 Cucamonga Val ey Water district East Vallee dater District (future)t'3 Billing Loma Linda East Valley Rater District (current) Yucaipa Valle. `Eater District West Valley %. ater District City of Redlands Unit SB Municipal i °; ater District Average Year Rate l.. 1/.. 2,. j.. 4.. 6., g„ 2005 $1.01 $7.50 514 00 $29.50 $42 50 S'4 ;n 17; 00 $241.00 $362.00 2006 1.08 7 50 400 29.50 42.50 -4 5o : 1 00 241.00 362.00 2007 1.20 8.40 33.00 47.60 0,Sn _2330 241.00 362.00 2008 1.35 10.45 14 63 18.81 30.30 1 :4 94 1, '9 219A4 303.04 2009 1.35 10.45 14 63 18.81 30.30 1 i49< 1 -',29 219.44 30304 2010°1 1.49 11.54 !756 32.49 7447 1?740 __ .30 452.06 721.76 "' Effective October 1, 2010 through Sepiemhe. =0. 2011 Source: District. The District Board has approved raising retail and commercial rites m Fiscal Year 2010, Fiscal Year 2011 and Fiscal Year 2012. Comparative Water Rates. Set forth below is a schedule of comparative rates effective for areas near to the District as of June 2010. Table I1 EAST VALLEY "'ASTER DISTRICT WATER SYSTEM Comparative Rates(l) Agency Monthh Rate2j Elsinore Valle} Municipal Water District S1 '!.?5 Western Municipal Water District X, I City of Riverside 5 4-: 4 Cucamonga Val ey Water district East Vallee dater District (future)t'3 1.. ^.8 Loma Linda East Valley Rater District (current) Yucaipa Valle. `Eater District West Valley %. ater District City of Redlands SB Municipal i °; ater District Average t" As of June 2010. 12) Based on 3/4" meter and 26 hcf volume -,onthlN usage 131 Based on new rates which will take effect nn October 1, 2010. Source: District. DOCS OC/ 1424854 v4 /022497 -001 1 Collection Procedures. Billings for water services provided are collected on a monthly basis. Write - offs for monthly water service occur once a year. In June 2009, write -offs were approximately $5,881 while in June 2010, write -offs were approximately $10,896. Future Water System Improvements A new water regulation placing stricter limits on disinfectant by- products discharged from the District's surface water treatment plant will require retrofitting the plant's treatment technology, most likely membrane filtration. In addition, the District plans to double this plant's capacity to 8 mgd in order to improve supply to its three upper pressure zones. The deadline for compliance with the regulation is October 2012, and the cost of the plant update /expansion is estimated at $16 million. Future water capacity challenges were addressed in the District's Water Master Plan update issued in January 2008 (the "Water Master Plan "). The Water Master Plan identifies a 17,000 gpm treatment plant (Plant 150) in the district's lower pressure zone, with an estimated cost of $19.9 million, as a key facility in treating water from lower zone wells, pumping water to higher elevations where demand is expected to exceed supply, and possibly to take treated water from a regional treatment plant currently under consideration. A State Revolving Fund Loan of approximately $18 million is expected to help finance the project, with the balance of the project cost to be paid from a portion of proceeds of the Bonds. Six new wells, new booster stations, and approximately 3 miles of new pipelines are also categorized as necessary in the next five years by the Water Master Plan. Seismic Considerations The District is located in a seismically active region in Southern California. Significant fault zones in this region include the Elsinore, San Jacinto, Wildomar and San Andreas Fault Zones. There is significant potential for destructive ground shaking during the occurrence of a major seismic event. In addition, land along the aforementioned 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 District. District facilities are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The impact of lesser magnitude events is expected by the District to be temporary, localized and repairable. To date, no District facilities have suffered any significant earthquake damage. Outstanding Water System Indebtedness The District has incurred the following obligations that are payable from Net Revenues on a parity with the Installment Payments not including payments under the 2001 Installment Purchase Agreement which will be prepaid with a portion of the proceeds of the Bonds. See "THE REFUNDING PLAN." 1004 Installment Sale Agreement. The District entered into the 2004 Installment Sale Agreement to finance certain Water System facilities. The 2004 Installment Sale Agreement was outstanding in the aggregate principal amount of $8,067,777 as of June 30, 2010. Under the 2004 Installment Sale Agreement, the District is obligated to make installment payments from Net Revenues of the Water System on a parity with the obligation of the District to make payments under the Installment Purchase Agreement. 2006 Installment Sale Agreement. The District entered into the 2006 Installment Sale Agreement to finance certain Water System facilities. The 2006 Installment Sale Agreement was outstanding in the aggregate principal amount of $5,218,703 as of June 30, 2010. Under the 2006 Installment Sale Agreement, the District is obligated to make installment payments from Net Revenues of the Water System on a parity with the obligation of the District to make payments under the Installment Purchase Agreement. -19- DOCS OC/ 1424854v4/022497 -001 I State Revolving Fund Loans. The District expects to enter intc mo State Revolving Fund Loans for improvements to Plant 134 and Plant 150, respectively, in the beginrit g o` September 2010 (the "State Loans "). The obligation of the District to make payments under the Sue Leans will be on a parity with the obligation of the District to make pad ^ncnts under the Installment Purchasr lereement. Other Obligations The County along with the California Department of Health, a; pa-t of an agreement to provide a combination of grants and loans tc the Arroyo Verde Water Com1,,a1)N f "AVWC ") to finance capital improvements to its distribution system. required that the AVWC disc'.: and transfer its customers to the District. The District entered into t`e Arroyo Verde Assessment District Construction Loan (the "Arroyo Verde Loan ") to finance installation o:' a new distribution system serving he Arroyo Verde customers. The Arroyo Verde Loan was outstanding n the aggregate principal amount of 5 1 -2,004 as of June 30, 2010. The Arroyo Verde is payable from assessments levied by the District. No Pe %enues of the Water System are pledged to repayment of this loan. In 2009, the County Department of Health offered funding to as ist the District with absorbing the Eastwood Farms Water Users Association. Ballots are currently being ( Lected to determine whether or not property owners approve the formation of an assessment district. A coin binalion of state grants and a 0% interest loan would also help finance this project. No Revenues of the 1 "aier System would be pledged to repayment of this loan. Water System Financial Information Financial Statements. Copies of the most recent audited financial statements of the District prepared by Rogers, Anderson, Malody & Scott. LLP, San Bernardino. Califor.ii :the "Auditor ") are attached as Appendix A hereto (the "Financial Statements "). The Auditor's letter con; uses that the Financial Statements present fairly, in all material respects, the financial position of the District is of June 30, 2009 and 2008, and the results of its operations, changes in net assets and its cash flows for t re years then ended in conformity with accounting principles generally accepted in the United States of America. as well as accounting systems prescribed by the State Controller's O "ce and State regulations governim_ <pec; al districts. Historic Operating Results and Debt Service Coverage The following table is a summary of operating results of the Wale: System of the District for the last five Fiscal Years. These results have keen derived from the financia' stater eats of the District but exclude certain non -cash items and include certain other adjustments. The table has iw been audited by the Auditor. -20- DOCS OC/ 1424854v4/022497 -001 I NON - OPERATING REVENUES Interest Income EAST VALLEY WATER DISTRICT $ 323,256 $ Historic Operating Results & Debt Service Coverage(() $ 157,610 $ 35,760 Fiscal Year Ending June 30 467,687 516,619 2006 1007 1008 2009 1010 OPERATING REVENUES: 59,368 Miscellaneous 14,144 Water department $ 12,378,436 $ 13,827,142 $ 14,584,521(') $ 15,720,165 ") $ 15,186,585 OPERATING EXPENSES: 147.526 Total Non - Operating Revenues Water department 9,066,049 9,450,039 10,071,445 11,714,659 11.702,315 OPERATING INCOME: $ 3,312,387 $ 4,377,103 $ 4,513,076 $ 4,005,496 $ 3,484,266 NON - OPERATING REVENUES Interest Income $ 208,893 $ 323,256 $ 316,792 $ 157,610 $ 35,760 Capacity Charges 467,687 516,619 1,102,289 309,704 59,368 Miscellaneous 14,144 106,269 25,093 -- 147.526 Total Non - Operating Revenues $ 690,724 $ 946,144 $ 1,444,174 $ 467,314 $ 242,6511 Net Revenues Available $ 4,003,111 $ 5,323,247 $ 5,957,250 $ 4,472,820 $ 3,631,792 DEBT SERVICE: 1996 Installment Purchase Agreement $ 867,985 $ 870,605 $ 617,455 $ 623,447 $ 631,60`. 2001 Installment Purchase Agreement 1,038,979 1,036,460 1,037,773 1,037,810 1,036,57:1 2004 Installment Sale Agreement 503,829 503,829 503,829 503,829 503,829 2006 Installment Sale Agreement -- 476.024 476.024 476.024 476,02 Total Debt Service $ 2,410,793 $ 2,886,918 $ 2,635,081 $ 2,641,110 $ 2,648,031 Net Revenues Available after $ 1,592,318 S 2,436,329 $ 3,322,169 $ 1,831,710 $ 983,761 Debt Service COVERAGE 1.66 1.84 2.26 1.69 1.37 111 Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. a) Reflects portion of a total credit of $282,561 to Metropolitan Water District as a result of billing error due to meter conversion error. Source: District. Projected Operating Results and Debt Service Coverage The estimated projected operating results for the Water System of the District for the current and next four Fiscal Years are set forth below, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the estimate of projected financial results of the District based upon its judgment of the most probable occurrence of certain important future events. The assumptions set forth in the footnotes to the chart below are material in the development of the financial projections of the District, 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. -21- DOC SOC/ 1424854x4/022497 -0011 EAST VALLEY WATER DISTRICT Projected Operating Results & Debt Service ( oN erage Fiscal Year Ending June 30 OPERATING REVENUES: Water department(l) OPERATING EXPENSES: Water departmen112) OPERATING INCOME- NON-OPERATING REVENUES: Miscellaneous Total Non - Operating Revenues Net Revenues Available DEBT SERVICE: 2001 Installment Purchase Agreement 2004 Installment Sale Agreement 2006 Installment Sale Agreement 2010 Installment Purchase Agreement"' Plant 134 SRF Loan (4) Plant 150 SRF Loan(s) Total Debt Service Net Revenues Available after Debt Service COVERAGE 2011 °' 2011r2' 2)7 -'t'' 20141 �1 $ 16,298,000 $ 16,454,808 $ - 6nu 440 $ 19,273,555 2075") $ 19,855,616 12.678,549 12.856,38 % __. ? _ ' - 9 9 . 6 8 2 14.1 13.626 14,643,253 $ 3,619.451 $ 3,598.421 S 0(,ti.958 $ 5,159,929 $ 5,212,363 167,000 408,810 _ _ _ 4A774 412.751 415,77 $ 167,000 $ 408.811, $ 4 1,774 $ 412,751 S 415,779 $ 3,786,451 $ 4,007231 $ u 4"° %.532 $ 5,572,680 $ 5,628,142 $ 920,318 $ -- S -- $ -- 503,829 503.829 503.829 503,829 476,024 476,024 4'x,024 476,024 87,128 970,878 41 � -525 413,500 -- -- -- 266,000 $ 1,967,299 $ 1,950,731 S ? 395.378 $ 2,659,353 $ 1,576,611 $ 2,036,685 $ 206L'93 $ 2,891,574 1.79 2.04 1.86 2.09 503,829 476,024 413,725 266,000 $ 2,659,578 $ 2,945,995 2.11 From adopted Fiscal Year 2011 Budge:. ('1 Based on Exhibit I in Appendix A of Comprehensive Water and Sewer Ratc Studs dated June 1, 2010. 13) Preliminary, subject to change and market conditions based on A+ California Ra<<rca:. - 'tiliry Scale as of July 8, 2010, with $17 million Project Fund, refinancing of 2001 COPS, capitalized interest fundci 'rough October 1, 2011 and principal payments commencing October 1, 201 wl Based on proposed annual payments for Nant 134 SRF Loan. (5j Based on proposed annual payments for plant 150 SRF Loan. Source: District. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB Article XIIIB of the State Constitution limits the annual appropnat ors of the State and of any district, county, school district, corporation or other political subdivision of the � 1. to to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted fo changes in the cost of living and population. The "base year" for establishing such appropriation limit is the 11 "74 -1979 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consu:ner prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial respt risibility for a service is transferred to another public entity or to a private emity; (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 cF3r ge in the limit for a period of time not to exceed four years. Appropriations subject to Anicle XIIIB generally include the pros eecs of taxes levied by the State or other entity of local government, exclusive of certain State subventions is refunds of taxes. "Proceeds of taxes" include, but are not limited to all tax revenues and the proceeds tc an entity of government from: -22- DOCSOC/ 1424854v4/022497 -00 1 1 (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of 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 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 existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably snake the provision of existing services more costly. The District is of the opinion that its charges for Water Service do not exceed the costs it reasonably bears in providing such services and therefore are not subject to the limits of Article XIIIB. The District has covenanted in the Installment Purchase Agreement that, to the fullest extent permitted by law, it will fix and prescribe, at the commencement of each Fiscal Year, rates and charges sufficient to provide for payment of the Installment Payments in each year. See the caption "SECURITY FOR THE BONDS —Rate Covenant." Proposition 218 General. An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative ") was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the Authority of local governments to impose taxes and property- related assessments, fees and charges." Article XIIID. 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 imposing or increasing any property - related fee or charge trust provide written notice thereof to the record owner of each identified parcel upon which such fee or 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, if and to the extent that a fee or charge imposed by a local government for water or wastewater service is ultimately determined to be a `Yee" or "charge" as defined in Article XIIID, the local government's ability to increase such fee or charge may be limited by a majority protest. In addition, Article XIIID includes a number of limitations applicable to existing fees and charges including provisions to the effect that: (a) revenues derived from the fee or charge may not exceed the funds 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 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 Janis 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 services that are "primarily based on the amount consumed" (i.e., metered water rates), which had been held to be commodity charges related to -23- DOCSOC/ 1424854v4/022497 -0011 consumption of the service, not property ownership. The Supreme Coun :t tied in Bighorn - Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (20 016) (the "Bighorn Case "). howeve- Iv! fees for ongoing water service through an existing connection were property - related fees and charge. `he Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association r. Car or Los Angeles that metered water rates are not subject to Proposition IS. The District has complied .z th .he notice and public hearing requirements of Article XIIID in determining whether to change Water Sv;l :m rates and charges since 2007. Article XIIIC. Article XIIIC provides that the initiative power :: a not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment. fe. rr charge and that the power of initiative to affect local taxes, assess nents, fees and charges is applicable c( all local governments. Article XIIIC does not define the terms "loco tax." "assessment." "fee" or `cl -at ze. 7 so it was unclear whether the definitions set forth in Article XIIT) referred to above are applicable o Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, asessr-:ents, fees and charges imposed after November 6, 1996. On July 24. '006, the Supreme Court held in the ,its horn Case that the provisions of Article XIIIC included rates and fees charged for domestic water use. In she decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges; could override statutory rate setting obligations. In any event, the District does not believe that Article k 11 C grants to the voters within the District the power to repeal or reduce rates and charges for the Water Serci::e in a manner which would be inconsistent with the contractual obligations of the District. Howeve-. Jiere can be no assurance of the availability of particular remedies adeouate to protect the beneficial owners of the Bonds. Remedies available to beneficial owners of the Bonds in he event of a default by the District 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) v ill be the sole registered owner of the Bonds and the rights and remedies of the Bond Owners will be exerci5.er ti-rough the procedures of DTC. In addition to the specific limitations on remedies contained in the applicable documents themselves, the rights and obligations with respect to the Bonds, the Indenture and the Ins�allment Purchase Agreement 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, and to the exercise ofjudicial discretion in appropriate cases and to limitations on iegr.l remedies against public agencies in the State. The various opinions of counsel to be delivered with respect I, such documents, including the opinion of Special Counsel (the forn of which is attached as Appendix C . .ri be similarly qualified. Future Initiatives Articles XIlIB, XIIIC and XIIID were adopted as a measure that .lualified for the ballot pursuant to California's initiative process. From time to time other initiatives could he ) mposed and adopted affecting the District's revenues or ability to increase revenues. THE AUTHORITY The Authority is a public body duly organized and existing 1-nier the Joint Exercise of Powers Agreement, dated as of August 20, 2010, by and between the District i,nr: California Municipal Finance Authority (the "JPA Agreement "). and under the Constitution and laa: of the State. The Authority was formed for the purpose of assisting the financing and refinancing of :ants] improvement projects of the District and to finance working capital for the District by exercising fl -e powers referred to in the JPA Agreement, including the power to issue bonds to pay the costs of public improvements. Neither the District nor California Municipal Finance Auttnrity is responsible for repayment o the obligations of the other. The members of the Board of Directors of the Authority are the members of the Rc;ird of Directors of the District. -24- DOCSOC/ 1424854x4/022497 -001 1 APPROVAL OF LEGAL PROCEEDINGS The legality and enforceability of the Indenture and certain other legal matters are subject to the approval of Special Counsel. The form of such legal opinion is attached as Appendix C to this Official Statement. Certain legal matters will be passed upon for the District by its District Counsel, for the Authority by its counsel and for the Trustee by its counsel. LITIGATION District At the time of delivery of and payment for the Bonds, the District 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 District, threatened against the District affecting the existence of the District 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, the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement, or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or its authority with respect to the Bonds or any action of the District contemplated by any of said documents, nor to the knowledge of the District, is there any basis therefor. 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, the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or 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, or 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 EXEMPTION In the opinion of Special 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 on to 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 and corporations. In the further opinion of Special Counsel, interest on the Bonds is exempt from State personal income tax. Special Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bond of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such 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 the Bond Owner will -25- DOC SOC/ 1424854x4/022497 -001 I increase the Bond Owner's basis in the Bond. In the opinion of Special Cowisel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of he 'ederai alternative minimum tax imposed on individuals and corporano-s. and is exempt from State persona rr..ome tax. Special Counsel's opinion ati to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and ccn fications made by the Authority and others and is subject to the condition that the Authority complies_ „ fl all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that intere�. (and original issue discount) on the Bonds will not become includable i-t gross income for federal income -a < nu-poses. 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 p :rposes retroactive to the date of is it ante of the Bonds. The Authority has covenanted to comply with all such requirements. The amount by which a Bond Owner's original basis for detennin ng ioss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount paw' ­e 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 app] °,:h'e Bond (and the amount of tax - exempt interest received), and is not ceductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond pret,tium may result in a Bond Owner trdi; ing 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 mt n tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS ") has initiated an expaided 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 municipa' obl gations). 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 Bo ds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their min kit value. It is possible that subsequent to the issuance of the Bonds thert :;light be federal, state, or local statutory changes (or judicial or regula'ory interpretations of federal, state. or iota] law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bond:.. No assurance can be given that subsequent to the issuance of the Bond: such changes or interpretations will nc I occur. Special Counsel's opinions may be affected by actions taken (or ro taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to dctem7ine, or to inform any person, whether any such actions or events are taken or do occur. The Indenrure. tl e installment Purchase Agreement and the Tax Certificate relating to the fonds permit certain actions to he taKe -t or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Coin se! expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue ( in:ount) on the Bonds for federal income tax purposes with respect to ant Bond if any such action is taken o omitted based upon the advice of counsel other than Stradling Yocca Car aon & Rauth. Although Special Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes pre led that the Authority continues to comply with certain requirements of the Code, the ownership of the Bond:, air! the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect th� tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequence:. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax ad,. or, with respect to collateral tax consequences relating to the Bonds. -26- DOCSOC/ 1424 854v4/022497 -001 I CONTINUING DISCLOSURE The District has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District not later than January 1 following the end of the District's Fiscal Year (currently its Fiscal Year ends on June 30) (the "Annual Report "), commencing with the report for Fiscal Year ending June 30, 2010, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and the notices of material events will be filed by the District with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emma.msrb.org /. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix E — "FORM OF CONTINUING DISCLOSURE CERTIFICATE" hereto. These covenants have been made in order to assist the Representative in complying with Rule 15c2- 12(b)(5) promulgated under the Securities Exchange Act of 1934. The District has not previously failed to comply with any previous continuing disclosure undertaking in any material respect. RATINGS The Authority expects that S &P and Fitch Ratings, Inc. ( "Fitch ") will assign the Bonds the ratings of " " and "_ ", respectively. There is no assurance that any credit rating given to the Bonds will be maintained for any period of time or that the ratings may not be lowered or withdrawn entirely by S &P or Fitch if, in the judgment of S &P or Fitch, respectively, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. Such ratings reflect only the views of S &P and Fitch and an explanation of the significance of such ratings may be obtained from S &P and Fitch, respectively. FINANCIAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Irvine, California (the "Financial Advisor ") as financial advisor in connection with the sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. UNDERWRITING The Bonds were purchased at a competitive sale on August _, 2010 by (the "Underwriter ") at a purchase price of $ (being the aggregate principal amount thereof less /plus an aggregate original issue discount/premium of $ and less an underwriters' discount of $ I. The obligation to make such purchase is subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel, and certain other conditions. 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. -27- DOCSOC/ 1424854v4/022497 -001 I MISCELLANEOUS Insofar as any statements made in this Official Statement imol�- natters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as reprc-ert::tions of fact. No representation is made that any of such statements trade will be realized. Neither this ( )'fcial Statement nor any statement which may have been made verbalh or in writing is to be construed a,: t :ontract with the Owners of the Bonds. The execution and deliver} of :his Official Statement have been dut} authorized by the District. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY By: - Execu:ive Director EAST VALLEY NVATER DISTRICT By: —ral Manager DOCSOC/ 1424854v4/022497 -0011 APPENDIX B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE I-\ S1 PURCHASE AGRE ENIENT AND THE INDENTURE The following is a summari of certain provisions of the ln.cta,6.test Purchase Agreement and the Indenture which are not described ,lyewhere. This summary doe r2c' .nr: /port to be comprehensive and reference should be made to the ;v.,pecme agreement jot a fuli and, o.m Icrc statement of the provisions thereof [TO COME] B -1 DOCSOC/ 1424854v4/022497 -001 I APPENDIX C FORM OF OPINION OF SPECIAL COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, proposes to render its final approving opinion in substantially the following form: ,2010 East Valley Water District Financing Authority c/o East Valley Water District 3654 East Highland Avenue, Suite 18 Highland, California 92346 -2607 Members of the Board of Directors: We have acted as Special Counsel to the East Valley Water District Financing Authority (the "Authority") in connection with the issuance of $ aggregate principal amount of East Valley Water District Financing Authority Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 (the "Bonds "). The Bonds have been issued by the Authority pursuant to the terms of the Indenture of Trust, dated as of September I, 2010 (the "Indenture "), by and between the Authority and Union Bank, N.A., as trustee (the "Trustee "). The Bonds are limited obligations of the Authority payable solely from payments (the "Installment Payments ") to be made by the East Valley Water District (the "District") to the Authority pursuant to an Installment Purchase Agreement, dated as of September 1, 2010, by and between the District and the Authority. 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: I . 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 now in force, and the Indenture has been duly authorized, executed and delivered by the Authority, and, 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 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, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. With respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. Interest on the Bonds is exempt from State of California personal income tax. C -1 DOCSOCA 424854v4/022497 -0011 5. The difference between the issue price of a Bond (the first prise at which a substantial amount of the Bonds of the same series and matuu!\ is to be sold to the public) and , u stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue �iscount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner bef-r: receipt of cash attributable to such excludable income. The amount of or.gmal issue discount deemed received I -} 'he Bond Owner will increase the Bond Owner's basis in the Bond. In tie opinion of Special Counsel. the erret-nt of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such c,vne- for federal income tax purposes, is not an item of tax preference for pu:l)oseS of the federal alternative nnr r. urr: tax imposed on individuals and corporations, and is exempt from State c� Califomia personal income tax 6. The amount by whicl a Bond Owner's original basis for demrnmning loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount pa}'al le on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized undo, Berton 171 of the Internal Revenue Code of 1986, as amended (the "Code;: such amortizable bond premium --,mice the Bond Owner's basis in the applicable Bond (and the amount of tax- exempt interest received). and is t ceductible for federal income tax purposes. The basis reduction as a result of the amortization of Bona pre n:um 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 ol. the Bond to the Owner. Purchasers o! t ^e Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions expressed hereto as to the exclusion from gross income c f interest on the Bonds are based upon certain representations of fact and certifications made by the Authority Lnd others and are subject to the condition that the Authority complies with all requirements of the Code that must ?>e satisfied subsequent to issuance of the Bonds to assure that interest on the Bonds will not become includable ur gross income for federal income tax purposes. Failure to comply with such -equtrements of the Code might cause r terest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance cf the Bonds. The Authority has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or rot taken) or events occurring (or not occurring) after the date hereof. We ha%e not undertaken to determine. or to nform any person, whether any such actions or events are taken or do occur The Indenture and the Tax Cenifica.E relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Special Counse is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross m:eme of interest (and original issue discount) for federal income tax purposes with respect to the Bonds if an} s rch action is taken or omitted based upon the opinion or advice of counsel n *.her than ourselves. Other than expres, k stated herein, we express no other opinion regarding tax consequences with respect to the Bonds. The opinions expressed herein are based upon our analysis and interpretarion of existing laws, regulations, rulings and judicial decisions and covet certain matters not directly addressed hn ;uch authorities. We call attention to the fact that the rights and obligations under the Indenture and the Bond< are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting :reditors' 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 pu"hc agencies in the State of California Respectfully submitted. C -2 DOC SOG l 424854v4i022497 -0011 APPENDIX D 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 District and the Underwriters believe to be reliable, but neither the Authority, the District nor the Underwriters take 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 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book - entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). DTC has Standard & Poor's highest rating: AAA. 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 and www.dtc.org. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners ,dill 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 Bonds representing their ownership interests in 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 D -I DOCSOC/ 1424854v4/022497 -0011 such Bonds are credited, which may or may not be the Beneficial Owners. I :, Direct and Indirect Participants will remain responsible for keeping account o� their holdings on behalf of then eu•aomcrx. Conveyance of notices and other communications by DTC to Direct I anicipants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to =3eietiaal Owners will be governed by arrangements among them, subject to am" statutory or regulatory requirement a. -rav be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment tl;e transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders. (icfaclts, and proposed amendments to the Bond documents. For example, Bene icial Owners of Bonds may wish to ,;certain that the nominee holding the Bonds for their benefit has agreed to obtam and transmit notices to Beneficia. •ac:ers. In the alternative, Beneficial Owners may wish to provide their narnes and addresses to the registrar .n i request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonc> within a maturity are being prepaid, DTC's practice is to determine by let the amount of the interest of each Dire, i ' articipant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will :otsent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Pion edares. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after '-, -ecord date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants a :: iose 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 Bend, will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of F' , "I'' - DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail it fo- rnation from the Authority or the Trustee, on payable date in accordance with their respective holdings show,, cn 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 n "street name," and will be the responsibility of such Participant and net of DTC, the Trustee, or the Distric •ubiect to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption F r o .,eeds. distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an auiY orzed representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payrnem, to Direct Participants will be the responsibility of DTC, and disbursemen7 . of such payments to the Beneficia' '),avers will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice *o elect to have its Bonds purchased o- tendered, through its Participant, to the Trustee, and shall effect delivery of <uch 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 :ati<ied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and follow° 1 c) a book -entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respec t: the Bonds at any time by giving reasonable notice to the Authority or he Trustee. Under such circumsi:ii ce,. in the event that a successor depository is not obtained, physical certificates are required to be printed and -- .'.eiivrred. The Authority may decide to discontinue use of the system of book -:n r1 only transfers through DTC (or a successor securities depository). In that e\ ent, Bonds will be printed and deli\ cr-d 'o DTC. THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY S]'STFn1 N USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMP I ON OR OTHER NOTICES TO (_) .y'?r =RS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY 7iC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OF I F? ECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF IIIL PROCEEDINGS RELATING —) IHE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION ')R OF ANY OTHER ACTION PRI IN IS ED ON SUCH NOTICE. D -2 D OCSOC/ 1424 854x4/022497 -0011 FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the issuance of the Bonds, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the East Valley Water District (the "District ") in connection with the issuance of $ East Valley Water District Financing Authority Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) (the "Bonds "). The Bonds are being issued pursuant to an Indenture of Trust, dated as of September 1, 2010 (the "Indenture "), by and among the East Valley Water District Financing Authority (the "Authority") and Union Bank, N.A., as trustee (the "Trustee ") and are secured by Installment Payments payable by the District to the Authority pursuant to an Installment Purchase Agreement, dated as of September 1, 2010 (the "Installment Purchase Agreement "), by and between the District and the Authority. The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District 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. 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term "Beneficial Owner" means 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. EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emnia.msrb.org /. Fiscal Year. The term "Fiscal Year" means the one -year period ending on the last day of June of each year. Holder. The term "Holder" means a registered owner of the Bonds. Listed Events. The term "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate. Official Statement. The term "Official Statement" means the Official Statement of the District dated 2010 delivered in connection with the Bonds. Participating Underwriter. The term "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule. The term "Rule" means Rule 15c2 -12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. (a) The District shall provide not later than January I following the end of its Fiscal Year (commencing with Fiscal Year 20 10) to EMMA an Annual Report relating to the immediately preceding Fiscal Year E -I DOC SOC/ 1424 854 v4 /022497 -0011 which is consistent with the requirement, of Section 4 of this Disclosure Certi-icete, which Annual Report may be submitted as a single document or as separate documents comprising a pt_kaee. and may cross- reference other information as provided in Section 4 of -his Disclosure Certificate. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in the manner by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contair or incorporate by reference the following: (a) The audited financial statements of the District fot the prior Fiscal Year, prepared in accordance with generally accepted ac,:ounting principles as promulgated to spyly to governmental entities from time to time by the Governmental Accounting- Standards Board. If the District' . i edited financial statements are not available by the time the Annual Report is required to be filed pursuant to S ctlon 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial stnements contained in the final Official Statement, and the audited financial statements shall be filed in the same manic as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. (c) Balance in the Reserve Fund and a statement o - rte reserve requirement with respect thereto. (d) An update of the information in the following tables under the caption entitled "THE WATER SYSTEM OF THE DISTRICT' in the Official Statement: (i) "EAST VALLEY WATER DISTRICT— Historic Water Production and Accounts" on page _ of the Official Statement. (ii) "EAST VALLEY WATER DISTRIC -- -Historic Sales Revenues" on page _ of the Official Statement. (iii) "EAST VALLEY WATER DISTRICT - -- Largest Customers" on page_ of the Official Statement (iv) "EAST VALLEY WATER DISTRICT -- Historic Operating Results of Debt Service Coverage" on page _ of the Official Statement. 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 District or related public entities, xv-,1, ;lave been submitted to EMMA or the Securities and Exchange Commission: provided, that if any document -eluded by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Foard: and provided further, that the District shall clearly identify each such document so included by reference 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Dj >tr:ct shall give, or cause to be given, notice of the occurrence of any of the folicwing events with respect to the Bon - .:f material: 1. principal and interest payment delinquencies. 2. non - payment related defaults. 3. unscheduled draws on the credit enhance +tie tits reflecting financial difficulties. E -2 DOCSOC/ 1424854v4/022497 -001 1 4. unscheduled draws on the debt service reserves reflecting financial difficulties. 5. substitution of the credit or liquidity providers or their failure to perform. 6. adverse tax opinions or events affecting the tax - exempt status of the Bonds. 7. modifications to rights of Bondholders. 8. optional, contingent or unscheduled Bond calls. 9. defeasances. 10. release, substitution or sale of property securing repayment of the Bonds. IL . rating changes. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. (c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the District shall promptly file a notice of such occurrence with EMMA. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, E -3 DOC SOC/ 1424854x4/022497 -001 I and a written notice of and request to -ure such failure, and the District s-a 1 have refused to comply therewith within a reasonable time. IL Beneficiaries. This Disclosure Certificate shall inure solel. m the benefit of the District, 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. Dated: 2010 EAST VALLEY WATER DISTRICT By: -- Its: General Manaee- E -4 DOCSOC/ 1424854v4/022497 -001 1 Stradling Yocca Carlson 8z Routh Draft of 8116110 INSTALLMENT PURCHASE AGREEMENT by and between EAST VALLEY WATER DISTRICT and EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Dated as of September 1, 2010 relating to EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING), SERIES 2010 DOCSOC/1322156v5/022497 -0011 TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.1. Definitions .......... .................................................... ............................... Section 5.2. ARTICLE II Section 5.3. REPRESENTATIONS AND WARRAT ; IES Section 2.1. Representations by the District ................................ ............................... Section 2.2. Representations and Warranties by the Authority . . ............................... Section 5.6. ARTICLE III SALE AND PURCHASE OF THE PRCiFCT Section 3.1. Purchase and Sale of the Project ................ .................... Section3.2. Titl e ............................................. ............................... ........................... Section 3.3. Acquisition and Construction of the Project .............. ........................... Section 3.4. Changes to the Project .................. ............................... ........................... Section 3.5. Acquisition Fund.... ................................... ........ .. .. . ......................... ARTICLE IV INSTALLMENT PAYMENTS Section 4.1. Purchase Price .......................... ............................... ......................... Section 4.2. Installment Payments ............. ............................... ........................... ARTICLE V SECURITY Section 5.1. Pledge of Revenues ................ ............................... .... .................. Section 5.2. Allocation of Revenues .......... ............................... .................. Section 5.3. Additional Contracts and Parity Bonds ................. .. ................... Section 5.4. Subordinate Obligations.. ............................. - . ............... Section 5.5. No Senior Obligations .............................. ....... _........._................... Section 5.6. Investments ....... ............................................ ............................... ARTICLE VI COVENANTS OF THE DISTRICT Section 6.1. Compliance with Installment Purchase Agreement and Ancillary Agreements.................................................... ............................... i DOC SOC/ 1322156v5/022497 -001 I Page 10 10 ...........12 ...........12 15 TABLE OF CONTENTS (continued) Page Section 6.2. Against Encumbrances ................................................................ .............................16 Section 6.3. Against Sale or Other Disposition of Property ........................... .............................16 Section 6.4. Against Competitive Facil ities .................................................... .............................16 Section 6.5. Tax Covenants ............................................................................ .............................17 Section 6.6. Maintenance and Operation of the Water System ...................... .............................17 Section 6.7. Payment of Cl aims ...................................................................... .............................18 Section 6.8. Compliance with Contracts ......................................................... .............................18 Section 6.9. Insurance ..................................................................................... .............................18 Section 6.10. Accounting Records; Financial Statements and Other Reports .. .............................19 Section 6.11. Protection of Security and Rights of the Authority ..................... .............................19 Section 6.12. Payment of Taxes and Compliance with Governmental Regulations ......................19 Section 6.13. Amount of Rates and Charges .................................................... .............................19 Section 6.14. Collection of Rates and Charges ................................................. .............................20 Section 6.15. Eminent Domain Proceeds .......................................................... .............................20 Section 6.16. Further Assurances ...................................................................... .............................20 Section 6.17. Enforcement of Contracts ........................................................... .............................20 Section 6.18. Continuing Disclosure ................................................................. .............................20 ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section7.1. Prepayment ................................................................................. .............................21 Section 7.2. Method of Prepayment ................................................................ .............................21 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.1. Events of Default and Acceleration of Maturities ...................... .............................21 Section 8.2. Application of Funds Upon Acceleration ................................... .............................22 Section 8.3. Other Remedies of the Authority ................................................ .............................23 Section8.4. Non - Waiver ................................................................................. .............................23 Section 8.5. Remedies Not Excl usive ............................................................. .............................23 ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obl igations ..................... ............................... ARTICLE X MISCELLANEOUS Section 10.1. Liability of District Limited to Revenues ................................... .............................25 Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties .............................25 Section 10.3. Successor Is Deemed Included in all References to Predecessor ............................25 ii DOCSOC/ 1322156v5 /022497 -001 1 TABLE OF CONTENTS Page Section 10.4. Waiver o{ Personal Liability ..--------.--'. .----...---,,.—..25 Section 10.5. �u�c]euodStcdruRtxdi .0uuderuodT\tferoocrs . ............................. 26 Section 10.6. Partial Invalidity. -----.---.--------' ��,---,.,.---...�26 Section 10.7. Assignment ..,—.---..—.---- .— ...................................... 26 Section 10.8. Net Contract ........ ................ ............. ... . —' ... .................................. 26 Section 10.9. California Law ... ............... ... .................................. 26 Section10.10. Notices ......... ..... ........................ ..... ..... — ..... ......................... ...... 26 Section 10. Effective Date .... ..................................... — .---^,.`---,....27 Section 10.12. Execution io Counterparts ....................... ......... .... —..... ................................ 27 Section 10.13. Indemnification nf/\u1hority ..................... — .... . — ...... ................................ 27 Section 10.14. Amendments Permitted ................. .......... ... --- — .... .................................. 27 Section }0.]5. Paired Obligation yoovidorGnidclinoo--..--' -----....---.`..28 Section 10.16. Notice 10 Rating Agency ................ ............... —'---...... ................................ 28 EXHIBIT PURCHASE PRICE. ....................................... .----' '............ ........................ A-1 EXHIBIT R'l DESCRIPTION (}7 THE PRIOR PR(}}EC7----. ' .......... ........................ B'l-1 EXHIBIT B'2 DESCRIPTION ()P1`}|£20lO PROJECT ........ ...................... EXHIBIT FORM OF REQUISITION NO. ___ FOR DlSBUR}FKJ ENT FROM — u� D0CS0{/7322156v5/022497-001 | INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT, made and entered into as of September 1, 2010 by and between EAST VALLEY WATER DISTRICT, a county water district duly organized and existing under and by virtue of the laws of the State of California (the "District'), and EAST VALLEY WATER DISTRICT FINANCING AUTHORITY, a public body duly organized and existing under the Joint Exercise of Powers Agreement dated as of August 20, 2010, by and between the District and California Municipal Finance Authority, and under the Constitution and laws of the State of California (the "Authority'). WITNESSETH: WHEREAS, the District proposes to finance and refinance certain equipment and facilities within the District Water System as more particularly described in Exhibit B hereto (collectively, the "Project'); WHEREAS, the District is authorized by Division 12 of the Water Code of the State of California, including but not limited to Section 31042, to acquire property for its Water System; WHEREAS, the Authority has agreed to assist the District in financing and refinancing the Project for the District on the terms and conditions set forth in this Installment Purchase Agreement; and WHEREAS, the Authority is authorized by Division 2 of Title 5 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; and WHEREAS, the District and the Authority have duly authorized the execution of this Agreement; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, 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 I.1. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the DOC SOC/ 1322156v5/022497-001 1 terms defined herein. Unless the context otherwise requires, all capitalized terms used herein and not defined herein shall have the meamrles ascribed thereto in the Indennr e Accountant's Report The term "Accountant's Report" means a report signed by a 'Independent Certified Public Accountant. Acquisition Fund The term "Acquisition Fund" means the fund bN that tame established pursuant to Section 3.5 hereof. Agreement The term "Agreement" means this Installment Purchase ",,reement, by and between the District and the Authority, dated as of September 1, 2010, as origina'ly executed and as it may from time to time be amended or supplemented in accordance herewith. Authority The term "Authority" means the East Valley Water District Financing Authority, a public body duly organized and existing under the Joint Exercise of Powers Agreement dated as of August 20, 2010, by and between the District and California Municipal z'mance Authority, and under the Constitution and laws of the State of California. Business Da The term "Business Day" means a day other than: a Saturday or Sunday or a day on which (i) banks located in the city in which the principal corporate trust office of the Trustee is located are not required or authorized to remain closed, and (ii) on which The ?de x' York Stock Exchange is not closed. Continuing Disclosure Certificate The term "Continuing Disclosure Certificate" shall mean that certain Continuing Disclosure Certificate executed by the District and dated the date of execution and delivery of the Series 2010 Bonds, as originally executed and as it may be amended from time Ic time in accordance with the terms thereof. Contracts The term "Contracts" means and is limited to (i) this Installment Purchase Agreement and any amendments and supplements hereto, and (ii) all contracts of Ihf District previously or hereafter authorized and executed by the District and the Parity Installment P� yments of which are on a parity with the Installment Payments and which are secured by a pled,-- ind lien on the Revenues as described in Section 5.1 hereof including, but not limited to the 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement, but excluding contracts entered into for operation and maintenance of the Water System. DOC SOC/ 1322156v5/O22497-001 I Date of Operation The term "Date of Operation" means, with respect to any uncompleted component Parity Project, the estimated date by which such uncompleted component Parity Project will have been completed and, in the opinion of an engineer, will be ready for operation by or on behalf of the District. Debt Service The term "Debt Service" means, for any period of calculation, the sum of. (1) the interest accrued during such period on all outstanding Parity Bonds during such period, assuming that all outstanding serial Parity Bonds are retired as scheduled and that all outstanding term Parity Bonds are prepaid or paid from sinking fund payments as scheduled (except to the extent that such interest is capitalized), (2) those portions of the principal amount of all outstanding serial Parity Bonds maturing in such period or the next succeeding period, in each case accruing during such period in each case and computed as if such principal were deemed to accrue daily during such period in equal amounts, (3) those portions of the principal amount of all outstanding term Parity Bonds required to be prepaid or paid in such period or the next succeeding period, in each case accruing during such period and computed as if such principal were deemed to accrue daily during such period in equal amounts, and (4) those portions of payments under the Contracts required to be made during such period, or the next succeeding period, in each case accruing during such period and computed as if such Contract was deemed to accrue daily during such period in equal amounts (except to the extent the interest evidenced and represented thereby is capitalized); but less the earnings to be derived from the investment of moneys on deposit in debt service reserve funds established for Parity Bonds or Contracts; provided that, as to any such Parity 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 except for the satisfaction of Section 5.3 of this Agreement, be assumed to bear interest at a fixed rate equal to the higher of (i) the actual rate on the date of calculation, or if such Contract or Parity Bond is not yet outstanding, the initial rate (if established and binding), and (ii) the highest average variable rate borne over a 3 month period of the preceding 12 months by outstanding variable rate debt issued by the District 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 comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued; DOCSOC/ 1322156x5 /022497 -0011 provided further that, in connectior with issuance of additional F'aiit� Bonds or the execution of additional Contracts under Sectioc. 5.3 of this Agreement, the assumed rate on variable rate obligations shall be The Bond Buyer's Revenue Bond Index; and provided further that if any series or issue of such Parity Bonds or Cot tracts have twenty -five percent (25 %) or more of the aggregate principal amount of such series or i:�suc 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 Parity Bonds or Contracts were being paid fi nri the date of incurrence thereof in substantially equal annual amounts over a period of twenty -die° 25) years from the date of calculation; and provided further that, as to any such Parity Bonds or Contracts or peh ions thereof bearing no interest but which are sold at a discount and which discount accretes with res -oect to such Parity 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 Parity Bonds or Contracts constitute Paired Obligations, the interest rate on such Parity Bonds or Contracts shall be the resulting linked rate of the effective fixed interest rate to be paid by the District 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 t=ie final maturity of the Parity Bonds and Contracts for which such debt service reserve fund was established and to the extent 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. Director of Finance The Term "Director of Finance" means the Director of Finance of the District, or any other person designated by the Director of Finance to act on behalf of the Director of Finance. District The term "District" means East Valley Water District, a count} water district duly organized and existing under and by virtue of the laws of the State of California. Event of Default The term "Event of Default' means an event described in Sec tion 8.1. Fiscal Year The term "Fiscal Year" means the period beginning on July I of each year and ending on the next succeeding June 30, or any other twelve -month period selected and designated as the official Fiscal Year of the District. DOC S OC/ 1322156v5/022497 -001 1 Independent Certified Public Accountant The term "Independent Certified Public Accountant" means any firin of certified public accountants appointed by the District, each of whom is independent of the District and the Authority pursuant to the Statement on Auditing Standards No. I of the American Institute of Certified Public Accountants. Indenture The term "Indenture" means the Indenture of Trust, dated as of September 1, 2010, by and between the Authority and the Trustee, relating to the Series 2010 Bonds, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. Independent Financial Consultant The term "Independent Financial Consultant' means a financial consultant or firm of such consultants appointed by the District, and who, or each of whom: (1) is in fact independent and not under domination of the District; (2) does not have any substantial interest, direct or indirect, with the District; and (3) is not connected with the District as an officer or employee thereof, but who may be regularly retained to make reports thereto. Installment Payment Date The term "Installment Payment Date" means the fifth day prior to each Interest Payment Date, or if said date is not a Business Day, then the preceding Business Day. Installment Payments The term "Installment Payments" means the Installment Payments of interest and principal scheduled to be paid by the District under and pursuant hereto. Installment Purchase Agreement The term "Installment Purchase Agreement' means the Installment Purchase Agreement, dated as of September 1, 2010, by and between the District and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance therewith. Interest Payment Date The term "Interest Payment Date" means March 25 and September 25 of each year, commencing March 25, 2011. Joint Exercise of Powers Agreement The term "Joint Exercise of Powers Agreement' means that certain Joint Exercise of Powers Agreement, dated as of August 20, 2010, by and between the District and California Municipal Finance Authority, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time. 5 DOCS OC/ 1322156v5/022497 -0011 Law The term "Law" means the County Water District Law of the State of California (being Division 12 of the Water Code of the State of California, as amended), and all laws amendatory thereof or supplemental thereto. Manager The Tenn "Manager' means the General Manager of the District, or any other person designated by the General Manager to act on behalf of the General M9 tnager. Net Proceeds The term "Net Proceeds" means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or coneemnation award remaining after payment of all expenses (including attorneys fees) incurred in the cc liection of such proceeds. Net Revenues The term "Net Revenues" means, for any Fiscal Year, the Fe,enues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year Operation and Maintenance Costs The term "Operation and Maintenance Costs" means (i) costs spent or incurred for maintenance and operation of the Water System calculated in acccrdance with generally accepted accounting principles, including (among other things) the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the District that are charged directly or apportioned to the Water System, including but not limited to sa.anes and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys, consultants or engineers and insurance premiums, and including all other reasonable and necessary costs of the District or charges (other than Debt Service) required to be paid by it to comply with the terms of this Agreement or any other Contract or of any resolution or indenture authorizing the issuance of any Parity Bonds or of such Parity Bonds and (ii) all costs of water purchased or otherwise acquired for delivery by the Water System (including any interim or renewed arrangement therefor), 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. Paired Obligation Provider The term "Paired Obligation Provider' means a party to a Paired Obligation other than the Authority or the District. Paired Obligations The term "Paired Obligations" means any Parity Bond ni Contract (or portion thereof) designated as Paired Obligations in the resolution, indenture or other document authorizing the issuance or execution and deliver thereof, which are simultaneously issued or executed and 3 DOCSOC/ 1322156x5 /022497 -0011 delivered (i) the principal of which is of equal amount maturing and to be redeemed or prepaid (or cancelled after acquisition thereof) on the same dates and in the same amounts, and (ii) the interest rates which, taken together, result in an irrevocably fixed interest rate obligation of the District for the term of such Parity Bond or Contract as certified by an Independent Financial Consultant in writing, and which comply with the provisions of Section 10.15 hereof. Partic:patine Underwriter The term "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. Parity Bonds The term "Parity Bonds" means all revenue bonds or notes of the District authorized, executed, issued and delivered by the District, the payments of which are on a parity with the Installment Payments and which are secured by a pledge of and lien on the Revenues as described in Section 5.1 hereof. Parity Installment Payment Date The term "Parity Installment Payment Date" means each date on which Parity Installment Payments are scheduled to be paid by the District under and pursuant to any Contract. Parity Installment Payments The term "Parity Installment Payments" means the payments of interest and principal scheduled to be paid by the District under and pursuant to the Contracts. Prior Proiect The term "Prior Project" means the refinancing of the Water System distribution and treatment facilities and the Wastewater System facilities described as the "Prior Project" in Exhibit B -1 hereto. Project; Parity Project The term "Project" means the additions, betterments, extensions and improvements described in Exhibit B hereto under the heading "Project ", consisting of the 2010 Project and the Prior Project. The term "Parity Project" means any additions, betterments, extensions or improvements to the District's Water System designated by the Board of Directors of the District as a Parity Project, the acquisition and construction of which is to be paid for with the proceeds of any Contracts or Parity Bonds. Purchase Price The term "Purchase Price" means the principal amount plus interest thereon owed by the District to the Authority under the terms hereof as provided in Section 4.1. 7 DOCSOC/1322156v5/022497.0011 Revenue Fund The term "Revenue Fund" means the fund by that name established pursuant to Section 5.2 hereunder; provided, however, the Revenue Fund excludes any accnt:n* into which ad valorem taxes levied by the District are deposited. Revenues The term "Revenues" means all income, rents. rates, fees. <hr,rges and other moneys derived from the ownership or operation of the Water System, including, ,kithout limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the District from the sale, furni,hing and supplying of water or other services, facilities, and commodities sold, furnished or supp ied hrough the facilities of or in the conduct or operation of the business of the Water System. plus (2) the proceeds of any stand -by water availabiliv, charges, plus (3) the earnings on and income derived from the investment of the amounts described in clauses (1) and (2) hereof and on Water System reserves. but, excluding in all cases, connection charges and facility fees of similar charges related to the Water System, customer deposits or any other deposits or advar.c�s subject to refund until such deposits or advances have become the property of the District, and my proceeds of taxes restricted by law to be used by the District to pay bonds hereafter issued. Series 2010 Bonds The term "Series 2010 Bonds" means the $ aggregate principal amount of East Valley Water District Water Revenue Bonds (Water System Improvement Projects), Series 2010, executed and delivered on behalf of the District and at any Vnie outstanding pursuant to the Indenture. Subordinate Obligations The term "Subordinate Obligations" means all contracts or bends of the District which are secured by a pledge of and lien on the Revenues subordinate to the pledge of and lien on Revenues securing the Parity Bonds or Contracts. The Bond Buyer's Revenue Bond Index The term "The Bond Buyer's Revenue Bond Index" means the revenue bond index published by The Bond Buyer. 2001 Installment Purchase Agreement The term "2001 Installment Purchase Agreement' means the Amended and Restated Installment Purchase Agreement, dated as of April 1, 2001, by and `,etueen the District and the East Valley Water District Financing Corporation. 8 DOCSOC/ 1322156v5/022497 -001 1 2004 Installment Sale Agreement The term "2004 Installment Sale Agreement' means the Installment Sale Agreement #04- 058 -AF, dated July 13, 2004, by and between the District and Municipal Finance Corporation. 2006 Installment Sale Agreement The term "2006 Installment Sale Agreement' means the Installment Sale Agreement #05- 106 -AF, dated January 10, 2006, by and between the District and Municipal Finance Corporation. 2010 Proiect The term "2010 Project' means the financing of the Water System distribution and treatment facilities described as the "2010 Project' in Exhibit B -2 hereto. Trustee The term "Trustee" means Union Bank, N.A., acting in its capacity as Trustee under and pursuant to the Indenture, and its successors and assigns. Water Service The term "Water Service" means the water distribution service made available or provided by the Water System. Water System The term "Water System" means the whole and each and every part of the water system of the District, 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. Written Consent of the Authority or District Written Order of the Authority or District Written Request of the Authority or District. Written Requisition of the Authority or District The terms "Written Consent of the Authority or District," "Written Order of the Authority or District," "Written Request of the Authority or District," and "Written Requisition of the Authority or District' mean, respectively, a written consent, order, request or requisition signed by or on behalf of (i) the Authority by its Authorized Representative or (ii) the District by the President of its Board of Directors or the Manager of the District or by any two persons (whether or not officers of the Board of Directors of the District) who are specifically authorized by resolution of the District to sign or execute such a document on its behalf. 0 DOCS OC/ 1322156v5/0224 97 -001 1 ARTICLE II REPRESENTATIONS AND WARRAN "I "E S Section 2.1. Representations by the District. The District makes the following representations: (a) The District is a county water district duly ort,anized and existing under and pursuant to the laws of the State of California. (b) The District has full legal right, power ani authority to enter into this Agreement and carry out its obligations hereunder, to cant' oLt and consummate all other transactions contemplated by this .Agreement, and the District has c: )mplied with the provisions of the Law in all matters relating to such transactions. (c) By proper action, the District has duly authonzeda the execution, delivery and due performance of this Agreement. (d) The District will not take or, to the extent w ithir its power, permit any action to be taken which results in the interest paid for the installment pu chase of the Project under the terms of this Agreement being included in the gross income of the '' er ies 2010 Bond Owners or their assigns for purposes of federal or State of California income taxation. (e) The District has determined that it is necessary and proper for District uses and purposes within the terms of the Law that the District finance anc refinance the acquisition of the Project in the manner provided for in this Agreement. Section 2.2. Representations and Warranties by the Authority. The Authority makes the following representations and warranties: (a) The Authority is a public body duly organized and in good standing under the Joint Exercise of Powers Agreement and under the Constitution and laws of the State of California, has full legal right, power and authority to enter into this P.creement and to carry out and consummate all transactions contemplated by this Agreement a-]d by proper action has duly authorized the execution and delivery and due performance of this A;_reement. (b) The execution and delivery of this Agreeme it and the consummation of the transactions herein contemplated will not violate any provision cf 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 o- zsses 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 resin, in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoe\ er upon any of the properties or assets of the Authority. (c) The Authority will not take or permit any action to be taken which results in interest paid for the installment purchase of the Project under tl e terms of this Agreement being included in the gross income of the 2010 Bond Owners or their ass: ns for purposes of federal or State of California income taxation. 10 DOCS OC/ 1322156v5 /022497 -001 I ARTICLE III SALE AND PURCHASE OF THE PROJECT Section 3.1. Purchase and Sale of the Proiect (a) In consideration for the Authority's assistance in refinancing the Prior Project and the 2010 Project, the District agrees to sell, and hereby sells, to the Authority, and the Authority agrees to purchase, and hereby purchases, from the District, the Project at the purchase price specified in Section 4.1 hereof and otherwise in the manner and in accordance with the provisions of the Installment Purchase Agreement. (b) In consideration for the Installment Payments as set forth in Section 4.2, the Authority agrees to sell, and hereby sells, to the District, and the District agrees to purchase, and hereby purchases, from the Authority, the Project at the Purchase Price specified in Section 4.1 hereof and otherwise in the manner and in accordance with the provisions of this Agreement. Section 3.2. Title. All right, title and interest in the Prior Project shall vest in the District immediately upon execution and delivery of the Installment Purchase Agreement. All right, title and interest in each component of the 2010 Project shall vest in the District immediately upon acquisition thereof. Such vesting shall occur without further action by the Authority or the District and the Authority shall, if requested by the District or, if necessary to assure such automatic vesting, deliver any and all documents required to assume such vesting. Section 3.3. Acquisition and Construction of the Project. The Authority hereby agrees to cause the 2010 Project, and any additions or modifications thereto to be constructed, acquired or installed by the District as its agent, and the District shall enter into contracts and provide for, as agent for the Authority, the complete construction, acquisition and installation of the 2010 Project. The District hereby agrees that the District will cause the construction, acquisition and installation of the 2010 Project to be diligently performed after the deposit of funds into the Acquisition Fund, and that it will use its best efforts to cause the construction, acquisition and installation of the 2010 Project to be completed. 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 2010 Project and that all such costs and expenses shall be paid by the District, regardless of whether the funds deposited in the Acquisition Fund are sufficient to cover all such costs and expenses. Section 3.4. Changes to the Proiect. The District may add other improvements to or substitute other improvements for those listed as components of the Project in Exhibit B hereto, but only if the District first files with the Authority and the Trustee a statement of the District: (a) identifying the improvements to be deleted from such Exhibit, if any, and the improvements to added or replaced, if any; and (b) stating that the estimated costs of construction, acquisition and installation of the added or substituted improvements will not cause the cost of the uncompleted portion of the Project to exceed the amount available therefore in the Acquisition Fund. Section 3.5. Acquisition Fund. There is hereby established with the District the Acquisition Fund into which amounts shall be deposited pursuant to Section 3.02 of the Indenture. 11 DOC SOC/ 1322156v5 /022497 -001 1 The moneys in the Acquisition Fund shall be held by the District in trust and shall be applied to the payment of the costs of acquisition and construction of the Proje,:t. and of expenses incidental thereto. Before any payment is made from the Acquisition Fund he the Director of Finance of the District, the Manager shall cause to be filed with the Director Of Fi-tance of the District a Written Requisition of the District in the form set forth in Exhibit C hereto. Upon receipt of each such Written Requisition the Director of Finance of the District will pay the amount set forth in such Written Requisition as directed by the e-ms thereof. The Director of Finance of the District need not make any such payment if it has recciced notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payrm--n: of, any of the moneys to be so paid, which has not been released or will not be released simultare JUSIv with such payment. When the Project shall have been constructed and acO,uircd in accordance with the Installment Purchase Agreement, a statement of the District stating the fact and date of such acquisition, construction and acceptance and stating that all Of' euch 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 whic't a retention in the Acquisition Fund is to be maintained in the full amount of such claims until suc h dispute is resolved), shall be delivered to the Director of Finance of the District and the Trustee h : the District. Upon the receipt of such statement, the Director of Finance of the District shall transf °r 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 District by the District) to the Trustee which shall transfer such amounts to the Revenue Fund Upon the occurrence and continuation of an Event of Default or an event which would constitute an Event of Default, amounts on deposit in the Acquisition Fund shall not be disbursed, but shall instead be applied to the payment of the principal, intere!a and prepayment penalty with respect to the Certificates. ARTICLE IV INSTALLMENT PAYMENTS Section 4.1. Purchase Price. (a) The Purchase Price to be paid by the District tereunder to the Authority is the sum of the principal amount of the District's obligations hereunder plus the interest to accrue on the unpaid balance of such principal amount from the effective date I-en-c t over the term hereof, subject to prepayment as provided in Article VII. (b) The principal amount of the payments to be r Lade by the District hereunder is set forth in Exhibit A hereto. (c) The interest to accrue on the unpaid balarre of such principal amount is as specified in Section 4.2 and Exhibit A hereto, and shall be paid by the District as and constitute interest paid with respect to the principal amount of the District's ob igations hereunder. Section 4.2. Installment Payments. The District shall, subject to any rights of prepayment provided in Article VII, pay the A- thority the Purchase Price in irst ailment payments of interest and 12 DOCS OC/ 1322156v5/022497-001 I principal in the amounts and on the Installment Payment Dates as set forth in Exhibit A hereto; provided, however, that the amount of Installment Payments payable on any Installment Payment Date shall be reduced by the amounts on deposit in the Certificate Payment Fund on such Installment Payment Date, if any. Each Installment Payment shall be paid to the Authority in lawful money of the United States of America. In the event the District fails to make any of the payments required to be made by it under this Section, such payment shall continue as an obligation of the District until such amount shall have been fully paid; and the District 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 Installment Payments if paid in accordance with their terms. Subject to Section 10.1 hereof, the obligation of the District to make the 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 District will not discontinue or suspend any Installment Payments 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 2010 Project has been completed, and such payments shall not be subject to reduction whether by 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 5.1. Pledee of Revenues. All Revenues and all amounts on deposit in the Revenue Fund are hereby irrevocably pledged to the payment of the Installment Payments as provided herein; and the Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of the Revenues and amounts on deposit in the Revenue Fund there may be apportioned such sums for such purposes, including payments with respect to the 2004 Installment Sale Agreement and 2006 Installment Sale Agreement which constitute Contracts within the meaning of this Agreement; as are expressly permitted herein this Agreement constitutes a Contract within the meaning of the 2004 Installment Sale Agreement. This pledge, together with the pledge created by all other Contracts and Parity Bonds, shall constitute a first lien on Revenues and, subject to application of Revenues and all amounts on deposit therein as permitted herein, the Revenue Fund and other funds and accounts created hereunder for the payment of the Installment Payments and all other Contracts and Parity Bonds in accordance with the terms hereof and the Indenture. Section 5.2. Allocation of Revenues. In order to carry out and effectuate the pledge and lien contained herein, the District agrees and covenants that all Revenues shall be received by the District in trust hereunder and shall be deposited when and as received in a special fund designated as the "Revenue Fund," which fund is hereby established and which fund the District agrees and covenants to maintain and to hold separate and apart from other funds so long as any Contracts or Parity Bonds remain unpaid. Moneys in the Revenue Fund shall be used and applied by the District as provided in this Agreement. 13 DOC SOC/ 13221560/022497 -001 1 The District shall, from the moneys in the Revenue Fund. pa ` all Operation and Maintenance Costs (including amounts reasonably required to be set aside in cont.ncency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become dne and payable. Thereafter all remaining moneys in the Revenue Fund shall be applied by the District at the following times for the tray sfer to the following respective special funds in the following order of priority; and all moneys in eac`t of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes set lorth in this Section. (a) Installment Payments. Not later than each nstallment Payment Date, the District shall, from the moneys in the Revenue Fund, transfer to the '1 rutee the Installment Payment due and payable on that Installment Payment Date. The District s -iall also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit r. the respective payment fund, without preference or priority, and in the event of any insufficience of such moneys ratably without any discrimination or preference, any other Parity Installment Payments or Debt Service in accordance with the provisions of any Parity Bond or Contract. (b) Reserve Funds. On or before each Installment Payment Date the District shall, from the 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, and to the applicable trustee for such other reserve funds and /or accounts, if any, as may have been established in connection with Parity Bonds or Contracts other that this Agreement, that sum, if any, necessary to restore the reserve funds to an amount equal to the reserve fund requirement (if any) for such Parity Bonds or Contracts. (c) Surplus. Moneys on deposit in the Revenue Fund on each Installment Payment Date not necessary to make any of the payments required above may be expended by the District at any time for any purpose permitted by law including nut not limited to Subordinate Obligations. Section 5.3. Additional Contracts and Parity Bonds. The District may at any time execute any Contract or issue any Parity Bonds, as the case may be, in accordance herewith; provided: (a) The Net Revenues for the most recent audited Fiscal Year preceding the date of adoption by the Board of Directors of the District of the resolu ion authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, w the case may be, as evidenced by both a calculation prepared by the )istrict and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on zu_h calculation on file with the District, shall have produced a sur- equal to at least one hundred 1-;r, °} percent (120 %) of the Debt Service for such Fiscal Year; and (b) The Net Revenues for the most recent auditeI Fiscal Year preceding the date of the execution of such Contract or the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Parity Bonds, r:s the case may be, including adjustments to give effect as of the first day of such Fiscal Year to ircreases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a calculation prepared by the District. shall have produced a sum equal to at least one hundred twenty percent (120 %) of (x) the Debt Service for such Fiscal Year plus (y) the Debt Service on any Contracts executed or Parity Bonds issued since the end of such Fiscal Year assuming such Contracts had been executed or Parity Bonds had been issued at the beginning oi'such Fiscal Year, plus (z) the 14 DOCSOC/ 132215 6v5/022497 -001 1 Debt Service on the Contract to be executed or Parity Bonds to be issued had such Contract been executed or Parity Bonds been issued at the beginning of such Fiscal Year; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Parity Project, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for the Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the General Manager on file with the District, shall produce a sum equal to at least one hundred twenty percent (120 %) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Parity Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects within such Fiscal Years, assuming that all such Contracts and Parity Bonds have maturities, interest rates and Proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Parity Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Parity Projects; and Notwithstanding the foregoing, Parity Bonds or Contracts may be issued or incurred to refund outstanding Parity Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Parity Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Parity Bonds or Contracts, but excluding such refunding Parity Bonds or Contracts) not being refunded are outstanding. Section 5.4. Subordinate Obligations. Notwithstanding any other provision of this Agreement, the District may issue or execute and deliver, as applicable, Subordinate Obligations at any time in the District's sole discretion. Section 5.5. No Senior Obligations. Notwithstanding any other provision of this Agreement, the District shall not issue or execute and deliver, as applicable, additional obligations payable on a basis senior to the Installment Payments, other than obligations constituting Operation and Maintenance Costs. Section 5.6. Investments. All moneys held by the District in the Revenue Fund shall be invested in Permitted Investments and the investment earnings thereon shall remain on deposit in such fund, except as otherwise provided herein. ARTICLE VI COVENANTS OF THE DISTRICT Section 6.1. Compliance with Installment Purchase Agreement and AncillaryAgreements. The District will punctually pay the Installment Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate this Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances 15 DOCSOC/ 1322156x5/022497 -0011 that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the Uni. ed 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, :ovenant or term contained herd t required to be observed and performed by it, whether express or implied, or any duty, liability cr obligation arising out of or connected herewith or the insolvency, or deemed insolvency; or i ,.arkruptcy 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, st-ikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. It is expressly understood and agreed by and among the parties to this Agreement that, subject to Section 10.6 hereof, each of the agreements, conditions, co e rants and terms contained in this Agreement is an essential and material term of the purchase of and payment for the Project by the District pursuant to, and in accordance with, and as authorized under the Law. The District will faithfully observe and perform all the agreements, conditions, covenants and terms required to be observed and performed by it pursuant to all oustanding Contracts and Parity Bonds as such may from time to time be executed or issued, as the case may be. Section 6.2. Against Encumbrances. The District will no make any pledge of or place any lien on Revenues or the moneys in the Revenue Fund except as provided herein. The District may at any time, or from time to time, execute Contracts or issue Parity Bonds as permitted herein or incur evidences of indebtedness or incur other obligations for any lav,fiil purpose which are payable from and secured by a pledge of and lien on Revenues and on an} moneys in the Revenue Fund as may from time to time be deposited therein, provided that such pledge and lien shall be subordinate in all respects to the pledge of and lien thereon provided herein. Section 6.3. Against Sale or Other Disposition of Property. The District will not enter into any agreement or lease which impairs the operation of the 'V' 4_er System or any part thereof necessary to secure adequate Revenues for the payment of the 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 equipmera which has become worn out, may be sold if such sale will not impair the ability of the District to nay 'he Installment Payments and if the proceeds of such sale are deposited in the Revenue Fund. Nothing herein shall restrict the ability of the District to sell sury portion of the Water System if such portion is immediately repurchased by the District and if such arrangement cannot by its terms result in the purchaser of such portion of the Water Systen exercising any remedy which would deprive the District of or otherwise interfere with its right w own and operate such portion of the Water System. Notwithstanding the foregoing, the District rrai, permit competitive systems where it determines that provision of Water Service is either geographically, technically or economically prohibitive or where provision of such services is mete -eadily obtained from another provider of such services. Section 6.4. Against Competitive Facilities. To the extent aermitted by law, the District covenants that it will not acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other pu )fc or private agency, Authority, 16 DOC SOC/ 1322156v5 /022497 -001 1 district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the District any water system competitive with the Water System, Section 6.5. Tax Covenants. Notwithstanding any other provision of this Agreement, absent an opinion of Special Counsel that the exclusion from gross income of interest with respect to the Series 2010 Bonds will not be adversely affected for federal income tax purposes, the District and the Authority covenant to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The District and the Authority will not take or omit to take any action or make any use of the proceeds of the Series 2010 Bonds or of any other moneys or property which would cause the Series 2010 Bonds to be "private activity bonds" within the meaning of Section 141 of the Code. (b) Arbitrage. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Series 2010 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. (c) Federal Guarantee. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or take or omit to take any action that would cause the Series 2010 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) Information Reporting. The District and the Authority will take or cause to be taken all necessary action to comply with the informational reporting requirements of Section 149(e) of the Code necessary to preserve the exclusion of interest on the 2010A Bonds pursuant to Section 103(a) of the Code. (e) Hedge Bonds. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Series 2010 Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the District 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 Series 2010 Bonds for federal income tax purposes. (f) Miscellaneous. The District and the Authority will take no action, or omit to take any action, inconsistent with the expectations stated in any Tax Certificate executed with respect to the Series 2010 Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the District and the Authority from executing and delivering Series 2010 Bonds, the interest with respect to which has been determined by Special Counsel to be subject to federal income taxation. Section 6.6. Maintenance and Operation of the Water System. The District will maintain and preserve the Water System in good repair and working order at all times and will operate the 17 DOCSOC/ 1322156v5 /022497 -001 1 Water System in an efficient and economical manner and will pa% all Dperation and Maintenance Costs as they become due and payable. Section 6.7. Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might becorrne a lien on the Revenues or the funds or accounts created hereunder or on any funds in the hands of'--he District pledged to pay the Installment Payments or to the Owners prior or superior to the lier of the Installment Payments or which might impair the security of-lie Installment Payments. Section 6.8. Compliance with Contracts. The District wit neither take nor omit to take any action under any contract if the effect of such act or failure to act w ould in any manner impair or adversely affect the ability of the District to pay Installment Paymc r ts; and the District will comply with, keep, observe and perform all agreements, conditions, covenarr� a-td terms, express or implied, required to be performed by it contained in all other contracts affecting or involving the Water System, to the extent that the Distric, is a party thereto. Section 6.9. Insurance. (a) The District will procure and maintain or .ause to be procured and maintained insurance on the Water System with responsible insurers :n such amounts and against such risks (including damage to :)r destruction of the Water Syst:;rr) as are usually covered in connection with a water system similar to the Water System so long: as such insurance is available from reputable insurance companies on commercially reasonable ternts. In the event of any damage to or destruction of the `J mer System caused by the perils covered by such insurance, the Net Proceeds thereof shall be appliec to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The District shall begin such reconstruction, repair or replacement promptly after such damage or c estruction 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 compieted and the Water System shall be free and clear of all claims and liens. If such Net Proceeds exceed the costs of such recorstruction, repair or replacement portion of the Water System, and /or the cost of the construction of additions, betterments, extensions or improvements to the Water System, then the excess Net Proceeds may, at the option of the District, be applied in part to the prepayment of Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Parity Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Installment Payments then bears to the aggregate unpaid principal amount of such Parity Bonds and Contracts. If such Net Proceeds are sufficient to enable the District to retire the entire obligation evidenced hereby prior to the final due date of the Installment Payments as well as the entire obligations evidenced by Parity Bonds and Contracts then remaining unpaid prior to their final respective due dates, the District may elect not to reconstruct, -epair or replace the damaged or destroyed portion of the Water System, and /or not to construct other additions, betterments, extensions or improvements to the Water System; and thereupon ,u -h Net Proceeds shall be applied to the prepayment of Installment Payments as provided in Article x'11 and to the retirement of such Parity Bonds and Contracts. 18 DOC SOC/ 1322156v5 /022497 -001 I (b) The District will procure and maintain such other insurance as 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 a water system similar to the Water System. (c) Any insurance required to be maintained by paragraph (a) above and, if the District 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 a water system similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound. Section 6.10. Accounting Records: Financial Statements and Other Reports. (a) The District will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the District, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions. (b) The District will prepare and file with the Authority and the Trustee annually within one hundred eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2009) financial statements of the District for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant's Report thereon. The Trustee shall not be responsible for reviewing such financial statements. Section 6.11. Protection of Security and Rights of the Authori ty. The District will preserve and protect the security hereof and the rights of the Authority to the Installment Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. Section 6.12. Payment of Taxes and Compliance with Governmental Regulations. The District 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 District 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 District 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 6.13. Amount of Rates and Charges. (a) To the fullest extent permitted by law, the District shall fix and prescribe rates and charges for the Water Service provided by the Water System which will be at least sufficient to yield during each Fiscal Year Net Revenues equal to one hundred twenty percent (120 %) of Debt Service for such Fiscal Year allocable to the Water System. (b) The District 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. 19 DOCSOC/ 1322156x5/022497 -001 1 Section 6.14. Collection c, Rates and Charges. The District w 11 have in effect at all times by -laws, rules and regulations requiring each customer to pay the ra*.e� and charges applicable to the Water Service and providing for t,e billing thereof and for a due date and a delinquency date for each bill. Section 6.15. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings. the Net Proceeds thereof shall )e applied as follows: (a) If (1) the District files with the Authority and the Trustee a certificate showing (i) the estimated loss of annual Net Revenues, if any. suffered or to be suffered by the District by reason of such eminent domain proceedings, (ii) a genera; description of the additions, betterments, extensions or improvements to the Water Syste r iroposed to be acquired and constructed by the District from such Net Proceeds, and (iii) an estim lte of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements, and (2) the District, on the basis of such certificate filed with the Authority and 'he Trustee, determines that the estimated additional annual Net R- evenues will sufficiently offset -.he ° stimated loss of annual Net Revenues resulting from such eminent domain proceedings so that tI-e ability of the District to meet its obligations hereunder will not be substantially impaired (which ( eternination shall be final and conclusive), then the District shall promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in -, ccordance with such certificate and such Net Proceeds shall be applied for the payment of the costs of such acquisition and construction, and any balance of such Net Proceeds not required by the District for such purpose shall be deposited in the Revenue Fund. (b) If the foregoing conditions are not met, then such Net Proceeds shall be applied by the District in part to the prepayment of Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Parity Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Installment Payments then bears to the aggregate unpaid principal amount of such Parity Bonds and Contracts. Section 6.16. Further Assurances. The District 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'-erein. Section 6.17. Enforcement of Contracts. The District sill 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 he ability of the District to pay Installment Payments. Section 6.18. Continuing Disclosure. The District hereby covenants and agrees that it will comply with and carry out all of the provisions of the C ontinuing Disclosure Certificate. Notwithstanding any other provision of this Agreement, failure of the District to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, any Owner of Series 2010 Bonds or Bene"cial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Section. For purposes of .h s Section, `Beneficial Owner" in DOCSOC/ 1322156v5/022497 -0011 means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2010 Bonds (including persons holding Series 2010 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2010 Bonds for federal income tax purposes. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section 7.1. Prepayment. (a) The District may or shall, as the case may be, prepay from the Net Proceeds as provided herein on any date, all or any part on any Installment Payment Date, of the principal amount of the unpaid Installment Payments at a prepayment price equal to the sum of the principal amount prepaid plus accrued interest thereon to the date of prepayment. (b) The District may prepay the Installment Payments in the order as directed in a Written Request of the District to the Trustee, and by lot within a maturity, as a whole or in part, on any date on or after September 25, 20_ from any available funds. The principal amount of the unpaid Installment Payments is payable at a prepayment price equal to the principal amount of the Installment Payments to be prepaid plus accrued interest thereon to the date of prepayment without premium. Notwithstanding any such prepayment, the District 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 7.2. Method of Prepayment. Before making any prepayment pursuant to Section 7.1(a), the District may, 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 of the Series 2010 Bonds will be paid, which date shall be not less than thirty (30) days from the date such notice is given, unless such prepayment must occur on an Interest Payment Date, in which case such date shall be the next Interest Payment Date with respect to which notice of prepayment may be timely given pursuant to the Indenture. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.1. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen, that is to say -- (a) if default shall be made by the District in the due and punctual payment of any Installment Payment or any Contract or Parity Bond when and as the same shall become due and payable; 21 DOCSOC/ 132215 6x5/022497 -001 I (b) if default shah be made by the District in the l er;orrnance of any of the other agreements or covenants required herein or in any Contractor Pariv: Bc-1d to be performed by it, and such default shall have continued for a period of thirty (30) days aver the District shall have been given notice in writing of such default by the Authority; (c) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applirble law of the United States of America or any state therein, or if a court of competent jurisdiction ;h 311 approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of Unerica or any state therein, or if under the provisions of any other law for the relief or aid of d fbtors any court of competent jurisdiction shall assume custody or control of the District or of the �, hole or any substantial part of its property; or (d) if payment of the principal of any Contract or Parity Bond is accelerated in accordance with its terms; then and in each and every such case during the continuance of suc t Event of Default specified in clauses (c) and (d) above, the Authority shall, and for any other such F vent of Default the Authority may, declare the entire principal amount of the unpaid Installment Pa-v rents and the accrued interest thereon to be due and payable immediately, and upon any such dec aration the same shall become immediately due and payable, anything contained herein to the c )ntrary notwithstanding. This subsection however, is subject to the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shal I have been so declared due and payable and before any judgment or decree for the payment of thz moneys due shall have been obtained or entered the District shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Installment Payments and/or the unpaid pavtnent of any other Contract or Parity 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 Installment Payments or such Contract or Parity 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 Installment Payments and the accrued interest thereon due End 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 therein, then and in every such case the Authority, by written notice to the District, may rescind and arnul such declaration and its consequences; but no such rescission and annulment shall extend io or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.2. Application of Funds Upon Acceleration. I. por the date of the declaration of acceleration as provided in Section 8.1, all Revenues thereafter received shall be applied in the following order - First, to the payment, without preference or priority, and it the event of any insufficiency of such Revenues ratably without any discrimination or preference. A the fees, costs and expenses of the Authority and Trustee, if any, including reasonable compensation to its accountants and counsel; Second, to the payment of the Operation and Maintenance Costs: and 22 DOCSOC/ 1322156v5/022497 -001 1 Third, to the payment of the entire principal amount of the unpaid Installment Payments and the unpaid principal amount of all Parity Bonds and Contracts and the accrued interest thereon, with interest on the overdue installments at the rate or rates of interest applicable to the unpaid Installment Payments and such Parity Bonds and Contracts if paid in accordance with their respective terms. Section 8.3. Other Remedies of the Authori ty. 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 District or any director, officer or employee thereof, and to compel the District or any such director, officer or employee to perform and carry out its or his duties under the Law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the District and its directors, officers and employees to account as the trustee of an express trust. Notwithstanding anything contained herein, the Authority shall not have a security interest in or mortgage on the Project, the Water System or other assets of the District, and no default hereunder shall result in the loss of the Project, the Water System or other assets of the District. Section 8.4. Non - Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payments to the Authority at the respective due dates or upon prepayment from the Net Revenues, the Revenue 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 embodied herein. A waiver of any default or breach of duty or contract by the Authority shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by the Law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If any action, proceeding or suit to enforce any right or exercise any remedy is discontinued or abandoned, the District 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 8.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. 23 DOC SOC/ 1322156v5/022497-001 1 If any action, proceeding o7 suit to enforce any right or exerc se any remedy is discontinued or abandoned, the Trustee and Certificate Owners shall be restored to heir former positions. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obligations. When: (a) all or any portion of the Installment Paymerts shall have become due and payable in accordance herewith or a written notice of the District tt� )repay all or any portion of the Installment Payments shall have been filed with the Trustee; and (b) there shall have been deposited with the Trustee at or prior to the Installment Payment Dates or date (or dates) specified for prepayment, in trust I'(- the benefit of the Authority or its assigns and irrevocably appropriated and set aside to the payment of all or any portion of the Installment Payments, sufficient moneys and non - callable Permitted Investments, issued by the United States of America and described in clause (A) of the definiti )n thereof, the principal of and interest on which when due will provide money sufficient to pay all prncipal, prepayment premium, if any, and interest of such Installment Payments to their respective Installment Payment Dates or prepayment date or dates as the case may be; and (c) provision shall have been made for paying all fees and expenses of the Trustee; and (d) the principal amount of the Bonds equal to the principal component of the Installment Payments to be discharged hereunder has been deemed :to longer outstanding under the Indenture because of the application of funds or Permitted Investments received under clauses (a) and (b); then and in that event, the right, title and interest of the Authority herein and the obligations of the District hereunder shall, with respect to all or such portion o� the 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 District to have such moneys and such Permitted Investments applied to the payment of such Insta.1ment Payments). In such event, upon request of the District the Trustee shad cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as ma:. 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 th^ District, after payment of all amounts due the Trustee pursuant to the Indenture, as an overpa}'nent of Installment Payments, all such moneys or such Permitted Investments held by it pursuant Iareto other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Installment Payments, which moneys and Permitted Investments shall continue o be held by the Trustee in trust for the payment of the Installment Payments and shall be applied Iy the Trustee to the payment of the Installment Payments of the D strict. 24 DOCSOC/ 1322156v5/022497 -001 I ARTICLE X MISCELLANEOUS Section 10.1. Liability of District Limited to Revenues. The obligation of the District to make the Installment Payments is a special obligation of the District payable solely from the Net Revenues, and does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. Notwithstanding anything contained herein, the District shall not be required to advance any moneys derived from any source of income other than the Revenues and the Revenue Fund for the payment of amounts due hereunder or for the performance of any agreements or covenants required to be performed by it contained herein. The District 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 District for such purpose. Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the District or the Authority any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the District or the Authority shall be for the sole and exclusive benefit of the other party. Section 10.3. Successor Is Deemed Included in all References to Predecessor. Whenever either the District 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 District or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 10.4. Comoensation and Indemnification of Trustee. The District shall pay to the Trustee from time to time all reasonable compensation for all services 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 District 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 the Lust created under the Indenture, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers under the Indenture. The rights of the Trustee and the obligations of the District under this 10.4 shall survive removal or resignation of the Trustee under the Indenture or the discharge of the Bonds and the Indenture. Section 10.5. Waiver of Personal Liability. No director, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payments, but nothing contained herein shall relieve any director, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. 25 DOCSOC /7 322156v5/022497-0011 Section 10.6. Article and Section Headings, Gender and References. The headings or titles of the several articles and sections hereof and the table of contents amended hereto shall be solely for convenience of reference and shall not affect the meaning, contraction 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 -he words "hereby ". "herein," " hereof," "hereto," "herewith" and other words of similar import refer to this Agreement as a whole and not to any particular article, section, subdivision or clause hereof. Section 10.7. Partial Invalidity. If any one or more of he agreements or covenants or portions thereof required hereby to be performed by or on the part :)f the District or the Authority shall be contrary to law, then such agreement or agreements, sucl -,c Tenant 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 valAity hereof. The District and the Authority hereby declare that they would have executed this 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, serrences, clauses or phrases hereof or the application thereof to an} person or circumstance may b­ `teld to be unconstitutional, unenforceable or invalid. Section 10.8. Assignment. This Agreement and any rights hereunder may be assigned by the Authority, as a whole or in part, without the necessity of oht� ining the prior consent of the District. Section 10.9. Net Contract. This Agreement shall be deemed and construed to be a net contract, and the District shall pay absolutely net during the tetra hereof the Installment Payments and all other payments required hereunder, free of any deductions anc without abatement, diminution or set -off whatsoever. Section 10.10. California Law. THE INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANC3 `XITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.11. 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 r ther address as such party may provide to the other party in writing from time to time, namely: If to the District: East Valley Water District 3654 East Highland Avenue. Suite 18 Highland, CA 93246 Attention: General Manager If to the Authority: East Valley Water District Financing Authority 3654 East Highland Avenue. Suitr 8 Highland, CA 93246 Attention: President 26 DOC SOC/ 1322156v5 /022497 -001 1 Section 10.12. Effective Date. This 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 10.13. Execution in Counterparts. This 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 10.14. Indemnification of Authority. The District hereby agrees to indemnify and hold harmless the Authority if and to the extent permitted by law, from and against all claims, advances, damages and losses, including legal fees and expenses, 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 10.15. Amendments Permitted. This Agreement and the rights and obligations of the Authority, the District, the Owners of the Series 2010 Bonds and of the Trustee may be modified or amended at any time by an amendment hereto which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Series 2010 Bonds then Outstanding, exclusive of Series 2010 Bonds disqualified as provided in the Indenture, shall have been filed with the Trustee. No such modification or amendment shall (1) extend the stated maturities of the Series 2010 Bonds, or reduce the rate of interest represented thereby, or change the method of computing the rate of interest with respect thereto, or extend the time of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment thereof, without the consent of the Owner of each Series 2010 Bond so affected, or (2) reduce the aforesaid percentage of Owners of Series 2010 Bonds whose consent is required for the execution of any amendment or modification of this Agreement without the consent of the Owners of all Series 2010 Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee or the Authority without its respective written consent thereto. This Agreement and the rights and obligations of the Authority, the District and of the Owners of the Series 2010 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 Series 2010 Bonds, but only to the extent permitted by law and only for any one or more of the following purposes - (a) to add to the covenants and agreements of the Authority or the District contained in this Agreement other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the Authority or the District, and which shall not adversely affect the interests of the Owners of the Series 2010 Bonds; (b) to cure, correct or supplement any ambiguous or defective provision contained in this Agreement or in regard to matters or questions arising under this Agreement, as the Authority or the District may deem necessary or desirable and which shall not adversely affect the interests of the Owners of the Series 2010 Bonds; and (c) to make such other amendments or modifications as may be in the best interests of the Owners of the Series 2010 Bonds; and 27 DOC SOC/ 1322156v5/022497-0011 (d) to make anv amendments or supplements necessary or appropriate to preserve or protect the exclusion of interest with respect to the Series 2010 Bonds from gross income for federal income tax purposes under the Code or the exemption of such interest from State personal income taxes. No amendment without consent of the Owners of the Series 2010 Bonds may modify any of the rights or obligations of the Trustee without its written consent thereto. Section 10.16. Paired Obligation Provider Guidelines. For purposes of Section 5.3 and Section 6.13, Paired Obligations shall comply with the following conditions: (a) A Paired Obligation Provider shall initially hive a long -term rating equal to or better than the Initial Rating Requirement. (b) So long as the long -term rating of the Paired Obligation Provider is not reduced below the Minimum Rating Requirement, the interest rate of su,h Paired Obligation shall be deemed to be equal to the irrevocable fixed interest rate attributable :hereto for purposes of Section 5.3 and Section 6.13. (c) In the event that a Paired Obligation Provider does not maintain the Minimum Rating Requirement and the District does not replace such Paired Obligation Provider with another Paired Obligation Provider which maintains the Initial Rating Requir °ment within ten (10) Business Days of notice that the Paired Obligation Provider has not maintained the Minimum Rating Requirement, interest with respect to such Paired Obligations shall be computed for purposes of Section 5.3 and Section 6.13 without regard to payments to be recei ✓ed from the Paired Obligation Provider. Section 10.17. Notice to Rating Agency. Copies of all amendments to this Agreement shall be mailed by first class mail to Standard & Poor's Ratings Sen,':es at least 15 days prior to the effective date of such amendment. 28 DOCSOC/1322156v5/022497 -0011 IN WITNESS WHEREOF, the parties hereto have executed and attested this Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST Secretary of the Board of the District EAST VALLEY WATER DISTRICT President EAST VALLEY WATER DISTRICT FINANCING AUTHORITY President S -I DOCSOC/1322156v5/022497 -0011 EXHIBIT A PURCHASE PRICE The principal amount of payments to be made h� the District hereunder is 2. The installment payments of principal and interest an: payable in the amounts and on the Installment Payment Dates as follows: Installment Payment Date Amount Attributable to 5th Day Prior to: Principal A -1 DOC SOC/ 1322156v5/022497-001 I Amount Attributable to Interest Installment Payment Date Amount Attributable to 5th Day Prior to: Principal A -2 DOCSOC/1322156v5/022497 -0011 Amount Attributable to Interest EXHIBIT B -I DESCRIPTION OF THE PROJECT The Prior Project comprises the following described imp -c ve nents to the Water System financed under the 2001 Installmem Purchase Agreement. Component B -1 -1 DOCSOC/I322156v5/022497 -0011 Cost System. EXHIBIT B -2 DESCRIPTION OF THE PRIOR PROJECT The 2010 Project is comprised of the following described improvements to the Water Component B -2 -1 DOCSOC/1322156v5/022497 -0011 Cost EXHIBIT C [FORM OF REQUISITION NO. _ F02 DISBURSEMENT FROM ACQUISITION F `,:D] S EAST VALLEY WATER DISTRICT FINANCING U T'HORITY "DATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERI �S 2 00 1 REFUNDING), SERIES 2010 The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting General Manager of the East Valley Water District, a California county r� ater district organized and existing under the laws of the State of California (the "District "), and as such, is familiar with the facts her--in certified and is authorized to certify the same; (ii) that, pursuant to Section 3.5 of that certain Installment Purchase Agreement, dated as of September 1, 2010 (the 'Installment Purchase Agreement "), hN and between the East Valley Water District Financing Authority and the District, the undersigned hereby requests the Director of Finance of the District to disburse this date the following amounts from the Acquisition Fund established under the Installment Purchase Agreement, to the payees designated on the attached Exhibit A to Exhibit C; (iii) that each obligation mentioned herein has been incurred by the District and is a proper charge against the Acquisition Fund; (iv) that any approval required under the California Fri ironmental 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; (v) that there has not been filed with or served upon the District 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 xNith the payment of such obligai on. other than materialmen's or mechanics' liens accruing by mere operation of law. EAST VALLEY WATER DISTRICT Ge feral Manager C -1 DOCSOC/ 1322156v5/022497 -001 1 Exhibit A to EXHIBIT C ACQUISITION FUND DISBURSEMENTS Item Purpose of Number Payee Name and Address Obligation Amount C -2 DOCSOC/ 1322156x5 /022497 -001 I INDENTURE OF TRUST Dated as of September 1, 2010 By and between UNION BANK, N.A., as Trustee and the EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Relating to $[Bond Amount] EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 DOCSOC/ 1424659v5/022497-001 I TABLE OF CONTENTS ! ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES ANP, OPINIONS Section 1.01. Definitions... ...................................................... ........... ..............................3 Section 1.02. Content of Certificates and Opinions .................. ................ ..............................9 Section 1.03. Interpretation ........................ ............................... . ............... .............................10 ARTICLE II THE BONDS Section 2.01. Authorization o` Bonds ........ ............................... ................. .............................10 .............................17 Section 2.02. Terms of the Bonds .................. ............................... ............ .............................10 .............................17 Section2.03. Transfer of Bonds ..................... ............................... ........... ..............................1 1 Section 2.04. Exchange of Bonds ................... ............................... ............ .............................12 .............................18 Section 2.05. Registration Books ................................................................ .............................12 ............................... 18 Section 2.06. Form and Execu,.ion of Bonds ............................................. ............................... 12 Section 2.07. Bonds Mutilated. Lost. Destroyed or Stolen ........... ........... ............................... 13 Section2.08. Book Entry Svstem ............................................................. ............................... 13 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the Bonds ........................................................... .............................16 Section 3.02. Application of Proceeds of the Bonds ............... ................ .............................16 Section 3.03. Establishment and Application of Costs of Issuance Fund ...... .............................16 Section 3.04. Validity of Bonds .................................................................... .............................16 ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption ............................................................ .............................17 Section 4.02. Selection of Bonds for Redemption .................... ................. .............................17 Section 4.03. Notice of Redemption ........ ............................... ................... .............................17 Section 4.04. Partial Redempt: onofBonds ... ............................... ............. .............................18 Section 4.05. Effect of Redemption .......... ............................... .. ........... ............................... 18 ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PFtINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund ................................. .............................18 Section 5.02. Allocation of Authority Revenues ....................................... ............................... 19 Section 5.03. Application of Interest Account .............................................. .............................19 Section 5.04. Application of Principal Account ........................................... .............................20 i DOCSOC/ 1424659v5 /022497 -001 1 TABLE OF CONTENTS (continued) NO Section 5.05. Application of Redemption Fund ............................................. .............................20 Section5.06. Investments .............................................................................. .............................20 Section5.07. Rebate Fund ............................................................................. .............................21 Section 5.08. Application of Funds and Accounts When No Bonds are Outstanding ................22 ARTICLE VI PARTICULAR COVENANTS Section6.01. Punctual Payment .................................................................... .............................22 Section 7.02. Section 6.02. Extension of Payment of Bonds ............................................... .............................23 Application of Authority Revenues and Other Funds After Default ... Section 6.03. Against Encumbrances ............................................................. .............................23 Section 7.05. Section 6.04. Power to Issue Bonds and Make Pledge and Assignment ....... .............................23 Suit by Owners ...................................................... ............................... Section 6.05. Accounting Records and Financial Statements ........................ .............................23 Section 7.08. Section6.06. Tax Covenants ......................................................................... .............................23 No Waiver of Defaul t ............................................ ............................... Section 6.07. Payments Under Installment Purchase Agreement .................. .............................24 Section6.08. Waiver of Laws ........................................................................ .............................24 Section 6.09. Further Assurances .................................................................. .............................25 Section6.10. Eminent Domain ...................................................................... .............................25 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS Section 7.01. Events of Default .................................................. ............................... Section 7.02. Remedies Upon Event of Default ......................... ............................... Section 7.03. Application of Authority Revenues and Other Funds After Default ... Section 7.04. Trustee to Represent Bond Owners ...................... ............................... Section 7.05. Bond Owners' Direction of Proceedings .............. ............................... Section7.06. Suit by Owners ...................................................... ............................... Section 7.07. Absolute Obligation of the Authority ................... ............................... Section 7.08. Remedies Not Exclusive ....................................... ............................... Section 7.09. No Waiver of Defaul t ............................................ ............................... ARTICLE VIII THE TRUSTEE .................25 .................25 .................26 .................27 .................27 .................27 .................28 .................28 .................28 Section 8.01. Duties, Immunities and Liabilities of Trustee .......................... .............................28 Section 8.02. Merger or Consolidation .......................................................... .............................30 Section 8.03. Liability of Trustee .................................................................. .............................30 Section 8.04. Right to Rely on Documents .................................................... .............................32 Section 8.05. Preservation and Inspection of Documents .............................. .............................33 Section 8.06. Compensation and Indemnification ......................................... .............................33 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE ii DOC SOC/ 1424659v5/022497 -0011 TABLE OF CONTENTS (continued) Page Section 9.01. Amendments Permitted .................. ..... .......... .._ . .. ........... .............................33 Section 9.02. Effect of Supplemental Indenture ............................ ........... .............................34 Section 9.03. Endorsement of Bonds; Preparation of New Bonds .. ............ .............................35 Section 9.04. Amendment of Particular Bonds ......................... ... ........... .............................35 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture .......................................................... .............................35 Section 10.02. Discharge of Liability on Bonds .............................. ........... .............................36 Section 10.03. Deposit of Money or Securities with Trustee .......... ........... .............................36 Section 10.04. Payment of Bonds After Discharge of Indenture ...... ........... .............................36 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of Authority Limited to Authority Recent: es ............ .............................37 Section 11.02. Successor Is Deemed Included in All References to Predecessor ........................37 Section 11.03. Limitation of Rights to Parties and Bond Owners .................. .............................37 Section 11.04. Waiver of Notice; Requirement of Mailed Notice ................. .............................37 Section 11.05. Destruction of Bonds .............................................................. .............................38 Section 11.06. Severability of Invalid Provisions .......................................... .............................38 Section11.07. Notices ................................................................................... .............................38 Section 11.08. Evidence of Rights of Bond Owners ..................................... .............................38 Section 11.09. Disqualified Bonds ................................................................ .............................39 Section 11.10. Money Held for Particular Bonds .......................................... .............................39 Section 11.11. Funds and Accounts ............................................................... .............................39 Section 11.12. Waiver of Personal Liability ................................................... .............................39 Section 11.13. Execution in Sep eral Counterparts .......................................... .............................39 Section 11.14. CUSIP Numbers ..................................................................... .............................39 Section 11.15. Choice of Law ........................................................................ .............................40 Section 11.16. Notice to Rating Agencies .................................................... .............................40 Signatures........................................................................................... ............................... S -1 ExhibitA Form of 2010 Bond .............................. ......................... ................. .................... A -1 DOCSOC/ 1424659v5/022497 -0011 INDENTURE OF TRUST THE INDENTURE OF TRUST, made and entered into as of September 1, 2010, by and between the EAST VALLEY WATER DISTRICT FINANCING AUTHORITY, a public entity duly organized and existing under the Joint Exercise of Powers Agreement, and under the Constitution and laws of the State of California (the "Authority "), and UNION BANK, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee hereunder (the "Trustee "); WITNESSETH: WHEREAS, the Authority has been created pursuant to the Joint Exercise of Powers Agreement with the powers, among others, to issue bonds and to finance and refinance water supply and wastewater facilities on behalf of its members; and WHEREAS, East Valley Water District (the "District "), a member of the Authority, has determined that it is in the best interest of the public to finance certain improvements to its water supply and wastewater facilities and to refinance certain of its obligations with the assistance of the Authority; and WHEREAS, 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 5 and 10 of the Joint Exercise of Powers Agreement to incur indebtedness to finance such improvements and refinance such obligations 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 by its members to the Authority; and WHEREAS, the District has previously entered into a certain Amended and Restated Installment Purchase Agreement (the "2001 Installment Purchase Agreement') dated as of April 1, 2001 which provides security for certain certificates of participation, which remain outstanding in the aggregate principal amount of $ (the "2001 Certificates "); and WHEREAS, the District has entered into that certain Installment Sale Agreement #04-058 - AF (the "2004 Installment Sale Agreement') and Installment Sale Agreement #05- 106 -AF (the "2006 Installment Sale Agreement') in each case by and between the District and Municipal Finance Corporation; and WHEREAS, the District has determined that it is in the best interest of the District to refinance the capital improvements (the "Prior Project ") originally financed by the 2001 Certificates, (the "Refunded Obligations "), as further described in the Installment Purchase Agreement defined herein; and WHEREAS, the District has determined that it is in the District's best interest to finance the acquisition and construction of certain improvements to its water supply system (the "2010 Project "), as further described in the Installment Purchase Agreement; and WHEREAS, the Authority hereby finds pursuant to Section 6586 of the Government Code that the issuance of the bonds authorized pursuant to Section 2.01 hereof (the "Bonds ") to refinance DOC S OC/ 142465 9v5/O22497-0011 the Prior Project and to finance the 2010 Project will have demonsn a h I c savings ineffective interest rate, bond preparation, bond under, citing or bond issuance costs and WHEREAS, in order to provide for the authentication and deli\ ery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are o be issued and secured and to secure the payment of the principal thereof and interest and premiun, if any, thereon, the Authority has authorized the execution and delivery of the Indenture; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee, and duly issued, the valid. binding and legal special oblie.rtions of the Authority, and to constitute the Indenture a valid and binding agreement for the uses � nd purposes herein set forth in accordance with its terms, have been done and taken, and the execur«n and delivery of the Indenture have been in all respects duly authorized; NOW, THEREFORE, THE INDENTURE WITNESSETH: GRANTING CLAUSES The Authority, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, in order to secure the payment of he principal of and the interest and premium (if any) on all Bonds at any time issued and Outstanding under the Indenture, according to their tenor, and to secure the performance and observance of al' the covenants and conditions therein and herein set forth, does hereby assign and pledge unto, and e -ant a security interest in, the following (the "Trust Estate ") to the Trustee, and its successors in 'lust and assigns forever, for the securing of the performance of the obligations of the Authority to the Bond Owners hereinafter set forth: GRANTING CLAUSE FIRST All right, title and interest of the Authority in and to the "wthority Revenues (as 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 payable to or receivable by the Authority under the Constitution of this State, the ( oN ernment Code of the State of California 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 co any and all things which the Authority is or may become entitled to do thereunder, subject to the w ns hereof. GRANTING CLAUSE 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 c ,ransferred as and for additional security hereunder to the Trustee by the Authority or by anyone o> its behalf, or with its written consent, and to hold and apply the same, subject to the terms hereo.` GRANTING CLAUSE THIRD 2 DOCSOC/ 1424659v5/022497 -001 1 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 HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto 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 the covenants 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 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. THE INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all Bonds 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 1.01. Definitions. Unless the context otherwise requires, the terms 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 used herein and not defined have the meanings ascribed thereto in the Installment Purchase Agreement. Accountant. The term "Accountant" means any firm of independent certified public accountants selected by the Authority in its sole discretion. DOCSOC/ 1424659x5 /022497 -001 I Authority. The term "Authority' means the East Valley Wait r District Financing Authority, a public body duly organized and existing under the Joint Exercise of Powers Agreement, and under the Constitution and laws of the State of California. Authority Revenues. The term "Authority Revenues' mean.: a) all Installment Payments received by the Authority or the Trustee pursuant to or with resl-.e_t 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 Representatix e" means with respect to the Authority, its President, Vice President, Secretary, Director of Finance or Executive Director or any other person designated as an Authorized Representative of the Atthority by a Certificate of the Authority signed by its President, Vice President, Secretary. Treast rer or Executive Director and filed with the Trustee. Bond Counsel. The term "Bond Counsel' means Stradling. Yocca. 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 C: )de. Bond Year. The term "Bond Year" means the period beginning on the date of issuance of the Bonds and ending on October 1, 2010, and each successive one year or. during the last period prior to maturity, shorter period thereafter until there are no Outstanding Bonc.s. Bonds. The term "Bonds- means the Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding), Series 2010 issued by the Authority pursuant to this 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 otter state in which the Office of the Trustee is located, are closed: or (ii) a day on which the New Yorl Stock Exchange is not closed. Certificate, Direction, Request, and Requisition. The term "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 Authoriz,,d Representative. Any such instrument and supporting opinions or representations, if any, may. Sul 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. l:- and to the extent required by Section 1.02, each such instrument ,hall include the statements pro,, i ded for in Section 1.02. Closing Date. The term "Closing Date" means the date on tthic:h 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 tems of expense directly or indirectly payable by or reimbursable to the Authority and related m fie 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 A credit fees and bond insurance 4 DOCSOC/ 1424659x5/022497 -001 I 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 or DTC. The term "Depository" or "DTC' means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York in its capacity as securities depository for the Bonds. District. The term "District' means the East Valley Water District, a [county] water district duly organized and existing under and by virtue of the laws of the State. Escrow Agreement. The term "Escrow Agreement' means the Escrow Agreement by and among District, Corporation and Trustee dated as of September 1, 2010. Escrow Bank. The term "Escrow Bank" means Union Bank, N.A., as established by the Escrow Agreement. Escrow Fund. The tern "Escrow Fund" means the Escrow Fund established pursuant to the Escrow Agreement. Event of Default. The term "Event of Default' means any of the events 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. Fiscal Year. The term "Fiscal Year" means the twelve month period beginning on July I 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 Authority. Fitch. The term "Fitch" means Fitch Ratings, Ltd., or any successor thereto. 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 September 1, 2010, 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. DOC SOC/ 142465 9v5/022497 -0011 Installment Purchase Agreement. The term `Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of September 1, 2010. b, tnd between the Authority and the District, as amended from time to time. Interest Account. The tern "Interest Account" means the account by that name in the Revenue Fund established pursuant to Section 5.01. Interest Payment Date. The term "Interest Payment Date" --r ans October I and April 1, of each year commencing April 1, 20-: . Investment Agreement. The term `Investment Agreement' means an investment agreement supported by appropriate opinions of counsel, provided that the g, raxantor thereof is rated at least "AA" and "Aa" by S &P and MoodN's. respectively, at the time of 1-11clivery and as further described in the definition of "Permitted Investments." Joint Exercise of Powers Agreement. The term "Joint Exercis-- of Powers Agreement" means that certain Joint Exercise of Powers Agreement, dated as of Angus 20. 2010, by and between the District and California Municipal Finance Authority, a public boc y. corporate and politic, duly organized and existing under the lak+ s of the State, as amended from t me to time. Letter of Representations. The term "Letter of Representations" means the letter of the Authority and the Trustee 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 Depasitory 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 and the Trustee delivered to and accepted by the Depository. Moody's. The term "Moody's" means Moody's Investor, 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.(: ,� hereof. Office. The term "Office' means with respect to the Trustee. the principal corporate trust office of the Trustee at 120 South San Pedro Street, 4 " Floor I,os Arrgeles, California 90012, Attention: Corporate Trust Division, or at such other or additional o'fces 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 ;)f ice or agency of the Trustee at which, at any particular time, its corporate trust agency business sha'�l be conducted. Opinion of Counsel. The term "Opinion of Counsel" means a written opinion of counsel (including but not limited to counsel to the Authority) selected by he .".uthority. If and to the extent required by the provisions of Section 1.02, each Opinion of Coun!:el shall include the statements provided for in Section 1.02. Outstandine. The term "Outstanding," when used as of an\ 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 1 Bonds with respect to which all liability of the Authority shall ha, e been discharged in accordant t with Section 10.02, including 6 DOCSOC/ 1424659v5/022497 -0011 Bonds (or portions thereof) described in Section 11.10; 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 or Bond Owner. The term "Owner" or "Bond Owner," whenever used herein with respect to a Bond, means 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: (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) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; 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 "Aria" 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, certificates of deposit, federal funds and banker's acceptances with domestic commercial banks, which may include the Trustee and its affiliates, which 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 - l" by Moody's and 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 -I +" by S &P and "P - I" by Moody's and which matures not more than 270 days after the date of purchase; (5) investments in a money market fund rated "AAAm" or "AAAm G" or better by S &P, including funds for which the Trustee or its affiliates provide investment advisory or other management services; (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 Revenue Fund established pursuant to Section 5.01. 7 DOCSOC/ ] 424659v5/022497 -0011 Rating. The term "Rating means any currently effective rating on the Bonds issued by a Rating Agency. Rating A eg ncies. The term "Rating Agencies" means S &P ; n i Ditch Ratings, Inc. Rebate Fund. The term "Rebate Fund" means the fund b} ':hat name established pursuant to Section 5.07. Record Date. The term "Record Date" means, with respect !o any Interest Payment Date, the fifteenth (15th) day of the calendar month preceding such Interest P� m<:nt 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. Refunded Obligations. The term "Refunded Obligations" means the 2001 Certificates. Registration Books. The term "Registration Books" means the records maintained by the Trustee for the registration of ownership and registration of transfer c f 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 se:retary 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. Revenue Fund. The term '-Revenue Fund" means the fund hN that name established pursuant to Section 5.01(c). S &P. The term "S &P" means Standard & Poor's ('c rporation, A Division of the McGraw -Hill Companies, Inc., or any successor thereto. Securities Depositories. The term "Securities Depositories" means The Depository Trust Company; and, in accordance with then current guidelines e` the Securities and Exchange Commission, such other addresses and /or such other securities oerositories as the Authority may designate in a Request of the Authority deliver to the Trustee. State. The term "State' means the State of California. 8 DOCSOC/ 1424659v5/022497 -001 I Supplemental Indenture. The term "Supplemental Indenture" means any indenture 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 applicable 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 Union Bank, N.A., Los Angeles, California, 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. 2001 Certificates. The term "2001 Certificates" means the $ original aggregate principal amount of water revenue refunding bonds executed and delivered on or about 2001 related to the 2001 Installment Purchase Agreement referenced in the recitals hereof. Value. The term "Value" which shall be determined as of the end of each month, means that the value of any investments shall be calculated as follows: (a) for the purpose of determining the amount of any fund, all Permitted Investments credited to such fund shall be valued at fair market value. The Trustee shall determine the fair market value based on accepted industry standards and from accepted industry providers. Accepted industry providers shall include, but are not limited to, pricing services provided by Financial Times Interactive Data Corporation, Merrill Lynch and Morgan Stanley Smith Barney. (b) As to certificates of deposit and bankers' acceptances: the` face amount thereof, plus accrued interest. (c) As to any investment not specified above: the value thereof established by prior agreement between the Authority and the Trustee. Section 1.02. Content of Certificates and Opinions. Every certificate or opinion provided for in the Indenture except the certificate of destruction 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 has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; (4) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such person, such provision has been complied with. Any such certificate or opinion made or given by an officer of the Authority may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an 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 9 DOC SOC/ 1424659v5/022497 -0011 such certificate or statement mad be based, as aforesaid, is enoncous. Any such certificate or opinion made or given by counsel or an 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 su:h counsel or 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 Accountant, as the case may be, need not certify to d of the matters required to be certified under any provision of the Indenture, but different ofticer:.:;ounsel or Accountants may certify to different matters, respectiN ely. Section 1.03. Interpretation. (a) Unless the context otherwise indicates, NNords 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 aid shall not affect the meaning, construction or effect hereof. (c) All references herein to "Articles," "Section" 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 2.01. Authorization of Bonds. 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 2010 Project and refinancing the Refunded Obligations. The Bonds are hereby designated the "East Valley Water District Financing Authority Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding). Series 2010 " in the aggregate principal amount of $[Bond Amount]. 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. pro,lisions 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. (a) The Bonds shall mature on October 1 in earl- 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: 10 DOCS OC/ 1424659v5/022497 -001 1 Maturity Date (October I) Principal Amount Interest Rate $ 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 March 15, 2011, 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 DOC SOC/ 1424659v5/022497 -001 1 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 trar,fer. the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bra ds of authorized denomination or denominations for a like series and aggregate principal amount of t to same maturity. The Trustee shall require the Bond Owner requesting such transfer to pay any tax in other governmental charge required to be paid with respect to :uch transfer. Following any n- nsfer of Bonds, the Trustee will cancel and destroy the Bonds it has received. 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 denominationz if 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 la K 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 it has received. Section 2.05. Registration Books. The Trustee will keep nr cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer o? o%% nership of the Bonds, which shall upon reasonable notice and a-% reasonable times be open to inspection during regular business hours by the Authority, the District and the Owners; and, upon pre >entation 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 hereinbefore 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 by 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 hereto. The Bonds shall be executed in the name and on behalf of the Authority with the manual or facsimile signature of its President, 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 c impressed on the Bonds. The Bonds shall then be delivered to the Trustee for authentication by t. 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 he authenticated, delivered and issued and, upon such authentication. delivery and issue, shall be as hinding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and also any Bonds may be signed and attested on behalf of the Authority by such persons as at the actual date of execution of such Bonds shall be the proper officers >f the Authority although at the nominal date of such Bonds any such person shall not have been sucL officer of the Authority. Only such of the Bonds as shall bear thereon a certificate cf authentication substantially in the form set forth in Exhibits A hereto, manually executed by the Tn. sice, shall be valid or obligatory for any purpose or entitled to the benefits of the Indenture, and such cenificate of or on behalf of the 12 DOCSOC/ I424659v5/022497 -001 I 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 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 the Authority redeems the Bonds in part; or (iv) the payment by the Depository or any Participant or any other person, of any amount 13 DOCSOC/ 1424659v5/022497 -001 1 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 13 )nd is registered in the Bond Registration Books as the absolute Owner of such book entry Bond fer the purpose of payment of principal of, premium and interest on such Bond, for the purpose of g. wing notices of redemption and other matters with respect to such Bond, for the purpose of register -t2 transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pa} a 1 principal of, premium, if any, and interest on the Bonds only to cn upon the order of the respecti %( Owner, as shown in the Bond Registration Books, or his respective attorney duly authorized in wriing, and all such payments shall be valid and effective to fully satisfy and discharge the Authorit%'s obligations with respect to payment of principal of, premium, if any, and interest on the Bonds t) 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, p emium, 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 and the Trustee shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Authority or the Trustee any obligation whatsoever with respect to persons having interests in such book entr; Bonds other than the Owners, as shown on the Bond Registration Books. By executing a Letter of Representations, the Trustee shall agree to take all action necessary at all times so that the Trustee v ill be in compliance with all representations of the Trustee in such Letter of Representations. It addition to the execution and delivery of a Letter of Representations, the Authority and the Trustee 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'i) -he 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 :n 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 3egistration Books in the name of the Nominee, but shall be registered in whatever name or nan es 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 provision 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 Bond and all notices with respect to such Bond shall )e 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. 14 DOCSOC/ 1424659v5/022497 -001 1 (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) ( "Substitute 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 not have responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Bonds. 15 DOCSOC/ 1424659x5 /022497 -0011 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 DT: c! its successor (or Substitute Depository or its successor), except to the Owner of any Boucs. and the Trustee may rely conclusively on its records as to the identity of the Owners of the Bonds. 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 $[Bond Amount]. Section 3.02. Application of Proceeds of the Bonds. The rroceeds received from the sale of the Bonds in the amount of $ shall be deposited it trust with the Trustee, who shall apply such proceeds as follows: (a) The Trustee shall transfer to the Escrow Agert the amount of $ from the proceeds of the Bonds for deposit in the Escrow Fund. (b) The Trustee shall deposit the amount of $__- _ from the proceeds of the Bonds in the Costs of Issuance Fund. (c) The Trustee shall transfer the amount of $ from the proceeds of the Bonds to the District for deposit by the District into the Acqui;inon Fund to finance a portion of the costs of the 2010 Project. Section 3.03. Establishment and Application of Costs of issuance 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 obli :4ation was incurred, that such payment is proper charge against said fund and that payment for su ,,:h charge has not previously been made. On the six month anniversary of the issuance of the Bonds. er upon the earlier Request of the Authority, all amounts remaining in the Costs of Issuance Fund sha11 be transferred by the Trustee to the Authority for deposit in the Interest Account. Investment earn n,as on amounts on deposit in the Cost of Issuance Fund shall be applied in accordance with Section 5J.6 hereof. Section 3.04. 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 h^ any proceedings taken by the Authority, the District or the Trustee with respect to or in connectio 1 with the Installment Purchase Agreement. The recital contained in the Bonds that the same are isued pursuant to the Constitution and laws of the State shall be conclusive evidence of the validay and of compliance with the provisions of law in their issuance. 16 DOC S OC/ 1424659v5 /022497 -001 1 ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption. (a) The Bonds with stated maturities on or after October 1, 2021, shall be subject to redemption prior to their respective stated maturities, 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, on or after October 1, 2020, at a price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. (b) The Bonds with stated maturities on October 1, 20 are subject to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 1, 20 , 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: Redemption Date Principal (October I) Amount * Final Maturity. 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 thirty (30) days before any Redemption Date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services; provided that, in the case of notice of optional redemption not related to an advance or current refunding, such notice may be given only if sufficient funds have been deposited with the Trustee to pay the applicable Redemption Price of the Bonds to be redeemed, provided that such notice may be cancelled by the Authority upon written request delivered to the Trustee not less than five (5) days prior to such Redemption Date. Each notice of redemption shall state the date of notice, the redemption date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all Bonds of any such maturity are to be redeemed, the serial numbers of the Bonds of such maturity to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, have been called for redemption 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 17 DOCSOC/ 1424659v5/022497-0011 said Bonds or parts thereof 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 (pro -ided that moneys for redemption have been deposited with the Trustee) from and after such redernftion date interest thereon shall cease to accrue, and shall require .hat such Bonds be then sunende -ec. 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 shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Autl ority. With respect to any notice of optional redemption of Bonds. such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium. if' tr v. 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 n( -t so received, the redemption shall not be made, and the Trustee shall within a reasonable time th:�reatter give notice, in the manner in which the notice of redemption ,vas given, that such moneys were :lo, 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 auth )rized denominations equal in aggregate principal amount to the unredeemed portion of the Boncs 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, togelher with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so ca1ed 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 T ustee 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 provisions of this .:article shall be canceled upon surrender thereof. ARTICLE V REVENUES, FUNDS AND ACCOU`N " -S: PAYMENT OF PRINCIPAL AND INTEF:EST Section 5.01. Pledge and Assignment; Revenue 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 established purscart 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 them terms and the provisions of the 18 DOCSOC/ 1424659v5/022497 -001 I Indenture subject only to the provisions of the Indenture permitting the terms and conditions set forth herein. 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. (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 Installment Payments payable by the District 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 Revenue Fund, which the Trustee covenants to maintain and hold in trust separate and apart from other funds held by it so long as any Installment Payments remain unpaid. Except as directed in Section 5.06 and 5.09, all Authority Revenues shall be promptly deposited by the Trustee upon receipt thereof into the Revenue 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 Revenue Fund. Section 5.02. Allocation of Authority Revenues. The Trustee shall transfer from the Revenue 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 third 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 third 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). 19 DOCS OC/ 1424659v5 /022497 -001 I Section 5.04. Application; of Principal Account. All amot.nts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal _ Mount of the Bonds at maturity, mandatory sinking fund redemptio::, purchase or acceleration; prcrided, 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 nrivate 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 Recuest 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 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 4.01; provided, however, that at any time prior to selection for redemptio 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 ( exclusiv° 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 established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments. 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 (which directions shall be promptly confirmed to the Trustee in writing) In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (13)(5) of the definition thereof; provided, how eve', that any such investment shall be made by the Trustee only if, prior to the date on which suer investment is to be made, the Trustee shall have received a written direction from the District specif,ing a specific money market fund and, if no such written direction from the District is so recen ed, 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 shall be deposited in the Interest Account unless otherwise provided in the Indenture. For purposes of acquir-)g 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 or an affiliate 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 .is 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 spsc fically waives receipt of such confirmations to the extent permitted by law. The Trustee will fiunish the Authority periodic cash transaction statements which include detail for all investment tra tsactions made by the Trustee hereunder. 20 DOCSOC/ 1424659v5/022497 -001 1 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 Authority shall invest, or cause to be invested, all monies in any fund or accounts established with the Trustee as provided in the Tax Certificate. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. In making any valuations of investments hereunder, the Trustee may utilize and rely on computerized securities pricing services that may be available to the Trustee, including those available through the Trustee accounting system. Section 5.07. Rebate Fund. (a) Establishment. The Trustee shall establish a separate fund separate accounts for the Bonds designated the "Rebate Fund." 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 with respect to the Bonds will not be adversely affected if such requirements are not satisfied. Notwithstanding anything to the contrary contained 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; and (ii) shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate; and (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(f)(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(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the "1 V2% 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 written 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 written 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 21 DOCSOC/ 1424659v5/022497 -0011 subsection (a). In the event that immediately following the trarsfer 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 written Request of the Authority, the — nistee shall withdraw the excess from the Rebate Fund and then credit the excess to the Revenue Fund (iii) Payment to the Treasury. The Tnt,tee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Rebate Account: (A) Not later than 60 days after :he 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; anti (B) Not later than 60 days after the )ayment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of--he end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage. -"mputed 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 paymery 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 Ser ice 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 En }thing 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 Outstandine. On the date on which all Bonds shall be retired hereunder or provision mad° 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 ? rustee 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 Pavment. The Authority shall punctually pay or cause to be paid the principal and interest to become due in respect of all the Bonds. in ic- conformity with the terms of the Bonds and of the Indenture. according to the true intent and neaning thereof, but only out of Authority Revenues and other assets pledged for such payment as provided in the Indenture. 22 DOCSOC/ I424659v5/022497 -001 I 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 Joint Exercise of Powers 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 purported to be pledged and assigned under the Indenture in the manner and to the extent 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 made by it relating to the proceeds of Bonds, the Authority Revenues and all funds and accounts established by it pursuant to the Indenture. Such books of record and account shall be available for inspection by the Authority and the District upon reasonable prior notice during business hours and under reasonable circumstances. Section 6.06. Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of the portion of 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 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 Activitv. The Authority will take no action or refrain from taking any action or make any 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; 23 DOCSOC/ 142465 9x5/022497 -001 I (b) Arbitrage The Authority will make no use of' ht proceeds of the Bonds or of any other amounts or property. regardless of the source, or take amv action or refrain from taking any action which will cause the Rends to be "arbitrage bonds" witl in the meaning of Section 148 of the Code; (c) Federal Guarantee. The Authority will make no use of the proceeds of the Bonds or take or omit to take anN action that would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (d) Information Reporting. The Authority wi.1 take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code 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, or take a i) action or refrain from taking any action that would cause either the Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the Authority takes all necess< r,, action to assure compliance with the requirements of Section 149(8) of the Code to maintain he exclusion from gross income of interest on the Bonds for federal income tax purposes; and (f) Miscellaneous. The Authority will take no action or refrain from taking any action inconsistent with its expectations stated in that certain Tax Certificate executed by the Authority in connection with the issuance of the Bonds and wil comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the Authority from causing the Trustee to issue revenue bonds or to execute and deliver contracts payable on a parity with the Bands, the interest with respect to which has been determined by Bond Counsel to be subject to federal income taxation. Section 6.07. Payments Under Installment Purchase Agreement. The Authority shall promptly collect all Installment Payments due from the District purstart 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 District thereunder. The Authority shall not enter into any amendments to the Installment Purchase Agreement except as permitted therein. The Trustee shall give written consen 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, modificat on or termination. Section 6.08. Waiver of Laws. The Authority shall not at 2nd 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 _nd agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any suc - a., or laws is hereby expressly waived by the Authority to the exten permitted by law. 24 DOCSOC/ t 424659v5/022497 -001 1 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 2010 Project shall be taken by eminent domain proceedings (or sold to a government entity threatening to exercise the power of eminent domain), the Net Proceeds therefrom shall be applied in the manner specified in Section 6.15 of the Installment Purchase Agreement. [DISCUSS] 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 if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property. 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 District, 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 25 DOC SOC/ 1424659v5/022497 -001 I and shall be immediately due and payable, anything in the Indenture < r in the Bonds contained to the contrary notwithstanding. Nothing contained in the Indenture shall permit or require ue Trustee or the Authority to accelerate payments due under the It Purchase Agreement i f the District, which is a party to such Installment Purchase Agreement. is not in default of its obligatioi :hereunder. Any such declaration is subject to the condition that if at any tune after such declaration and before any judgment or decree for the payment of the moneys du-- shall have been obtained or entered, the Authority or the District shall deposit with the Truster, a �,um sufficient to pay all the principal of and installments of interest on the Bonds payment of e,hicl; is overdue, with interest on such overdue principal at the rate b-.a-ne by the respective Bonds to it e 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 payrrent of principal of and interes� in the Bonds 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 ha r been made therefor, then, and in every such case the Trustee shall on behalf of the Owners of al: cf the Bonds, rescind and annul such declaration and its consequences and waive such Event of Del" ult; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall 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 and any other funds then held or thereafter received by the Trustee under any of the provisions of -.hc Indenture (other than amounts held in the Rebate Fund) shall be applied by the Trustee as follows and in the following order: (i) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and pa }ment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursement:, of its counsel) incurred in and about the performance of its powers and duties under the Indenture: (ii) To the payment of the principal of anc interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherw?S� 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 entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount 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 --t 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 available shall not be sufficient to pay in full all the Bond,,, 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 anv discrimination or preference: and 26 DOC SOC/ 1424659v5/022497 -0011 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 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 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 Joint Exercise of Powers 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 inconsistent with such written request shall 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. 27 DOCS OC/ 1424659v5/022497 -0011 Such notification, request, tender of indemnity and refusal of omission are hereby declared, in every case, to be conditions precedent to the exercise by any O.vner 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 his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of Bonds. c r to enforce any right under the Bonds, the Indenture, the Installment Purchase Agreement, the Joirt Exercise of Powers Agreement or other applicable law with respect to the Bonds, except in the manrer herein provided, and that all proceedings at law or in equity to enforce any such right shall be inst Aned, had and maintained in the manner herein provided and for the benefit and protection of all Cvr-ters of the Outstanding Bonds, subject to the provisions of the Indenture. Section 7.07. Absolute Obligation of the Authority. Nothing n this Section 7.07 or in any other provision of the Indenture or in the Bonds contained shall affec or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal )f 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 exc usive of any other remedy or remedies, and each and every such remedy, to the extent permitted b� la A , 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 occurren ;e 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 c menants or duties shall be read into the Indenture against the Trustee. The Trustee shall, durint 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 cruse under the circumstanc. es in the conduct of his own affair,'. (b) The Authority may remove the Trustee at any time, unless an Event of Default shall have occurred and then be continuing, and shall rcr ove the Trustee if at any time requested to do so by an instrument or concurrent instruments in wri t nc signed by the Owners of not less than a majority in aggregate principal amount of the Bonds thee. Outstanding (or their attorneys duly authorized in writing) or if at anv time the Trustee shall cease a:, he eligible in accordance with 28 DOC SOC/ 1424659v5/022497-001 1 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 and thereupon shall promptly appoint a successor Trustee by an instrument in writing. (c) The Trustee may at any time resign by giving 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 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 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 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 appointed under the provisions 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 above referred to, then 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 29 DOCSOC/ 1424659v5/022497 -0011 accordance with the provisions of this subsection (e), the Trustee shad resign immediately in the manner and with the effect specified in this Section. Section 8.02. Merger or Consolidation. Any trust compan✓. banking association or bank into which the Trustee may be mer<ed or converted or with which it may be consolidated or any trust company, banking association or bank resulting from any merger. _onversion or consolidation to which it shall be a party or any trust company, banking association .,r bank to which the Trustee may sell or transfer all or substantially all of its corporate trust busine -s. provided such trust company, banking association or bank shall be eligible under subsection (e} o" Section 8.01, shall be the successor to such Trustee, without the execution or filing of any panel 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 contained 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 c f the Indenture, the Bonds, the Installment Purchase Agreement. nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respectrvo 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, e,ccpt 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 rc 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, whethe or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of Judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee %a as 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 .irw 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 ,r any other event which, with the passage of time, the giving of notice. or both, would constitute m Event of Default hereunder or under the Installment Purchase Agreement unless and until a Respon;ible 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 tot less than twenty five percent 30 DOC SOC/ 1424659v5/022497-001 I (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 District 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 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 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 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 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. 0) The immunities 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 ( "unavoidable delay ") in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the 2010 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. (m) The Trustee agrees to accept and act upon instructions or directions pursuant to the Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Trustee shall have received an incumbency 31 DOC SOC/ 142465 9v5/022497-001 1 certificate listing persons designated to give such instructions or direc *ions and containing specimen signatures of such designated persons, which such incumbency cenificate shall be amended and replaced whenever a person is to be added or deleted from the lists 1:. If the Authority elects to give the Trustee e -mail or facsimile instructions (or instructions by a s :-ni' a electronic method) and the Trustee in its discretion elects to act upon such instructions. the "- rustee`s understanding of such instructions shall be deemed controlling. The Trustee shall not he Fable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance iipon and compliance with such instructions notwithstanding such : nstructions conflict or are incons st °nt with a subsequent written instruction. The Authority agrees to assume all risks arising ou of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of irterception and misuse by third parties. (n) The Trustee shall not be concerned with rt accountable to anyone for the subsequent use or application of any moneys which shall be releasec or withdrawn in accordance with the provisions hereof. (o) The Trustee shall be under no obligation I) exercise any of the rights or powers vested in it hereby at the request, order or direction of ant of the Owners pursuant to the provisions hereof unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be in w red therein or thereby. (p) 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 oil ei f7an its negligence or willful misconduct. (q) The Trustee shall have no responsibility car liability with respect to any information, statements or recital in any offering memorandum or :)1her disclosure material prepared or distributed with respect to the issuance of the Bonds. 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. w th regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee 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 upar it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or estv.1,11 ished prior to taking or suffering any action hereunder, such matter (unless other evidence in resne-t thereof be herein specifically prescribed) 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 prc i sions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, 32 DOCSOC/ 1424659v5/022497 -001 1 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 received by the Trustee under the provisions of the Indenture shall be retained in their respective possession and shall be subject at all reasonable times to the inspection of the Authority, the District 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 all reasonable compensation for all services 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 and of the Owners of the Bonds and of 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 disqualified as provided in Section 11.09 hereof, shall have been filed with the Trustee. No such modification or amendment shall: (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 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 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 33 DOCS OC/ 1424659v5 /022497 -001 I Supplemental Indenture, to each Rating Agency and the Owner, ,f' 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 sac t 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 Jrte to time and at any time by a Supplemental Indenture, which the .Authority and the Trustee may e uer into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bold Counsel to the effect that the provisions of such Supplemental Indenture shall not materially ad•,:crsely affect the interests of the Owners of the Outstanding Bonds, including, without limitaticr.. fbr any one or more of the following purposes: (1) 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 surivnder 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 defecti,c 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 coed tions 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 n(d be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) cf this Section which materially adversely affects the Trustee's own rights, duties or immunities undo 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 that the adoption of such Supplemental Indenture will not. in ar( (if' itself, adversely affect the exclusion of interest on the Bonds from federal income taxation and from state income taxation. Section 9.02. Effect of Supplemental Indenture. Upon the e ),ecution of any Supplemental Indenture pursuant to this Article. the Indenture shall be deemec t.) ne 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 de -med to be part of the terms and conditions of the Indenture for any and all purposes. 34 DOCSOC/ 1424659v5/022497 -001 1 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 and the Trustee 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 and the Trustee, to any modification or amendment 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 him. ARTICLE X DEFEASANCE Section 10.01. 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. If the Authority shall also pay or cause to be paid all other sums 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 made 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. 35 DOCSOC/1424659v5/022497 -0011 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 amour? (Fs 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 ha\ e been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, tl-et all liability of the Authority in respect of such Bonds shall cease, terminate and be completely dischinged, and the Owners thereof shall thereafter be entitled only to payment out of such money .e securities deposited with the Trustee as aforesaid for their payment, subject however, to the prosi si ins of Section 10.04. The Authority may at any time surrender to the Trustee `or cancellation by it any Bonds previously issued and delivered, which the Authority may have accuired 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 ^eposited with or held in trust by he Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money c- , ecurities 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 he: (a) lawful money of the United States of Amerca in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturay, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of w lnch 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 Accountant filed with the Authority and the 'I nrstee, provide money 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 redeemec. 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 been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the gig i tg of such notice; provided, in each case, that: (i) the Trustee shall have been irrevocabl,r instructed (by the terms of the Indenture or by Request of the .Authority) to apply such mone} to he 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 Authori v and the Trustee to the effect that such Bonds have been discharged in accordance with the inde iture (which opinion may rely upon and assume the accuracy of the Accountant's opinion referred 1 � above). Section 10.04. Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining 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 It(-, d at such date, or two (2) years after the date of deposit of such moneys if deposited after said data when all of the Bonds became due and payable, shall be repaid to the Authority free from the tru,ts c: eared by the Indenture upon 36 DOC SOC/ 1424659v5/022497-001 1 receipt of an indemnification agreement 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 11.01. 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 in the Indenture mentioned, 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 herein. The District shall have no liability or obligation herein except with respect to 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 the covenants and agreements in the Indenture contained 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 expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the District 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 District 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 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. 37 DOCSOC/1424659v5/022497 -0011 Section 11.05. Destruction of Bonds. Whenever in the Indc pure provision is made for the cancellation by the Trustee and the delivery to the Authority of anv Fronds, the Trustee shall destroy such Bonds as may be allowed by law. and deliver a certificate of such destruction to the Authority. Section 11.06. Severability of Invalid Provisions. If any e ne or more of the provisions contained in the Indenture or in -lie Bonds shall for any reason hr held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shad': b : deemed severable from the remaining provisions contained in the Indenture and such invalidov ]legality or unenforceability shall not affect any other provision of the Indenture, and the Indentwe 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 n try 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, sewer --es, 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 neing sent by telex or by being deposited, first class mail, postage prepaid, in a post office letter bex. addressed, as the case may be, to the Authority, c/o East Valley 'Water District, 3654 E. Highlanc avenue, Suite 18, Highland, California 92346, Attention: Chief Financial Officer (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 or fax transmission to (213) 972 -5694. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee shall not be deemed to have received, and shall not be ha-fle 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 required or permitted by the Indenture to be signed and executed by Bond Owners may be in any number of concurrent insuvments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents dtdv 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 delta cry, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trust -;e 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 notar} public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgmen.s of deeds, certifying that the person signing such request, consent or other instrument acknowledgcd 'o him the execution thereof, or by an affidavit of a witness of such execution duly sworn to bef 'c re 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 issu-d in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done b­ '. e Trustee or the Authority in accordance therewith or reliance thereon. 38 DOCSOC/ 1424659v5/022497 -001 t 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 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 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 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 IL 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 of registered 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 IL 11. Funds and Accounts. Any fund or account 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 District shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent, 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. 39 DOC SOC/ 1424659v5/022497 -0011 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 notic° of each amendment to the Indentu °e and a copy thereof at least 15 days in advance of its execution. 40 DOCSOC/ 1424659v5/022497 -0011 IN WITNESS WHEREOF, the Authority has caused the Indenture to be signed in its name by its President 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 officers thereunto duly authorized, all as of the day and year first above written. Attest: Secretary of the Board EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Bv. Its: President of the Board UNION BANK, N.A., as Trustee Rv Its: Authorized Officer S -1 DOCSOC/ 1 394495/200048-0001 DOCSOC/ 1424659v5/022497-001 1 No. EXHIBIT A FORM OF 2010 BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZFD REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PA }" -)ENT, AND ANY BOND ISSUED IS REGISTERED It THE NAME OF CEDE & CO. OR LN SUCH OTHER NAME AS IS REQUESTED BY AA' 4UTHORIZED REPRESENTATIVI OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF 7HE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR YAL UE OR OTHERWISE BY OR TO ANYPERSONIS WRONGFUL INASMUCHAS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNITED STATES OF AMERICA STATE OF CALIFORNIA K EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BOND (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 INTEREST RATE MATURITY DATE ORIGINAL N';UE DATE CUSIP % October 1, . 2010 REGISTERED OWNER CEDE & CO. PRINCIPAL AMOUNT: DOLLARS The EAST VALLEY WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers agency duly organized and existing under the laws of the State of California (the "Authority"), for value received. hereby promises to pay to the Rep tered 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 there -ar 'n like lawful money from the interest payment date next preceding the date of authentication of th s 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 follox+ing interest payment date, in which event it shall bear interest firm such interest payment date. cr (ii) this Bond is authenticated on or before March 15, 2011, in which event it shall bear interest iiom the Original Issue Date identified above; provided, however, that if as of the date of authent ication 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 Bord ). at the Interest Rate per annum specified above, payable semiannually on October 1 and April 1 it ;-ach year, commencing April 1, A -1 DOCSOC/ 1424659v5/022497 -001 1 2011, 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 surrender hereof at the Office (as defined in the hereinafter described Indenture) of Union Bank, N.A., 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 ($1,000,000) or more in principal amount, such payment may, at such registered owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such registered owner prior to the fifteenth (15th) day of the month preceding such interest payment date). This Bond is not a debt of the members of the Authority, the State of California, or any of its political subdivisions (other than the Authority), and neither the members of the Authority or said State, nor any of its political subdivisions (other than the Authority), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Authority Revenues (as such term is defined in the Indenture of Trust, dated as of September 1, 2010 (the `Indenture "), by and between the Authority and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the District to make payments in accordance with the Installment Purchase Agreement is a limited obligation of the District as set forth in the Installment Purchase Agreement (as such terms are defined in the Indenture) and the District shall have no liability or obligation in connection herewith except with respect to such Installment Payments to be made pursuant to the Installment Purchase Agreement. The Bonds do not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the Authority designated as the "East Valley Water District Financing Authority Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding), Series 2010 " (the "Bonds "), of an aggregate principal amount of Seventeen Million Four Hundred Eighty Five Thousand Dollars ($[Bond Amount]), 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 as of August 20, 2010, by and between the District and California Municipal Finance Authority, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time (the "Joint Exercise of Powers Agreement ") 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 and refinance certain public capital improvements and related costs, as more fully described in the Indenture. 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 A -2 DOCSOC/ 1424659v5/022497 -0011 Authority, and are payable from. and are secured by a pledge and lien on the Authority Revenues, including all Installment Payments received from the District by Authority or the Trustee, and any other amounts on deposit in certain funds and accounts creates under the Indenture. As and to the extent set forth in the Indenture. all of the Authority Revenue= are -exclusively and irrevocably pledged in accordance with the terns hereof and the provisions of 'lie 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 Auihor:r 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 ,f 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 shall: (i) extend the fixed maturity of any Bonds, or reduce the amount of principal there)' 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 co,;s.-m of the Owners of which is required to affect any such modification or amendment, or permit he creation of any lien on the Authority Revenues and other assets pledged under the Indenture prier ±e 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 o her 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. ofthe 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 terns 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 a&c sely affect the interests of the Owners of the Outstanding Bonds. The Bonds with stated maturities on or after October I, 2021 shall be subject to redemption prior to their respective stated maturities. as a whole or in pan on any date as directed by the Authority and by lot within each maturity in integral multiples of $5.000, on or after October 1, 2020, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. The Bonds with stated maturities on October 1, 20 are <uhject to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 1 . 20, 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 s< hedule: Redemption Date prin cipal (October I) Amount S * Final Maturity. A -3 DOCSOC/ 1424659v5/022497 -0011 As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than thirty (30) 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. It is hereby certified that all of the things, conditions and acts 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 Joint Exercise of Powers 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. A -4 DOCSOC/ 1424659v5/022497 -0011 IN WITNESS WHEREOF. the Authority has caused this B )nd to be executed in its name and on its behalf with the manual er facsimile signature of its Presidem and attested to by the manual or facsimile signature of its Secretary, all as of this _ day of September, 2010. Attest: Secretary of the Board Dated: EAST VALLEY WA I ER DISTRICT FINANCING AUTHORITY By: Its: President of the B )aid [FORM OF TRUSTEE'S CERTIFICATE OF AUTF- FN'TICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within - mentioned It denture. UNION BANK, N.A.. as Trustee By - - -- Its: Authorized Signatory A -5 DOCSOC/ 1424659v5/022497 -001 1 [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: 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. Signature Guaranteed: Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. A -6 D O C S OC/ 1424659v5/022497-001 I OFFICIAL NOTICE OF SALE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 Date of Sale: Wednesday, September 15, 2010 10:00 a.m., Pacific Standard Time BIDS TO BE RECEIVED VIA PARITY For further information, please contact: Thomas DeMars, Principal (949) 660 -7316 tdemars(a ieldman.com Joshua Lentz, Assistant Vice President (949) 660 -7320 ilentz(a,fieldman.com Fieldman, Rolapp & Associates 19900 MacArthur Boulevard, Suite 1100 Irvine, California 92612 Fax: (949) 474-8773 A copy of the Preliminary Official Statement may be obtained at: www.ficidman.com /offerings.asp ' Preliminary, subject to change. OFFICIAL NOTICE OF SALE S` EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 Date of Sale: Wednesday, September 15, 2010 10:00 a.m., Pacific Standard Time IDS TO BE RECEIVED VIA PARITY For further information, please contact: Thomas DeMars, Principal (949) 660 -7316 tdemars(a)fieldman.com Joshua Lentz, Assistant Vice President (949) 660 -7320 ilentz"eldman.com Fieldman, Rolapp & Associates 19900 MacArthur Boulevard, Suite 1100 Irvine, California 92612 Fax: (949) 474 -8773 A copy of the Preliminary Official Statement may be obtained at: www.fieldman.com /offerinps.asi) Preliminary, subject to change. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 NOTICE IS HEREBY GIVEN that all -or -none bids will 1)e received by a representative of the EAST VALLEY WATFR DISTRICT (herein, the "D st et "), for the purchase of $ * par value bonds designated "EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPOVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010" (herein, the "Bonds "). All electronic bids must be submitted via Pari(yK the electronic bidding system, u -1 to the time and at the place specified as follows: TIME: 10:00 a.m., Pacific Standard Time DATE: Wednesday, September 15, 2 )10 provided, however, that without further advertising, and so long as an electronic bid has not been accepted by the District, electronic bids via Parity® will be accented at such time and place on September 16, 2010 and each succeeding Business Day thereafter until the earlier of September 28, 2010 or receipt by the District of an acceptable electronic bid for the Bonds. No bid will be entertained at any price less than 1.5% of the par value of the Bonds, or that produces less than $ in proceeds at settlement, not including accrued interest, if any, to the date of settlement (in each case, inclusive of thr costs of issuing the Bonds payable by the successful bidder at closing). The terms of sale further allow for the adjustment, both by maturity and in total, of the amount of Ronds offered. See "TERMS OF SALE" herein. Please note that the Authority and the District reserve the right to cancel or reschedule the sale of the Bonds upon notice given through Thomson Municipal News h� 5:00 p.m., California time the day prior to the day bids are scheduled to be received, and if the st,le is rescheduled, notice of the new sale date and time, if any, will be given through Thomson .Vu iicioal News no later than 5:00 p.m. California time the day prior to the new day bids are to be received, and bids will be received in the manner set forth above at the rescheduled date and -lime as the Authority and the District may determine. DESCRIPTION OF THE BOND' ISSUE. The Bonds will be issued in the original principal amount of $ *, and bear interest from the date of their issue, in full book -entry only fiom in denominations of $5,000 and any integral multiple thereof. maturing as shown belo\N wider the caption "MATURITY SCHEDULE." The Bonds are subject to optional Redem )tion and special mandatory ' Preliminary, subject to change. Page 1 of 244 Redemption prior to maturity as shown below under the caption "OPTIONAL REDEMPTION." Prospective bidders should note that the terms of sale permit adjustment of individual maturities. See "ADJUSTMENTS OF PRINCIPAL AMOUNTS" below. Reference is made to the Preliminary Official Statement prepared in connection with the offering of the Bonds for a complete description of the Bonds. INTEREST RATE. Interest will be calculated on the basis of a 360 -day year composed of twelve 30 -day months. The Bonds shall bear interest from their date at a rate or rates to be determined at the sale thereof, but not to exceed six and half percent (6.25%) per annum. Interest on the Bonds is payable semiannually on April 1 and October 1 in each year (the "Interest Payment Dates "); commencing April 1, 2011. Bidders may specify any number of separate interest rates, and any rate may be repeated as often as desired; provided, however, that (i) each interest rate specified must be in a multiple of 1/20 of 1% or 1/8 of 1 %; (ii) a zero rate of interest cannot be specified; (iii) each Bond shall bear interest from its dated date to its stated maturity date at the interest rate specified in the bid; (iv) all Bonds of the same maturity date shall bear the same rate of interest; and (v) no bid will be accepted which provides for the cancellation and surrender of any interest payment or for the waiver of interest or other concession by the bidder as a substitute for payment in full of the purchase price of the Bonds. Bids that do not conform to the terms of this paragraph will be rejected. PAYMENT. Principal of and interest on the Bonds will be payable by Union Bank, N.A. the trustee for the Bonds (herein, the "Trustee "), in lawful money through the facilities of The Depository Trust Company, or its nominee. AUTHORITY FOR ISSUANCE AND PURPOSE. The Bonds are being issued by the East Valley Water District Financing Authority (the "Authority ") pursuant to an Indenture of Trust, dated as of September 1, 2010, by and between the Trustee and the Authority, and pursuant to the laws of the State of California. The Bonds are a special obligation of the Authority payable solely from Net Revenues of the Water System of the District consisting of all payments ( "2010 Installment Payments ") required to be paid by the District under the Installment Purchase Agreement (the "2010 Installment Purchase Agreement "), by and between the Authority and the District. The proceeds of the Bonds will be used to (i) finance capital improvements to the District's Water System, (ii) refund a portion of the District's Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, (iii) fund interest due through and including [October 1, 2011], and (iv) pay certain costs incurred in connection with the issuance of the Bonds. DENOMINATIONS. The Bonds will be issued and delivered as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereof. DATE OF BONDS. The Bonds will be dated their date of delivery (the "Closing Date "), which is anticipated to be on or about September 28, 2010. MATURITY SCHEDULE. The Bonds will mature, or be subject to mandatory sinking fund Redemption, on October 1 in each of the years, and in the amounts, as set forth in the Page 2 of 1 I following table. The final principal amount of the Bonds, and the final amount of each maturity of the Bonds, is subject to increase or reduction as descnhed below under the heading "ADJUSTMENT OF PRINCIPAL AMOUNTS." Each bidder must specify in its bid whether, for any particular year, the Bonds will mature or, alternatively, b subject to mandatory sinking fund Redemption in such year. Maturity Maturity (October 1) P_ rincipal Amount(') October_I Principal Amount ttt 2011 2026 2012 2027 2013 2028 2014 2029 2015 2030 2016 2031 2017 2032 2018 2033 2019 2034 2020 2035 2021 2036 2022 2037 2023 2038 2024 2039 2025 2040 "' Preliminary, subject to change. See also "Adjustment of Pr ncipal Amounts" herein ADJUSTMENT OF PRINCIPAL AMOUNTS. The principal amounts set forth in this Notice of Sale for the Bonds reflect certain estimates of the Distrct and its financial advisor with respect to the likely interest rates of a winning bid and the premirm'discount specified in such a winning bid described below under the caption "TERMS OF SALE." The total principal amount of the Bonds and the principal amounts payable in each of the years set forth above are subject to adjustment, in $5,000 increments, *.n reflect the actual interest rates and any premium /discount contained in the winning bid, and to maintain substantially level annual debt service payments on the Bonds. The Authority -eseties the right to increase or decrease the principal amount of any maturity of the Bonds (or. in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking find Redemption on October 1 in any year) in order to achieve such intention. The winning bidder will be notified of any adjustment in principal amounts as soon as practical. Adjustment :)f the principal amounts will not affect the determination of the winning bid. A successful bid('..er may not withdraw its bid as a result of any changes made within these limits. OPTIONAL REDEMPTION. The Bonds maturing on or after [October 1, 2021] are subject to Redemption prior to maturity at the option of the District, among maturities as directed by the District and by lot within maturity in whole at any time or in part, on any date on or after [October 1, 2020] in integral multiples of $5,000 from any source of funds, upon notice as described in the Official Statement, at a Redemption price equal t i 1he principal amount thereof, without premium, together with interest accrued to such date fixed fi-r Redemption. Page 3 of I I MANDATORY REDEMPTION. Any bidder may, at its option, specify that one or more maturities of the Bonds will consist of term bonds which are subject to mandatory sinking fund Redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder; provided that no Bond may have sinking fund payments prior to October 1, 2020. In the event that the bid of the successful bidder specifies that any maturity of Bonds will be term bonds, such term bonds will be subject to mandatory sinking fund Redemption on October 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading "THE BONDS — Redemption of Bonds — Mandatory Redemption ", at a Redemption price equal to the principal amount thereof to be paid together with accrued interest thereon to the Redemption date, without premium. BOOK ENTRY SYSTEM. The Bonds when issued will be registered in the name of CEDE & CO., as nominee of The Depository Trust Company, New York, New York ( "DTC "), and will be initially issued as one bond for each of the maturities of the Bonds. DTC will be appointed depository for the Bonds and registered ownership of the Bonds may not thereafter be transferred except as provided in the procedures, rules and requirements established by DTC. The Trustee will pay payments of principal and interest to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. SECURITY. Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues (the "Authority Revenues "), which consist of Installment Payments to be made by the District under the Installment Purchase Agreement, and from 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 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 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 Installment Payments and its rights as may be necessary to enforce payment of the Installment Payments when due. i 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 subject only to the provisions of the Indenture permitting the terms and conditions set forth therein. 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 District to pay Installment Payments is payable from Net Revenues on a parity with an installment sale agreement of the District dated July 13, 2004 in the outstanding aggregate principal amount of $8,067,777.08, and an installment sale agreement dated January Page 4 of I I 10, 2006 in the outstanding aggregate principal amount of %5.109.853.96. For definitions of certain capitalized terms used in this paragraph and not otherU ise defined and for more information regarding the security for the Bonds, see the caption of the Preliminary Official Statement entitled "SECURITY FOR THE BONDS" and APF�?,�DIX A— "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ". TAX EXEMPTION. In the opinion of Stradling Yocca Carson & Rauth, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax pu-p )ses. Interest on the Bonds is not a specific preference item for purposes of the federal indi,, dual or corporate alternative minimum taxes, nor, as to corporations is the interest included a an adjustment in calculating corporate alternative minimum taxable income. In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation by the State of California. Bidders are referred to the Preliminary Official Statement for a description of 'he. proposed opinion of Bond Counsel. NO RESERVE FUND. Neither the Installment Purchase Agreement nor the Indenture establishes a reserve fund for the Bonds. DELIVERY OF SECURITIES. Delivery of the Bonds will be made to the successful bidder through the facilities of The Depository Trust Company it New York, New York (or at any other mutually agreeable location) on or about September 28, 2010. Payment must be made in cash, Federal Reserve Bank funds, or other immediately available funds. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEE. Attention of bidders is directed to California Government Code Section 8856, which provides that the lead underwriter or the purchaser of the Bonds will be :harged the California Debt and Investment Advisory Commission fee. QUALIFICATION FOR SALE; BLUE SKY. Compliance ,vi *,h blue sky laws shall be the sole responsibility of the successful bidder. The District will furrish such information and take such action not inconsistent with law as the successful bidder mad request and the District shall deem necessary or appropriate to qualify the Bonds for offer and ; tle under the blue sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as may be designated by the successful bidder; provided. towever, that the District shall not execute a general or special consent to service of process or qualify to do business in connection with such qualification or determination in any jurisdiction. The successful bidder will not offer to sell or solicit any offer to buy, the Bonds in any jt risdiction where it is unlawful for such bidder to make such offer. solicitation or sale, and the bidder shall comply with the blue sky and other securities laws and regulations of the states and jurisdictions in which the bidder sells the Bonds. CUSIP NUMBERS. It is anticipated that CUSIP numbers wi l be printed on the Bonds, but neither the failure to print such numbers on any Bonds nor any error with respect thereto shall constitute cause for failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accordance with the terms thereof. All expenses it relation to the printing of CUSIP numbers on the Bonds shall be paid for by the District; provided, however, that the Page 5 of I I ordering of and the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the winning bidder. NO LITIGATION CERTFICATE. At the time of issuance of the Bonds, the District will certify there is no litigation pending concerning the validity of the Bonds, the corporate existence of the District, or the entitlement of the officers thereof to their respective offices. RIGHT OF CANCELLATION. The successful bidder will have the right, at its option, to cancel its purchase of the Bonds if the District fails to execute the Bonds and tender the same for delivery within 60 days from the date of award thereof. In such event, the successful bidder will be entitled to the return of the deposit accompanying the bid. PRELIMINARY OFFICIAL STATEMENT AND FINAL OFFICIAL STATEMENT. The preliminary official statement, distributed in connection with the sale of the Bonds, dated August _, 2010 (the 'Preliminary Official Statement ") has been deemed final by the Authority and the District for purposes of Rule 15c2 -12 of the Securities Exchange Commission (the "Rule "), but is subject to revision, amendment and completion in a final official statement (the "Final Official Statement ") as provided in the Rule. The Authority and the District has authorized a Preliminary Official Statement and Final Official Statement relating to the Bonds, a copy of which is available on the Internet at www.fieldman.com /offerinps.asv. The Authority and the District will deliver to the purchaser of the Bonds a certificate dated the Closing Date to the effect that the Authority and the District has reviewed each of the Preliminary Official Statement and Final Official Statement and has determined that as of the date of each thereof, to the best of its knowledge and belief, that each of the Preliminary Official Statement and Final Official Statement does not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Up to 100 copies of the Final Official Statement will be furnished to the successful bidder at no charge within 7 business days of the award of the Bonds. CONTINUING DISCLOSURE. The District has covenanted for the benefit of Owners to provide certain financial information and operating data relating to the District by not later than January 1 st of each year after the end of the District's fiscal year (which fiscal year presently ends June 30), commencing with January 1, 2011 (the "Annual Report"), and to provide notices of the occurrence of certain enumerated material events. The Annual Report and notices of material events will be filed by the District through the Electronic Municipal Market Access System ( "EMMA ") of the Municipal Securities Rulemaking Board (the "MSRB "). The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized in the Preliminary Official Statement under the caption "CONTINUING DISCLOSURE." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5). TERMS OF SALE BASIS OF AWARD. The Bonds will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Bonds. The true interest cost of any such bid will be that rate which, when used in computing the present value of principal and interest to be paid on all Bonds from the expected date of delivery (which is assumed for computational purposes to be Page 6 of 11 September 28, 2010), to their respective maturity dates, or mandato , sinking fund prepayment dates in the case of term bonds, produces an amount equal to tl-e purchase price (including any premium or discount) specified :n such bid. For purposes of co nputing the true interest cost represented by any bid, the purchase price specified in such bid 1 all be equal to the par amount of the Bonds plus any premium specified in such bid or less am- discount specified in such bid, and the true interest rate shall be calculated by the use of a semiarnual interval of compounding interest based on the Interest Pawnent Dates for the Bonds. Ir the event of a tied bid, the procedure for determining the winning bid will be at the sole discretion of the Authority. ALL OR NONE BID. Any prospective purchaser may subm it a bid for the Bonds, provided that if any of the Bonds are bid for. then all of the Bonds must be b: d for. MAXIMUM DISCOUNT. No bid will be considered for less than ninety -eight and one half percent (98.5 %) the par value of the Bonds offered for sale. An;. discount will be based on and considered as it relates to the aggregate principal amount of the Bonds, as set forth in this Notice of Sale. FORM OF BID. All bids must be unconditional. Each bid must be in accordance with the terms and conditions set forth herein. Bids will only be accepted c;a PARITY® pursuant to this Notice until 10:00 a.m., Pacific Standard Time on the date set forth for receipt of bids. To the extent any instructions or directions set forth in PARITY(K) conflict with this Notice, the terms of this Notice shall control. For further information about PARITY,). potential bidders may contact the Financial Advisor, Fieldman, Rolapp & Associates at (949) 6607300 or PARITY® at (212) 849 -5021. DELIVERY AND PAYMENT. It is estimated that deliver, o` the Bonds will be made to the Purchaser on or about September 28, 2010. Payment of the parchase price (less the amount of the good faith deposit mentioned below) must be made in furls ;mmediately available to the District. ELECTRONIC BIDS. Electronic Bids via PARITY® (the "Electronic Bidding System ") will be accepted in accordance with this Notice of Sale until 10:00 a.m. Pacific Daylight Time,. September 15, 2010, but no bid will be received after this time. To the extent any instructions or directions set forth in PARITY(k) conflict with this Notice of Sale. the terms of this Notice shall control. For further information about PARITY®, potential bidders may contact Fieldman, Rolapp & Associates or PARITM` at 1359 Broadway, 2' Floor. Ncw York, New York 10018, telephone (212) 849 -5021. WARNING REGARDING ELECTRONIC BIDS. THE AUTHORITY AND THE DISTRICT WILL ACCEPT BIDS IN ELECTRONIC FORM SOLELY THROUGH PARITY ON THE OFFICIAL BID FORM CREATED FOR THAT PURPOSE. EACH BIDDER SUBMITTING AN ELECTRONIC BID UNDERSTANDS AND AGREES BY DOING SO THAT IT IS SOLELY RESPONSIBLE FOR ALL ARRANGEMFNITS WITH PARITY, THAT THE AUTHORITY AND THE DISTRICT NEITHER ENDORSES NOR EXPLICITLY ENCOURAGES THE USE OF PARITY, AND THAT PARITY' IS NOT ACTING AS AN AGENT OF THE AUTHORITY qND THE DISTRICT. INSTRUCTIONS AND FORMS FOR SUBMITTING ELECTRONIC BIDS MUST BE OBTAINEI: FROM PARITY, AND THE DISTRICT ASSUMES NO RESPONSIBILITY FOR ENSURING OR VERIFYING BIDDER Page 7 of I 1 COMPLIANCE WITH THE PROCEDURES OF PARITY. THE DISTRICT SHALL ASSUME THAT ANY BID RECEIVED THROUGH PARITY HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE BIDDER. THE AUTHORITY AND THE DISTRICT WILL MAKE ITS BEST EFFORTS TO ACCOMMODATE ELECTRONIC BIDS; HOWEVER THE AUTHORITY AND THE DISTRICT, THE FINANCIAL ADVISOR AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID SUBMITTED ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED, RECEIVED OR OPENED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICIAL TIME FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE AUTHORITY AND THE DISTRICT AT THE PLACE OF BID OPENING, AND THE DISTRICT SHALL NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY PARITY AS THE OFFICIAL TIME. GOOD FAITH DEPOSIT. A good faith deposit (the "Deposit') in the amount of $300,000, payable to the order of the "East Valley Water District Financing Authority" is required from the purchaser of the Bonds ( "Purchaser ") subsequent to award of sale. That Purchaser is required to wire transfer such amount not later than 3:30 PM New York time on the next business day following the award, to the Authority per wire instructions to be provided by the Authority to the Purchaser. If such Deposit is not received by that time, the award of sale maybe rescinded by the Authority. No interest on the Deposit will accrue to the Purchaser. The Deposit will be applied to the purchase price of the Bonds. The Deposit accompanying any accepted bid shall be cashed and the proceeds thereof applied to the purchase price. In the event the successful bidder fails to honor its accepted bid, the Deposit will be retained by the Authority as and for full liquidated damages. TRUE INTEREST COST. Bidders are requested to supply a calculation of the true interest cost of the Bonds to the District on the basis of their respective bids, which shall be considered as informative only and not binding on either the bidder or the Authority and the District. UNDERWRITING GROUP. Each bidder is requested to furnish the names of all joint managers participating in the bid, if applicable. The successful bidder will be required to submit a list of all syndicate members in addition to the managers not later than 24 hours after receiving a verbal award. RIGHT OF CANCELLATION OF SALE BY THE DISTRICT. The Authority and the District reserves the right, in its sole discretion, at any time to cancel the public sale of the Bonds. In such event, the Authority and the District shall cause notice of cancellation of this invitation for bids and the public sale of the Bonds to be communicated through Thomson Municipal News as promptly as practicable. However, no failure to publish such notice or any defect or omission therein shall affect the cancellation of the public sale of the Bonds. RIGHT TO MODIFY OR AMEND. The Authority and the District reserves the right, in its sole discretion, to modify or amend this Official Notice of Sale including, but not limited to, the right to adjust and change the principal amount and principal amortization schedule of the Bonds being offered, however, such modifications or amendments shall be made not later than 5:00 p.m., California time, on the business day prior to the bid opening and communicated through Thomson Municipal News. Page 8 of I I RIGHT OF POSTPONEMENT BY THE AUTHORITY A.ND THE DISTRICT. The Authority and the District reserve the right, in its sole discretion. to postpone, from time to time, the date established for the receipt of bids. Any such postporement will be communicated through Thomson Municipal News not later than 5:00 p.m., Cal fomia time, on the business day prior to any announced date for receipt of bids. If any date is po,iponed, any alternative sale date will be announced via Thomson Municipal News by 5:00 p.m. C ilifomia Time on the business day prior to such alternative sale date. On any such alternative =a e date, any bidder may submit a bid for the purchase of the Bonds in conformity in all respects with the provisions of this Official Notice of Sale, except for the date of sale and except or the changes announced by Thomson Municipal News at the tune the sale date and time are announced. RIGHT OF REJECTION. The Authority and the District reserves the right, in its discretion, to reject any and all bids and to waive any irregularity or 1 nformality in any bid. PROMPT AWARD. An authorized officer of the Authority will take action awarding the Bonds or rejecting all bids not later than 3:00 p.m. California time on August _, 2010 provided that the award may be made after the expiration of the specified rime if the winning bidder has not given to the Authority a notice in writing of the withdrawal o' -+uch bid. CERTIFICATION OF REOFFERING PRICE. The successful bidder will, as of the date the Bonds are sold pursuant to this Official Notice of Sale, ce -tify- to the Authority and the District the prices at which it reasonably expects to initially offer each maturity of the Bonds to the general public (the "Initial Offering Prices "). For this purpose. the general public does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers. The successful bidder agrees that, on or prior to the Closing Date.. it will actually offer 100% of each maturity of the Bonds to the general public in a bona fide public offering for prices equal to or less than the Initial Offering Prices. The Underwriter agrees that, prior to the Closing Date, it will deliver a certificate dated as of the Closing Date in form and substance attached as Exhibit 1 and satisfactory to the Authority's Counsel and District's Counsel. APPROVED by the East Valley Water District Financing Authority by resolution adopted August 24, 2010. fe Robert Martin Execu ire Director Page 9 of ] 7 EXHIBIT 1 Reoffering Price Certificate EAST VALLEY WATER DISTRICT Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 CERTIFICATE OF PURCHASER The undersigned, on behalf of , as underwriter (the "Underwriter ") of the above - captioned bonds (the "Bonds "), hereby confirms our advice that: (i) Based upon reasonable expectations and actual facts which existed on , being the date upon which the East Valley Water District (the "Issuer ") sold the Bonds to the Underwriter (the "Sale Date "), the Underwriter reasonably expected to sell a substantial amount of each maturity of the Bonds (being at least 10% of each maturity) to the general public (for purposes of this Certificate, "general public" excludes certificate houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices, or in the case of obligations sold on a yield basis, at the respective yields (together the "Initial Offering Prices ") set forth in Exhibit A attached hereto and by this reference incorporated herein (these prices are also shown of the cover of the Official Statement). (ii) The aggregate of the Initial Offering Prices is $ (iii) As of the date hereof, 100% of the Bonds of each maturity were actually offered to the general public in a bona fide public offering for the Initial Offering Prices. (iv) As of the Sale Date, the Underwriter, taking into account market conditions, had no reason to believe any of the Bonds would be initially sold to the general public at prices greater than the Initial Offering Prices. (v) As of the Sale Date, other than the and maturities of the Bonds, at least 10% of each maturity of the Bonds was initially sold to the general public for the respective Initial Offering Prices. (vi) In our opinion, the Initial Offering Prices do not exceed the fair market value of said maturities of the Bonds to the general public as of the Sale Date. Page 10 of 11 Capitalized terms used herein and not otherwise defined shall ca c .he meanings ascribed thereto in the Indenture, dated as of September 1, 2010, by and between Unici Bank, as Trustee, East Valley Water District Financing Authority, authorizing the issuance of the Bord;. Dated: 12010 as Underxrt,,r By Page I I of I I Name, Title EXHIBIT A Maturity Date Principal (October 1 Amount * Stated as a percentage of par. Page 12 of 11 Interest Reoffering Rate Price % EXHIBIT B Attach computations of arbitrage Yield under Section 148, Form 80- � -G computations and CDIAC computations Page 13 of I I Subject to Annroval EAST VALLEY WATER DISTRICT August 10, 2010 REGULAR BOARD MEETING MINUTES The meeting was called to order at 3:00 p.m. by President Wilson. Director Sturgeon led the flag salute. PRESENT: Directors: Le Vesque, Malmberg, Sturgeon, Wilson ABSENT: Director: Morales STAFF: Robert Martin, General Manager; Brian Tompkins, Chief Financial Officer; Ron Buchwald, District Engineer; Justine Hendricksen, Administrative Manager; Eileen Bateman, Executive Assistant LEGAL COUNSEL: Steve Kennedy GUEST (S): Brad Neil (Stradling Yocca), Dr. Katy Henry; Cara Van Dijk (CV Strategies), Karla Camacho (Hodgdon Group), David Miank (Hodgdon Group), Charles Roberts (Highland Community News), PUBLIC COMMENTS President Wilson declared the public participation section of the meeting open at 3:01pm. There being no verbal or written comments the public participation section was closed. APPROVAL OF AGENDA Item #10 Vice President LeVesque recommended that Item #10 Approval of Development Agreement between East Valley Water District and Glenrose Ranch LP, be placed after Item #13 — Discussion and possible action regarding the Regional Urban Water Management Plan, on the Agenda for Discussion. Director Malmberg stated that he would like to abstain from the vote on Item 44 — Approval of Board Meeting Minutes for June 22, 2010 M /S /C (Sturgeon - LeVesque) that the August 10, 2010 agenda be approved with the recommended changes. 1 Minutes 8/10/10 etb APPROVAL TO WRITE -OFF CLOSED CUSTOMER ACCOUNTS WITH BALANCES OF LESS THAN $18 AND BALANC F.S DISCHARGED IN BANKRUPTCY M /S /C (LeVesque - Sturgeon) to approve to write -off dosed customer accounts with balances of less than $18 and balances discharged in bankr-1ptcy APPROVAL OF BOARD MEETING MINUTES FOR J1 NE 22, 2010 M/S /C (LeVesque - Sturgeon) that the Board meeting riinutes for June 22, 2010 be approved as submitted. Director Malmberg abstained APPROVAL OF BOARD MEETING MINUTES FOR JULY' 13, 2010 M/S /C (LeVesque- Sturgeon) that the Board meeting minutes for July 13, 2010 be approved as submitted. APPROVAL OF SPECIAL MEETING MINUTES FOR J1 LY 14, 2010 M /S /C (LeVesque- Sturgeon) that the Special meeting minutes for July 14, 2010 be approved as submitted. APPROVAL OF SPECIAL '.MEETING AND PUBLIC HE 4RING MINUTES FOR JULY 15, 2010 M /S /C (LeVesque- Sturgeon) that the Special meeting and Public Hearing meeting minutes for July 15, 2010 be approved as submitted. APPROVAL OF BOARD MEETING MINUTES FOR JU1 Y 27, 2010 M /S /C (LeVesque- Sturgeon) that the Board meeting minutes for July 27, 2010 be approved as submitted. APPROVAL TO WRITE -OFF TEN - YEAR -OLD ACCOUNT BALANCES M /S /C (LeVesque- Sturgeon) to approve the write -off of ten - year -old account balances DISBURSEMENTS Vice President LeVesque requested clarification of disbursements 9225328 and 9225352. The Chief Financial Officer stated that the classification of these disbursements is to allow for detailed accounting of costs for a specific job or project 2 Minutes 8/10/10 etb M /S /C (LeVesque - Sturgeon) that the General Fund Disbursements #225202 through 4225385 which were distributed during the period of July 21, 2010 through August 2, 2010, in the amount of $871,217.05 and Payroll and Benefit contributions for the period ended August 2, 2010 and included checks and direct deposits, in the amount of $291,051.61 and $9,465.49 totaling $1,171,734.15 be approved. GENERAL MANAGERS FEE'S AND EXPENSES M /S /C (LeVesque- Sturgeon) that the General Managers fees and expenses be approved Director Morales arrived at 3:08 PM DISCUSSION AND POSSIBLE ACTION REGARDING THE REGIONAL URBAN WATER MANAGEMENT PLAN The General Manager provided an update regarding the Districts' efforts to meet the 20% reduction by 2020; that the District will be involved in more aggressive programs for the future to comply with the Regional Urban Water Management Plan Mr. Buchwald reported on the workshop he attended for SBX77; that there are many options to respond to the 20% reduction of water use by 2020. Vice President LeVesque inquired on the requirements of the will -serve letters from the District M /S /C (LeVesque - Malmberg) to accept the report prepared by Kennedy /Jenks Item #10 APPROVAL OF DEVELOPMENT AGREEMENT BETWEEN EAST VALLEY WATER DISTRICT AND GLENROSE RANCH LP M /S /C (LeVesque- Sturgeon) to approve the Development Agreement between East Valley Water District and Glenrose Ranch LP Vice President LeVesque stated that the District begin efforts in working with the City on conserving water in the future to comply with the Urban Water Management Plan Director Morales stated that the Agreement was approved 2 years ago with a different developer. 3 Minutes 8 /10 /10 etb DISCUSSION AND POSSIBLE ACTION REGARDING THE CONEJO SEWER MAIN REPLACEMENT PROJECT The General Manager reviewed the project with the Board: that he recommends the Board authorize staff to move forward with the bidding process M /S /C (Malmberg - Levesque) to authorize District Staff to advertise for bids for the Conejo sewer main replacement project DISCUSSION AND POSSIBLE ACTION REGARDING THE ADOPTION OF A DEBT MANAGEMENT POLICY The General Manger stated that this policy was reviewed by the Policy Committee, Bond Consultants and the Chief Financial Officer Director Morales sated that the policy is good to have in place: that the policy committee reviewed prior to submitting for adoption M /S /C (Levesque- Malmberg) to adopt the Debt Management Policy DISCUSSION AND POSSIBLE ACTION REGARDING THE ADOPTION OF A DESIGNATED FUNDS POLICY M/S (LeVesque - Malmberg) to adopt the Designated Funds Policy Director Morales stated that the language is unclear in the Capital Replacement Funds section Mr. Tompkins stated that he had new language that reflects the correction to the Capital Replacement Funds section and the Target Level section. M /S /C (LeVesque - Malmberg) to amend the motion to reflect the changes submitted by the Chief Financial Officer and adopt the Desigr ated Funds Policy RESOLUTION 2010.16 — A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLFY WATER DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY OF A JOINT EXERCISE OF POWERS AGREEMENT BY AND BETWEEN THE EAST VALLY1 WATER DISTRICT AND CALIFORNIA MUNICIPAL FINANCE AUTHORIT V The General Manager stated that the Resolution begins the proc es-; to set up and complete the 2010 water revenue bond financing M /S /C (Malmberg - Sturgeon) that Resolution 2010.16 N approved 4 Minutes 8 /10 /10 :etb DISCUSSION AND POSSIBLE ACTION REGARDING AWARD OF CONSTRUCTION CONTRACT TO DALKE CONSTRUCTION FOR SUITE 30 IMPROVEMENTS The General Manager reported on the bidding process and results for the Suite 30 improvements M /S /C (LeVesque - Malmberg) to award construction contract to Dalke Construction for the Suite 30 improvements DIRECTORS' FEES AND EXPENSES FOR JULY 2010 M /S /C (LeVesque - Morales) to approve the Directors' Fees and Expenses for July 2010. GENERAL MANAGER /STAFF REPORTS The General Manager stated that the Baseline Gardens situation has been receiving media attention; that he commends Ms Van Dijk for the good job she has done on the recent Press Releases regarding Baseline Gardens; that the bid opening for the project at Plant 134 came in substantially less than budgeted CONSULTANT REPORTS Ms Van Dijk provided an update regarding a media release for Eastwood Farms COMMITTEE REPORTS a. Legislative (Standing) Director Morales stated that he has been receiving reports from the Districts lobbyists; that the main issue at hand is the Santa Ana Sucker Fish The General Manager gave an update regarding the press editorial that was very encouraging for the Santa Ana Sucker Fish; that local representatives are very involved with this issue b. Community Affairs (Standing) No Report at this time. Meeting rescheduled. c. Policy (Ad -Hoc) Director Morales stated that the committee completed the two policies presented in the current Board packet for approval; that the committee will look to update the existing Drug/Alcohol Policy 5 Minutes 8/10 110 etb Director Malmberg stated concerns with lays changing; that new laws regarding drugs and alcohol need to be cons dcred when updating the policy ORAL COMMENTS FROM BOARD OF DIRECTORS No comments at this time. WATER EDUCATION FOUNDATION'S "NORTHERN CALIFORNIA TOUR ", SACRAMENTO, SEPTEMBER 22-24,2010 Information only. The Board took a break at 4:29 pm. CLOSED SESSION The Board entered into Closed Session at 4:40 p.m. as proviaed in the California Open Meeting Law, Government Code Section 54945.9(a), to discuss hose items listed on the agenda. ANNOUNCEMENT OF CLOSED SESSION ACTIONS No reportable action ADJOURN The meeting was adjourned at 4:43 p.m. until the next regularly scheduled Board Meeting. George Filson, President Robert E. Martin, Secretary Minutes 8/10/10 etb East Valley Water District Board Memorandum From: Brian W. Tompkins / Chief Financial Office) Subject : Disbursements. ��/y� Recommandation: Approve the attached list of accounts payable checks and payroll issued during the period August 4, 2010 through August 16, 2010. Background: Date: AUGUST 24, 2010 Accounts payable checks are shown on the attached listing and include numbers 225386 to 225574 for A total of $810,383.79. The source of funds for this amount is as follows:. Unrestricted Funds $810,383.79 Payroll and benefit contributions paid for this period totaled $224,467.81. 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O O N "O -' L O U> W N rG W C f- U U d O O O O o O O o 0 O N O O O O N N O O O O `n 0 �0 r[l t0 O O O (O O O N 0 0 0 N O O O O O O O O 0 0 0 0 0 0 n N N 0 0 0 O O O n N 0 O (O O n O Y O O Y O Y O Y O Y O Y C o 0 0 0 0 0 0 0 0 0 0 0 I: 0 0 0 0 0 0 Y 0 Y 0 Y U > > U > U > U > U > U Q 2 > > > > > > > > > > > �> > > > > > > U > U > U (O O v N (D m M to. cc (O t0 (O r ID (D in M o o o - i 'n n n (O r O to N r r to m to m i to n to to m n c c r m v m m m m m m m N to s (n � N O O m p> N N R ❑ m m R V O C6 M M ❑ O O N O ❑ ❑ N N O p O O M M M M O 10 O F U > ? Z a a w IL o Q ¢ U O U x J Z (9 J Q O ¢ fn x w O U 06 z 2 ? O' Z 0 ! J U Z Z Z w > D > ¢ n O O y v � N m N z 0o a c CO U U C N O O O O ° N .0 O O N M w= X t °° U a�� o m ° E � U 0 ° 0 0 0 0 0o O O N O VO v> v> >> U > U> 0 m W t0 N 0 0 N N 0 N o G� N o Np N r o N n tODEast Valley Water District Board Memorandum Date: AUGUST 24, 2010 From: Brian W. Tompkins / Chief Financial Officer � Subject: General Manager's Expenses. / Recommendation: Approve the attached list of payments and reimbursements for General Manager expenses during the period August 4, 2010 through August 16, 2010. Background: Business and Travel expenses incurred by the General Manager and paid during the reporting period stipulated above totaled $1237.05. A summary of theses expenses by authorized payment methods follows: American Express — R Martin 1181.34 American Express — J Hendricksen CalCard — R Martin 55.71 Cal Card — J Hendreksen CalCard — E Bateman / C Contreras Direct Reimbursement Total 1237.05 East Valley Water District Board Memorandum No. B -37 -2010 Date: August 24, 2010 From: Gary Sturdivan, Safety & Regulatory Affairs Director Subject: Eastwood Farms Public Meeting Background: As a requirement of the Eastwood Farms / East Valley Water District Notice of Award and Acceptance, East Valley Water District ( "EVWD ") is required to form an Assessment District by October 31, 2010. EVWD is holding a Public Meeting to inform property owners of the CDPH funding requirements and benefits in forming an Assessment District, to consolidate Eastwood Farms into EVWD. A Public Hearing is scheduled for September 15, 2010 at the City of Highland Council Chambers. Property Owner's Ballots were mailed out on July 30, 2010 and cannot be opened until the conclusion of the Public Hearing. If EVWD receives the required majority "yes" vote; the Assessment District will be formed and EVWD will move forward to consolidate Eastwood Farms into EVWD, and finalize the State Funding. AGREEMENT TO TRANSFER WATER SERVICE THIS AGREEMENT is made as of July 27, 2010, by and between EAST VALLEY WATER DISTRICT, a public agency ( "District "), and the EASTWOOD FARMS COMMUNITY WATER USERS, a California corporation ( "Company "). RECITALS A. District is formed and organized pursuant to the County Water District Law, California Water Code Section 30000 et seq. B. Company is a private corporation organized and operating as a nonprofit organization under the laws of the State of California. Company's service area is within the District's jurisdictional boundaries and is more particularly described in the document attached hereto as Exhibit "A" and incorporated herein by this reference. C. Company's water system consists of well, booster pump, and various types of piping that are inoperable and/or not in compliance with the legal standards enforced by the State of California Department of Public Health and/or the County of San Bernardino Department of Environmental Health Services ( "the Water System "). As a result, Company's shareholders are currently receiving domestic water service by virtue of an emergency connection to District's water distribution system pursuant to an Emergency Water Supply Agreement entered into by the parties hereto on or about September 10, 1996, as amended by the First Amendment to Emergency Water Supply Agreement entered into by the parties hereto on or about May 28, 1997 ( "Intertie Agreement "). D. Company's shareholders have formally requested that District permanently assume the operation and control of the Water System and that the properties served thereby become part of District's official service area. E. District agreed to consider said proposal if outside funding can be obtained to repair and replace the Water System and a majority of the shareholders of Company consent to the financing mechanism deemed appropriate by District to repay the costs thereof. F. On behalf of Company, District submitted an application for construction monies from the Safe Drinking Water State Revolving Fund ( "the Fund ") for the purpose of securing revenue to be used for the construction of facilities necessary to bring the Water System into a condition deemed appropriate by District to assume the operation and control thereof ("the Project "). G. On or about January 12, 2010, District's Board of Director's adopted a Mitigated Negative Declaration for the proposed Project pursuant to the California Environmental Quality Act (Public Resources Code Section 21000 et seq.) and the Guidelines promulgated thereunder (14 California Code of Regulations Section 15000 et seq.). H. On or about April 16, 2010, District and Company entered into a Notice of Application Acceptance issued by the State of California Depa-iment of Water Resources on or about April 5, 2010, for Project No. 3600100 -003, wherein the I ind would provide a construction loan in the amount of 5264.440.00 ( "the Loan ") and a constriction grant in the amount of $1,057,756.00 ( "the Grant'), for a total contribution by the Fund of S 1,322,196.00 to be applied to the cost of the Project, the tota' price of which is currently estimat -d to be the sum of$ 1,520,526.00. 1. On or about July 27, 2010, District's Board of Directors adopted Resolution No. 2010.1 1, which authorized the initiation of proceedings to form the Eastwood Farms Assessment District ( "EFAD ") in accordance with California law to repay the I.oan and reimburse District for the portion of the Project costs not covered by the Fund, and which nstructed District staff to cause a Notice of Public Meeting and Public Hearing and Official Ballets ('Ballots ") to be delivered to the records owner(s) of each parcel within the EFAD as determines fi om the last equalized property tax roll as set forth in the Water System Improvement Project report repared by W.J. McKeever, Inc., and William J. McKeever, a registered professional engineer certi aed by the State of California ( "the McKeever Report"), J. The purpose of this Agreement is to set forth the terms and condition under which District will assume the obligation to supply domestic water service to the area currently being served by Company if, after conducting a public hearing on the proposed EFAD and considering all public testimony offered in connection therewith and accepting a'I Ballots returned to District prior to the close of the public hearing, District's Board of Directory finds that a majority protest to the Project does not exist and approves the McKeever Report and the formation of the EFAD, subject to full and complete satisfaction by District and Company of all requirements and conditions necessary to secure the Loan and the Grant, including said parties' execution of this Agreement. COVENANTS IN CONSIDERATION OF THE MUTUAL COVENANTS, AGREEMENTS, REPRESENTATIONS, AND WARRANTIES CONTAINED IN THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS: 1. Subject to the terms and conditions set forth in this Agreement, Company agrees to convey, transfer, assign, and deliver to District, and District agrees to accept from Company, all of the following (which are collectively referred to herein as the "Assets-): (a) All water rights held, owned, and /or possessed by c r otherwise existing in the name of, Company; and (b) Customer Iist(s) of all persons and /or entities to u horn Company presently supplies water, which Company hereby represents is fully reflected in the document attached hereto as Exhibit "B" and incorporated herein b, this reference. 2. As full payment for the transfer of the Assets by Company to District, District agrees to assume the obligation to provide water service to the following as of the date of final completion of the Project, subject to the terms and conditions of District's rules, regulations, resolutions, ordinances, and minute actions as same may be amended from time to time: (a) Those customers of Company; and (b) Those persons or entities within Company's service area. 3. It is expressly understood and agreed that District shall not be liable for any debts, obligations, or liabilities of Company of any kind or nature, other than those specifically assumed by District in this Agreement. District specifically does not assume any of Company's liabilities or obligations, existing or contingent, known or unknown, except for those set forth pursuant to Section 2 of this Agreement. Further, Company recognizes, understands, and acknowledges that Company shall continue to be responsible for any and all accounts payable and any obligation for outstanding back taxes. Company hereby agrees to hold harmless and indemnify District for all loss, expenses, damages, and costs arising from or in connection with Company's liabilities or obligations not assumed pursuant to this paragraph. 4. The following shall be conditions precedent to District's responsibility to perform its obligations under this Agreement: (a) Full and complete payment by Company of all sums owed to District for water service rendered by District pursuant to Company's emergency connection to District's water distribution system; (b) Formation of the EFAD without majority protest or any legal challenge thereto; (c) Full and complete satisfaction by District and Company of all requirements and conditions necessary to secure the Loan and the Grant; (d) Receipt by District of all proceeds from the Loan and the Grant; and (e) Construction of the Project to the satisfaction of District without any legal challenge thereto ( "the Closing "). The conditions set forth in this Section are solely for the benefit of District and may be waived only by District. District shall, at all times prior to the termination of this Agreement, have the right to waive any termination of this Agreement and shall have the right to waive any of these conditions; provided that such waiver is in writing. In the event that the conditions are not satisfied or waived by the District, in writing, District shall be released from any liabilities or obligations under this Agreement. 5. Company agrees to pay all sales and use taxes, to the extent of liability therefor, arising out of the transfer of the Assets, and shall pay said taxes on or before the Closing. District shall not be responsible for any business, occupation, withholding, or similar tax, or any taxes or any kind related to any period before the Closing, including any income taxes representing Company's liability for operation of the business prior to the Closing. 6. Company represents and warrants to District that the folr :wing matters are true and correct as of the execution of this Agreement and will also be true and cosec: as of the Closing: (a) Company has all necessary corporate powers to o r n its own properties and to carry on its business as now owned and operated by C'r mpany. (b) Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of California. Company has the right, power, legal capacity, and authority to enter into and perform its obligations under this Agreement, and no approvals or consents of any l,. =rsons are necessary in connection therewith. (c) All of the documents executed by Company which are to be delivered to District at the Closing date shall have been duly authorized, executed, and delivered by Company and will be legal, valid, and binding obligations of Company enforceable against Company in accordance with their respective terms (except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other principles relating to or limiting the right of contracting parties generally), and will not violate any provisions of any agreern -r.' to which Company is a party or to which it is subject. (d) There are no liabilities, debts, or other obligations outstanding, or in any way left unresolved, as of the date of this Agreement. (e) A meeting of Company's shareholders was called and held on or before the execution date of this Agreement, for the purpose of author zing and approving the transfer of the Assets to District on the terms and conditions provided in this Agreement and to perform its other obligations as set forth in this agreement. (f) Company has not previously assigned transferred or conveyed in any manner whatsoever all or any portion of the Assets wh,cl are the subject of this Agreement, or any interest therein. (g) Except as set forth herein, there are no pending or threatened claims, proceedings, lawsuits, or allegations of any kind, whether fer taxes or otherwise, concerning the Company or lie Assets. At the Closing, Comna-t� will not be in default under any rd agreements, encumbrances, or instruments pertaining to the Company or the Assets (h) The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby will not: (i) violate any provisions of, or require any consent, authorization, or approval under any law, administrative regulation, any order, award, judgment, writ, injunction, or decree applicable to, or any governmental permit or license issued to, Company relating to the Assets; or (ii) result in the creation of any lien, charge, or encumbrance upon the Assets. (i) Neither Company nor any third party has used, generated, manufactured, refined, produced, processed, stored, or disposed of on, under, or about the Company's real property, or transported to or from the real property, any hazardous materials, nor does Company intend to use the real property in the future for the purpose of generating, manufacturing, refining, producing, storing, handling, transferring, processing, or transporting hazardous materials. For the purposes hereof, "hazardous materials" shall mean any flammable explosive, radioactive materials, asbestos, petroleum, organic compounds known as polychlorinated biphenyls, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances, or related materials, including, without limitation, any substances currently defined as or included in the definition of "hazardous substances ", "hazardous material ", or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 8601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 6901, et seq.; and in the regulations adopted, published, and/or promulgated pursuant to said laws. (j) Company has no existing employment contracts with any of its employees. All personnel are presently employed on an hourly wage basis, and Company provides no fringe benefits which may present a continuing liability to District as a condition to retained employment or present personnel. There is no pending or threatened labor dispute, strike, or work stoppage affecting Company's business. District shall not assume any liability in regard to employee benefits of any nature whatsoever. (k) Company has complied with, and is not in violation of, any applicable federal, state, or local statute, law, or regulation, including, without limitation, any applicable building, zoning, or other law, ordinance, or regulation, and is not presently involved in any action, arbitration, or legal, administrative, or other proceeding, or governmental investigation pending, which may impose some liability or lien upon Company's business, the assets therein, or restrictions thereof. District assumes no responsibility or liability of any nature whatsoever in regard to any such alleged defects in the system or instrumentalities comprising Company's business, and Company shall indemnify and hold harmless the District from and against any liability, claim, or action whatsoever in connection therewith. 5 (l) All federal, state, and local income, real, personal. and any other tax returns with respect to the operation and Assets of Compam' which are required to be filed or paid, have been filed, and Company has paid o- caused to be paid to the respective taxing authorizes all taxes as shown on such returns. or on any assessment received by it, to the extent that such taxes have become due. Company knows of no proposed tax assessments against Company. (m) All representations and warranties of Company se- forth in this paragraph, and in any written statements delivered to District under tl— Agreement, will also be true and correct as of the Closing as if made on that date enc shall survive the Closing. Company hereby covenants with the District as follows: (a) After the date hereof and prior to the Closing, no part of the Assets, or any interest therein, will be sold or otherwise transferred or er cumbered without District's prior written consent. (b) Except with respect to this Agreement and such other contracts and agreements as are necessary to cause the completion of the transacti ,)n contemplated herein, no leases, contracts, agreements, or commitments (collect; v ely. "Submittals ") shall be executed which shall bind the Assets or the Company w.tho, t the prior written approval and consent of District, which consent and approvai :nay be withheld in the reasonable discretion of District. (c) Company agrees that it will not, prior to Closing. iermit any alteration, modification, or addition to the Water System, except as approved in writing by District. Company will carry on its business activities diligently ar.d tivill not become delinquent in the payment of monies to District for water service rendered by District by operation of Company's emergency connection to District's water distribution system. (d) No default of Company shall be permitted to occur under any contract or agreement by which the Company is or may be bound, ivh:ch default will materially and adversely affect this Agreement. (e) Company shall promptly notify District of ary asserted and /or threatened claim which directly or indirectly materially affects or could affect Company or this Agreement. (f) Company shall continue to insure all of its assets and business providing the customary coverage, including property damage and loss of income by fire or other casualty, and adequate insurance protection against all liabilities, claims, and risks customarily insured in Company's type of business. up to the Closing. On or before the Closing, Company shall obtain "tail" insurance in an amount acceptable to District to cover its operations and liabilities prior to the Closing. 8. District and its counsel, accountants, and other representatives shall have full access during normal business hours to all properties (real and personal), books, accounts, records, contracts, and documents of or relating to Company. District, its agents and representatives, shall be entitled to enter onto any real property owned by the Company to carry out the intent of this Agreement. Company shall fumish, or cause to be furnished, to District and its representatives, all data and information concerning the business, finances, and properties of Company that may reasonably be requested. 9. Simultaneously with the consummation of the transfer, Company, through its officers, agents, and employees, will put District into full possession and enjoyment of the Assets and all properties necessary to carry out the intent of this Agreement. 10. Company and Company's shareholders shall indemnify, defend, and hold harmless District against and in respect of any and all claims, losses, costs, expenses, obligations, liabilities, damages, recoveries, and deficiencies, including interest, penalties, and reasonable attorneys' fees that it shall incur or suffer, which arise, result from, or relate to any breach of, or failure by Company or Company's shareholders to perform, any of Company's representations, warranties, covenants, or agreements in this Agreement or in any schedule, certificate, exhibit, or other instrument furnished or to be furnished by Company under this Agreement. In addition, Company indemnifies and holds the District harmless from and against any and all liabilities, obligations, claims, charges, or activities prior to the Closing, regardless of whether such actions are currently known or unknown. Company specifically indemnifies and holds District harmless from any and all liabilities, obligations, claims, or charges related to any liabilities of the business, or otherwise incurred, whether known or unknown, prior to the Closing. H. Each of the parties represents and warrants that it has dealt with no broker or finder in connection with any of the transactions contemplated by this Agreement, and insofar as it knows, no broker or other person is entitled to any commission or finder's fee in connection with any of these transactions. 12. (a) It is hereby acknowledged and understood that the Water System facilities currently being utilized by the Company in its service area are in need of replacement in order to meet capability and other requirements. Company hereby acknowledges that District would not have entered into this Agreement if District would be required, at its cost and expense, to repair or replace Company's Water System. The parties hereto understand that this Agreement contemplates that the District will form, or cause to be formed, the EFAD for the purpose of repaying the Loan and financing the Project costs not funded by the Grant. Company understands and acknowledges that the costs of the Project shall include, without limitation, fees and expenses for engineering, accountants, financial consultants, attorneys, and other related costs. 7 (b) (i) In the event that the formation of the EFAD does not occur after the conclusion of the public hearing held thereon by District's Board of Directors or is challenged within one (1) year atie- Closing, District shall have the right, at its sole option, to elect to require Company to rescind the sale of the Assets hereunder and repurchase the A sets from District. In such event, District shall notify Company of Di:c.r ct's election to have Company re- acquire the Assets by written notice In the event of such election, the physical condition of the Water System a! the time of such transfer shall be as-is, where -is, without representation or warranty. Company shall also pay to District all costs and expenses incurred h;. District in connection with this Agreement, the Project, the McKeever Report, and the EFAD. District may elect, in the exercise of its sole discretion. .o recover such costs and expenses from Company by lump -sum invoice payt.ble to District in full within thirty (30) days of the date thereof, or b} levy of a surcharge on the rate for emergency water service provided to Company by District pursuant to the Interne .Agreement, both options being er forceable by means including but not limited to the District's termination of said Intertie Agreement, and /or by exercise of any and all other rights and remedies legally available to the District, including but not limited to termination of the Intertie Agreement. (ii) Company covenan ts and agrees that it shal I not dissolve to terminate, or cause to be dissolved or terminated, its corporate existence, either directly or indirectly, prior to the termination of District's option, or if the option is exercised, prior to the time the Assets are transferred back to Company. 13. (a) This Agreement constitutes the entire Agreemen between the parties pertaining to the subject matter contained herein, and superseces all prior and contemporaneous agreements, representations, and understandirg5 of the parties. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by all of the parties. No waiver of any :)''the provisions of this Agreement shall be deemed, or shall constitute, a waiver o` any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. (b) This Agreement may be executed simultaneously or in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective heirs, legal representatives, suc- essors, and assigns. (d) If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. (e) District may, on or before the Closing, terminate this Agreement without liability to Company: (i) Failure of any of the conditions precedent contained in Section 4 of this Agreement; or (ii) if any bona fide action or proceeding shall be pending against either party on the Closing that could result in an unfavorable judgment, decree, or order that would hinder, prevent, or make unlawful the carrying out of this Agreement; or (iii) If the legality and sufficiency of all steps taken or to be taken by the parties and either shareholders in carrying out this Agreement shall not have been approved, as may be required, by appropriate governmental authority; or (iv) if upon the proposed Closing, one party is unable to proceed and consummate the transaction and there is no written agreement to extend said date between the parties. (i) All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the second day after mailing if mailed to the party to whom notice is to be given, by first class mail, and properly addressed as follows: COMPANY Eastwood Farms Community Water Users Post Office Box 8125 Redlands, CA 92375 -1325 DISTRICT East Valley Water District 3654 Highland Avenue, Suite 18 Highland, CA 92346 0 (g) This Agreement shall be construed in accordance with and governed by laws of the State of California. (h) Company, at any time before Closing date, wil execute, acknowledge, and deliver any further deeds, assignments, conveyances, anc other assurances, documents, and instruments c1 transfer reasonably requested ;)} District, and will take any other action consistent with the terms of this Agreemern, that may reasonably be requested by District for the purpose of carrying out the intent of this Agreement. IN WITNESS WHEREOF, the parties to this Agreement have duly executed on the day and year first above written. EAST VALLEY WATER DISTRICT , By: Ge46rge . Wilson, President EASTWOOD FARMS COMMUNITY WATER USERS 1 C By: Paul McCullough, P-esi6ent;? H EXHIBIT LIST EXHIBIT "A" DESCRIPTION OF COMPANY SERVICE AREA EXHIBIT `B" CUSTOMER LIST CALIFORNIA ALL - CAPACITY ACKNOWLEDGMENT State of California ss. County of %RP J ALAt)ij1\) D On A jl4lq 201 li before me, C CONTRERAS NOTARYpUBLIC Date Name erCTne" - - 19 Jerre Doe Notary PuDhc') Personally appeared �Gl 1T Y I ( C OaU X12 s -- C.CONTRERAS COMM.11842223 Z Z° NOTARYPUBLIC- CALIFORNIA SAN BERNARDINO COUNTY My Comm. Expires March 27, 2013 who proved to me on the basis of satisfactory evidence to be the person,(e)'whose name(a'( is/fiaFe" subscribed to Inc within instrument and acknowledged to me that he%shegbey executed the same in hiS[hetftl�e+r-- authorized capacity(io and that by hisftMwhherrs)cnatureX on the instrument the person(/s)', or the en ity upon behalf of which the personwacted, execxded the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and :crrect. WITNESS my hp ,d and Iclal seal. OPTIONAL Though do Intorrini below Is not mqulred by law, d may prove valuable to persona mlying on the documani and could prevent heudulenr removal and manachrowt or this tom to another document Description of Attached Document Title or Type of Document: Document Date: Number of Pages: I 1 Signer(s) Other Than Named Above: A �L wC 1� �' -? I , I I (. Capacity(Ies) Claimed by Signer I C Signer's Name: Top of thumb here individual Paso ek1- y(Corporate Officer – Title(s). — -- Partner - Limhed. General Attomey -in -Fad Trustee Guardian or Conservator Other: -- I Air A;Ca� '*VW(�-) 11 I1 I !I(1_I Li11y( Hp Signer Is Representing: { { _ _ - - - - �ir.. �wwwwAAA +�+iAAhAAIwAA+V+VAAAA+VAAAAN w m y h w 0 ly Q. 2 s � 4 z yea Qm V W � k�q �F LQQ Fwd w y w °off � � O Eq . a w � I 0279 - 701 -20 0179 - ?07 -19 0779- 101 -70 0719 - 201 -11 0179- 70I -17 0 279- 131 -09 C� 0779 - 207 -06 0279 - 701 -IJ 0779 - 701 -05 0279 - 101 -01 0179 - 701 -14 0779 - 201 -15 0279 - 701 -03 0779 - 101 -02 0279 - 701 -16 0179 - 201 -01 0779- 70I -17 �I 0279 - IJI -11 0279 - 731 -12 0779- IJ1-10 0 279- 131 -09 C� '� 02.'9 -t.!'- J7 0179 - 131 -30 0279 - 131 -07 0179 - 131 -J7 0 ?79- IJI -15 N ti al� W x N W 0779 - 131 -06 0779- 1J1 -16 Z s N m I 0279 - 131 -05 0 279- 131 -17 0779 -131 0779 -131 o279-137-04 -J5 -J6 0279- 1J7 -19 0279 -UI -0 � � W q 0279- IJI -02 o'ti a 75 ~. :2 p i~ O O � O J,33NJS 30NYOUdd i 0 L •1 —7 N h 0279 - 151 -39 I 0279- 751 -33 0179- 151 -10 1 t t2� 0279- 75I -1/ 0279 - 151 -38 1 �g�13 0179- r51 -16 t 0279-1.51 42 0279 - 151 -/1 WI E a CY `W 0279 -151 -u f 01]9 - 151 -71 � co 0279 - 151 -30 J 0179-1.51 -1b 0778 - 151 -15 0179- 15/ -t5 Q. 0779- 751 -29 G7! - 14)_37 ti a 1 5 V F Z 71Q s. 1 W f w W _ I 0 279- 151 -2 8 I n° ��•@ 48 �' 4 ^i i . Np �� \ � �� \ — \��-- 0279 - 15 1-2733 079- 1 3 77o_.a1 — A 0279- 151 -27 0179- 751 -10 01 0179 -]H -]I 0279 -1U -67 0779 - 111 -08 010279- )11 -07 79- 1 +1 -66 0779 - 111 -61 w C N 0179- 11/ -63 0179 - 111 -06 0279 -N1 -62 0279 -N -05 0779 - 141 -10 0779 -1 41 -19 0779- 111 -01 0779- N i -11 i T a y \it h b qI 1p q 1 q 02 ° o o a � uZOI o Q� `,1�• 4y, Z I EXHIBIT "B" EASTWOOD FARMS WATER SYSTEM IMPROVEMENT PROJECT EAST VALLEY WATER D13TRICT PRELMINARY ASSESSMENT ROLL 3/302010 ASSESSMENT LAND A.P. MAIL TO NUMBER USE7NN0TE NUMBER RAMEAODRESS 1 D279- 131.01 Garcia, Am W« 26772 Union St. Highland, CA 92345 2 0279.131-02 Orb9s. Jorge A 671 W 21st Street San Bernardino, CA 92405 3 0279- 131 -03 V61a, RWwd Fermly Co RMJrrd V30 T42 Terra0e Road San Barnerdslo, CA 92410 4 0279.13144 Vila, Richard Farnly CIO Ronal Vab 742 Tarns Road San Bernardino, CA 92410 5 027913l-05 ApWar, Yanb 24971 66r St. San Bernardino, CA 92410 a 0279131-05 Abbess, Kash 24M oth St. San Semerdino. CA 92410 7 02790.13147 McFarsind. Blares S Muiarlane, Dorn P.O. Box 623 Highland, CA 92346 e 0279 -131-0 Doan. Marvin 25013 6th St. San Bermclino, CA 92410 9 0279131-09 Cordaro, Rose 2604 W Cale VIM Ddw Rieft CA 92377 10 027913140 TosoMd, LwAaPM 1141.D4 979 Via Swans Upland, CA 91764 11 0279131.11 Tose0nl, Alberl R 10500 Owsrannouth Avar" Chatsworth. CA 91311 12 0279201 -01 Taffy, Danal L Jars" 30597 Mir MI Dr. Redbn06, CA 92373 Legal Des9rlptlon W 200' Lott 9 a 10 Eastwood Farms MB 34178 E 50' of die W 25V Lab 9 6 10 Eastwood Femo MB 3486 Lots 9 610, m E 50' S W 25Y Eastw000 Fanne MB 34178 E 50'LOb 9610 Eastwood Famts MB 341`70 W 112 Lot B Eastwood Farms MB 34f78 E 12 Lot Eastwood Farms MB 34175 LA 7 Eastwood Farms MB 3428 W 112 Lath Eastwood Fame MB 34776 E 12 Lath Eselwnod Farms MB 34/78 W 12 Lot 6 Eastwood Farms MB 3076 E 12 Lot Eastwood Famrs MB 34,78 W 12 Lot Eastwood Farms MB 34175 13 0279 -204-02 Ge. M F E 112 Lou 11750 M1. Vernon Ave, 60223 Eastwood Fame MB 34/78 Grand Tenvoe. CA 92313 14 0278-201-03 Ton Loi N9oc W 50' Lot 5 25078 Oh S;, Eastwood Farmer MS 34/78 San Bemardino, CA 92410 15 0279 -201-04 Stewart. Nelson E 100' Lat 3 14 Asa Hiss Way Eastwood Fars MB 34,70 Laguna Niguel, CA 82677 16 0279 -201-05 Esparta. Yolanda W 12 Lot 2 25105 6th St. Eastwood Farms MB W78 San Bernardino, CA 92410 17 0279 -201-06 Ahsw. Nils 6 Roomer, Ann E 12 Lot 2 26117 6th St Eastwood Fames MB 34176 San Samvdino, CA 92410 15 0279 - 20149 Jamison, Ray W 50' of N 1 SO' Lol 1 Eastwood Farms MB 34178 25137 6M St San Bernardino, CA 92410 19 0279-201 -20 Jamison. Ray Ld 1 Exo. W SO' of N 150' 2S737 6th St Eastwood Famq MB 34/78 San Bamardno. CA 92410 20 11279. 201 -10 FaeWood Acroa Water Community Users do Eastwood Farms Weer E 32 of the S 50' of Lot 22 25019112 5M St Eastwood Farms MB 34!78 San Bernardino. CA 92410 Lot 22 sec E 32 of the S 50 6 asc W 60 21 0279.201.11 Maya, Joseph of the S 140' Eastwood Farms MB 34178 25142 SM St San Bemardino, CA 92410 W 60' of the S 140' Lot 1x122 22 0279 -20142 Miler, Linda Eastwood Fame MB 34178 25128 5th St San Bernardino, CA 92410 23 0279401.13 Brewed. Natson Lot 21 14 Ate Hills Way Eastwood Farms MB 34176 LW" Nigwl, CA 92577 24 0279 - 201.14 Stewart. Nelson E 12 Lot 20 14 Alta Was Way Eastwood Farms MB 34/78 Laguna Niguel, CA 92677 25 0279 - 201 -16 Zeduahe. Lour 8 Roods, Helen W 12lot 20 25064 E 6th St Eastwood Fame MB 3478 Hlp6srd, CA 92348 26 0279-201 -18 CuWto. Sergio E 12 Lot 19 12863 SPA19 Mamfeln Or Eastwood Fame MB 34178 Ramiro Cutamongs, CA 91730 27 0279 - 201.17 AgWlsr, George 6 Lydia W 12 Lot 18 25062 SM St Eastwood Farms MB 34178 San SornaNlno, CA 92410 28 0279. 131 -12 Lea C W22M Lot 18 229 W Tudor St Eastwood Fame MB 34/78 Covina, CA 91722 29 0279 -131 -32 10Nsia Penbocebl Unida Latino E 12 Lot 17 25014 5th St. Eastwood Famna MB 34/8 San BemaN9no, CA 92410 30 0279- 131 -37 Vincent FarrY17 5 -21 -91 W 12 Lot 17 8 E80' Lot 15 P.O. Box 2799 Eastwood Famla MB 34/78 Running Sprkm&. CA 92382 31 0279- 131 -15 Mo(.olbl ?I. Paul 6 FaOh WWI-01116 24992 ST Street a0 Eastwood Famna MB 34/78 San Bamardag, Ca 92410 32 0270- 131 -16 Msta7, Mark E 12 Lot 15 24982 5111 S1. Eastwood Farme MB 34178 San SarnWgo, CA 92410 33 0270- 131.17 Rives, WiiWm W12 Lot 15 24974 5th St. Eastwood Fame MB 34775 San BenrNbo, CA 92410 34 0279.131.36 Rivas Marla E 12, E 12, E 12 Lot 14 24934 5th 51. Eastwood Farm M8 Will San Benrntlno, CA 92410 35 0279.131.35 Shad Trust E 12, E V4 E 12 Lot 13 1708 Justine Way Eastwood Farms MB 34/78 Upland, CA 91784 35 0279. 131 -19 Cramp Properfas W 12, E 12, E 12, Lob 13 i 14 1370 N. 0 SL Apt. 109 Eastwood Femns MS 34PS San BrnaNNn, CA 92405 37 0270 - 131.20 Toblae, Ceadio L Mora W 12, E 12 Lot 14 2495 Filth SL Eastwood Farm MB 34/8 10pnand, CA 92410 30 0270.131 -21 Coin, Enrique & Vicenoio, Shia W 112 Lot 14 ex: W 1451 24932 E. 651 St. Eastwood Famw MB 34178 Highland, CA 92410 39 0279. 131 -22 Andrawis, Rental 8 WWameon, A6rt W 145' La 14 8979 Palm CL Apt. 119 Eastwood Famus MB 34178 RivenMe, CA 92508 40 027W131-23 Lidbe, Carlos a Jose S 60, W 100' Lot 13 847 W 2910 Soviet Eastwood Fans MB 34/78 San Bennardgd, CA 92405 41 0279- 131 -24 UriM, Joao & Carlos Lot 13 exc S 50, W 100' 8 E 12, E 112 Lot 13 847 W 29n Street Easlwood Frets MB 34178 Sri Brandin, CA 92405 42 0279 - 131 -25 U65►, Jon a Carlos S a17 Lot 12 647 W 291h Street Eastwood Fame MB 34170 Son Bernardino, CA 02405 548- Lot 11 6 N 20' Lot 12 43 0279-131 -35 Pole, Clarence Entwvod Finns MB 34178 7955 Tippecanoe Ave. San Bernamino. CA 92410 N 62- Lot 11 44 0279 - 131.27 Federal liolx Loan Mb Corp Eestevcd Farms MB 3075 e20d Jonas &encl, k. McLean,VP 22102 -3110 Lot 23 esc Flood Control RW 45 0279 -1S139 %7bO L Lie Eastwood Farms MB 34178 8760 19th St *370 Alta Loms. CA 81701 lot 24 ow Flood Coni ol RW 46 0279- 151.35 Natlko9kr, Zakel a Mabeka Eastvod Farms MR 34178 310 Ed9emo-d Dr. ReOsnos, CA 92373 N 268' Lot 25 L N leg of E 10' b128 47 0279 - 161-42 Naoko9W, ZOW a Mabsile Eastood Fames MR 34175 310 Edllemonl Dr Redands, CA 82373 Lot 25 asc N 266' 48 0279 -151 -43 Naa'ka91u, Zekai 6 Mabepe Easkeood Farms MB 34178 310 Ed9emont R . Rdsrds, CA 92373 Lot 26 WO N 168' of E 10' i Flood Control RW 49 0279151 -44 Van, C"g 6 Hisp E,owwo Farms MB 34778 7a10 Soaon Ave RivaMde, CA 92503 Lot 27 lolc Flood Control RW 50 027 &161 -30 Sanchez• Danny Eastwood Fame MB 34178 25075 5th St San tierreidn0, CA 92410 Lot 28 asc Flood COMO RW 51 0279. 151 -29 Denial, Wfkem 61ambD* Eastwood Farms MS 34778 PMB 362 7226 CWMh SL Ste A20 Highland, CA 92346 Lot 29 6 E S' Lot 30 art9 Flood Control RW 52 0279 -151-25 Denl Wiliam 6 t9n bary EagwDod Fans MB 3477S PMB 362 7226 Church SL Ste A20 HigNwd, CA 92346 W 95' tot W axc Flood Conlml RW 53 0279 - 15147 Mkt, Wallace 6 Nomro EnnvoOd Farts MB 34776 25037 SN St. San Bernardino, CA 92410 Lot 31 a= Flood Control RW 54 0279 - 141 -74 Skpn, Mahinder a QN, M K Entiood Farts MB 34475 1650 WNtar C, . Colton, CA 92324 N 3110' Lot 32 55 0279141 -07 Banal Mechamoll Inc. Easiwom Farms MB 3488 25003 Sin St. Son Bemerdino, CA 92410 5 200 of N SW Lot 32 axc W10'01 S191 66 0279141.018 Fenn, PNip 5 Standferm, Mena of N 491' Eaeiwpod Famm MB 3078 P.O. Box 88 Pat10n, CA 9M9 Lot 32 axo N SW 6 Food Control RW 57 0279141-06 Sklppar, Tad A FlOhn EnM'o0d Famm MB 34/75 257 W 58m SL San Bemsicho. CA 92407 Lot 33 mt N SOB• L W 50'S 200' 8 Flood 56 027&14142 Skipper. Tab Con ,d RW Eastwood Penns MS SN78 257 W 6881 St San Bernardino, CA 92407 S BC N 506'1-d 335W 10'S 71'N 491' 59 0279.141-29 0 "a• AIn1a Lot 32 Eastwood Fame MB 34/76 24991 5N St. San Bernardino, CA 92410 N 420' Lot 33 8 W 10 S 120'N 420 50 0279 - 141.06 Banat Mad°nkel Ino Lot 32 Ertwood Farms MB 34/76 25003 SN SL San Bamrd'no, CA 92410 E 50'S 200' N 500' Lot 34 E1 0279-14140 Shop, Jack BChedina EnMOOd Farm &MS 34!76 P.O. B=614 Rtslb, CA 92377 E 60N 300' Lot 34 62 0279 -141 -05 Sharp, Jack 6 Charllna Basswood FarrrM MB 34/76 P.O. a" 814 RWOO, CA 92377 63 0279 -Ut-04 Bamr, Lawnaia, VI9tsn W 60 N 300' Lot 34 Ftsesood Farms MS 34178 um C 26320 7u0of CL Redlands, CA 82374 64 0274 141 -03 S9la Mgrm u ur E 100 Lot 35 EpNNdd FartM MB Sre 4900 Sant Ants A" 920 El Monte. CA 91731 E 50 W 292.70' Ld 35 86 0274147 -02 Eashmood Farina MB 34176 24939 S, St 2483D 6N St. San Barturdsho, CA 92410 0279. 141 -0t 24939 581 Street Land Third E W W 242.741ot 35 86 Ems oW Farms MB 34/78 24939 5th St. San Bernardino, CA 92410 E 82.70' W192.7O Lot 35 97 0279.741.73 Par, Hating 8 Hasryon Eastwood Farms MB 34778 24901 5th St San Somw[ ino, CA 92410 W1 1O Lot 35 L W1 1O NSO' Lot 36 60 0279. 141.72 Park, Hung 8 Haeryon Eastwood Fam1s MB 3078 24901 6th SL San Bernardino, CA 92410 Lot 36 wad W110' N5O 69 0279. 141.55 Alvarez, A9wno Eastwood Fame MS "Ill 8073 Tippecanoe Avant San BrrardNO. CA 92410 70 0279.14148 Rms Residential Pmprbp L10 N 12 W 12 Lot 37 6742 Lucent Blvd 9300 Eastwood Fanns MB Writ Highlands Rands CO 60429 71 0270 - 141-46 Mwwlvo. Vatdamar S 12 W 12 Lot 37 7177 Bmndw AV 9216 Eastwood Fame MS are Riverside. CA 92606 72 0279 -14144 Jun Jong is Sole Settler N 12 W 12 Lot 38 P.O. Boa 1011 Essasood Fenn& MB 34,78 HlghIVA, CA 92346 73 0279-14143 Jun Jong J. Sole Setlbr S 1f2 W 12 Lot 38 P.O. Box 1011 Eastwood Farms MS 3408 Hignlano, CA 92318 74 02M141.55 Alvarez, Albano E 112 Lot 37 P.O. Box 936 Eastwood Farm, Me 34178 San Bonarcfm, CA 92402 75 0279 - 14112 Jun Jong is So Ssttlor E 172 Lot 39 mto E 75' P.O. Box 1011 Eastwood Farm, MB 34175 Highland, CA 92348 78 D279.14141 Jun Jong Js Soo Settlor E 75' Lot 38 a S 200 N 500'W 50 Lot 34 P.O. Box 1011 Eastwood Fame MB 3408 Highland, CA 92315 77 0279.141419 Ginthm, Donald Portion of Lot 39 3348 N. D St Eastwood Farms MB 3478 San Barnandino, CA 92405 78 0279 - 141 -70 Glnawr, Don Poraon of Lot 39 3346 N. D St Eastwood Farms MB 3408 San Benwdino, CA 92405 79 0279 -141 -W Barrett, Myrna 5 dnthsr. Don N 7.5' lot 40 8 Pa9un 01 the S 7.5' Lot 39 11002 i rz Cap lne Dr. Eastwood Fame MB 3498 T* ga, CA 91042 80 0279 -141 39 Jun Jong Js Sole Smtlor W 75'E 1 SO Lot 39 9x0 S 7.5' PC. Box 1011 Eastwood Fame MB 3476 Highland, CA 92346 01 0279-141 -39 Jun Jong Js We Sensor E 75' LM 39 P.O. Box 1011 Eastwood Fame MB 3408 Highland. CA 92348 a2 0279-141 -69 GinBwr, Donald Poraoa 0 Lot 40 L 41 3348 N. D SI, Eastwood Farms MB 34178 San BemMrdno, CA 92405 83 0279-141 -62 GfMher, Donald Tr 2008 8 FBes, Stan Tr 2000 S 3.75'N 46.25'W 125' Lot 40 3348 N. D St Eastwood Fame MB 3408 San Bsmsrdino, CA 92405 84 0279.141-33 Glraher, Donald Tr 2008 6 Flies, Stan Tr 2006 S 46.27 W 125 Lot 40 3348 N. DEL Eastwood Fauns ME 3478 San Bamardino, CA 92405 85 0279-141-32 Free, Stan Tr 2008 W W Lot 41 as E 240.17 3345 N. D SL Eastwood Fame MB 3478 San Bamardmro. CA 92405 as 0279-14154 Seaboard Inc S 112 Lot 41 7780 Sterling Avenue Eastwood Farms MB 3408 San Bamanjim, CA 92410 87 0279.14119 Seaboard Inc S 88'W 209 75' Let 42 7766 Sterling Avenue Eastwood Fama M9 3418 Son Barnard -nc, CA 9200 at 0779 - 141 -20 5eeboerd Inc. W W E 160' S 55' Lot 42 7756 Sledog AN Eastwood Farms MB 34176 San Barnad9a, CA 92410 as 0279 - 141 -22 Seaboard Inc. 7755 Sterling Avenue EaaWood Farms MB 34176 San Bernamh0. CA 92410 W 0279-141 -23 Seaboard Inc. E 6C La 42 7766 Seeding Avellga Eastwood Farms MS 34176 San BernanIM. CA 92410 91 D279- 141 -16 Pedrela, VWIW 5 Angela P~ Lot 43 6125 Tlppecerge AN. EasMCod Fame MB 370 San Bemardlnc, CA 92410 92 0279-141 -17 PedrWA, Victor b Angela Potion Lot 43 6125 Tippecanoe Ave. Easa000d Farms MB 34176 San Bernardino. CA 92410 93 0279- 141 -21 Pedn,,s. Victory Anpab Portion Lot 43 6125 Tppecame Ave. Eastwood Farms MB 3417a San BemaJIMM, CA 92410 94 0279- 141 -77 Emami, Kavaua y Helder. All W W S 200` Lot 33 an 5 50'9 S 200' 2297 N Euclid Ave Lot 34 y Lot 44 on FbW Control RW Uptand, CA 91794 Eastwood Fa"s MB 34178 95 0279. 141 -75 San Bernordw County Flood CcnW W STS 50'S 200' Lo133 B25 E 334 St Eastwood Farms MB 378 San 8emardino, CA 92415 96 02M141310 Plan y Propn9ee Inc. Portion lot 45 345 Pearl AN. Ste 230 Eash oW Fame MB 376 Redlands, CA 92374 97 0279.141 -63 Young. Don 9 Nancy Portion 1ol 45 11572 Lewlon Cl. Easevood farms MB 34!76 Lone Undo, CA 92354 go 0279 -141-84 Young, Dan y Nancy lot 46 a= Flood Connor RW 11572 Lawton CL Easbmed Forme MS 376 Loma L9Me, CA 92364 99 0279.141 -87 Felts. Therms y Made Lot 47 9= Flood Control RW 901 Park CenW Dr. Ste 205 Eaenload Farms MB 34/78 Santa Ana, CA 92706 1DD 0279. 161.40 False. Thomas 6 Mane Tr Lot 46 on Flood Control RW 801 Park Center Dr. Sit 205 Eastwood Fame MB 34/76 Santa Ana, CA 92705 101 0279. 151 -23 Fatal, Lukas y Penny Lot 49 on N 378' W W 6 sort Food 7225 WWA@ry od Lana Contra RW Eastwood Farm, MB 376 HIpNam, CA 92346 102 0279 -151 -M Felts, Lukas y Pervey N 376' W 501M 49 an Flood Control RW 7225 Wkderwoae Lane Ea s ood Femta MB 376 HIgNa d, CA 02346 103 027945147 Natxxwl Conssuction Consu. Lot 50 exc S 160' E 75'& Flood Control RW 3351 Cernbe Ave Eastwood Fans MB 34/78 Los Atam4es, CA 90720 104 0279- 151 -18 DreChand, Kinhi9ae,r 6 Donne S 160' WSW E 75' Ldt 50 950 Starught CL Eastwood Fanns MB Unit Banning. CA 92220 105 02MI51-05 Tans unica. Mine 6 Lockwood, Sbven W 43' S 320 Lot 51 6 E 20'S 160' Lot 50 700 E Redtantls Blvd. U231 Eastwood Fame MB 34176 Redlands, CA 92373 106 0270-167.1 B Bonilla, Rgooarto 6 Josaia E 6T S 320' La 51 25086 Jrd Sl Eastwood Farms MB 34!78 San Bernardino, CA 92410 107 0270-151 -16 Rwas, Margarita a Rubio, Mum Lot 51 a= S 320' a Flood Control RW 25094 314 S' Eastwood Fame MB 34/78 San Bamsrdinm, CA 92410 104 0270-1S1-14 Robertson, Lyda 3384118 Lot 52 axc Flood Control RW 1694 Md(vAey Ave Eastwood Farms MB 3M6 San Bemardwo, CA 92404 109 0279-151.41 RWop Fin] M12 lmtm Lk Let 53 an Flood Control RW 555 H St a9 EMMoad Fame MB 34/70 Eureka, CA 95501 110 0279- 151 -26 Ralxop Flni Mi91nNre Lk; Lot 54 axc awc por IV N of CL Ain Sir and a 655 H St aq E 50' S 250' EasMOOd Fame MB 34r76 Eureka, CA 95501 111 0270-15141 Reprop FiN M12 InWa Lk E 50'6 250' L9154 655 H St O9 Sastwood Fame ME 34178 Eureka, CA 95501 112 0279- 151 -10 Faccone, Ket'MrIM S 435.6' Lot 55 601 E Mardi Dr. Easwood Fanns MB 34778 Redlands, CA 92373 113 0279. 151.33 L81eny Sall Dav Lk Lot 55 exc S 435.60' 1033 Kimbark Avanw Eastwood Fame MB 34/IS Ban BeR ind. CA 92407 114 0270-151-34 Hernandez, Sere E 60' Lot 54 b N CL 4th Sk ad aw: Flood 251264th St. Con" RW Eastwood Farms MB 34/76 San Bernardino, CA 92410 116 0279 -1S14S Te ats, Nicole, W 60' Lot 54 ly N CL 4M Sir ad as Flood 25124 4th St Control RW Eastwood Farms MB 34/78 San Bemaroin0, CA 92410 116 0279- 123-019 Cho, Hire Sook Portion of Lot 10 Elk 50 15321 Pamarn Ct. RSB MB 7/2 Grin Hills, CA 91709 117 0279-123-021 Banks. M�cneel 8 J904L"m PordDn of Let 10 Bk 50 24801 Plumtree Cl RSB M6 712 Moreno Velley, CA 02557 11e 027P123-012 119 027&14140 Banks, Mch"I i JocgUD" 24801 PIU"MO Ct. MOr w V&W. CA 92557 Olnttw, OorAW Tr 2006 3348 N. 0 St. Son BemoNkw, CA 92403 Portion Of Lot 10 Bk so RSB MB 72 and PWtIon of ThW Sir. Vetoted S 92.5' E 113.6' Lot 4 and E113,V N 50 Lot 41 Eastwood Farms MB 34175 120 0276141 -29 SkOw, Ted S 400' N 700' Lot 34 257 W 68th St am 5200' W 600' Sd Lot Son Bon ardkw, CA 92407 E*Ol d Fomto M9 34176 RESOLUTION NO. 2010.11 A RESOLUTION OF INTENTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT TO INITIATE PROCEEDINGS TO FORM EASTWOOD FARMS ASSESSMENT DISTRICT WHEREAS, the Board of Directors of the East Valley Water District ("EVWD") finds as follows: A. EVWD is formed and organized pursuant to the County Water District Law, California Water Code Section 30000 et seq. B. The Eastwood Farms Community Water Users ( "EFCWU ") is a private corporation organized and operating as a nonprofit organization under the laws of the State of California. EFCWU's service area is within the jurisdictional boundaries of EVWD. C. EFCWU's water system consists of a well, booster pump, and various types of piping that are inoperable and /or not in compliance with the legal standards enforced by the State of California Department of Public Health and/or the County of San Bernardino Department of Environmental Health Services ( "the Water System "). As a result, EFCWU's shareholders are currently receiving domestic water service by virtue of an emergency connection to EVWD's water distribution system. D. EFCWU's shareholders have formally requested that EVWD permanently assume the operation and control of the Water System and that the properties served thereby become part of EVWD's official service area. E. EVWD has agreed to consider said proposal if outside funding can be obtained to repair and replace the Water System and a majority of the shareholders of EFCWU consent to the financing mechanism deemed appropriate by EVWD to repay the costs thereof. F. On behalf of EFC_WU, EVWD submitted an application for construction monies from the Safe Drinking Water State Revolving Fund ( "the Fun l ") for the purpose of securing revenue to be used for the construction of facilities necessary tc bring the Water System into a condition deemed appropriate by EVWD to assume the operation and control thereof ( "the Project ") G. On or about January 12, 2010, EVWD's Board cf Directors adopted a Mitigated Negative Declaration for the proposed Project pursuant to the California Environmental Quality Act (Public Resources Code Section 21000 et seq.) and the Guidelines promulgated thereunder (14 California Code of Regulations Section 15000 et seq.). H. On or about April 16, 2010, EVWD and EFCWU entered into a Notice of Application Acceptance issued by the State of California Department of Water Resources on or about April 5, 2010, for Project No. 3600100 -003, wherein the Fund would provide a construction loan in the amount of $264,440.00 ( "the Loan"') and a construction grant in the amount of $1,057,756.00 ( "the Grant "), for a total contribution by the Fund of $1,322,196.00 to be applied to the cost of the Project, the total price of which is currently estimated to be the sum of $1,520,526.00. I. In order to repay the Loan and reimburse EVWD for the portion of the Project costs not covered by the Fur.d, EVWD intends to initiate proceedings to form the Eastwood Farms Assessment District ( "EFAD ") in accordance with California law and the terms and conditions contained herein. NOW, THEREFORE, BE IT RESOLVED, that the Beard of Directors of EVWD does hereby determine and order as follows: 2 (1) Plans and specifications of the proposed Project. The plans and specifications need not be detailed and are sufficient if they show or describe the general nature, location, and extent of the improvements. If the EFAD is divided into zones, the plans and specifications shall indicate the class and the type of improvements to be provided for each zone. The plans or specifications may be prepared as separate documents, or either or both may be incorporated in the report as a combined document. (2) A general description of works or appliances already installed and any other property necessary or convenient for the operation of the proposed Project, if the works, appliances, or property are to be acquired as part of the improvement. (3) An estimate of the cost of the proposed Project and of the cost of lands, rights -of -way, easements, and incidental expenses in connection therewith, including any cost of registering bonds. (4) An estimate of the private utility damages associated with the proposed Project. (5) An estimate of the amount of the assessment for the maintenance, repair, or improvement of the proposed Project for each of the first five years during which the assessment would be levied. (6) A diagram showing, as they existed at the time of the passage of this Resolution, (a) the exterior boundaries of the EFAD, (b) the boundaries of any zones within the EFAD, and (c) the lines and dimensions of each parcel of land within the EFAD. Each subdivision, including each separate condominium interest, shall be given a separate number upon the diagram. The diagram may refer to the county assessor's maps for a detailed 4 SECTION 1. Statement of Intent. A. Assessment District Formation. The Board cf Directors of EVWD formally declares its intention to form the EFAD for the purpose of repaving the Loan and reimbursing EVWD for any portion of the proposed Project costs not covered by the Fund. B. Levy of Assessment. The Board of Directors of EVWD formally declares its intention to provide for the repayment of the Loan and the reimbursement of any proposed Project costs paid by EVWD by virtue of the levy of an assessment on each property within the EFAD. C. Compliance with Law. It is the intent of the Board of Directors of EVWD in adopting this Resolution, to adopt assessment ballot proceedings which are consistent and in compliance with Articles XIIIC and XIIID of the California Constitution and with the Proposition 218 Omnibus Implementation Act. It is not the invent of the Board of Directors of EVWD to vary in any way from the requirements of Articles X.IIIC and XIIID or the Proposition 218 Omnibus Implementation Act. SECTION 2. Description. A. Project. The proposed Project is briefly described in the document attached hereto as Exhibit "A" and incorporated herein by this reference. B. Boundaries. The exterior boundaries of the proposed EFAD is also described in the document attached hereto as Exhibit "A" and incorporated herein by this reference. SECTION 3. Engineer's Report. A. Preparation. Fhe Board of Directors of the EVWD hereby directs William J. McKeever, a registered professional engineer certified by the State of California, to prepare a report that contains all of the following: 3 description of the lines and dimensions of any parcels, in which case those maps shall govern for all details concerning the lines and dimensions of the parcels. (7) A proposed assessment of the total amount of the cost and expenses of the proposed Project upon the several subdivisions of land in the district in proportion to the estimated beneftts to be received by each subdivision, respectively, from the improvement. In the case of an assessment for installation of planned local drainage facilities which are financed, in whole or in part, pursuant to Section 66483 of the Government Code, the assessment levied against each parcel of subdivided land may be levied on the basis of the proportionate storm water runoff from each parcel. When any portion or percentage of the cost and expenses of the improvement is ordered to be paid out of EVWD's treasury, the amount of that portion or percentage shall first be deducted from the total estimated cost and expenses of the proposed Project, and the assessment upon property proposed in the report shall include only the remainder of the estimated cost and expenses. The assessment shall refer to the subdivisions by their respective numbers as assigned pursuant to subdivision (6). (8) A proposed maximum annual assessment upon each of the several subdivisions of land in the district to pay costs incurred by EV WD and not otherwise reimbursed which result from the administration and collection of assessments or from the administration or registration of any associated bonds and reserve or other related funds. (9) A maximum annual assessment to pay for EVWD's administrative costs which shall not exceed a reasonable estimate of costs actually incurred or likely to be incurred. B. Filing. The Engineer's Report must then be filed and presented it to EVWD's Board of Directors for confirmation, modification, and/or correction. 5 SECTION 4. Assessment Ballot Proceeding. The following procedures shall be used in an assessment ballot proceeding required by Article X1111'. Section 4, of the California Constitution: A. Amount of Assessment. Only special benefits are assessable. The amount of each assessment shall be each identified parcel's proportionate share of the public improvement or property related service based upon that parcel's special beretit from the proposed Project. The amount shall be proportional to and no greater than the benei its conferred on the property. B. Special Benefit. For purposes of determining the amount of the assessment: (1) Special benefit means a particular and distinct benefit over and above general benefits conferred on real property located in the assessment district or to the public at large; (2) Special benefits are those which the property assessed receives, due to the proposed Project, in excess of the general public benefit; (3) The fact that the other property within the district or within the area will be, to a greater or lesser extent specially benefitted by the proposed Project, will not have the effect of depriving assessed property of its character of specially benefitted property; (4) Special benefit is immediate and of sucl: a character as can be seen and traced. General benefits are remote and sometimes contingent. C. Engineer's Report. The Engineer's Report directed herein by EVWD's Board of Directors shall comply with the applicable state statute authorizing the assessment and with article MID, Section 4, of the California Constitution. The Engineer's Report shall explain the special benefit, as defined in Section 413 of this Resolution, conferred by the proposed Project. The Engineer's Report shall also provide the evidence upon which this council may find that a R special benefit exists. If the proposed Project confers a general benefit, the Engineer's Report shall describe the general benefit and explain how it will be funded. D. Notice. The following guidelines shall apply to giving notice of an assessment. (1) The record owner(s) of each parcel to be assessed shall be determined from the last equalized property tax roll. If the property tax roll indicates more than one owner, each owner shall receive notice. Only property owners shall receive notice. (2) The form of notice is attached to this Resolution as Exhibit `B ". (3) The notice shall be sent at least forty -five (45) days prior to the date set for the public hearing on the assessment. (4) The notice provided by this section and in accordance with Article XIIID, Section 4, of the California Constitution, shall supersede and be in lieu of any other statutes requiring notice to levy or increase an assessment, including but not limited to the notice required by the state statute authorizing the assessment and Government Code Section 54954.6. proceedings. district. (5) Failure of any person to receive notice shall not invalidate the (6) The cost of providing notice shall be included as a cost of the assessment E. Assessment Ballot. The following guidelines shall apply to the assessment ballot: (1) The ballot required by Article XIIID, Section 4(d), of the California Constitution shall be mailed to all property owners of record within the EFAD at least forty-five (45) days prior to the date of the public hearing on the proposed assessment. (2) The form of the ballot is attached to this Resolution as Exhibit "C ". 7 (3) All ballots must be returned to EVWD's General Manager by mail or in person, sealed in the envelope provided, not later than the date for return of ballots stated on the notice described in Section 4D of this Resolution. (4) A ballot must be signed under penalty c f perjury. For properties with more than one owner of record, ballots will be accepted from each owner of record. Each owner of record is entitled to vote. EVWD's General Manager steal: apportion the voting rights between the owners based upon the respective record interests as EVWD's General Manager deems correct, proper, and appropriate. However, if only one owner of record votes, EVWD's General Manager shall tabulate that vote on behalf of the entire parcel. (5) A tenant of real property shall not have the power or authority to submit an assessment ballot. (6) Only ballots with original signatures, not photocopies, will be accepted. (7) EVWD's General Manager may issue a duplicate ballot to any property owner whose original ballot was lost or destroyed. Such ballots shall be clearly marked as duplicate ballots and shall be accompanied by sufficient information for EVWD's General Manager to verify the location and ownership of the property in question and the identity of the individual casting the ballot in order to verify its authenticity. (8) An assessment ballot proceeding is not an election. F. Tabulating Ballots. The following guidelines shall apply to tabulating assessment ballots: (1) EVWD's General Manager shall determine the validity of all ballots. EVWD's General Manager shall accept as valid all ballots except those in the following categories: 0 (a) A photocopy of a ballot which does not contain an original signature; (b) An unsigned ballot; (c) A ballot which lacks an identifiable "yes" or "no" vote; (d) A ballot which appears tampered with or otherwise invalid based upon its appearance or method of delivery or other circumstances. (2) The decision of EVWD's General Manager that a ballot is invalid, after consultation with EVWD's General Counsel, shall be final and may not be appealed to EVWD's Board of Directors. (3) All assessment ballots received by EVWD will remain sealed until tabulation. During and after the tabulation, the assessment ballots will be treated as disclosable public records and equally available for inspection by the proponents and the opponents of the proposed assessment. (4) A property owner who has submitted an assessment ballot may withdraw the ballot and submit a new or changed ballot up until the conclusion of the public hearing on the assessment. (5) A property owner's failure to receive an assessment ballot shall not invalidate the proceedings conducted under this section and Section 4, Article XIIID, of the California Constitution. G. Public Hearing. (1) At the public hearing, EVWD's Board of Directors shall hear all public testimony regarding the proposed assessment and accept ballots until the close of the public hearing. E (2) EVIA'D's Board of Directors may impcsc reasonable time limits on both the length of the entire hearing and the length of each speaker's t,^stimony. (3) At the conclusion of the hearing, ar: :mpartial person designated by EV WD who does not have a vested interest in the outcome of the proposed assessment will tabulate the assessment ballots submitted and not withdrawn, in support of, or in opposition to, the proposed assessment. (4) If it is not possible to tabulate the ballots or., the day of the public hearing, or if additional time is necessary for public testimony, EVWD's Board of Directors may continue the public hearing to a later date to receive additioral testimony, information, or to finish tabulating the ballots. (5) If according to the final tabulation of the ballots, ballots submitted against the assessment exceed the ballots submitted in favor of the assessment, weighted according to the proportional financial obligation of the affected property, a "majority protest" exists and EVWD's Board of Directors shall not impose or increase the assessment. (6) EVWD's Board of Directors reserves the right to withhold approval of the Project or the formation of the assessment district for any reason, including but not limited to failure to obtain consent thereto, without qualification, objection, or legal recourse, from every person and/or entity to which an assessment would be levied by EV WD. SECTION 5. Payment of Un- Funded Project Costs. If the Project is approved by EVWD's Board of Directors, and the EFAD is formed pursua °tt to this Resolution, the General Manager of EVWD will be authorized to pay the portion of the proposed Project costs not covered by the Fund from such treasury account as may be designated by EVWD's Board of Directors. 10 SECTION 6. Disposal of Surplus Funds. If any surplus monies derived from the assessment district remain in the improvement fund after completion of the Project, said monies shall be disposed of in a manner deemed appropriate by EV WD's Board of Directors. ADOPTED this 27' day of July, 2010. AYES: LeVesque, Malmberg, Morales, Sturgeon NOES: None ABSTAIN: None ABSENT: Wilson orge E. Wilson, President ATTEST: �r Robert E. Martin, cretary Attachments: Exhibit "A" - Preliminary Project Report Exhibit `B" - Form of Notice Exhibit "C" - Form of Assessment Ballot EAST VALLEY WATER DISTRICT EASTWOOD FARMS MUTUAL WATER COMPANY WATER SYSTEM IMPROVEMENT PROJECT Prepared for: East Valley Water District 3654 Highland Avenue, Ste. 18 Highland, CA 92346 (909) 888 -8986 (909) 383 -1481 Fax Prepared by: W. J. McKeever, Inc. 900 E. Washington St., Ste. 208 Colton, CA 92324 (909) 825 -8048 (909) 825 -8639 Fax July 29, 2010 EAST VALLEY WATER DISTRICT EASTWOOD FARMS MUTUAL WATER COMPANY WATER SYSTEM IMPROVEMENT PROJECT 04/12/10 TABLE OF CONTENTS 1. Background 2. Area 3. Project Description 4. Improvements 5. Proposed Financing 6. Assessments 7. Legal Requiremems/Procedums g. Tentative Schedule 9. Exhibits A. Improvement District Boundary Map B. Proposed Water System Improvements C. Preliminary Assessment Diagram D. Preliminary Assessment Roll E. Preliminary Project Construction Cost Estimate F. Finance Summary G. Preliminary Assessment Calculations H. Loan Summary & Payments Page 2 of 15 SECTION 1: BACKGROUND Tract No. 2439, Eastwood Farms, was recorded in June of 1930. Sometime after that date, a water system was constructed. The system consisted of service mains supplied by 2 wells and a hydropneumatic booster system. The only plan available for this system is a plan titled "Proposed Improvements to Eastwood Farms Mutual Water Co." dated August 1974 prepared by L.A. Hosegood. This plan shows some 6" and 3" mains but does not show service laterals to all the parcels. There is essentially no above ground storage for Fire protection. The system does not meet State Department of Health Standards. The current situation is that the wells have failed and the area is currently being served by an emergency connection to the East Valley Water District distribution system that is adjacent to the company's service area. SECTION 2: AREA The area currently being served by the Eastwood Farms Mutual Water Company consists of all of Tract No. 2439 Recorded in Book 34 of Maps page 7 records of San Bernardino County California and Assessor's Parcels Number 279- 123 -012, 279 - 123 -021 and 279 - 123 -019. The service area includes approximately 77 acres. The land uses within the service area consist of Residential, Commercial and some Light Industrial. The parcels located east of Tippecanoe Avenue within Tract 2439 are within the corporate limits of the City of Highland. The 3 parcels located west of Tippecanoe Avenue on the north side of Third Street are within the unincorporated area of San Bernardino Lounty. The general plan for the City of Highland shows the land uses within the area to be Planned Commercial and Business Park. The majority of the existing land toes do not conform to these designations. There arc a total of 120 parcels within the improvement district boundary, 117 of these parcels will require water service. The remaining 3 parcels consist of the existing Eastwood Farms Water Company well site and 2 parcels that appear to be access roads. Existing improvements within the project area consist of: 1. Street paving with some parcels improved with curb and gutter and sidewalks. City of Highland Circulation Element of General Plan classifies the streets as follows: 6"' Street — Collector 66' RW — 44' Curb 5a' Street — Mayor Highway 104' RW — 80' Curb 3`d Street — Primary Arterial 112' RW — 94' Curb Tippecanoe Street — Secondary Highway 88' RW - 64' Curb Existing street improvements are not constructed to these standards sections. 2. Driveways and sidewalks are scattered throughout the project area- Page 3 of 15 3. Sewer System. The EVWD owns and operates a sewer collection system within part of the project area. 4. Water System. The Eastwood Farms Water Company has a distribution system within the project boundary. This system was supplied by a well and a hydropneumatic booster system. The distribution system does not meet standards and the well is no longer operable. SECTION 3: PROJECT DESCRIPTION The proposed project consists of the construction of the following improvements to the standards and specifications of the East Valley Water District. SIXTH STREET Construct service laterals to parcels on the south side of street connected to existing 12" water main in street. Construct fire hydrants per Fire Department Standards on south side of street. FIFTH STREET Construct main, service laterals and fire hydrants EXTENSION OF FOURTH STREET Construct main, service laterals and fire hydrants. THIRD STREET Construct main, service laterals and fire hydrants on north side of street TIPPECANOE STREET Construct service laterals to parcels on the east side of skeet connected to existing main on west side of street Constrict fire hydrant on the southerly portion of the street. The proposed systems will be connected into the existing East Valley Water District. The mains to be installed in Fifth Street, Third Street and the southern end of Tippecanoe Street ,will be 12" in size. These mains have been sized to implement the District's Master Plan. These mains will be installed within public street rights of way. The extension of the main in Third Street west of Tippecanoe Street will be 8" in size. This main ,will also be constructed with public street right of way. The mains that will be installed in Fourth Street and the 3 private roads east of Tippecanoe Street between the Flood Control Channel and Fifth Street will be 8" in size. These mains will be installed within East Valley Water District easements that will need to be acquired. Page 4 of 15 SECTION 4: IMPROVEMENTS The proposed water distribution system will consist of the following: 1. Water Main - 8" & 12" Ductile Iron Pipe per EV WD Standard Specification 2.04; 2. Fire Hydrant - per EV WD Standard Specification 2.08; 3. Gate Valves- per EV WD Standards Specification 2.06; 4. Water Service - per BV WD Standard Specification 2.15; and 5. Water Meters- per EV WD Standard Specification 2.17. NOTE: Information received from the City of Highland, City .Engineer's office, indicates that the City will not require AC overlay in addition to the standard 1 -mch repair. Consequently, no cost was included in the estimate for AC overlay. SECTION 5: PROPOSED FINANCING Typically, an assessment project would be funded by the sale of tax- exempt municipal improvement bonds. This project, however, lacks the size required to make a bond issue feasible. The project has qualified for "Safe Drinking Water State Revolving Fund" funding as "Eastwood Farms Mutual Water Company Project No. 3600100 -003 (consolidation with East Valley Water District) ". Under this Smding program, the project is eligible for a construction loan in the amount of $264,440 and a construction grant in the amount of S1,057,756. The loan is to be repaid over 30 years at zero percent interest. The grant does not require repayment. The balance of the project cost, approximately $949,203, will be loaned by East Valley Water District to be repaid over a 10 -year period at 100/9 interest. COSTS ASSOCIATED WITH A PROJECT OF THIS NATURE ARE: I. Construction cost of new distribution system including service laterals to right of way, abandonment of the existing well and a 15% construction cost contingency. 2. Capacity fees and meter set fees as required by East Valley Water District. 3. Consultant fees. 4. Administrative fees charged by East Valley Water District. 5. Construction cost of onsite service laterals. NOTE: No cost was included for right of way acquisition. Page 5 of 15 SECTION 6: ASSESSMENTS The parcels within the project vary in size and current land use. The City of Highland General Plan Land Use Element designated the area as "Planned Commercial" and "Business Park ". Very few of the current land uses conform to those designations. The overall cost of the project was broken down into two categories as follow; COSTS TO BE SPREAD OVER ALL BUILDABLE PARCELS WITHIN THE ASSESSMENT DISTRICT 1. Construction of new mains 2. Construction of service laterals 3. Construction of Fire Hydrants 4. Front footage charge for existing water mains. 5. Consultants fees 6. East Valley Water District Fees COSTS TO BE ASSIGNED TO SPECIFIC PARCELS 1. Meter set fees 2. Capacity fees 3. Cost for individual parcel onsite service lateral The Spread Costs are apportioned to the parcels as follows: 1. 50% of Spread Cost is assigned to each parcel based on the parcel frontage as a percentage of the total frontage within the project. 2. 50% of Spread Cost is assigned to each parcel based on the area of the parcel as a percentage of the total of the areas of all the parcels within the project. The cost assigned to Parcels is assessed to each parcel based on the number and size of the meters required for that parcel and the quantity of onsite service lateral. The owner of each parcel may determine the number and size of meters desired. The owners of vacant parcels may elect to defer meter set fees and capacity fees to the time that the parcel is developed. The Owner of each Parcel may elect to not have the cost of any onsite service included within the Assessment for their Parcel. If the meter set fee and the capacity fee are deferred, the District will require the owner, to pay the fees based on the District's current adopted fee scheduled at the time of payment of said fee. The total assessment for each parcel is shown on the Preliminary Assessment Calculations. Monthly payments are shown based on both the State Revolving Fund Loan and the East Valley Water District Loan that require repayment. The State Revolving Fund Loan is a 30 -year payback and the East Valley Water District Loan is a 10 -year payback. Consequently, the monthly payment will be reduced alter 10 years. The value of the accrued benefits to each parcel within the assessment district, by virtue of the construction of the water system, is far greater than the amount assessed to each parcel. Efficiency of costs are achieved by virtue of the large size of the construction Page 6 of 15 project and 46% of the cost being paid for by a Safe Drinking Water, State Revolving Fund Grant. Actual benefits accruing to the assessed parcels are as follows 1. A water system that meets current codes. 2. A water system that provides fire protection. 3. A water system connected to East Valley Water District's storage facilities for emergency and fire flow. 4. 24 hour a day - 7 day a week emergency response by D, strict Staff for operation and maintenance of the water system. 5. Potential outside assistance during disasters by virtue of East Valley Water District's affiliation with relief associations and emergency interties with adjacent water systems. Page 7 of 15 SECTION 7: LEGAL REOUIREMENTS /PROCEDURES The following is a brief general outline of the applicable legal requirements concerning the content of the Engineer's Report that is a necessary prerequisite for the establishment of an Assessment District to fund the improvements necessary for the project discussed herein. 1. ENABLING AUTHORITY As a county water district organized and operating pursuant to Water Code Section 30000 et seq., EVWD is authorized by law to finance a broad range of local public improvements using a number of benefit assessment acts. See, e.g., Water Code Sections 31030, 31300, 31370. The Improvement Act of 1911 (Streets and Highways Code Sec. 5000 et seq.) permits cities and counties to fund the construction of transportation systems, street paving, parks, sewers, drainage systems, fire protection, flood control, water systems, and other necessary improvements. Officials must complete the improvements before residents can be assessed for their costs., The Municipal Improvement Act of 1913 (Streets and Highways Code Sec. 10000 et seq.) authorizes cities, counties, and special districts to fund everything included in the 1911 Act plus power and public transit facilities. Unlike the 1911 Act, assessments can be levied before construction begins. H. SATISFACTION OF JUDICIAL CRITERIA A special assessment is a charge levied on real property that benefits directly from some public project or service. The charge is used to finance all or part of the costs of the improvement. Special assessments are collected with property taxes, and appear on the same bill as the property tax. The amount charged is usually not based on the value of the property, but is either a fixed per - parcel levy or a scheduled levy that varies either with location or type of property. Special assessments are based upon the premise that those who receive a special benefit from a public improvement should contribute to the payment of its costs. However, the amount of assessment is theoretically not to be determined by the costs of the improvement, but by the amount of benefit received by affected individuals. Those who receive greater benefits should pay more than those who receive less benefit. Because the assessment is to be levied on the amount of benefit received, it is not considered a tax. Thus, for a benefit assessment to be legal, it must provide a direct or special benefit to the property above and beyond the general benefits received throughout the area. General benefits should be paid for by taxes. County of Fresno v. Malmstrom (1979) 94 Cal. App. 3d 974,156 Cal. Rptr. 777; C of Larkspur v. Marin County Flood Control & Water Conservation District (1985) 168 Cal. App. 3d Page 8 of 15 947, 214 Cal. Rptr. 689; Solvang Municipal Improvement District %. Board of Supervisors (1980) 112 Cal. App. 3d 545, 169 Cal. R.ptr. 391. ID. SATISFACTION OF STATUTORY CRITERIA Under the Municipal Improvemeni Act of 1913, Streets and Highways Code' Section 10000 et seq. "the Act ", the following provisions apply with respect to the Engin °er's Report: General Procedure Before ordering any improvement which is authorized by the Act to be made, the Board must adopt a resolution that (a) declares its intention to do so, (b) briefly describes the proposed improvement, (c) specifies the exterior boundaries of the assessment district, (c) provides for the issuance of improvement bonds, if any bonds are to be issued, (e) declares its in' ention to levy an assessment to maintain, repair, or improve the facility, if it intends to levy such an assessment, (f) provides for the disposal of any surplus remaining in the improvement fund after the Ampletion of the improvement, and (g) contains a brief statement of the intention of the legislative body to enter into an agreement with any otherpublic agency, or public utility, in connection with th _ improvement. Section 10200. In the resolution of intention, the Board may also order that a specified portion or percentage of the cost and expenses of the improvement shall be paid out of EVWD's treasury from such fund as the Board may designate. Section 10201. In the resolution of intention, the Board may refer the proposed improvement to an Engineer and direct the Engineer to make and file with the Board a report in writing. Section 10203. Under Section 10204, said report must contain all of the following: (a) Plans and specifications of the proposed improvement if he improvement is not already installed. The plans and specifications need not be detailed and are sufficient if they show or describe the general nature, location, and extent of the improvements. If the assessment district is divided into zones, the plans and specifications shall indicate the class and the type of improvements to be provided for each zone. The plans or specifications maybe prepared as separate documents, or either or both may be incorporated in the report as a combined document. (b) A general description of works or appliances already installed and any other property necessary or convenient for the operation of the improvement, if the works, appliances, or property are to be acquired as part of the improvement. 1 Unless otherwise indicated, all references herein to a specific statutory section shall be to the Streets and Highways Code. Page 9 of 15 (c) An estimate of the cost of the improvement and of the cost of lands, rights -of -way, easements, and incidental expenses in connection with the improvement, including any cost of registering bonds. If the Board, in the resolution of intention, ordered that private utility damages be included in the assessment, the report shall contain an estimate of the private utility damages. If the Board, in the resolution of intention, declared its intention to levy an assessment for the maintenance, repair, or improvement of the work, system, or facility, the report shall contain an estimate of the amount of this assessment for each of the first five years during which the assessment would be levied. (d) A diagram showing, as they existed at the time of the passage of the resolution of intention, (1) the exterior boundaries of the assessment district, (2) the boundaries of any zones within the district, and (3) the lines and dimensions of each parcel of land within the district. Each subdivision, including each separate condominium interest, shall be given a separate number upon the diagram. The diagram may refer to the county assessor's maps for a detailed description of the lines and dimensions ofanyparcels, in which case those maps shall govern for all details concerning the lines and dimensions of the parcels. (e) A proposed assessment of the total amount of the cost and expenses of the proposed improvement upon the several subdivisions of land in the district in proportion to the estimated benefits to be received by each subdivision, respectively, from the improvement. In the case of an assessment for installation of planned local drainage facilities which are financed, in whole or in part, pursuant to Section 66483 of the Government Code, the assessment levied against each parcel of subdivided land may be levied on the basis of the proportionate storm water runoff from each parcel. When any portion or percentage of the cost and expenses of the improvement is ordered to be paid out of EVWD's treasury, the amount of that portion or percentage shall first be deducted from the total estimated cost and expenses of the improvement, and the assessment upon property proposed in the report shall include only the remainder of the estimated cost and expenses. The assessment shall refer to the subdivisions by their respective numbers as assigned pursuant to subdivision (d). (f) A proposed maximum annual assessment upon each of the several subdivisions of land in the district to pay costs incurred by the city and not otherwise reimbursed which result from the administration and collection of assessments or from the administration or registration of any associated bonds and reserve or other related funds. The Engineer's Report must then be filed and presented to the Board for confirmation, modification, and /or correction. Section 10300. When, upon the hearing, the proposed assessment provided forin the Engineer's Report is confirmed as filed, as modified, or corrected, by resolution, the Board may order the proposed improvement to be made or acquired, and declare its action upon the report and assessment. Section 10312. The resolution shall be final as to all persons, and the assessment thereby levied upon the respective subdivisions of land in the assessment district. Section 10312(a) Under Section 10312(b), if an annual assessment to pay for administrative cost is provided for in the Page 10 of 15 Engineer's Report, the Board must determine, by resolution, the amount of the annual assessment for this purpose, which shall not exceed the maximum amount set forth therein and shall not exceed a reasonable estimate of costs actually incurred or likely to be incurred This determination maybe included in the resolution adopted above. The Board may subsequently determine by resolution that the annual assessment shall be a different amount, but in no event shall the annual assessment exceed the maximum annual assessment provided for in the Engineer's Re- omL Such resolutions shall be final as to all persons, and the annual assessment in the amount dimmnined shall thereby be levied annually until changed by a subsequent resolution adopted pursuant to the above procedure. These assessments may be collected in the same manner and in the came installments as the other assessments, and may be combined with those assessments for collection in any manner, which is convenient and economical. 2. Alternative Procedure The Act provides an alternative procedure for authorizing assessments. However, the alternative procedure does not apply to (a) proceedings to finance public facilities unless 80 percent or more of the district is developed for residential, commercial, or industrial use at the time that proceedings are commenced, and (b) the acquisition of existing works, appliances, or property except insofar as the acquisition is incidental to a proposed improvement not already installed. Section 10360. Under the alternative procedure, Section 10364 states that the Engineer's Report must contain the following elements instead of those specified in Section 10204: (a) A general description of the proposed project. Detailed plans and specifications need not be included in the report. (b) A general description of works or appliances already installed and any other property necessary or convenient for the operation of the improvement, if the work, appliance, or property is to be acquired as part of the improvement. (c) An estimate of the costs of the improvement and of the cost of lands, rights -of -way, easements, and incidental expenses in connection with the mprovement. If the Board, in the resolution of intention, ordered that private utility damages be included in the assessment, the report must contain an estimate of private utility damages. In addition to the estimate of the likely cost of the project, the report must state a maximum cost of the project and anyprivate utility damages. If the Board, in the resolution of intention , declared its intention to levy an assessment for the maintenance, repair, or improvement o, the work, system, or facility, the report must contain an estimate of the amount of this assessment for each of the first five years during which the assessment would be levied. (d) A diagram showing the assessment district and the boundaries and dimensions of the subdivisions of land within the district as they existed at the time of the passage of the resolution of intent. Each subdivision, including each separate condominium interest, must be given a separate number upon the diagram. Page 11 of 15 (e) A proposed assessment of a percentage share of the cost and expense of the proposed improvement upon each subdivision of real property in the district in proportion to the estimated benefits to be received by those subdivisions, respectively, from the improvement. The amount of the proposed assessment against each subdivision ofreal property, assuming the improvement costs and expenses are the amount estimated in subdivision (c) and assuming the project costs and expenses are the maximum amount stated in subdivision (c). When any portion or percentage of the cost and expenses of the improvement is ordered to be paid out of EV WD's treasury, the amount of that portion or percentage must first be deducted from the total estimated costs and expenses of the improvement and from the maximum costs and expenses of the project, and the assessment upon property proposed in the report must include only the remainder of the estimated costs and expenses. The assessment shall refer to the subdivisions by their respective numbers as assigned pursuant to subdivision (d). Under the alternative procedure, Section 10368 provides that the assessment must be confirmed as follows instead of the procedure specified in Section 10312: (a) When upon the hearing the proposal to assess is confirmed as filed, modified, or corrected by resolution, the Board must order the proposed improvement to be made and declare its action upon the report and assessment. (b) After design work and plans and specifications have been completed, and after contracts have been let, the Board must, by resolution, fix the amount of the assessment, which shall be equal to or less than the maximum assessment stated in the Engineer's Report, as filed, modified, or corrected. If the amount of the assessment is more than the estimated cost ofthe project stated in the report, as filed, modified, or corrected, the Board must include, within the resolution fixing the amount of the assessment, an explanation for the increase over the estimated cost of the project. In no case shall the amount of the assessment exceed the maximum assessment stated in the report, as filed, modified, or corrected. Resolutions adopted pursuant to the Act's alternative procedure are be final as to all persons, and the assessment fixed shall be thereby levied upon the respective subdivisions of land in the assessment district. Section 10368, IV. SATISFACTION OF CONSTITUTIONAL CRITERIA In 1996, California voters approved Proposition 218, known as the "Right to Vote on Taxes Act," which added Articles XIIIC and XIIID to the California Constitution? Specifically, Section 3(a) of Article XIIID provides in pertinent that "no assessment shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except assessments as provided by this Article." 2 All references herein to a specific Article shall be to the California Constitution. Page 12 of 15 Under Section 4(b) of Article XIIID, all such assessments "must be supported by a detailed engineer's report prepared by a registered professional engineer certi ied by the State ofCalifomia." Compliance with all of the following requirements contained in Sect or 4(a) of Article XIIID should be reflected in the Engineer's Report: (a) Identification of all parcels, which will have a special benefit conferred, upon them and upon which an assessment will be imposed. (b) The proportionate special benefit derived by each identified parcel must be determined in relationship to the entirety of the capital costs of a public in provement or the maintenance and operation expenses of a public improvement or for 'he costs of the property related service being provided. (c) No assessment shall be imposed on any parcel, which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. (d) Only special benefits are assessable, and EV WD must separate the general benefits from the special benefits conferred on a parcel. (e) Parcels within a district that are owned or used by any agen :y, the State of California or the United States must not be exempt from assessment unless the report demonstrates by clear and convincing evidence that such publicly owned parcels ii fact receive no special benefit. Thereafter, written notice of a proposed assessment must be given to "record owners" of the properties proposed to be assessed, together with the date, time, and location of a public hearing on the assessment, to be conducted no fewer than 45 days after the notice is mailed. Article XIIID, Section 4(c), (e). The notice must include the amount chargeable o the owner's parcel, the reason for the assessment, its proposed duration, and the basis upon whim the assessment was calculated. Article XIIID, Section 4(c). Each notice must also include a ballot whereby each owner can indicate his or her support or opposition to the proposed assessment and a statement disclosing that a "majority protest" against the assessment will result in the assessment not being imposed. Article XIIID, Section 4(d), (e). Pursuant to Section 4(e), at the public hearing EV WD must consider all protests against the proposed assessment and tabulate the ballots. EVWD may not impose an assessment if there is a majority protest. A majority protest exists if, upon the conclusion of the hearing, ballots submitted in opposition to the assessment exceed the ballots submitted in favor of the assessment. In tabulating the ballots, the ballots shall be weighted according to the proportional financial obligation of the affected property. In 1997, after passage of Proposition 218, the State Legislature enacted Government Code Section 53750 et seq., designed to clarify the implementation of Proposition 218. Government Code Section 53753 addressed the procedures for protesting assessments. A. originally enacted, Government Page 13 of 15 Code Section 53753 contained no provisions for assessment ballot secrecy. The statute provided that "each assessment ballot shall be signed and either mailed or otherwise delivered to the address indicated on the assessment ballot." Former Government Code Section 53753(c), Government Code Section 53753 was amended in 2000 to provide for a certain measure of assessment ballot secrecy. The 2000 amendment made clear that ballot secrecy was to be preserved before the assessment ballots were tabulated, but that the ballots were to be made a public record thereafter. Government Code Section 53753(c), as amended in 2000, therefore now provides in pertinent part: "Assessment ballots shall remain sealed until the tabulation of ballots pursuant to subdivision (e) commences, provided that an assessment ballot may be submitted, or changed, or withdrawn by the person who submitted the ballot prior to the conclusion of the public testimonyon the proposed assessment at the hearing required pursuant to subdivision (d)." Government Code Section 53753(e) provides in pertinent part: "At the conclusion of the public hearing conducted pursuant to subdivision (d), an impartial person designated by the agency who does not have a vested interest in the outcome of the proposed assessment shall tabulate the assessment ballots submitted, and not withdrawn, in support of or opposition to the proposed assessment. During and after the tabulation, the assessment ballots shall be treated as disclosable public records and equally available for inspection by the proponents and the opponents of the proposed assessment." Most of the other original provisions of Government Code Section 53753, including the requirement that ballots be signed, were not modified by the 2000 amendment and remain in force today. All of the above requirements, principles, and procedures have been followed, complied with, and incorporated into the calculation of the assessments contain in this report. This report identifies all parcels which will have a special benefit conferred upon them by virtue of the proposed project and upon which an assessment will be imposed. The proportionate special benefit derived by each identified parcel has been determined in relationship to the entirety of the capital costs of the proposed improvement. The amount of the proposed assessment imposed on any parcel does not exceed the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits have been assessed; general benefits have been separated from the special benefits conferred on a parcel by virtue of the proposed project. In this case, the properties within the proposed project area no longer have the benefit of a functioning water distribution system. Even with the temporary connections to the EVWD system, the existing distribution system does not meet current California Department of Public Health or San Bernardino County Department of Environmental Health Services drinking water standards. If this situation is allowed to continue, the owners of properties being served by the current distribution system face the possibility of the properties being condemned by the County of San Bernardino Department of Environmental Health Services. Page 14 of 15 Section 8: Tentative Schedule Using 1913 Act Procedures I . Meetings between East Valley Water District ("EVWD' ) staff and Eastwood Farms Mutual Water Company ("EFMWC`) directors and stockholders: 2. Preparation of Preliminary Engineer's Report for Water S,,stem Improvement Project ("Project'): 3. Circulation of petition and survey among EFMWC stockholders to gauge shareholder support for the Project; 4. Completion of environmental review of the Project and adoption of Mitigated Negative Declaration and issuance of Notice of Determ nation; 5. Submittal of application for financial assistance from he State for the Project: 6. Approval and execution of Notice of Application Acceptance from the State by both EVWD and EFMWC; 7. Preparation of Final Engineer's Report for the Project; 8. Approval and execution of Agreement to Transfer Water Service by EVWD and EFMWC; 9. Adoption of Resolution of Intention to Initiate Proceedings to form Eastwood Farms Assessment District ("EFAD-) by EVWD Boare of Directors; 10. EVWD causes Notice of Public Meeting and Public I leaning and Official Ballots to be delivered to record owner(s) of each parcel within the proposed EFAD; 11. EVWD Board of Directors conducts public meeting on the proposed EFAD; 12. EVWD Board of Directors conducts public protest hearing on the proposed EFAD: 13. Adoption of Resolution by EVWD Board of Directors approving the Final Engineer's Report for the Project and the formation of the EFAD; 14. Record Boundary Map; 15. Record Assessment Diagram & Notice of Assessments (may not be necessary when not selling bonds); 16. Advertise for bids; 17. Accept bids; 18. Receive approval of bid award from CDPH; 19. Award construction contract for Project: 20. Notify property owners within EFAD of Project construction on affected properties; and 21. Construction of Proiect. 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MAIL TO NUMBER IMER90TE NUMBER NAMEIADOREEE 1 0279- 131 -01 Gwas, A"NOor 2 0279.131-02 3 0279.111 -03 4 0279.13144 5 02706131-06 a 0279.13146 7 0279 -131-07 a 0274431.10 9 027413149 10 0274131 -10 11 OM131 -11 12 0274201 -01 257721Jnbn St. HVIMnd, CA 62116 OMM Jabs A 671 W 2191 Sbstl Swl Bwnwdlw, CA 92605 VMS, RWhwd Fan* 0b Rich" VMs 742 Tsnw9 Road San Smor", CA 92410 YM& RWWd Family Ob RIOWd VIM 742 Twwos Rood Son Bwwdlm. CA 92410 A01r9ar, Yank 24971605 St. can BsnrNkw. CA 92410 AbbdN, KOM1 24996 aM 61. Son llonarEbq, CA 92410 MCFarlond, OWM 6 AMoFwYn9, Dorm P.C. Box 923 ftmww. G 9x46 Uhmn, Mw.in 26113 6m 91. Son Barr, — w CA 92410 0 o. Row 2604 W CatM VMM Ddv9 Rwft CA 92377 TOWN, IaurslRt 11404 9'79 VM Sams UP*W, CA 91714 TOWN. AIbod R 10600 Orwrwmwah Awwo CIVINAa91,CA 91311 Toett, DowN 6 Jw1Mo 30697 Mln ld. Rad Wrds, CA 92373 La9w Ussslwum W 200'LaM 9a 10 ENSWVOW F9rmt MB 34076 E 50 of 0w W 250' Las 9 A 10 E84*10W Farms M9 34176 LaM9 i10, wE 60'4W2517 Euwood Farms 059 We E SO tAlm 9 610 EMWood FomN MB 3479 W 112 Lot 6 ftubm 9d Farms MB 34176 E 12 Lae EaatAOO- Fans MBWa Lot 7 FAasaew Fw MB 34176 W 117 LIA 6 Fswwood Fame Me 34M E 12 Lot a Fawwnd Fans MB 3056 W 112 14 6 Ea Wood Fwma MB We E 12 Lai 5 EwWow Fwms MB 34076 W 42 Lao Eswvto d Fwms MB 34770 13 0279 - 201-02 Gill, M P E 12 Lol4 11750 ML Vamon An, 90223 Dabrood Fame MB 34179 Grad Tarnca, CA 92013 14 0279 -201-05 Ton Ld Npoc W 50 Ld 5 ZW79 alh St Faah ood Fame MB SKIS San ll mirdin, CA 92410 15 0279201-04 BWAWL Nolow E 100' Ld S 74 Ne FM Way EmalwOOd Farms MB 34176 La9Ne WwK CA 92677 16 0179 -201-06 EApa2A, Y011IF104 W 112 Ld 2 25105 an SO, Fjalwmd Farms MB 34175 San Borrwdno, CA 92410 17 D279 -201-06 AbW, Nle a BOY,illrt, Ann E 12 Ld 2 26117 Sm St. EaAeaood Fame MB 34176 San Brnrdlno. CA92410 16 0279201.19 Jams m Ray W DV of N 160' Lot 1 25137 W St. Eashowd F4 MB 3-1116 San Brrerdbro. CA 92410 19 0274201 -20 JarnkW. ROY Lot 1 E= W 50'01 N 150' 25137 6th S1 Essmoml Farms MB 34!76 San Banerdw CA 9411) 20 0279- 201 -10 Emow90d Av" Wa4Ar Co LNW UMn do Eaab W Fame WAbr E 329f to S 50' of Lot 22 250191/2 5M SL E*WhNMd Fame MB 34/76 San BwnardW CA92410 21 0279201 -11 Mye, Johan tot 22 a E 32 d 819 S Sa 6 au w SO 25142 ft SO of M S 140' Em%mood Fame MB 34176 San li marOin, CA 92410 22 027920142 Millar. L n" W SM of M S 140' Lot 10172 26126 Sth S! Eaalw99d Fame MB 547/6 San Ba m*no, CA 9410 23 0279- 201-13 BraaerL Nation W 21 14 Ala HBa Way Eaawmd Fame MB 34176 Lapna Mpur, CA 92677 24 0279. 201.14 Brawn, Nation E 12 Ld 20 %ANA HNA Way Eaabvood Fame MB 34//a Lapwd Ni9un, CA 92877 25 0270. 20145 Zwkde. Loo* t Raoaa- Hahn W 112 lot 20 26084 E W SL Ematwwd Fame MB 34174 HW rld. CA 02316 25 0279 - 201 -16 Crmio. BrOio E 12 Ld 19 12WS 6Fdnp MourWn Dr. Eastwood Fame MB 31179 Rancho CLcwrw", CA 91739 27 0279-201 -17 Apulrr, GODW a Lyia w 12 Ld 19 25062 601 SI. Ea MOW Fame MS 34778 San ll r rdino, CA 22410 26 OM- 131.12 20 0279-731.32 30 0276,131-37 $1 0279-131 -15 32 0270- 131 -16 33 0270- 131 -17 34 0276,131-36 35 0276131-35 35 0276131.19 37 0279.131 -20 84 0276131.21 39 0270.13142 40 0276131 -23 41 0279-121.24 42 0276131 -U Lee C x22/0 Lot 10 239 W TUdo St Eootmd Femw MB 347M CoAU, CA 01722 VAWm PwM1mebl Unlde Leiio E 1/2 Lot 17 25014 BP at Emwxmd Froze MB 3946 Sm So. (dino, CA 92410 Vwant Fm* 5 -21 -91 W 1/2 Lot 17 t EW0 16 P.O. Box 2799 EmMomod Fe" M6 34/76 RurwdM Spftc CA 92362 MoOoDaM3, Pad 2 FeIN W 90' Lot 16 24002 W Seeet ft Eeetwo0d Fume MB 2W76 ben Bwn&Mlw,Ce 92410 Melmy, Mwk E 12 tat 15 24962 56t SL EeeLM00d Fwme MR 34176 Sot Bwrmdbm, CA 09410 Rive, VAlem W 12 LOt 1 S 24974 541 SL Eewwood Fo n s MB 34/76 Son Bemwdno, CA 92410 Rk"mom E V4 E IPA E 12 Lot 14 249M SN SL EeeMOOd Femr MB 3476 Son Bemwdin . CA 02410 SOwt Tnw E 12, E 12, E 12 Lw 13 1706 JWne VW* Eeetepod Fenn MR 3406 Upland. CA 91784 C,7emp piopm W 12, E IM E 12, Lob 13 L 14 1370 H. O SL Apt 109 EaeMOW Fe MB 34176 San BwrArdino. CA 92405 TOblee, CeC9O 6 Mole W 12, E 12 Lot 14 24946 F0N SL SwoMmOd Funs MR 3406 HlpMmd. CA 02410 Coen, EMgm 6 Vlownao, Sih m W 1 112 Lot 14 em W 145 249M E. SN SL Eoet^vW Fwme MR 3406 H~ CA 92410 An*wmk, RoaW 0 VOWnwii, Abfl W 145' Let 14 6070 PmYn CL Apt. 119 FASMV 6 Fe MR 3405 RNOMWO, CA 92306 thee, CedN 6 JON S 60, w 100' Lot 13 647 W 29M Sir" EMONO d Fame MR 31176 Ben Bemwdep, CA 92405 UdN, Jo BCalla W 13 em 650, W 100 L E 1P{ E /129- 13 647W2041R9M1 EMWwd Fe MB SW6 Son B~dit, CA 92405 Ufb, JON i Cobe S BY Lot 12 647 W 2941 SnN1 E0Nf0od Fw111e MB 3WS Son Remrdim, CA 22405 43 0279 -131-5 44 0279 - 131.27 46 02M"1 -9 46 0279-161-5 47 0279 - 151.42 48 0279- 151-43 49 0279 -151-44 50 0279.151- l 31 0279. 131 -29 52 0270 -1SUZ 53 0279.131 -27 54 0279 - 141 -74 65 0279 -141 -07 58 0279-141 -08 67 0279.14118 Pope. Clarence 5 46' Lot 11 5 N 20' Lot 12 7955 Tippecanoe Ave. Eastwood Fens MB 348 Sari 9enrrdW CA 92410 F Hone Loan MI9 Corp N Sr Lot 11 8200 Jana Branch Dr. Eastwood Funs MB 34/76 McLean. VA 221023110 %7be U Lie Lot 23 ex; Flood Control RW 6780 19th St 9370 Eastwood Fama MB 34/76 AM Lana, CA 91701 Nsakogk,. Zskal 6 Msbda Lot 24 axc Food Contrd RW 310 Edgernm D.. Eastwood Farms MB 34/78 Redlands, CA 92373 N87Jk00o, Zaaal a Metals, N 288' Lot 25 t N 16C of E 10' 0128 310 Ed9amarl D, Ea*eaood Furrna MB 34178 Radanda, CA 92373 Na2*A r, Zekal6 MabWa Lot 26m N 266' 310 Edgsmont Dr. Eastwood Fams MB 34/78 Redlands, CA 92373 Van, Dotal; A Hap Lot 28 ac N 189' of E 10' A. Flood Control RW 7810 BOOM Ave Eastwood Farms MB 34ne RMNde, CA 9250 Ssrrdlsa. Danny Lot 27 ac Flood C x*d RW 25070 Qp Si. Eastwood Farms MB 34/7e San IN rdno. CA 92410 DNaeL William i Kienta y Lot 26 ex Flood Canard RW PM 362 7225 Church St Ste AN Eastwood FAMIN, MB 34/18 Highland, CA 92346 Diesel. Willem t KlmbuN Lot 29 6 E V Lot 30 arc Rood Co" RW PMB 362 7226 Church SL Me A20 FANd ood Fama MB 34178 Nlghlan4 CA 9234a Balch, Wallace 6 Name W 9T Lot 3041m Flood Control RW 2607 SIN SL Eastwood Fame MB 34f76 San Bernardino, CA 92410 Skph, Molaxlar a (MR. M K Lot 31 ex0 Flood Control RW 1650 WsYr CL Eastwood Farms MB 348 COMM CA 9=4 BMMI Macherkel Inc. N JOLT Let 32 25003 5m Sl Easts farms ME 34176 San Bernardino. CA 42410 Fwro, Phillip 6 Srandfeno, law S 200 Of N 500 Lot 32 axe W 10' 01 &191 P.O. BOX on of N 491' EaaMood Fame MB 348 Paton, CA 92368 Sipper, Ted L Florian Lot 32 a1m N 500' 6 Flood CaWel RW 267 W SBn 51 Eastwood Fpm* ME 348 Spar Bernsidno. CA 02407 56 0270-141.42 Sk7pper, Ted Lot 33 4170 N 400' 3 W SW 6 200' L Flow 257 W 600r el. ComrW RW FieMO0d Farad MS 3676 San Bsmadno, CA 92407 59 02716141.20 ON=, Alan 3 0B' N S06T.o133 L W 10' 371' N 491' 24991 661 SL Lol 32 Ewbwwd Forme MB 3678 Srr Bwmdno, CA 92410 00 0279-141-00 BW W Nedrdcel ax:. N 420' L04 33 4 W 10' S 120'N 420' 26003 ft SL Lot 32 Ewlwo6d Farms MB 34,70 art Bamwdno, CA 02410 al 0279 -141-40 More, Joa i CMrlrr E SW S 200'N S0O lot 34 P.O. Box 014 Eos0sood Femd MB 341" Rkdb, CA 92377 62 0279441-03 6narp, Jack 3 Chm*m E 00' N 300' Lot 34 P.O. Sox 014 Emsaaood Frms MB 3670 RWb, CA 02377 93 0279-141-04 Omer, Feral 4 Lewrrm. VMm W a0' N 300' Lot 34 26323 Tudor CL Eutwood Fames MB 34170 RodkMft, CA 92374 64 0279-141-03 SWOOS 91069 L3 E 100' Lot 35 4900 Sank Aria Am C2 E4s1woo0 F4mw MB 34174 El Mods, G 91731 65 0270-141-02 Oouepq Ramon E 50' W 292.70 Lie 35 24030 510 6t EaaFaood Forma MB 34/23 Sao So Wdnq CA 02410 66 0279 -141-01 24939 Mk 60er Land Trust E 60' W 242.70' Lot 35 21030 w S1 Erlwood Fame MB 3670 Sao Bwnwd d, CA 92410 67 0279.141 -73 Pads, HOLM 0 HMMM E 8270' W192.70' Lot W 21001 ash 3t Eastwood Frma MB 34170 San Bwmtlho. G 22410 a0 0279-141.72 Pedt HW^ a Hsryon "710' lot 35 a All 10' NW Lot 30 24901 4m SL EeseeoW Forma MB 34/70 Son Brnwrdro. CA 92410 00 0279. 141 -30 ANarea, A9rtu Lai 30 rr0 W1/0' NSW 0033 T"maanos Al Eaetood Fames MB 3674 San Bsmodso, CA 92410 70 0270-/41x0 Rms Resided" Pmpr9aa LJO N 112 W 1/J Lo137 6742 Lu0ed BAd 03D0 Eoawosd Farms MB 31170 ftMnds Randt CO 00129 71 0279. 141.46 Montelft, VYMmr 6112 W I Lot 37 7177 Bloddm Awadr 0216 ESSMMW Farms MB 34170 Rh amide, CA 92506 72 0270 -141-44 Jdl Jr19 Ja gab Souw N 172 W 12 Lol 30 P.O. Box 1011 Eyyood Ferrite MB 31179 IO iW4, CA 023/6 73 027944143 Jun Jong,b Sob Ssttla 5 112 W W Lot 38 P.O. am 1011 EaslWOOd Fnras MB 34/76 WghW0, CA 92346 74 0270.141.66 Al mm, Abono E 172 Lot 37 P.O. am 936 Eastwood Famr M9 34176 San BWnWdlno, CA 92402 76 0279 -141 42 Jun Jong is 6060 SOMN E 112 Lo138 asc E 76' P.O. Bros 1011 EaaaMod Famla MB 34M Hghisnd, CA 92346 76 0270.141-41 Jun Jong y Sob Sailor E 75' LOA 361 S 200 N 600' W tad Lot 34 P.O Box 1011 Eastwood Femis MB Una MONand, CA 9290 77 0270.14140 OnOW. DorWd Potion or ld 30 330 N. D St EaMwootl Farms MB 34775 San B6rtrrdNa, CA 92406 78 0279- 141 -70 G~, Don Porko d Lot 30 3346 N. D SL Eastwood Fame MB 34"6 Ran Bamard m, CA 92406 70 02M141.0 Bene4 Mf1M 4 Ghahsr, Don H 7.8' lot 40 a PMW Of the R 7A' Lul SO 11002 12 CS"Wr rw Or. Eastwood Fanny MS SVM 7uo%K CA 91042 s0 0279- 141 -36 Jun Jong A Sea adder W 7S E 160' Lot 30 em 6 7.6' P.O. floc 1011 Eaatwo0d Fates MB Una HghW1d, CA 0230 61 0270-141 -.10 Jun JON is Sob Semor E 76' Lat 39 P.O. Bat 1011 E8aatwc0d Famr MB 34/76 HgNand, CA 92346 92 0270.14140 OhjW. Dark POdlen of Lot 40 a. 41 330 N. D St. Eastwood Fam s MB 31//S San Sm rdirw, CA92406 03 027 ►141.62 Glf*w, 0~ Tr 2006 6 fk*. elan Tr 20M 6 3.75'N "25'W 126' 10140 3345 N. D St Eastwood Farms MS 3VrS San Ban e0w. CA 92405 64 0279.141-33 GMasr, Donal Tr 2005 a Far, Stan Tr 2006 S 46.2T W 125 Lot 40 330 N. D M FJatw00d Forms ME 3678 San Berardino, CA 92406 as 0279.141-32 Flee, SYn Tr 2006 W 12 Lc141 ant E 24017* 3346 N. 0 St EaaWood Famit Mg 34176 San Barrardn0, CA 92405 Be 0279 -14154 Seabasud n0. S 112 Lot 41 7756 S160V Avenue Eastwood Fame MB 34"8 San Ssmardn0, CA 02410 57 0270. 141 -19 Seaboard no. S 88' W 200.75' Lot 42 7706 S'MrYn9 An" Eastwood Fanna MB 34/7a San Bernardino, CA 92410 06 0770.141.20 Ssaioord Inc. W 6C E 10C' S 03 Lot 42 7706 SW&V Awrwa Faehvocd Farms MO 34,76 San Bernardino. CA 22410 as 0270141.22 Saabard kx 7760 SW" Awnua Eaa6wood Farms MO 34770 Sn Barrwd no, CA 02410 sD 0274141 -23 Sasbanl Inc. E 00' Lot 42 7760 SM14p Awns Eaainosd Farms MO 3470 San Barrwdino, CA 02410 91 0279-141.10 Padma, Moor a ArpNa Portion La 43 0126 Tippecaroa Ave. EM ►rood Fan* MS 34/78 San Bamarding, CA 92410 92 0279. 141.17 Porrn. ylolar a Angola Portion Lot 43 6125 Tlpparaea Aw. Eastwood Farms MB 3470 San BerarOiq. CA 92410 93 0279,11,21 Psdron. Victor a MpMa Portion La 43 0125 Tlppwoanoa Aw. Eagwood Farms MB 3476 San Berrardao, CA 02410 04 0770.14177 Eim . R2u9as A Haldad, All W 60' S 20P Lot 33 9,o¢ S 60' a S 200 7107 N EMN Aw Lot 34 0 IN 44 axc Flood Co" RW UpbM, CA 91764 Eashwood Fanns MO 34776 95 0270141 -75 San Bamwdino Count' Flood Control W 6W S 60' S 207 Lot 33 625 E 3rd St Easklood Farms MS 34/76 San Bernardino. CA 92415 s6 027014/-99 PBa a PmpwNS ire Poladrl lot 45 345 Peen Aw. 30 230 bahwood Farms MO 34170 Redlands. CA 92374 97 027011453 Young, Don a Nancy Portia tq 45 11672 Lawion CL Eaalwood Farms MB 3473 Loma !lards. CA 92354 as 027044144 Young, Don a Nancy tat"9,w: Floe Cawd RW 11572 Lawim CL Easawood Fame MB 3416 Loma Lida, CA 02364 90 027 0.141417 False, Thomas a Mara La 47 eno Flood Controi RW 901 Park Canbw Dr. 8% 205 Eastwood Farma M8 3470 Swas AM. CA 02706 100 0279.16 40 Folas, Thomas a Mom Tr LOt499,a: Flood C9rwd RW 001 Park Caraar Dr. SM 206 Fjatwaa Farms MS 3479 Bart Ana, CA 92705 101 0270161 -23 Fab, Lukas a Pway 1x149 9,e N 379' W 60' a axe Fbod 7226 Wmlwwood Lana Corrlld RW Eastwood Farma MB 34179 HWdmd, CA 92340 102 0270.161-06 Fab, Wkas a Penny N 376• W 60' Lol 49 m3: Hood Cord RW 7225 WilMmood Lww Eastwood Fame MB 34,70 IiWiand, CA 9234a 103 0270.15137 Nwkeel Conskudbn Caen. Lot 50M S 160 E 7T 6 Fkod Cm.k RW 3761 CrrOm Ave Eastwood Fs MB 3N7s LM Alwnbk, CA SM20 104 0270- 151.10 DrOdrM, Kwlfipu 6 Dionne S 100 W 65' E 75' La150 060 S~t C Em*Nmd Fame MB 34ns Bemkq, CA 02120 105 0270.15146 Trey . Adna s LodMMW. BWM W 47S 320' Lol 51 6 E 20' S 100 Lot 60 700 E RedaMa RNd. 11231 EaelwDod FO MB 34rM RKWWMS, CA 92373 1D0 0279461 -16 B"C Rlpobwm 7 Joaeh E Sr S SW La 51 2SO96 3rd St EOeswood Fs10e MB 34778 SM BwltwdM, CA 92410 107 0279- 151.16 Rohe, Mergwb L ihblo, Mao Lot 6/ as0 8 320' R Fkwd Cankd RW 26094 3rd SL EOSmood FOmr MB 34118 San Be. — dM. CA 92410 106 0274151.14 RohOreOn, LyM 3 -28-00 94152 sm Flood Cmtrd RW 1604 MdQ1Icy Ave EMMood Fr MB 34!78 Son Bomwuhno CA 92404 100 0274151 -41 Rep op Finl MID kWn Lk Lot 53 m Rood Co"M RW 555 H St ft MB 34!/0 Ewvks,G 95501 110 0274161.20 Rspmp F1nl Mlp kMn Lk UA 54 ow K pm b N CO CL 41h Sk ad $65 H 81 sp E 50' 5 250' EANAl d Frma MB 34176 Eureka. CA 06501 111 0274161.11 Rpmp Firg MV lnN LID E 00' 6 250' Lot 54 565 H SI sp EOOlwood FOOns MB 34/70 EWWO, CA 95501 112 0274161.10 FOOOae, Koths" 8 435.61-055 6M E f WWd Dr. Ea4lwaod Frets MB 34170 RedOldn, CA 92373 113 027 4161 -33 lardy Bell Dav LK Lot 65 r S 436.0 1033 Kknba* A~m E"bmood Fen! MB 34M$ Sm Bwnwdrw. CA 02407 114 0279 -IM44 1lernanftL San E 60' Lot 611/ N CL 4th 6k at exc Flpod 25128 4th SL Comw RW EM4wood Frrna MB 34,78 am Bwnrdkw. CA 02410 116 0274161 -35 Tejo&, NI001M W W W 54 b N CL 4th Sir old a FWW 25124 40161. Co" RW EOstwood Fems M6 34178 SM BOmwdkw, CA 92410 110 0279 - 123419 Cho, HP Sook Pr6M of La 10 Blk 50 15321 Pe91wn Ct, RSB MB 7Q ChkW H41a. CA 91709 117 0274123-021 BOnks, 66dwW 7 JsagLWIM poribm of Lei 10 Bk 50 24601 PkwnkM Ct. RBB IM W Mo1M0 VsMy. CA 92557 tie 02M12U12 119 0270.14140 Bmk4, Wheal a Jropuwkr 24801 No odo Ct Ma Vtdloy, CA 82W7 GYnnr, Oon M Tr 2000 3340 N. 0 St. Son BamorOkq, CA 92406 Poreon of Lot 10 Sk So RSB MB 712 and Portion Of Thad Str. vacom 8 GZW E 113.4' Lot 4 and E113.51 N W Lot 41 Er *xwd Fwnr MB 3470 120 0276141 -2e Sk4pW. TM S 400' N 700 int 34 257 W 6eM St. uc. 92M W SW 9d Lot Sin BorMIdlM. CA !2407 ErMOed F4111114 MS UPS Ela)erT'E" EASTWOOD FARMS WATER SYSTEM MlIIOVEMENT PROJECT EAST VALLEY VAITER Dtl TNIOT PRELMINARY PROJECT OONSTRUCTPON COST ESTWTE 419=10 CONSTRUCTION COST ESTIMATE REM Connocoon ba- I naySMwn lrp WSonPp r ow" San PIN 12:x 1r 17 TM 12; x 12'V IN 12'O V r(;M Vtho Ir u BSM 1r x r Raww 2C Swad erM CR*Q Q FC FIn Hy*"AuWlft SMNm Lalwall Main iM TM'YA Pw~ Raptor (Ce7 a/ Hot n3) Sw•k firw TI Pxwro ftww (C97 o(,Idtl l Ftt 1179 Eanin4S'N Trwd1 PM RaraS (CRY Of "O4 ) Ac 0+w1" (Cay a NV+--) M9Y 0 Trarch Pawwisi RapW 1 S s Co Y) aaMi Trvrch rau.trN Rapw (s s wRF ) F NA swvkS lr.w Pawrcri IMp" (S D c—* ) AC Otto IS S C6u97 ) Tr91k 86 Ob RSPN, R lrwgcw Ab.WW EId9MQVMI OUANTM UNIT 3 E80 3,372 IJ Fi 2.145 Llo Ft R E.Ch 3 Earn 3 Estl 6 Ea R Fa 1 Eam AO Lin FL 22 Ea S,la LML FL &M Lin fl 2,11M Lh FL MC LM Fl 5q Ft 407 Lh FL 505 LA Ft - Un. n >q.fl 1 Lure Sun 1 L.vip Bun 1 EaCi uNrT COST ! 5 s 6 S 1 3 s S S 1 ! ! s Lamm 75.W 90.0 760.00 650.00 2]0.00 1.0000 20000 200.00 50-00 3.200.W Q.00 1400 SW 9 DO 060 14M 900 I CDC 9 10.0m.m 2 20.000.00 t 4.6WA0 DE.- f SA0 W t 252,950.0 s 120.750 W i 3,000.00 f 1.i50.W S B,WDW i 6.000.00 S 600.50 t 200.00 S 2DAM O i 70.400.00 5 125,040.0 S 51191.00 S 25.542.0 S 2,970.0 S s 6.M.00 S 2.772 00 S S a 10,00000 S M,OD0.OD i 1.550 W { 741,491.09 { 7uA91n y 111,56010 7 991,21am CONMLTA PAMYASME 0-* T L.iry fun S 32,SM1m i 32,50050 OMLM1 501.9 p I Luny , S 4.5M.W $ 9,50.0 Dmign erirwD.9Lrlwrl.n►1aow . lbn 7 LulpFin , 30,40000 9 5-0.400.50 A1a�E1Q9MWft 1 L.Mp ! 11,500.00 S I1,M,UD Logo 1 Lure Sun S 2DA0000 S 20,050.00 CwNUDbn Sp Pr03wF 1 Lu BUn S 5,00 OD S S,M.W F"cl"Ar Wton 1 Lv B. S IODWOO S 10,00000 Cona0tOwl Swam i Lup sun $ ISA50.m S 10,m.00 � 4 1 Lary 8lan S 133MOD S 15.200.00 S USA" EJLST VALLEY WATER MTRICT $M PQn ChKk 7.6011 rw3wi S 743.885-00 S Wna.10 S4poa w Dal 3 ow,00 S 36,OW.W Adm4EMbn COM 1 Lury Sun 9 26.00oW S 23,00.0 Fmiawrny A 1 Lu70 bum S 26,000.00 S 26.000.00 Frog Foofte Ch W M Sk. a Ti PPP N 3141 Lk, Ft S mm S ",230 m f 258,991.16 s +,291,913JM EXHIBIT "F" EASTWOOD FARMS WATER SYSTEM IMPROVEMENT PROJECT EAST VALLEY WATER DISTRICT FINANCE SUMMARY 4/1212010 FUNDING SOURCES SDWSRF GRANT $ 1,057.756.00 SDWSRF LOAN $ 264,440.00 EVWD LOAN $ 949.203.30 Total Project Costs $ 2,271,399.30 COSTS SYSTEM CONSTRUCTION & FEES $ 1,244,453.30 ( Eligible for SDWSRF Grant & Loan ) METER SET FEES $ 718,333.00 ( Eligible for SDWSRF Grant & Loan, required funds in excess of SDWSRF Grant & Loan provided by EVWD Loan ) INDIVIDUAL ONSITE SERVICE LATERALS $ 308,613.00 ( Not eligible for SDWSRF Grant & Loan, funds provided by EVWD Loan) Total Project Funding $ 2,271,399.30 EVWD LOAN PORTION OF METER SET FEES $ 640,590.30 INDIVIDUAL ONSITE SERVICE LATERALS $ 308.613.00 Total Cost to be Assessed E 949,203.30 ASSESSMENT SDWSRF GRANT+ LOAN $ 1,322,196.00 SYSTEM CONSTRUCTION & FEES $ 1,244,453.30 Loan Excess = E 77,742.70 SDWSRF LOAN E 284,440.00 LOAN EXCESS $ 77.742.70 Balance to be Assessed $ 186,697.30 ! ----------------- |� t |! |§ ■§|§! �,.7 |§| l�.., \., /,... /... \8 2\..../ \§)\� |�� � ,�,,.� §l.vt,r|� ■ ■: !_ || .................. ,._ , , $ $ 8$ Y R a 6 6 Y 8 8 a A a R 8 a R f H e gARerte, ®.�eg�I�g�R��!eg !�g -»____»»»»__...__.._«-__-- R^ C- a? • - - - - - - - - - - - - - - - - - - - - - - - - - - - - ;111iI?jPIIII!II111!;ii1111 iK K K t y� t¢ 8$• C C A K 8 g 8 8 R 8 R$ B 8$ 6 '�� ~• -� F x F F i F F F�� L i� 1� b A A i A A A A R A A A a t A A A R Y i t a i t t C i f R w a 0 a a a A a a s i 9 a a 3 a 6 8 t t F 0 F: K 2 d t t a ■ ! ■ ! § ! 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[ ! � ! ! | | | | | ! ; | ; | | ! | | | | ■ | ! | | | | | | ! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � . . . ■ � ■ . » , , ■ , � � ; , � � , , . , , . . . . . . . . . . . . . . . . . . . . . . . . . $ ■ k k ° m I - - r - A § 1. | ! ■ - # # . ■ n 9 « . . . . . . . . . . . . . . . . . . . . . . . . . § E ! ■ ! 4 q 9 ! 4 f q V ! ! ! ! = q ! ! | 1 | k g R R r n M N h N w � CI K' S r � w w w M rl Y Y M r h w w Y � g as N 8 w 9 Notice of Public Hearing TO: Record Owner Parcel Number FROM: Robert E. Martin, General Manager East Valley Water District DATE: July 30, 2010 SUBJECT: Assessment Ballot Proceeding The purpose of this notice is to provide you with information about the assessment ballot proceeding being conducted by the East Valley Water District ( "EVWD") and its effect on real property that you own. This notice is being sent to you in accordance with EVWD Resolution No. 2010.11, Section 53753 of the California Government Code, and Section 4(c) of Article XIIID of the California Constitution. Please be advised of the following: • The Public Meeting will be held on: Tuesday, August 24, 2010 at 3:00 p.m. • The address of the Public Meeting is: 3654 E. Highland Ave., Suite 12, Highland, CA 92346 • The Public Hearing will be held on: Wednesday September 15, 2010 at 6:00 p.m. • The address of the Public Hearing is: 27215 Baseline Rd., Highland, CA 92346 • The reason[s] for the assessment are: There is no above ground storage for fire protection. The system does not meet State Department of Health Standards. The current situation is that the wells have failed and the area is currently being served by an emergency connection to the East Valley Water District distribution system that is adjacent to the company's service area. • Proposed fiscal year 2012 -2013 assessment for your parcel: • The total amount chargeable to entire assessment district: $2,271,399.30 • Assessment duration: 30 years How the proposed assessment was calculated: EVWD has retained the services of William J. McKeever a registered professional engineer certified by the State of California, to prepare a report detailing various aspects of the proposed project, including the calculation of assessmews that would be levied on affected properties to pay for the proposed project. In that renort, the overall cost of the project was broken down into two categories as follow: COSTS TO BE SPREAD OVER ALL BUILDABLE PARCELS WITHIN THE ASSESSMENT DISTRICT 1. Construction of new mains 2. Construction of service laterals 3. Construction of Fire Hydrants 4. Front footage charge for existing water mains. 5. Consultants fees 6. EVWD Fees COSTS TO BE ASSIGNED TO SPECIFIC PARCELS 1. Meter set fees 2. Capacity fees 3. Cost for individual parcel onsite service lateral The Spread Costs were apportioned to the parcels as follows: 1. 50% of Spread Cost is assigned to each parcel based on the parcel frontage as a percentage of the total frontage within the project. 2. 50% of Spread Cost is assigned to each parcel based on the area of the parcel as a percentage of the total of the areas of all the parcels within the project. The cost assigned to Parcels is assessed to each parcel based on the number and size of the meters required for that parcel and the quantity of onsite service lateral. The owner of each parcel may determine the number and size of meters desired. The owners of vacant parcels may elect to defer meter set fees and capacity fees to the time that the parcel is developed. The Owner of each Parcel may elect to not have the cost of any onsite service included within the Assessment for their Parcel. If the meter set fee and the capacity fee are deferred, the District will require the owner, to pay the fees based on the District's current adopted fee scheduled at the .ime of payment of said fee. The total assessment for each parcel is shown on the Preliminary Assessment Calculations contained in the Engineer's Report. Monthly payments are also shown in the report based on both the State Revolving Fund Loan and the EVWD Loan that require repayment. The State Revolving Fund Loan is a 30 -year payback and the EVWD Loan is a 10 -year payback. Consequently, the monthly payment will be reduced after 10 years. The value of the accrued benefits to each parcel within the proposed assessment district, by virtue of the construction of' the proposed water system, is far greater than the amount assessed to each parcel. Efficiency of costs is achieved by -irtue of the large size of the construction project and 46% of the cost being paid for by .a Safe Drinking Water, State Revolving Fund Grant. Actual benefits accruing to the assessed parcels are described as follows in the Engineer's Report: 1. A water system that meets current codes. 2. A water system that provides fire protection. 3. A water system connected to EV WD's storage facilities for emergency and fire flow. 4. 24 hour a day — 7 day a week emergency response by EVWD Staff for operation and maintenance of the water system. 5. Potential outside assistance during disasters by virtue of EV WD's affiliation with relief associations and emergency interties with adjacent water systems. The Engineer's Report identifies all parcels which will have a special benefit conferred upon them by virtue of the proposed project and upon which an assessment would be imposed. The proportionate special benefit derived by each identified parcel has been determined in relationship to the entirety of the capital costs of the proposed improvement. The amount of the proposed assessment imposed on any parcel does not exceed the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits have been assessed in the report; general benefits have been separated from the special benefits conferred on a parcel by virtue of the proposed project. Enclosed with this notice You will find an assessment ballot Please follow the directions on the assessment ballot to express your view on the proposed assessment. 1. You may mail or deliver only your own ballot to EVWD's General Manager at the location shown on the ballot. Ballots not submitted by mail or hand delivery by the person who signed the ballot will not be accepted. 2. Ballots may be sent or delivered to the EV WD's General Manager at any time, but MUST be received not later than the conclusion of the public hearing on September 15, 2010, at 6;00 p.m., to be held at the Donahue Council Chambers located at 27215 Baseline Rd., Highland, California. Any time prior to the conclusion of the public hearing, you may withdraw your ballot and submit a changed or new ballot in place of the ballot previously submitted. 3. Only ballots with original signatures - not photocopies of signatures - will be accepted. 4. The following ballots will not be accepted or tabulated: • A ballot which is a photocopy without an original signature; • A ballot which is unsigned; • A ballot which lacks an identifiable "yes" or "no" vote; or • A ballot which appears to have been tampered with or otherwise be invalid based upon its appearance or method of delivery. 5. All assessment ballots received by EVWD will remain sealed until tabulation. At the conclusion of the public hearing, ar. impartial person designated by EVWD who does not have a vested interest in the outcome of the proposed assessment will tabulate the assessment ballots submitted and not withdrawn, in support of, or in opposition to, the proposed assessment if the number of ballots received at the hearing is such that it is not feasible to accurately tabulate the ballots that evening, NVWD's Board of Directors mad continue the meeting to a later date for the sole purpose of obtaining the final taoulation. 6. During and after the tabulation, the assessmert ballots will be treated as disclosable public records and equally available for irspection by the proponents and the opponents of the proposed assessment. 7. EVWD will not impose the assessment if there is a majority protest. A majority protest exists if, upon the conclusion of the: gearing, ballots submitted in opposition to the assessment exceed the ballots submitted in favor of the assessment. Ballots shall be weighted according to the proportional financial obligation of the affected property. Should you have any questions, please call or write to: Robert E. Martin, General Manager East Valley Water District 3654 E. Highland Ave., Suite 18 Highland, CA 92346 Tel: (909) 889 -9501 Official Ballot Eastwood Farms Assessment District Assessor's Parcel Number: aParcelAPN » Property Owner's Name: ((Record Owner)) Property Owner's Address: aProperty_Addressa _ Proposed Assessment for This Parcel Beginning 2012.2013 Fiscal Year: oAssessment Amount » Instructions For Completing and Delivering This Ballot • To express your view on the proposed assessment, place a check mark before the word "YES" or "NO" in the box below, then sign and date the ballot. • After completing your ballot, mail or deliver this entire ballot to the General Manager of the East Valley Water District located at 3654 Highland Avenue, Suite 18, Highland, California 92346. • Ballots may be sent or delivered to the clerk at anytime, but MUST be received not later than the conclusion of the public hearing on the proposed assessment set for September 15,2010, at 6:00 p.m., at the Donahue Council Chambers located at 27215 Baseline Road, Highland, California. PLEASE EXPRESS YOUR VIEW BY MARKING AND SIGNING BELOW Yes, I approve the proposed assessment described above for the parcel identified in this ballot. _ No,1 do not approve the proposed assessment described above for the parcel identified in this ballot. 1 hereby declare under penalty of perjury that I am a record owner of the parcel listed above. Signature of Record Owner Date East Valley Water District Board Memorandum No. 1336 -2010 Date: August 24, 2010 From: Robert Martin, General Manager Subject: East Valley Water District Summary and Recommendations Recommendation: Approval of Resolution of the Financing Authority Authorizing the Issuance of Bonds and Approving the Installment Purchase Agreement, the Indenture of Trust, the Official Notice of Sale, and the Preliminary Official Statement, and Authorizing the Preparation, Sale and Issuance of Bonds, Resolution of the District Authorizing the Financing Authority to issue Bonds and Approving the Installment Purchase Agreement, the Escrow Agreement, the Official Notice of Sale, and Preliminary Official Statement, and Authorizing the Preparation, Sale and Issuance of the Bonds, and Resolution of the Facilities Corporation Approving the Escrow Agreement. Background: As discussed in the recent rate - setting process, the recently approved water rates for 2010, 2011 and 2012 were based on funding the Capital Improvement Program (CIP). At this time, East Valley Water District Financing Authority (Financing Authority), on behalf of the District, anticipates issuing approximately $22 million in JPA revenue Bonds (Bonds) to fund $15 million in water system improvements and $6 million to refund the outstanding 2001 Certificates of Participation. This is based on construction costs of $15 million, refunding of the outstanding 2001 Certificates of Participation, funding capitalized interest on the new money through October 1, 2011, as well as paying for cost of issuance related to the financing. Staff recommends that the Board of Directors approve the attached proposed resolutions to approve the legal documents to issue the Bonds, approve the Preliminary Official Statement and authorize the Financing Authority to issue the Bonds. Based on these approvals, staff and the financing team would work to implement the financing transaction and the Bonds would be issued by late September or early October. This timeline will enable District to take advantage of historically low long -term interest rates. Discussion: Water Improvement Projects Staff has developed a list of water improvement projects that are anticipated to be implemented over the next three years and forded by proceeds from the Bonds, as follows: Project Component Amount Plant 134 Upgrade / Expansion $ 3,700,000 Plant 143 Blending and Air Reduction Tank 1,500,000 Plant 150 Design 700.000 : - 1,800,000 Plant Construction - Local Share -150 Sixth Street Pipeline -Plant 151 to Plant 40 5.200,000 Sixth Street Pipeline - Plant 150 to Plant 12 `_00,000 Vine / Union /Live Oak Main Replacements `.00,000 _ . - Bruce Street Main Replacement °00,000 ....._...._ Plant 40 Boosters 600,000 - -- Total $ 15,000,000 The financing documents will provide a substitution clause, should alternative projects be developed or priorities change. Structure of Debt Issuance Based on construction costs of $15 million, it is anticipated the par amount would be $22 million, including $6 million for the refunding of the outstanding 2001 Certificates of Participation, funding capitalized nterest on the new money through October 1, 2011 and paying for cost of issuance. The Bonds would be issued backed by net water system revenues only. The refunding of 2001 Certificates of Participation will assist in structuring in the new money portion of the financing along with provide cash flow savings for the District. The Bonds will be sold in Mid September 2010 through a competitive bidding process. Proposed Resolutions and Legal Documents The proposed resolutions will authorize the General Manager to implement the financing process. The proposed resolutions approve the legal documents, the Preliminary Official Statement and authorizes the issuance of the Bonds. The documents referenced for approval are as follows: Installment Purchase Agreement The proposed Installment Purchase Agreement is between the District and the Financing Authority and governs how the District pays installment payments to the Financing Authority. The proposed Agreement includes the technical language about the water system, revenue requirements, payment timing, maintenance of the water operations system and other such items. The proposed Agreement specifies that net water system revenues are pledged for debt service, that net water system revenues will be maintained at 120% of debt service. Indenture of Trust The proposed Indenture of Trust is between the Financing Authority and the Trustee (Union Bank). The Financing Authority will issue and deliver the Bonds to the Trustee, and the Trustee will hold, invest and disburse all payments and monies. The Trustee will provide funds to the Acquisition Fund, the Interest Fund, the Cost of Issuance Fund and other such funds. The Trustee will receive installment payments from District and will make payments to bondholders. The Trustee will also handle arbitrage issues. Escrow Agreement The proposed Escrow Agreement is among the District, the East Valley Public Facilities Corporation and the Escrow Bank (Union Bank). The Escrow Agreement establishes an escrow fund in which a portion of the proceeds of the Bonds will be used to purchase government securities in an amount that will be sufficient to retire the outstanding 2001 Certificates of Participation on December 1, 2010. Continuing Disclosure Certificate The proposed Continuing Disclosure Certificate provides that the District will provide information on any issues that may affect its debt financing transactions. Official Notice of Sale The proposed Official Notice of Sale is prepare +d for use by the purchasers of the Bonds and includes the information essential to making an informed investment decision Preliminary Official Statement The proposed Preliminary Official Statement is prepared on behalf of the Authority and the District. The proposed Preliminary Official Statement discloses material information on the bond issue, the District and its finances. Future Actions: Staff will continue to work with the financing team to obtain a credit rating from Standard & Poor's and Fitch Ratings, monitor market conditions and determine the optimal structure of the financing. The financing will be implemented by late - September /early October 2010. Staff will report back to the Board with the final financial information. Resolution of Intent to Issue Tax Exempt Obligations: At its October 27, 2009 meeting, the Board of Di- ectors approved Resolution No. 2009.21, which will allow the District to use bond proceeds to reimburse the District's reserve funds for expenditures that were of will be incurred before bond proceeds are available. This will cover expenditures for ongoing capital improvement projects made from October 27, 2009 to the date when the bond funds are available. RESOLUTION NO. 2010.18 RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT APPROVING AUTHORIZING THE EXECUTION AND DELIVERY OF AN INSTALLMENT PURCHASE AGREEMENT FOR THE PURPOSE OF CAUSING THE ISSUANCE OF APPROXIMATELY $24,000,000 AGGREGATE PRINCIPAL AMOUNT OF WATER REVENUE BONDS AND APPROVING THE EXECUTION AND DELIVERY OF THE ESCROW AGREEMENT, THE PRELIMINARY OFFICIAL STATEMENT, THE CONTINUING DISCLOSURE CERTIFICATE AND THE OFFICIAL NOTICE OF SALE WHEREAS, the East Valley Water District (the "District "), a county water district duly organized and existing under and by virtue of the laws of the State of California (the "State "), proposes to undertake the refinancing of certain facilities within its water system (the "Prior Project ") financed in 2001 pursuant to certain certificates of participation evidencing an interest in District payments under an installment purchase agreement (the "2001 Certificates ") and to undertake the financing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (the "2010 Project," and together with the Prior Project, the "Project "); and WHEREAS, the District is a member of the East Valley Water District Financing Authority (the "Authority "), a public entity duly organized and existing under a joint exercise of powers agreement and under the Constitution and laws of the State; and WHEREAS, the Authority has agreed to issue refunding revenue and revenue bonds (the Bonds ") to assist the District in refinancing the Prior Project and financing the 2010 Project; and WHEREAS, the Board of Directors of the District (the "Board ") has determined that it is in the best interest of the District to enter into an Installment Purchase Agreement, dated as of September 1, 2010 by and between the District and the Authority (the "Installment Purchase Agreement "), and to approve certain other documents to provide for the financing and refinancing of the Project; and WHEREAS, the Bonds are to be secured by Installment Payments to be made pursuant to the Installment Purchase Agreement, payable from net revenues of the District's water system on a parity with certain existing installment purchase payment obligations of the District, to the extent set forth in the Installment Purchase Agreement; and WHEREAS, the Authority and Union Bank, N.A., as Trustee, will enter into an Indenture of Trust dated as of September 1, 2010 (the `Indenture of Trust "), to provide for the issuance and security of the Bonds and to provide for the construction of the 2010 Project and the refunding of the outstanding 2001 Certificates; and WHEREAS, a preliminary official statement with respect to the Certificates (the "Preliminary Official Statement "), has been prepared by the District and Stradling Yocca Carlson & Rauth, a Professional Corporation, as bond and disclosure counsel; and DOCSOC /14171]9v4/022497-001 1 WHEREAS, the District desires to execute and deliver a Cont nuing Disclosure Certificate to be dated the closing date of the Bonds: and WHEREAS, the District desires to enter into an EscroxN Agreement (the "Escrow Agreement') to be dated as of September 1, 2010 providing for the 1-rrpayment and defeasance of the 2001 Certificates and the related 20 +:/1 installment purchase agreemen : and WHEREAS, there has been presented to this Board of D:re:-tors copies of each of the aforementioned documents and certain other documents relating to the foregoing; NOW, THEREFORE, THE DISTRICT'S BOARD OF DIRECTORS DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. Findings. The District's Board hereby specifically finds and declares that each of the statements, findings and determinations of the District �e forth in the above recitals and in the preambles of the documents approved herein are true and correct and that the financing of the 2010 Project will result in significant public benefits for the reside r of the District. The Board hereby further finds and determines that there are significant public benefits to the citizens of the District of the type described in Section 6586(a) of the Marks -Roos f oval Bond Pooling Act of 1985 (the "Act ") by having the East Valley Water District Public Financing Authority (the "Authority ") assist the District with respect to the financing of the Project through -he issuance of the Bonds, in that the issuance of the Bonds and related transactions will result in demonstrable savings in effective interest rate to the District and, significant reductions in effective user charges levied by the District. SECTION 2. Competitive Sale. The District hereby apprrn-es the sale of the Bonds by the Authority by competitive sale pursuant to and as described in the Official Notice of Sale for the Bonds (the "Notice of Sale "), in the form thereof on file with the Secretary together with any changes therein or additions thereto approved by the General Manager of the District upon consultation with Fieldman, Rolapp & Associations. the District's Financial Advisor (the "Financial Advisor "). The Bonds shall be awarded to the bidder who submits the highest resp )nsible bid to be determined in accordance with the Notice of Sale and the Authority board resolutir n authorizing issuance and sale of the Bonds. SECTION 3. Notice of Sale. The Financial Advisor is hereby authorized and directed to publish a notice inviting such sealed proposals by one insertion in The Bond Buyer, a newspaper of general circulation, circulated within the State, said publication to be at least five (5) days prior to the date of opening bids stated in said notice in accordance with Cal f7 rnia Government Code Section 53692. SECTION 4. Offering Document. The District hereby approves the initial draft of the Preliminary Official Statement, and the Financial Advisor is authorized to complete the Preliminary Official Statement and distribute the Preliminary Official Statement tc prospective purchasers in the form hereby approved, together with such conforming changes ther -in and additions thereto as are deemed necessary by the General Manager of the District to make such Preliminary Official Statement complete and accurate as of its date. The General Manager of the District is hereby authorized to certify that the Preliminary Official Statement is final within the meaning of Rule 15c- 2-12 of the Securities Exchange Act of 1934, as amended. The General Manager of the District is hereby directed to execute and deliver, for and in the name and on behalf of the District, the final Official Statement relating to the Bonds, which shall be in substantially the form of the Preliminary 2 DOCSOC /14171 ] 9v4/022497 -001 1 Official Statement with such changes therein and additions thereto as are deemed necessary by the General Manager of the District, such approval to be conclusively evidenced by the execution and delivery thereof. The Financial Advisor is hereby authorized and directed to cause to be furnished to prospective bidders copies of the Preliminary Official Statement and a notice inviting proposals. That said notice shall be substantially as set forth in the form attached hereto. The failure, in whole or in part, to comply with this Section 4 and Section 3 hereof shall not in any manner affect the validity of the sale of said Bonds SECTION 5. Trustee Appointment. Union Bank, N.A. is appointed Trustee under and pursuant to the Indenture of Trust, with the powers and duties of said office as set forth therein. SECTION 6. Installment Purchase Agreement. The Installment Purchase Agreement in the form attached hereto is approved. The President or Vice President of the Board or the General Manager of the District or the designee thereof are authorized and directed to execute and deliver the Installment Purchase Agreement. Such agreement shall be executed in substantially the form hereby approved, with such additions and changes thereto as are approved by the officers executing such agreement, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 7. Escrow Agreement. The Escrow Agreement in the form attached hereto is approved. The President or Vice President of the Board or the General Manager of the District or the designee thereof are authorized and directed to execute and deliver the Escrow Agreements. Such agreements shall be executed in substantially the form hereby approved, with such additions and changes thereto as are approved by the officers executing such agreement, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 8. Continuing Disclosure Certificate. The Continuing Disclosure Certificate in the form attached hereto is approved. The President or Vice President of the Board or the General Manager of the District or the designee thereof are authorized and directed to execute and deliver the Continuing Disclosure Certificate. Such Continuing Disclosure Certificate shall be executed in substantially the form hereby approved, with such additions and changes thereto as are approved by the officers executing such Continuing Disclosure Certificate, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 9. Other Actions. The President or Vice President of the Board or the General Manager of the District or the designee thereof and any other proper officers of the District, acting singly, be and each of them hereby is authorized and directed to do any and all things and to execute and deliver any and all documents and certificates which such officers may deem necessary or advisable in order to consummate the sale, execution and delivery of the Bonds, the delivery of the Installment Purchase Agreement, the Escrow Agreement, the Continuing Disclosure Certificate, the Preliminary Official Statement and the final Official Statement and otherwise effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 10. Effect. This Resolution shall take effect immediately. 3 DOCSOC/1417119v4/022497 -0011 SECTION 11. Recitals. Each of the foregoing recitals are tray and correct. PASSED AND ADOPTED "PHIS 24th DAY OF August, 20 11) President of the Boar! of' Directors of East Valley Water District (SEAL) ATTEST: Secretary of the Board of Directors of of East Valley Water District DOCSOC/1417119v4/022497 -0011 STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN BERNARDINO ) I, Robert Martin, Secretary of the Board of Directors of East Valley Water District, DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Board of Directors of said District at a regular meeting of said Board of Directors held on the 24th day of August, 2010, and that it was so adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: Secretary of the Board of Directors East Valley Water District (SEAL) DOCSOC/ 1417119v4/022497 -0011 STATE OF CALIFORNIA ) ss. COUNTY OF SAN BERNARDINO ) 1, Robert Martin, Secretary of the Board of Directors of th East Valley Water District, do hereby certify that the above and foregoing is a full, true and correct c ipy of Resolution No. 2010.18, of said Board, and that the same has not been amended or repealed. DATED: .2010 Secretary of the Boa °d eI Directors of East Valley Water District (SEAL) 0 DOC SOC/ 14171 19v4/022497 -001 1 Stradling Yocca Carlson & Rauth Draft of 8116110 INSTALLMENT PURCHASE AGREEMENT by and between EAST VALLEY WATER DISTRICT and EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Dated as of September 1, 2010 relating to EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING), SERIES 2010 DOCSOC/1322156v5/022497 -0011 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section1.1. Definitions ............................... ............................... ................ ............................... I Section 4.2. ARTICLE I] REPRESENTATIONS AND WARRANT ES Section 2.1. Representations b} the District ..... ............................... ......... ............................... 10 Section 2.2. Representations and Warranties by the Authority ....... ............ .............................10 13 Section 5.2. ARTICLE III Section 5.3. SALE AND PURCHASE OF THE PRO?ECT Section 3.1. Purchase and Sale of the Project ............................................. ............................... 11 Section3.2. Titl e ......................................................................................... ............................... 11 Section 3.3. Acquisition and Construction of the Project... ........... ....................................... I l Section 3.4. Changes to the Project ................ ............................... ............... ..............................1 I Section 3.5. Acquisition Fund ..................................................................... ............................... 11 ARTICLE IV INSTALLMENT PAYMENTS Section4.1. Purchase Price ........................ ............................... .................. .............................12 Section 4.2. Installment Payments .............. ............................... ................... .............................12 ARTICLE V SECURITY Section 5.1. Pledge of Revenues ................................................................ ............................... 13 Section 5.2. Allocation of Revenues ........... ............................... ... ............. .............................13 Section 5.3. Additional Contracts and Parity Bonds ..................... ............ .............................14 Section 5.4. Subordinate Obligations .......................................................... ............................... 15 Section 5.5. No Senior Obligations ................................................. ............. .............................15 Section5.6. Investments ............................................................................ ............................... 15 ARTICLE VI COVENANTS OF THE DISTRICT Section 6.1. Compliance with Installment Purchase Agreement anc Ancillary Agreements.............................. ............................... ................ .............................15 i DOCSOC/1322156v5/022497 -0011 TABLE OF CONTENTS (continued) Page Section 6.2. Against Encumbrances .............................................................. ............................... 16 Section 6.3. Against Sale or Other Disposition of Property ........................... .............................16 Section 6.4. Against Competitive Facil ities .................................................... .............................16 Section 6.5. Tax Covenants ............................................................................ .............................17 Section 6.6. Maintenance and Operation of the Water System ...................... .............................17 Section 6.7. Payment of Claims ...................................................................... .............................18 Section 6.8. Compliance with Contracts ......................................................... .............................18 Section6.9. Insurance ..................................................................................... .............................18 Section 6.10. Accounting Records; Financial Statements and Other Reports .. .............................19 Section 6.11. Protection of Security and Rights of the Authority ..................... .............................19 Section 6.12. Payment of Taxes and Compliance with Governmental Regu lations ......................19 Section 6.13. Amount of Rates and Charges .................................................... .............................19 Section 6.14. Collection of Rates and Charges ................................................. .............................20 Section 6.15. Eminent Domain Proceeds .......................................................... .............................20 Section 6.16. Further Assurances ...................................................................... .............................20 Section 6.17. Enforcement of Contracts ........................................................... .............................20 Section 6.18. Continuing Disclosure ................................................................. .............................20 ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section7.1. Prepayment ................................................................................. .............................21 Section 7.2. Method of Prepayment ................................................................ .............................21 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.1. Events of Default and Acceleration of Maturities ...................... .............................21 Section 8.2. Application of Funds Upon Acceleration ................................... .............................22 Section 8.3. Other Remedies of the Authority ................................................ .............................23 Section8.4. Non - Waiver ................................................................................. .............................23 Section 8.5. Remedies Not Exclusive ............................................................. .............................23 ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obligations ............................................................ .............................24 ARTICLE X MISCELLANEOUS Section 10.1. Liability of District Limited to Revenues ................................... .............................25 Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties .............................25 Section 10.3. Successor Is Deemed Included in all References to Predecessor ............................25 ii DOCSOC/ 1322156v5 /022497 -0011 TABLE OF CONTENTS (continued) Page Section 10.4. Waiver of Personal Liability ..................................................... .............................25 Section 10.5. Article and Section Headings, Gender and Reference• . ........... .............................26 Section10.6. Partial Invalidity .. ................................................................... .............................26 Section10.7. Assignment ......... .................................................................... .............................26 Section 10.8. ...................... ............................... Net Contract........ ............ .............................26 Section10.9. California Law.. .. .................................................................. .............................26 Section10.10. Notices .................................... ............................... ................. .............................26 Section10.1 1. Effective Date ........................... ............................... ............... .............................27 Section 10.12. Execution in Coun, erparts ........ ............................... ............. .............................27 Section 10.13. Indemnification o= .authority .. ............................... .............. .............................27 Section 10.14. Amendments Permitted ............ ............................... ... _........................................ 27 Section 10.15. Paired Obligation Provider Guidelines ................... ................. .............................28 Section 10.16. Notice to Rating Agency .......... ............................... .............. .............................28 EXHIBIT A PURCHASE PRICE .................... ............................... ........................... EXHIBIT B -1 DESCRIPTION OF THE PRIOR PROJECT .............. . ..................... EXHIBIT B -2 DESCRIPTION OF THE 2010 PROJECT ...................... ..................... EXHIBIT C FORM OF REQUISITION NO. FOR DISBURSF',,IF.NT FROM ACQUISITION FUND .......................................... ............................... DOC SOC/ 1322156v5/022497 -0011 ..............A -I ...........B -1 -1 ...........B -2 -1 C -1 INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT, made and entered into as of September 1, 2010 by and between EAST VALLEY WATER DISTRICT, a county water district duly organized and existing under and by virtue of the laws of the State of California (the "District "), and EAST VALLEY WATER DISTRICT FINANCING AUTHORITY, a public body duly organized and existing under the Joint Exercise of Powers Agreement dated as of August 20, 2010, by and between the District and California Municipal Finance Authority, and under the Constitution and laws of the State of California (the "Authority"). WITNESSETH: WHEREAS, the District proposes to finance and refinance certain equipment and facilities within the District Water System as more particularly described in Exhibit B hereto (collectively, the "Project'); WHEREAS, the District is authorized by Division 12 of the Water Code of the State of California, including but not limited to Section 31042, to acquire property for its Water System; WHEREAS, the Authority has agreed to assist the District in financing and refinancing the Project for the District on the terms and conditions set forth in this Installment Purchase Agreement; and WHEREAS, the Authority is authorized by Division 2 of Title 5 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; and WHEREAS, the District and the Authority have duly authorized the execution of this Agreement; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, 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 I. I. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the D OCSOC/ 1322156v5 /022497 -001 I terms defined herein. Unless the context otherwise requires, all capita:iz A terms used herein and not defined herein shall have the meanings ascribed thereto in the Indem.c e Accountant's Report The term "Accountant's Report" means a report signed by a!: Independent Certified Public Accountant. Acquisition Fund The term "Acquisition Fund' means the fund b) that i ame established pursuant to Section 3.5 hereof. Agreement The term "Agreement" means this Installment Purchase Agreement, by and between the District and the Authority, dated as of September 1, 2010, as original iy executed and as it may from time to time be amended or supplemented in accordance herewith. Authori ty The term "Authority" means the East Valley Water District 1- financing Authority, a public body duly organized and existing under the Joint Exercise of Powers .Agreement dated as of August 20, 2010, by and between the District and California Municipal Finance Authority, and under the Constitution and laws of the State of California. Business Dav The term "Business Day' means a day other than: a Saturda, or Sunday or a day on which (i) banks located in the city in which the principal corporate trust office of the Trustee is located are not required or authorized to remain closed, and (ii) on which The N -" York Stock Exchange is not closed. Continuing Disclosure Certificate The term "Continuing Disclosure Certificate" shall mean that certain Continuing Disclosure Certificate executed by the District and dated the date of execution :md delivery of the Series 2010 Bonds, as originally executed and as it may be amended from lime to time in accordance with the terms thereof. Contracts The term "Contracts" means and is limited to (i) this Installment Purchase Agreement and any amendments and supplements hereto, and (ii) all contracts of the District previously or hereafter authorized and executed by the District and the Parity Installment Payments of which are on a parity with the Installment Payments and which are secured by a pledge and lien on the Revenues as described in Section 5.1 hereof including, but not limited to the 20(4 hn tallment Sale Agreement and the 2006 Installment Sale Agreement, but excluding contract= ; n:+:ered into for operation and maintenance of the Water System. DOCSOC/ 1322156v5/022497 -001 1 Date of Operation The tern "Date of Operation" means, with respect to any uncompleted component Parity Project, the estimated date by which such uncompleted component Parity Project will have been completed and, in the opinion of an engineer, will be ready for operation by or on behalf of the District. Debt Service The term "Debt Service" means, for any period of calculation, the sum of: (1) the interest accrued during such period on all outstanding Parity Bonds during such period, assuming that all outstanding serial Parity Bonds are retired as scheduled and that all outstanding term Parity Bonds are prepaid or paid from sinking fund payments as scheduled (except to the extent that such interest is capitalized), (2) those portions of the principal amount of all outstanding serial Parity Bonds maturing in such period or the next succeeding period, in each case accruing during such period in each case and computed as if such principal were deemed to accrue daily during such period in equal amounts, (3) those portions of the principal amount of all outstanding term Parity Bonds required to be prepaid or paid in such period or the next succeeding period, in each case accruing during such period and computed as if such principal were deemed to accrue daily during such period in equal amounts, and (4) those portions of payments under the Contracts required to be made during such period, or the next succeeding period, in each case accruing during such period and computed as if such Contract was deemed to accrue daily during such period in equal amounts (except to the extent the interest evidenced and represented thereby is capitalized); but less the earnings to be derived from the investment of moneys on deposit in debt service reserve funds established for Parity Bonds or Contracts; provided that, as to any such Parity 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 except for the satisfaction of Section 5.3 of this Agreement, be assumed to bear interest at a fixed rate equal to the higher of (i) the actual rate on the date of calculation, or if such Contract or Parity Bond is not yet outstanding, the initial rate (if established and binding), and (ii) the highest average variable rate borne over a 3 month period of the preceding 12 months by outstanding variable rate debt issued by the District 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 comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued; 3 DOC SOC/ 1322156v5/022497 -0011 provided further that, in connection with issuance of additional Panty Bonds or the execution of additional Contracts under Section 5.3 of this Agreement. the assumed rate on variable rate obligations shall be The Bond Buye-'s Revenue Bond Index; and provided further that if any series or issue of such Parity Bonds or C:ronacts have twenty -five percent (25 %) or more of the aggregate principal amount of such series or sue due in any one year, Debt Service shall be determined for the period of determination as if the 1, incipal of and interest on such series or issue of such Parity Bonds nr Contracts were being paid from, tare date of incurrence thereof in substantially equal annual amounts over a period of twenty -fvc (25) years from the date of calculation; and provided further that, as to any such Parity Bonds or Contracts or portions thereof bearing no interest but which are sold at a discount and which discount accretes with aspect to such Parity Bonds or Contracts or portions thereof, such accreted discount shall be trealea as interest in the calculation of Debt Service; and provided further that if the Parity Bonds or Contracts constitute Pa:rcd Obligations, the interest rate on such Parity Bonds or Contracts shall be the resulting linked rate ,1 the effective fixed interest rate to be paid by the District 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 a, the final maturity of the Parity Bonds and Contracts for which such debt service reserve fund was established and to the extent the amount in such debt service reserve fund is in excess of such amount rf 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. Director of Finance The Term "Director of Finance" means the Director of Finance of the District, or any other person designated by the Director of Finance to act on behalf of the - 'irector of Finance. District The term "District' means East Valley Water District, a count.\ water district duly organized and existing under and by virtue of the laws of the State of California Event of Default The term "Event of Default" means an event described in Sec lion 8.1. Fiscal Year The term "Fiscal Year" means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve -month period selected and designated as the official Fiscal Year of the District. DOCSOC/ 1322156x5 /022497 -001 1 Independent Certified Public Accountant The term "Independent Certified Public Accountant" means any firm of certified public accountants appointed by the District, each of whom is independent of the District and the Authority pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants. Indenture The term "Indenture" means the Indenture of Trust, dated as of September 1, 2010, by and between the Authority and the Trustee, relating to the Series 2010 Bonds, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. Independent Financial Consultant The term "Independent Financial Consultant' means a financial consultant or firm of such consultants appointed by the District, and who, or each of whom: (1) is in fact independent and not under domination of the District; (2) does not have any substantial interest, direct or indirect, with the District; and (3) is not connected with the District as an officer or employee thereof, but who may be regularly retained to make reports thereto. Installment Payment Date The term "Installment Payment Date" means the fifth day prior to each Interest Payment Date, or if said date is not a Business Day, then the preceding Business Day. Installment Payments The term "Installment Payments" means the Installment Payments of interest and principal scheduled to be paid by the District under and pursuant hereto. Installment Purchase Agreement The term "Installment Purchase Agreement' means the Installment Purchase Agreement, dated as of September 1, 2010, by and between the District and the Authority, as originally executed and as it may from time to time be amended or supplemented in accordance therewith. Interest Payment Date The term "Interest Payment Date" means March 25 and September 25 of each year, commencing March 25, 2011. Joint Exercise of Powers Agreement The term "Joint Exercise of Powers Agreement' means that certain Joint Exercise of Powers Agreement, dated as of August 20, 2010, by and between the District and California Municipal Finance Authority, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time. 5 DOCSOC/ 1322156v5 /022497 -001 I Law The term "Law" means the County Water District I.av, c :he State of California (being Division 12 of the Water Code of the State of California, as ame �ded), and all laws amendatory thereof or supplemental thereto. Manager The Tenn "Manager" means the General Manager of the District. or any other person designated by the General Manager to act on behalf of the General PIanager. 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 co111 -ction of such proceeds. Net Revenues The term "Net Revenues' means, for any Fiscal Year. the ReN enues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year. Operation and Maintenance Costs The term "Operation and Maintenance Costs" means ( i) costs spent or incurred for maintenance and operation of the Water System calculated in acco dance with generally accepted accounting principles, including (among other things) the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the 'A ater System in good repair and working order, and including administrative costs of the Distr -:� that are charged directly or apportioned to the Water System. including but not limited to sal tries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys, consultants or engineers and insurance premiums, and including all other reasonable and necessary costs of the District or charges (othe than Debt Service) required to be paid by it to comply with the terns of this Agreement or any other Contract or of any resolution or indenture authorizing the issuance of any Parity Bonds or of such Parity Bonds and (ii) all costs of water purchased or otherwise acquired for delivery by the Water S ^stem (including any interim or renewed arrangement therefor), but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of niangibles or other bookkeeping entries of a similar nature. Paired Obligation Provider The term "Paired Obligation Provider" means a party to a faired Obligation other than the Authority or the District. Paired Obligations The tern "Paired Obligations" means any Parity Bond �,r Contract (or portion thereof) designated as Paired Obligations in the resolution, indenture of other document authorizing the issuance or execution and delivery thereof, which are simultan ,-ously issued or executed and M DOCSOC/1322156v5/022497 -0011 delivered (i) the principal of which is of equal amount maturing and to be redeemed or prepaid (or cancelled after acquisition thereof) on the same dates and in the same amounts, and (ii) the interest rates which, taken together, result in an irrevocably fixed interest rate obligation of the District for the term of such Parity Bond or Contract as certified by an Independent Financial Consultant in writing, and which comply with the provisions of Section 10.15 hereof. Participating Underwriter The term "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. Parity Bonds The term "Parity Bonds" means all revenue bonds or notes of the District authorized, executed, issued and delivered by the District, the payments of which are on a parity with the Installment Payments and which are secured by a pledge of and lien on the Revenues as described in Section 5.1 hereof. Parity Installment Payment Date The term "Parity Installment Payment Date" means each date on which Parity Installment Payments are scheduled to be paid by the District under and pursuant to any Contract. Parity Installment Payments The term "Parity Installment Payments" means the payments of interest and principal scheduled to be paid by the District under and pursuant to the Contracts. Prior Project The term "Prior Project" means the refinancing of the Water System distribution and treatment facilities and the Wastewater System facilities described as the "Prior Project" in Exhibit B -1 hereto. Project, Parity roiect The term "Project" means the additions, betterments, extensions and improvements described in Exhibit B hereto under the heading "Project ", consisting of the 2010 Project and the Prior Project. The term "Parity Project" means any additions, betterments, extensions or improvements to the District's Water System designated by the Board of Directors of the District as a Parity Project, the acquisition and construction of which is to be paid for with the proceeds of any Contracts or Parity Bonds. Purchase Price The term "Purchase Price" means the principal amount plus interest thereon owed by the District to the Authority under the terms hereof as provided in Section 4.1. 7 DOCSOC/ 1322156v5/022497 -001 1 Revenue Fund The term "Revenue Fund" means the fund by that name e�tahlished pursuant to Section 5.2 hereunder; provided, however, the Revenue Fund excludes any accot m into which ad valorem taxes levied by the District are deposited. Revenues The term "Revenues" means all income, rents, rates. fees. ch irges and other moneys derived from the ownership or operation of the Water System, including_ w thout limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges. h,tsmess interruption insurance proceeds or other moneys derived by the District from the sale. fun - fishing and supplying of 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. plus (2) the proceeds of any stand -by water availabi lit c harges, plus (3) the eamings on and income derived from the investment of the amounts described in clauses (1) and (2) hereof and on Water System reserves. but, excluding in all cases, connection charges and facility fees or similar charges related to the Water System, customer deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District, and any proceeds of taxes restricted by law to be used by the District to pay bonds hereafter issued. Series 2010 Bonds The term "Series 2010 Bnnds" means the $ _ aggregate principal amount of East Valley Water District Water Revenue Bonds (Water System ImprOement Projects), Series 2010, executed and delivered on behalf of the District and at any '.imc outstanding pursuant to the Indenture. Subordinate Obligations The term "Subordinate Obligations" means all contracts o, bonds of the District which are secured by a pledge of and lien on the Revenues subordinate to ,h(- pledge of and lien on Revenues securing the Parity Bonds or Contracts. The Bond Buyer's Revenue Bond Index The term "The Bond Buyer's Revenue Bond Index" means ;he revenue bond index published by The Bond Buyer. 2001 Installment Purchase Agreement The term "2001 Installment Purchase Agreement" means the Amended and Restated Installment Purchase Agreement. dated as of April 1, 2001. by and between the District and the East Valley Water District Financing Corporation. DOCSOC/1322156v5/022497 -001 i 2004 Installment Sale Agreement The term "2004 Installment Sale Agreement' means the Installment Sale Agreement #04- 058 -AF, dated July 13, 2004, by and between the District and Municipal Finance Corporation. 2006 Installment Sale Agreement The term "2006 Installment Sale Agreement' means the Installment Sale Agreement #05- 106 -AF, dated January 10, 2006, by and between the District and Municipal Finance Corporation. 2010 Project The term "2010 Project' means the financing of the Water System distribution and treatment facilities described as the "2010 Project' in Exhibit B -2 hereto. Trustee The term "Trustee" means Union Bank, N.A., acting in its capacity as Trustee under and pursuant to the Indenture, and its successors and assigns. Water Service The term "Water Service" means the water distribution service made available or provided by the Water System. Water System The term "Water System" means the whole and each and every part of the water system of the District, 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. Written Consent of the Authority or District, Written Order of the Authority or District, Written Request of the Authority or District, Written Requisition of the Authority or District The terms "Written Consent of the Authority or District," "Written Order of the Authority or District," "Written Request of the Authority or District," and "Written Requisition of the Authority or District' mean, respectively, a written consent, order, request or requisition signed by or on behalf of (i) the Authority by its Authorized Representative or (ii) the District by the President of its Board of Directors or the Manager of the District or by any two persons (whether or not officers of the Board of Directors of the District) who are specifically authorized by resolution of the District to sign or execute such a document on its behalf. 9 DOCSOC/ 1322156v5/022497 -001 I ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Representations by the District. The Cisrrict makes the following representations: (a) The District is a county water district duly onsacized and existing under and pursuant to the laws of the State of California. (b) The District has full legal right, power and authority to enter into this Agreement and carry out its obligations hereunder, to carry rn 1 and consummate all other transactions contemplated by this Agreement, and the District has complied with the provisions of the Law in all matters relating to such transactions. (c) By proper action, the District has duly authori <ed the execution, delivery and due performance of this Agreement. (d) The District will not take or, to the extent within its power, permit any action to be taken which results in the interest paid for the installment purchase of the Project under the terms of this Agreement being included in the gross income of the Series 2010 Bond Owners or their assigns for purposes of federal or State of California income taxation. (e) The District has determined that it is necessar: and proper for District uses and purposes within the terms of the Law that the District finance and refinance the acquisition of the Project in the manner provided for in this Agreement. Section 2.2. Representations and Warranties by the Authority. The Authority makes the following representations and warranties: (a) The Authority is a public body duly organized and in good standing under the Joint Exercise of Powers Agreemem and under the Constitution and laws of the State of California, has full legal right, power and authority to enter into this . Agreement and to carry out and consummate all transactions contemplated by this Agreement and by proper action has duly authorized the execution and delivery and due performance of this Agreement. (b) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated will not violate any provision of aw. any order of any court or other agency of government, or and indenture, material agreement o 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 whatsce -cr upon any of the properties or assets of the Authority. (c) The Authority will not take or permit any act on to be taken which results in interest paid for the installment purchase of the Project under the erins of this Agreement being included in the gross income of the 2010 Bond Owners or their assigns for purposes of federal or State of California income taxation. 10 DOCSOC/ 1322156v5/022497-001 I ARTICLE III SALE AND PURCHASE OF THE PROJECT Section 3.1. Purchase and Sale of the Project (a) In consideration for the Authority's assistance in refinancing the Prior Project and the 2010 Project, the District agrees to sell, and hereby sells, to the Authority, and the Authority agrees to purchase, and hereby purchases, from the District, the Project at the purchase price specified in Section 4.1 hereof and otherwise in the manner and in accordance with the provisions of the Installment Purchase Agreement. (b) In consideration for the Installment Payments as set forth in Section 4.2, the Authority agrees to sell, and hereby sells, to the District, and the District agrees to purchase, and hereby purchases, from the Authority, the Project at the Purchase Price specified in Section 4.1 hereof and otherwise in the manner and in accordance with the provisions of this Agreement. Section 3.2. Title. All right, title and interest in the Prior Project shall vest in the District immediately upon execution and delivery of the Installment Purchase Agreement. All right, title and interest in each component of the 2010 Project shall vest in the District immediately upon acquisition thereof. Such vesting shall occur without further action by the Authority or the District and the Authority shall, if requested by the District or, if necessary to assure such automatic vesting, deliver any and all documents required to assume such vesting. Section 3.3. Acquisition and Construction of the Project. The Authority hereby agrees to cause the 2010 Project, and any additions or modifications thereto to be constructed, acquired or installed by the District as its agent, and the District shall enter into contracts and provide for, as agent for the Authority, the complete construction, acquisition and installation of the 2010 Project. The District hereby agrees that the District will cause the construction, acquisition and installation of the 2010 Project to be diligently performed after the deposit of funds into the Acquisition Fund, and that it will use its best efforts to cause the construction, acquisition and installation of the 2010 Project to be completed. 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 2010 Project and that all such costs and expenses shall be paid by the District, regardless of whether the funds deposited in the Acquisition Fund are sufficient to cover all such costs and expenses. Section 3.4. Changes to the Project. The District may add other improvements to or substitute other improvements for those listed as components of the Project in Exhibit B hereto, but only if the District first files with the Authority and the Trustee a statement of the District: (a) identifying the improvements to be deleted from such Exhibit, if any, and the improvements to added or replaced, if any; and (b) stating that the estimated costs of construction, acquisition and installation of the added or substituted improvements will not cause the cost of the uncompleted portion of the Project to exceed the amount available therefore in the Acquisition Fund. Section 3.5. Acquisition Fund. There is hereby established with the District the Acquisition Fund into which amounts shall be deposited pursuant to Section 3.02 of the Indenture. DOCSOC/ 1322156v5 /022497 -001 1 The moneys in the Acquisition Fund shall be held by the District in rust and shall be applied to the payment of the costs of acquisition and construction of the Prgje: 1. and of expenses incidental thereto. Before any payment is made from the Acquisition Fund h,.- the Director of Finance of the District, the Manager shall cause to be tiled with the Director of : i:tance of the District a Written Requisition of the District in the fora set forth in Exhibit C hereto. Upon receipt of each such Written Requisition the Director c: Finance of the District will pay the amount set forth in such Written Requisition as directed by th,: terns thereof. The Director of Finance of the District need not make any such payment if it has received notice of any lien, right to lien or attachment upon, or claim affecting the right to receive pay-m•ni of, any of the moneys to be so paid, which has not been released or will not be released simultancously with such payment. When the Project shall have been constructed and acgt ired in accordance with the Installment Purchase Agreement. a statement of the District stati tg the fact and date of such acquisition, construction and acceptance and stating that all o+ 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 arc subject to dispute and for whn_l. a retention in the Acquisition Fund is to be maintained in the full amount of such claims until such ::lispute is resolved), shall be delivered to the Director of Finance of the District and the Trustee h% the District. Upon the receipt of such statement, the Director of Finance of the District shall trans] (..r 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 District by the District) to the Trustee which shall transfer such amounts to the Revenue Fund. Upon the occurrence and continuation of an Event of Default or an event which would constitute an Event of Default, amounts on deposit in the Acquisition Fund shall not be disbursed, but shall instead be applied to the payment of the principal, interes. and prepayment penalty with respect to the Certificates. ARTICLE IV IN STALLMENT PAYMENTS Section 4.1. Purchase Price. (a) The Purchase Price to be paid by the District hereunder to the Authority is the sum of the principal amount of the District'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) The principal amount of the payments to be made by the District hereunder is set forth in Exhibit A hereto. (c) The interest to accrue on the unpaid balance of such principal amount is as specified in Section 4.2 and Exhibit A hereto, and shall be paid ':-N the District as and constitute interest paid with respect to the principal amount of the District's of ° Aga *.ions hereunder. Section 4.2. Installment Payments. The District shall, subject to any rights of prepayment provided in Article VII, pay the Authority the Purchase Price in installment payments of interest and 12 DOCSOC/ 1322156v5/022497 -001 1 principal in the amounts and on the Installment Payment Dates as set forth in Exhibit A hereto; provided, however, that the amount of Installment Payments payable on any Installment Payment Date shall be reduced by the amounts on deposit in the Certificate Payment Fund on such Installment Payment Date, if any. Each Installment Payment shall be paid to the Authority in lawful money of the United States of America. In the event the District fails to make any of the payments required to be made by it under this Section, such payment shall continue as an obligation of the District until such amount shall have been fully paid; and the District 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 Installment Payments if paid in accordance with their terms. Subject to Section 10.1 hereof, the obligation of the District to make the 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 District will not discontinue or suspend any Installment Payments 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 2010 Project has been completed, and such payments shall not be subject to reduction whether by 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 5.1. Pledge of Revenues. All Revenues and all amounts on deposit in the Revenue Fund are hereby irrevocably pledged to the payment of the Installment Payments as provided herein; and the Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of the Revenues and amounts on deposit in the Revenue Fund there may be apportioned such sums for such purposes, including payments with respect to the 2004 Installment Sale Agreement and 2006 Installment Sale Agreement which constitute Contracts within the meaning of this Agreement; as are expressly permitted herein this Agreement constitutes a Contract within the meaning of the 2004 Installment Sale Agreement. This pledge, together with the pledge created by all other Contracts and Parity Bonds, shall constitute a first lien on Revenues and, subject to application of Revenues and all amounts on deposit therein as permitted herein, the Revenue Fund and other funds and accounts created hereunder for the payment of the Installment Payments and all other Contracts and Parity Bonds in accordance with the terms hereof and the Indenture. Section 5.2. Allocation of Revenues. In order to cant' out and effectuate the pledge and lien contained herein, the District agrees and covenants that all Revenues shall be received by the District in trust hereunder and shall be deposited when and as received in a special fund designated as the "Revenue Fund," which fund is hereby established and which fund the District agrees and covenants to maintain and to hold separate and apart from other funds so long as any Contracts or Parity Bonds remain unpaid. Moneys in the Revenue Fund shall be used and applied by the District as provided in this Agreement. 13 DOCSOC/1322156v5/022497 -0011 The District shall, from the moneys in the Revenue Fund, pa: ill Operation and Maintenance Costs (including amounts reasonablh required to be set aside in co-)t ncency reserves for Operation and Maintenance Costs, the payment of which is not then immedi, :ely required) as such Operation and Maintenance Costs become due and payable. Thereafter all re-naining moneys in the Revenue Fund shall be applied by the District at the following times for the transfer to the following respective special funds in the following order of priority; and all moneys in eac;i cd such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes s� t forth in this Section. (a) Installment Payments. Not later than each installment Payment Date, the District shall, from the moneys in the Revenue Fund, transfer to the Trustee the Installment Payment due and payable on that Installmen. Payment Date. The District s]-a 1 also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for depos t :n the respective payment fund, without preference or priority, and in the event of any insufficienc,, of such moneys ratably without any discrimination or preference, any other Parity Installment 1'avments or Debt Service in accordance with the provisions of any Parity Bond or Contract. (b) Reserve Funds. On or before each Installment Payment Date the District shall, from the remaining moneys in the Revenue Fund, thereafter. ,T.i'ho ut preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, and to the applicable trustee for such other reserve funds and /or a( , ounts, if any, as may have been established in connection with Parity Bonds or Contracts other than this Agreement, that sum, if any, necessary to restore the reserve funds to an amount equal to the reser: e fund requirement (if any) for such Parity Bonds or Contracts. (c) Surplus. Moneys on deposit in the ReN er.ue Fund on each Installment Payment Date not necessary to make any of the payments required shove may be expended by the District at any time for any purpose permitted by law includin ;= )Lit not limited to Subordinate Obligations. Section 5.3. Additional Contracts and Parity Bonds. The District may at any time execute any Contract or issue any Parity Bonds, as the case may be, in accord ince herewith; provided: (a) The Net Revenues for the most recent audited Fiscal Year preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as *he case may be, as evidenced by both a calculation prepared by the District and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the District, shall have produced a sum equal to at least one hundred tn:roly percent (120 %) of the Debt Service for such Fiscal Year; and (b) The Net Revenues for the most recent audited Fiscal Year preceding the date of the execution of such Contract or the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Parity Bonds, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year to tn: reases or decreases in rates and charges for the Water Service approved and in effect as of the date of .;alculation, as evidenced by a calculation prepared by the District. shall have produced a sum eq_t1 to at least one hundred twenty percent (120 %) of (x) the Debt Service for such Fiscal Year ph s (y) the Debt Service on any Contracts executed or Parity Bonds issued since the end of such Fisc tl Year assuming such Contracts had been executed or Parity Bonds had been issued at the beginning c l'such Fiscal Year, plus (z) the 14 DOC SOC/ 1322156v5/022497-001 I Debt Service on the Contract to be executed or Parity Bonds to be issued had such Contract been executed or Parity Bonds been issued at the beginning of such Fiscal Year; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Parity Project, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for the Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the General Manager on file with the District, shall produce a sum equal to at least one hundred twenty percent (120 %) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Parity Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects within such Fiscal Years, assuming that all such Contracts and Parity Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Parity Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Parity Projects; and Notwithstanding the foregoing, Parity Bonds or Contracts may be issued or incurred to refund outstanding Parity Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Parity Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Parity Bonds or Contracts, but excluding such refunding Parity Bonds or Contracts) not being refunded are outstanding. Section 5.4. Subordinate Obligations. Notwithstanding any other provision of this Agreement, the District may issue or execute and deliver, as applicable, Subordinate Obligations at any time in the District's sole discretion. Section 5.5. No Senior Obligations. Notwithstanding any other provision of this Agreement, the District shall not issue or execute and deliver, as applicable, additional obligations payable on a basis senior to the Installment Payments, other than obligations constituting Operation and Maintenance Costs. Section 5.6. Investments. All moneys held by the District in the Revenue Fund shall be invested in Permitted Investments and the investment earnings thereon shall remain on deposit in such fund, except as otherwise provided herein. ARTICLE VI COVENANTS OF THE DISTRICT Section 6.1. Compliance with Installment Purchase Agreement and Ancillary Agreement The District will punctually pay the Installment Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate this Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances 15 DOCSOC/ 1322156v5 /022497 -001 I that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the Uni er_ 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 contained herein required to be observed and performed by it, whether express or implied, or any duty, liability obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or hankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest. sto "n. earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, s,rikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. It is expressly understood and agreed by and among the Parties to this Agreement that, subject to Section 10.6 hereof, each of the agreements, conditions. cevenants and terms contained in this Agreement is an essential and material term of the purchase of and payment for the Project by the District pursuant to, and in accordance with, and as authorized under the Law. The District will faithfully observe and perform all the agreements, conditions, covenants and terms required to be observed and performed by it pursuant to all o itstanding Contracts and Parity Bonds as such may from time to time be executed or issued, as the ca:e may be. Section 6.2. Against Encumbrances. The District will not make any pledge of or place any lien on Revenues or the moneys in the Revenue Fund except as provided herein. The District may at any time, or from time to time, execute Contracts or issue Party Bonds as permitted herein or incur evidences of indebtedness or incur other obligations for any la, +ful purpose which are payable from and secured by a pledge of and lien on Revenues and on and moneys in the Revenue Fund as may from time to time be deposited therein, provided that such pledge and lien shall be subordinate in all respects to the pledge of and lien thereon provided herein. Section 6.3. Against Sale or Other Disposition of Prope a. The District will not enter into any agreement or lease which impairs the operation of the Water System or any part thereof necessary to secure adequate Revenues for the payment of the 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 whicl- 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 District to }-a} the Installment Payments and if the proceeds of such sale are deposited in the Revenue Fund. Nothing herein shall restrict the ability of the District to sell any portion of the Water System if such portion is immediately repurchased by the District and il' such arrangement cannot by its terms result in the purchaser of such portion of the Water System exercising any remedy which would deprive the District of or otherwise interfere with its right .o wo,n and operate such portion of the Water System. Notwithstanding the foregoing, the District Tray permit competitive systems where it determines that provision of Water Service is either eographically, technically or economically prohibitive or where provision of such services is rncre readily obtained from another provider of such services. Section 6.4. Against Competitive Facilities. To the extent permitted by law, the District covenants that it will not acquire, construct, maintain or operate and %vill not, to the extent permitted by law and within the scope of its powers, permit any other pub is or private agency, Authority, 16 DOCSOC/ 1322156v5 /022497 -001 1 district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the District any water system competitive with the Water System. Section 6.5. Tax Covenants. Notwithstanding any other provision of this Agreement, absent an opinion of Special Counsel that the exclusion from gross income of interest with respect to the Series 2010 Bonds will not be adversely affected for federal income tax purposes, the District and the Authority covenant to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The District and the Authority will not take or omit to take any action or make any use of the proceeds of the Series 2010 Bonds or of any other moneys or property which would cause the Series 2010 Bonds to be "private activity bonds" within the meaning of Section 141 of the Code. (b) Arbitrage. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Series 2010 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. (c) Federal Guarantee. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or take or omit to take any action that would cause the Series 2010 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) Information Reporting. The District and the Authority will take or cause to be taken all necessary action to comply with the informational reporting requirements of Section 149(e) of the Code necessary to preserve the exclusion of interest on the 2010A Bonds pursuant to Section 103(a) of the Code. (e) Hedge Bonds. The District and the Authority will make no use of the proceeds of the Series 2010 Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Series 2010 Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the District 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 Series 2010 Bonds for federal income tax purposes. (f) Miscellaneous. The District and the Authority will take no action, or omit to take any action, inconsistent with the expectations stated in any Tax Certificate executed with respect to the Series 2010 Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the District and the Authority from executing and delivering Series 2010 Bonds, the interest with respect to which has been determined by Special Counsel to be subject to federal income taxation. Section 6.6. Maintenance and Operation of the Water System. The District will maintain and preserve the Water System in good repair and working order at all times and will operate the 17 DOCSOC/ 1322156v5 /022497 -0011 Water System in an efficient and economical manner and will pa} cll Operation and Maintenance Costs as they become due and payable. Section 6.7. Payment of Claims. The District will pay an :1 discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might becorn,: a lien on the Revenues or the funds or accounts created hereunder or on any funds in the hands of the District pledged to pay the Installment Payments or to the Owners prior or superior to the lie- nt die Installment Payments or which might impair the security of -e Installment Payments. Section 6.8. Compliance with Contracts. The District wilt reither take nor omit to take any action under any contract if the effect of such act or failure to act would in any manner impair or adversely affect the ability of the District to pay Installment Pavtnents: and the District will comply with, keep, observe and perform all agreements, conditions, coveta;- *. aad terms, express or implied, required to be performed by it contained in all other contracts af,'ecting or involving the Water System, to the extent that the District is a party thereto. Section 6.9. Insurance. (a) The Distric_ will procure and maintain or cause to be procured and maintained insurance on the Water System with responsible insurers in such amounts and against such risks (including damage to or destruction of the Water Systcrr) as are usually covered in connection with a water system similar to the Water System so long as such insurance is available from reputable insurance companies on commercially reasonable tenr.s In the event of any damage to or destruction of the t'dater 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 Syster.t. The District shall begin such reconstruction, repair or replacement promptly after such damage o- 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 com:)lt�ted and the Water System shall be free and clear of all claims and liens. If such Net Proceeds exceed the costs of such reconstruction, repair or replacement portion of the Water System, and'or the cost of the construction of acditions, betterments, extensions or improvements to the Water Svstem, then the excess Net Proceeds may, at the option of the District, be applied in part to the prepayment of Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Parity Bonds and Contracts in the same proportion which the aggrega e unpaid principal balance of Installment Payments then bears to the aggregate unpaid principal amount of such Parity Bonds and Contracts. If such Net Proceeds are sufficient to enable the District to retire the entire obligation evidenced hereby prior to the final due date of the Installment 11a,.rrtents as well as the entire obligations evidenced by Parity Bnnds and Contracts then remair ing unpaid prior to their final respective due dates, the District may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Water System, and /or not to constr .c: ;xher additions, betterments, extensions or improvements to the `A ater System; and thereupon such \et Proceeds shall be applied to the prepayment of Installment Payments as provided in Article `, lI and to the retirement of such Parity Bonds and Contracts. E DOCSOC/1322156v5/022497 -0011 (b) The District will procure and maintain such other insurance as 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 a water system similar to the Water System. (c) Any insurance required to be maintained by paragraph (a) above and, if the District 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 a water system similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound. Section 6.10. Accounting Records; Financial Statements and Other Reports. (a) The District will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the District, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions. (b) The District will prepare and file with the Authority and the Trustee annually within one hundred eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2009) financial statements of the District for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant's Report thereon. The Trustee shall not be responsible for reviewing such financial statements. Section 6.11. Protection of Security and Rights of the Authority. The District will preserve and protect the security hereof and the rights of the Authority to the Installment Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. Section 6.12. Payment of Taxes and Compliance with Governmental Regulations. The District 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 District 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 District 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 6.13. Amount of Rates and Charges. (a) To the fullest extent permitted by law, the District shall fix and prescribe rates and charges for the Water Service provided by the Water System which will be at least sufficient to yield during each Fiscal Year Net Revenues equal to one hundred twenty percent (120 %) of Debt Service for such Fiscal Year allocable to the Water System. (b) The District 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. 19 DOCSOC/ 1322156v5/022497 -001 1 Section 6.14. Collection of Rates and Charges. The District %. ill have in effect at all times by -laws, rules and regulations requiting each customer to pay the rates :.nd charges applicable to the Water Service and providing for the billing thereof and for a due date and a delinquency date for each bill. Section 6.15. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds thereof sha I I be applied as follows: (a) If (1) the District files with the Authority -, and the Trustee a certificate showing (i) the estimated loss of annual Net Revenues, if any, su Tered or to be suffered by the District by reason of such eminent domain proceedings, (ii) a gene at description of the additions, betterments, extensions or improvements to the Water Syster- proposed to be acquired and constructed by the District from such Net Proceeds, and (iii) an estin-ate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements, and (2) the District, on the basis of such certificate filed with the Authority and the Trustee, determines that the estimated additional annual Net Revenues will sufficiently offset 'he estimated loss of annual Net Revenues resulting from such eminent domain proceedings so tha'.. t ie ability of the District to meet its obligations hereunder will not be substantially impaired (which letermination shall be final and conclusive), then the District shall promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in ac;nrdance with such certificate and such Net Proceeds shall be applied for the payment of the costs of such acquisition and construction, and any balance of such Net Proceeds not required by the District for such purpose shall be deposited in the Revenue Fund. (b) If the foregoing conditions are not met, then such Net Proceeds shall be applied by the District in part to the prepayment of Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Parity Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Installment Payments then bears to the aggregate unpaid principal amount of such Parity Bonds and Contracts. Section 6.16. Further Assurances. The District will adopt. deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Authority of the rights and benefits provided to it herein. Section 6.17. Enforcement of Contracts. The District ,A ill not voluntarily consent to or permit any rescission of, nor will it consent to any amendment tc 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 District to pay Installment Payments. Section 6.18. Continuing Disclosure. The District hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Agreement, failure c f he District to comply with the Continuing Disclosure Certificate shall not be considered an Even: r Default; however, any Owner of Series 2010 Bonds or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance b: court order, to cause the District to comply with its obligations under this Section. For purposes o this Section, `Beneficial Owner" 20 DOCSOC/ 1322156v5/O22497-001 I means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2010 Bonds (including persons holding Series 2010 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2010 Bonds for federal income tax purposes. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section 7.1. Prepayment. (a) The District may or shall, as the case may be, prepay from the Net Proceeds as provided herein on any date, all or any part on any Installment Payment Date, of the principal amount of the unpaid Installment Payments at a prepayment price equal to the sum of the principal amount prepaid plus accrued interest thereon to the date of prepayment. (b) The District may prepay the Installment Payments in the order as directed in a Written Request of the District to the Trustee, and by lot within a maturity, as a whole or in part, on any date on or after September 25, 20_ from any available funds. The principal amount of the unpaid Installment Payments is payable at a prepayment price equal to the principal amount of the Installment Payments to be prepaid plus accrued interest thereon to the date of prepayment without premium. Notwithstanding any such prepayment, the District 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 7.2. Method of Prenavment. Before making any prepayment pursuant to Section 7.1(a), the District may, 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 of the Series 2010 Bonds will be paid, which date shall be not less than thirty (30) days from the date such notice is given, unless such prepayment must occur on an Interest Payment Date, in which case such date shall be the next Interest Payment Date with respect to which notice of prepayment may be timely given pursuant to the Indenture. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.1. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen, that is to say -- (a) if default shall be made by the District in the due and punctual payment of any Installment Payment or any Contract or Parity Bond when and as the same shall become due and payable; 21 DOCSOC/1322156v5/022497 -0011 (b) if default slialI be made by the District in the Performance of any of the other agreements or covenants required herein or in any Contract or Paritv Bond to be performed by it, and such default shall have continued for a period of thirty (30) days a1* the District shall have been given notice in writing of such defau't by the Authority; (c) if the District shall file a petition or arms ver seeking arrangement or reorganization under the federal bankruptcy laws or any other applicabl_; 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 District seeking arrangement or r- zurganization under the federal bankruptcy laws or any other applicable law of the United States o` �,merica or any state therein, or if under the provisions of any other law for the relief or aid of d -blors any court of competent jurisdiction shall assume custody or control of the District or of the ­thole or any substantial part of its property; or (d) if payment of the principal of any Contract or Parity Bond is accelerated in accordance with its terms; then and in each and every such case during the continuance of suc❑ Event of Default specified in clauses (c) and (d) above, the Authority shall, and for any other such Event of Default the Authority may, declare the entire principal amount of the unpaid Installment Pavnients and the accrued interest thereon to be due and payable immediately, and upon any such dec aration the same shall become immediately due and payable, anything contained herein to the c xntrary notwithstanding. This subsection however, is subject to the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shall I:ave been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered the District shall deposit with the Authority a s tm sufficient to pay the unpaid principal amount of the Installment Payments and, /or the unpaid pa.mient of any other Contract or Parity 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 r, tes applicable to the remaining unpaid principal balance of the Installment Payments or such Cortract or Parity 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 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 satisfact on 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 District, may rescind ant: annul such declaration and its consequences; but no such rescission and annulment shall extend bl or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.2. Application of Funds Upon Acceleration Upon the date of the declaration of acceleration as provided in Section 8.1, all Revenues thereafter r,-ccived shall be applied in the following order - First, to the payment, without preference or priority, and in .he event of any insufficiency of such Revenues ratably without any discrimination or preference.._ 1, the fees, costs and expenses of the Authority and Trustee, if any, including reasonable compensatior tr its accountants and counsel; Second, to the payment of the Operation and Maintenance i' -ists; and 22 DOCSOC/ 1322156v5/022497 -0011 Third, to the payment of the entire principal amount of the unpaid Installment Payments and the unpaid principal amount of all Parity Bonds and Contracts and the accrued interest thereon, with interest on the overdue installments at the rate or rates of interest applicable to the unpaid Installment Payments and such Parity Bonds and Contracts if paid in accordance with their respective terms. Section 8.3. 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 District or any director, officer or employee thereof, and to compel the District or any such director, officer or employee to perform and carry out its or his duties under the Law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the District and its directors, officers and employees to account as the trustee of an express trust. Notwithstanding anything contained herein, the Authority shall not have a security interest in or mortgage on the Project, the Water System or other assets of the District, and no default hereunder shall result in the loss of the Project, the Water System or other assets of the District. Section 8.4. Non - Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payments to the Authority at the respective due dates or upon prepayment from the Net Revenues, the Revenue 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 embodied herein. A waiver of any default or breach of duty or contract by the Authority shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by the Law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If any action, proceeding or suit to enforce any right or exercise any remedy is discontinued or abandoned, the District 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 8.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. 23 DOCSOC/ 1322156v5/022497 -0011 If any action, proceeding or suit to enforce any right or exer.;se any remedy is discontinued or abandoned, the Trustee and Certificate Owners shall be restored tr :heir former positions. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obli atg ions. When: (a) all or any, portion of the Installment Pa}merts shall have become due and payable in accordance herewith or a written notice of the District to )repay all or any portion of the Installment Payments shall have been filed with the Trustee; and (b) there shall have been deposited with the Trustee at or prior to the Installment Payment Dates or 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 Installment Payments, sufficient moneys and non - callable Permitt °d Investments, issued by the United States of America and described in clause (A) of the definiti )n thereof, the principal of and interest on which when due will provide money sufficient to pay all principal, prepayment premium, if any, and interest of such Installment Payments to their respecti,. -e Installment Payment Dates or prepayment date or dates as the case may be; and (c) provision shall have been made for paying all fees and expenses of the Trustee; and (d) the principal amount of the Bonds equal to :he principal component of the Installment Payments to be discharged hereunder has been deemed no longer outstanding under the Indenture because of the application of funds or Permitted Investments received under clauses (a) and (b); then and in that event, the right, title and interest of the .Authority herein and the obligations of the District hereunder shall, with respect to all or such portion of the Installment Payments as have been so provided for, thereupon cease, terminate, become void an(' he completely discharged and satisfied (except for the right of the Trustee and the obligation of the District to have such moneys and such Permitted Investments applied to the payment of such Inst�llrrent Payments). In such event, upon request of the District the Trustee sha.1 cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District 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 'he District, after payment of all amounts due the Trustee pursuant to the Indenture, as an overpayment of Installment Payments, all such moneys or such Permitted Investments held by it pursuant her.,to other than such moneys and such Permitted Investments as are required for the payment c prepayment of the Installment Payments, which moneys and Permitted Investments shall continue to ')e held by the Trustee in trust for the payment of the Installmen-. Payments and shall be applied 'Oy. :he Trustee to the payment of the Installment Payments of the District. 24 DOCSOC/ 1322156v5/022497 -001 1 ARTICLE X MISCELLANEOUS Section 10.1. Liability of District Limited to Revenues. The obligation of the District to make the Installment Payments is a special obligation of the District payable solely from the Net Revenues, and does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. Notwithstanding anything contained herein, the District shall not be required to advance any moneys derived from any source of income other than the Revenues and the Revenue Fund for the payment of amounts due hereunder or for the performance of any agreements or covenants required to be performed by it contained herein. The District 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 District for such purpose. Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the District or the Authority any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the District or the Authority shall be for the sole and exclusive benefit of the other party. Section 10.3. Successor Is Deemed Included in all References to Predecessor. Whenever either the District 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 District or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 10.4. Compensation and Indemnification of Trustee. The District shall pay to the Trustee from time to time all reasonable compensation for all services 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 District 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 the trust created under the Indenture, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers under the Indenture. The rights of the Trustee and the obligations of the District under this 10.4 shall survive removal or resignation of the Trustee under the Indenture or the discharge of the Bonds and the Indenture. Section 10.5. Waiver of Personal Liability. No director, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payments, but nothing contained herein shall relieve any director, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. 25 DOCSOC/ 1322156v5/022497 -0011 Section 10.6. Article and Section Headings, Gender and References. The headings or titles of the several articles and sections hereof and the table of contents a ipended hereto shall be solely for convenience of reference and shall not affect the meaning, con! <traction or effect hereof, and words of any gender shall be deemed and construed to include all i- Tiders. 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." "lerecf.°' "hereto," "herewith" and other words of similar import refer to this Agreement as a whole and not to any particular article, section, subdivision or clause hereof Section 10.7. Partial Invalidity. If any one or more of th-- agreements or covenants or portions thereof required hereby tc he performed by or on the par of he District 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 'mm the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The District and the Authority hereby declare that they would have executed this 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 'lc held to be unconstitutional, unenforceable or invalid. Section 10.8. Assignment. This 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 District. Section 10.9. Net Contract. This Agreement shall be deemed and construed to be a net contract, and the District shall pay absolutely net during the term hereof the Installment Payments and all other payments required hereunder, free of any deductions and without abatement, diminution or set -off whatsoever. Section 10.10. California Law. THE INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE 1,4'ITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.11. 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 parry in writing from time to time, namely: If to the District: East Valley Water District 3654 East Highland Avenue, Suite 18 Highland, CA 93246 Attention: General Manager If to the Authority: East Valley Water District Financ_ng Authority 3654 East Highland Avenue, Suite 1 R Highland- CA 93246 .Attention: President 26 DOCSOC/1322156v5/022497 -0011 Section 10.12. Effective Date. This 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 10.13. Execution in Counterparts. This 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 10.14. Indemnification of Authori ty. The District hereby agrees to indemnify and hold harmless the Authority if and to the extent permitted by law, from and against all claims, advances, damages and losses, including legal fees and expenses, 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 10.15. Amendments Permitted. This Agreement and the rights and obligations of the Authority, the District, the Owners of the Series 2010 Bonds and of the Trustee may be modified or amended at any time by an amendment hereto which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Series 2010 Bonds then Outstanding, exclusive of Series 2010 Bonds disqualified as provided in the Indenture, shall have been filed with the Trustee. No such modification or amendment shall (1) extend the stated maturities of the Series 2010 Bonds, or reduce the rate of interest represented thereby, or change the method of computing the rate of interest with respect thereto, or extend the time of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment thereof, without the consent of the Owner of each Series 2010 Bond so affected, or (2) reduce the aforesaid percentage of Owners of Series 2010 Bonds whose consent is required for the execution of any amendment or modification of this Agreement without the consent of the Owners of all Series 2010 Bonds then Outstanding, or (3) modify any of the rights or obligations of the Trustee or the Authority without its respective written consent thereto. This Agreement and the rights and obligations of the Authority, the District and of the Owners of the Series 2010 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 Series 2010 Bonds, but only to the extent permitted by law and only for any one or more of the following purposes - (a) to add to the covenants and agreements of the Authority or the District contained in this Agreement other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the Authority or the District, and which shall not adversely affect the interests of the Owners of the Series 2010 Bonds; (b) to cure, correct or supplement any ambiguous or defective provision contained in this Agreement or in regard to matters or questions arising under this Agreement, as the Authority or the District may deem necessary or desirable and which shall not adversely affect the interests of the Owners of the Series 2010 Bonds; and (c) to make such other amendments or modifications as may be in the best interests of the Owners of the Series 2010 Bonds; and 27 DOC SOC/ 1322156v5/022497 -0011 (d) to make an} amendments or supplements nece szry or appropriate to preserve or protect the exclusion of interest with respect to the Series 201 0 Bonds from gross income for federal income tax purposes under the Code or the exemption of ,u -+ interest from State personal income taxes. No amendment without consent of the Owners of the Serie< -'0 0 Bonds may modify any of the rights or obligations of the Trustee without its written consent therm . Section 10.16. Paired Obligation Provider Guidelines. Fnr purposes of Section 5.3 and Section 6.13, Paired Obligations shall comply with the following conc itions: (a) A Paired Obligation Provider shall initially hive a long -term rating equal to or better than the Initial Rating Requirement. (b) So long as the long -term rating of the Paired Obligation Provider is not reduced below the Minimum Rating Requirement, the interest rate (-,I such Paired Obligation shall be deemed to be equal to the irrevocable fixed interest rate attributable thereto for purposes of Section 53 and Section 6.13. (c) In the event that a Paired Obligation Provider does not maintain the Minimum Rating Requirement and the District does not replace such Paired Obligation Provider with another Paired Obligation Provider which maintains the Initial Rating Requirement within ten (10) Business Days of notice that the Paired Obligation Provider has not rna manned the Minimum Rating Requirement, interest with respect to such Paired Obligations shal he computed for purposes of Section 5.3 and Section 6.13 without regard to payments to be received from the Paired Obligation Provider. Section 10.17. Notice to Rating Agencv. Copies of all amerdments to this Agreement shall be mailed by first class mail to Standard & Poor's Ratings Services at least 15 days prior to the effective date of such amendment. 28 DOCSOC/ 1322156v5 /022497 -001 I IN WITNESS WHEREOF, the parties hereto have executed and attested this Agreement by their officers thereunto duly authorized as of the day and year first written above. ATTEST Secretary of the Board of the District EAST VALLEY WATER DISTRICT President EAST VALLEY WATER DISTRICT FINANCING AUTHORITY President S -1 DOCSOC/1322156v5/022497 -0011 EXHIBIT A PURCHASE PRICE The principal amount of payments to be made bN the District hereunder is 2. The installment payments of principal and interest are payable in the amounts and on the Installment Payment Dates as follows: Installment Payment Date Amount Attributable to 5th Day Prior to: Principal A -1 DOCSOC/ 1322156v5/022497 -0011 .Amount Attributable to Interest Installment Payment Date Amount Attributable to 5th Day Prior to: Principal A -2 DOC S OC/ 1322156v5/022497 -001 1 Amount Attributable to Interest EXHIBIT B -1 DESCRIPTION OF THE PROJECT The Prior Project comprises the following described imp -mements to the Water System financed under the 2001 Installmen, Purchase Agreement. Component B -1 -1 DOC SOC/ 1322156v5/022497 -001 I Cost System. EXHIBIT B -2 DESCRIPTION OF THE PRIOR PROJECT The 2010 Project is comprised of the following described improvements to the Water Component B -2 -1 DOCSOC/1322156v5/022497 -0011 Cost EXHIBIT C [FORM OF REQUISITION NO. __ FCR DISBURSEMENT FROM ACQUISITION F 1: ND] EAST VALLEY \WATER DISTRICT FINANCINi AUTHORITY \'MATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING), SERIES 2010 The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting General Manager of the East Valley Water District, a California county v:ater district organized and existing under the laws of the State of California (the "District "), and as such. is familiar with the facts heicin certified and is authorized to certify the same; (ii) that, pursuant to Section 3.5 of that certain Installment Purchase Agreement, dated as of September I, 2010 (the "Installment Purchase Agreement'). h% and between the East Valley Water District Financing Authority and the District, the undersigned hereby requests the Director of Finance of the District to disburse this date the following amounts from the Acquisition Fund established under the Installment Purchase Agreement, to the paves designated on the attached Exhibit A to Exhibit C; (iii) that each obligation mentioned herein has been :n<urred by the District 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). fnor to the expenditure of such amount for the purpose set forth on the attached Exhibit A has been received and is final; (v) that there has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, or claim affecting the right to recei% -c ;iayment of, any of the moneys payable to any of the payees named on the attached Exhibit A. Nvhi :h has not been released or will not be released simultaneously with the payment of such obli2atic n. other than materialmen's or mechanics' liens accruing by mere operation of law. EAST VALLEY WATER DISTRICT Grl:eral Manager C -1 DOC SOC/ 1322156v5 /022497 -001 1 Exhibit A to EXHIBIT C ACQUISITION FUND DISBURSEMENTS Item Purpose of Number Payee Name and Address Obligation Amount C -2 DOCSOC/ 1322156v5/022497 -0011 Stradling Yocca Carlson & Rauth Draft of 8116110 ESCROW AGREEMENT relating to the defeasance of $12,000,000 Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001 THIS ESCROW AGREEMENT, dated as of September 1, 2010, by and between the East Valley Water District (the "Issuer ") and Union Bank, N.A., acting in its capacity as escrow bank (the "Escrow Bank ") pursuant to this Escrow Agreement (the "Agreement "); WITNESSETH: WHEREAS, the Issuer and the East Valley Public Facilities Corporation (the "Corporation ") authorized the preparation, execution and delivery of certificates of participation (the "2001 Certificates "), dated as of April 26, 2001, in the aggregate principal amount of $12,000,000, evidencing and representing interests of the holders thereof in payments made pursuant to an Amended and Restated Installment Purchase Agreement, dated as of April 1, 2001, by and between the District and the Corporation (the "2001 Installment Purchase Agreement "); and WHEREAS, the 2001 Certificates were executed and delivered pursuant to a trust agreement, dated as of April 1, 2001 (the "2001 Trust Agreement "), by and among the Issuer, the Corporation and Union Bank, N.A., successor -in- interest to Union Bank of California, N.A. (the "2001 Trustee "); and WHEREAS, the Issuer has determined that it is in its best interests and desirable that the obligation represented by the 2001 Certificates, as described in Schedule A (the "Refunded Certificates "), be refinanced and be defeased; and WHEREAS, in order to accomplish such refinancing it is necessary and desirable for the Issuer to secure payment of its obligation under the 2001 Installment Purchase Agreement in accordance with the terms of the 2001 Installment Purchase Agreement and to thereby defease the Refunded Certificates maturing on and after December 1, 2010 in accordance with the terms of the 2001 Trust Agreement; and WHEREAS, the Issuer has agreed to provide funds necessary to secure payment of the obligation under the 2001 Installment Purchase Agreement and defease the Refunded Certificates by requesting the Corporation to authorize, prepare, execute and deliver $ aggregate principal amount of water revenue bonds (the "2010 Bonds "), secured by installment purchase payments to be made by the Issuer to the Corporation pursuant to an Installment Purchase Agreement, dated as of September 1, 2010; and WHEREAS, the Issuer has determined that it is in its best interests and desirable for the 2010 Bonds to be executed and delivered and for a portion of the proceeds of the 2010 Bonds to be applied to the current refunding of the Issuer's obligation under the 2001 Installment Purchase Agreement and the Refunded Certificates in accordance with the terms of this Agreement; DOC SOC/ 14257500/022497-0011 NOW, THEREFORE, in consideration of the mutual cc % : nants and agreements herein contained, the Issuer and the Escro,.v Bank agree as follows: SECTION 1. Deposit of Moneys. (a) As used herein, the tern "Investment Securities' mea v the Investment Securities set forth in Schedule B hereto which constitute direct noncallable none: epayable obligations issued by the United States Treasury. The Issuer hereby deposits with the Escrow Bank $ , representing $ of the net proceeds of the 2010 Bonds. and $ transferred from the funds held by the 2001 Trustee with respect to the Refirtded Certificates to be held in irrevocable escrow by the Escro %x Bank separate and apart frog, other funds of the Issuer, the Corporation, the Escrow Bank and the 2001 Trustee in a fund hereh, created and established and to be known as the "Escrow Fund`. and to be applied solely as pr(,\ ided in this Agreement. Such moneys are at least equal to an amount sufficient to purchase the )rincipal amount of Investment Securities set forth in Schedule B hereto; and the aggregate p incipal amount of Investment Securities described in Schedule B hereto, together with all inter-s due or to become due on such Investment Securities, and $_ of cash will be sufficient to pay No hen due (i) the principal and interest with respect to the Refunded Certificates due on and prig to December 1, 2010 and the prepayment price of the Refunded Certificates set forth in the 2001 7 nisi Agreement on December 1, 2010. (b) The Escrow Bank hereby acknowledges receipt of the written opinion of Causey Demgen & Moore Inc., certified public accountants, dated September _, 2010 relating to the Investment Securities, and the opinion of Stradling Yocca Carlson & Rauth, dated September_, 2010. and relating to this Agreement with respect to the fact that tie Issuer's obligations under the 2001 Installment Purchase Agreement with respect to the Refunded Certificates are defeased in the manner and to the extent provided in Section 3.12 of the 2001 Inst;etiment Purchase Agreement and all obligations of the Issuer under the 2001 Trust Agreement with respect to the Refunded Certificates have been discharged in the manner and to the extent provided in Section 9.02 of the 2001 Trust Agreement. SECTION 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section I and agrees: (a) immediately to invest $ of the mon%— described in Section 1(a) hereof in the Investment Securities set forth in Schedule B of and to derosn such Investment Securities in the Escrow Fund; and (b) to make the payments required under Section 3i a 1 hereof at the times set forth in Section 3(a) hereof. SECTION 3. Payment of Refunded Certificates. (a) Payment. As the principal of the Investment Secur ties set forth in Schedule B hereof and the investment income and earnings thereon are paid, the Fs; row Bank shall, no later than the respective Interest Payment Dates (as defined in the 2001 Tnts:ee Agreement), transfer from the Escrow Fund to the 2001 Trustee for the Refunded Certificates t nw ruts sufficient to pay (i) prior to and on December 1, 2010 the principal and interest evidenced ry thc. Refunded Certificates, and (ii) on December 1, 2010, the prepay ment price of such certificates (a; aescribed in Schedule E attached 2 DOCSOC/ 14257500/022497-0011 hereto). Such transfers shall constitute the respective payments of the principal and interest with respect to the Refunded Certificates and prepayment price due from the Issuer. (b) Unclaimed Moneys. Any remaining moneys, if any, after December 1, 2010, shall be repaid by the Escrow Bank to the Issuer. (c) Priority of Payments. The holders of the Refunded Certificates shall have a first lien on the moneys and Investment Securities in the Escrow Fund which are allowable and sufficient to pay the Refunded Certificates until such moneys and Investment Securities are used and applied as provided in this Agreement. Any cash or securities held in the Escrow Fund are irrevocably pledged only to the Refunded Certificate holders. (d) Termination of Obligation. Upon deposit of the moneys set forth in Section 1 hereof with the Escrow Bank pursuant to the provisions of Section I hereof and the simultaneous purchase of the Investment Securities as provided in Section 2 hereof, the holders of the Refunded Certificates shall cease to be entitled to any lien, benefit or security under the 2001 Trust Agreement. SECTION 4. Performance of Duties. The Escrow Bank agrees to perform the duties set forth herein. SECTION 5. Reinvestment. Upon written direction of the Issuer, the Escrow Bank may reinvest any uninvested amounts held as cash under this Agreement in noncallable nonprepayable obligations which are direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America provided (i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying agent for the payment of the principal of, redemption price of, and interest on the Refunded Certificates will not be diminished or postponed thereby, (ii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such reinvestment will not adversely affect the exclusion from gross income of interest with respect to the 2010 Bonds or the Refunded Certificates, (iii) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such reinvestment, the principal of and interest on obligations in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purposes, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest evidenced by the Refunded Certificates; and (iv) the Escrow Bank shall receive an opinion of nationally recognized bond counsel that such reinvestment is permissible under this Agreement. SECTION 6. Indemnity. The Issuer hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the Issuer or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of its Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the 3 DOCSOC / 14257500/022497 -001 1 Escrow Bank in accordance with the provisions of this Agreement: pir. ided, however, that the Issuer shall not be required to indemnify -he Escrow Bank against the Es-ow Bank's own negligence or willful misconduct or the negligent or willful misconduct of 111c Escrow Bank's respective successors, assigns, agents and employees or the breach by the Es,_-ow Bank of the terms of this Agreement. In no event shall the I . uer or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby ether than to each other as set forth in this section. The indemnities contained in this section shall survive the termination o.` this Agreement. SECTION 7. Responsibilities of the Escrow Bank. The Fscrow Bank and its respective successors, assigns, agents and sen ants shall not be held to any pen nai liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or , ecurities deposited therein, the purchase of the Investment Securities, the retention of the Invesurert Securities or the proceeds thereof, the sufficiency of the Investment Securities to accomplish the defeasance of the Refunded Certificates or any payment, transfer or other application of money; or obligations by the Escrow Bank in accordance with the provisions of this Agreement or by reason of any non - negligent act, non - negligent omission or non - negligent error of the Escrow Bank In ide in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas' clauses herein shall be taken as the statements of the Issuer and the Corporation and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representatior as to the sufficiency of the Investment Securities to accomplish the defeasance of the Refunded Certificates or to the validity of this Agreement as to the Issuer and, except as otherwise provided herein, the Escrow Bank shall incur no liability with respect thereto. The Escrow Bank shall not he liable in connection with the performance of its duties under this Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the Issuer, and in reliance upon the written opinion of s tch counsel shall have full and complete authorization and protection with respect to any action alien, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank sl•.a l deem it necessary or desirable that a matter be proved or established prior to taking, suffering. n,i omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the Issuer. SECTION 8. Substitution of Investment Securities. At the written request of the Issuer and upon compliance with the conditions hereinafter set forth. the Esc cw Bank shall have the power to sell, transfer, request the redemption or otherwise dispose of some o all of the Investment Securities in the Escrow Fund and to substitute noncallable nonprepayahle obligations (the "Substitute Investment Securities ") constituting direct obligations issued b\ the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America as contemplated by Section 9.02 of the 2001 Trust A.nreement. The foregoing may be effected only if (i) the substitution of Substitute Investment Securi, ies for the Investment Securities (or Substitute Investment Securities) occurs simultaneously; (ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the 2001 Trustee for the payment of the principal of and /or redemption price of and or interest on the Refunded Certificates will not be diminished or postponed thereby; (iii) the Escrow Bank shall receive the :nqualified opinion of nationally recognized municipal bond attorneys to the effect that such disposiron and substitution would not adversely affect the exclusion from gross income of interest with respect to the Refunded Certificates or the 2010 Bonds, and that the conditions of this Section 8 as to the disposition and substitution have been satisfied and that the substitution is permitted by this Agreement; and (iv) the Escrow Bank El DOCSOC/ 1425750x3/022497 -001 1 shall receive from an independent certified public accountant a certification that, immediately after such transaction, the principal of and interest on the Substitute Investment Securities in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest evidenced by the Refunded Certificates. Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from the disposition and substitution of Substitute Investment Securities pursuant to this Section 8 to the extent such cash will not be required, in accordance with the 2001 Trust Agreement and this Agreement, and as demonstrated in the certification described in (iv) above, at any time for the payment when due of the principal or redemption price of or interest evidenced by and the Refunded Certificates shall be paid to the Issuer as received by the Escrow Bank free and clear of any trust, lien, pledge or assignment securing such Certificates or otherwise existing under this Agreement. In no event shall the Escrow Bank invest or reinvest monies held under this Agreement in mutual funds or unit investment trusts. SECTION 9. Irrevocable Instructions as to Notice. The Escrow bank hereby acknowledges that upon the funding of the Escrow Fund as provided in this Agreement, the receipt of the opinions described in Section 1(b) of this Agreement and the giving of irrevocable instructions to publish and mail as provided in the Irrevocable Instructions and Request to Trustee attached hereto as Schedule C (constituting all of the conditions precedent to the defeasance of the Refunded Certificates), the Refunded Certificates shall be paid in accordance with the 2001 Trust Agreement and the Refunded Certificates shall cease to be entitled to any lien, benefit or security under the 2001 Trust Agreement. SECTION 10. Amendments. This Agreement is made for the benefit of the Issuer and the holders from time to time of the Refunded Certificates and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Bank and the Issuer; provided, however, but only after the receipt by the Escrow Bank of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest with respect to the 2010 Bonds and the Refunded Certificates will not be adversely affected for federal income tax purposes, that the Issuer and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement for any one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the Refunded Certificates any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii) to include under this Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized municipal bond attorneys with respect to compliance with this Section 10, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Refunded Certificates or that any instrument executed hereunder complies with the conditions and provisions of this Section 10. In the event of any conflict with respect to the provisions of this Agreement, this Agreement shall prevail and be binding. SECTION 11. Term. This Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i) the date upon which the Refunded Certificates have been paid in accordance with this Agreement or (ii) the date upon which no unclaimed moneys remain on deposit with the Escrow Bank pursuant to Section 3(b) of this Agreement. DOCSOC/14257500/ 22497 -0011 SECTION 12. Compensation. The Escrow Bank shall re crive its reasonable fees and expenses as previously agreed to: provided, however, that under nt- circumstances shall the Escrow Bank be entitled to any lien nor w 11 it assert a lien whatsoever on air, moneys or obligations in the Escrow Fund for the payment of fees and expenses for services re-der:ad by the Escrow Bank under this Agreement. SECTION 13. Resignation or Removal of Trustee as Escre �N Bank. (a) The Escrow Bank may resign by giving notice in u r ting to the Issuer, which notice shall be published once in a newspaper of general circulation published at least once each calendar week in the County of San Bemardino, and in a daily newspaper of general circulation in the Borough of Manhattan, Issuer and State of New York. The Escro- Sank may be removed (1) by (i) filing with the Issuer of an instrument or instruments executed tr: u,e holders of at least 51% in aggregate principal amount of the Refunded Certificates then remain ng unpaid, (ii) the publishing of such notice at least 60 days prior to the effective date of said re -no %al in a newspaper of general circulation in the County of San Bernardino, and in a daily newspaper of general circulation in the Borough of Manhattan, Issuer and State of New York, and (no the delivery of a copy of the instruments filed with the Issuer to the Escrow Bank or (2) by a cowl of competent jurisdiction for failure to act in accordance with the provisions of this Agreement ipon application by the Issuer or the holders of 5% in aggregate principal amount of the Refunded C ertificates then remaining unpaid. (b) If the position of Escrow Bank becomes vacant due to resignation or removal of the Escrow Bank or any other reason, a successor Escrow Bank may he appointed by the Issuer. Notice of such appointment shall be published in accordance with the rccuirements more specifically set forth in clause (1) (ii) of subsection (a) of this Section. Within one gear after a vacancy, the holders of a majority in principal amount of the Refunded Certificates Tien remaining unpaid may, by an instrument or instruments filed with the Issuer, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the Issuer. If no succe;sor Escrow Bank is appointed by the Issuer or the holders of such Refunded Certificates then remaming unpaid, within 45 days after any such resignation or removal. the holder of any such Refunded C ertificate or any retiring Escrow Bank may apply to a court of- competent jurisdiction for the appoirtment of a successor Escrow Bank. The responsibilities of the Escrow Bank under this Escrow P greement will not be discharged until a new Escrow Bank is appointed and until the cash and in,estrnents held under this Escrow Agreement are transferred to the new Escrow Bank. SECTION 14. Severability. If any one or more of the cove nants or agreements provided in this Agreement on the part of the Issuer or the Escrow Bank to be -)erformed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining , zn enants and agreements herein contained and shall in no way affect the validity of the remaining pi—N i sions of this Agreement. 6 DOCSOCr 1425750x3/022497 -0011 SECTION 15. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 16. Governing Law. This Agreement shall be construed under the laws of the State of California. SECTION 17. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Agreement, and no interest shall accrue for the period after such nominal date. SECTION 18. Assignment. This Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the Issuer. SECTION 19. Moody's and Standard and Poor's. The Issuer agrees to provide to Moody's Investors Service, Inc., 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, Attention: Public Finance Rating Desk/Refunded Bonds, and Standard & Poor's Corporation, 55 Water Street, 45 Floor, New York, New York 10041, prior notice of each amendment entered into pursuant to Section 10 hereof and a copy of such proposed amendment, and to forward a copy (as soon as possible) of (i) each amendment hereto entered into pursuant to Section 10 hereof, and (ii) any action relating to severability or contemplated by Section 14 hereof. 7 DOCS OC/ 14257500/022497-0011 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seats to be hereunder affixed and attested as of the day and year first written above. EAST VALLEY WA ITR DISTRICT By: - President (SEAL) Attest: General Manager/Board Secretary UNION BANK, N.A.. as Escrow Bank By: Authorized Officer S -1 DOCSOC/I4257500 /022497-0011 SCHEDULEA Refunded Certificates Maturity Date (December 1) Principal Coupon 2010 $ 785,000 4.250% 2011 790,000 4.250 2012 820,000 4.400 2013 855,000 4.500 2014 900,000 4.625 2015 220,000 4.700 2016 230,000 4.800 2017 240,000 4.875 2018 250,000 4.875 2019 565,000 5.000 2020 280,000 5.000 A -1 DOCSOC/1425750v3/022497 -0011 SCHEDULE B "Investment Securities" are defined to be. and shall be. as folic Na Type Coupon Maturity Date Par Amount B -1 DOCSOC / 1425750v3/022497 -001 1 Settlement Price Date SCHEDULE C IRREVOCABLE INSTRUCTIONS AND REQUEST TO TRUSTEE , 2010 Union Bank, N.A., as Trustee $12,000,000 Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001 Evidencing a proportionate interests of the owners in installment purchase payments to be made by the EAST VALLEY WATER DISTRICT to the EAST VALLEY PUBLIC FACILITIES CORPORATION relating to Certificates due December 1, 2010 through 2020 (collectively, the "Refunded Certificates ") Ladies and Gentlemen: As Trustee under that certain Trust Agreement, dated as of April 1, 2001 (the "Trust Agreement "), you are hereby notified of the irrevocable election of the East Valley Water District and the East Valley Public Facilities Corporation to cause to be paid (i) on December 1, 2010, the prepayment price of the Refunded Certificates and (ii) the principal and interest evidenced by all such Refunded Certificates on and prior to December 1, 2010. You are hereby irrevocably instructed to publish and mail, as provided in the Trust Agreement, notice of prepayment of such principal amounts of said Refunded Certificates as are scheduled to be prepaid prior to maturity to the extent that such Refunded Certificates have not been otherwise prepaid or purchased by the Escrow Bank prior to said dates. Such notice shall be in the form annexed hereto as Exhibit X. You are hereby further irrevocably instructed to publish, as soon as practicable, a notice to the holders of such Refunded Certificates (in the form annexed hereto as Exhibit Y) that the deposit of investment securities and moneys has been made with you as such Escrow Bank and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal or prepayment price and the interest evidenced by said Refunded Certificates outstanding as such become due or are subject to prepayment. EAST VALLEY WATER DISTRICT LIM Authorized Representative C -1 DOCSOC/1425750v3/022497 -0011 Receipt acknowledged and consented to: UNION BANK, N.A., as Trustee m Authorized Representative C -2 DOCSOC/14257500/022497 -001 1 EXHIBIT X NOTICE OF REDEMPTION OF $12,000,000 Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001 Evidencing a proportionate interests of the owners in installment purchase payments to be made by the EAST VALLEY WATER DISTRICT to the EAST VALLEY PUBLIC FACILITIES CORPORATION relating to Certificates due December 1, 2010 through 2020 (collectively, the "Refunded Certificates ") Notice is hereby given to the holders of the outstanding Refunded Certificates that such Refunded Certificates have been called for prepayment prior to maturity in accordance with their terms at a prepayment price of 100% of the principal amount thereof, together with accrued interest evidenced thereby to December 1, 2010. The source of the funds to be used for such prepayment is the principal of and interest on investment securities heretofore deposited with Union Bank, N.A., as Escrow Bank, together with moneys, if any, heretofore deposited with the Escrow Bank. The prepayment price and accrued interest evidenced by the Refunded Certificates shall become due and payable on December 1, 2010 and from and after December 1, 2010, interest evidenced by the Refunded Certificates shall cease to accrue and be payable. Holders of the Refunded Certificates will receive payment of the prepayment price and accrued interest to which they are entitled upon presentation and surrender thereof at the principal corporate trust office of Union Bank, N.A. Dated this _ day of September, 2010. EAST VALLEY WATER DISTRICT UNION BANK, N.A., as Trustee X -1 DOCSOC / 14257500/022497 -001 1 EXHIBIT Y NOTICE OF REFUNDING OF $12,000,000 Certificates of Participation (Reservoir Project and Series 1994 Refm rdins4) Series 2001 Evidencing a proportionate interests of the v s ners in installment purchase payments to be made 1 � the EAST `:'ALLEY WATER DISTRICT in -lie EAST VALLEY PUBLIC FACILITIES CORPORATION relating to Certificates due December 1, 2010 through 2020 (collectively, the "Refunded Certificates , Notice is hereby given to the holders of the Refunded Cer ificates that (i) there has been deposited with Union Bank, N.A.. as Escrow Bank, moneys and im estment securities as permitted by the Trust Agreement, dated as of April 1, 2001 (the "Trust Agreement"), by and among the East Valley Water District, the East Valley Public Facilities Corporatior and Union Bank, N.A., as trustee thereunder, the principal of and the interest on which when due wi l provide moneys which, together with such other moneys deposited with the Escrow Bank, shall be st.fficient and available (a) to pay on and prior to December 1, 2010. the principal and interest evidenced by the Refunded Certificates and scheduled to be paid on and prior to December 1, 2010 and (h; to prepay on December 1, 2010 the Refunded Certificates at a prepayment price (expressed as a percentage of the principal amount of the Refunded Certificates to be prepaid) equal to 100 %; (ii) the Escn w Bank has been irrevocably instructed to prepay on December 1, 2010 the Refunded Certificates; and (iii) the Refunded Certificates are deemed to be paid in accordance with Section 9.02 o 'the Trust Agreement. Dated this _ day of September, 2010. EAST VALLEY W A"'FR DISTRICT UNION BANK, N.A. as Trustee Y -1 DOCSOC/ 1425750x3/022497 -001 I SCHEDULE E ESCROW FUND CASHFLON\ Cash Receipts from SLGS Purchased with Purchased with Certificate Debt Service Debt Se/virc Dates Proceeds Funds Requirements Ending Balance E -1 DOCSOC/ 1425750v3/022497 -0011 o r _ m � S y O a c T u At u c p � U w ,e o T A L v. O O � v O 4.. U � o c 0 c `o 9 O v � o c c O � c E d v ;? c o vui v u F F 6 m N u m E U .. a F � as 0 F 3 u o — A vV `c � � o E.2 a � � o w u c c C Ej .c � 9 U C C v Z, r C � U O z ° 3 c n' o c c E C U L 'u n F m � U LU U W L c O c E U U L y u n`. E>� Z [—z L Stradling Yocca Carlson & flauth Draft of 8117170 PRELIMINARY OFFICIAL STATEMENT DATED AUGUST _, 2010 NEW ISSUE - BOOK -ENTRY ONLY RATINGS: S &P: _ Fitch: _ In the opinion of Stradling Yocca Carlson & Routh, a Professional Corporation, Special 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 far federal income tax purposes poses and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the fur her opinion of Special Counsel, interest (and original issue discount) on the Bonds is exemptfrom State of California personal income tax. See the caption "TAX EXEMPTION" $ EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 Dated: Date of Delivery Due: October 1, as shown on inside front cover 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 April 1 and October 1 of each year, commencing April 1 2011. 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, mandatory redemption, all as more fully described herein. The Bonds are being issued to provide funds: (i) to finance certain improvements for the District's Water System: (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001; (iii) to fund interest due through and including (October 1, 2011) and (iv) to pay costs incurred in connection with the issuance of the Bonds. The Bonds are being delivered pursuant to the hidentma of Trust, dated as of September 1, 2010, by and between the East Valley Water District Financing Authority and Union Bank, N.A., as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 1, 2010, BY AND BETWEEN THE DISTRICT 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 1S OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. The obligation of the District to make the Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District's Water System. The Installment Payments are on a parity with the District's obligation to make payments on $13,286,480 aggregate principal amount of other contracts as more particularly described herein. THE OBLIGATION OF THE DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT 1S OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT'S WATER SYSTEM REMAINING AFTER PAYING OPERATION AND MAINTENANCE COSTS AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT 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) The Bonds are offered when, as and if delivered and received by the Representative, subject to the approval as to the valid and binding nature of The Indenture by Stradling Yocca Carlson & Routh, a Professional Corporation, Special Counsel, and certain other conditions. Certain legal matters will be passed upon for the District and the Authority by Brunick, McElhaney & Beckett, General Counsel 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 September_, 2010. Dated: 12010 * Preliminary, subject to change. DOC SOC/ 1424854v4/022497 -001 I MATURITY SCHEDULE BASE CUSIP' $ EAST VALLEY WATER DISTRICT FINANCING AT THORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERI ES 2001 REFUNDING) SERIES 2010 $ Serial Bonds Maturity (October I) Principal Amount Interest Rate Field CUSIPi $ % Term Bonds Due October 1, 20 - 1'!eld —% CUSIP CUSIP' is a registered trademark of the Am, ,'ran Bankers Association. Cop}'rigld !YSP _1,. 0 Standard & Poor s, A Division of the McGraw -Hill Companies, Inc All rights reseri rd CUSIP` data herein is provided b Stanch c.' , i 'v)v's CUSIP Seance Bureau. This data is not intended to create a database and does not rl e in anv v.,av as a substitute for the( r Bureau CUSIP' numbers are provided for convenience of reference only. None of the raso-ict. the Authority or the Under wei n4 csponsibiliry for the accuracy of such numbers. ' Preliminary, subject to change. DOCS OC/ 1424854v4/022497 -0011 EAST VALLEY WATER DISTRICT FINANCING AUTHORITY BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt Levesque James Morales, Jr. Larry Malmberg EAST VALLEY WATER DISTRICT BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt LeVesque James Morales, Jr. Larry Malmberg DISTRICT STAFF Robert E. Martin, General Manager Brian W. Tompkins, Chief Financial Officer Ron Buchwald, District Engineer SERVICES General Counsel Brunick, McElhaney & Beckett San Bernardino, California Special Counsel Stradling Yocca Carlson & Rauth, A Professional Corporation Newport Beach, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Trustee and Escrow Bank Union Bank, N.A. Los Angeles, California Verification Agent Causey Demgen & Moore Inc. Denver, Colorado DOCS OC/ 1424854v4/022497-001 1 This Official Statement does riot constitute an offering of any secwin other than the original offering of the Bonds of the District. No dealer. broker, salesperson or other perscr ra : been authorized by the District or the Authority to give any information or to make any representatior )the, than those contained in this Official Statement in connection with i`he offering made hereby and, if Qr.cr Or made, such other information or representations must not be relied upon as having been authorized by the )i strict or the Authority. This Official Statement does not constitute an offer to sell Or tie �o'.icitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which t is unlawful for such person to make such an offer, solicitation or sal(. This Official Statement is not to be construed as a contract Na ith the purchasers 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 a representation of facts. The information and expression of opinions herein are subject to change 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 1 )i! trict or any other parties described herein since the date hereof. All summaries of the Indenture, Instalbncnt Purchase Agreement, or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby Trade to such documents on file with the District for further information in connection therewith. CERTAIN STATEMENTS CONTAINED IN' THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND °FORWARD- LOOKING STATEMENTS." NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS [.DISCUSSED HEREIN WILL BE ACHIEVED, AND ACTUAL REST LTS MAY DIFFER MATF.RIA1.1Y FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS "ESTIMATE.- "PROJECT," "ANTICIPATE," "EXPECT," "INTEND," "BELIEVE" AND SIMILAR EXPRESSIONS 4RE INTENDED TO IDENTIFY FORWARD - LOOKING STATEMENTS. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWART- LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTION /I RY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED T." it CH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. This Official Statement and the information contained herein are sibtect to completion or amendment without notice. These securities may not be sold nor may an offer to bu ; he accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there I•: anv sale of these securities in any jurisdiction in which such offer, solic tation or sale would be unlawfu tenor to registration or qualification under the securities laws of any such urisdiction. IN CONNECTION WITH THE OFFERING OF THE BOND;. THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHFR`.bISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING. IF COMMENCED, MAY BE DISCONTINUED AT ANYTIME. THE UNDERWRITERS MAY OFFER AND SELL THE BONDS TO CLR FAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWEF. " IIAN THE PUBLIC OFFERING PRICE STATED ON THE INSIDE FRONT COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM 'TIME TO TIME BY THE Uri IDEI WR..ITERS. DOCS OC/ l 424854v4/022497-0011 The District maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. DOC S OC/ 1424854v4/022497 -0011 TABLE OF CONTENTS Page THEBONDS .............................................................. ............................... ..................... ..............................3 GeneralProvisions .............................................. ............................... ................ ..............................3 Book -Entry Only System ....................................... ............................... ....................... ..............................3 Transfers and Exchanges Upon Termination of Book -Entry Only S} sxrn ..................... ..............................4 Redemption........................................................... ............................... .................... ..............................4 Selection of Bonds for Redenptiou ....................... ............................... ................ ..............................5 Noticeof Redemption ........................................... ............................... .................. ..............................5 Effectof Redemption ............................................ ............................... .................. ..............................5 DEBT SERVICE SCHEDULE ................................... ............................... ................. ..............................6 SECURITYFOR THE BONDS .................................. ............................... ......................... ..............................6 Installment Payments Payable From Net Revenues ............................ ........................ ..............................7 RateCovenant ................................................................................................................. ..............................7 NoReserve Fund .................................................. ............................... ........................ ..............................8 Parity Bonds and Additional Contracts ............................................................................ ..............................8 THEDISTRICT ........................................................... ............................... .......................... ..............................9 General............................................................................................................................. ..............................9 Governance and Management ........................................................................................ ..............................9 DistrictPowers ................................................................................................................ .............................10 Employees and Employee Benefits ......................... ............................... ...................... .............................10 Defined Benefit Pension Plan... ... .................................... ......... .. .. .................. .............................10 PostretirementBenefts ................ _ ............................................... ...... _ ...................... .............................11 BudgetProcess ............................................................................................................... .............................11 DistrictInsurance ............................................................................................................ ..............................1 l LandUse ......................................................................................................................... .............................12 THE WATER SYSTEM OF THE DISTRICT ...................................................................... .............................12 WaterSupply ................................................................................................................ .............................12 Groundwater and Surface Water ............................... ............................... .................. .............................12 SupplementalWater ................................................... ............................... .................. .............................13 TheWater System .......................................................................................................... .............................14 LargestCustomers ................................................... ............................... .. .................. .............................17 Water System Rates and Charges .................................................................................. .............................17 Future Water System Improvements ............................................................................. .............................19 Seismic Considerations ................................................................................................. .............................19 Outstanding Water System Indebtedness ....................................................................... .............................19 OtherObligations ......................................................................................................... .............................20 Water System Financial Inf ormanon ............................................................................. .............................20 Historic Operating Results and Debt Service Coverage ................................................ .............................20 Projected Operating Results and Debt Service Coverage ............................................. .............................21 i DOC SOC/ I424854v4/022497 -001 I TABLE OF CONTENTS (continued) Page CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ............ .............................22 ArticleXIIIB ................................................................................................................... .............................22 Proposition21 8 ................................................................................................................ .............................23 FutureInitiatives .............................................................................................................. .............................24 THEAUTHORITY ................................................................................................................ .............................24 APPROVAL OF LEGAL PROCEEDINGS .......................................................................... .............................25 LITIGATION......................................................................................................................... .............................25 District............................................................................................................................. .............................25 Authority.......................................................................................................................... .............................25 TAXEXEMPTION ................................................................................................................ .............................25 CONTINUING DISCLOSURE ............................................................................................. .............................27 RATINGS............................................................................................................................... .............................27 FINANCIALADVISOR ........................................................................................................ .............................27 UNDERWRITING................................................................................................................. .............................27 MISCELLANEOUS.............................................................................................................. ..............................2 8 APPENDIX A - DISTRICT FINANCIAL STATEMENTS ............................................ ............................... A -] APPENDIX B - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE ..........................B -1 APPENDIX C - FORM OF OPINION OF SPECIAL COUNSEL ...................................... ............................0 -1 APPENDIX D - INFORMATION CONCERNING DTC ................................................ ............................... D -1 APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE .................... ............................E -1 DOCS OC/ 1424854v4/022497 -001 I SUMMARY STATEMENT This summary 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. Purpose. The Bonds are being issued to provide funds: (i) to finance certain improvements for the District's Water System, as described under the caption "THE 2010 PROJECT "; (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, as described under the caption "THE REFUNDING PLAN "; (iii) to fund interest due through and including [October 1, 2011] and (iv) to pay costs incurred in connection with the issuance of the Bonds. Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Installtnent Payments to be trade by the District to the Authority pursuant to the Installtnent 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 parrient 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 BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT. The obligation of the District to make Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District's Water System remaining after paying Operation and Maintenance Costs. The Installment Payments are payable on a parity with the District's obligation to make payments on $19,221,480 aggregate principal amount of other contracts as more particularly described herein. See the captions "DEBT SERVICE SCHEDULE" and "The WATER SYSTEM OF THE DISTRICT — Outstanding Water System Indebtedness." The obligation of the District to snake the Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments required thereunder have been paid in full (or provision for the payment thereof has been trade as provided for in the Installment Purchase Agreement), the District will not discontinue or suspend any 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 2010 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 DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. -1- DOCSOC/ 1424854v4/022497 -001 I Rate Covenant. The Installment Purchase Agreement will require the District, to the fullest extent permitted by law, to 5x and prescribe rates and charges for the Water Ser: cc provided by the Water System which will be at least sufficient to yield during each Fiscal Year Net Rea e-..e< equal to 120% of Debt Service for such Fiscal Year allocable to the Water System, all as more particular],. •ies.cribed herein under the caption "SECURITY FOR THE BONDS —Rate Covenant." Additional Indebtedness. The Installment Purchase Agreement j+oes not permit the District to make any additional pledge of, or to place am, , additional lien, on the Net Rever- -e s, or any portion thereof, which is senior to the pledge and lien securing the payment of the Installment Payments. The Installment Purchase Agreement does permit the District to incur Parity Bonds or Contracts pay:il le on a parity with the Installment Payments provided that certain conditions are satisfied as described he -em. Nothing in the Installment Purchase Agreement precludes the District from entering into obligations which are Operation and Maintenance Costs and, therefore, payable from Revenues prior to the Insr:11ment Payments, or from issuing any bonds or executing contracts the payments under which are payable I om Net Revenues subordinate to Parity Bonds or Contracts of the District. See the caption "SECURITY FOR ` 3E BONDS —Parity Bonds and Additional Contracts." Redemption. The Bonds are subject to optional, mandatory redemption. See the caption "THE BONDS — Redemption." The District. Encompassing an area of approximately 30 square miles (the "Service Area "), the District was originally formed in 1954 to provide domestic water serve-, to the then unincorporated and agriculturally -based communities of Highland and East Highland. The Senicc Area is now largely urbanized. Approximately 15% of the Service Area is located in the unincorporated area of San Bernardino County and the remaining 85% is located within the City of San Bernardino and the ('i v of Highland. The Service Area has a service population of approximately 65,000. The District operates a wastewater collection and transmission system, but the revenues from the wastewater system are not pledged or available to pay Installment Payments -ii- DOCS OC/ 1424854v4/022497 -001 1 $ EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPROVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010 INTRODUCTION This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of the East Valley Water District Financing Authority Water Revenue Bonds, (Water System Improvement Projects) Series 2010 (the "Bonds "). Descriptions and summaries of various documents hereinafter set forth 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 document. Capitalized terms used and not otherwise defined herein have the meanings ascribed thereto in Appendix B hereto. The Bonds are being issued pursuant to an Indenture of Trust, dated as of September 1, 2010 (the "Indenture "), by and between the East Valley Water District Financing Authority (the "Authority") and Union Bank, N.A., Los Angeles, California, as trustee (the "Trustee "). The Bonds are limited obligations of the Authority payable solely from payments (the "Installment Payments ") to be made by the East Valley Water District (the "District ") to the Authority pursuant to an Installment Purchase Agreement (the "Installment Purchase Agreement "), dated as of September 1, 2010, by and between the District and the Authority. The Bonds are being issued to provide funds: (i) to finance certain improvements for the District's Water System (the "Project "), as described under the caption "THE 2010 PROJECT "; (ii) to refund a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, as described under the caption "THE REFUNDING PLAN "; (iii) to fund interest due through and including [October 1, 2011 ] and (iv) to pay costs incurred in connection with the issuance of the Bonds. The District regularly prepares a variety of reports, including audits, budgets and related documents. Any Bond Owner may obtain a copy of such report, as available, from the District. THE 2010 PROJECT A brief description of each component of the Project is set forth below. Pursuant to the Installment Purchase Agreement, the District may substitute or add additional projects to the Project. See Appendix B— "DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE" under the caption "Installment Purchase Agreement —Sale and Purchase of the Project —Changes to the Project." The District expects to spend approximately $ I of Certificate proceeds to construct a variety of capital improvements to the District Water System during Fiscal Years 2011 through 2014. These improvements include plant upgrade, expansion, design and construction, improvements to the Water System distribution system, water pipeline replacements and other miscellaneous improvements. The District expects to undertake environmental approvals on individual components of the Project prior to commencement of each component. The District expects to comply with all bidding and other permitting requirements for each component of the Project as required by law. All components of the Project are expected to be substantially completed by " Preliminary, subject to change. DOCSOC/ 1424854v4/022497 -001 1 THE REFUNDING PLAN A portion of the proceeds frcm the sale of the Bonds will be used a establish and partially fund an irrevocable escrow to effectuate the defeasance of the 2001 Certificate=_ the "Escrow Fund "), held by Union Bank, N.A., as escrow bank (the "Esaow Bank ") pursuant to an escrow ;agreement, dated as of September 1, 2010 by and between the District and the Escrow Bank (the "Escrow Agre: neat=`). In addition to the use of a portion of the proceeds from the sale of the Bonds, all money on deco <u as of the date of delivery of the Bonds, in the funds and accounts established under the Trust Agreement, Ai te:l as of April I, 2001 (the "2001 Trust Agreement "), by and among the ")istrict, the East Valley Public Facili \ Corporation (the "Corporation') and Union Bank, N.A. (the "2001 Trustee "), as successor -in- interest to Unit it Sank of California, N.A. will be transferred by the 2001 Trustee to the f ;crow Bank for deposit in the Fscw%. i und. Moneys on deposit in the Escrow Fund will be invested in ruec. obligations of, or obligations unconditionally guaranteed by, the !'sited State Government (the "E SCIOV, Securities "), the interest and principal payments from which will secure and provide funds to pa} t to District's installment purchase payments due under the Amended and Restated Installment Purchase Agree Tent, dated as of April 1, 2001, by and between the District and the Corporation (the "2001 Installment Pt -ria =e Agreement') on and prior to December 1, 2010 and the Districts optional prepayment on December , 2( 10 of the remaining installment purchase payments due under the 2001 Installment Purchase Agreement paid respective moneys will be applied to the principal and interest due with respect to the 2001 CertiFicz. t s due on and prior to December 1, 2010 and on December 1, 2010 to prepay the outstanding principal of the 2CO 1 Certificates. Establishment of the Escrow Fund will operate to defease the M)l Certificates. The registered owners of the 2001 Certificates will remain the owners of an undivided merest in the installment purchase payments due under the 2001 h7stalbnent Purchase Agreement. Moneys devosited with the Escrow Bank with respect to the Escrow Fund are irrevocably pledged to secure, as provided in the Escrow Agreements, the payments of the installment purchase payments under the 2001 Installment ' urchase Agreement as due on and prior to December 1, 2010, and to cause prepayment of the remaining i tstallrnent purchase payments due under the 2001 Installment Purchase Agreement on December 1, 2010. Verification of Mathematical Computations Upon delivery of the Bonds. the arithmetical accuracy of c:rtain computations included in the schedules provided by the Underwriter on behalf of the District and the Au hority relating to the: (i) adequacy of forecasted receipts of principal and interest on the Escrow Securities and cash to be held pursuant to the Escrow Agreement; (ii) forecasted pavMents of principal and interest with respect to the 2001 Certificates on and prior to their projected maturity and /or redemption dates; and (iii) yic cs vith respect to the Bonds and on the obligations and other securities b_ be deposited pursuant to the Escrrw Agreement upon delivery of the Bonds, will be verified by Causey Derngen & Moore, Inc., independeta certified public accountants (the "Verification Agent'). Such verification shall be based solely upon infotina, ion and assumptions supplied to the Verification Agent by the Undem titer. The Verification Agent has nc t :-fade a study or evaluation of the information and assumptions on which such computations are based and. accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions or the ac- :it �._b!lity of the forecasted outcome. -2- DOCSOC/ 1 424854x4/022497 -001 I 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: Sources: Principal Amount of Bonds Moneys Released from 2001 Trust Agreement Plus /Less Net Original Issue Premium/Discount Total Sources: Uses: Acquisition Fund Interest Fund Escrow Fund Delivery Cost Fund(2) Underwriter's Discount Total Uses: ") Amounts rounded to the nearest dollar. (2) Includes certain legal, financing, rating agency and Trustee fees and printing costs. THE BONDS General Provisions 93 The Bonds will be issued in the aggregate principal amount of $ . The Bonds will bear maturit interest from and be dated the date of initial issuance, and will be payable upon y on the dates set forth on the inside front cover page hereof. Interest on the Bonds will be payable on April 1 and October 1 of each year, commencing April 1, 2011. Interest will be calculated at the rates set forth on the inside front cover page hereof and 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 ( "DTC "). 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" below and Appendix D attached hereto. In the event that the book -entry only system described below is discontinued, the principal of 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 each series of the Bonds in the principal amount of the Bonds of such maturity. It 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 tern "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. -3- DOCSOC/1424854v4/022497 -0011 The Authority cannot and does not give any assurances that DTC p<rucipants or others will distribute payments with respect to the Bonds received by DTC or its nominee .:a the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do ;n on a timely basis, or that DTC will service and act in the manner described in this Official Statement. S:e Anpendix D hereto for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book -Entry Only System In the event the book -entry sv_ stem described above is disconer icd. 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 registerea, it person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Truster 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 airy Bond during the period in whiclt tl-e Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond or Bonds is surrendered for transfer, the Awlor:ty will execute and the Trustee will authenticate and deliver a new Bend or Bonds of authorized denon- 7 aeon or denominations for a like series and aggregate principal amount of the same maturity. The Tr.s,ec will require the Bond Owner requesting such transfer to pay any tax or other governmental charge requred to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destrr } the Bonds it has received. 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 t of required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption and ,try Bond that has been selected for redemption. The Trustee will requ re the Bond Owner requesting sucl etchange to pay any tax or other governmental charge required to be paid with respect to such exchange. I ollowing any exchange of Bonds, the Trustee will cancel and destroy the Bonds it has received. Redemption Optional Redemption. The Bonds with stated maturities on or after October I, 20 , will be subject to redemption prior to their respective stated maturities. 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, on or after October 1, 20 , at a price equal to the principal amount thereof plus accred merest thereon to the date fixed for redemption, without premium. Mandatory Redemption. The Bonds with stated maturities on October 1, 20_ are scbiect to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 11 20 _ it. integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest e� tdenced and represented thereby to the date fixed for redemption, without premium, in accordance with the fcl � �u ing schedule: Redemption Date Principal (Februae), 1) Amount * Final Maturity. -4- DOC SOC/ 1424854x4/022497 -001 1 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. 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 provisions set forth above under the caption "— Redemption." 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 30 days before any Redemption Date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services; provided that, in the case of notice of optional redemption not related to an advance or current refunding, such notice may be given only if sufficient funds have been deposited with the Trustee to pay the applicable Redemption Price of the Bonds to be redeemed, provided that such notice may be cancelled by the Authority upon written request delivered to the Trustee not less than 5 days prior to such Redemption Date. Each notice of redemption will state the date of notice, the redemption date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all Bonds of any such maturity are to be redeemed, the serial numbers of the Bonds of such maturity to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, have been called for redemption 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 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 ceases 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 will 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 -5- DOCSOC/ I424854v4/022497 -0011 Trustee will, upon surrender for payment of any of the Bonds to be redee n( d -m their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the provisions of the Indenture \ +ill be canceled upon surrender thereof. DEBT SERVICE SCHEDULE Set forth below is a schedule of the District's payment obligations r�ith respect to a portion of the Installment Payments and Parity Cor.mact payments for each annual pe -icd - nding on June 30 of the years indicated. See the caption "THE W/\TER SYSTEM OF THE DISTRK f— Outstanding Water System Indebtedness" for further information �, ith respect to the Parity Contract Pax ments. Installment Payments Fiscal Year Ending Pala} June 30 Principal Interest Conrrscrr" Total 2011 S S S S 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Total s S 5 S `u Parity Contracts include the 2001 Inslalimen'i Payments, 2004 Installment Payment,. 200E 1 tsie.11meni Payments, Plant 134 SRF Loan and Plant 150 SRF Loan described under t9z caption "THE WATER SYSTEM OI -11 DISTRICT— Ouistanding Water System Indebtedness.° SECURITY FOR THE BONDS Each Bond is a special limited obligation of the Authority pays }le solely from Authority Revenues (the "Authority Revenues "), which consist of Installment Payments tc le made by the District under the Installment Purchase Agreement, anc from certain other funds and :c runts established pursuant to the Indenture. NEITHER THE FULL FAITH AND CREDIT NOR ANY O FHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE P:'.YMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE F AYMENTS OF PRINCIPAL AND -6- DOCSOC/ 1424854v4 /022497 -0011 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 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 Installment Payments and its rights as may be necessary to enforce payment of the Installment Payments when due. 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 subject only to the provisions of the Indenture permitting the temts and conditions set forth therein. 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 District to pay Installment Payments is payable from Net Revenues on a parity with the obligation of the District to make payments under the 2004 Installment Sale Agreement, the 2006 Installment Sale Agreement and the State Loans described under the caption "THE WATER SYSTEM OF THE DISTRICT — Outstanding Water Indebtedness." In order to carry out and effectuate such pledge and lien, the District has agreed and covenanted that all Revenues (as such term is defined in the Installment Purchase Agreement) will be received by the District in trust and deposited when and as received in a special fund designated as the "Revenue Fund," which fund has been established and which fund the District has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any Parity Bonds or Contracts remain unpaid. Moneys in the Revenue Fund will be used and applied by the District as provided in the Installment Purchase Agreement. Notwithstanding anything contained in the Installment Purchase Agreement, the District is not required to advance any moneys derived from any source of income other than the Revenues and the Revenue Fund for the payment of amounts due under the Installment Purchase Agreement or for the performance of any agreements or covenants required to be performed by it contained therein. The District 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 District for such purpose. THE OBLIGATION OF THE DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT'S WATER SYSTEM REMAINING AFTER PAYING OPERATION AND MAINTENANCE COSTS AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA (THE "STATE ") OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Rate Covenant The Installment Purchase Agreement requires the District, to the fullest extent permitted by law, to fix and prescribe rates and charges for the Water Service provided by the Water System which will be at least -7- DOCSOC/ I424854v4/022497 -001 I sufficient to yield during each Fiscal Year Net Revenues equal to 120 0'0 , -Debt Service for such Fiscal Year allocable to the Water System. The District may make adjustments from time to time in such rate and charges and may make such classification thereof as it deems necessary, but will not reduce the rates snJ charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be suf- ctent to meet the above - described requirements. No Reserve Fund Neither the Installment Purchase Agreement nor the Indenture rsutblishes a reserve fund for the Bonds. Paritv Bonds and Additional Contracts The District may at any time issue any Parity Bonds or execute ar N Contract, as the case may be, in accordance with the Installment Purchase Agreement; provided: (a) The Net Revenues for the most recent audited Fiscal Ycat preceding the date of adoption by the Board of Directors of the District the "Board ") of the resolution at•-i rizing 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 District and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the Distr ct. produces a sum equal to at least 120% of the Debt Service for such Fiscal Year; and (b) The Net Revenues for the most recent audited Fiscal Year preceding the date of the execution of such Contract or the date of adoption by the Board of the resolution authorizing the issuance of such Parity Bonds, as the case may be, including adjustments to give effect as of t1 e first day of such Fiscal Year to increases or decreases in rates and charges for the Water Service appro, ec and in effect as of the date of calculation, as evidenced by a calculation prepared by the District, produces a sum equal to at least 120% of the Debt Service for such Fiscal Year plus the Debt Service which wotild have accrued on any Contracts executed or Parity Bonds issued since :he end of such Fiscal Year assumin _ such Contracts had been executed or Parity Bonds had been issued at the beginning of such Fiscal Year plus 7hc Debt Service which would have accrued had such Contract been executed or Parity Bonds been issued at the beginning of such Fiscal Year; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest -)Etc of Operation of any uncompleted Parity Project, as evidenced by a ce -..ificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleteu Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any inc; ease in the income, rents, fees, rates and charges estimated to be fixed. prescribed or received for the Water � ervice and which are economically feasible and reasonably considered necessary based on projected operations tor such period, as evidenced by a certificate of the General Manager or file with the District, shall produce a sum equal to at least one hundred twenty percent (120 %) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Parity Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects whl in such Fiscal Years, assuming that all such Contracts and Parity Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract las! executed or then being executed of t'hte Parity Bonds last issued or then being issued for the purpose of acquiring and constructing any of such u-,., nrpleted Parity Projects. Notwithstanding the foregoing, Parity Bonds or Contracts may be issued or incurred to refund outstanding Parity Bonds or Contracts if, after giving effect to the appli.ation of the proceeds thereof, total -8- DOC SOC/ 1424854v4/022497 -001 1 Debt Service will not be increased in any Fiscal Year in which Parity Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Parity Bonds or Contracts, but excluding such refunding Parity Bonds or Contracts) not being refunded are outstanding. THE DISTRICT General The Board of Supervisors of San Bernardino County approved a petition in writing for the formation of the East Valley Water District (formerly, East San Bernardino County Water District) under Division 12 of the Water Code of the State of California and ordered an election held January 12, 1954. The formation of the District was approved through the electors, and the Board of Supervisors approved the formation of the District. Incorporation of the District was approved by the State of California on February 1, 1954. Encompassing an area of approximately 30 square miles, the District was originally formed to provide domestic water service to the then unincorporated and agriculturally -based communities of Highland and East Highland. The Service Area is now largely urbanized. Approximately 15% of the Service Area is located in the unincorporated area of San Bernardino County and the remaining 85% is located within the City of San Bernardino and the City of Highland. The Service Area has a service population of approximately 65,000. The District holds a majority of the voting stock of two mutual water companies in the City of Highland, the North Fork Water Company ( "North Fork ") and City Creek Water Company ( "City Creek "). The District's ownership interests allow it to take certain quantities of water and to use the mutual water companies' existing distribution systems. During Fiscal Years 2009 and 2008, the District paid annual assessments of $58,295 and $58,295, respectively, to North Fork and City Creek. In April 2009, the District and North Fork completed construction of a water canal replacement project (the "North Fork FEMA Project "). North Fork FEMA Project costs totaled $4,987,184 with $3,784,614 paid from the proceeds of a Federal Emergency Management Agency Grant, and the retraining $1,202,570 divided evenly between the District and North Fork, each of which will hold a 50% interest in the North Fork FEMA Project. The District operates a wastewater collection and transmission system, but revenues from the wastewater system are not pledged to or available to pay Installment Payments. The District does not own or operate a wastewater treatment plant, but instead contracts with the City of San Bernardino for the treatment of wastewater delivered to the District's wastewater system. Governance and Management The District is governed by a five member Board of Directors. The Directors are elected by the registered voters of the District and serve staggered four -year terms. The current directors, their occupations and the expiration dates of their terms are set forth below. Expiration Director of Term Occupation George E. "Skip" Wilson, President Matt LeVesque Larry Malmberg James Morales, Jr. Kip E. Sturgeon DOC SOC/ 1424854x,4/022497 -001 1 November 2011 Retired director of water agency November 2013 President of engineering and construction company November 2011 President of security consulting company November 2013 Legislative analyst November 2011 Former Navy reserve equipment operator 52 District Powers The District has broad general powers over the use of water and istewater collection within District boundaries, including the right of eminent domain and the authotiq 'c acquire, control, distribute, store, spread, sink, treat, purify, reclaim, process and salvage any water for ber- civil use; to provide sewer service, to sell treated or untreated water, to contract with the United States, other political subdivisions, public utilities, and other persons, and, subject to certain constitutional ]units. :o le�A -.axes on lands. Employees and Employee Benefits There are currently 68 full time employees working for the District. of whom 33 are devoted to water service, 3 are devoted to sewer service and 32 are devoted to admin ;t a' on and support services. The employees of the District are represerted by union under a contract whie : expired on July 2, 2010 which was extended for one year with no changes through June 30, 2011. The non - management employees of the District have never conducted a strike against the District. Day -to -day management of the District is delegated to the General vlanager (the "General Manager "), Robert E. Martin. Mr. Martin has served as the District's General Ma­a,ei since 1990. Before becoming General Manager, Mr. Martin served as the District Engineer for six year. Prior to Mr. Martin's employment with the District, he was employed as a private civil engineer. Mr. Martin holds a Bachelor of Science Degree in Civil Engineering and is a Registered Professional Civil Engineer in California. Brian W. Tompkins serves as Chief Financial Officer of the Disvic . Mr. Tompkins has been with the District since January of 2002. Before coming to the District, Mr. 7 st tpkins was employed by Rogers, Anderson, Malody and Scott, LLP, Certified Public Accountants. Mr. Ton pkins holds a Bachelor of Science Degree in Business Administration and is a Certified Public Accountant. Ron Buchwald has served as District Engineer for the Distne since June 2006. Prior to his appointment as District Engineer, Mr. Buchwald served as Assistant District Fngineer for 4 years. The District has employed Mr. Buchwald since 1999. Before coming to the District. \Ii Buchwald was employed as a civil engineer with a private company for nine years. Mr. Buchwald held; a Bachelor of Science Degree in Civil Engineering and is a Registered Professional Civil Engineer in Califomia Defined Benefit Pension Plan The District contributes to the California Public Employees Retirement System ( "CalPERS "), an agent multiple- employer public employee defined benefit pension plan. CaIPER� p-ovides retirement and disability benefits, annual cost -of- living adjustments and death benefits to plan mar hers and beneficiaries. CalPERS acts as a common investment and administrative agent for participatinc public entities within the State. Benefit provisions and all other requirements are established by state statute and the resolutions of the District. All full -time District employees are eligible to participate in PEF S with benefits vesting after five years of service. District employees %oho retire at age 55 are entitled to an annual retirement benefit, payable monthly for life, in increasing percentage increments up to 2.7% of their trace full -time monthly pay rate for the highest 12 consecutive months for each year of credited services. Participants are required to contribute 8% of their annual covered salary. The District makes the contributions required of District empLyees on their behalf and for their account. The District is required to contribute at an actuarially detennined rate; the contribution rate for Fis<a 'gear 2011 is 16.656% of annual covered payroll. Benefit provisions and all other requirements are estahl shed by State statute and District ordinance. For the Fiscal Year ended Tune 30, 2010, the amount comrib_,t_c by the District on behalf of the employees was $762,700, which was equal to the District's required comribu ion. The required contribution -10- DOCSOC/ 1424854 v4 /022497 -001 1 was determined as part of the June 30, 2007, actuarial valuation using the entry age normal actuarial cost method. The three -year trend information for the annual pension costs of the District is as follows: CaIPERS recently announced significant investment losses. The District expects that its annual pension cost will increase in future years as a result of such investment losses. The District cannot predict at this time the magnitude of such increases, but does not expect such increases to have a material adverse effect on the District's obligation to make payments under the Installment Purchase Agreement. Postretirement Benefits In addition to a pension plan, substantially all the employees of the District and surviving spouses may become eligible for certain health care benefits if they reach normal retirement age while working for the District. As of June 30, 2010, four retirees receive full benefits of up to $550 per month and another 4 retirees, having reached Medicare age, receive a reduced benefit of approximately $109 per month. Governmental Accounting Standards Board Statement No. 45 ( "GAS13 45 ") requires governmental agencies that fund post - employment benefits on a pay -as- you -go basis, such as the District, to account for and report the outstanding obligations and commitments related to such post employment benefits in essentially the same manner as for pensions. For the District, the reporting obligation began with the Fiscal Year ending June 30, 2009. Based on a preliminary report dated May 29, 2009 prepared by The Epler Company (the "Actuarial Consultant "), the Actuarial Consultant concluded that, as of June 30, 2009, the District's unfunded actuarial accrued liability for post - employment benefits based upon a 3.00% discount rate was $1,290,086. The Actuarial Consultant also concluded that the District's annual required contribution (the actuarial value of benefits earned during Fiscal Year 2009 plus costs to amortize the unfunded actuarial accrued liability, or "ARC ") is $163,799. While requiring the District to disclose the unfunded actuarial accrued liability and the ARC in its financial statements, GASB 45 does not require the District to fund the ARC. In Fiscal Years 2009 and 2010, the District paid expenses with respect to post - employment benefits of $45,886 and $26,105, respectively. For Fiscal Year 2011, the District has budgeted $172,000 of post - employment benefits including direct payments to retirees and contributions to the post - employment benefits trust. The District does not expect that any increased funding of post - employment benefits will have a material adverse affect on the ability of the District to snake payments under the Installment Purchase Agreement. Budget Process The operating budget takes the form of a one -year financial plan which is adopted by the District Board. The budgetary process begins each year in January, with final approval generally occurring in June. The District adopted its Fiscal Year 2011 budget on July 27, 2010. District Insurance The District's insurance coverage for general liability, automobile liability, public official's liability, property and fidelity is provided through a self - insurance program under the Special District Risk Management Authority (the "Authority "). The Authority is a risk - pooling self - insurance authority created under the -11- DOCSOC/1424854v4/022497 -0011 Annual Percentage of Net Pension Fiscal Year Pension Cost (APC) APC Contributed Obligation 2007 $601,748 100% $0 2008 736,225 100 0 2009 940,107 100 0 CaIPERS recently announced significant investment losses. The District expects that its annual pension cost will increase in future years as a result of such investment losses. The District cannot predict at this time the magnitude of such increases, but does not expect such increases to have a material adverse effect on the District's obligation to make payments under the Installment Purchase Agreement. Postretirement Benefits In addition to a pension plan, substantially all the employees of the District and surviving spouses may become eligible for certain health care benefits if they reach normal retirement age while working for the District. As of June 30, 2010, four retirees receive full benefits of up to $550 per month and another 4 retirees, having reached Medicare age, receive a reduced benefit of approximately $109 per month. Governmental Accounting Standards Board Statement No. 45 ( "GAS13 45 ") requires governmental agencies that fund post - employment benefits on a pay -as- you -go basis, such as the District, to account for and report the outstanding obligations and commitments related to such post employment benefits in essentially the same manner as for pensions. For the District, the reporting obligation began with the Fiscal Year ending June 30, 2009. Based on a preliminary report dated May 29, 2009 prepared by The Epler Company (the "Actuarial Consultant "), the Actuarial Consultant concluded that, as of June 30, 2009, the District's unfunded actuarial accrued liability for post - employment benefits based upon a 3.00% discount rate was $1,290,086. The Actuarial Consultant also concluded that the District's annual required contribution (the actuarial value of benefits earned during Fiscal Year 2009 plus costs to amortize the unfunded actuarial accrued liability, or "ARC ") is $163,799. While requiring the District to disclose the unfunded actuarial accrued liability and the ARC in its financial statements, GASB 45 does not require the District to fund the ARC. In Fiscal Years 2009 and 2010, the District paid expenses with respect to post - employment benefits of $45,886 and $26,105, respectively. For Fiscal Year 2011, the District has budgeted $172,000 of post - employment benefits including direct payments to retirees and contributions to the post - employment benefits trust. The District does not expect that any increased funding of post - employment benefits will have a material adverse affect on the ability of the District to snake payments under the Installment Purchase Agreement. Budget Process The operating budget takes the form of a one -year financial plan which is adopted by the District Board. The budgetary process begins each year in January, with final approval generally occurring in June. The District adopted its Fiscal Year 2011 budget on July 27, 2010. District Insurance The District's insurance coverage for general liability, automobile liability, public official's liability, property and fidelity is provided through a self - insurance program under the Special District Risk Management Authority (the "Authority "). The Authority is a risk - pooling self - insurance authority created under the -11- DOCSOC/1424854v4/022497 -0011 provisions of State Government Code Section 6500 et seq. The Authority s eeverned by a board consisting of a representative from each member agency. The board controls the op =rations of the Authority including selection of management and approN a of operating budgets. The relati ,n;h p between the District and the Authority is such that the Authority is not a component unit of the District. :r financial reporting purposes. The purpose of the Authoritv is to arrange and administer programs of insurance for the pooling of self- insured losses and to purchase excess insurance coverage. The A,nl ority provides joint protection coverage for losses in excess of the ^iember districts' individualh specified self- insurance retention levels. Individual claims (and aggregate public liability and property claims) in c:cess of specified levels are covered by excess insurance policies purchased from commercial insurance camer.. See Note 10 to Appendix A— "DISTRICT FINANCIAL STATEMENTS" for a description of coverage lirrrh; as of June 30, 2009. Land Use Land use within the District s primarily residential with some commercial /industrial, park/landscape and agricultural uses. According to the District, approximately 93.61io of the District's metered customers are residential (91.2% single- family and 2.4% multi- Family). The District'a commercial customers account for approximately 4.9% of the total metered services. The District's park and landscape customers represent approximately 1.5% of the current metered services. Agriculture users receive irrigation water from the Santa Ana River via the North Fork Canal anc therefore account for zero percent <f the current metered services. THEN ATER SYSTEM OF THE DISTRICT Water Supply The District's water supply is obtained from 21 active deep gro indwater wells, (10 of which are not used, and are temporarily off -line) that provide a combined capacity of spprcximately 36 million gallons per day ( "mgd "). The District's average daily production of water during, the F iscal Years 2006 through 2010 has varied from 19.5 mgd to 24.3 mgd. The water is of high quality and gene -all,- does not require treatment. The District also has a surface water treatment plant with a capacity of 4 mhd "knish will be expanded to 8 mgd (see — "Future Water System Improvements" below). The District takes d Slivery of flow from the Santa Ana River surface water rights to portions of the flows in the Santa Ana P.,\ c, and City Creek by virtue of its ownership of stock in a mutual water company. The District currently pumps approximately 85% of water supplies to customers from the Bunker Hill Groundwater Basin (the "Basin ") and obtains approximately 15% of v,aler supplied to customers from the Santa Ana River. During dry years, when water supplies are short. the District has the option of obtaining supplemental water from the State \\'ater Project through the San Bernardi u, Valley Municipal Water District ( "SBVMWD "). During wet years. Mien there is excess water available. the District works with the San Bernardino Valley Water Conservation District to transport surplus water to man -made spreading grounds, areas with porous soil where surface i� ater can easily percolate into the Bas .n and be stored for future use. The amount of groundwater and purchased water varies from year to year based nr climatic and other conditions. Groundwater and Surface Water The District currently pumps approximately 19,400 acre -feet of in oundwater per year from the Basin and approximately 3,300 acre -feet from the Santa Ana River. The Basin is estimated to have a total storage capacity of approximately 5,000,000 acre -feet at an average depth of 1.0'f Feet. In accordance with the terms of the Western Judgment (Case No. 78426 — County of Riverside) entered in 1969 and currently still in force, the District has no limitations on the amount of groundwater it produces o serve its customers. The District is not required to obtain a pen-nit for gro mdwater production. Total maxi n.nn daily pumping from the Basin is approximately 29 mgd gallons and is currently sufficient to supply 85% of .N.:'er demand within the District. -12- DOCSOC/ 1424854v4/022497 -001 1 The District also takes surface water from the Santa Ana River which flows through the Basin. Four tributaries to the Santa Ana River provides surface flows within the District. The District holds rights to direct delivery of native surface water through majority stock ownership in North Fork. The District currently has Santa Ana River water rights of 4 mgd with the ability to expand to over 6.5 mgd with conversion of retraining agricultural properties and water shares of stock. The surface water is conveyed to the Surface Water Treatment Plant No. 134 with a capacity of 4 mgd. Water Treatment Agreement. In October 2008, the District and Basin Water, Inc. ( "Basin Water ") signed an agreement (the "Nitrate Removal Agreement ") under which Basin Water agreed to maintain treatment facilities at two District wells (Well 107 and Well 27) contaminated by nitrates through June 16, 2018. Under the Nitrate Removal Agreement, the District will pay Basin Water a $480 /acre -foot treatment fee for up to 2,000 acre -feet (the "Base Quantity") of water delivered by the District and a $360 /acre -foot treatment fee for any water delivered for treatment in excess of 2,000 acre -feet. The per acre -foot treatment fee ($480) times the Base Quantity (2,000 acre -feet) equal $960,000, which represents the minimum payable annually under the Nitrate Removal Agreement. Perchlorate Treatment. During Fiscal Year 2008, District crews and contractors completed work on the site preparation for, and installation of, a mobile perchlorate treatment unit at the District's Plant 27, and site preparation, demobilization and remobilization of a mobile perchlorate treatment from District Plant 132 to Plant 107. Contamination Clean -Up Responsibilities. The District has been included on a list of parties responsible for the clean up of a hazardous waste disposal site in Bakersfield, California. The District's relationship to the site was established in 1991 when the District was clearing contaminated soil from land it had purchased from the State of California. The contaminated soil was hauled to the site, and the site owners were paid by the District to properly dispose of the soil. In 2000, the State of California discovered that the site owners had abandoned the site and that none of the contaminants accepted there had actually been disposed of The State then contacted all of the parties that had used the site, including the District (the "Gibson Group "), and informed them that they were now responsible for clean up of the hazardous waste. As of September 2009, the Gibson Group have made contributions toward the site clean -up totaling $7.6 trillion. In addition the Gibson Group's management committee has been successful in collecting almost $10 million in settlements from non -group members, offsetting some of the financial responsibility that would have otherwise been borne by Gibson Group members. The District paid contributions totaling $16,118.62. With the site cleaned up, the property has now been sold, and the risk of liability transferred, to Environmental Liability Transfer, Inc. of Mississippi. A third amendment to the participation agreement entered into by the Gibson Group members has been drafted and with it a plan to distribute Gibson Group Trust assets to the Gibson Group members. The District's share of this distribution based on its share of contributions is approximately $1,680. Supplemental Water During dry years, District purchases supplemental water from the State Water Project ( "SWP ") through SBVMWD which in turn purchases SWP water through the California Department of Water Resources ( "DWR "). The water SBVMWD provides to the District is treated at Plant 134. The treatment process for all surface water includes flocculation, coagulation, sedimentation, filtration and chlorination. The District does not own or operate any treatment facilities or any pipelines for transmission and distribution of SBVMWD imported water. SBVMWD faces various challenges in the continued supply of imported water to the District and other member agencies. A description of these challenges as well as a variety of other operating infonnation with respect to SBVMWD is included in certain disclosure documents prepared by SBVMWD, respectively. SBVMWD has entered into certain continuing disclosure agreements pursuant to which SBVMWD is -13- DOCSOC/ 1424854v4/022497 -001 I contractually obligated for the benefit of owners of certain of its outstandmg daiigations, to file certain annual reports, notices of certain material events as defined under Rule 15c2 -12 f he Securities Exchange Act of 1934 ( "Rule 15c2 -12 "), as amended. and annual audited financial statements ( 'Disclosure Information ") with the Municipal Securities Rulemaking Board's Electronic Municipal M:. :ci Access System for municipal securities disclosures, maintained on the Internet at http: / /emina.msrb.orc' '.BVMWD HAS NOT ENTERED INTO ANY CONTRACTUAL CW, MITMENT WITH THE DISTRI: `, THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE DISCLOSURE IN "( RMATION TO THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES. SWP reliability has been neeatively affected due to the State' = nability to complete the SWP as contracted. Despite efforts, it is unlikely that the full 4.2 million acre -feet per year design delivery capacity will ever be reached due to environmental limitations. Currently the mammurn delivery capability for the SWP is somewhat less than 3.5 million acre -feet. In most years this arunmt cannot be delivered due to infrastructure limitations and environmental restrictions. The Department of Water Resources ( "DWR ") faces various cha lei.ges in the continued supply of SWP water to the District. A description of these challenges as well as a aueiy of other operating information with respect to DWR is included in certain disclosure documents prepares h,. DWR. DWR has entered into certain continuing disclosure agreements pursuant to which DWR is contractually obligated for the benefit of owners of certain of their outstanding obligations, to file certain annual ; eports, notices of certain material events as defined under Rule 15c2 -12 and annual audited financial statements. DWR HAS NOT ENTERED INTO A CONTRACTUAL COMMITMENT WITH THE DISTRICT. - 1-IF TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE SWP INFORMATION TO TI?F DISTRICT OR THE OWNERS OF THE CERTIFICATES. NONE OF DWR OR SBVMWD HAVE REVIEWED THIS OFFICIAL STATEMENT AND NONE HAVE MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CON FAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO FINN-R, THE SWP OR SBVMWD. NONE OF DWR OR SBVMWD ARE CONTRACTUALLY OBLIGATED, AND NONE HAVE UNDERTAKEN, TO UPDATE DISCLOSURE INFORMATION OR ';WP INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE CEP FIFICATES UNDER RULE 15c2- 12. The Water System General. The District owns and operates 292 miles of waterlines ranging in size from 4 inches to 30 inches in diameter. Eighteen active reservoirs provide storage of approx roately 28.6 million gallons of water. The District has approximately 21654 billed water connections as of the date nereof. Water Quality. The District-!, water meets all current requireirei is of the Safe Drinking Water Law and the regulations of the Californiz Department of Health and Ser\ices (;lie "Health Department "). Water supplied by the District meets all state and federal standards for safe. powl-le water. The District is required to perform frequent sample monitoring and testing, with independent water analysis also performed by State certified laboratories. Resulted are submitted to the Health Department. -14- DOCSOC/ 1424854 v4 /022497 -001 I Historic Water Production, Accounts and Sales Revenues. The following table shows the water production of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Historic Water Production (In acre -feet per year) Fiscal Groundwater& %Increase/ %Increase/ Connections Year Surface If'ater (Decrease) SBVMWD"' (Decrease) Total 2006 24,079 - -% 0 - -% 22,826 2007 27,252 11.6 0 22,826 2008 23,612 (15.4) 1,549.7 21,375 2009 23,353 (1.1) 347.3 (77.6) 2010... 21,382 21,792 (7.2) 0 (100.0) 19,803 Reflects unaudited actual Fiscal Year 2010 results. (2) Imported water in Fiscal Years 2008 and 2009 was not used to supplement water supply, but rather to replace surface water from the Santa Ana River when there was interruption in availability of North Fork intake canal between river and plant, i.e., during canal replacement. See "THE DISTRICT — General" above. Source: District. The following table shows a history of billed water connections of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Number of Billed Water Connections(" Fiscal Year Connections 201012) 21,951 2009 21,806 2008 21,826 2007 21,899 2006 21,698 1j) Includes connections for both residential and commercial customers. (2) Reflects unaudited actual Fiscal Year 2010 results. Source: District. -15- DOCSOC/1424854v4/022497 -0011 The following table shows historic sales revenues of the Rater S,,st'm of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Actual Sales Revenues'" Fiscal Residential and % fit cease/ Year Commercial ( De(rease) 2010'2' $14,853,424 2)% 2009 14,870,655 r I 2008 13,444,479 2007 13,105,269 0 2006 11,807,046 . -7 of includes water revenues for both resdennal and commercial customers. itt Reflects unaudited actual Fiscal Year 2010 results. Source: District. Projected Water Production, Connections and Water Revenues. I he following table shows water of the District for the current and next four Fiscal Years as prop e _led by the District. production EAST VALLEY WATER DISTRICT Projected Water Production Fiscal % Increase/ "i Increase/ Year Groundwater (Decrease) SBVMWD (Decrease) Total 2011 21,000 (4.0)% 0 -% 21,000 2012 21,900 4.3 500 22,400 2013 22,500 2.7 0 '100.0) 22,500 2014 23,000 2.2 1,000 0 24,000 2015 25,000 8.6 0 (100.0) 25,000 Source: District. The following table shows the projected water accounts for the r trrent and next four Fiscal Years as projected by the District. EAST VALLEY WATER DISTRICT Projected Water Connections") Fiscal Residential and %v I,t(rease/ Year Commercial (Dt crease) 2011 22,985 H(% 2012 23,005 o; 2013 23,025' -" 2014 23,045'18 2015 23,065;.08 Source: District. -16- DOCS OC/ 1424854v4/022497 -001 I The following table shows the sales revenues from the Water System for the current and next four Fiscal Years as projected by the District. EAST VALLEY WATER DISTRICT Projected Sales Revenues Fiscal Residential and %Increase/ Year Commercial (Decrease) 2011 $15,516,914 2.58 2012 16,454,808 6.04% 2013 17,666,440 7.36 2014 19,273,555 9.10 2015 20,455,256 3.02 Source: District. Projected sales revenues assume average precipitation, no increase in customer accounts and adoption of the projected rate increases described under the caption " —Water System Rate and Charges" below. Largest Customers The following table sets forth the ten largest customers of the Water System of the District as of June 30, 2010, as determined by the amount of their respective payments. EAST VALLEY WATER DISTRICT Largest Customers — Fiscal Year 2010 Customer Revenue %ofTotalo' SBCUSD $ 351,276 3.00% Patton State Hospital 302,280 2.58 San Manual Mission Indians 185,203 1.58 San Manuel Indian Bingo Casino 118,414 1.01 Stubblefield Construction Co. 87,744 0.75 East Highland Ranch 83,878 0.72 Valencia Lea Mobile Home Park 82,860 0.71 Safety Investment 69,078 0.59 Eastwood Fannsttl 67,448 0.58 Highland Palms Homeowners 59,841 0.51 TOP TEN TOTAL $1,408,022 12.02% TOTAL SYSTEM S11,7 10,00012) , Mutual water company being taken over by the District. 12) Sales to customers. Source: District. These ten customers accounted for approximately 12.02% of total revenues from sales to customers for the year ended June 30, 2010. Water System Rates and Charges General. Water revenues of the District may be derived from three sources: (a) water sales (consumption charge); (b) system charges (meter availability charge); and (c) connection charges. The District -17- DOCS OC/ 1424854 v4 /02249 7 -001 1 Board has rate setting authority as provided under the Act. The District i- i o; subject to the jurisdiction of, or regulation by, the California Public Utilities Commission. See lh�: caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATII'.)NS AND CHARGES" for cert.-,;,i Limitations of the rate setting authority of the District Board. The District annually detennines the adequacy of the Water System rate structure after full consideration of expected operations, maintenance and capital costs. Wave- rates are currently $1.20 per 100 cubic feet (which will increase to 51.49 per 100 cubic feet effective Ocioter 1. 2010) plus a minimum monthly charge that varies with the size of the metered services as describec ) (,l )\k Historically, the District has increased certain water rates. The histo-ic increases in water rates are lisle ne ow. EAST VALLEY WATER DISTRICT Water Rate History 2005 -2010 "' Effective October 1, 2010 through September 30. 201 I. Source: District. The District Board has approved raising retail and commercial rates in Fiscal Year 2010, Fiscal Year 2011 and Fiscal Year 2012. Comparative Water Rates. Set forth below is a schedule of comparative rates effective for areas near to the District as of June 2010. Table 11 EAST VALLEY WASTER DISTRICT WATER SYSTEM Comparative RatesPl Agency Elsinore Valley Municipal Water District Western Municipal Water District City of Riverside Cucamonga Valley Water district East Valley Water District (future)131 Loma Linda East Valley Water District (current) Yucaipa Valle} Water District West Valley Water District City of Redlands SB Municipal Water District Average t'1 As of June 2010. 12) Based on 3/4" meter and 26 hef volume monthly usage ('I Based on new rates which will take effect on October 1, 2010. Source: District. -1R- DOCSOC/1424854v4/022497 -001 1 Monthh, Rate al 51(1.36 X4.'4 45.:C � ?. ?4 a fi.3(1 Per Billing Unit Year Rare . . 8„ 2005 $1.01 $7.50 514.00 $29.50 $42.50 $7450 i1400 $241.00 $362.00 2006 1.08 7.50 1 +.00 29.50 42.50 7450 .14,00 241.00 362.00 2007 1.20 8.40 1 S 70 33.00 47.60 83 50 :]5110 241.00 362.00 2008 1.35 10,45 14.63 18.81 30.30 1 14 64 :k-9 219.44 303.04 2009 1.35 10.45 1 4 63 18.81 30.30 114.44 i4f :9 219.44 303.04 20 10") 1.49 11.54 1'.56 32.49 74.47 137.40 ... ".i0 452.06 721.76 "' Effective October 1, 2010 through September 30. 201 I. Source: District. The District Board has approved raising retail and commercial rates in Fiscal Year 2010, Fiscal Year 2011 and Fiscal Year 2012. Comparative Water Rates. Set forth below is a schedule of comparative rates effective for areas near to the District as of June 2010. Table 11 EAST VALLEY WASTER DISTRICT WATER SYSTEM Comparative RatesPl Agency Elsinore Valley Municipal Water District Western Municipal Water District City of Riverside Cucamonga Valley Water district East Valley Water District (future)131 Loma Linda East Valley Water District (current) Yucaipa Valle} Water District West Valley Water District City of Redlands SB Municipal Water District Average t'1 As of June 2010. 12) Based on 3/4" meter and 26 hef volume monthly usage ('I Based on new rates which will take effect on October 1, 2010. Source: District. -1R- DOCSOC/1424854v4/022497 -001 1 Monthh, Rate al 51(1.36 X4.'4 45.:C � ?. ?4 a fi.3(1 Collection Procedures. Billings for water services provided are collected on a monthly basis. Write - offs for monthly water service occur once a year. In June 2009, write -offs were approximately $5,881 while in June 2010, write -offs were approximately $10,896. Future Water System Improvements A new water regulation placing stricter limits on disinfectant by- products discharged from the District's surface water treatment plant will require retrofitting the plant's treatment technology, most likely membrane filtration. In addition, the District plans to double this plant's capacity to 8 mgd in order to improve supply to its three upper pressure zones. The deadline for compliance with the regulation is October 2012, and the cost of the plant update /expansion is estimated at $16 million. Future water capacity challenges were addressed in the District's Water Master Plan update issued in January 2008 (the "Water Master Plan "). The Water Master Plan identifies a 17,000 gpm treatment plant (Plant 150) in the district's lower pressure zone, with an estimated cost of $19.9 million, as a key facility in treating water from lower zone wells, pumping water to higher elevations where demand is expected to exceed supply, and possibly to take treated water from a regional treatment plant currently under consideration. A State Revolving Fund Loan of approximately $18 million is expected to help finance the project, with the balance of the project cost to be paid from a portion of proceeds of the Bonds. Six new wells, new booster stations, and approximately 3 miles of new pipelines are also categorized as necessary in the next five years by the Water Master Plan. Seismic Considerations The District is located in a seismically active region in Southern California. Significant fault zones in this region include the Elsinore, San Jacinto, Wildomar and San Andreas Fault Zones. There is significant potential for destructive ground shaking during the occurrence of a major seismic event. In addition, land along the aforementioned 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 District. District facilities are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The impact of lesser magnitude events is expected by the District to be temporary, localized and repairable. To date, no District facilities have suffered any significant earthquake damage. Outstanding Water System Indebtedness The District has incurred the following obligations that are payable from Net Revenues on a parity with the Installment Payments not including payments under the 2001 Installment Purchase Agreement which will be prepaid with a portion of the proceeds of the Bonds. See "THE REFUNDING PLAN." 2004 Installment Sale Agreement. The District entered into the 2004 Installment Sale Agreement to finance certain Water System facilities. The 2004 Installment Sale Agreement was outstanding in the aggregate principal amount of $8,067,777 as of June 30, 2010. Under the 2004 Installment Sale Agreement, the District is obligated to make installment payments from Net Revenues of the Water System on a parity with the obligation of the District to make payments under the Installment Purchase Agreement. 2006 Installment Sale Agreement. The District entered into the 2006 Installment Sale Agreement to finance certain Water System facilities. The 2006 Installment Sale Agreement was outstanding in the aggregate principal amount of $5,218,703 as of June 30, 2010. Under the 2006 Installment Sale Agreement, the District is obligated to make installment payments from Net Revenues of the Water System on a parity with the obligation of the District to snake payments under the Installment Purchase Agreement. -19- DOC S OC/ 1424854v4/022497 -001 1 State Revolving Fund Loans. The District expects to enter into m o State Revolving Fund Loans for improvements to Plant 134 and Plan: 150, respectively, in the beeinni-t} of September 2010 (the "State Loans "). The obligation of the District to make payments under the State ,pans will be on a parity with the obligation of the District to make payments under the Installment Purchase n gr::etnent. Other Obligations The County along with the California Department of Health. a; pari of an agreement to provide a combination of grants and loans to the Arroyo Verde Water Compam 'AVWC ") to finance capital improvements to its distribution system. required that the AVWC dissoF.r and transfer its customers to the District. The District entered into the Arroyo Verde Assessment Districi C onstruction Loan (the "Arroyo Verde Loan ") to finance installation of a new distribution system servinpl the Arroyo Verde customers. The Arroyo Verde Loan was outstanding it the aggregate principal amount of 51 2.004 as of June 30, 2010. The Arroyo Verde is payable from assessments levied by the District No Rnenues of the Water System are pledged to repayment of this loan. In 2009, the County Department of Health offered funding to aesist the District with absorbing the Eastwood Farms Water Users Association. Ballots are currently being cnl'ecied to determine whether or not property owners approve the formation of an assessment district. A com:rination of state grants and a 0% interest loan would also help finance this project. No Revenues of the 'T ater System would be pledged to repayment of this loan. Water System Financial Information Financial Statements. Copies of the most recent audited financial statements of the District prepared by Rogers, Anderson, Malody & Scott. LLP, San Bernardino, Calif0n "13 the "Auditor ") are attached as Appendix A hereto (the "Financial Statements "). The Auditor's letter con: udes that the Financial Statements present fairly, in all material respects. the financial position of the District 3s of June 30, 2009 and 2008, and the results of its operations, changes in net assets and its cash flows for ric years then ended in conformity with accounting principles generally accepted in the United States of Aire, ica, as well as accounting systems prescribed by the State Controller's Office and State regulations go\ erning , pecial districts. Historic Operating Results and Debt Service Coverage The following table is a summary of operating results of the Wate System of the District for the last five Fiscal Years. These results have been derived from the financial stn entents of the District but exclude certain non -cash items and include certain other adjustments. The table has not been audited by the Auditor. -20- DOC SOC/ 1424854v4/022497 -0011 EAST VALLEY WATER DISTRICT Historic Operating Results & Debt Service Coverage([) Fiscal Year Ending June 30 t') Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. a) Reflects portion of a total credit of $282,561 to Metropolitan Water District as a result of billing error due to meter conversion error. Source: District. Projected Operating Results and Debt Service Coverage The estimated projected operating results for the Water System of the District for the current and next four Fiscal Years are set forth below, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the estimate of projected financial results of the District based upon its judgment of the most probable occurrence of certain important future events. The assumptions set forth in the footnotes to the chart below are material in the development of the financial projections of the District, 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. -21- DOCSOC/ 1424854x4/022497 -0011 1006 2007 2008 1009 2010 OPERATING REVENUES: Water department $ 12,378,436 $ 13,827,142 $ 14,584,521121 $ 15,720,165[2) $ 15,186,58:5 OPERATING EXPENSES: Water department 9.066,049 9.450039 10,071,445 11.714,659 11.702,319 OPERATING INCOME: $ 3,312,387 $ 4,377,103 $ 4,513,076 $ 4,005,496 $ 3,484,266 NON - OPERATING REVENUES: Interest Income $ 208,893 $ 323,256 $ 316,792 $ 157,610 $ 35,760 Capacity Charges 467,687 516,619 1,102,289 309,704 59,363 Miscellaneous 14.144 106.269 25,093 147.5215 Total Non - Operating Revenues $ 690,724 $ 946,144 $ 1,444,174 $ 467,314 $ 242,654 Net Revenues Available $ 4,003,111 $ 5,323,247 $ 5,957,250 $ 4,472,820 $ 3,631,792 DEBT SERVICE: 1996 Installment Purchase Agreement $ 867,985 $ 870,605 $ 617,455 $ 623,447 $ 631,60:) 2001 Installment Purchase Agreement 1,038,979 1,036,460 1,037,773 1,037,810 1.036,573 2004 Installment Sale Agreement 503,829 503,829 503,829 503,829 503,829 2006 Installment Sale Agreement - 476.024 476.024 476.024 476,02 Total Debt Service $ 2,410,793 $ 2,886,918 $ 2,635,081 $ 2,641,110 $ 2,648,031 Net Revenues Available after $ 1,592,318 $ 2,436,329 $ 3,322,169 $ 1,831,710 $ 983,761 Debt Service COVERAGE 1.66 1.84 2.26 1.69 1.37 t') Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. a) Reflects portion of a total credit of $282,561 to Metropolitan Water District as a result of billing error due to meter conversion error. Source: District. Projected Operating Results and Debt Service Coverage The estimated projected operating results for the Water System of the District for the current and next four Fiscal Years are set forth below, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the estimate of projected financial results of the District based upon its judgment of the most probable occurrence of certain important future events. The assumptions set forth in the footnotes to the chart below are material in the development of the financial projections of the District, 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. -21- DOCSOC/ 1424854x4/022497 -0011 EAST VALLEY WATER DISTRICT Projected Operating Results & Debt Service Coverage Fiscal Year Ending June 30 OPERATING REVENUES: Water department(l) OPERATING EXPENSES: Water department (2) OPERATING INCOME: NON - OPERATING REVENUES: Miscellaneous Total Non - Operating Revenues Net Revenues Available DEBT SERVICE: 2001 Installment Purchase Agreement 2004 Installment Sale Agreement 2006 Installment Sale Agreement 2010 Installment Purchase Agreement" Plant 134 SRF Loan (4) Plant 150 SRF Loan(5) Total Debt Service Net Revenues Available after Debt Service COVERAGE 2017 °1 2012 "' 'G73'' 1014(" 1015'2' S 16,298,000 S 16,454,808 $. %. ,6( 440 $ 19,273,555 $ 19,855,616 12.678 549 12.856387 __ ?_,90 682 14.113 -626 14.643253 S 3,619,451 $ 3,598,421 S 1 (w?58 $ 5,159,929 $ 5,212,363 167.000 408,810 __1_(1774 S 167,000 $ 408,810 S 1 774 S 3,786,451 S 4.007,231 S 41 %'.532 S 920,318 $ -- S -- 503,829 503,829 5rLS29 476,024 476,024 1- (,,()24 87,128 970,878 1;_.525 $ 1,967,299 $ 1,950,731 s, ' 395378 $ 1,576,611 S 2,036,685 5 . "161,193 1.79 2.04 1.86 412,751 415,779 $ 412,751 $ 415,779 $ 5,572,680 $ 5,628,142 503,829 503,829 476,024 476,024 413,500 413,725 266,000 266,000 $ 2,659,353 $ 2,659,578 $ 2,891,574 $ 2,945,995 2.09 2.11 "i From adopted Fiscal Year 2011 Budgel (3) Based on Exhibit 1 in Appendix A of Comprehensive Water and Sewer Rate Stu 3v dated June], 2010. 1 �1 Preliminary, subject to change and market conditions based on A+ Cal ifomia Re%enjr Uti Iity Scale as of July 8, 2010, with $17 million Project Fund, refinancing of 2001 COPS, capitalized interest funds( though October 7, 2011 and principal payments commencing October 1, 2012 ( °1 Based on proposed annual payments for Plant 134 SRF Loan. (sl Based on proposed annual payments for Plant 150 SRF Loan. Source: District. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any district, county, school district, corporation or other political subdivision of the St;ite to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted or :hanges in the cost of living and population. The "base year" for establishing such appropriation limit is the 1 ;'78 -1979 State fiscal year and the limit is to be adjusted annually to reflect changes in population and c:a.sumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial regpon�ibility for a service is transferred to another public entity or to a primate entity; (b) the financial source for tho prevision 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 subject to Anicle XIIIB generally include the pr-,,, eeds of taxes levied by the State or other entity of local government, exclusive of certain State subvention : nc refunds of taxes. "Proceeds of taxes" include, but are not limited to. all tax revenues and the procee<L it) an entity of government from: -22- DOCSOC/1424854v4/022497 -0011 (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of 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 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 existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and payments 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 District is of the opinion that its charges for Water Service do not exceed the costs it reasonably bears in providing such services and therefore are not subject to the limits of Article XIIIB. The District has covenanted in the Installment Purchase Agreement that, to the fullest extent permitted by law, it will fix and prescribe, at the commencement of each Fiscal Year, rates and charges sufficient to provide for payment of the Installment Payments in each year. See the caption "SECURITY FOR THE BONDS —Rate Covenant." Proposition 218 General. An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative ") was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the Authority of local governments to impose taxes and property - related assessments, fees and charges." Article X711D. 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 deterniming whether a fee or charge is imposed as an incident of property ownership. Article XIIID requires that any agency imposing or increasing any property- related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or 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, if and to the extent that a fee or charge imposed by a local government for water or wastewater service is ultimately determined to be a "fee" or "charge" as defined in Article XIIID, the local government's ability to increase such fee or charge may be limited by a majority protest. In addition, Article XIIID includes a number of limitations applicable to existing fees and charges including provisions to the effect that: (a) revenues derived from the fee or charge may not exceed the funds 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 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 services that are "primarily based on the amount consumed" (i.e., metered water rates), which had been held to be commodity charges related to -23- DOCSOC/1424854v4/022497 -0011 consumption of the service, not propen} ownership. The Supreme Court stated in Bighorn - Desert View Water Agency v. Veriil, 39 Cal. 41h 205 (20! 0) (the "Bighorn Case "). howe\ er that fees for ongoing water service through an existing connection were property- related fees and charge: The Supreme Court specifically disapproved the holding in Howard ✓ands Taxpayers Association v Cah of !os Angeles that metered water rates are not subject to Proposition 218. The District has complied �crh the notice and public hearing requirements of Article XIIID in detennining whether to change Water Svzicm rates and charges since 2007. Article XIIIC. Article XIIIC' provides that the initiative power ma not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, lee ca charge and that the power of initiative to affect local taxes, assesstr.ents, fees and charges is applicable tc all local governments. Article XIIIC does not define the terms "local tax," "assessment." `Yee" or "clvnt:e - 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, asses.ments, fees and charges imposed after November 6, 1996. On July 24, 2006, the Supreme Court held in the Piphorn Case that the provisions of Article XIIIC included rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an icitiative to reduce fees and charges rnu',d override statutory rate setting obligations. In any event, the Distric does not believe that Article Xli!C grants to the voters within the District the power to repeal or reduce rates and charges for the Water Service in a manner which would be inconsistent with the contractual obligations of the District. Howes e here can be no assurance of the availability of particular remedies adequate to protect the beneficial owners of the Bonds. Remedies available to beneficial owners of the Bonds in the event of a default by the Distric, are dependent upon judicial actions which are often subject to discretion and delay and could prove both expere i%e and time - consuming to obtain. So long as the Bonds are held in book -entry form, DTC (or its nominee, 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. In addition to the specific limitations on remedies contained in the applicable documents themselves, the rights and obligations with respect to the Bonds, the Indenture and the Installment Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium, frauduler' conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if cquitablc remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on lep I remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Special Counsel (the form of which is attached as Appendix C it be similarly qualified. Future Initiatives Articles XIIIB, XIIIC and XIIID were adopted as a measure that lualified for the ballot pursuant to California's initiative process. From time to time other initiatives could be )roposed and adopted affecting the District's revenues or ability to increase revenues. THE AUTHORITY The Authority is a public body duly organized and existing tinder the Joint Exercise of Powers Agreement, dated as of August 20, 2010, by and between the Distric tnd California Municipal Finance Authority (the "JPA Agreement "), and under the Constitution and lay.s c' the State. The Authority was formed for the purpose of assisting the financing and refinancing of capital improvement projects of the District and to finance working capital for the District by exercising .1,e powers referred to in the JPA Agreement, including the power to issue bonds to pay the costs of public :nprovements. Neither the District nor California Municipal Finance Au hority is responsible for repaymen, oft to obligations of the other. The members of the Board of Directors of the Authority are the members of tl:e Sea *d of Directors of the District. -24- DOC SOC/ 1424854v4/022497 -001 I APPROVAL OF LEGAL PROCEEDINGS The legality and enforceability of the Indenture and certain other legal matters are subject to the approval of Special Counsel. The fonn of such legal opinion is attached as Appendix C to this Official Statement. Certain legal matters will be passed upon for the District by its District Counsel, for the Authority by its counsel and for the Trustee by its counsel. LITIGATION District At the time of delivery of and payment for the Bonds, the District 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 District, threatened against the District affecting the existence of the District 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, the application of the proceeds thereof in accordance with the Installtnent Purchase Agreement and the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installtnent Purchase Agreement, or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or its authority with respect to the Bonds or any action of the District contemplated by any of said documents, nor to the knowledge of the District, is there any basis therefor. 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, the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installtnent Purchase Agreement, or any action of the Authority contemplated by any of said documents, or 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 EXEMPTION In the opinion of Special 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 on to 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 and corporations. In the further opinion of Special Counsel, interest on the Bonds is exempt from State personal income tax. Special Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bond of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such 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 the Bond Owner will -25- DOCSOC/1424854v4/022497 -0011 increase the Bond Owner's basis in the Bond. In the opinion of Special ( xrnsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gr� stcorne of such owner for federal income tax purposes, is not an iteir of tax preference for purposes of ' c federal alternative minimum tax imposed on individuals and corporations. and is exempt from State perso .2 :rcome tax. Special Counsel's opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and cerifications made by the Authority and others and is subject to the cond,,ion that the Authority complies %,it t 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 .a x ) urposes. 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 ::s Lance of the Bonds. The Authority has covenanted to comply with all such requirements. The amount by which a Bond Owner's original basis for determit ing 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 uder Section 171 of the Code; such amortizable bond premium reduces 'he Bond Owner's basis in the applicable Bond (and the amount of tax - exempt interest received), and is not deductible for federal income taa fumoses. The basis reduction as a result of the amortization of Bond premium may result in a Bond Ownet reap zing a taxable gain when a Bond is sold by the Owner for an amount eeual to or less (under certain circu n, tances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their c .v t tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS ") has initiated an expanded program for the auditing of tax - exempt bond issues, including both random and targeted audits. 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 B mds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their m.trket value. It is possible that sull to the issuance of the Bonds the-e might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, ot local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations , i.1 not occur. Special Counsel's opinions may be affected by actions taken (or rnt taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to letetmine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture, he Installment Purchase Agreement and the Tax Certificate relating to the Bonds permit certain actions to be ,aken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special C rt nsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is take > -tr omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth. Although Special Counsel has rendered an opinion that interest and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes p-o ided that the Authority continues to comply with certain requirements of ,.he Code, the ownership of the Bond; and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise aflie, t 'he tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax ad.tsors with respect to collateral tax consequences relating to the Bonds. -26- DOCSOC/ 1424854v4/022497 -001 1 CONTINUING DISCLOSURE The District has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District not later than January I following the end of the District's Fiscal Year (currently its Fiscal Year ends on June 30) (the "Annual Report"), commencing with the report for Fiscal Year ending June 30, 2010, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and the notices of material events will be filed by the District with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emina.msrb.org /. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix E — "FORM OF CONTINUING DISCLOSURE CERTIFICATE" hereto. These covenants have been made in order to assist the Representative in complying with Rule 15c2- 12(b)(5) promulgated under the Securities Exchange Act of 1934. The District has not previously failed to comply with any previous continuing disclosure undertaking in any material respect. RATINGS The Authority expects that S &P and Fitch Ratings, Inc. ( "Fitch ") will assign the Bonds the ratings of and "_ ", respectively. There is no assurance that any credit rating given to the Bonds will be maintained for any period of time or that the ratings may not be lowered or withdrawn entirely by S &P or Fitch if, in the judgment of S &P or Fitch, respectively, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. Such ratings reflect only the views of S &P and Fitch and an explanation of the significance of such ratings may be obtained from S &P and Fitch, respectively. FINANCIAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Irvine, California (the "Financial Advisor ") as financial advisor in connection with the sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. UNDERWRITING The Bonds were purchased at a competitive sale on August _, 2010 by (the "Underwriter ") at a purchase price of $ (being the aggregate principal amount thereof less /plus an aggregate original issue discount /premium of $ and less an underwriters' discount of $ ). The obligation to make such purchase is subject to certain tenns and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel, and certain other conditions. 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. -27- DOCSOC/1424854v4/022497 -0011 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 repre >entations of fact. No representation is made that any of such statements trade will be realized. Neither this t tfic al Statement nor any statement which may have been made verbally .,r in writing is to be construed a: contract with the Owners of the Bonds. The execution and delivery of ris Official Statement have been dul' authorized by the District. EAST VALLEY \r1.ATER DISTRICT FINANCING AUTHORITY By: D: e, utive Director EAST VALLEY WATER DISTRICT General Manager _2g_ DOCSOC/1424854v4/022497 -0011 APPENDIX B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREFMENT AND THE INDENTURE; The following is a summar, of certain provisions of the Insm'i neat Purchase Agreement and the Indenture which are not descrihed , 'SC11 here. This summary does not Pteport to be comprehensive and reference should be made to the re�pective agreement fora full and ccnit.leie statement of the provisions thereof. [TO COME] B -1 DOCSOC/1424854v4/022497 -0011 APPENDIX C FORM OF OPINION OF SPECIAL COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, proposes to render its final approving opinion in substantially the following form: ,2010 East Valley Water District Financing Authority c/o East Valley Water District 3654 East Highland Avenue, Suite 18 Highland, California 92346 -2607 Members of the Board of Directors: We have acted as Special Counsel to the East Valley Water District Financing Authority (the "Authority") in connection with the issuance of $ aggregate principal amount of East Valley Water District Financing Authority Water Revenue Bonds ()A 7ater System Improvement Projects and Series 2001 Refunding) Series 2010 (the "Bonds "). The Bonds have been issued by the Authority pursuant to the terms of the Indenture of Trust, dated as of September 1, 2010 (the "Indenture "), by and between the Authority and Union Bank, N.A., as trustee (the "Trustee "). The Bonds are limited obligations of the Authority payable solely from payments (the "Installment Payments ") to be made by the East Valley Water District (the "District") to the Authority pursuant to an Installment Purchase Agreement, dated as of September 1, 2010, by and between the District and the Authority. 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 famished 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 now in force, and the Indenture has been duly authorized, executed and delivered by the Authority, and, 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 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, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. With respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 4. Interest on the Bonds is exempt from State of California personal income tax C -1 DOCSOC/I424854v4/022497 -0011 5. The difference between the issue price of a Bond (the first -,T3 :e at which a substantial amount of the Bonds of the same series and mature: is to be sold to the public) and th:.tated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discouw will accrue to a Bond Owner befo�c receipt of cash attributable to such excludable income. The amount of original issue discount deemed received b� '.le Bond Owner will increase the Bond Owner's basis in the Bond. In to opinion of Special Counsel. the ai nnmt of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such c- ie, for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimem tax imposed on individuals and corporations. and is exempt from State o` Cahifomia personal income tax. 6. The amount by which a Bond Owner's original basis for detein:ning loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount pay.tb'le en maturity (or on an earlier call date) constitutes amortizable bond prerr.:um, which must be amortized unde- Se,'ion 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 -(, deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond ptrrnum may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amouv 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, computalian and collateral consequences of awa-tiiable bond premium. The opinions expressed herein as to the exclusion from gross income of interest on the Bonds are based upon certain representations of fact and certifications made by the Authorip and others and are subject to the condition that the Authority complies will all requirements of the Code that mu, t 're satisfied subsequent to issuance of the Bonds to assure that interest on the Bonds will not become includable in gr, -ss income for federal income tax purposes. Failure to comply with such requirements of the Code might causesenst on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuaru e �f the Bonds. The Authority has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or nit taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or w :ifcrm 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 Special Counsel i� provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross intone of interest (and original issue discount) for federal income tax purposes with respect to the Bonds if any si ch 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. The opinions expressed herein are based upon our analysis and imerp elation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed hp such authorities. We call attention to the fact that the rights and obligations under the Indenture and the Bonds 3 e �.ubject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting <re:litors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicia' li <cretion in appropriate cases and to limitations on legal remedies against public agencies in the State of Californiz Respectfully submitted C -2 DOCSOC/ 1424854v4/022497 -001 1 APPENDIX D 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 District and the Underwriters believe to be reliable, but neither the Authority, the District nor the Underwriters take 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 bens fcial 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 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book - entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). DTC has Standard & Poor's highest rating: AAA. 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 and www.dtc.org. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ( "Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in 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 D -1 DOCSOC/ I424854v4/022497 -001 I such Bonds are credited, which may or ruy not be the Beneficial Owners. The ):,ect and Indirect Participants will remain responsible for keeping account cf their holdings on behalf of their cus'nrters. Conveyance of notices and other communications by DTC to Direct Pa rr.:ipants, by Direct Participants to Indirect Participants, and by Direct Pan:cpants and Indirect Participants to Eerefieial Owners will be governed by arrangements among them, subject to any :tatulory or regulatory requirements may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment thr ra:tsmission to them of notices of significant events with respect to the Bonds. such as prepayments, tenders. cl_iaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may uish to asxrain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial O rl -n =rs. In the alternative, Beneficial Owners may wish to provide their namrs and addresses to the registrar anc -equest that copies of notices be provided directly to them. Redemption notices shall be sen. to DTC. If less than all of the Bons within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Ditec: f articipant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will c,�r sent or vote with respect to Bonds unless authorized by a Direct Participant n accordance with DTC's MMI Prcr., titres. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after ti e record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants -o 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 Bo ids will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DIY . DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail mfornation from the Authority or the Trustee, on payable date in accordance with their respective holdings sho, r o❑ DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions anc c.tstomary practices, as is the case with securities held for the accounts of customers in bearer form or registere l in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, s- ib,ect 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 I rastee, disbursement of such payment. t:) Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial c twners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased of 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 fir physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed :atisiied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and follmke I -y a book -entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respee to the Bonds at any time by giving reasonable notice to the Authority or tite Trustee. Under such circums'arce,, in the event that a successor depository is not obtained, physical certificates are required to be printed and e i%cred. The Authority may decide to discontinue use of the system of book -e� r, only transfers through DTC (or a successor securities depository). In that ex cut. Bonds will be printed and deli Bred 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 t)%� ^"ERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANT) DTC PARTICIPANT, OR OF AN`: D. 'C PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR 1 Tf ECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING 'It') THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PRL1,11SED ON SUCH NOTICE. D -2 DOCSOC/ 1424854v4/022497 -001 I APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the issuance of the Bonds, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the East Valley Water District (the "District ") in connection with the issuance of $ East Valley Water District Financing Authority Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) (the "Bonds "). The Bonds are being issued pursuant to an Indenture of Trust, dated as of September 1, 2010 (the "Indenture "), by and among the East Valley Water District Financing Authority (the "Authority") and Union Bank, N.A., as trustee (the "Trustee ") and are secured by Installment Payments payable by the District to the Authority pursuant to an Installment Purchase Agreement, dated as of September 1, 2010 (the "Installment Purchase Agreement "), by and between the District and the Authority. The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate This Disclosure Certificate is being executed and delivered by the District 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. 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term "Beneficial Owner" means 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. EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emma.msrb.org /. Fiscal Year. The term "Fiscal Year" means the one -year period ending on the last day of June of each year. Holder. The term "Holder" means a registered owner of the Bonds. Listed Events. The term "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate. Official Statement. The term "Official Statement" means the Official Statement of the District dated 2010 delivered in connection with the Bonds. Participating Underwriter. The term "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule. The term "Rule" means Rule 15c2 -12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Provision of Annual Report s. (a) The District shall provide not later than January 1 following the end of its Fiscal Year (commencing with Fiscal Year 2010) to EMMA an Annual Report relating to the immediately preceding Fiscal Year E -1 DOC SOC/ 1424854x4/0224 97 -00 1 1 which is consistent with the requirements of Section 4 of this Disclosure Ceruf cafe, which Annual Report may be submitted as a single document or as se.iarate documents comprising a na;lage and may cross- reference other information as provided in Section 4 of thi< Disclosure Certificate. (b) If the District is unable to provide to EMMA an ,%r. mal Report by the date required in subsection (a), the District shall send r. EMMA a notice in the manner p�_ scribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall conr.rr. or incorporate by reference the following: (a) The audited financial statements of the District for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to : pp:ly to governmental entities from time to time by the Governmental Accounting Standards Board. If the Districts FLdited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements In a format similar to the financial statements contained in the final Official Statement, and the audited financial late.rtents shall be filed in the same ma: • er as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. (c) Balance in the Reserve Fund and a statement of 'hc reserve requirement with respect thereto. (d) An update of the information in the following 12hL's ander the caption entitled "THE WATER SYSTEM OF THE DISTRICT- in the Official Statement: G) "EAST VALLEY WATER DISTRICT Iistoric Water Production and Accounts" on page _ of the Official Statement. (ii) "EAST VALLEY WATER DISTRI( Historic Sales Revenues" on page _ of the Official Statement. (iii) "EAST VALLEY WATER DISTRICT -- Largest Customers" on page _ of the Official Statement (iv) "EAST VALLEY WATER DISTRICT— Historic Operating Results of Debt Service Coverage" on page _ of the Official Statement. 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 District or related public entities. which have been submitted to EMMA or the Securities and Exchange Commission: provided, that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Bnard: and provided further, that the District shall clearly identify each such document so included by reference. 5. Reoortina of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bo-ioi . Is material: 1. principal and interest payment delinquenac. 2. non - payment related defaults. 3. unscheduled draws on the credit enhancem(nt•: reflecting financial difficulties. E -2 DOCS OC/ 1424854v4/022497 -0011 4. unscheduled draws on the debt service reserves reflecting financial difficulties. 5. substitution of the credit or liquidity providers or their failure to perform. 6. adverse tax opinions or events affecting the tax- exempt status of the Bonds. 7. modifications to rights of Bondholders. 8. optional, contingent or unscheduled Bond calls. 9. defeasances. 10. release, substitution or sale of property securing repayment of the Bonds. 11. rating changes. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. (c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the District shall promptly file a notice of such occurrence with EMMA. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, E -3 DOCSOC/ 1424854v4/022497 -0011 and a written notice of and request to cure such failure, and the District sY.tl hive refused to comply therewith within a reasonable time. 11. Beneficiaries. This Disclosure Certificate shall inure sold} r. the benefit of the District, the Participating Underwriter and Holders and Beneficial Owners from time to Lure of the Bonds. and shall create no rights in any other person or entity. Dated: , 2010 EAST VALLEY WATER DISTRICT By: Its: General Manager E -4 DOCSOC/ 1424854v4/022497 -001 I OFFICIAL NOTICE OF SALE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 Date of Sale: Wednesday, September 15, 2010 10:00 a.m., Pacific Standard Time IDS TO BE RECEIVED VIA PARITY For further information, please contact: Thomas DeMars, Principal (949) 660 -7316 tdema rs(ii),field man.com Joshua Lentz, Assistant Vice President (949) 660 -7320 ilentz(a),fieldman.com Fieldman, Rolapp & Associates 19900 MacArthur Boulevard, Suite 1100 Irvine, California 92612 Fax: (949) 474-8773 A copy of the Preliminary Official Statement may be obtained at: www.f'ieldman.com/offerines.asp Preliminary, subject to change. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 NOTICE IS HEREBY GIVEN that all -or -none bids will be received by a iep-esentative of the EAST VALLEY WATER DISTRICT (herein, the "District "), for t-e pc:rchase of $ * par value bonds designatec "EAST VALLEY WATER DISTRICI ci "dANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPOVEMEV! PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010" (herein, the "Bonds "). Al e e;'ronic bids must be submitted via PariOXID, the electronic bidding system, up to the time Inc. a: the place specified as follows: TIME: 10:00 a.m.. Pacific Standard Time DATE: Wednesday, September 15, 2010 provided, however, that without further advertising, and so long as an electronic `. is has not been accepted by the District, electronic bids via Parity) will be accepted at such titre and place on September 16, 2010 and each succeeding Business Day thereafter until the earlier of September 28, 2010 or receipt by the District of an acceptable electronic bid for the Bonds. No bid will be entertained at any price less than 1.5% of the par value of the Bonds, or that produces less than $ in proceeds at settlement, not including accrued interest, if any, to the date of settlement (in each case, inclusive of the costs of issuing the Bonds payable by the successful bidder at closing). The terms of sale further Olo% for the adjustment, both by maturity and in total, of the amount of Bonds offered. fee "TERMS OF SALE" herein. Please note that the Authority and the District reserve the right to cancel or resched ae the sale of the Bonds upon notice given through Thomson Municipal News by 5:00 p.m., CElif )rr is time the day prior to the day bids are scheduled to be received, and if the sale is reschcdulea n ,t ice of the new sale date and time, if any, will be giver through Thomson Municipal News no late- than 5:00 p.m. California time the day prior to the new day bids are to be received, and h ds will be received in the manner set forth above at the rescheduled date and time as the ? _t re7 fly and the District may determine. DESCRIPTION OF THE BONDS ISSUE. The Bonds will be issued in ;he original principal amount of $_ _ _ *, and bear interest from the date of their issue, in full book -entry only form in denomination; of $5,000 and any integral multiple thereof, maturing as shown below under the caption "11aTURITY SCHEDULE." The Bonds are subject to optional Redemption and spcci t! mandatory Preliminary, subject to change. Page 1 of 14 Redemption prior to maturity as shown below under the caption "OPTIONAL REDEMPTION." Prospective bidders should note that the terms of sale permit adjustment of individual maturities. See "ADJUSTMENTS OF PRINCIPAL AMOUNTS" below. Reference is made to the Preliminary Official Statement prepared in connection with the offering of the Bonds for a complete description of the Bonds. INTEREST RATE. Interest will be calculated on the basis of a 360 -day year composed of twelve 30 -day months. The Bonds shall bear interest from their date at a rate or rates to be determined at the sale thereof, but not to exceed six and half percent (6.25 %) per annum. Interest on the Bonds is payable semiannually on April I and October 1 in each year (the "Interest Payment Dates "); commencing April 1, 2011. Bidders may specify any number of separate interest rates, and any rate may be repeated as often as desired; provided, however, that (i) each interest rate specified must be in a multiple of 1/20 of 1% or 1/8 of 1 %; (ii) a zero rate of interest cannot be specified; (iii) each Bond shall bear interest from its dated date to its stated maturity date at the interest rate specified in the bid; (iv) all Bonds of the same maturity date shall bear the same rate of interest; and (v) no bid will be accepted which provides for the cancellation and surrender of any interest payment or for the waiver of interest or other concession by the bidder as a substitute for payment in full of the purchase price of the Bonds. Bids that do not conform to the terms of this paragraph will be rejected. PAYMENT. Principal of and interest on the Bonds will be payable by Union Bank, N.A. the trustee for the Bonds (herein, the "Trustee "), in lawful money through the facilities of The Depository Trust Company, or its nominee. AUTHORITY FOR ISSUANCE AND PURPOSE. The Bonds are being issued by the East Valley Water District Financing Authority (the "Authority") pursuant to an Indenture of Trust, dated as of September 1, 2010, by and between the Trustee and the Authority, and pursuant to the laws of the State of California. The Bonds are a special obligation of the Authority payable solely from Net Revenues of the Water System of the District consisting of all payments ( "2010 Installment Payments ") required to be paid by the District under the Installment Purchase Agreement (the "2010 Installment Purchase Agreement "), by and between the Authority and the District. The proceeds of the Bonds will be used to (i) finance capital improvements to the District's Water System, (ii) refund a portion of the District's Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, (iii) fund interest due through and including (October 1, 20111, and (iv) pay certain costs incurred in connection with the issuance of the Bonds. DENOMINATIONS. The Bonds will be issued and delivered as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereof. DATE OF BONDS. The Bonds will be dated their date of delivery (the "Closing Date "), which is anticipated to be on or about September 28, 2010. MATURITY SCHEDULE. The Bonds will mature, or be subject to mandatory sinking fund Redemption, on October 1 in each of the years, and in the amounts, as set forth in the Page 2 of I I following table. The final principal amount of the Bonds, and the final amount of cash maturity of the Bonds, is subject to increase or reduction as described below under the heading "ADJUSTMENT OF PRINCIPAL AMO[ NTS." Each bidder must specify in its 1-A whether, for any particular year, the Bonds will mature or. alternatively, be subject to mandatan sinking fund Redemption in such year. Maturity (October 1) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal Amount"' Maturity (October 1) 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Principal Amount 'M 2022 2037 2023 2038 2024 2039 2025 2040 " t Preliminary, subject to change. See also "Adjustment of Principal Amounts' terein. ADJUSTMENT OF PRINCIPAL AMOUNTS. The principal amounts set forth in this Notice of Sale for the Bonds reflect certain estimates of the District and its financial advisor with respect to the likely interest rates of a winning bid and the premium /discount specif iec in such a winning bid described below under the caption "TERMS OF SALE." The total principal amount of the Bonds and the principal amounts payable in each of the years set forth above are subject to adjustment, in 55,000 increments, to reflect the actual interest rates and any premium /discount contained in the winning bid, and to maintain suhsiantially level annual debt service payments on the Bonds. The Authority reserves the right t t increase or decrease the principal amount of any maturity of the Bonds (or, in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking fund Redemption or October 1 in any year) in order to achieve such intention. The winning bidder will be nctifed of any adjustment in principal amounts as soon as practical. Adjustment of the principal amounts will not affect the determination of the winnin€ bid. A successful bidder may not wrrorav its bid as a result of any changes made within these limits. OPTIONAL REDEMPTION. The Bonds maturing on or after [October 1. 20211 are subject to Redemption prior to maturity at the option of the District, among mater nes as directed by the District and by lot within maturity in whole at any time or in part, on any date on or after [October 1, 20201 in integral multiples of $5,000 from any source of funds. upo-t notice as described in the Official Statement, at a Redemption price equal to the principal amount thereof, without premium, together with interest accrued to such date fixed for Redempti ^n Page 3 of 11 MANDATORY REDEMPTION. Any bidder may, at its option, specify that one or more maturities of the Bonds will consist of term bonds which are subject to mandatory sinking fund Redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder; provided that no Bond may have sinking fund payments prior to October 1, 2020. In the event that the bid of the successful bidder specifies that any maturity of Bonds will be term bonds, such term bonds will be subject to mandatory sinking fund Redemption on October 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading "THE BONDS - Redemption of Bonds - Mandatory Redemption ", at a Redemption price equal to the principal amount thereof to be paid together with accrued interest thereon to the Redemption date, without premium. BOOK ENTRY SYSTEM. The Bonds when issued will be registered in the name of CEDE & CO., as nominee of The Depository Trust Company, New York, New York ( "DTC "), and will be initially issued as one bond for each of the maturities of the Bonds. DTC will be appointed depository for the Bonds and registered ownership of the Bonds may not thereafter be transferred except as provided in the procedures, rules and requirements established by DTC. The Trustee will pay payments of principal and interest to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. SECURITY. Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues (the "Authority Revenues "), which consist of Installment Payments to be made by the District under the Installment Purchase Agreement, and from 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 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 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 Installment Payments and its rights as may be necessary to enforce payment of the Installment Payments when due. 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 subject only to the provisions of the Indenture permitting the terms and conditions set forth therein. 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 District to pay Installment Payments is payable from Net Revenues on a parity with an installment sale agreement of the District dated July 13, 2004 in the outstanding aggregate principal amount of $8,067,777.08, and an installment sale agreement dated January Page 4 of I 1 10, 2006 in the outstanding aggregate principal amount of $5,109,853.96. For cefnitions of certain capitalized terms used in this paragraph and not otherwise defined aid for more information regarding the security for the 3onds, see the caption of the Preh riary Official Statement entitled "SECURITY FOR THE BONDS" and APPENDIX A— 'S11W,IARY OF PRINCIPAL LEGAL DOCUMENTS ". TAX EXEMPTION. In the opinion cf Stradling Yocca Carlson & Rauth. B>nd Counsel, subject, however to the qualifications set firth below, under existing law. the interest on the Bonds is excluded from gross income for federal income tax purposes. Interest >r the Bonds is not a specific preference item for purposes of the federal individual or corpc.a e alternative minimum taxes, nor, as to corporations is :he interest included as an adjustmer, in calculating corporate alternative minimum taxable income. In the further opinion of Bond CC't:n =_el, interest on the Bonds is exempt from personal income taxation by the State of California Fidders are referred to the Preliminary Official Statement for a description of the proposed c ni tion of Bond Counsel. NO RESERVE FUND. Neither the Installment Purchase Agreement nor the Indenture establishes a reserve fund for the Bonds. DELIVERY OF SECURITIES. Delivery of the Bonds will be made tc the successful bidder through the facilities of The Depository Trust Company in New York. Nev. `.'ork (or at any other mutually agreeable location) on or about September 28, 2010. Paymer r Lust be made in cash, Federal Reserve Bank funds, or other immediately available funds. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEE. Attention of bidders is directed to California Government Code Section 8856. w hicri provides that the lead underwriter or the purchaser of the Bonds will be charged the California Debt and Investment Advisory Commission fee. QUALIFICATION FOR SALE; BLUE SKY. Compliance with blue sky lags shall be the sole responsibility of the successful bidder. The District will furnish such inforn�tion and take such action not inconsistent with law as the successful bidder may request and t ^e District shall deem necessary or appropriate to qualify the Bonds for offer and sale under the blue skb or other securities laws and regulations of such states and other jurisdictions of the Unites. States of America as may be designated by the successful bidder; provided, however, that the D strict shall not execute a general or special consent to service of process or qualify to &, business in connection with such qualification or determination in any jurisdiction. The successful bidder will not offer to sell or solicit any offer to bev. the Bonds in any jurisdiction where it s unlawful for such bidder to make such offer, solicitation or sale, and the bidder shall comp � with the blue sky and other securities laws and regulations of the states and jurisdictions in which the bidder sells the Bonds. CUSIP NUMBERS. It is anticipated that CUSIP numbers will be printed on Cne Bonds, but neither the failure to print such numbers on any Bonds nor any error with resp:cl thereto shall constitute cause for failure or refusal by the purchaser thereof to accept deliver. cf =nd pay for the Bonds in accordance with the terms thereof. All expenses in relation to ale orinting of CUSIP numbers on the Bonds shall be paid for by the District; provided. hoc,:ver, that the Page 5 of I I ordering of and the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the winning bidder. NO LITIGATION CERTFICATE. At the time of issuance of the Bonds, the District will certify there is no litigation pending concerning the validity of the Bonds, the corporate existence of the District, or the entitlement of the officers thereof to their respective offices. RIGHT OF CANCELLATION. The successful bidder will have the right, at its option, to cancel its purchase of the Bonds if the District fails to execute the Bonds and tender the same for delivery within 60 days from the date of award thereof. In such event, the successful bidder will be entitled to the return of the deposit accompanying the bid. PRELIMINARY OFFICIAL STATEMENT AND FINAL OFFICIAL STATEMENT. The preliminary official statement, distributed in connection with the sale of the Bonds, dated August _, 2010 (the "Preliminary Official Statement ") has been deemed final by the Authority and the District for purposes of Rule 15c2 -12 of the Securities Exchange Commission (the "Rule "), but is subject to revision, amendment and completion in a final official statement (the "Final Official Statement ") as provided in the Rule. The Authority and the District has authorized a Preliminary Official Statement and Final Official Statement relating to the Bonds, a copy of which is available on the Internet at www.fieldman.com/offerings.as . The Authority and the District will deliver to the purchaser of the Bonds a certificate dated the Closing Date to the effect that the Authority and the District has reviewed each of the Preliminary Official Statement and Final Official Statement and has determined that as of the date of each thereof, to the best of its knowledge and belief, that each of the Preliminary Official Statement and Final Official Statement does not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Up to 100 copies of the Final Official Statement will be furnished to the successful bidder at no charge within 7 business days of the award of the Bonds. CONTINUING DISCLOSURE. The District has covenanted for the benefit of Owners to provide certain financial information and operating data relating to the District by not later than January I st of each year after the end of the District's fiscal year (which fiscal year presently ends June 30), commencing with January 1, 2011 (the "Annual Report"), and to provide notices of the occurrence of certain enumerated material events. The Annual Report and notices of material events will be filed by the District through the Electronic Municipal Market Access System ("EMMA ") of the Municipal Securities Rulemaking Board (the "MSRB "). The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized in the Preliminary Official Statement under the caption "CONTINUING DISCLOSURE." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5). TERMS OF SALE BASIS OF AWARD. The Bonds will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Bonds. The true interest cost of any such bid will be that rate which, when used in computing the present value of principal and interest to be paid on all Bonds from the expected date of delivery (which is assumed for computational purposes to be Page 6 of 11 September 28, 2010), to their respective maturity dates, or mandatory sinking fund p-epayment dates in the case of term bonds, produces an amount equal to the purchase price ri -.0 ud.ng any premium or discount) specified in such bid. For purposes of computing the true .merest cost represented by any bid, the purchase price specified in such bid shall be equal to the far a-nount of the Bonds plus any premium specified in sjch bid or less any discount specifies n s Ich bid, and the true interest rate shall be calculated bN the use of a semiannual interval of c.- •sip:wnding interest based on the Interest Payment Dates for the Bonds. In the event of a - cd b'd, the procedure for determining the winning bid wil beat the sole discretion of the Auther:t- ALL OR NONE BID. Any prospective purchaser may submit a bid for the Bo -d pr:rvided that if any of the Bonds are bid for, then all of the Bonds must be bid for. MAXIMUM DISCOUNT. No bid will be considered for less than ninety -eight aid one half percent (98.5 %) the par value of the Bonds of eyed for sale. Any discount will be "Irsed on and considered as it relates to the aggregate principal amount of the Bonds, as set forth in th s Notice of Sale. FORM OF BID. All bids must be unconditional. Each bid must be in accoraar cc with the terms and conditions set forth herein. Bids +. ill only be accepted via PARITI':a pursualt to this Notice until 10:00 a.m., Pacific Standard Time on the date set forth for receipt of b ds. To the extent any instructions or directions set ford- in PARITY9 conflict with this Notice. he terms of this Notice shall control. For further information about PARITY, potential bidde, s nay contact the Financial Advisor, Fieldman, Rolapp & Associates at (949) 660 -7300 or PAR, rYf+ at (212) 849 -5021. DELIVERY AND PAYMENT. It is estimated that delivery of the Bonds N a be made to the Purchaser on or about September 28, 2010. Payment of the purchase price (less the amount of the good faith deposit mentioned below) must be made in funds immediately zvailable to the District. ELECTRONIC BIDS. Electronic Bids via PARITY® (the "Electronic Biddine System ") will be accepted in accordance with this Not..ce of Sale until 10:00 a.m. Pacific Dcvlieht Time, September 15, 2010, but no bid will be received after this time. To the extent any instructions or directions set forth in PARITY® conflict with this Notice of Sale, the terms of t}ns Notice shall control. For further information about PARITY®, potential bidders may cor,act Fieldman, Rolapp & Associates or PARITY® at 1359 Broadway, 2nd Floor, New York. Ne« Ycrk 10018, telephone (212) 849 -5021. WARNING REGARDING ELECTRONIC BIDS. THE AUTHORITY AND THE DISTRICT WILL ACCEPT BIDS IN ELECTRONIC FORM SOLELY THR011(3F PARITY ON THE OFFICIAL BID FORM CREATED FOR THAT PURPOSE. EACH BIDDER SUBMITTING AN ELECTRONIC BID I'NDERSTANDS AND AGREES EY DOING SO THAT IT IS SOLELY RESPONSIBLE FOR ALL ARRANGEMENTS WITH F?AI -Y, THAT THE AUTHORITY AND THE DISTRICT NEITHER ENDORSES NOR FkPLICITLY ENCOURAGES THE USE OF PARITY AND THAT PARITY IS NOT AC "FCC.; AS AN AGENT OF THE AUTHORITY AND THE DISTRICT. INSTRUCTIONS AND FOR -NIS FOR SUBMITTING ELECTRONIC BIDS MU5,T BE OBTAINED FROM PART l'- AND THE DISTRICT ASSUMES NO RESPONSIBILITY FOR ENSURING OR VERIF "'N(: BIDDER Fage 7 of I I COMPLIANCE WITH THE PROCEDURES OF PARITY. THE DISTRICT SHALL ASSUME THAT ANY BID RECEIVED THROUGH PARITY HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE BIDDER. THE AUTHORITY AND THE DISTRICT WILL MAKE ITS BEST EFFORTS TO ACCOMMODATE ELECTRONIC BIDS; HOWEVER THE AUTHORITY AND THE DISTRICT, THE FINANCIAL ADVISOR AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID SUBMITTED ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED, RECEIVED OR OPENED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICIAL TIME FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE AUTHORITY AND THE DISTRICT AT THE PLACE OF BID OPENING, AND THE DISTRICT SHALL NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY PARITY AS THE OFFICIAL TIME. GOOD FAITH DEPOSIT. A good faith deposit (the "Deposit ") in the amount of $300,000, payable to the order of the "East Valley Water District Financing Authority" is required from the purchaser of the Bonds ( "Purchaser ") subsequent to award of sale. That Purchaser is required to wire transfer such amount not later than 3:30 PM New York time on the next business day following the award, to the Authority per wire instructions to be provided by the Authority to the Purchaser. If such Deposit is not received by that time, the award of sale may be rescinded by the Authority. No interest on the Deposit will accrue to the Purchaser. The Deposit will be applied to the purchase price of the Bonds. The Deposit accompanying any accepted bid shall be cashed and the proceeds thereof applied to the purchase price. In the event the successful bidder fails to honor its accepted bid, the Deposit will be retained by the Authority as and for full liquidated damages. TRUE INTEREST COST. Bidders are requested to supply a calculation of the true interest cost of the Bonds to the District on the basis of their respective bids, which shall be considered as informative only and not binding on either the bidder or the Authority and the District. UNDERWRITING GROUP. Each bidder is requested to famish the names of all joint managers participating in the bid, if applicable. The successful bidder will be required to submit a list of all syndicate members in addition to the managers not later than 24 hours after receiving a verbal award. RIGHT OF CANCELLATION OF SALE BY THE DISTRICT. The Authority and the District reserves the right, in its sole discretion, at any time to cancel the public sale of the Bonds. In such event, the Authority and the District shall cause notice of cancellation of this invitation for bids and the public sale of the Bonds to be communicated through Thomson Municipal News as promptly as practicable. However, no failure to publish such notice or any defect or omission therein shall affect the cancellation of the public sale of the Bonds. RIGHT TO MODIFY OR AMEND. The Authority and the District reserves the right, in its sole discretion, to modify or amend this Official Notice of Sale including, but not limited to, the right to adjust and change the principal amount and principal amortization schedule of the Bonds being offered, however, such modifications or amendments shall be made not later than 5:00 p.m., California time, on the business day prior to the bid opening and communicated through Thomson Municipal News. Page 8 of 11 RIGHT OF POSTPONEMENT BY THE AUTHORITY AND THE DISTRICT. The Authority and the District reserve the right. in its sole discretion, to postpone, from Lime to time, the date established for the receipt of bids Any such postponement will be c-n n- ..micated through Thomson Municipal News not later than 5:00 p.m., California time, on the business day prior to any announced date for receipt of bids. If any date is postponed, any altern.ai, e kale date will be announced via Thomson Municipal '�ev.ts by 5:00 p.m. California Time or. tile business day prior to such alternative sale date. On am such alternative sale date, any bidde may submit a bid for the purchase of the Bonds in conformity in all respects with the prew.,,n, of this Official Notice of Sale, except for the date of sale and except for the chances - announced by Thomson Municipal News at the time the sale date and time are announced. RIGHT OF REJECTION. The Authority and the District reserves the right. in its discretion, to reject any and all bids and to waive any irregularity or informality in an% hid PROMPT AWARD. An authorized officer of the Authority will take actior a yarding the Bonds or rejecting all bids not later than 3:00 p.m. California time on August _. '0 10 provided that the award may be made after the expiration of the specified time if the winnim.: kidder has not given to the Authority a notice in writing : f the withdrawal of such bid. CERTIFICATION OF REOFFERING PRICE. The successful bidder "ill. a of the date the Bonds are sold pursuant to this Official Notice of Sale, certify to the Autho -it} and the District the prices at which it reasonably expects to initially offer each maturity e' the Bonds to the general public (the "Initial Offering Prices "). For this purpose, the general put lic does not include bond houses, brokers or similar persons or organizations acting in t-e capacity of underwriters or wholesalers. The successful bidder agrees that, on or prier to the Closing Date, it will actually o`fe- 100% of each maturity of the Bonds to the general public in a bona fide public offering for prices equal to or less than the Initial Offering Prices. The Underwriter agrees that, prior to the Closing Date, it will deliver a certificate dated as of the Closing Date in form and substance attached as Exhibit 1 and satisfactory to th, Authority's Counsel and District's Counsel. APPROVED by the East Valley Water District Financing Authority by resolution adopted August 24, 2010. Executive Director Page 9 of 11 Deleted: LY EXHIBIT 1 Reoffering Price Certificate EAST VALLEY WATER DISTRICT Water Revenue Bonds (Water System Improvement Projects and Series 2001 Refunding) Series 2010 CERTIFICATE OF PURCHASER The undersigned, on behalf of as underwriter (the "Underwriter ") of the above - captioned bonds (the "Bonds "), hereby confirms our advice that: (i) Based upon reasonable expectations and actual facts which existed on , being the date upon which the East Valley Water District (the "Issuer ") sold the Bonds to the Underwriter (the "Sale Date "), the Underwriter reasonably expected to sell a substantial amount of each maturity of the Bonds (being at least 10% of each maturity) to the general public (for purposes of this Certificate, "general public' excludes certificate houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices, or in the case of obligations sold on a yield basis, at the respective yields (together the "Initial Offering Prices ") set forth in Exhibit A attached hereto and by this reference incorporated herein (these prices are also shown of the cover of the Official Statement), (ii) The aggregate of the Initial Offering Prices is $ (iii) As of the date hereof, 100% of the Bonds of each maturity were actually offered to the general public in a bona fide public offering for the Initial Offering Prices. (iv) As of the Sale Date, the Underwriter, taking into account market conditions, had no reason to believe any of the Bonds would be initially sold to the general public at prices greater than the Initial Offering Prices. (v) As of the Sale Date, other than the and maturities of the Bonds, at least 10% of each maturity of the Bonds was initially sold to the general public for the respective Initial Offering Prices. (vi) In our opinion, the Initial Offering Prices do not exceed the fair market value of said maturities of the Bonds to the general public as of the Sale Date. Page 10 of 11 Capitalized terms used herein and not oth ::rn%ise defined shall have the meanings asc-I%c thereto in the Indenture. dated as of September 1. 201 by and between Union Bank. as Truct;c F.,c Valley Water District Financing Authority. authorizing the issuance of the Bonds. Dated: —2010 as Underariter Bv Name. Title i'sge 11 of]] EXHIBIT A Maturity Date Principal Interest Reoffering October I Amount Rate Price " * Stated as a percentage of par. Page 12 of I I EXHIBIT B Attach computations of arbitrage yield under Section 148, Form 8038 -0 computation, ano CDI AC computations Page 13 of I I RESOLUTION FOR CONSTRUCTION FUNDING AGREEMENT 7 RESOLUTION NO. 2010.17 RESOLUTION OF East Valley Water District AUTHORIZING THE General Manager TO SIGN FUNDING AGREEMENT, AMENDMENTS, AND CERTIFICATIONS FOR FUNDING UNDER THE SAFE DRINKING WATER STATE REVOLVING FUND; AUTHORIZING THE General Manager TO APPROVE CLAIMS FOR REIMBURSEMENT; AUTHORIZING THE General Manager TO EXECUTE BUDGET AND EXPENDITURE SUMMARY; AUTHORIZING THE General Manager TO SIGN THE CONTRACTOR'S RELEASE FORM AND THE General Manager TO SIGN THE CERTIFICATION OF PROJECT COMPLETION; AND DEDICATING REVENUES FROM Assessment against property AS THE SOURCE OF REVENUE TO REPAY SAID LOAN. WHEREAS, on December 29, 2008, the Eastwood Farms Mutual Water Company made application to die California Department of Public Health for a$ 1,520,526 loan under the Safe Drinking Water State Revolving Fund; and WHEREAS, on April 15, 2010, the California Department of Public Health issued a Notice of Application Acceptance to said East Valley Water District and Eastwood Farms Mutual Water Company committing $ 264,440 in Loan Funding and $ 1,057,756 in Grant Funding from the Safe Drinking Water State Revolving Fund fir 3600100 -003 Eastwood Farms Mutual Water Company consolidation with East Valley Water District; and WHEREAS, on July 27, 2010 said East Valley Water District Board of Directors adopted a project budget totaling $2,271,399; and WHEREAS, on April 5, 2010, the California Department of Public Health committed funding in the amount of $ 1,322,196 under the Safe Drinking Water State Revolving Fund program; and WHEREAS, the remaining $ 949,203 of project costs are to be funded under the Formation of a 30 -year Assessment District against Eastwood Farms properties WHEREAS, the Funding Agreement under the Safe Drinking Water State Revolving Fund will provide for a 30 year repayment period at a 0 percent interest rate; and WHEREAS, East Valley Water District will loan Eastwood Farms property owners the balance of any project cost not allowable for SRF or grant funding for 10 years at 10% interest. WHEREAS, prior to the California Department of Public Health issuing said Funding Agreement, East Valley Water District Board of Directors is required to pass a resolution formally establishing a dedicated source of revenue to repay said loan, authorizing an officer to execute said Funding Agreement, amendments, and certifications, designating a person to approve claims for reimbursement, designating a person (registered engineer) to sign the Budget and Expenditure Summari, designating a person (registered engineer) to sign Certification of Project Completion, and designating a person to sign rile Contractor's Release Form. WHEREAS, prior to the California Department of Public Health issuing said Funding Agreement, said East Valley Water District Board of Directors is required to form an Eastwood Farms Assessment District to ensure revenues equal to repay State Revolving funds and East Valley Water District loans. NOW, THEREFORE, BE IT RESOLVED AND ORDERED, that the General Manager is hereby authorized to sign the Safe Drinking Water State Revolving Fund program Funding Agreement and any amendments thereto; is a Registered Engineer in the State of California; and Rev. 4/22/2010 Page 1 of I Enclosure No. 14 BE IT FURTHER RESOLVED AND ORDERED, that the General Manager is hereby authorized to approve Claims for Reimbursement under the Safe Drinking Water State Revolving FurJ n*ogram; is a Registered Engineer in the State of California: and BE IT FURTHER RESOLVED AND ORDERED, that the General Manager is hereby authorized to execute the Budget and Expenditure Summary for the Safe Drinking Water State Revok m ! ur.d program; is a Registered Engineer in the State of California; and BE IT FURTHER RESOLVED .AND ORDERED, that the General Manager is hereby authorized to sign the Contractor's Release Form for the Safe Drinking Water State Revolving Fund Pto.r-zm: is a Registered Engineer in the State of California; and BE IT FURTHER RESOLVED AND ORDERED, that the General -1 anaeer is hereby authorized to certify that the project is complete and ready for final inspection; is a Registered Engineer tr the State of California; and BE IT FURTHER RESOLVED AND ORDERED, that the East Vallee Water District does hereby designate revenues from Eastwood Farms Assessment District as the dedicated souce of revenue to repay this Safe Drinking Water State Revolving Fund loan. This dedication shall remain in full force end effect until such loan is fully discharged, unless modification or change of such dedication is approved in writing by the C'rl fo-nia Department of Public Health. If for any reason, said source of revenues proves insufficient to satisfy the debt service rf rte Safe Drinking Water State Revolving Fund loan, sufficient funds shall be raised through increased water rates, user harges, or assessments or any other legal means available to meet this loan obligation and to operate and maintain this proie,.t. ........................ ............................... 4............................1 Passed and adopted by the East Valley Water District Board of Directors on, by the following vote: AYES: Directors NOES: Directors EXCUSED: Directors Prr >ident ATTEST: Robert E. 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W I- O CA O M t� O O 04 N in W 0 0) N o 0 0 +) vou�m J W V O O N w N M vnr Z O LLJ J c� z w Y J � W w Q Q LL LL cr Of U Q U W U LL LL Z O U O (D 00 M O O OO V L N @ m (D It O N (O r N m V N V N C C C G 0 o O O O V Cl) O m Cl) N V I N 0co0 000 O M O O O O In co W O (3) co Lf) Lf) U. W a � Z a) N .o E E (o m U U m (a a 2 a m ¢ Q o 3 c U u D3:3�3 c m° U U U U 2 2 0 0 0 Q Q 0 0 0 0 V O 0 N 0 O Q) V M' i I 0 0 v N C M r, m N IJ I� O O O O r ? W I- O CA O M t� O O 04 N in W 0 0) N o 0 0 ❑ w N Q7 O LL ` N (D iry N M U. W a � Z a) N .o E E (o m U U m (a a 2 a m ¢ Q o 3 c U u D3:3�3 c m° U U U U 2 2 0 0 0 Q Q 0 0 0 0 V O 0 N 0 O Q) V M' i I 0 0 v N C M r, m N IJ I� CALIFORNIA STATE UNIVERSITY, SAN BERNARDINO Albert K. Karnig President August 4, 2010 Mr. Bob Martin. General Manager East Valiey Water District 3654 Highland Ave., No. 18 Highland. CA 92346 Dear Bob: Thank you and our collesnes at the F.as-,. Valley Water District for the $15,000 gift to suppctt the Water Resources Institute. We deeply appreciate the contribution and value the District's efforts in helping to advance the mission of the WRI. Because the success of the WR.I is doubtless related to the support it receives from the District and other local agencies, we can't overstate our appreciation. Thanks again for the funding. I, hope you're enjoying the summer and look 'o-ward to secinb you soon. R.e ards, 06, " I Albert K. Kai n' President 909.537.5002 • fax: 909.537.5901 • www.csusb.edu /president 5500 UNIVERSITY PARKWAY, SAN BERNARDINO, CA 92407 -2393 KI becu ri & Emergency Response C November 3 -4, 2010 - Doubletree Hotel and Convention Center o Ontario, CA Sponsored by r D ° t� WR.TEt2 `t East Valley R A T E: H •% This two -day, three -track conference will present timely information for water utility executives and managers, treatment plant operators, scientists, researchers, and engineers. There are sessions designed for engineers, researchers, water agencies, lawyers, academics, regulators, elected officials and military representatives, board members and city council members. TRACK ONE will focus on occurrences, environmental fate, treatment, effects and public perception of emerging contaminants. TRACK TWO will focus on nanotechnology, endocrine disruptors, perchlorate, and other current topics focusing on detection, treatment, and contamination levels and effects. TRACK THREE will focus on emergency response. Dr. Lucy Jones, Chief Scientist USGS Multi- Hazard for Southern California, Dr. Anne Wien, USGS Operations Research Analyst, and Margaret Vinci, Caltech Earthquake Programs, will discuss Ark Storm, economic impacts and other issues facing water providers. On t!,.e second day the program will design a tabletop exercise and then execute the scenario in the afternoon. General Registration (NOTE: If you area sponsor, speaker or exhibitor, please contact the Water Education Foundation, 916 - 444 -6240 to obtain the appropriate form) Faxed registrations will be accepted with purchase orders or credit cards. Fax to 916/448 -7699 • To pay by check, mail form and payment to Water Education Foundation, 717 K Street, Ste. 317, Sacramento, CA 95814 Name(s) Job Title(s) _ Organization Address — City 250 to 300 people a e expected to attend the November 3-4,2010 Water Qu,ility & Regulatory Conference, to be held at the Do'.a le +ree Hotel and Conference Center, 222 North Vinevarc i )ntario, Calif. 50 leading experts will present the lztc si information on water quality, tech- nology and emerp 19 contaminates information. Poster presentations an, .pl-roximately 35 vendors and agencies will be on hand in 1^c exhibit hall. (Space is limited) Up to 20 DHS coat act hours for water plant and waste- water plant operat r� are available, as well as MCLE credits for attorr ,,, Abstracts are still being accepted until August 31 Contact Jo McAndrews, 951- 787 -9267, or sayhiio @emnr. eneLCm for more information. Secure your spot z t the conference for the special regis- tration rate of $2cio until September 15. Registration after September 15 is SP 4J; registration at the door will be $370. Registration includes continental breakfast and lunch both days and a hosted reception November 3. We have secured a limited number ,f rooms at the Doubletree Hotel at the special rate of $10'4, plus tax, per night. Reserve your room early; room rates after October 3 will vary. Contact the Doubletree, 909 -9 i7 0900. Be sure to say you are attending the Water Educzkion Foundation conference. Exhibitor and sponsorship opportunities are available. Visit www.watereducation ora /conferences for more details or contact Jo McAndrews, 951- 787 -9267, or _ayhijo @empire net,CUM , Enclosed is my registration fee: Lunch Choice: ❑ $299 by Sept. 15 11/3 ❑ Vegetarian ❑ $350 after Sept. 15 ❑ Tri -Tip ❑ $20 additional for credits ❑ Chicken Total enclosed $ Credit card number State____— zip Phone 11 ,'4 yl Vegetarian `1 Chicken J Salmon date Signature (must be signed to process credit card order Cancellation policy. There is a $50 cancellation fee after Sept. 15. C sncellations must be in writing. No refunds after Oct. 15, 2010. Substitutions may 1,e made at any time. OFFICIAL NOTICE OF SALE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds Water System Improvement Projects and Series 2001 Refunding) Series 2010 Date of Sale: Wednesday, September 15, 2010 10:00 a.m., Pacific Standard Time BIDS TO BE RECEIVED VIA PARITY For further information, please contact: Thomas DeMars, Principal 949) 660 -7316 tdemars(a ieldman.com Joshua Lentz, Assistant Vice President 949) 660 -7320 ilentz(a,fieldman.com Fieldman, Rolapp & Associates 19900 MacArthur Boulevard, Suite 1100 Irvine, California 92612 Fax: (949) 474-8773 A copy of the Preliminary Official Statement may be obtained at: www.ficidman.com /offerings.asp Preliminary, subject to change. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Water Revenue Bonds Water System Improvement Projects and Series 2001 Refunding) Series 2010 NOTICE IS HEREBY GIVEN that all -or -none bids Nn ill be received by a representative of the EAST VALLEY WATER DISTRICT (herein. the "District'), for the purchase of par value bonds designated "EAST VALLEY WATER DISTRICT FINANCING AUTHORITY WATER REVENUE BONDS (WATER SYSTEM IMPOVEMENT PROJECTS AND SERIES 2001 REFUNDING) SERIES 2010" (herein. the "Bonds "). All electronic bids must be submitted via Parit) i . the electronic bidding system. up to the time and at the place specified as follows: TIME: 10:00 a.m., Pacific Standard Time DATE: Wednesday, September 15. 2010 provided, however, that without further advertising, and so long as an electronic bid has not been accepted by the District, electronic bids via Parity will be accepted at such time and place on September 16, 2010 and each succeeding Business Day thereafter until the earlier of September 28, 2010 or receipt by the District of an acceptable electronic bid for the Bonds. No bid will be entertained at any price less than 1.5% of the par value of the Bonds, or that produces less than $ in proceeds at settlement (in each case, inclusive of the costs of issuing the Bonds payable by the successful bidder at closing). The terms of sale further allow for the adjustment, both by maturity and in total, of the amount of Bonds offered. See "TERMS OF SALE" herein. Please note that the Authority and the District reserve the right to cancel or reschedule the sale of the Bonds upon notice given through Thomson Municipal.Keirs by 5:00 p.m., California time the day prior to the day bids are scheduled to be received, and if the ,ale is rescheduled, notice of the new sale date and time, if any, will be given through Thomson Municipal News no later than 5:00 p.m. California time the day prior to the new day bids are to be received, and bids will be received in the manner set forth above at the rescheduled date and time as the Authority and the District may determine. DESCRIPTION OF THE BONDS ISSUE. The Bonds will be issued in the original principal amount of $ *, and bear interest from the date of their issue, in full book -entry onh, firm in denominations of $5,000 and any integral multiple thereof. maturing as shown beloN under the caption "MATURITY SCHEDULE." The Bonds are subject to optional redemption and mandatory sinking fund redemption prior to maturity as shown below under the caption Preliminary, subject to change. Page 1 of 14 OPTIONAL REDEMPTION." Prospective bidders should note that the terms of sale permit adjustment of individual maturities. See "ADJUSTMENTS OF PRINCIPAL AMOUNTS" below. Reference is made to the Preliminary Official Statement prepared in connection with the offering of the Bonds for a complete description of the Bonds. INTEREST RATE. Interest will be calculated on the basis of a 360 -day year composed of twelve 30 -day months. The Bonds shall bear interest from their date at a rate or rates to be determined at the sale thereof, but not to exceed six and quarter percent (6.25 %) per annum. Interest on the Bonds is payable semiannually on April I and October I in each year (the "Interest Payment Dates "); commencing April 1, 2011. Bidders may specify any number of separate interest rates, and any rate may be repeated as often as desired; provided, however, that (i) each interest rate specified must be in a multiple of 1/20 of I% or 1/8 of I%; (ii) a zero rate of interest cannot be specified; (iii) each Bond shall bear interest from its dated date to its stated maturity date at the interest rate specified in the bid; (iv) all Bonds of the same maturity date shall bear the same rate of interest; and (v) no bid will be accepted which provides for the cancellation and surrender of any interest payment or for the waiver of interest or other concession by the bidder as a substitute for payment in full of the purchase price of the Bonds. Bids that do not conform to the terns of this paragraph will be rejected. PAYMENT. Principal of and interest on the Bonds will be payable by Union Bank, N.A. the trustee for the Bonds (herein, the "Trustee "), in lawful money through the facilities of The Depository Trust Company, or its nominee. AUTHORITY FOR ISSUANCE AND PURPOSE. The Bonds are being issued by the East Valley Water District Financing Authority (the "Authority ") pursuant to an Indenture of Trust, dated as of September], 2010, by and between the Trustee and the Authority, and pursuant to the laws of the State of California. The Bonds are a special obligation of the Authority payable solely from Net Revenues of the Water System of the District consisting of all payments ("2010 Installment Payments ") required to be paid by the District under the Installment Purchase Agreement (the "2010 Installment Purchase Agreement "), by and between the Authority and the District, and moneys held in certain funds by the Trustee as described in the Indenture. The proceeds of the Bonds will be used to (i) finance capital improvements to the District's Water System, (ii) refund a portion of the District's Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001, (iii) fund a portion of the interest due through and including October I, 2011, and (iv) pay certain costs incurred in connection with the issuance of the Bonds. DENOMINATIONS. The Bonds will be issued and delivered as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereof. DATE OF BONDS. The Bonds will be dated their date of delivery (the "Closing Date "), which is anticipated to be on or about September 28, 2010. Page 2 of I I MATURITY SCHEDULE. The Bonds will mature, or he subject to mandatory sinking fund redemption, on October I in each of the years, and in the amounts, as set forth in the following table. The final principal amount of the Bonds, and the final amount of each maturity of the Bonds, is subject to increase or reduction as described below under the heading ADJUSTMENT OF PRINCIPAL AMOUNTS." Each bidder must specify in its bid whether, for any particular year, the Bonds will mature or, alternativeh. be subject to mandatory sinking fund redemption in such year. Maturity Maturity October 1) Principal Amount(i) Octobers Principal Amount (0 2011 2026 2012 2027 2013 2028 2014 2029 2015 2030 2016 20?1 2017 2032 2018 2033 2019 2034 2020 2035 2021 2036 2022 2037 2023 2038 2024 2039 2025 2040 Preliminary, subject to change. See also "Adjustment of principal Amounts' herein ADJUSTMENT OF PRINCIPAL AMOUNTS. The principal amounts set forth in this Notice of Sale for the Bonds reflect certain estimates of the District and its financial advisor with respect to the likely interest rates of a winning bid and the premium /discount specified in such a winning bid described below under the caption "TERMS OF SALE." The total principal amount of the Bonds and the principal amounts payable in each of the years set forth above are subject to adjustment, in $5.000 increments. to reflect the actual interest rates and any premium /discount contained in the winning bid, and to maintain substantially level annual debt service payments on the Bonds. The Authority reserves the right to increase or decrease the principal amount of any maturity of the Bonds (or, in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking (und redemption on October I in any year) in order to achieve such intention. The winning bidder will be notified of any adjustment in principal amounts as soon as practical. Adjustment of the principal amounts will not affect the determination of the winning bid. A successful bidder may not withdraw its bid as a result of any changes made within these limits. OPTIONAL REDEMPTION. The Bonds maturing on or after October 1, 2021 are subject to redemption prior to maturity at the option of the District, among maturities as directed by the District and by lot within maturity in whole at any time or in part, on any date on or after October 1, 2020 in integral multiples of $5,000 from any source of funds, upon notice as Page 3 of 1 I described in the Official Statement, at a redemption price equal to the principal amount thereof, without premium, together with interest accrued to such date fixed for redemption. MANDATORY REDEMPTION. Any bidder may, at its option, specify that one or more maturities of the Bonds will consist of term bonds which are subject to mandatory sinking fund redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder; provided that no Bond may have sinking fund payments prior to October 1, 2020. In the event that the bid of the successful bidder specifies that any maturity of Bonds will be term bonds, such term bonds will be subject to mandatory sinking fund redemption on October 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading "THE BONDS — Redemption — Mandatory Redemption", at a redemption price equal to the principal amount thereof to be paid together with accrued interest thereon to the redemption date, without premium. BOOK ENTRY SYSTEM. The Bonds when issued will be registered in the name of CEDE CO., as nominee of The Depository Trust Company, New York, New York ( "DTC"), and will be initially issued as one bond for each of the maturities of the Bonds. DTC will be appointed depository for the Bonds and registered ownership of the Bonds may not thereafter be transferred except as provided in the procedures, rules and requirements established by DTC. The Trustee will pay payments of principal and interest to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. SECURITY. Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues (the "Authority Revenues"), which consist of Installment Payments to be made by the District under the Installment Purchase Agreement, and from 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. Tl {E 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 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 Installment Payments and its rights as may be necessary to enforce payment of the Installment Payments when due. 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) are 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 subject only to the provisions of the Indenture permitting the terms and conditions set forth therein. The obligation of the District to pay Installment Payments is payable from Net Revenues on a parity with an installment sale agreement of the District dated July 13, 2004 in the outstanding aggregate principal amount of $8,067,777.08, and an installment sale agreement dated January 10, 2006 in the outstanding aggregate principal amount of $5,109,853.96. For Page 4 of 11 definitions of certain capitalized terms used in this paragraph and not otherwise defined and for more information regarding the security for the Bonds, see the caption of the Preliminary Official Statement entitled "SECURITY FOR THE BONDS" and APPENDIX B —" DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE ". TAX EXEMPTION. In the opinion of Stradling Yocca Carlson & Rauth, 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 on to the Bonds is excluded from gross income for federal income tax purposes and is not and is not an item of tax preference for purposes of c<dculating the federal alternative minimum tax imposed on individuals and corporations. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability A' such corporations. Bidders are referred to the Preliminary Official Statement for a description of the proposed opinion of Bond Counsel. NO RESERVE FUND. Neither the Installment Purchase .Agreement nor the Indenture establishes a reserve fund for the Bonds. DELIVERY OF SECURITIES. Delivery of the Bonds will be made to the successful bidder through the facilities of The Depository Trust Company in New York, New York (or at any other mutually agreeable location) on or about September 28. 2010. Payment must be made in cash, Federal Reserve Bank funds, or other immediately available t Inds. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEE. Attention of bidders is directed to California Government Code Section 8856, which provides that the lead underwriter or the purchaser of the Bonds will be charged the California Debt and Investment Advisory Commission fee. QUALIFICATION FOR SALE; BLUE SKY. Compliance kith blue sky laws shall be the sole responsibility of the successful bidder. The District will furnish such information and take such action not inconsistent with law as the successful bidder may request and the District shall deem necessary or appropriate to qualify the Bonds for offer and sale under the blue sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as may be designated by the successful bidder; provided, however, that the District shall not execute a general or special consent to service of process or qualify to do business in connection with such qualification or determination in any jurisdiction. The successful bidder will not offer to sell or solicit any offer to buy, the Bonds in arry jurisdiction where it is unlawful for such bidder to make such offer. solicitation or sale, and the hidder shall comply with the blue sky and other securities laws and regulations of the states and i.Irisdictions in which the bidder sells the Bonds. Page 5 of I I CUSIP NUMBERS. It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds nor any error with respect thereto shall constitute cause for failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accordance with the terms thereof. All expenses in relation to the printing of CUSIP numbers on the Bonds shall be paid for by the District; provided, however, that the ordering of and the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the winning bidder. NO LITIGATION CERTFICATE. At the time of issuance of the Bonds, the District will certify there is no litigation pending concerning the validity of the Bonds, the corporate existence of the District, or the entitlement of the officers thereof to their respective offices. RIGHT OF CANCELLATION. The successful bidder will have the right, at its option, to cancel its purchase of the Bonds if the District fails to execute the Bonds and tender the same fbr delivery within 60 days from the date of award thereof. In such event, the successful bidder will be entitled to the return of the deposit accompanying the bid. PRELIMINARY OFFICIAL STATEMENT AND FINAL OFFICIAL STATEMENT. The preliminary official statement, distributed in connection with the sale of the Bonds, dated August _, 2010 (the 'Preliminary Official Statement ") has been deemed final by the Authority and the District for purposes of Rule 15c2 -12 of the Securities Exchange Commission (the Rule "), but is subject to revision, amendment and completion in a final official statement (the Final Official Statement ") as provided in the Rule. The Authority and the District have authorized a Preliminary Official Statement and Final Official Statement relating to the Bonds, a copy of which is available on the Internet at www.fieldlnan.comlofferings.asp. The Authority and the District will each deliver to the purchaser of the Bonds a certificate dated the Closing Date to the effect that the Authority and the District, respectively, have reviewed the Final Official Statement and has determined that as of the date of each thereof, to the best of its knowledge and belief, that each of the Preliminary Official Statement and Final Official Statement does not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Up to 100 copies of the Final Official Statement will be furnished to the successful bidder at no charge within 7 business days of the award of the Bonds. CONTINUING DISCLOSURE. The District has covenanted for the benefit of Owners to provide certain financial information and operating data relating to the District by not later than January 1 st of each year after the end of the District's fiscal year (which fiscal year presently ends June 30), commencing with January 1, 2011 (the `Annual Report"), and to provide notices of the occurrence of certain enumerated material events. The Annual Report and notices of material events will be filed by the District through the Electronic Municipal Market Access System EMMA ") of the Municipal Securities Rulemaking Board (the "MSRB" ). The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized in the Preliminary Official Statement under the caption "CONTINUING DISCLOSURE." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5). Page 6 of 1 1 TERMS OF SALE BASIS OF AWARD. The Bonds will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Bonds. The true : nterest cost of any such bid will be that rate which, when used in computing the present value of principal and interest to be paid on all Bonds from the expected date of delivery (which is assumed for computational purposes to be September 28, 2010), to their respective maturity dates, or mandatory sinking fund redemption dates in the case of Term Bonds, produces an amount equal to the purchase price (including any premium or discount) specified in such bid. For purposes of computing the true interest cost represented by any bid, the purchase price specified in such bid shall be equal to the par amount of the Bonds plus any premium specified in such bid or less anv discount specified in such bid, and the true interest rate shall be calculated by the use of a semiannual interval of compounding interest based on the Interest Payment Dates for the Bonds. In the event of a tied bid, the procedure for determining the winning bid will be at the sole discretion of the Authority. ALL OR NONE BID. Any prospective purchaser may suhmit a bid for the Bonds, provided that if any of the Bonds are bid for, then all of the Bonds must be bid for. MAXIMUM DISCOUNT. No bid will be considered for less than ninety -eight and one half percent (98.5 %) the par value of the Bonds offered for sale. Any discount will be based on and considered as it relates to the aggregate principal amount of the Bonds, as set forth in this Notice of Sale. FORM OF BID. All bids must be unconditional. Each bid must be in accordance with the terms and conditions set forth herein. Bids will only be accepted via PARITY& pursuant to this Notice until 10:00 a.m., Pacific Standard Time on the date set forth for receipt of bids. To the extent any instructions or directions set forth in PARITYR conflict with this Notice, the terms of this Notice shall control. For further information about PARIT"!? . potential bidders may contact the Financial Advisor, Fieldman, Rolapp & Associates at (949) 660 -7300 or PARITYR at 212) 849 -5021. DELIVERY AND PAYMENT. It is estimated that delivery of the Bonds will be made to the Purchaser on or about September 28, 2010. Payment of the purchase price (less the amount of the good faith deposit mentioned below) must be made in i1inds immediately available to the District. ELECTRONIC BIDS. Electronic Bids via PARITY!z : (the "Electronic Bidding System ") will be accepted in accordance with this Notice of Sale until 10:00 a.m. Pacific Daylight Time, September 15, 2010, but no bid will be received after this time. To the extent any instructions or directions set forth in PARITYCR conflict with this Notice of Sale.. the terms of this Notice shall control. For further information about PARITYR, potential bidders may contact Fieldman, Rolapp & Associates or PARI77'R at 1359 Broadway, 2nd Floor, New York, New York 10018, telephone (212) 849 -5021. WARNING REGARDING ELECTRONIC BIDS. THE AUTHORITY AND THE DISTRICT WILL ACCEPT BIDS IN ELECTRONIC FORM SOLELY THROUGH PARITY ON THE OFFICIAL BID FORM CREATED FOR THAT PURPOSE. EACH BIDDER SUBMITTING AN ELECTRONIC BID UNDERSTANDS AND AGREES BY DOING SO Page 7 of I 1 THAT IT IS SOLELY RESPONSIBLE FOR ALL ARRANGEMENTS WITH PARITY, THAT THE AUTHORITY AND THE DISTRICT NEITHER ENDORSES NOR EXPLICITLY ENCOURAGES THE USE OF PARITY, AND THAT PARITY IS NOT ACTING AS AN AGENT OF THE AUTHORITY AND THE DISTRICT. INSTRUCTIONS AND FORMS FOR SUBMITTING ELECTRONIC BIDS MUST BE OBTAINED FROM PARITY, AND THE DISTRICT ASSUMES NO RESPONSIBILITY FOR ENSURING OR VERIFYING BIDDER COMPLIANCE WITH THE PROCEDURES OF PARITY. THE AUTHORITY SHALL ASSUME THAT ANY BID RECEIVED THROUGH PARITY HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE BIDDER. THE AUTHORITY AND THE DISTRICT WILL MAKE ITS BEST EFFORTS TO ACCOMMODATE ELECTRONIC BIDS; HOWEVER THE AUTHORITY AND THE DISTRICT, THE FINANCIAL ADVISOR AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID SUBMITTED ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED, RECEIVED OR OPENED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICIAL TIME FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE AUTHORITY AND THE DISTRICT AT THE PLACE OF BID OPENING, AND THE DISTRICT SHALL NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY PARITY AS THE OFFICIAL TIME. GOOD FAITH DEPOSIT. A good faith deposit (the "Deposit') in the amount of $300,000, payable to the order of the "East Valley Water District Financing Authority" is required from the purchaser of the Bonds ( "Purchaser ") subsequent to award of sale. The Purchaser is required to wire transfer such amount not later than 3:30 P.M. New York time on the next business day following the award, to the Authority per wire instructions to be provided by the Authority to the Purchaser. If such Deposit is not received by that time, the award of sale may be rescinded by the Authority. No interest on the Deposit will accrue to the Purchaser. The Deposit will be applied to the purchase price of the Bonds. The Deposit accompanying any accepted bid shall be cashed and the proceeds thereof applied to the purchase price. In the event the successful bidder fails to honor its accepted bid, the Deposit will be retained by the Authority as and for full liquidated damages. TRUE INTEREST COST. Bidders are requested to supply a calculation of the true interest cost of the Bonds to the District on the basis of their respective bids, which shall be considered as informative only and not binding on either the bidder or the Authority and the District. UNDERWRITING GROUP. Each bidder is requested to furnish the names of all joint managers participating in the bid, if applicable. The successful bidder will be required to submit a list of all syndicate members in addition to the managers not later than 24 hours after receiving a verbal award. RIGHT OF CANCELLATION OF SALE BY THE DISTRICT. The Authority and the District reserves the right, in its sole discretion, at any time to cancel the public sale of the Bonds. In such event, the Authority and the District shall cause notice of cancellation of this invitation for bids and the public sale of the Bonds to be communicated through Thomson Municipal Nevis as promptly as practicable. However, no failure to publish such notice or any defect or omission therein shall affect the cancellation of the public sale of the Bonds. Page 8 of I I RIGHT TO MODIFY OR AMEND. The Authority and the District reserves the right, in its sole discretion, to modify or amend this Official Notice of Sale including, but not limited to, the right to adjust and change the principal amount and principal amortization schedule of the Bonds being offered, however, such modifications or amendments shall be made not later than 5:00 p.m., California time, on the business day prior to the bid opening and communicated through Thomson Municipal Neirs. RIGHT OF POSTPONEMENT BY THE AUTHORITY. The Authority reserves the right, in its sole discretion, to postpone, from time to time. the date established for the receipt of bids. Any such postponement will be communicated through Thomson Municipal News not later than 5:00 p.m., California time, on the business day prior to any announced date for receipt of bids. If any date is postponed, any alternative sale date a ill be announced via Thomson Municipal News by 5:00 p.m. California Time on the business day prior to such alternative sale date. On any such alternati\c sale date, any bidder may submit a bid for the purchase of the Bonds in conformity in all respects with the provisions of this Official Notice of Sale, except for the date of sale and except for the changes announced by Thomson Municipal News at the time the sale date and time are announced. RIGHT OF REJECTION. The Authority reserves the right. in its discretion, to reject any and all bids and to waive any irregularity or informality in any hid. PROMPT AWARD. An authorized officer of the Authority will take action awarding the Bonds or rejecting all bids not later than 3:00 p.m. California time on September 15, 2010 provided that the award may be made after the expiration of the specified time if the winning bidder has not given to the Authority a notice in writing of the v: ithdrawal of such bid. CERTIFICATION OF REOFFERING PRICE. The successful bidder will, as of the date the Bonds are sold pursuant to this Official Notice of Sale. certify to the Authority and the District the prices at which it reasonably expects to initially offer each maturity of the Bonds to the general public (the "Initial Offering Prices "). For this purpose. the general public does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers. The successful bidder agrees that, on or prior to the Closing Date, it will actually offer 100% of each maturity of the Bonds to the general public in a bona tide Public offering for prices equal to or less than the Initial Offering Prices. The Underwriter agrees that, prior to the Closing Date, it will deliver a certificate dated as of the Closing Date in form and substance attached as Exhibit I and satisfactory to the Authority's Counsel and District's Counsel. APPROVED by the East Valley Water District Financing Authority by resolution adopted August 24, 2010. s, Robert Martin Executive Director Page 9 of t I EXHIBIT 1 Reoffering Price Certificate EAST VALLEY WATER DISTRICT Water Revenue Bonds Water System Improvement Projects and Series 2001 Refunding) Series 2010 CERTIFICATE OF PURCHASER The undersigned, on behalf of , as underwriter (the "Underwriter ") of the above - captioned bonds (the `Bonds "), hereby confirms our advice that: i) Based upon reasonable expectations and actual facts which existed on September 15, 2010, being the date upon which the East Valley Water District (the Issuer ") sold the Bonds to the Underwriter (the "Sale Date"), the Underwriter reasonably expected to first sell 10% of each maturity of the Obligations to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices, or in the case of obligations sold on a yield basis, at the respective yields (together the "Initial Offering Prices ") set forth in Exhibit A attached hereto and by this reference incorporated herein (these prices are also shown of the cover of the Official Statement). ii) The aggregate of the Initial Offering Prices is S iii) As of the date hereof, 100% of the Bonds of each maturity were actually offered to the general public in a bona fide public offering for the Initial Offering Prices. iv) As of the Sale Date, the Underwriter, taking into account market conditions, had no reason to believe any of the Bonds would be initially sold to the general public at prices greater than the Initial Offering Prices. v) Based upon reasonable expectations and actual facts which existed on the Sale Date, the initial offering prices of each maturity of the Obligations to the public excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which a substantial amount (at least 10 %) of each maturity of the Obligations was expected to be sold to the public is set forth on Exhibit A attached hereto and by this reference incorporated herein. vi) In our opinion, the offering prices of the Obligations set forth in Exhibit A are within a reasonable range of, and should reflect, the fair market prices for such Obligations as of the Sale Date. Page 10 of I I Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Indenture, dated as of September 1, 2010, by and between I. nion Bank, as Trustee, and the East Valley Water District Financing authority, authorizing the issuance of the Bonds. Dated: .2010 C Page I I of I I as Fnderu ritrr Name, Title Maturity Date October 1 Stated as a percentage of par. EXHIBIT A Principal Amount Interest Reoffering Rate Price Page 12 of 11 EXHIBIT B Attach computations of arbitrage yield under Section 148, Form 038 -G computations and CDIAC computations Page 13 of I I